This discussion paper is divided into seven parts. Firstly introduction briefly explains the changes in the contemporary world and what they are influenced with. Second part explains the four biggest challenges of the current economic environment - technology, globalization, diversity and aging population. Then the third and fourth parts are short overviews of the most important milestones of human resource (HR) and organizational development (OD). Fifth and sixth parts discover the roles of OD and HR in talent management (TM) and highlight the specific tasks of each. And finally the conclusion summarizes the content of this article.
We live in a world of change. Modern communication technologies (especially internet) are providing to almost everyone the opportunity to find the kind of information they are looking for. It is the information, and the ease of getting it which makes everything faster. Looking for some information twenty years ago, one would have to physically visit a library, manually search within all books and documents hoping to find what they were looking for. Today with just basic computer skills we could get most of information needed with only a few clicks on the laptop keyboard or even mobile phone. It is the speed of information transfer which contributes most to the current state of change which goes hand in hand with a highly competitive environment. It is becoming increasingly hard for organizations to gain competitive advantage by simply offering new products or services, as their rivals could now easily copy it. As a result margins are decreasing and organizations struggle. Managers already understand that they have to look for other alternatives and some of them are focusing on decreasing costs by moving production in developing countries. But it can not last forever - as others join this trend, the actual effect will diminish over time.
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In addition, a globally aging population brings yet another challenge - skilled workforce is becoming more and more precious. For organizations these days it is a must to rethink their employee strategies in order to gain competitive advantage - it is time for talent management (TM).
The purpose of this article is to explain the need for TM, and trace the historic connections and the roles of human resource (HR) and organizational development (OD) in birth of TM.
Challenges of current economy environment
The speed of change in the contemporary economy is accelerating as never before. There are innumerous new, advanced technologies emerging every day, forcing organizations to continuously improve in order to retain competitive advantage...
Products that used to have a lifecycle of five years might now only be viable for a few months. New ideas, products, or benchmark business processes that in the past could be protected for decades, are now copied, stolen, and possibly even rendered obsolete within weeks (Sullivan 2009).
And there are other, arguably even more challenging changes coming. First of all it is the aging population. For example the median age of Australians has increased by 5.1 years over the last two decades and over the next several decades population ageing is expected to have great effects on many areas of the society including skilled labour (ABS 2009). But it is not only the decreasing numbers of skilled workforce - the replacement of 'baby boomers' by Generation Y employees (GYEs) (by 2020 42% of Australian workforce is expected to be GYEs) (Buik 2008, 9-11) also means shift in employees' set values and expectations. For example 63% of GYEs stay less than two years with an employer, 90% of GYEs would stay longer with an employer, given the chance of proper training and development, 81% of GYEs expect to be promoted in two years and finally 97% of GYEs value a leadership style that involves empowerment, consultation, and partnering and will leave if they don't get it (Vaiman & Vance 2008, 67; Delong 2004, 12-16).
New technologies and shortage in skilled employees combined with impacts of globalisation (open markets = bigger competition) and increasing diversity of workforce are the biggest four challenges of contemporary economy. It was also new technologies that have impacted mostly the evolution of HR during past 20 years.
Repetitive and transactional processes (payrolls, benefits, time and attendance administration etc.) were during that period mostly automated giving HR the chance to develop new, more strategic discipline - Talent Management (Schweyer, Newman and DeVries 2009, 15 - 27). The OD on the other hand helps to integrate the TM philosophy deep into organization culture. It is amazing how both OD and HR (if managed well) understand and complement each other. In order to better understand this unique synergy, we shall see their historical backgrounds.
History of HR
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According to (Bratton and Gold 2001, 6) HR has merged from different sources including conflict management, increasing specialization of labour as well as from influence of science on managing organizations.
During the Industrial Revolution in Britain poorly educated employees were 'motivated' by strict disciplinary actions and fines. It was in the 1840s under the pressure of politics and the broader public, when some employers realised that there might be other motivational factors. But it was only around 1890s when companies like Cadbury or Rowntree in Britain introduced a new job position called 'industrial welfare for workers', which over time transformed into the modern personnel specialists.
Interestingly enough World War I (1914-1918) also brought some important changes in HR. Since men were needed in the front line it was the first time when women had to join the industry. By the end of World War I, there were many women supervisors who brought the 'caring' factor in the industry. It was also during this period, when the premium bonus system came to light (Bratton & Gold 2001, 6-7).
At the same time Frederick Taylor proposed 'Scientific management'. Taylor among others noted the effect the incentive of increased wages had on the productivity, and that managers should plan and control, and workers should work towards given instructions. Despite his timeless foundations, critics blamed him that his methods made the workplace 'dull' and the workers operate like machines.
Another protagonist of Scientific management at that time was Henry Gantt, known for his control system composed of flow charts, used presently in flow management. He is also the founder of gain-sharing or profit-sharing concepts also used in today's reward systems (Clark & Seward 2000, 20-22).
Next two theories which are still of great importance in HR and OD today - Administrative Management and especially Behavioural Management - also evolved in parallel with scientific management. Henri Fayol and Max Weber are the biggest names of the Administrative era. The first developed 14 principles of management including remuneration, authority or unity of direction. He believed that any person could be taught principles either in school or in the workplace. The later one developed theories about different structures of authority, which are still in place in many governments and organizations today.
Special attention should be paid to the behavioural management, as it is the primary source of today's OD, HR and consequently TM theories. Hugo Munsterberg, the founder of industrial psychology believed that through a better alignment of individual abilities the needs of the workplace efficiency could be increased. His theories laid the ground for today's performance appraisals and selection of new employees.
Mary Parker Follett in the other hand suggested that individual potential could only be released through group interaction and dynamics. She is also the founder of studies in leadership and power.
Frederick Herzberg came up with two-factor theory of employee motivation.
Douglas McGregor's theory X, Y assumptions shows that employees will perform better, provided they are treated as responsible and valued individuals. His theories form the base to the study of motivation.
Clayton Alderfer has modified Maslow's motivational theory into more flexible ERG theory, which emphasises that performance constraints outside the control of the individual and also the lack of competence or low intrinsic work motivation may have negative consequences on employee's morale (Wood & Zeffane & Fromholtz & Fitzgerald 2006, 84-85; Clark & Seward 2000, 22-30).
The system approach is another important theory which started to appear in the mid-1960s suggested that an organisation could be viewed as a system of interdependent components which produces a complete unit. The use of this system became one of the current trends in OD (Brown & Harvey 2006, 40-44; Clark & Seward 2000, 31).
Even though many of the above systems are already aged, they still provide strong backbone for development of modern practices in today's HR and OD.
By definition HRM is:
Administrative activities associated with human resources planning, recruitment, selection, orientation, training, appraisal, motivation, remuneration, etc. HRM aims at developing people through work (BusinessDictionary.com. 2010).
History of OD
"OD is the application of behavioural science, action research and systems theory to human systems, to increase the internal and external effectiveness of the organization, especially in managing change, using participative processes that involve all those affected (Rothwell and Sullivan 2005, 103)."
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The history of some form of organizational development could be viewed to go as far back as the beginning of human kind itself. However the OD as we know it today started to take shape at the very beginning of the 20th century. It was Sigmund Freud, who believed that there were inner 'powers' driving every human being.
B.F. Skinner is the father of today's performance management. He applied in theory Pavlov's salivating dogs on humans and concluded that what gets rewarded gets repeated. Famous Abraham Maslow's motivational theory is still in use, however there already are some more flexible modifications to his work including the already mentioned ERG theory, or more recently appreciative inquiry.
Many organizations have also adapted Eric Berne's transactional analysis (TA) in order to improve their communication and interpersonal skills. TA can help people better understand their behaviour in different situations (Brown & Harvey 2006, 246; Wood et al. 2006, 84; Rothwell and Sullivan 2005, 81-83).
Rensis Likert found that survey research (today it could be done effectively via interactive websites) results were not often used effectively. He suggested that top-down feedback strategy was necessary in order to bring the desirable outcome in which all groups of the organization would be actively involved (Rothwell and Sullivan 2005, 30-31).
However those above named came up with many important theories none of them influenced the OD as we know it today more directly than the following ones:
Kurt Lewin came up with two fundamental theories. Firstly force field analysis suggests that there are two forces affecting workers performance - restraining forces and driving forces. Improved performance could be achieved by either strengthening a driving force or weakening the later. And secondly T-group theory, which was primarily invented in order to find the roots of inter-ethnic prejudice in US communities. These groups were designed to sensitize the forces of group dynamics like decision making and conflict resolution (Rothwell and Sullivan 2005, 87-88).
Wilfred Bion is the author of Tavistock Method - he was appointed to treat traumatized soldiers in World War II. Bion brought them into groups and while he worked with one of them at a time, the others spontaneously began to share their own experiences. He realised that while they were helping each other, at the same time they were learning from each other. This foundation was important in formation of semi-autonomous work teams.
It is also worth mentioning that Frederick Herzberg (see previous chapter) was applying Bion's insights to motivating employees (Rothwell and Sullivan 2005, 89-91).
Douglas McGregor and Frederick Taylor were already mentioned in the previous chapter.
When we try and compare OD and HR history we can easily see the parallel between both especially in behavioural management theories, although their roles in formation of TM are quite different though.
Role of HR in Talent management
Talent management, whether to be understood as an extension or successor of HR, is shifting the role of HR from being just a business' tool to the position of strategic partner. That is mostly because managers start to understand increasing importance of human resources as a competitive advantage and spend more time and energy on talent management initiatives (Cheese, Thomas and Craig 2008, 233). HR should be responsible for executing TM strategies, supervising TM process and providing guidance and new ideas about TM programs. HR's transformation into more strategic TM also forces its leaders to deeper understanding of organizational financial objectives or return on investment analysis so they could effectively execute management's strategy (Schweyer, Newman and Peter DeVries 2009, 29-32).
Role of OD in Talent management
Ideally for TM to be successful, it has to be deeply integrated in all sectors of the organization. First of all though, it has to be fully supported by top management then it could be further extended into other sectors of organization (departments, teams, units etc). The role of OD lies in changing the current status of the organization into a more effective one using behavioural sciences, at the same time emphasising the importance of individuals, providing support to them and continually changing in order to stay effective and healthy (Rothwell and Sullivan 2005, 19). OD adopted and developed many theories especially from behaviour management and it also provides TM with many useful tools for improving the performance of workers, recruiting, mentoring, succession planning, talent development, performance management and retention.
This paper was written as reaction on the current economical climate. It highlighted the biggest challenges which today's organisations are facing - with special importance being given to new technologies and the aging population - explaining how these affect organizations now and in the future. Further identified is Talent Management as a possible solution when facing these challenges and more so to discovering the roles of Organisational Development and Human Resource in Talent Management in the historic, present and future contexts.
Comparing the origins of Organisational Development and Human Resource showed that both have surprisingly many common traits especially in behavioural management, giving Talent Management the opportunity to build on those similarities and become a strategic partner for organizations in future. Talent Management should use the strengths of Human Resource and the philosophy of constant change of Organisational Development supported by new technologies in order to help organizations to create a culture of change, where the knowledge is highly nurtured, giving the organizations competitive advantage of timeless change planning.
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