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ABC Systems is currently in an expansion phase that requires strategic human resource planning rather than implementing ad hoc policies. Up until now, the organization has taken on a 'reactive' approach to the expansion which is starting to create problems in terms of employee turnover, absenteeism, low employee morale, disciplinary procedures and thereby low quality of output. Additionally, the organizational structure at ABC Systems was never planned to adapt to the expansion. Rather, it has evolved into a 'just-in-time' culture where leadership has become less significant in determining the effectiveness and direction of the establishment. The last few months have also seen the entry of newer, smaller firms into the industry.
The main purpose of this report is to analyse ABC Systems and its external challenges to determine effective human resource solutions that enable it cope market growth and competition in the best way possible so as to establish its ground within the IT Sector. This report will be divided into six sections: Organizational Structure, Strategic Human Resource Management, Human Resource Planning (HRP), Human Resource Development, Performance & Reward Strategies, and Employment Relationships. Finally, this report will enclose a conclusion that will summarize the most effective solutions for ABC Systems.
Mullins (2010) states that change within an organization is inevitable, inescapable and constant. The open-systems theory assets that businesses tend to interact, to a great extent, with the external environment. Changes in the external environment cannot be controlled by the management of an organization. But, efforts should be made to manage these changes which will eventually require a change in the organizational process and structure (Turner & Northway, 2011).
As organizations grow in size, human resource managers should take actions to manage the firm's growth so as to ensure smooth functioning of operations. This has not been the case at ABC Systems where management had introduced mere ad hoc policies to cope with changes in size of the organization. Like other firms that evolve without planned growth, ABC Systems will also face complexity and coordinate problems due to internal and external pressures that will require ABC Systems to change their organizational structure. Greiner (1972) discusses the organizational life cycle in terms of a framework for understanding the diverse issues for resolving problems of growth and consolidation. According to this, each fragment of the life-cycle (start-up, expansion, maturity and aging) has its own characteristics. In the case of ABC Systems which is past its start-up phase and is currently undergoing speedy expansion, there is a need for a formal structure and specialization. At the time of start-up, the focus was on coping with the external environment. However, with the growth in size of the business, it is important that the firm manages its internal environment to cope with the external challenges (Turner & Northway, 2011).
ABC Systems should adopt an organizational structure that promotes innovation and novelty because this makes it impossible to codify operational responses and discourage bureaucratic models (governed by rules and procedures) which lead to stagnation and decline due to lack of flexibility and low employee morale. The organizational structure most suited for ABC Systems are those with flat hierarchies and 'organic' organizational structures because it promotes an innovative and flexible environment that allows exploitation of information and knowledge. Furthermore, maintaining entrepreneurial values and continuous innovation is important to maintain a successful business. To prevent stagnation and decline of ABC Systems, the organization should retain its simplicity and responsiveness. ABC Systems should never lose focus on its external environment. An example of a flat organizational structure is a matrix structure (Turner & Northway, 2011).
Strategic Human Resource Management
Personnel management refers to a practice where management is concerned about the 'well-being' of its employees. This idea was introduced by 19th century social reformers who brought into limelight that building positive working relations and a loyal workforce can be good for the success of a business. Torrington et al (2007) suggests that is personnel management is workforce centred and focuses its efforts on the employees of the business by performing employee related functions such as training employees, explaining expectations of management, justifying actions of management, dealing with employee work problems, modifying actions of management that may result in an unwelcome response from employees (Torrington et al, 2007).
Human resource management, on the other hand, is more of a strategic role compared to personnel management - an operational role. Armstrong (2006) refers to human resource management as the management of an 'organization's 'most valued assets' which contribute towards the success of an organization. The concept of human resource management stresses on the strategic importance of human resources in a business. Human resource management is considered to be central to an organization's performance and hence, should include line managers. It suggests that an organizational structure should be vertically and horizontally integrated to increase organizational performance. Human resource management is also responsible for improving reward strategies that contribute towards performance of the employees that thereby, result in organizational success (Armstrong, 2006).
Strategic Human Resource Management is linked to the overall strategy making process of the organization. This approach takes a long-standing view of observing, management, and controlling employees to achieve organizational strategy. It refers to making decisions based on the organizational goals and visions by creating policies and procedures that are concerned with employee learning and development, reward strategies, employment relationships, performance management and so on. In a nutshell, human resource activities are linked with the overall strategy of the organization to ensure it has adequate competent and committed employees to achieve organizational success (Torrington et al, 2007).
The challenges in the external environment have resulted in organizations adopting strategic human resource management to cope with increased competition. Maintaining competitive advantage is essential for the success of any business. In the case of ABC Systems, the IT industry has witnessed some new entrants and this requires that ABC Systems improve its employee's capabilities and skills so that the business does not lose its customers to the new entrants. Strategic human resource management focuses on investing in human resource as the most efficient approach to achieving competitive advantage in light of external challenges (McGuiness, 2011).
Implementing changes in the organizational structure is quite a daunting task but is undoubtedly, the responsibility of the human resource manager. It requires that the human resource manager reassess the organizational strategy and realign it with external challenges (or customer demands). At ABC Systems, there have been quite a few changes in its organizational structure and culture due to its expansion. It is important that human resource managers carefully plan the implementation of change in an organization because ad hoc changes may cause complexities that may become quite difficult to 'undo' in a competitive and challenging industry. Furthermore, Mullins (2010) notes that the three elements - structure, strategy and culture - are so closely linked that a change in strategy requires a change in structure which inevitably requires a change in organizational culture (McGuiness, 2011).
Psychologist Kurt Lewin suggests three steps to handle resistance to change. These include (Turner & Northway, 2011):
Unfreezing - This refers to demolishing current employee practices/processes and explaining to employees the need for this change.
Moving - Employees are encouraged to adopt and follow new practices/ processes.
Refreezing - The new practices/processes are established as the new norms of the business. Reward strategies (or other motivational forms) should be implemented for following the new processes.
Human Resource Planning
Human resource planning is a strategic management process that identifies an organization's present and future human resource needs, formulates and implements plans to meet those requirements and monitors the overall performance of these plans. It requires that human resource managers forecast when these employee positions need to be filled, the number of employees needed and what type of employees should be recruited. In short, it matches the need for employees by an organization in the short-term and long term and ensures the quality and quantity needs of the business (in terms of employees) are fulfilled (McGuiness, 2011).
In terms of human resource planning, ABC Systems seems to be far behind. The organization has evolved in its organizational structure to cope with the expansion without any strategic or forward planning. Ad hoc policies and procedures have been introduced to deal with the expansion. Although this has worked in the past, the organization has witnessed some negative results in the form of employee turnover, absenteeism, low employee morale and declining quality of work. ABC Systems, therefore, has to take on a forward thinking approach by introducing organizational change that has been strategically planned and linked with the human resource function of the organization. This means introducing flatter structures and conducting employee development programmes to deal with the changes in the organization (Turner & Northway, 2011).
The recruitment and selection process at ABC Systems has received widespread criticism throughout the organization because employees seem to be leaving just as soon as they are recruited. This may be due to the fact that there is no formal assessment to identify the best candidate for the job role making it possible that the organization is hiring the incompetent candidates or placing competent candidates in the wrong job roles. A good recruitment and selection process takes into account the human resource plan and ensures that a business attracts the 'most competent' candidate for the job. Placing the wrong candidate in a job position can often affect the quality of output thereby, affecting organizational performance. It also leads to employee demotivation and increase employee turnover as is the case in ABC Systems. In this regard, it is important that ABC Systems introduce a formal human resource planning process to rectify this problem. The human resource planning process can be done in three step process (McGuiness, 2011):
Demand Forecasting - This refers to forecasting the number of employees an organization needs to carry outs its organizational functions effectively.
Supply Forecasting - This refers to the organizations supply of manpower with the right skills, qualifications and capabilities.
Reconcile Demand and Supply - This refers to formulating plans to match demands and supply of employees.
Additionally, ABC Systems can 'undo' its past mistakes by conducting a review of the skills and qualifications of all of its employees. This will enable the organization to place the right candidate in the right position by moving them across the organization through transfers, promotions and rotations. It may also be essential to training existing employees so that they are better able to perform their current job role and responsibilities. Hiring and firing is a key aspect of such a process but is considered more expensive (Saunders, 2007).
Human Resource Development
The increasing importance of training and development to remain competitive in a challenging external environment, has contributed to the introduction of human resource development as part of the strategic management process. Human resource development refers to the investment of an organization in its human capital. It stresses on employee development programmes and training programmes that will help an organization to meet its future requirement in terms of human capital skills. From an employee's perspective, human resource development increases personal employability, adaptability and competence by ensuring an opportunity to learn new skills and attain knowledge that allows carrying out day-to-day job responsibilities. From an organization's perspective, human resource development increases employee skills that thereby improve organizational effectiveness and sustainability (Gibb, 2007).
The lack of an effective human resource development strategy at ABC Systems can be seen by the fact that there has been a reduction in the quality of output in the past few months. ABC Systems will therefore have to introduce a good human resource development strategy that focuses on a systematic learning process to enhance jobs skills of its workforce. The human resource manager will have to define specific learning objectives and ensure that these objectives are met by both, line managers and their staff. ABC Systems can also introduce a strategy that includes changing the organizational culture to one that promotes learning and continuous development. Organizations with lifelong learning cultures are often successful in coping with external challenges due to the adaptive attitudes of its employees (McGuiness, 2011).
Performance and Reward Strategies
It is important that human resource managers link their human resource strategy to performance management which refers to a strategic approach to improve proficiency, competence and performance of an organization's employees. Performance management control and monitors human resource strategy to achieve organizational effectives. After successful implementation of a human resource plan, it is important that ABC Systems bring on an initiative that encourages a high performance culture to improve overall performance. An effective performance management system usually has a good reward system that matches employee goals to the goals of the business so that employees are motivate to properly contribute to the success of the business. Performance appraisals techniques need to be devised to estimate whether the human resource strategy is moving in the right direction and employees are given feedback on their performance and other future expectations. These techniques allow personnel to examine their performance in light of management expectation. From an organization's perspective, performance appraisals help determine employees suitable for promotions and those that need better training to carry out job responsibilities (Armstrong, 2006).
Reward systems usually act as motivators for employees to perform their job responsibilities in the best way possible. Currently, ABC Systems is witnessing low employee morale with high turnover and absenteeism. A change in its reward strategies may help change the situation. For instance, the human resource manager can introduce a best engineer of the year award for the engineer that provides the best output for ABC Systems or it could provide bonuses for all staff exceeding an efficiency of operations. Reward strategies need to be carefully linked to the human resource strategy of the organization. Furthermore, it is important that ABC Systems benchmark reward strategies to those of the industry. The high turnover may also be a result of unsatisfactory reward strategies and ABC Systems may be losing valuable staff to new entrants in the market. A good reward strategy ensures that employees have good morale, low turnover (and absenteeism) and increased quality of output that ensures business performance (McGuiness, 2011).
The term employment relationships denote the relationship between employers and employees within a business environment. Human resource managers are responsible for promoting good communication and effective cooperation amongst both parties. However, in the case of ABC Systems, there has been many disciplinary and grievance procedures conducted in the last few months which can be deduced to lack of proper communication and knowledge sharing amongst employers and employees within the organization (McGuiness, 2011).
ABC Systems can improve employment relationships by introducing psychological contracts wherein employers and employees discuss their perspectives and expectations amongst each other. It is important that the human resource function at ABC Systems train its line managers to build trusting relationships, promote effective communication and clarify issues giving constructive feedback. Positive psychological contracts promote improve relationships amongst employees which promote knowledge sharing and thereby improves employee morale and the performance of the organization (McGuiness, 2011).
Employment relationships can also be improved by equality of opportunity amongst the workforce at ABC Systems. This means that the human resource function at ABC Systems should create an organizational culture wherein employees embrace diversity and have respect for different sexes, races and religions. Furthermore, ABC Systems should ensure that discipline and grievance procedures are fair and unbiased. This means that employees with similar complaints are dealt in an equal manner. A fair grievance and disciplinary procedure creates and environment of strong employee morale and loyalty towards the organization (McGuiness, 2011).
ABC Systems should move towards a flatter organizational structure that promotes knowledge sharing and better communication amongst employees. The human resource function should take on a proactive approach to challenges in the environment. It should encourage strategic planning (linking human resources to organizational goals) combines with a systematic process for implementing any change in the organization. With intense market growth and competition, human resource planning is an urgent requirement at ABC Systems. The recruitment and selection process at ABC Systems also needs to improve to accommodate formal assessments. ABC Systems should invest in its human capital if it wants to gain competitive advantage and retain its customers. Furthermore, the organization requires an effective performance management system that ensures that human resource strategies are moving in the right direction. Reward strategies need to be improved to boost employee morale. ABC Systems also need to ensure that employers and employees have good working relationships through psychological contracts, equality of opportunity and proper discipline and grievance procedures. In conclusion, a move towards a strategic human resource management is the best solution for ABC Systems.