Human resources
Michael Armstrong
th edition10
HUMAN
RESOURCE
MANAGEMENT
PRACT ICE
A Handbook of
Now in its tenth edition, this internationally best-selling text has been fully updated to
incorporate new developments in human resource management policy and research.
Based on the latest HRM theory, A Handbook of Human Resource Management Practice
considers the HR function in relation to the needs of the business as a whole.Thoroughly
updated in the light of current best practice and drawing on new research, the handbook
presents in-depth coverage of:
• managing people; • performance management;
• HRM processes; • human resource development;
• work and employment; • rewarding people;
• organizational behaviour; • employee relations;
• organization, design and development; • health, safety and welfare;
• people resourcing; • employment and HRM services.
The book also now includes sections on human capital management, the role of the front-line
manager, developing and implementing HR strategies, and learning and development.
Recognizing HRM as a strategic process, Michael Armstrong provides practical advice on how
companies can maximize the effectiveness of the HRM function and ensure that it makes a
major contribution to organizational success.This comprehensive handbook is also essential
reading for HRM students at both undergraduate and postgraduate levels.
FREE CD ROM FOR LECTURERS
Michael Armstrong has created a unique CD ROM containing over 400 lecture presentation slides.
This CD is available from the publisher on request.
Michael Armstrong is a Companion and former Chief Examiner of the Chartered
Institute of Personnel and Development (CIPD), joint managing partner of e-reward and an
independent management consultant. He is the author of several best-selling HR titles
including Performance Management, Strategic Human Resource Management, A Handbook of
Management and Leadership (with Tina Stephens), Job Evaluation and Reward Management (with
Helen Murlis), all published by Kogan Page.
Kogan Page
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London N1 9JN
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Kogan Page US
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Human resources
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Michael
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10TH EDITION
A Handbook of
Hndbk HRM Prac 10 PB aw 12/5/06 9:57 am Page 1
HUMAN
RESOURCE
MANAGEMENT
PRACTICE
A Handbook of
London and Philadelphia
Michael Armstrong
HUMAN
RESOURCE
MANAGEMENT
PRACTICE
A Handbook of
10TH EDITION
First published by Kogan Page Limited as A Handbook of Personnel Management Practice in 1977
Second edition 1984
Third edition 1988
Fourth edition 1991
Fifth edition 1995
Sixth edition 1996
Seventh edition published by Kogan Page Limited as A Handbook of Human Resource Management Practice
in 1999
Eighth edition 2001
Ninth edition 2003
Tenth edition 2006
Apart from any fair dealing for the purposes of research or private study, or criticism or review, as
permitted under the Copyright, Designs and Patents Act 1988, this publication may only be reproduced,
stored or transmitted, in any form or by any means, with the prior permission in writing of the
publishers, or in the case of reprographic reproduction in accordance with the terms and licences issued
by the CLA. Enquiries concerning reproduction outside these terms should be sent to the publishers at
the undermentioned addresses:
120 Pentonville Road 525 South 4th Street, #241
London N1 9JN Philadelphia, PA 19147
United Kingdom USA
www.kogan-page.co.uk
© Michael Armstrong, 1977, 1984, 1988, 1991, 1995, 1996, 1999, 2001, 2003, 2006
The right of Michael Armstrong to be identified as the author of this work has been asserted by him in
accordance with the Copyright, Designs and Patents Act 1988.
British Library Cataloguing in Publication Data
A CIP record for this book is available from the British Library.
ISBN 0 7494 4631 5
Library of Congress Cataloging-in-Publication Data
Armstrong, Michael, 1928-
A handbook of human resource management practice/Michael Armstrong.–10th ed.
p.cm.
Includes bibliographical references and index.
ISBN 0-7494-4631-5
1. Personnel management–Handbooks, manuals, etc. I. Title.
HF5549.17.A76 2006
658.3–dc22
2005032487
Typeset by Jean Cussons Typesetting, Diss, Norfolk
Printed and bound in Great Britain by Cambridge University Press
Contents
List of figures xvii
List of tables xxi
About the author xxiii
Preface xxv
PART I MANAGING PEOPLE
1 Human resource management 3
Human resource management defined 3; Human resource system 4;
Models of HRM 5; Aims of HRM 8; Policy goals of HRM 10;
Characteristics of HRM 11; Reservations about HRM 15; HRM and
personnel management 18; How HR impacts on organizational
performance 20; HRM in context 24
2 Human capital management 29
Human capital management defined 29; Human capital management
and human resource management 30; The concept of human capital 33;
Human capital management: practice and strategy 36; Human capital
measurement 37; Human capital reporting 47
3 Role of the HR function 53
The overall role of the HR function 54; The role of HR in facilitating and
managing change 54; Variations in the practice of HR 56; Organizing the
HR function 57; Marketing the HR function 59; Preparing, justifying and
protecting the HR budget 60; Outsourcing HR work 61; Shared HR
services 63; Using management consultants 64; Evaluating the HR
function 66
4 The role of the HR practitioner 71
The basic roles 71; Models of the practitioners of HR 76; Gaining support
and commitment 81; Ethical considerations 84; Professionalism in HRM
85; Ambiguities in the role of HR practitioners 87; Conflict in the HR
contribution 88; The competencies required by HR professionals 89
5 Role of the front-line manager 93
The basic role 93; The line manager and people management 94; The
respective roles of HR and line management 95; The line manager’s role
in implementing HR policies 97; How to improve front-line managers as
people managers 98
6 International HRM 99
International HRM defined 99; Issues in international HRM 99;
International organizational models 100; Convergence and
divergence 101; Cultural diversity 102; Think globally and act
locally 104; International HR policies 104; Managing expatriates 104
PART II HUMAN RESOURCE MANAGEMENT PROCESSES
7 Strategic HRM 113
The concept of strategy 113; Strategic HRM defined 115; Aims of
strategic HRM 116; Approaches to strategic HRM 117; Implementing
strategic HRM 121
8 HR strategies 123
HR strategies defined 123; Purpose 124; The distinction between
strategic HRM and HR strategies 124; Types of HR strategies 124;
Criteria for an effective HR strategy 129
vi ❚ Contents
9 Developing and implementing HR strategies 131
Propositions about the development process 132; Levels of strategic
decision-making 132; Strategic options and choices 133; Approaches
to HR strategy development 134; Methodology for strategy
development 140; Conducting a strategic review 141; Setting out the
strategy 143; Implementing HR strategies 143
10 HRM policies 147
What human resource policies are 147; Why have HR policies 147; Do
policies need to be formalized? 148; HR policy areas 148; Formulating
HR policies 156; Implementing HR policies 157
11 Competency-based HRM 159
Types of competencies 160; Competency frameworks 161; Reasons for
using competencies 163; Coverage of competencies 164; Use of
competencies 165; Developing a competency framework 167; Defining
technical competencies 169; Keys to success in using competencies 169;
Emotional intelligence 170
12 Knowledge management 173
Knowledge management defined 174; The concept of knowledge 175;
The purpose and significance of knowledge management 176;
Approaches to knowledge management 176; Knowledge management
systems 178; Knowledge management issues 178; The contribution of
HR to knowledge management 180
13 Analysing roles, competencies and skills 181
Role analysis 187; Competency analysis 193; Skills analysis 198
PART III WORK AND EMPLOYMENT
14 The nature of work 205
What is work? 205; Theories about work 206; Organizational factors
affecting work 208; Changing patterns of work 210; Unemployment 212;
Attitudes to work 212; Job-related well-being 212
Contents ❚ vii
15 The employment relationship 215
The employment relationship defined 215; Nature of the employment
relationship 215; Basis of the employment relationship 217; Defining the
employment relationship 217; Significance of the employment
relationship concept 218; Changes in the employment relationship 218;
Managing the employment relationship 218; Trust and the employment
relationship 220
16 The psychological contract 225
The psychological contract defined 225; The significance of the
psychological contract 227; The nature of the psychological contract 228;
How psychological contracts develop 229; The changing nature of the
psychological contract 231; The state of the psychological contract 233;
Developing and maintaining a positive psychological contract 234; The
state of the psychological contract 2004 235
PART IV ORGANIZATIONAL BEHAVIOUR
17 Characteristics of people 239
Individual differences 239; Attitudes 244; Influences on behaviour
at work 244; Attribution theory – how we make judgements about
people 245; Orientation to work 246; Roles 247; Implications for HR
specialists 248
18 Motivation 251
The process of motivation 252; Types of motivation 253; Motivation
theory 254; Instrumentality theory 254; Content (needs) theory 255;
Process theory 258; Herzberg’s two-factor model 262; The relationship
between motivation, job satisfaction and money 263; Job satisfaction 264;
Motivation and money 267; Motivation strategies 268
19 Organizational commitment and engagement 271
The concepts of commitment and engagement 271; Organizational
commitment 273; Influences on commitment and employee
satisfaction 279; Engagement 281
viii ❚ Contents
20 How organizations function 283
Basic considerations 283; Organization theories 283; Organization
structure 288; Types of organization 289; Organizational processes 292
21 Organizational culture 303
Definitions 303; The significance of culture 305; How organizational
culture develops 306; The diversity of culture 306; The components of
culture 307; Classifying organizational culture 309; Assessing
organizational culture 311; Measuring organizational climate 312;
Appropriate cultures 313; Supporting and changing cultures 314
PART V ORGANIZATION, DESIGN AND DEVELOPMENT
22 Organization design 319
The process of organizing 319; Aim 320; Conducting organization
reviews 321; Organization analysis 321; Organization diagnosis 322;
Organization planning 324; Responsibility for organization design 325
23 Job design and role development 327
Jobs and roles 327; Factors affecting job design 328; Job design 330; Job
enrichment 332; Self-managing teams 333; High-performance work
design 334; Role development 334
24 Organizational development, change and transformation 337
What is organizational development? 337; Organization
development 338; Change management 343; Organizational
transformation 352; Development and change processes 355
PART VI PEOPLE RESOURCING
People resourcing defined 359; People resourcing and HRM 359;
Plan 361
25 Human resource planning 363
The role of human resource planning 363; Aims of human resource
planning 368; The process of human resource planning 368; Resourcing
strategy 371; Scenario planning 372; Estimating future human resource
requirements 373; Labour turnover 375; Action planning 382; The
contribution of HR to human resource planning 388
Contents ❚ ix
26 Talent management 389
Talent management defined 390; The elements of talent
management 390; Creating a great place to work 394; Attraction
strategies 395; Retention strategies 397; Career management 399;
Talent management for knowledge workers 407; Talent management
in practice 407
27 Recruitment and selection 409
The recruitment and selection process 409; Defining requirements 409;
Attracting candidates 414; Advertising 416; E-recruitment 420;
Outsourcing recruitment 423; Educational and training
establishments 424; Application forms 425; Sifting applications 425;
Selection methods 429; Types of interviews 430; Assessment centres 430;
Graphology 431; Choice of selection methods 432; Improving the
effectiveness of recruitment and selection 432; References,
qualifications and offers 434; Final stages 436
28 Selection interviewing 439
Purpose 439; Advantages and disadvantages of interviews 440;
The nature of an interview 441; Interviewing arrangements 442;
Preparation 443; Timing 444; Planning and structuring interviews 444;
Interviewing approaches 445; Interview techniques – starting and
finishing 450; Interviewing techniques – asking questions 450; Selection
interviewing skills 457; Coming to a conclusion 458; Dos and don’ts of
selection interviewing 459
29 Selection tests 461
Psychological tests: definition 461; Purpose of psychological tests 461;
Characteristics of a good test 462; Types of test 463; Interpreting test
results 467; Choosing tests 468; The use of tests in a selection
procedure 468
30 Introduction to the organization 471
Induction defined 471; Why taking care about induction is important 472;
Reception 473; Documentation 474; Company induction – initial
briefing 475; Introduction to the workplace 475; Formal induction
courses 476; On-the-job induction training 477
x ❚ Contents
31 Release from the organization 479
General considerations 479; Redundancy 482; Outplacement 485;
Dismissal 487; Voluntary leavers 490; Retirement 490
PART VII PERFORMANCE MANAGEMENT
32 The basis of performance management 495
Performance management defined 495; Aims of performance
management 496; Characteristics of performance management 496;
Understanding performance management 497; Guiding principles of
performance management 499; Performance appraisal and performance
management 500; Views on performance management 500
33 The process of performance management 503
Performance management as a process 503; Performance management as
a cycle 503; Performance agreements 504; Managing performance
throughout the year 508; Reviewing performance 509; Rating
performance 512; Dealing with under-performers 515; Introducing
performance management 517
34 360-degree feedback 521
360-degree feedback defined 521; Use of 360-degree feedback 522;
Rationale for 360-degree feedback 523; 360-degree feedback –
methodology 524; Development and implementation 526; 360-degree
feedback – advantages and disadvantages 527; 360-degree feedback –
criteria for success 528
PART VIII HUMAN RESOURCE DEVELOPMENT
35 Strategic human resource development 533
Strategic HRD defined 533; Strategic HRD aims 534; Components of
HRD 534; HRD and HRM 535; The process of learning and
development 535; Strategies for HRD 536; Human resource development
philosophy 537
36 Organizational learning and the learning organization 539
Organizational learning 540; The learning organization 543
Contents ❚ xi
37 How people learn 549
Learning defined 549; The learning process 550; Learning theory 550;
Learning styles 552; Learning to learn 554; The learning curve 554; The
motivation to learn 555; The implications of learning theory and
concepts 556
38 Learning and development 559
Learning 559; Development 570; Training 575
39 E-learning 583
What is e-learning? 583; Aim of e-learning 584; The technology of
e-learning 584; The e-learning process 585; The business case for
e-learning 586; Developing e-learning processes 588
40 Management development 591
Aims of management development 592; Management development:
needs and priorities 592; The requirements, nature and elements of
management development 593; Management development activities 594;
Approaches to management development 596; Emotional intelligence
and leadership qualities 602; Responsibility for management
development 603
41 Formulating and implementing learning and development strategies 607
Making the business case 607; Developing a learning culture 609;
Identifying learning needs 610; Planning and implementing learning and
development programmes 612; Evaluation of learning 615
PART IX REWARDING PEOPLE
42 Reward management 623
Reward management defined 623; The aims of reward management 624;
The philosophy of reward management 624; The elements of reward
management 625; Total reward 629; Reward management for directors
and executives 634; Reward management for sales staff 636; Paying
manual workers 636
xii ❚ Contents
43 Strategic reward 643
Reward strategy defined 643; Why have a reward strategy? 644; The
structure of reward strategy 644; The content of reward strategy 645;
Guiding principles 649; Developing reward strategy 649; Components of
an effective reward strategy 651; Reward strategy priorities 652;
Examples of reward strategies 653; Implementing reward strategy 656;
Reward strategy and line management capability 657
44 Job evaluation 659
Job evaluation defined 660; Analytical job evaluation 660; Non-analytical
job evaluation 664; The incidence of job evaluation 666; Computer-
assisted job evaluation 667; Criteria for choice 668; The case for and
against job evaluation 671; Designing a point-factor job evaluation
scheme 672; Conclusions 679
45 Market rate analysis 681
Purpose 681; The concept of the market rate 681; The information
required 682; Job matching 682; Presentation of data 683; Sources of
information 683
46 Grade and pay structures 689
Grade structure defined 689; Pay structure defined 690; Guiding
principles for grade and pay structures 690; Types of grade and pay
structure 691; Designing grade and pay structures 698
47 Contingent pay 707
Contingent pay defined 708; The incidence of contingent pay 708; The
nature of individual contingent pay 709; Individual contingent pay as a
motivator 709; Arguments for and against individual contingent pay 710;
Alternatives to individual contingent pay 712; Criteria for success 713;
Performance-related pay 713; Competence-related pay 714;
Contribution-related pay 716; Skill-based pay 718; Service-related
pay 720; Choice of approach 721; Readiness for individual contingent
pay 721; Developing and implementing individual contingent pay 724;
Team-based pay 724; Organization-wide schemes 725
Contents ❚ xiii
48 Employee benefits, pensions and allowances 729
Employee benefits 729; Occupational pension schemes 731; Allowances
and other payments to employees 734
49 Managing reward systems 737
Reward budgets and forecasts 737; Evaluating the reward system 739;
Conducting pay reviews 740; Control 744; Reward procedures 745;
Responsibility for reward 746; Communicating to employees 748
PART X EMPLOYEE RELATIONS
Employee relations defined 751; Plan 752
50 The framework of employee relations 753
The elements of employee relations 754; Industrial relations as
a system of rules 754; Types of regulations and rules 755; Collective
bargaining 756; The unitary and pluralist views 758; The reconciliation of
interests 759; Individualism and collectivism 759; Voluntarism and its
decline 759; The HRM approach to employee relations 761; The context
of industrial relations 762; Developments in industrial relations 763; The
parties to industrial relations 766; Role of the HR function in employee
relations 771
51 Employee relations processes 773
Employee relations policies 774; Employee relations strategies 778;
Employee relations climate 779; Union recognition and
de-recognition 781; Collective bargaining arrangements 783; Informal
employee relations processes 788; Other features of the industrial
relations scene 789; Managing with trade unions 791; Managing
without trade unions 792
52 Negotiating and bargaining 795
The nature of negotiating and bargaining 795; Negotiating 796;
Negotiating and bargaining skills 803
xiv ❚ Contents
53 Employee voice 807
The concept of employee voice 807; Involvement and participation 808;
Purposes of employee voice 808; The framework for employee voice 808;
Expression of employee voice 809; Factors affecting choice 810; Forms of
employee voice 810; Joint consultation 811; Attitude surveys 812;
Suggestion schemes 814; Planning for voice 815
54 Communications 817
Communication areas and objectives 819; Communications strategy 819;
Communication systems 821
PART XI HEALTH, SAFETY AND WELFARE
55 Health and safety 829
Managing health and safety at work 830; The importance of health
and safety in the workplace 830; Benefits of workplace health
and safety 831; Health and safety policies 832; Conducting risk
assessments 833; Health and safety audits 836; Safety inspections 838;
Occupational health programmes 838; Managing stress 839; Accident
prevention 841; Measuring health and safety performance 841;
Communicating the need for better health and safety practices 842;
Health and safety training 843; Organizing health and safety 843
56 Welfare services 845
Why provide welfare services? 845; What sort of welfare services? 847;
Individual services 848; Group welfare services 851; Provision of
employee welfare services 851; Internal counselling services 852;
Employee assistance programmes 852
PART XII EMPLOYMENT AND HRM SERVICES
57 Employment practices 857
Terms and conditions and contracts of employment 858; Mobility
clauses 860; Transfer practices 860; Promotion practices 861; Flexible
working 862; Attendance management 863; Equal opportunity 866;
Ethnic monitoring 867; Managing diversity 868; The Data
Protection Act 869; Sexual harassment 870; Smoking 872; Substance
abuse at work 873; Bullying 873; AIDS 874; E-mails 874; Work-life
balance 875
Contents ❚ xv
58 HRM procedures 879
Grievance procedure 880; Disciplinary procedure 881; Capability
procedure 883; Redundancy procedure 885
59 Computerized human resource information systems 889
Benefits of a computerized human resource information system 890;
HR information strategy 890; The functions of a computerized HR
system 891; The technical infrastructure 892; Rating of system
features 892; An effective system 893; Problems and how to deal with
them 894; Developing a computerized HR information system 895;
Applications 899; Auditing the system 906
Appendix: Example of an attitude survey 907
References 911
Subject index 953
Author index 977
xvi ❚ Contents
List of figures
0.1 Route map xxvi
0.2 Relationship between aspects of people management 2
1.1 HRM activities 5
1.2 The Human Resource Cycle 6
1.3 The Harvard Framework for Human Resource Management 7
1.4 Model of the link between HRM and performance 23
2.1 The Sears Roebuck Model: Employee-Customer-Profit chain 41
2.2 The balanced scorecard 43
2.3 The EFQM model 44
2.4 Human capital external reporting framework 49
2.5 Human capital reporting dashboard for area managers: Nationwide 51
4.1 Types of personnel management 78
4.2 The changing role of the HR practitioner 79
9.1 Strategic review sequence 142
13.1 Example of a role profile 192
15.1 Dimensions of the employment relationship 216
16.1 A model of the psychological contract 230
18.1 The process of motivation 253
18.2 Motivation model 260
20.1 Channels of communication within groups 294
25.1 The process of human resource planning 370
25.2 A survival curve 378
26.1 The elements of talent management 391
26.2 Career progression curves 401
26.3 The process of career management 401
26.4 Management succession schedule 404
26.5 Competence band career progression system 405
26.6 Career paths in a career family structure 406
26.7 Talent acquisition and development at Centrica 408
27.1 Person specification for an HR officer 412
27.2 Example of an application form (compressed) 426
27.3 Accuracy of some methods of selection 433
28.1 Part of a critical-incident interview for sales people 448
28.2 Behavioural-based interview set 449
29.1 A normal curve 467
33.1 The performance management cycle 504
34.1 360-degree feedback model 522
34.2 360-degree feedback profile 525
35.1 Components of human resource development 534
36.1 Single- and double-loop learning 541
36.2 Managing learning to add value; the learning cycle 542
37.1 The Kolb learning cycle 552
37.2 A standard learning curve 555
37.3 Different rates of learning 555
37.4 A stepped learning curve 556
38.1 Stages in preparing and implementing a personal development plan 572
38.2 Impact of development 575
38.3 Systematic training model 577
39.1 A blended learning programme 587
41.1 Learning needs analysis – areas and methods 611
41.2 A learning specification 613
42.1 Reward management: elements and interrelationships 630
42.2 The components of total reward 631
42.3 Model of total reward 633
43.1 A reward gap analysis 646
43.2 Reward philosophy and guiding principles at B&Q 650
43.3 A model of the reward strategy development process 651
43.4 Reward strategy priorities 652
43.5 The Norwich Union Insurance Progression, Performance & Pay 654
framework
xviii ❚ List of figures
43.6 Integrated reward model – Kwik-fit 655
44.1 A paired comparison 665
44.2 A typical job evaluation programme 675
44.3 Design sequence 676
46.1 A narrow, multi-graded structure 692
46.2 A broad-graded structure 693
46.3 Narrow and broad-banded structures 694
46.4 A broad-banded structure with zones 694
46.5 A job family structure 694
46.6 A career family structure 696
46.7 A pay spine 697
46.8 Type of grade and pay structure 701
46.9 Flow chart: design of a new grade and pay structure 705
47.1 Incidence of contingent pay schemes 708
47.2 Line of sight model 713
47.3 Performance-related pay 713
47.4 Competence-related pay 714
47.5 Contribution pay model (1) 716
47.6 Contribution pay model (2) 716
47.7 Contribution-related pay 717
47.8 Contribution-related pay model (Shaw Trust) 718
50.1 Employee relations: reconciliation of interests 760
52.1 Negotiating range within a settlement range 799
52.2 Negotiating range with a negotiating gap 800
52.3 Stages of a negotiation 801
53.1 A framework for employee voice 809
List of figures ❚ xix
List of tables
1.1 Similarities and differences between HRM and personnel management 19
1.2 Outcomes of research on the link between HR and organizational
performance 21
4.1 Competency framework for HR professionals 90
4.2 Key competency areas 91
9.1 Linking HR and competitive strategies 136
9.2 HRM best practices 137
11.1 Incidence of different competency headings 162
14.1 Feelings at work 213
16.1 Job satisfaction 235
18.1 Summary of motivation theories 256
18.2 Motivation strategies 269
19.1 The Hay Group model of engaged performance 282
25.1 Survival rate analysis 378
25.2 Leavers by length of service 380
32.1 Performance appraisal compared with performance management 501
37.1 The implications of learning theory and concepts 557
38.1 Characteristics of formal and informal learning 565
41.1 Use of learning activities 615
41.2 Use of evaluation tools 619
42.1 Economic theories explaining pay levels 626
42.2 Summary of payment and incentive arrangements for sales staff 637
42.3 Comparison of shopfloor payment-by-result schemes 639
43.1 Examples of reward strategies and their derivation 656
44.1 Comparison of approaches to job evaluation 669
45.1 Summary of sources of market data 686
46.1 Summary analysis of different grade and pay structures 699
47.1 Comparison of individual contingent pay schemes 722
50.1 Contrasting dimensions of industrial relations and HRM 761
54.1 Communication areas and objectives 820
59.1 Computer system problems and solutions 894
xxii ❚ List of tables
About the author
Michael Armstrong is an honours graduate in economics from the London School of
Economics, a Companion of the Chartered Institute of Personnel and Development
and a Fellow of the Institute of Management Consultancy.
This book is largely based on Michael Armstrong’s hands-on experience as a
personnel practitioner, initially in the engineering industry, specializing in industrial
relations, and then in the engineering and food industries as an employee develop-
ment specialist.
For 12 years he was an executive director with responsibility for HR in a large
publishing firm and for three years of that period also acted as general manager for
an operating division. For a further 10 years he headed up the HR consultancy divi-
sion of Coopers & Lybrand. He is Managing Partner of e-reward.uk and also practises
as an independent consultant. This experience has been supplemented recently by a
number of research projects carried out on behalf of the Chartered Institute of
Personnel and Development. These covered the personnel function’s contribution to
the bottom line, strategic HRM, incentive pay, job evaluation, team rewards, broad-
banded pay structures, and performance management. He was Chief Examiner
Employee Reward for the CIPD from 1997–2001.
His publications for Kogan Page include Reward Management, Performance Manage-
ment, How to Be an Even Better Manager, A Handbook of Management Techniques and A
Handbook of Employee Reward, Management and Leadership.
Preface
This tenth edition of A Handbook of Human Resource Management Practice contains
many additions and revisions. It refers to major developments in HR practice in the
last two to three years such as the development of the theory and practice of human
capital management, talent management and approaches to learning and develop-
ment, all covered in new or substantially revised chapters. Reference is also made to a
number of significant research projects including those conducted by the CIPD, IES
and e-reward. Chapters on the following subjects have been either wholly replaced or
extensively revised in the light of new concepts of good practice, the experience of the
author as a practitioner and the outcomes of research:
● human resource management;
● role of the HR function;
● role of the HR practitioner;
● strategic human resource management;
● competency-based HRM;
● the delivery of learning and training;
● performance management;
● reward management fundamentals;
● grade and pay structures.
The plan of the handbook is illustrated in the ‘route map’ shown in Figure 0.1.
xxvi ❚ Preface
3 Role of HR function
4 Role of HR practitioner
5 Role of line manager
II HRM processes
7 Strategic HRM
8 HR strategies
9 Developing HR strategies
10 HRM policies
11 Competency-based HRM
12 Knowledge management
13 Analysing roles,
competencies and skills
V Organization
22 Organization
design
23 Job and role
design
24 Organization
development
VI People resourcing
25 Human resource
planning
26 Talent
management
27 Recruitment and
selection
28 Selection tests
29 Introduction to the
organization
30 Release from the
organization
VII Performance
management
32 Basis of
performance
management
33 Performance
management
processes
34 360-degree
feedback
VIII Human resource
development
35 Strategic HRD
36 Organizational
learning
37 How people learn
38 Learning and
development
39 E-learning
40 Management
development
41 Learning and
development
strategies
IX Rewarding
people
42 Reward
management
43 Strategic reward
44 Job evaluation
45 Market rate
analysis
46 Grade and pay
structures
47 Contingent pay
48 Employee benefits
49 Managing reward
systems
X Employee
relations
50 Framework of
employee relations
51 Employee relations
processes
52 Negotiating and
bargaining
53 Employee voice
54 Communications
XI Health, safety
and welfare
55 Health and safety
56 Welfare services
XII Employment and
HRM services
57 Employment
practices
58 HRM procedures
59 Computerised
HR information
systems
Factors affecting HRM strategy
policy and practice
III Work and employment
14 The nature of work
15 The employment relationship
16 The psychological contract
IV Organizational behaviour
17 Characteristics of people
18 Motivation
19 Commitment and engagement
20 How organizations function
21 Organizational culture
I People management
1 Human resource management
2 Human capital management
HRM strategy,
policy and
practice
6 International HRM
Figure 0.1 Route map
Managing people
This part underpins the rest of the Handbook. It deals with the approaches and philosophies
that affect how people are managed in organizations, the roles of the HR function and its
members, and the special considerations that affect international people management. The
term ‘people management’ embraces the two related concepts of human resource management
(HRM) and human capital management (HCM), which are defined and explained in the first
two chapters. These have virtually replaced the term ‘personnel management’, although the
philosophies and practices of personnel management still provide the foundations for the
philosophy and practices of HRM and HCM. The relationships between these aspects of people
management are modelled in Figure 0.2.
Part I
2 ❚ Managing people
People management
The policies and practices which govern
how people are managed and developed
in organizations.
Human resource management
‘A strategic and coherent approach to the
management of an organization’s most
valued assets – the people working there
who individually and collectively contribute
to the achievement of its objectives.’
Human capital management
‘An approach to obtaining, analysing and
reporting on data which informs the direc-
tion of value-adding people management
strategic investment and operational deci-
sions at corporate level and at the level of
front line management.’
Personnel management
‘Personnel management is concerned with
obtaining, organizing and motivating the
human resources required by the enter-
prise.’
(Armstrong, 1977)
Figure 0.2 Relationship between aspects of people management
Human resource management
The terms ‘human resource management’ (HRM) and ‘human resources’ (HR) have
largely replaced the term ‘personnel management’ as a description of the processes
involved in managing people in organizations. The concept of HRM underpins all the
activities described in this book, and the aim of this chapter is to provide a framework
for what follows by defining the concepts of HRM and an HR system, describing the
various models of HRM and discussing its aims and characteristics. The chapter
continues with a review of reservations about HRM and the relationship between
HRM and personnel management and concludes with a discussion of the impact
HRM can make on organizational performance.
HUMAN RESOURCE MANAGEMENT DEFINED
Human resource management is defined as a strategic and coherent approach to the
management of an organization’s most valued assets – the people working there who
individually and collectively contribute to the achievement of its objectives.
Storey (1989) believes that HRM can be regarded as a ‘set of interrelated policies
with an ideological and philosophical underpinning’. He suggests four aspects that
constitute the meaningful version of HRM:
1
1. a particular constellation of beliefs and assumptions;
2. a strategic thrust informing decisions about people management;
3. the central involvement of line managers; and
4. reliance upon a set of ‘levers’ to shape the employment relationship.
HUMAN RESOURCE SYSTEM
Human resource management operates through human resource systems that bring
together in a coherent way:
● HR philosophies describing the overarching values and guiding principles adopted
in managing people.
● HR strategies defining the direction in which HRM intends to go.
● HR policies, which are the guidelines defining how these values, principles and
the strategies should be applied and implemented in specific areas of HRM.
● HR processes consisting of the formal procedures and methods used to put HR
strategic plans and policies into effect.
● HR practices comprising the informal approaches used in managing people.
● HR programmes, which enable HR strategies, policies and practices to be imple-
mented according to plan.
Becker and Gerhart (1996) have classified these components into three levels: the
system architecture (guiding principles), policy alternatives and processes and prac-
tices.
See Figure 1.1.
MODELS OF HRM
The matching model of HRM
One of the first explicit statements of the HRM concept was made by the Michigan
School (Fombrun et al, 1984). They held that HR systems and the organization struc-
ture should be managed in a way that is congruent with organizational strategy
(hence the name ‘matching model’). They further explained that there is a human
resource cycle (an adaptation of which is illustrated in Figure 1.2), which consists of
four generic processes or functions that are performed in all organizations. These are:
1. selection – matching available human resources to jobs;
4 ❚ Managing people
2. appraisal – performance management;
3. rewards – ‘the reward system is one of the most under-utilized and mishandled
managerial tools for driving organizational performance’; it must reward short
as well as long-term achievements, bearing in mind that ‘business must perform
in the present to succeed in the future’;
4. development – developing high quality employees.
Human resource management ❚ 5
Organization Resourcing
Human resource
planning
Recruitment and
selection
Talent
management
HR services
HR
development
Reward
management
Employee
relations
Design
Organizational
learning
Job evaluation/
Market surveys
Industrial
relations
Development
Individual
learning
Grade and pay
structures
Employee voice
Job/role
design
Management
development
Contingent pay Communications
Performance
management
Employee
benefits
Health/safety
and welfare
Knowledge
management
Human capital
management
HUMAN RESOURCE
MANAGEMENT
Figure 1.1 HRM activities
The Harvard framework
The other founding fathers of HRM were the Harvard School of Beer et al (1984) who
developed what Boxall (1992) calls the ‘Harvard framework’. This framework is
based on the belief that the problems of historical personnel management can only be
solved:
when general managers develop a viewpoint of how they wish to see employees
involved in and developed by the enterprise, and of what HRM policies and practices
may achieve those goals. Without either a central philosophy or a strategic vision –
which can be provided only by general managers – HRM is likely to remain a set of
independent activities, each guided by its own practice tradition.
Beer and his colleagues believed that ‘Today, many pressures are demanding a
broader, more comprehensive and more strategic perspective with regard to the orga-
nization’s human resources.’ These pressures have created a need for: ‘A longer-term
perspective in managing people and consideration of people as potential assets rather
than merely a variable cost.’ They were the first to underline the HRM tenet that it
belongs to line managers. They also stated that: ‘Human resource management
involves all management decisions and action that affect the nature of the relation-
ship between the organization and its employees – its human resources.’
6 ❚ Managing people
Selection
Performance
management
Performance
Rewards
Development
Figure 1.2 The Human Resource Cycle (adapted from Fombrun et al, 1984)
The Harvard school suggested that HRM had two characteristic features: 1) line
managers accept more responsibility for ensuring the alignment of competitive
strategy and personnel policies; 2) personnel has the mission of setting policies that
govern how personnel activities are developed and implemented in ways that make
them more mutually reinforcing. The Harvard framework as modelled by Beer et al is
shown in Figure 1.3.
According to Boxall (1992) the advantages of this model are that it:
● incorporates recognition of a range of stakeholder interests;
● recognizes the importance of ‘trade-offs’, either explicitly or implicitly, between
the interests of owners and those of employees as well as between various interest
groups;
● widens the context of HRM to include ‘employee influence’, the organization of
work and the associated question of supervisory style;
Human resource management ❚ 7
Stakeholder
interests:
● shareholders
● management
● employees
● government
● unions
Situational
factors:
● work force
characteristics
● business
strategy and
conditions
● management
philosophy
● labour market
● unions
● task technology
● laws and social
values
HR outcomes:
● commitment
● congruence
● cost
effectiveness
Long-term
consequences
● individual well-
being
● organizational
effectiveness
● societal well-
being
HRM policy
choices:
● employee
influence
● human resource
flow
● reward systems
● work systems
Figure 1.3 The Harvard Framework for Human Resource Management (Source:
Beer et al, 1984)
● acknowledges a broad range of contextual influences on management’s choice of
strategy, suggesting a meshing of both product-market and socio-cultural logics;
● emphasizes strategic choice – it is not driven by situational or environmental
determinism.
The Harvard model has exerted considerable influence over the theory and practice
of HRM, particularly in its emphasis on the fact that HRM is the concern of manage-
ment in general rather than the personnel function in particular.
AIMS OF HRM
The overall purpose of human resource management is to ensure that the organiza-
tion is able to achieve success through people. As Ulrich and Lake (1990) remark:
‘HRM systems can be the source of organizational capabilities that allow firms to
learn and capitalize on new opportunities.’ Specifically, HRM is concerned with
achieving objectives in the areas summarized below.
Organizational effectiveness
‘Distinctive human resource practices shape the core competencies that determine
how firms compete’ (Cappelli and Crocker-Hefter, 1996). Extensive research has
shown that such practices can make a significant impact on firm performance. HRM
strategies aim to support programmes for improving organizational effectiveness by
developing policies in such areas as knowledge management, talent management
and generally creating ‘a great place to work’. This is the ‘big idea’ as described by
Purcell et al (2003), which consists of a ‘clear vision and a set of integrated values’.
More specifically, HR strategies can be concerned with the development of contin-
uous improvement and customer relations policies.
Human capital management
The human capital of an organization consists of the people who work there and on
whom the success of the business depends. Human capital has been defined by
Bontis et al (1999) as follows:
Human capital represents the human factor in the organization; the combined intelli-
gence, skills and expertise that give the organization its distinctive character. The human
elements of the organization are those that are capable of learning, changing, innovating
and providing the creative thrust which if properly motivated can ensure the long-term
survival of the organization.
8 ❚ Managing people
Human capital can be regarded as the prime asset of an organization and businesses
need to invest in that asset to ensure their survival and growth. HRM aims to ensure
that the organization obtains and retains the skilled, committed and well-motivated
workforce it needs. This means taking steps to assess and satisfy future people needs
and to enhance and develop the inherent capacities of people – their contributions,
potential and employability – by providing learning and continuous development
opportunities. It involves the operation of ‘rigorous recruitment and selection proce-
dures, performance-contingent incentive compensation systems, and management
development and training activities linked to the needs of the business’ (Becker et al,
1997). It also means engaging in talent management – the process of acquiring and
nurturing talent, wherever it is and wherever it is needed, by using a number of inter-
dependent HRM policies and practices in the fields of resourcing, learning and devel-
opment, performance management and succession planning.
The process of human capital management (HCM) as described in the next
chapter is closely associated with human resource management. However, the
focus of HCM is more on the use of metrics (measurements of HR and people perfor-
mance) as a means of providing guidance on people management strategy and
practice.
Knowledge management
Knowledge management is ‘any process or practice of creating, acquiring, capturing,
sharing and using knowledge, wherever it resides, to enhance learning and perfor-
mance in organizations’ (Scarborough et al, 1999). HRM aims to support the develop-
ment of firm-specific knowledge and skills that are the result of organizational
learning processes.
Reward management
HRM aims to enhance motivation, job engagement and commitment by introducing
policies and processes that ensure that people are valued and rewarded for what they
do and achieve and for the levels of skill and competence they reach.
Employee relations
The aim is to create a climate in which productive and harmonious relationships can
be maintained through partnerships between management and employees and their
trade unions.
Human resource management ❚ 9
Meeting diverse needs
HRM aims to develop and implement policies that balance and adapt to the needs of
its stakeholders and provide for the management of a diverse workforce, taking into
account individual and group differences in employment, personal needs, work style
and aspirations and the provision of equal opportunities for all.
Bridging the gap between rhetoric and reality
The research conducted by Gratton et al (1999) found that there was generally a wide
gap between the sort of rhetoric expressed above and reality. Managements may start
with good intentions to do some or all of these things but the realization of them –
‘theory in use’ – is often very difficult. This arises because of contextual and process
problems: other business priorities, short-termism, limited support from line
managers, an inadequate infrastructure of supporting processes, lack of resources,
resistance to change and lack of trust. An overarching aim of HRM is to bridge this
gap by making every attempt to ensure that aspirations are translated into sustained
and effective action. To do this, members of the HR function have to remember that it
is relatively easy to come up with new and innovatory policies and practice. The
challenge is to get them to work. They must appreciate, in the phrase used by Purcell
et al (2003) that it is the front line managers who bring HR policies to life, and act
accordingly.
POLICY GOALS OF HRM
The models of HRM, the aims set out above and other definitions of HRM have been
distilled by Caldwell (2004) into 12 policy goals:
1. Managing people as assets that are fundamental to the competitive advantage of
the organization.
2. Aligning HRM policies with business policies and corporate strategy.
3. Developing a close fit of HR policies, procedures and systems with one another.
4. Creating a flatter and more flexible organization capable of responding more
quickly to change.
5. Encouraging team working and co-operation across internal organizational
boundaries.
6. Creating a strong customer-first philosophy throughout the organization.
7. Empowering employees to manage their own self-development and learning.
10 ❚ Managing people
8. Developing reward strategies designed to support a performance-driven
culture.
9. Improving employee involvement through better internal communication.
10. Building greater employee commitment to the organization.
11. Increasing line management responsibility for HR policies.
12. Developing the facilitating role of managers as enablers.
CHARACTERISTICS OF HRM
The characteristics of the HRM concept as they emerged from the writings of the
pioneers and later commentators are that it is:
● diverse;
● strategic with an emphasis on integration;
● commitment-oriented;
● based on the belief that people should be treated as assets (human capital);
● unitarist rather than pluralist, individualistic rather than collective in its approach
to employee relations;
● a management-driven activity – the delivery of HRM is a line management
responsibility;
● focused on business values.
The diversity of HRM
But these characteristics of HRM are by no means universal. There are many models,
and practices within different organizations are diverse, often only corresponding to
the conceptual version of HRM in a few respects.
Hendry and Pettigrew (1990) play down the prescriptive element of the HRM
model and extend the analytical elements. As pointed out by Boxall (1992), such an
approach rightly avoids labelling HRM as a single form and advances more slowly
by proceeding more analytically. It is argued by Hendry and Pettigrew that ‘better
descriptions of structures and strategy-making in complex organizations, and of
frameworks for understanding them, are an essential underpinning for HRM’.
A distinction was made by Storey (1989) between the ‘hard’ and ‘soft’ versions of
HRM. The hard version of HRM emphasizes that people are important resources
through which organizations achieve competitive advantage. These resources have
therefore to be acquired, developed and deployed in ways that will benefit the orga-
nization. The focus is on the quantitative, calculative and business-strategic aspects of
Human resource management ❚ 11
managing human resources in as ‘rational’ a way as for any other economic factor. As
Guest (1999a) comments:
The drive to adopt HRM is… based on the business case of a need to respond to an
external threat from increasing competition. It is a philosophy that appeals to manage-
ments who are striving to increase competitive advantage and appreciate that to do this
they must invest in human resources as well as new technology.
He also commented that HRM ‘reflects a long-standing capitalist tradition in which
the worker is regarded as a commodity’. The emphasis is therefore on the interests of
management, integration with business strategy, obtaining added value from people
by the processes of human resource development and performance management and
the need for a strong corporate culture expressed in mission and value statements
and reinforced by communications, training and performance management
processes.
The soft version of HRM traces its roots to the human-relations school; it empha-
sizes communication, motivation and leadership. As described by Storey (1989) it
involves ‘treating employees as valued assets, a source of competitive advantage
through their commitment, adaptability and high quality (of skills, performance and
so on)’. It therefore views employees, in the words of Guest (1999a), as means rather
than objects, but it does not go as far as following Kant’s advice: ‘Treat people as ends
unto themselves rather than as means to an end.’ The soft approach to HRM stresses
the need to gain the commitment – the ‘hearts and minds’ – of employees through
involvement, communications and other methods of developing a high-commitment,
high-trust organization. Attention is also drawn to the key role of organizational
culture.
In 1998, Legge defined the ‘hard’ model of HRM as a process emphasizing ‘the
close integration of human resource policies with business strategy which regards
employees as a resource to be managed in the same rational way as any other
resource being exploited for maximum return’. In contrast, the soft version of HRM
sees employees as ‘valued assets and as a source of competitive advantage through
their commitment, adaptability and high level of skills and performance’.
It has, however, been observed by Truss (1999) that ‘even if the rhetoric of HRM is
soft, the reality is often hard, with the interests of the organization prevailing over
those of the individual’. And research carried out by Gratton et al (1999) found that in
the eight organizations they studied, a mixture of hard and soft HRM approaches was
identified. This suggested to the researchers that the distinction between hard and
soft HRM was not as precise as some commentators have implied.
12 ❚ Managing people
The strategic nature of HRM
Perhaps the most significant feature of HRM is the importance attached to strategic
integration, which flows from top management’s vision and leadership, and which
requires the full commitment of people to it. Guest (1987, 1989a, 1989b, 1991) believes
that this is a key policy goal for HRM, which is concerned with the ability of the orga-
nization to integrate HRM issues into its strategic plans, to ensure that the various
aspects of HRM cohere, and to encourage line managers to incorporate an HRM
perspective into their decision-making.
Legge (1989) considers that one of the common themes of the typical definitions of
HRM is that human resource policies should be integrated with strategic business
planning. Sisson (1990) suggests that a feature increasingly associated with HRM is a
stress on the integration of HR policies both with one another and with business plan-
ning more generally.
Storey (1989) suggests that: ‘The concept locates HRM policy formulation firmly at
the strategic level and insists that a characteristic of HRM is its internally coherent
approach.’
The commitment-oriented nature of HRM
The importance of commitment and mutuality was emphasized by Walton (1985a) as
follows:
The new HRM model is composed of policies that promote mutuality – mutual goals,
mutual influence, mutual respect, mutual rewards, and mutual responsibility. The theory
is that policies of mutuality will elicit commitment, which in turn will yield both better
economic performance and greater human development.
Guest (1987) wrote that one of the HRM policy goals was the achievement of high
commitment – ‘behavioural commitment to pursue agreed goals, and attitudinal
commitment reflected in a strong identification with the enterprise’.
It was noted by Legge (1995) that human resources ‘may be tapped most effectively
by mutually consistent policies that promote commitment and which, as a conse-
quence, foster a willingness in employees to act flexibly in the interests of the “adap-
tive organization’s” pursuit of excellence’.
But this emphasis on commitment has been criticized from the earliest days of
HRM. Guest (1987) asked: ‘commitment to what?’ and Fowler (1987) has stated:
At the heart of the concept is the complete identification of employees with the aims and
values of the business – employee involvement but on the company’s terms. Power in
Human resource management ❚ 13
the HRM system remains very firmly in the hands of the employer. Is it really possible to
claim full mutuality when at the end of the day the employer can decide unilaterally to
close the company or sell it to someone else?
People as ‘human capital’
The notion that people should be regarded as assets rather than variable costs, in
other words, treated as human capital, was originally advanced by Beer et al (1984).
HRM philosophy, as mentioned by Karen Legge (1995), holds that ‘human resources
are valuable and a source of competitive advantage’. Armstrong and Baron (2002)
stated that:
People and their collective skills, abilities and experience, coupled with their ability to
deploy these in the interests of the employing organization, are now recognized as
making a significant contribution to organizational success and as constituting a signifi-
cant source of competitive advantage.
Unitary philosophy
The HRM approach to employee relations is basically unitary – it is believed that
employees share the same interests as employers. This contrasts with what could be
regarded as the more realistic pluralist view, which says that all organizations contain
a number of interest groups and that the interests of employers and employees do not
necessarily coincide.
Individualistic
HRM is individualistic in that it emphasizes the importance of maintaining links
between the organization and individual employees in preference to operating
through group and representative systems.
HRM as a management-driven activity
HRM can be described as a central, senior management-driven strategic activity that
is developed, owned and delivered by management as a whole to promote the inter-
ests of the organization that they serve. Purcell (1993) thinks that ‘the adoption of
HRM is both a product of and a cause of a significant concentration of power in the
hands of management’, while the widespread use ‘of the language of HRM, if not its
practice, is a combination of its intuitive appeal to managers and, more importantly, a
response to the turbulence of product and financial markets’. He asserts that HRM is
about the rediscovery of management prerogative. He considers that HRM policies
14 ❚ Managing people
and practices, when applied within a firm as a break from the past, are often associ-
ated with words such as commitment, competence, empowerment, flexibility,
culture, performance, assessment, reward, teamwork, involvement, cooperation,
harmonization, quality and learning. But ‘the danger of descriptions of HRM as
modern best-management practice is that they stereotype the past and idealize the
future’.
Sisson (1990) suggested that: ‘The locus of responsibility for personnel manage-
ment no longer resides with (or is “relegated to”) specialist managers.’ More recently,
Purcell et al (2003) underlined the importance of line management commitment and
capability as the means by which HR policies are brought to life.
Focus on business values
The concept of HRM is largely based on a management and business-oriented philos-
ophy. It is concerned with the total interests of the organization – the interests of the
members of the organization are recognized but subordinated to those of the enter-
prise. Hence the importance attached to strategic integration and strong cultures,
which flow from top management’s vision and leadership, and which require people
who will be committed to the strategy, who will be adaptable to change, and who will
fit the culture. By implication, as Guest (1991) says: ‘HRM is too important to be left to
personnel managers.’
In 1995 Legge noted that HRM policies are adapted to drive business values and
are modified in the light of changing business objectives and conditions. She
describes this process as ‘thinking pragmatism’ and suggests that evidence indicates
more support for the hard versions of HRM than the soft version.
RESERVATIONS ABOUT HRM
For some time HRM was a controversial topic, especially in academic circles. The
main reservations have been that HRM promises more than it delivers and that its
morality is suspect.
HRM promises more than it can deliver
Noon (1992) has commented that HRM has serious deficiencies as a theory:
It is built with concepts and propositions, but the associated variables and hypotheses
are not made explicit. It is too comprehensive… If HRM is labelled a ‘theory’ it raises
expectations about its ability to describe and predict.
Human resource management ❚ 15
Guest (1991) believes that HRM is an ‘optimistic but ambiguous concept’; it is all
hype and hope.
Mabey et al (1998) follow this up by asserting that ‘the heralded outcomes (of HRM)
are almost without exception unrealistically high’. To put the concept of HRM into
practice involves strategic integration, developing a coherent and consistent set of
employment policies, and gaining commitment. This requires high levels of determi-
nation and competence at all levels of management and a strong and effective HR
function staffed by business-oriented people. It may be difficult to meet these criteria,
especially when the proposed HRM culture conflicts with the established corporate
culture and traditional managerial attitudes and behaviour.
Gratton et al (1999) are convinced on the basis of their research that there is:
a disjunction between rhetoric and reality in the area of human resource management
between HRM theory and HRM practice, between what the HR function says it is doing
and that practice as perceived by employers, and between what senior management
believes to be the role of the HR function, and the role it actually plays.
In their conclusions they refer to the ‘hyperbole and rhetoric of human resource
management’.
Caldwell (2004) believes that HRM ‘is an unfinished project informed by a self-
fulfilling vision of what it should be’.
In response to the above comments it is agreed that many organizations that think
they are practising HRM are doing nothing of the kind. It is difficult, and it is best not
to expect too much. Most of the managements who hurriedly adopted performance-
related pay as an HRM device that would act as a lever for change have been sorely
disappointed.
But the research conducted by Guest and Conway (1997) covering a stratified
random sample of 1,000 workers established that a notably high level of HRM was
found to be in place. This contradicts the view that management has tended to ‘talk
up’ the adoption of HRM practices. The HRM characteristics covered by the survey
included the opportunity to express grievances and raise personal concerns on such
matters as opportunities for training and development, communications about busi-
ness issues, single status, effective systems for dealing with bullying and harassment
at work, making jobs interesting and varied, promotion from within, involvement
programmes, no compulsory redundancies, performance-related pay, profit sharing
and the use of attitude surveys.
The morality of HRM
HRM is accused by many academics of being manipulative if not positively immoral.
16 ❚ Managing people
Willmott (1993) remarks that HRM operates as a form of insidious ‘control by compli-
ance’ when it emphasizes the need for employees to be committed to do what the
organization wants them to do. It preaches mutuality but the reality is that behind the
rhetoric it exploits workers. It is, they say, a wolf in sheep’s clothing (Keenoy, 1990a).
As Legge (1998) pointed out:
Sadly, in a world of intensified competition and scarce resources, it seems inevitable
that, as employees are used as means to an end, there will be some who will lose out.
They may even be in the majority. For these people, the soft version of HRM may be an
irrelevancy, while the hard version is likely to be an uncomfortable experience.
The accusation that HRM treats employees as means to an end is often made.
However, it could be argued that if organizations exist to achieve ends, which they
obviously do, and if those ends can only be achieved through people, which is clearly
the case, the concern of managements for commitment and performance from those
people is not unnatural and is not attributable to the concept of HRM – it existed in
the good old days of personnel management before HRM was invented. What
matters is how managements treat people as ends and what managements provide in
return.
Much of the hostility to HRM expressed by a number of academics is based on the
belief that it is hostile to the interests of workers, ie that it is managerialist. However,
the Guest and Conway (1997) research established that the reports of workers on
outcomes showed that a higher number of HR practices were associated with higher
ratings of fairness, trust and management’s delivery of their promises. Those experi-
encing more HR activities also felt more secure in and more satisfied with their jobs.
Motivation was significantly higher for those working in organizations where more
HR practices were in place. In summary, as commented by Guest (1999b), it appears
that workers like their experience of HRM. These findings appear to contradict the
‘radical critique’ view produced by academics such as Mabey et al (1998) that HRM
has been ineffectual, pernicious (ie managerialist) or both. Some of those who adopt
this stance tend to dismiss favourable reports from workers about HRM on the
grounds that they have been brainwashed by management. But there is no evidence
to support this view. Moreover, as Armstrong (2000a) pointed out:
HRM cannot be blamed or given credit for changes that were taking place anyway. For
example, it is often alleged to have inspired a move from pluralism to unitarism in indus-
trial relations. But newspaper production was moved from Fleet Street to Wapping by
Murdoch, not because he had read a book about HRM but as a means of breaking the
print unions’ control.
Human resource management ❚ 17
Contradictions in the reservations about HRM
Guest (1999a) has suggested that there are two contradictory concerns about HRM.
The first as formulated by Legge (1995, 1998) is that while management rhetoric may
express concern for workers, the reality is harsher. Keenoy (1997) complains that: ‘The
real puzzle about HRMism is how, in the face of such apparently overwhelming crit-
ical “refutation”, it has secured such influence and institutional presence.’
Other writers, however, simply claim that HRM does not work. Scott (1994) for
example, finds that both management and workers are captives of their history and
find it very difficult to let go of their traditional adversarial orientations. But these
contentions are contradictory. Guest (1999b) remarks that, ‘It is difficult to treat HRM
as a major threat (though what it is a threat to is not always made explicit) deserving
of serious critical analysis while at the same time claiming that it is not practiced or is
ineffective.’
HRM AND PERSONNEL MANAGEMENT
A debate about the differences, if any, between HRM and personnel management
went on for some time. It has died down recently, especially as the terms HRM and
HR are now in general use both in their own right and as synonyms for personnel
management. But understanding of the concept of HRM is enhanced by analysing
what the differences are and how traditional approaches to personnel management
have evolved to become the present day practices of HRM.
Some commentators (Hope-Hailey et al, 1998; Keenoy, 1990b; Legge, 1989, 1995;
Sisson, 1990; Storey, 1993) have highlighted the revolutionary nature of HRM. Others
have denied that there is any significant difference in the concepts of personnel
management and HRM. Torrington (1989) suggested that: ‘Personnel management
has grown through assimilating a number of additional emphases to produce an even
richer combination of experience… HRM is no revolution but a further dimension to
a multi-faceted role.’
The conclusion based on interviews with HR and personnel directors reached by
Gennard and Kelly (1994) on this issue was that ‘it is six of one and half a dozen of the
other and it is a sterile debate’. An earlier answer to this question was made by
Armstrong (1987):
HRM is regarded by some personnel managers as just a set of initials or old wine in new
bottles. It could indeed be no more and no less than another name for personnel
management, but as usually perceived, at least it has the virtue of emphasizing the virtue
of treating people as a key resource, the management of which is the direct concern of
18 ❚ Managing people
top management as part of the strategic planning processes of the enterprise. Although
there is nothing new in the idea, insufficient attention has been paid to it in many orga-
nizations.
The similarities and differences between HRM and personnel management are
summarized in Table 1.1.
Human resource management ❚ 19
Similarities Differences
1. Personnel management strategies, like 1. HRM places more emphasis on strategic
HRM strategies, flow from the business fit and integration.
strategy. 2. HRM is based on a management and
2. Personnel management, like HRM, business orientated philosophy.
recognizes that line managers are 3. HRM attaches more importance to the
responsible for managing people. The management of culture and the
personnel function provides the necessary achievement of commitment (mutuality).
advice and support services to enable 4. HRM places greater emphasis on the
managers to carry out their responsibilities. role of line managers as the implementers
3. The values of personnel management and of HR policies.
at least the ‘soft’ version of HRM are 5. HRM is a holistic approach concerned
identical with regard to ‘respect for the with the total interests of the business –
individual’, balancing organizational and the interests of the members of the
individual needs, and developing people organization are recognized but
to achieve their maximum level of subordinated to those of the enterprise.
competence both for their own satisfaction 6. HR specialists are expected to be business
and to facilitate the achievement of partners rather than personnel
organizational objectives. administrators.
4. Both personnel management and HRM 7. HRM treats employees as assets not costs.
recognize that one of their most essential
functions is that of matching people to
ever-changing organizational
requirements – placing and developing the
right people in and for the right jobs.
5. The same range of selection, competence
analysis, performance management,
training, management development and
reward management techniques are used
both in HRM and personnel management.
6. Personnel management, like the ‘soft’
version of HRM, attaches importance to
the processes of communication and
participation within an employee
relations system.
Table 1.1 Similarities and differences between HRM and personnel management
The differences between personnel management and human resource management
appear to be substantial but they can be seen as a matter of emphasis and approach
rather than one of substance. Or, as Hendry and Pettigrew (1990) put it, HRM can be
perceived as a ‘perspective on personnel management and not personnel manage-
ment itself’.
HOW HR IMPACTS ON ORGANIZATIONAL
PERFORMANCE
The assumption underpinning the practice of HRM is that people are the organiza-
tion’s key resource and organizational performance largely depends on them. If,
therefore, an appropriate range of HR policies and processes are developed and
implemented effectively, then HR will make a substantial impact on firm perfor-
mance.
The Holy Grail sought by many commentators on human resource management is
to establish that a clear positive link between HRM practices and organizational per-
formance exists. There has been much research, as summarized in Table 1.2, over the
last decade or so that has attempted to answer two basic questions: ‘Do HR practices
make a positive impact on organizational performance?’ ‘If so, how is the impact
achieved?’ The second question is the most important one. It is not enough to justify
HRM by proving that it is a good thing. What counts is what can be done to ensure
that it is a good thing. This is the ‘black box’ mentioned by Purcell et al (2003) that lies
between intentions and outcomes.
Ulrich (1997a) has pointed out that: ‘HR practices seem to matter; logic says it is so;
survey findings confirm it. Direct relationships between investment and attention to
HR practices are often fuzzy, however, and vary according to the population sampled
and the measures used’.
Purcell et al (2003) have cast doubts on the validity of some of the attempts through
research to make the connection:
Our study has demonstrated convincingly that research which only asks about the
number and extent of HR practices can never be sufficient to understand the link
between HR practices and business performance. As we have discussed it is misleading
to assume that simply because HR policies are present that they will be implemented as
intended.
Further comments about attempts to trace the link have been made by Truss (2001)
who, following research in Hewlett-Packard, remarked that:
20 ❚ Managing people
Our findings did lend strong support to the argument put forward by Mueller (1996) that
the informal organization has a key role to play in the HRM process such that informal
practice and norms of behaviour interact with formal HR policies… We cannot consider
how HRM and performance are linked without analysing, in some detail, how policy is
turned into practice through the lens of the informal organization.
Research outcomes
A considerable amount of research has been carried out to establish the link between
HRM and firm performance. The outcomes of some of the main projects are summa-
rized in Table 1.2.
Human resource management ❚ 21
Researcher(s) Methodology Outcomes
Arthur (1990, Data from 30 US strip mills used to Firms with a high commitment
1992, 1994) assess impact on labour efficiency strategy had significantly higher
and scrap rate by reference to the levels of both productivity and
existence of either a high quality than those with a
commitment strategy* or a control strategy.
control strategy*.
Huselid (1995) Analysis of the responses of 968 US Productivity is influenced by
firms to a questionnaire exploring employee motivation; financial
the use of high performance work performance is influenced by
practices*, the development of employee skills, motivation and
synergies between them and the organizational structures.
alignment of these practices with
the competitive strategy.
Huselid and An index of HR systems in 740 Firms with high values on the
Becker (1996) firms was created to indicate the index had economically and
degree to which each firm adopted statistically higher levels of
a high performance work system. performance.
Becker et al Outcomes of a number of research High performance systems make
(1997) projects were analysed to assess the an impact as long as they are
strategic impact on shareholder embedded in the management
value of high performance work infrastructure.
systems.
Table 1.2 Outcomes of research on the link between HR and organizational perfor-
mance
22 ❚ Managing people
Patterson et al The research examined the link HR practices explained significant
(1997) between business performance and variations in profitability and
organization culture and the use of productivity (19% and 18%
a number of HR practices. respectively). Two HR practices
were particularly significant: (1) the
acquisition and development of
employee skills and (2) job design
including flexibility, responsibility,
variety and the use of formal teams.
Thompson (1998) A study of the impact of high The number of HR practices and
performance work practices such as the proportion of the workforce
teamworking, appraisal, job rotation, covered appeared to be the key
broad-banded grade structures and differentiating factor between more
sharing of business information in and less successful firms.
623 UK aerospace establishments.
The 1998 An analysis of the survey which A strong assocation exists between
Workplace sampled some 2,000 workplaces HRM and both employee
Employee and obtained the views of about attitudes and workplace
Relations Survey 28,000 employees. performance.
(as analysed by
Guest et al
2000a)
The Future of 835 private sector organizations A greater use of HR practices is
Work Survey, were surveyed and interviews were associated with higher levels of
Guest et al carried out with 610 HR employee commitment and
(2000b) professionals and 462 chief contribution and is in turn linked
executives. to higher levels of productivity
and quality of services.
Purcell et al A University of Bath longitudinal The most successful companies had
(2003) study of 12 companies to establish what the researchers called ‘the big
how people management impacts on idea’. The companies had a clear
organizational performance. vision and a set of integrated values
which were embedded, enduring,
collective, measured and managed.
They were concerned with
sustaining performance and
flexibility. Clear evidence existed
between positive attitudes towards
HR policies and practices, levels of
satisfaction, motivation and
Table 1.2 continued
continued
How HR makes an impact
In Guest et al (2000b) the relationship between HRM and performance was modelled
as shown in Figure 1.4.
Human resource management ❚ 23
commitment, and operational
performance. Policy and practice
implementation (not the number
of HR practices adopted) is the
vital ingredient in linking people
management to business
performance and this is primarily
the task of line managers.
* In the US research projects set out in Table 1.2 reference is made to the impact made by the following
strategies: A commitment strategy – a strategy, as described by Walton (1985b) which promotes mutuality
between employers and employees. A control strategy – as described by Walton (1985b), one in which the
aim is to establish order, exercise control and achieve efficiency in the application of the workforce but
where employees did not have a voice except through their unions. High performance work systems – these
aim to impact on performance through its people by the use of such practices as rigorous recruitment and
selection procedures, extensive and relevant training and management development activities, incentive
pay systems and performance management processes.
Table 1.2 continued
Business
strategy
HR strategy
Quality of
goods and
services
Productivity
HR effectiveness
Financial
performance
HR practices
HR outcomes
Employee:
competence
commitment
flexibility
Figure 1.4 Model of the link between HRM and performance (Source: Guest et al,
2000b)
The messages from research, especially that carried out by Purcell et al (2003), are that
HR can make an impact by leading or contributing to:
● the development and successful implementation of high performance work prac-
tices, particularly those concerned with job and work design, flexible working,
resourcing (recruitment and selection and talent management), employee devel-
opment (increasing skills and extending the skills base), reward, and giving
employees a voice;
● the formulation and embedding of a clear vision and set of values (the big idea);
● the development of a positive psychological contract and means of increasing the
motivation and commitment of employees;
● the formulation and implementation of policies which, in the words of Purcell et al
(2003) meet the needs of individuals and ‘create a great place to work’;
● the provision of support and advice to line managers on their role in imple-
menting HR policies and practices;
● the effective management of change.
HRM IN CONTEXT
HRM processes take place within the context of the internal and external environ-
ment of the organization. They will be largely contingent on the environmental
factors that affect them.
Contingency theory
Contingency theory tells us that definitions of aims, policies and strategies, lists of
activities, and analyses of the role of the HR department are valid only if they are
related to the circumstances of the organization. Descriptions in books such as this
can only be generalizations that suggest approaches and provide guidelines for
action; they cannot be prescriptive in the sense of laying down what should be done.
Contingency theory is essentially about the need to achieve fit between what the
organization is and wants to become (its strategy, culture, goals, technology, the
people it employs and its external environment) and what the organization does
(how it is structured, and the processes, procedures and practices it puts into effect).
Contextual factors
There are three main contextual factors that influence HR policies and practices.
24 ❚ Managing people
1. Technology
The technology of the business exerts a major influence on the internal environment –
how work is organized, managed and carried out. The introduction of new tech-
nology may result in considerable changes to systems and processes. Different skills
are required and new methods of working are developed. The result may be an exten-
sion of the skills base of the organization and its employees, including multiskilling
(ensuring that people have a range of skills that enable them to work flexibly on a
variety of tasks, often within a teamworking environment). But it could result in de-
skilling and a reduction in the number of jobs (downsizing).
New technology can therefore present a considerable threat to employees. The
world of work has changed in many ways. Knowledge workers are employed in
largely computerized offices and laboratories, and technicians work in computer
integrated manufacturing systems. They may have to be managed differently from
the clerks or machine operators they displace. The service industries have become
predominant and manufacturing is in decline. New work environments such as call
centres have become common and tele-working (working from home with a net-
worked computer) is increasing.
2. Competitive pressures
Global competition in mature production and service sectors is increasing. This is
assisted by easily transferable technology and reductions in international trade
barriers. Customers are demanding more as new standards are reached through
international competition. Organizations are reacting to this competition by becom-
ing ‘customer-focused’, speeding up response times, emphasizing quality and contin-
uous improvement, accelerating the introduction of new technology, operating more
flexibly and ‘losing cost’.
The pressure has been for businesses to become ‘lean organizations’, downsizing
and cutting out layers of management and supervision. They are reducing permanent
staff to a core of essential workers, increasing the use of peripheral workers (sub-
contractors, temporary staff) and ‘outsourcing’ work to external service providers.
The aim is to reduce employment costs and enable the enterprise easily to increase or
reduce the numbers available for work in response to fluctuations in the level of
business activity. They become the so-called ‘flexible firms’. The ultimate develop-
ment of this process is the ‘virtual’ firm or corporation, where through the exten-
sive use of information technology a high proportion of marketing and professional
staff mainly work from home, only coming into the office on special occasions
to occupy their ‘hot desks’, and spending more time with their customers or
clients.
Human resource management ❚ 25
Another response to competitive pressures is business process re-engineering
(BPR), which examines the process that contains and links those functions together
from initiation to completion. It looks at processes in organizations horizontally to
establish how they can be integrated more effectively as well as streamlined. It can
therefore form the basis for an organizational redesign exercise. From an HR point of
view, the outcome of a BPR exercise may well be the need to attract or develop people
with new skills as well as pressure for the improvement of team working. It also
emphasizes the importance of an integrated – a coherent – approach to the develop-
ment and implementation of HR policies and employment practices. Re-engineering
often promises more than it achieves and is not regarded as highly as it once was, not
least because it often neglected the human aspects, giving insufficient attention to the
management of change and retraining staff.
3. Responses affecting people
The responses to the increased use of technology and to economic and competitive
pressures have changed the nature of people management in a number of ways.
These include slimmer and flatter organization structures in which cross-functional
operations and teamworking have become more important, more flexible working
patterns, total quality and lean production initiatives, and the decentralization and
devolvement of decision-making.
The challenge to HRM
Ulrich (1998) suggests that environmental and contextual changes present a number
of competitive challenges to organizations that mean that HR has to be involved in
helping to build new capabilities. These comprise:
● Globalization, which requires organizations to move people, ideas, products and
information around the world to meet local needs. New and important ingredi-
ents must be added to the mix when making strategy: volatile political situations,
contentious global trade issues, fluctuating exchange rates and unfamiliar
cultures.
● Profitability through growth – the drive for revenue growth means that companies
must be creative and innovative and this means encouraging the free flow of
information and shared learning among employees.
● Technology – the challenge is to make technology a viable, productive part of the
work setting.
● Intellectual capital – this is the source of competitive advantage for organizations.
The challenge is to ensure that firms have the capability to find, assimilate,
26 ❚ Managing people
compensate and retain human capital in the shape of the talented individuals
they need who can drive a global organization that is both responsive to its
customers and ‘the burgeoning opportunities of technology’. They have also to
consider how the social capital of the organization – the ways in which people
interact – can be developed. Importantly, organizations have to focus on organi-
zational capital – the knowledge they own and how it should be managed.
● Change, change and more change – the greatest challenge companies face is
adjusting to – indeed, embracing – non-stop change. They must be able to ‘learn
rapidly and continuously, and take on new strategic imperatives faster and more
comfortably’.
Human resource management ❚ 27
Human capital management
Human capital management (HCM) has been described as ‘a paradigm shift’ from
the traditional approach to human resource management (Kearns, 2005b) – a large
claim. It is considered in this chapter initially by defining the concept of human
capital management and its relationship to the concept of human resource manage-
ment. To understand HCM it is necessary to know about the concept of human
capital, which is the next section heading. The chapter is completed with an analysis
of the processes involved in HCM including a discussion of human capital measure-
ment and reporting.
HUMAN CAPITAL MANAGEMENT DEFINED
Human capital management (HCM) is concerned with obtaining, analysing and
reporting on data that informs the direction of value-adding people management,
strategic investment and operational decisions at corporate level and at the level of
front line management. The defining characteristic of HCM is this use of metrics to
guide an approach to managing people that regards them as assets and emphasizes
that competitive advantage is achieved by strategic investments in those assets
through employee engagement and retention, talent management and learning and
development programmes.
2
The Accounting for People Task Force Report (2003) stated that HCM involves
the systematic analysis, measurement and evaluation of how people policies and
practices create value. The report defined HCM as ‘an approach to people manage-
ment that treats it as a high level strategic issue rather than an operational matter “to
be left to the HR people” ’. The Task Force expressed the view that HCM ‘has
been under-exploited as a way of gaining competitive edge’. As John Sunderland,
Task Force member and Executive Chairman of Cadbury Schweppes plc commented:
‘An organization’s success is the product of its people’s competence. That link
between people and performance should be made visible and available to all stake-
holders.’
Nalbantian et al (2004) emphasize the measurement aspect of HCM. They define
human capital as, ‘The stock of accumulated knowledge, skills, experience, creativity
and other relevant workforce attributes’ and suggest that human capital management
involves ‘putting into place the metrics to measure the value of these attributes and
using that knowledge to effectively manage the organization’. HCM is defined by
Kearns (2005b) as ‘The total development of human potential expressed as organiza-
tional value.’ He believes that ‘HCM is about creating value through people’ and that
it is ‘a people development philosophy, but the only development that means
anything is that which is translated into value’.
HUMAN CAPITAL MANAGEMENT AND HUMAN
RESOURCE MANAGEMENT
In the opinion of Mayo (2001) the essential difference between HCM and HRM is that
the former treats people as assets while the latter treats them as costs. Kearns (2005b)
believes that in HCM ‘people are value adders, not overheads’ while in HRM ‘people
are (treated as) a significant cost and should be managed accordingly’. According to
Kearns, in HRM ‘the HR team is seen as a support service to the line’ – HR is based
around the function and the HR team performs ‘a distinct and separate role from
other functions’. Conversely, ‘HCM is clearly seen and respected as an equal business
partner at senior levels’ and is ‘holistic, organization-wide and systems-based’ as well
as being strategic and concerned with adding value.
The claim that in HRM employees are treated as costs is not supported by the
descriptions of the concept of HRM produced by American writers such as Beer et al
(1984). In one of the seminal texts on human resource management, they emphasized
the need for: ‘a longer-term perspective in managing people and consideration of
people as potential assets rather than merely a variable cost’. Fombrun et al (1984), in
the other seminal text, quite explicitly presented workers as a key resource that
30 ❚ Managing people
managers use to achieve competitive advantage for their companies. Grant (1991)
lists the main characteristics of human resources in his general classification of a
firm’s potential resources as follows:
● The training and expertise of employees determines the skills available to the
firm.
● The adaptability of employees determines the strategic flexibility of the firm.
● The commitment and loyalty of employees determine the firm’s ability to main-
tain competitive advantage.
Cappelli and Singh (1992) propose that competitive advantage arises from firm-
specific, valuable resources that are difficult to imitate, and stress ‘the role of human
resource policies in the creation of valuable, firm-specific skills’.
Other writers confirmed this view. For example:
HRM is an ‘approach to labour management which treats labour as a valued asset rather
than a variable cost and which consequently counsels investment in the labour resource
through training and development and through measures designed to attract and retain
a committed workforce’. (Storey, 1989)
Human resource management is a distinctive approach to employment management
that seeks to obtain competitive advantage through the strategic deployment of a highly
committed and capable workforce, using an integrated array of cultural, structural and
personnel techniques. (Storey, 1995)
The HRM argument is that people… are not to be seen as a cost, but as an asset in
which to invest, so adding to their inherent value. (Torrington, 1989, emphasis in the
original)
Of course, all these commentators are writing about HRM as a belief system, not
about how it works in practice. The almost universal replacement of the term
‘personnel management’ with HR or HRM does not mean that everyone with the job
title of HR director or manager is basing their approach on the HRM philosophy.
Guest commented in 1991 that HRM was ‘all hype and hope’.
A survey conducted by Caldwell (2004) provided some support to this view by
establishing that the five most important HR policy areas identified by respondents
were also the five in which the least progress had been made. For example, while 89
per cent of respondents said the most important HR policy was ‘managing people as
assets which are fundamental to the competitive advantage of the organization’, only
37 per cent stated that they had made any progress in implementing it.
Human capital management ❚ 31
However, research conducted by Hoque and Moon (2001) found that there
were significant differences between the activities of those described as HR specialists
and those described as personnel specialists. For example, workplace-level
strategic plans are more likely to emphasize employee development in workplaces
with an HR specialist rather than a personnel specialist, and HR specialists are
more likely to be involved in the development of strategic plans than are personnel
specialists.
Both HRM in its proper sense and HCM as defined above treat people as assets.
Although, as William Scott-Jackson, Director of the Centre for Applied HR Research
at Oxford Brookes University argues (Oracle, 2005), ‘You can’t simply treat people as
assets, because that depersonalizes them and leads to the danger that they are viewed
in purely financial terms, which does little for all-important engagement.’
However, there is more to both HRM and HCM than simply treating people as
assets. Each of them also focuses on the importance of adopting an integrated and
strategic approach to managing people, which is the concern of all the stakeholders in
an organization, not just the people management function. So how does the concept
of HCM reinforce or add to the concept of HRM? The answers to that question are
that HCM:
● draws attention to the importance of what Kearns (2005b) calls ‘management
through measurement’, the aim being to establish a clear line of sight between HR
interventions and organizational success;
● strengthens the HRM belief that people are assets rather than costs;
● focuses attention on the need to base HRM strategies and processes on the
requirement to create value through people and thus further the achievement of
organizational goals;
● reinforces the need to be strategic;
● emphasizes the role of HR specialists as business partners;
● provides guidance on what to measure and how to measure;
● underlines the importance of using the measurements to prove that superior
people management is delivering superior results and to indicate the direction in
which HR strategy needs to go.
The concept of HCM complements and strengthens the concept of HRM. It does not
replace it. Both HCM and HRM can be regarded as vital components in the process of
people management.
32 ❚ Managing people
THE CONCEPT OF HUMAN CAPITAL
Individuals generate, retain and use knowledge and skill (human capital) and create
intellectual capital. Their knowledge is enhanced by the interactions between them
(social capital) and generates the institutionalized knowledge possessed by an orga-
nization (organizational capital). These concepts of human, intellectual, social and
organizational capital are explained below.
Human capital
The term ‘human capital’ was originated by Schultz (1961) who elaborated his
concept in 1981 as follows: ‘Consider all human abilities to be either innate or
acquired. Attributes… which are valuable and can be augmented by appropriate
investment will be human capital.’
A more detailed definition was put forward by Bontis et al (1999) as follows:
Human capital represents the human factor in the organization; the combined intelli-
gence, skills and expertise that gives the organization its distinctive character. The
human elements of the organization are those that are capable of learning, changing,
innovating and providing the creative thrust which if properly motivated can ensure the
long-term survival of the organization.
Scarborough and Elias (2002) believe that: ‘The concept of human capital is most
usefully viewed as a bridging concept – that is, it defines the link between HR prac-
tices and business performance in terms of assets rather than business processes.’
They point out that human capital is to a large extent ‘non-standardized, tacit,
dynamic, context dependent and embodied in people’. These characteristics make it
difficult to evaluate human capital bearing in mind that the ‘features of human
capital that are so crucial to firm performance are the flexibility and creativity of indi-
viduals, their ability to develop skills over time and to respond in a motivated way to
different contexts’.
It is indeed the knowledge, skills and abilities of individuals that create value,
which is why the focus has to be on means of attracting, retaining, developing and
maintaining the human capital they represent. Davenport (1999) comments that:
People possess innate abilities, behaviours and personal energy and these elements
make up the human capital they bring to their work. And it is they, not their employers,
who own this capital and decide when, how and where they will contribute it. In other
words, they can make choices. Work is a two-way exchange of value, not a one-way
exploitation of an asset by its owner.
Human capital management ❚ 33
The choices they make include how much discretionary behaviour they are prepared
to exercise in carrying out their role (discretionary behaviour refers to the discretion
people at work can exercise about the way they do their job and the amount of effort,
care, innovation and productive behaviour they display). They can also choose
whether or not to remain with the organization.
Intellectual capital
The concept of human capital is associated with the overarching concept of intellec-
tual capital, which is defined as the stocks and flows of knowledge available to an
organization. These can be regarded as the intangible resources associated with
people who, together with tangible resources (money and physical assets), comprise
the market or total value of a business. Bontis (1996, 1998) defines intangible
resources as the factors other than financial and physical assets that contribute to the
value-generating processes of a firm and are under its control.
Social capital
Social capital is another element of intellectual capital. It consists of the knowledge
derived from networks of relationships within and outside the organization. The
concept of social capital has been defined by Putnam (1996) as ‘the features of social
life – networks, norms and trust – that enable participants to act together more effec-
tively to pursue shared objectives’. The World Bank (2000) offers the following defin-
ition:
Social capital refers to the institutions, relationships and norms that shape the quality
and quantity of a society’s social interactions… Social capital is not just the sum of the
institutions that underpin a society – it is the glue that holds them together.
It is necessary to capture individual knowledge through knowledge management
processes, as described in Chapter 12, but it is equally important to take into account
social capital considerations, that is, the ways in which knowledge is developed
through interaction between people. Bontis et al (1999) point out that it is flows as
well as stocks that matter. Intellectual capital develops and changes over time and a
significant part is played in these processes by people acting together.
Organizational capital
Organizational capital is the institutionalized knowledge possessed by an organiza-
tion, which is stored in databases, manuals, etc (Youndt, 2000). It is often called
34 ❚ Managing people
structural capital (Edvinson and Malone, 1997), but the term ‘organizational capital’ is
preferred by Youndt because, he argues, it conveys more clearly that this is the
knowledge that the organization actually owns.
The significance of human capital theory
The added value that people can contribute to an organization is emphasized by
human capital theory. It regards people as assets and stresses that investment by
organizations in people will generate worthwhile returns. The theory therefore
underpins the philosophies of human resource management and human capital
management.
Human capital theory is associated with the resource-based view of the firm as
developed by Barney (1991). This proposes that sustainable competitive advantage is
attained when the firm has a human resource pool that cannot be imitated or substi-
tuted by its rivals. Boxall (1996) refers to this situation as one that confers ‘human
capital advantage’. But he also notes (1996 and 1999), that a distinction should be
made between ‘human capital advantage’ and ‘human process advantage’. The
former results from employing people with competitively valuable knowledge and
skills, much of it tacit. The latter, however, follows from the establishment of:
difficult to imitate, highly evolved processes within the firm, such as cross-departmental
co-operation and executive development. Accordingly, ‘human resource advantage’,
the superiority of one firm’s labour management over another’s, can be thought of as the
product of its human capital and human process advantages.
For the employer, investments in training and developing people is a means of
attracting and retaining human capital as well as getting better returns from those
investments. These returns are expected to be improvements in performance, produc-
tivity, flexibility and the capacity to innovate that should result from enlarging the
skill base and increasing levels of knowledge and competence. Schuller (2000)
suggests that: ‘The general message is persuasive: skills, knowledge and competences
are key factors in determining whether organizations and nations will prosper.’ This
point is also made powerfully by Reich (1991).
But Davenport (1999) has some cautionary words about the asset-based content of
human capital theory. He argues that workers should not be treated as passive assets
to be bought, sold and replaced at the whim of their owners – increasingly, they
actively control their own working lives. Workers, especially knowledge workers,
may regard themselves as free agents who can choose how and where they invest
their talents, time and energy. He suggests that the notion that companies own
human assets as they own machines is unacceptable in principle and inapplicable in
Human capital management ❚ 35
practice; it short-changes people by placing them in the same category as plant and
equipment.
Important though human capital theory may be, interest in it should not divert
attention from the other aspects of intellectual capital – social and organizational
capital – which are concerned with developing and embedding the knowledge
possessed by the human capital of an organization. Schuller (2000) contends that:
The focus on human capital as an individual attribute may lead – arguably has already
led – to a very unbalanced emphasis on the acquisition by individuals of skills and
competences which ignores the way in which such knowledge is embedded in a
complex web of social relationships.
HUMAN CAPITAL MANAGEMENT: PRACTICE AND
STRATEGY
Practice
Human capital management is concerned with measurement, reporting measure-
ments and drawing conclusions about the significance of the outcomes of measure-
ment as a guide to future action. This is the process of human capital measurement
and reporting that is considered separately in the next two sections of this chapter.
But it is not the sole purpose. There is more to HCM than measurement. Human
capital management focuses the attention of an organization’s leadership team on the
strategies it should adopt as outlined below to increase the added value they obtain
from people. It identifies those aspects of people management that demonstrably
have the greatest bearing on business performance. It clarifies the returns that can be
obtained in terms of increased profitability, productivity and overall effectiveness
arising from the deployment, development and engagement of the people the organi-
zation needs to achieve its goals. HCM points the way to achieving human capital
advantage by highlighting where and how investments in people generate the
highest returns. It ensures that HRM policies and practices are developed to attain
this end. These policies include knowledge management, resourcing, talent manage-
ment, performance management, learning and development programmes, and
reward and recognition processes.
From an organizational perspective, an HCM approach generates the following
practical questions:
● What are the key performance drivers that create value?
● What skills have we got?
36 ❚ Managing people
● What skills do we need now and in the future to meet our strategic aims?
● How are we going to attract, develop and retain these skills?
● How can we develop a culture and environment in which organizational and
individual learning takes place that meets both our needs and the needs of our
employees?
● How can we provide for both the explicit and tacit knowledge created in our
organization to be captured, recorded and used effectively?
Strategy
To provide guidelines for action a human capital strategy can be developed making
use of the data provided by human capital measurement and reporting. The Mercer
HR consulting organizational performance model (CIPD, 2004a) describes a firm’s
human capital strategy as consisting of six interconnected factors:
1. People – who is in the organization, their skills and competencies on hiring; what
skills competences they develop through training and experience; their level of
qualification; and the extent to which they apply firm-specific or generalized
human capital.
2. Work processes – how work gets done; the degree of teamwork and interdepen-
dence amongst organizational units; and the role of technology.
3. Managerial structure – the degree of employee discretion, management direction
and control; spans of control; performance management and work procedures.
4. Information and knowledge – how information is shared and interchanged between
employees and with suppliers and customers through formal or informal means.
5. Decision-making – how important decisions are made and who makes them; the
degree of decentralization, participation and timeliness of decisions.
6. Rewards – how monetary and non-monetary incentives are used; how much pay
is at risk; individual versus group rewards; current versus longer-term ‘career
rewards’.
The human capital strategy of an organization can be regarded as complementary to
its human resource strategy, as discussed in Chapters 7 and 8.
HUMAN CAPITAL MEASUREMENT
As Becker et al (2001) emphasize: ‘The most potent action HR managers can take to
ensure their strategic contribution is to develop a measurement system that convinc-
ingly showcases HR’s impact on business performance.’ They must ‘understand how
Human capital management ❚ 37
the firm creates value and how to measure the value creation process’. This means
getting involved in human capital measurement as defined and described below.
Human capital measurement defined
Human capital measurement has been defined by IDS (2004) as being ‘about finding
links, correlations and, ideally, causation, between different sets of (HR) data, using
statistical techniques’. The CIPD (2004a) emphasizes that it deals with the analysis of
‘the actual experience of employees, rather than stated HR programmes and policies’.
The need for human capital measurement
There is an overwhelming case for evolving methods of valuing human capital as an
aid to decision-making. This may mean identifying the key people management
drivers and modelling the effect of varying them. The issue is to develop a framework
within which reliable information can be collected and analysed such as added value
per employee, productivity and measures of employee behaviour (attrition and
absenteeism rates, the frequency/severity rate of accidents, and cost savings
resulting from suggestion schemes).
Becker et al (2001) refer to the need to develop a ‘high-performance perspective’ in
which HR and other executives view HR as a system embedded within the larger
system of the firm’s strategy implementation. They state that: ‘The firm manages and
measures the relationship between these two systems and firm performance.’ A high-
performance work system is a crucial part of this approach in that it:
● links the firm’s selection and promotion decisions to validated competency
models;
● develops strategies that provide timely and effective support for the skills
demanded by the firm’s strategy implementation;
● enacts compensation and performance management policies that attract, retain
and motivate high-performance employees.
Reasons for the interest in measurement
The recognized importance of achieving human capital advantage has led to an
interest in the development of methods of measuring the value of that capital for the
following reasons:
● Human capital constitutes a key element of the market worth of a company. A
research study conducted in 2003 (CFO Research Studies) estimated that the
38 ❚ Managing people
value of human capital represented over 36 per cent of total revenue in a typical
organization.
● People in organizations add value and there is a case for assessing this value to
provide a basis for HR planning and for monitoring the effectiveness and impact
of HR policies and practices.
● The process of identifying measures and collecting and analysing information
relating to them will focus the attention of the organization on what needs to be
done to find, keep, develop and make the best use of its human capital.
● Measurements can be used to monitor progress in achieving strategic HR goals
and generally to evaluate the effectiveness of HR practices.
● You cannot manage unless you measure.
However, three voices have advised caution about measurement. Leadbeater (2000)
observed that measuring can ‘result in cumbersome inventories which allow
managers to manipulate perceptions of intangible values to the detriment of
investors. The fact is that too few of these measures are focused on the way compa-
nies create value and make money’. The Institute of Employment Studies (Hartley,
2005) emphasized that reporting on human capital is not simply about measurement.
Measures on their own such as those resulting from benchmarking are not enough;
they must be clearly linked to business performance. And Scarborough and Elias
(2002) concluded from their investigations that the specific set of measures or metrics
organizations reported were less important than the process of measuring and the
uses for the information gathered.
Approaches to measurement
Six of the main approaches to measurement are described below.
The human capital index – Watson Wyatt
On the basis of a survey of companies that have linked together HR management
practices and market value, Watson Wyatt (2001) identified four major categories of
HR practice that could be linked to a 30 per cent increase in shareholder value
creation. These are:
Practice Impact on market value (per cent)
total rewards and accountability 16.5
collegial, flexible workforce 9.0
recruiting and retention excellence 7.9
communication integrity 7.1
Human capital management ❚ 39
The organizational performance model – Mercer HR Consulting
As described by Nalbantian et al (2004) the Organizational Performance Model devel-
oped by Mercer HR Consulting is based on the following elements: people, work
processes, management structure, information and knowledge, decision-making and
rewards, each of which plays out differently within the context of the organization,
creating a unique DNA. If these elements have been developed piecemeal, as often
happens, the potential for misalignment is strong and it is likely that human capital is
not being optimised, creating opportunities for substantial improvement in returns.
Identifying these opportunities requires disciplined measurement of the organiza-
tion’s human capital assets and the management practices that affect their perfor-
mance. The statistical tool, ‘Internal Labour Market Analysis’ used by Mercer draws
on the running record of employee and labour market data to analyse the actual expe-
rience of employees rather than stated HR programmes and policies. Thus gaps can
be identified between what is required in the workforce to support business goals
and what is actually being delivered.
The human capital monitor – Andrew Mayo
Mayo (2001) has developed the ‘human capital monitor’ to identify the human value
of the enterprise or ‘human asset worth’, which is equal to ‘employment cost × indi-
vidual asset multiplier’. The latter is a weighted average assessment of capability,
potential to grow, personal performance (contribution) and alignment to the organi-
zation’s values set in the context of the workforce environment (ie how leadership,
culture, motivation and learning are driving success). The absolute figure is not
important. What does matter is that the process of measurement leads you to
consider whether human capital is sufficient, increasing, or decreasing, and high-
lights issues to address. Mayo advises against using too many measures and instead
to concentrate on a few organization-wide measures that are critical in creating share-
holder value or achieving current and future organizational goals.
A number of other areas for measurement and methods of doing so have been iden-
tified by Mayo (1999, 2001). He believes that value added per person is a good
measure of the effectiveness of human capital, especially for making inter-firm
comparisons. But he considers that the most critical indicator for the value of human
capital is the level of expertise possessed by an organization. He suggests that this
could be analysed under the headings of identified organizational core competencies.
The other criteria he mentions are measures of satisfaction derived from employee
opinion surveys and levels of attrition and absenteeism.
40 ❚ Managing people
The Sears Roebuck model
The Sears Roebuck model (Rucci et al, 1998) defines the employee-customer-profit
chain. It is sometimes called the ‘engagement model’. It explains that if you keep
employees satisfied in terms of their attitude to the company and their job you will
create a ‘compelling place to work’, which will encourage retention and lead to service
helpfulness and merchandize value, which leads to customer satisfaction, retention
and recommendations, thus creating ‘a compelling place to shop’. This in turn creates ‘a
compelling place to invest’, because of its impact on return on assets, operating margins
and revenue growth (Figure 2.1).
This model encourages the use of attitude surveys to measure job satisfaction and
engagement and has been used in a number of organizations in the UK.
Nationwide has developed its ‘Genome’ human capital investment model to quan-
tify the impact that employee commitment has on customer satisfaction and business
performance. The model uses data from existing sources such as employee opinion
surveys, customer satisfaction indices, business performance statistics and employee
metrics covering turnover, length of service and absence. Use of the model enabled
Human capital management ❚ 41
Attitude about
the job
Serving
helpfulness
Customer
recommendations
Employee
behaviour
Customer
impression
Return on assets
Operation margin
Revenue growth
Attitude about
the job
Employee
retention
Merchandize
value
Customer
retention
A compelling place
to work
A compelling place
to shop
A compelling place
to invest
Figure 2.1 The Sears Roebuck Model: Employee-Customer-Profit chain
Nationwide to prove statistically that the more committed the employee the happier
the customer. It is possible to use data modelling to predict the impact that a change
in one factor affecting employee commitment would have on customer satisfaction
and ultimately on business performance. For example, increasing employee satisfac-
tion with basic pay by 5 per cent would produce an overall rise in customer satisfac-
tion of 0.5 per cent and an increase in personal loan sales of 2.3 per cent.
The balanced scorecard
The balanced scorecard as originally developed by Kaplan and Norton (1992, 1996) is
frequently used as the basis for measurement. Their aim was to counter the tendency
of companies to concentrate on short-term financial reporting. They take the view
that ‘what you measure is what you get’, and they emphasize that ‘no single measure
can provide a clear performance target or focus attention on the critical areas of the
business. Managers want a balanced presentation of both financial and operational
measures’. Their original concept of the scorecard required managers to answer four
basic questions, which means looking at the business from four related perspectives,
as shown in Figure 2.2.
Some organizations have replaced the innovation and learning perspective with a
broader people or human capital element.
Kaplan and Norton emphasize that the balanced scorecard approach ‘puts strategy
and vision, not control at the centre’. They suggest that while it defines goals, it
assumes that people will adopt whatever behaviours and take whatever actions are
required to achieve those goals: ‘Senior managers may know what the end result
should be, but they cannot tell employees exactly how to achieve that result, if only
because the conditions in which employees operate are constantly changing.’
They suggest that the balanced scorecard can help to align employees’ individual
performance with the overall strategy: ‘Scorecard users generally engage in three
activities: communicating and educating, setting goals, and linking rewards to
performance measures’. They comment that:
Many people think of measurement as a tool to control behaviour and to evaluate past
performance. The measures on a Balanced Scorecard, however, should be used as the
cornerstone of a management system that communicates strategy, aligns individuals and
teams to the strategy, establishes long-term strategic targets, aligns initiatives, allocates
long- and short-term resources and, finally, provides feedback and learning about the
strategy.
Research by Deloitte & Touche and Personnel Today (2002) found that 32 per cent of
large UK companies are using the balanced scorecard methodology, although the
42 ❚ Managing people
methods adopted vary. At Lloyds TSB the balanced scorecard blends a mix of finan-
cial metrics and non-financial indicators to provide a single integrated measure of
performance that focuses on key indicators, from which a true reflection of organiza-
tion performance can be accomplished. The scorecard thus enables the organization
to focus on a small number of critical measures that create value for the organization.
Norwich Union Insurance describes its balanced scorecard as a ‘mechanism for
implementing our strategy and measuring performance against our objectives and
critical success factors to achieve the strategy’. The scorecard is cascaded throughout
the organization to measure the operational activities that are contributing to the
overall company strategy. The balanced scorecard changes from year to year. Most
recently, it set out to achieve three goals: positive benefit, staff impacts and financial
performance – in short, service, morale and profits. Previously, the emphasis was
Human capital management ❚ 43
Customer perspective
How do customers see us?
Internal perspective
What must we excel at?
Financial perspective
How do we appear to our
shareholders?
Innovation and learning
(people) perspective
Can we continue to improve
and add value
Figure 2.2 The balanced scorecard
predominantly on profit, in order to deliver the promises made to the City and share-
holders, but the company feels that more focus is now needed on service and morale.
The EFQM model of quality
The European Foundation for Quality Management (EFQM) model of quality as
shown in Figure 2.3 provides another framework for measuring and reporting on
human capital management. It indicates that customer satisfaction, people
(employee) satisfaction and impact on society are achieved through leadership. This
drives the policy and strategy, people management, resources and processes required
to produce excellence in business results.
The nine elements in the model are defined as follows:
1. Leadership – how the behaviour and actions of the executive team and all other
leaders inspire, support and promote a high performance culture.
2. Policy and strategy – how the organization formulates, deploys and reviews its
policy and strategy and turns them into plans and actions.
3. People management – how the organization realizes the full potential of its people.
44 ❚ Managing people
Business
results
People
satisfaction
Customer
satisfaction
Impact on
society
Processes
People
management
Resources
Policy and
strategy
Leadership
Enablers Results
Figure 2.3 The EFQM model
4. Resources – how the organization manages resources effectively and efficiently.
5. Processes – how the organization identifies, manages, reviews and improves its
processes.
6. Customer satisfaction – what the organization is achieving in relation to the satis-
faction of its external customers.
7. People satisfaction – what the organization is achieving in relation to the satisfac-
tion of its people.
8. Impact on society – what the organization is achieving in satisfying the needs and
expectations of the local, national and international community at large.
9. Business results – what the organization is achieving in relation to its planned
business objectives and in satisfying the needs and expectations of everyone with
a financial interest or stake in the organization.
Organizations that adopt the EFQM model accept the importance of performance
measurement and work all the time to improve the usefulness of their measures, but
they also recognize that simply measuring a problem does not improve it. There is a
risk that managers will exert their best energies to the analysis, leaving little left for
the remedy.
Measurement elements
The main data elements used for measurement are as follows:
● Basic workforce data – demographic data (numbers by job category, sex, race, age,
disability, working arrangements, absence and sickness, turnover and pay).
● People development and performance data – learning and development programmes,
performance management/potential assessments, skills and qualifications.
● Perceptual data – attitude/opinion surveys, focus groups, exit interviews.
● Performance data – financial, operational and customer.
● Non-financial variables – the top 10 as listed by Low and Siesfield (1998) are:
– quality of corporate strategy;
– execution of corporate strategy;
– management credibility;
– innovation;
– research leadership;
– ability to attract and retain talented people;
– market share;
– management expertise;
– alignment of compensation with shareholders’ interests;
– quality of major business processes.
Human capital management ❚ 45
In more detail the Council for Excellence in Management and Leadership (2002)
report listed the following measures:
A. Morale
1. Absenteeism.
2. Accidents.
3. Employee turnover.
4. Director and manager turnover.
5. Employee satisfaction (staff survey measure).
6. Sickness.
B. Motivation
1. Appraisal – completion rates.
2. Per cent of employees for whom documented annual appraisal has been agreed.
3. Per cent of jobs for which objectives have been documented.
4. Per cent of jobs for which job descriptions exist.
5. Employee understanding of strategy (staff survey measure).
6. Employee understanding of vision (staff survey measure).
7. Employee retention.
8. Director and manager retention.
9. Working hours.
C. Investment
1. Benchmarked remuneration levels.
2. Directors and managers’ salaries as a percentage of total salaries.
3. Human resource spend per employee.
4. Training investment.
D. Long-term development
1. Current management and leadership capability.
2. Potential management and leadership capability.
3. Management and leadership skill gaps.
4. Per cent of job holders for whom a development plan has been agreed.
5. Per cent of jobs for which competencies have been audited.
6. Training days.
46 ❚ Managing people
E. External perception
1. Job applications: vacancies.
2. Job offers: job acceptances.
Measuring human capital
The points that should be borne in mind when measuring human capital are:
● Identify sources of value including the competencies and abilities that drive busi-
ness performance.
● Analyse the relationships between people management practices and outcomes
and organizational effectiveness.
● Remember that human capital measurement is concerned with the impact of
people management practices on performance so that steps can be taken to do
better. It is not just about measuring the efficiency of the HR department in terms
of activity levels. It needs to be value-focused rather than activity-based. For
example, it is not enough just to record the number of training days or the expen-
diture on training; it is necessary to assess the return on investment generated by
that training.
● Keep measurements simple – concentrate on key areas of outcomes and behav-
iour.
● Only measure activities if it is clear that such measurements will inform decision-
making.
● Analyse and evaluate trends rather than simply record actuals – compare the
present position with baseline data.
● Focus on readily available and reliable quantified information; however, although
quantification is desirable it should not be based on huge, loose assumptions.
● Remember that measurement is a means to an end, not an end in itself. Do not get
so mesmerized by the process of collecting data as to forget that the data is there
to be used to support decision-making and generate action.
HUMAN CAPITAL REPORTING
Human capital reporting is concerned with providing information on how well the
human capital of an organization is managed. There are two aspects: first, external
reporting to stakeholders through, in the UK, the compulsory Operating and
Financial Review (OFR). The second aspect is internal reporting, which also informs
the leadership team and stakeholders generally about how human capital is being
Human capital management ❚ 47
managed, but extends this with statements of how the information will be used to
guide future action. The purpose is to inform decision-making about human capital
management, not just to record the figures.
External reporting
The Accounting for People Task Force Report (2003) recommended that operating
and financial review reports (OFRs) should be made by companies which have a
strategic focus, are balanced and objective and based on sound data’. The Task Force
specified that:
The report should clearly represent the Board’s understanding of the links between HCM
policies and practices and its business strategy and performance. This means that it
should normally include details on the size and composition of the workforce,
employee retention and motivation, skills, competencies and training, remuneration and
fair employment practice, and leadership and succession planning. The report should
follow a process that is susceptible to review by auditors, provide information in a form
that enables comparison over time, and use commonly accepted terms and definitions.
The CIPD (2003b) has recommended that the OFR should provide information on:
● the profile of the workforce and its diversity;
● senior executive remuneration;
● the quality of leadership and management strength;
● how well labour costs have been managed over time;
● evidence of a coherent, robust people strategy that is mapped to the stated busi-
ness strategy for the next three years;
● evidence that current people management practice (especially regarding acquisi-
tion, motivation and retention) are affecting organizational and business perfor-
mance;
● current and forecasted returns on people investment in the next three to five
years;
● the value of human capital assets and future investments, especially in major
corporate decisions such as mergers and acquisitions;
● comparator listings in financial league tables – such as industry FTSE or analyst
ratings.
The CIPD (2003b) also proposed the external reporting framework illustrated in
Figure 2.4.
48 ❚ Managing people
Internal reporting
Internal reporting should be linked to the external reporting framework but will
focus more on the practical implications of the data that has been assembled and
analysed. The information and the headings of the internal report have to be tailored
to the context and needs of the organization, but it could:
● set out the quantitative and qualitative information – this could include data on
the size and composition of the workforce, attraction and retention, absence,
motivation, skills and competencies, learning and development activities, remu-
neration and fair employment practices, leadership and succession planning, and
the outcomes of opinion or job satisfaction surveys;
● analyse measures of employee satisfaction and engagement, compare them with
data on business performance and demonstrate the links between them;
● analyse the outcomes of external benchmarking;
● identify the key performance drivers in the organization and indicate how human
capital management is contributing to adding value in each of these areas;
● review the extent to which people management strategy, policies and practices
are contributing to the achievement of business goals;
Human capital management ❚ 49
Human capital strategy
Learning and development
Human capital performance
Acquisition and retention
Human capital management
Management and leadership
Figure 2.4 Human capital external reporting framework (CIPD, 2003b)
● set out the returns on investments in people management and development
projects and evaluate the effectiveness of the investments;
● draw conclusions on the implications of the data for future people management
strategy, policy and practice.
An example of internal reporting is provided by Standard Chartered Bank. A range of
processes and benchmarks has been established to measure and enhance the contri-
bution of its employees. Work on human capital measurement has enabled the bank
to understand the difference that talented and motivated employees can make to the
business. A ‘Human Capital Roadmap’ has been developed to provide a clear people
agenda. The core of the roadmap is the five areas of focus which drive business
performance that are supported by key people processes and interventions. The latter
form the framework for metrics and evaluations. These include an engagement
survey (G12) developed by the Gallop Organization covering 12 factors that
underpin a productive and stimulating place to work. Research has established a
powerful link between engagement scores and business performance.
At Nationwide regular reports are made to area managers on key drivers. These
are presented graphically on dashboards, as illustrated in Figure 2.5, enabling
the manager to identify problem areas, investigate the circumstances and initiate
action.
50 ❚ Managing people
Human capital management ❚ 51
Key drivers of committed employees Outcomes
Area Pay Length of Coaching Resource Values Retention Customer
service manage- commitment
ment
1
2
3
4
5
Figure 2.5 Human capital reporting dashboard for area managers: Nationwide
Green Amber Red
Role of the HR function
HR functions are concerned with the management and development of people in
organizations. They are involved in the development and implementation of HR
strategies and policies and some or all of the following people management activities:
organization development, human resource planning, talent management, knowl-
edge management, recruitment and selection, learning and development, reward
management, employee relations, health and safety, welfare, HR administration,
fulfilment of statutory requirements, equal opportunity and diversity issues, and any
other matters related to the employment relationship.
The IRS survey of HR roles and responsibilities (IRS, 2004b) found that HR func-
tions were spending 20 per cent of their time on strategic activities, 40 per cent on
administration, 30 per cent on providing a consultancy service, and 10 per cent on
other activities.
The ‘clients’ or ‘customers’ of the HR function are not just management. They also
comprise the front-line managers who actually implement HR policies and on whom
the function relies to get things done, employees, and potential recruits.
This chapter deals with:
● the overall role of the function;
● the role of HR in facilitating and managing change;
● variations in practice;
● organization of the function;
3
● marketing the function;
● preparing, justifying and protecting the HR budget;
● outsourcing;
● the provision of shared services;
● the use of external consultants;
● evaluating the HR function.
THE OVERALL ROLE OF THE HR FUNCTION
The role of the HR function is to enable the organization to achieve its objectives by
taking initiatives and providing guidance and support on all matters relating to its
employees. The basic aim is to ensure that the organization develops HR strategies,
policies and practices that cater effectively for everything concerning the employ-
ment and development of people and the relationships that exist between manage-
ment and the workforce. The HR function can play a major part in the creation of an
environment that enables people to make the best use of their capacities and to realize
their potential to the benefit of both the organization and themselves.
Essentially, the HR function provides the advice and services that enable organiza-
tions to get things done through people. It is in the delivery business. Ulrich (1998)
points out that: ‘The activities of HR appear to be and often are disconnected from the
real work of the organization.’ He believes that HR ‘should not be defined by what it
does but by what it delivers’.
The more sophisticated HR functions aim to achieve strategic integration and
coherence in the development and operation of HRM policies and employment prac-
tices. Strategic integration could be described as vertical integration – the process of
ensuring that HR strategies are integrated with or ‘fit’ business strategies. The
concept of coherence could be defined as horizontal integration – the development of
a mutually reinforcing and interrelated set of HR employment and development poli-
cies and practices. These strategic aspects of the work of the function are dealt with in
Chapters 7, 8 and 9 of this book.
THE ROLE OF HR IN FACILITATING AND MANAGING
CHANGE
If HR is concerned – as it should be – with playing a major role in the achievement
of continuous improvement in organizational and individual performance and in
the HR processes that support that improvement, then it will be concerned with
54 ❚ Managing people
facilitating change. Ulrich (1997a) believes that one of the key roles of HR profes-
sionals is to act as change agents, delivering organizational transformation and cul-
ture change.
Strategic HRM is as much if not more about managing change during the process
of implementation as it is about producing long-term plans; a point emphasized by
Purcell (1999) who believes that: ‘We should be much more sensitive to processes of
organizational change and avoid being trapped in the logic of rational choice.’ In 2001
Purcell suggested that change is specially important in HRM strategies, ‘since their
concern is with the future, the unknown, thinking of and learning how to do things
differently, undoing the ways things have been done in the past, and managing its
implementation’. He believes that the focus of strategy is on implementation, where
HR can play a major part.
The importance of the human resource element in achieving change has been
emphasized by Johnson and Scholes (1997):
Organizations which successfully manage change are those which have integrated their
human resource management policies with their strategies and the strategic change
process… training, employee relations, compensation packages and so on are not
merely operational issues for the personnel department; they are crucially concerned
with the way in which employees relate to the nature and direction of the firm and as
such they can both block strategic change and be significant facilitators of strategic
change.
The contribution of HR to change management
The HR function may be involved in initiating change but it can also act as a stabi-
lizing force in situations where change would be damaging. Mohrman and Lawler
(1998) believe that:
The human resources function can help the organization develop the capability to
weather the changes that will continue to be part of the organizational landscape. It can
help with the ongoing learning processes required to assess the impact of change and
enable the organization to make corrections and enhancements to the changes. It can
help the organization develop a new psychological contract and ways to give
employees a stake in the changes that are occurring and in the performance of the orga-
nization.
How HR can facilitate change
Ulrich (1998) argues that HR professionals are ‘not fully comfortable or compatible in
the role of change agent’, and that their task is therefore not to carry out change but to
Role of the HR function ❚ 55
get change done. But HR practitioners are in a good position to understand possible
points of resistance to change and they can help to facilitate the information flow and
understanding that will help to overcome that resistance.
Change guidelines for HR
To facilitate change, HR has to be fully aware of the reasons why people resist change
and the approaches that can be adopted to overcome that resistance, indeed to gain
agreement that change is desirable. These approaches are described in Chapter 24.
Useful guidelines (quoted by Ulrich, 1998) on how HR can facilitate change have
been produced by the HR department in General Electric. These are to ensure that:
● employees see the reason for change;
● employees understand why change is important and see how it will help them
and the business in the long and short term;
● the people who need to be committed to the change to make it happen are recog-
nized;
● a coalition of support is built for the change;
● the support of key individuals in the organization is enlisted;
● the link between the change and other HR systems such as staffing, training,
appraisal, rewards, structure and communication is understood;
● the systems implications of the change are recognized;
● a means of measuring the success of the change is identified;
● plans are made to monitor progress in the implementation of change;
● the first steps in getting change started are recognized;
● plans are made to keep attention focused on the change;
● the likely need to adapt the change over time is recognized and plans can readily
be made and implemented for such adaptations.
VARIATIONS IN THE PRACTICE OF HR
The role of the HR function and the practice of human resource management vary
immensely in different organizations. As Sisson (1995) has commented, HR manage-
ment is not a single homogeneous occupation – it involves a variety of roles and
activities that differ from one organization to another and from one level to another in
the same organization. Tyson (1987) has claimed that the HR function is often ‘balka-
nized’ – not only is there a variety of roles and activities but these tend to be relatively
self-centred, with little passage between them. Hope-Hailey et al (1998) believe that
HR could be regarded as a ‘chameleon function’ in the sense that the diversity of
56 ❚ Managing people
practice established by their research suggests that ‘contextual variables dictate
different roles for the function and different practices of people management’.
Adams (1991) has identified four approaches to the role of the function, each of
which can be seen as representing a ‘kind of scale of increasing degrees of external-
ization, understood as the application of market forces to the delivery of HR activi-
ties’:
1. The in-house agency, in which the HR department is seen as a cost centre and the
activities are cross-charged to other departments or divisions.
2. The internal consultancy, in which the HR department sells its services to internal
customers (line managers), the implication being that managers have some
freedom to go elsewhere if they are not happy with the service that is being
provided.
3. The business within a business, in which some of the activities of the function are
formed into a quasi-independent organization that may trade not only with orga-
nizational units but also externally.
4. External consultancy, in which the organizational units go outside to completely
independent businesses for help and advice.
The common feature of all these approaches is that the services delivered are charged
for in some form of contract, which may incorporate a service level agreement.
The approach to the provision of services and their externalization will vary
between different organizations because of contextual factors such as the way in
which the business is organized and the type of people employed, the values and
beliefs of top management about the need for HR and the extent to which it will make
a contribution to the ‘bottom line’, and the reputation and credibility of the HR func-
tion.
Another area for variation is the extent to which the traditional methods of
managing HR functions have changed in the direction of setting up shared services
and outsourcing, as described later in this chapter.
ORGANIZING THE HR FUNCTION
The organization and staffing of the HR function clearly depends on the size of the
business, the extent to which operations are decentralized, the type of work carried
out, the kind of people employed and the role assigned to the HR function.
There is no standard ratio for the number of HR specialists to the number of
employees. It can vary from 1 to 80, to 1 to 1,000 or more. In the 128 organizations
Role of the HR function ❚ 57
covered by the IRS 2004b survey, there was on average one HR practitioner for every
109 employees.
The ratio is affected by all the factors mentioned above and can only be decided
empirically by analysing what HR services are required and then deciding on the
extent to which they are provided by full-time professional staff or can be purchased
from external agencies or consultants. The degree to which the organization believes
that the management of human resources is the prime responsibility of line managers
and team leaders affects not only the numbers of HR staff but also the nature of the
guidance and support services they provide.
There are, therefore, no absolute rules for organizing the HR function, but current
practice suggests that the following guidelines should be taken into account:
● The head of the function should report directly to the chief executive and should
be on the board, or at least be a member of the senior management or leadership
team, in order to contribute to the formulation of corporate strategies and play a
full part in the formulation and integration of HR strategies and policies. In prac-
tice, however, this does not happen as frequently as one would wish. Only four
out of 10 of the organizations surveyed by IRS in 2004 had a director with sole
responsibility for HR.
● In a decentralized organization, subsidiary companies, divisions, or operational
units should be responsible for their own HR management affairs within the
framework of broad strategic and policy guidelines from the centre.
● The central HR function in a decentralized organization should be slimmed down
to the minimum required to develop group human resource strategies and poli-
cies. It will probably be concerned with resourcing throughout the group at senior
management level and advising on both recruitment and career development. It
may also control remuneration and benefits policies for senior management. The
centre may co-ordinate industrial-relations negotiating if bargaining has been
decentralized, especially where bargaining is related to terms and conditions such
as hours of work, holidays and employee benefits. Although rates of pay may
vary among subsidiaries, it is generally desirable to develop a consistent
approach to benefit provision. A recent development is to operate as a ‘service
centre’, providing shared HR services to other parts of the organization, as
described later in this chapter.
● The HR function has to be capable of delivering the level of advice and services
required by the organization. Delivery may be achieved by the direct provision of
services but may be outsourced.
● The function will be organized in accordance with the level of support and
services it is required to give and the range of activities that need to be catered for,
58 ❚ Managing people
which could include resourcing, management development, training, reward
management, employee relations, knowledge management and HR services in
such areas as health and safety, welfare, HR information systems and employ-
ment matters generally. In a large department, each of these areas may be
provided for separately, but they can be combined in various ways.
The organization and staffing of the HR function needs to take account of its role in
formulating HR strategies and policies and intervening and innovating as required.
But the function also has to provide efficient and cost-effective services. These cannot
be neglected; the credibility and reputation of the function so far as line managers are
concerned will be largely a function of the quality of those services to the HR depart-
ment’s internal customers. It is, in fact, important for members of the function to
remember that line managers are their customers and deserve high levels of personal
service that meet their needs.
The most important principle to bear in mind about the organization of the HR
function is that it should fit the needs of the business. Against that background, there
will always be choice about the best structure to adopt, but this choice should be
made on the basis of an analysis of what the organization wants in the way of HR
management guidance and services. This is why there are considerable variations in
HR practice.
MARKETING THE HR FUNCTION
Top management and line managers are the internal customers whose wants and
needs the HR function must identify and meet. How can this be done?
First, it is necessary to understand the needs of the business and its critical success
factors – where the business is going, how it intends to get there and what are the
things that are going to make the difference between success and failure.
Market research data needs to be converted into marketing plans for the develop-
ment of products and services to meet ascertained needs – of the business and its
managers and employees. The marketing plan should establish the costs of intro-
ducing and maintaining these initiatives and the benefits that will be obtained from
them. Every effort must be made to quantify these benefits in financial terms.
The next step in the marketing process is to persuade management that this is a
product or service the business needs. This means spelling out its costs and benefits,
covering the financial and human resources required to develop, introduce and main-
tain it, and the impact it will make on the performance of the business. Identifying the
business need and convincing management that a product or service is worthwhile
will be easier if the initial customer research and product development activities have
Role of the HR function ❚ 59
been carried out thoroughly. Credibility is vital. This will be achieved if the proposal
for expenditure is credible in itself, but the track record of the HR function in deliv-
ering its promises is equally important.
This approach is akin to ‘branding’ in product planning. This identifies the product
or service, spells out the benefits it provides and differentiates it from other services,
thus bringing it to the attention of customers. Presentation is important through logos
and distinctive brochures. Some HR departments brand products with an immedi-
ately identifiable name such as ‘Genome’ or ‘Gemini’.
PREPARING, JUSTIFYING AND PROTECTING THE HR
BUDGET
Preparation
HR budgets are prepared like any other functional department budget in the
following stages:
1. Define functional objectives and plans.
2. Forecast the activity levels required to achieve objectives and plans in the light of
company budget guidelines and assumptions on future business activity levels
and any targets for reducing overheads or for maintaining them at the same
level.
3. Assess the resources (people and finance) required to enable the activity levels to
be achieved.
4. Cost each activity area – the sum of these costs will be the total budget.
Justification
Justifying budgets means ensuring in advance that objectives and plans are generally
agreed – there should be no surprises in a budget submitted to top management. A
cast-iron case should then be prepared to support the forecast levels of activity in
each area and, on a cost/benefit basis, to justify any special expenditure. Ideally, the
benefit should be defined as a return on investment expressed in financial terms.
Protection
The best way to protect a budget is to provide in advance a rationale for each area of
expenditure that proves that it is necessary and will justify the costs involved. The
worst thing that can happen is to be forced on to the defensive. If service delivery
60 ❚ Managing people
standards (service level agreements) are agreed and achieved these will provide a
further basis for protecting the budget.
OUTSOURCING HR WORK
Increasingly, HR services, which would previously have been regarded as a busi-
ness’s own responsibility to manage, are now routinely being purchased from
external suppliers. Managements are facing Tom Peters’ (1988) challenge: ‘Prove it
can’t be subcontracted.’ The formal policy of a major global corporation reads:
‘Manufacture only those items – and internally source only those support services –
that directly contribute to, or help to maintain, our competitive advantage.’ The IPD
(1998a) states that ‘the biggest single cause in the increase of outsourcing has been the
concept of the core organization which focuses its in-house expertise on its primary
function and purchases any necessary support from a range of sources in its
periphery’.
The HR function is well positioned to outsource some of its activities to manage-
ment consultancies and other agencies or firms that act as service providers in such
fields as training, recruitment, executive search, occupational health and safety
services, employee welfare and counselling activities, childcare, payroll administra-
tion and legal advisory services. HR functions, which have been given responsibility
for other miscellaneous activities such as catering, car, fleet management, facilities
management and security (because there is nowhere else to put them), may gladly
outsource them to specialist firms.
The case for outsourcing
There are three reasons for outsourcing:
1. Cost saving – HR costs are reduced because the services are cheaper and the size
of the function can be cut back.
2. Concentration of HR effort – members of the function are not diverted from the key
tasks that add value.
3. Obtaining expertise – know-how and experience that are unavailable in the orga-
nization can be purchased.
Problems with outsourcing
The advantages of outsourcing seem to be high, but there are problems. Some firms
have unthinkingly outsourced core activities on an ad hoc basis to gain short-term
Role of the HR function ❚ 61
advantage, while others found that they were being leveraged by their suppliers to
pay higher rates. Firms may focus on a definition of the core activities and those that
can be outsourced that may be justified at the time but do not take account of the
future. Additionally, a seemingly random policy of outsourcing can lead to lower
employee morale and to a ‘who next’ atmosphere.
Deciding to outsource
The decision to outsource should be based on rigorous analysis and benchmarking to
establish how other organizations manage their HR activities. This will define the
level of service required. The cost of providing the existing service internally should
also be measured. This will be easier if an activity-based costing system is used in the
organization.
To minimize problems, careful consideration should be given to the case for out-
sourcing. It is necessary to assess each potential area with great care in order to deter-
mine whether it can and should be outsourced and exactly what such outsourcing is
intended to achieve. The questions to be answered include: Is the activity a core one
or peripheral? How efficiently is it run at present? What contribution does it make to
the qualitative and financial well-being of the organization? This is an opportunity to
re-engineer the HR function, subjecting each activity to critical examination to estab-
lish whether the services can be provided from within or outside the organization, if
at all. Outsourcing may well be worthwhile if it is certain that it can deliver a better
service at a lower cost.
Selecting service providers
Potential service providers should be required to present tenders in response to a
brief. Three or four providers should be approached so that a choice can be made. The
tender should set out how the brief will be met and how much it will cost. Selection
should take into account the degree to which the tender meets the specification, the
quality and reputation of the firm and the cost (this is an important consideration but
not the only one – the level of service that will be provided is critical). References
should be obtained before a contract is drawn up and agreed. The contract should be
very clear about services, costs and the basis upon which it can be terminated.
Managerial and legal implications of outsourcing
Service providers need to be managed just as carefully – if not more so – than internal
services. Service standards and budgets should be reviewed and agreed regularly
and management information systems should be set up so that performance can be
62 ❚ Managing people
monitored. Swift corrective action should be taken if things go wrong, and the
contract terminated if there is a serious shortcoming.
The legal implications of outsourcing are that it will be based on a service contract
and the purchaser of the services has the right to insist that the terms of the
contract are fulfilled. Purchasers also have a duty to fulfil their side of the contract, for
example, providing agreed facilities, meeting the leasing terms set out in a car fleet
management contract, and paying for the services as required by the contract.
SHARED HR SERVICES
The term ‘shared services’ refers to the central provision of HR services that are avail-
able to a number of parties and are therefore the same for all those who take them up.
The nature of the services is determined by both the provider and the user. The
customer or user defines the level of the service and decides which services to take
up. Thus, ‘the user is the chooser’ (Ulrich, 1995). As described by Reilly (2000),
administrative tasks tend to be those most commonly covered by shared services, for
example:
● payroll changes;
● relocation services;
● recruitment administration;
● benefits administration (including flexible benefits and share schemes);
● company car provision;
● pensions administration;
● employee welfare support;
● training support;
● absence monitoring;
● management information.
Services can be provided through the internet, a telephone customer help line, a
consultancy pool of advisers, or ‘centres of excellence’ with expertise in such areas as
resourcing, employee relations, reward or training. The increasing interest in shared
services has been prompted by the more extensive and strategic use of HR informa-
tion systems.
The organizations covered by the research conducted by Reilly (2000) on behalf of
the Institute of Employment Studies identified one or more of the following reasons
for providing shared services:
Role of the HR function ❚ 63
● HR will be consumer-driven, more accessible, and more professional;
● the quality of HR services will be improved in terms of using better processes,
delivery to specification, time and budget, incorporation of good practice, the
achievement of greater consistency and accuracy;
● the process can help to achieve organizational flexibility – a common service will
support customers during business change;
● it can support the repositioning of HR, moving it from a purely operational to a
more strategic role so that HR is carrying out the role of ‘acting as a catalyst for
change… anticipating problems and making things happen’ (Hutchinson and
Wood, 1995).
The advantages of providing shared services include lower costs, better quality, more
efficient resourcing and better customer service. But there are disadvantages, which
include loss of face-to-face contact, de-skilling administrative jobs and, potentially,
remoteness from the users.
The steps required to introduce shared services in what is often described as an ‘HR
service centre’ are as follows (all should involve users as well as providers):
1. Identify present arrangements.
2. Obtain views from customers on the quality of existing services and what could
be done to improve them (including the scope for sharing services).
3. Define the areas for shared services.
4. Define how shared services would be supplied, including who provides the
service, where it is provided, how it is provided (this will include consideration
of outsourcing as discussed later in this chapter).
5. Decide on priorities.
6. Plan programme (this could be phased and might involve pilot testing).
USING MANAGEMENT CONSULTANTS
Management consultants act as service providers in such fields as recruitment, execu-
tive search and training. They also provide outside help and guidance to their clients
by advising on the introduction of new systems or procedures or by going through
processes of analysis and diagnosis in order to produce recommendations or to assist
generally in the improvement of organizational performance. Their role is to provide
expertise and resources to assist in development and change.
The steps required to select and use consultants effectively are:
64 ❚ Managing people
1. Define the business need – what added value consultants will provide.
2. Justify their use in terms of their expertise, objectivity and ability to bring
resources to bear that might otherwise be unavailable. If the need has been estab-
lished in cost/benefit terms, the use of external consultants rather than internal
resources has to be justified.
3. Define clearly the objectives of the exercise in terms of the end-results and deliv-
erables.
4. Invite three or four firms or independent consultants to submit proposals.
5. Select the preferred consultants on the basis of their proposal and an interview (a
‘beauty contest’) – the criteria should be the degree to which the consultants
understand the need, the relevance and acceptability of their proposed deliver-
ables and programme of work, the capacity of the firm and the particular consul-
tants to deliver, whether the consultants will be able to adopt to the culture and
management style of the organization, the extent to which they are likely to be
acceptable to the people with whom they will work, and the cost (a consideration
but, as for service providers, not the ultimate consideration).
6. Take up references before confirming the appointment.
7. Agree and sign a contract – this should always be in writing and should set out
deliverables, timing and costs, methods of payment and arrangements for termi-
nation.
8. Agree detailed project programme.
9. Monitor the progress of the assignment carefully without unduly interfering in
the day-to-day work of the consultants, and evaluate the outcomes.
Legal implications
If there is a serious problem, a consultancy assignment can be cancelled if either party
has clearly failed to meet the terms of the contract (whether this is a formal contract or
simply an exchange of letters). Clients can also sue consultants for professional negli-
gence if they believe that their advice or actions have caused financial or some other
form of measurable loss. Professional negligence is, however, not always easy to
prove, especially in HR assignments. Consultants can always claim that their advice
was perfectly good but that it has been used incorrectly by the client (this may also be
difficult to prove). Suing consultants can be a messy business and should only be
undertaken when it is felt that they (or their insurers) should pay for their mistakes
and thus help to recoup the client’s losses. It should also be remembered that inde-
pendent consultants and even some small firms might not have taken out profes-
sional liability insurance. If that is the case, all the aggrieved client who sues would
do is to bankrupt them, which may give the client some satisfaction but could be a
Role of the HR function ❚ 65
somewhat pointless exercise. The latter problem can be overcome if the client selects
only consultants who are insured.
EVALUATING THE HR FUNCTION
It is necessary to evaluate the contribution of the HR function to ensure that it is effec-
tive at both the strategic level and in terms of service delivery and support. In evalu-
ation it is useful to remember the distinction made by Tsui and Gomez-Mejia (1988)
between process criteria – how well things are done, and output criteria – the effective-
ness of the end-result. A ‘utility analysis’ approach as described by Boudreau (1988)
can be used. This focuses on the impact of HR activities measured wherever possible
in financial terms (quantity), improvements in the quality of those activities, and
cost/benefit (the minimization of the cost of the activities in relation to the benefits they
provide).
Huselid et al (1997) believe that HR effectiveness has two dimensions: 1) strategic
HRM – the delivery of services in a way that supports the implementation of the
firm’s strategy; and 2) technical HRM – the delivery of HR basics such as recruitment,
compensation and benefits. The methods that can be used to evaluate these dimen-
sions are described below.
Quantitative criteria
● Organizational: added value per employee, profit per employee, sales value per
employee, costs per employee and added value per £ of employment costs.
● Employee behaviour: retention and turnover rates, absenteeism, sickness, accident
rates, grievances, disputes, references to employment tribunals, successful
suggestion scheme outcomes.
● HR service levels and outcomes: time to fill vacancies, time to respond to applicants,
ratio of acceptances to offers made, cost of replies to advertisements, training
days per employee, time to respond to and settle grievances, measurable
improvements in organizational performance as a result of HR practices, ratio of
HR costs to total costs, ratio of HR staff to employees, the achievement of speci-
fied goals.
User reactions
The internal customers of HR (the users of HR services) can provide important feed-
back on HR effectiveness. Users can be asked formally to assess the extent to which
the members of the HR function demonstrate that they:
66 ❚ Managing people
● understand the business strategy;
● anticipate business needs and produce realistic proposals on how HR can help to
meet them;
● are capable of meeting performance standards and deadlines for the delivery of
HR initiatives and projects;
● provide relevant, clear, convincing and practical advice;
● provide efficient and effective services with regard to response and delivery times
and quality;
● generally demonstrate their understanding and expertise.
Service level agreements
A service level agreement (SLA) is an agreement between the provider of a service
and the customers who use the service on the level of service that should be provided.
It sets out the nature of the service provided, the volume and quality to be achieved
by the service, and the response times the provider must attain after receiving
requests for help. The headings of the agreement can be drawn from the list of HR
service level areas set out above. The agreement provides the basis for monitoring
and evaluating the level of service.
Employee satisfaction measures
The degree to which employees are satisfied with HR policies and practices can be
measured by attitude surveys. These can obtain opinions on such matters as their
work, their pay, how they are treated, their views about the company and their
managers, how well they are kept informed, the opportunities for learning and career
development, and their working environment and facilities.
Benchmarking
In addition to internal data it is desirable to benchmark HR services. This means
comparing what the HR function is doing with what is happening in similar organi-
zations. This may involve making direct comparisons using quantified performance
data or exchanging information on ‘good practice’ that can be used to indicate where
changes are required to existing HR practices or to provide guidance on HR innova-
tions. Organizations such as Saratoga provide benchmarking data under standard-
ized and therefore comparable headings for their clients.
Role of the HR function ❚ 67
Measuring performance
The following key points about measuring HR performance have been made by
Likierrnan (2005):
● agree objectives against budget assumptions: this will ensure HR’s role reflects
changes in strategy implementation;
● use more sophisticated measures – get underneath the data and look not only at
the figures but also at the reasons behind them;
● use comparisons imaginatively, including internal and external benchmarking;
● improve feedback through face-to-face discussion rather than relying on
questionnaires;
● be realistic about what performance measures can deliver – many measurement
problems can be mitigated, not solved.
The HR scorecard
The HR scorecard developed by Beatty et al (2003) follows the same principle as the
balanced scorecard described in Chapter 2, ie it emphasizes the need for a balanced
presentation and analysis of data. The four headings of the HR scorecard are:
1. HR competencies – administrative expertise, employee advocacy, strategy
execution and change agency.
2. HR practices – communication, work design, selection, development, measure-
ment and rewards.
3. HR systems – alignment, integration and differentiation.
4. HR deliverables – workforce mindset, technical knowledge, and workforce
behaviour.
These are all influenced by the factors that determine the strategic success of the
organization, ie operational excellence, product leadership and customer intimacy.
Preferred approach to evaluation
There is much to be said for the systematic HR scorecard approach, although every
organization would have to develop its own headings as a basis for evaluation. There
are plenty of typical measures but no standard set exists. Perhaps, as Guest and
Peccei (1994) suggest:
68 ❚ Managing people
The most sensible and important indicator of HRM effectiveness will be the judgements
of key stakeholders… The political, stakeholder, perspective on organizations acknowl-
edges that it is the interpretation placed on effectiveness in organizations and the attri-
butions of credit and blame that are derived from them that matter most in judging
effectiveness. In other words, at the end of the day, it is always the qualitative interpreta-
tion by those in positions of power that matters most.
However, they recognized ‘the desirability of also developing clearly specified goals
and quantitative indicators, together with financial criteria’.
Role of the HR function ❚ 69
The role of the HR practitioner
This chapter is concerned with what HR professionals do and how they do it, bearing
in mind the comment of Boxall and Purcell (2003) that ‘HRM does not belong to HR
specialists’. HRM belongs to line managers and the people they manage – the stake-
holders in people management.
This chapter starts with an analysis of the basic roles and activities of HR profes-
sionals and of the various models of these roles. A number of issues that affect the role
of HR people are then explored; these comprise gaining support and commitment,
role ambiguity, role conflict, ethics, and professionalism. The chapter concludes with
a discussion of the competencies required by HR practitioners.
THE BASIC ROLES
The roles of HR practitioners vary widely according to the extent to which they are
generalist (eg, HR director or HR manager), or specialist (eg, head of learning and
development, head of talent management, or head of reward), the level at which they
work (strategic, executive or administrative) the needs of the organization, the
context within which they work and their own capabilities.
The role can be proactive, reactive or a mixture of both. At a strategic level, HR
people take on a proactive role. Research conducted by Hoque and Moon (2001)
established that: ‘The growing number of specialists using the HR title are well
4
qualified, are more likely to be involved in strategic decision-making processes and
are most likely to be found in workplaces within which sophisticated methods and
techniques have been adopted.’ As such, they act as business partners, develop inte-
grated HR strategies, intervene, innovate, operate as internal consultants and volun-
teer guidance on matters concerning upholding core values, ethical principles and the
achievement of consistency. They focus on business issues and working with line
managers to deliver performance targets.
In some situations they play a mainly reactive role. They spend much of their time
doing what they are told or asked to do. They provide the administrative systems
required by management. This is what Storey (1992a) refers to as the non-interven-
tionary role, in which HR people merely provide a service to meet the demands of
management and front-line managers. The various roles are described in more detail
below.
Service provision
The basic role of HR specialists is that of providing services to internal customers.
These include management, line managers, team leaders and employees. The services
may be general, covering all aspects of HRM: human resource planning, recruitment
and selection, employee development, employee reward, employee relations, health
and safety management and welfare. Alternatively, services may only be provided in
one or two of these areas by specialists. The focus may be on the requirements of
management (eg, resourcing), or it may extend to all employees (eg, health and
safety).
The aims are to provide effective services that meet the needs of the business, its
management and its employees and to administer them efficiently.
Guidance and advice
To varying degrees, HR practitioners provide guidance and advice to management.
At the highest level, this will include recommendations on HR strategies that have
been developed by processes of analysis and diagnosis to address strategic issues
arising from business needs and human, organizational or environmental factors.
They will also provide advice on issues concerning culture change and approaches to
the improvement of process capability – the ability of the organization to get things
done through people.
Guidance will be given to managers to ensure that consistent decisions are made
on such matters as performance ratings, pay increases and disciplinary actions.
At all levels, guidance may be provided on HR policies and procedures and the
72 ❚ Managing people
implications of employment legislation. In the latter area, HR practitioners are
concerned with compliance – ensuring that legal requirements are met.
The business partner role
HR practitioners as business partners share responsibility with their line manage-
ment colleagues for the success of the enterprise and get involved with them in
running the business. They must have the capacity to identify business opportunities,
to see the broad picture and to understand how their HR role can help to achieve the
company’s business objectives.
As defined by Tyson (1985), HR professionals integrate their activities closely with
management and ensure that they serve a long-term strategic purpose. This is one of
the key roles assigned to HR by Ulrich (1998), who stated that HR should become a
partner with senior and line managers in strategy execution and that ‘HR executives
should impel and guide serious discussion of how the company should be organized
to carry out its strategy’. He suggested that HR should join forces with operating
managers in systematically assessing the importance of any new initiatives they
propose by asking: ‘Which ones are really aligned with strategy implementation?
Which ones should receive immediate attention and which can wait? Which ones, in
short, are truly linked to business results?’ But there is a danger of over-emphasizing
the glamorous albeit necessary role of business or strategic partner at the expense of
the service delivery aspect of the HR specialist’s role. As an HR specialist commented
to Caldwell (2004): ‘My credibility depends on running an extremely efficient and
cost-effective administrative machine… If I don’t get that right, and consistently, then
you can forget about any big ideas.’ Another person interviewed during Caldwell’s
research referred to personnel people as ‘reactive pragmatists’, a view that is in
accord with reality in many organizations.
The strategist role
As strategists, HR professionals address major long-term organizational issues
concerning the management and development of people and the employment rela-
tionship. They are guided by the business plans of the organization but they also
contribute to the formulation of those business plans. This is achieved by ensuring
that top managers focus on the human resource implications of the plans. HR strate-
gists persuade top managers that they must develop business strategies that make the
best use of the core competences of the organization’s human resources. They empha-
size, in the words of Hendry and Pettigrew (1986), that people are a strategic resource
for the achievement of competitive advantage.
The role of the HR practitioner ❚ 73
The innovation and change agent role
In their proactive role, HR practitioners are well placed to observe and analyse what
is happening in and to their organizations as it affects the employment of people, and
intervene accordingly. Following this analysis, they produce diagnoses that identify
opportunities and threats and the causes of problems. They propose innovations in
the light of these diagnoses that may be concerned with organizational processes
such as interaction between departments and people, teamwork, structural change
and the impact of new technology and methods of working, or HR processes such as
resourcing, employee development or reward. As innovators they have to be experts
in change management.
Impression management
The danger, according to Marchington (1995a), is that HR people may go in for
‘impression management’ – aiming to make an impact on senior managers and
colleagues through publicizing high-profile innovations. HR specialists who aim to
draw attention to themselves simply by promoting the latest flavour of the month,
irrespective of its relevance or practicality, are falling into the trap that Drucker
(1955), anticipating Marchington by 40 years, described as follows:
The constant worry of all personnel administrators is their inability to prove that they are
making a contribution to the enterprise. Their preoccupation is with the search for a
‘gimmick’ that will impress their management colleagues.
The HR specialist as change agent
Caldwell (2001) categorizes HR change agents in four dimensions:
1. Transformational change – a major change that has a dramatic effect on HR policy
and practice across the whole organization.
2. Incremental change – gradual adjustments of HR policy and practices that affect
single activities or multiple functions.
3. HR vision – a set of values and beliefs that affirm the legitimacy of the HR func-
tion as strategic business partner.
4. HR expertise – the knowledge and skills that define the unique contribution the
HR professional can make to effective people management.
Across these dimensions, the change agent roles that Caldwell suggests can be
carried out by HR professionals are those of change champions, change adapters,
change consultants and change synergists.
74 ❚ Managing people
Gratton (2000) stresses the need for HR practitioners to: ‘Understand the state of
the company, the extent of the embedding of processes and structures throughout the
organization, and the behaviour and attitudes of individual employees’. She believes
that ‘The challenge is to implement the ideas’ and the solution is to ‘build a guiding
coalition by involving line managers’, which means ‘creating issue-based cross-func-
tional action teams that will initially make recommendations and later move into
action’. This approach ‘builds the capacity to change’.
Guidelines for innovation and change
The following are 10 guidelines for HR innovators and change agents:
1. Be clear on what has to be achieved and why.
2. Ensure that what you do fits the strategy, culture and circumstances of the orga-
nization.
3. Don’t follow fashion – do your own thing.
4. Keep it simple – over-complexity is a common reason for failure.
5. Don’t rush – it will take longer than you think.
6. Don’t try to do too much at once – an incremental approach is generally best.
7. Assess resource requirements and costs.
8. Pay close attention to project planning and management.
9. Remember that the success of the innovation rests as much on the effectiveness
of the process of implementation (line manager buy-in and skills are crucial) as it
does on the quality of the concept, if not more so.
10. Pay close attention to change management – communicate, involve and train.
The internal consultancy role
As internal consultants, HR practitioners function like external management consul-
tants, working alongside their colleagues – their clients – in analysing problems, diag-
nosing issues and proposing solutions. They will be involved in the development of
HR processes or systems and in ‘process consulting’. The latter deals with process
areas such as organization, team building and objective setting.
The monitoring role
As monitors of the application of HR policies and procedures and the extent to which
the organization’s values relating to people management are upheld, HR practi-
tioners have a delicate, indeed a difficult, role to play. They are not there to ‘police’
what line managers do but it is still necessary to ensure that the policies and
The role of the HR practitioner ❚ 75
procedures are implemented with a reasonable degree of consistency. This role as
described by Storey (1992a) can mean that HR specialists can act as ‘regulators’ who
are ‘managers of discontent’ involved in formulating and monitoring employment
rules. The monitoring role is particularly important with regard to employment legis-
lation. HR practitioners have to ensure that policies and procedures comply with the
legislation and that they are implemented correctly by line managers.
Although the tendency is to devolve more responsibility for HR matters to line
managers, the latter cannot be given total freedom to flout company policy or to
contravene the provisions of employment, equal opportunity and health and safety
legislation. A balance has to be struck between freedom, consistency and legal obliga-
tions.
The guardian of values role
HR practitioners may act as the guardians of the organization’s values concerning
people. They point out when behaviour conflicts with those values or where
proposed actions would be inconsistent with them. In a sense, their roles require
them to act as the ‘conscience’ of management – a necessary role but not an easy one
to play.
MODELS OF THE PRACTITIONERS OF HR
A number of models classifying types of roles have been produced, as summarized
below. These simplify the complex roles that HR professionals often have to play
which, in different contexts or times, may change considerably or may mean
adopting varied approaches to meet altering circumstances. They are therefore not
universal but they do provide some insight into the different ways in which HR
specialists operate.
Karen Legge (1978)
Two types of HR managers are described in this model: 1) Conformist innovators who
go along with their organization’s ends and adjust their means to achieve them. Their
expertise is used as a source of professional power to improve the position of their
departments. 2) Deviant innovators who attempt to change this means/ends relation-
ship by gaining acceptance for a different set of criteria for the evaluation of organi-
zational success and their contribution to it.
76 ❚ Managing people
The Tyson and Fell (1986) model
This is the classic model, which describes three types of practitioner:
1. The clerk of works – all authority for action is vested in line managers. HR policies
are formed or created after the actions that led to the need. Policies are not inte-
gral to the business and are short term and ad hoc. Authority is vested in line
managers and HR activities are largely routine – employment and day-to-day
administration.
2. The contracts manager – policies are well established, often implicit, with a heavy
industrial relations emphasis, possibly derived from an employers association.
The HR department will use fairly sophisticated systems, especially in the field
of employee relations. The HR manager is likely to be a professional or very
experienced in industrial relations. He or she will not be on the board and,
although having some authority to ‘police’ the implementation of policies, acts
mainly in an interpretative, not a creative or innovative, role.
3. The architect – explicit HR policies exist as part of the corporate strategy. Human
resource planning and development are important concepts and a long-term
view is taken. Systems tend to be sophisticated. The head of the HR function is
probably on the board and his or her power is derived from professionalism and
perceived contribution to the business.
Although insightful and relevant at the time this model does not express the
complexities of the HR role as later ones do.
Kathleen Monks (1992)
The four types of practitioner identified by Monks following research in 97 organiza-
tions in Ireland extended those developed by Tyson and Fell:
1. Traditional/administrative – in this model the personnel practitioners have mainly
a support role with the focus on administrative matters, record-keeping and
adherence to rules and regulations.
2. Traditional/industrial relations – personnel practitioners concentrate on industrial
relations, giving their other functions lower priority.
3. Innovative/professional – personnel specialists are professional and expert. They
aim to remove traditional practices and replace them with improved human
resource planning, recruitment and development, and reward policies and
practices.
The role of the HR practitioner ❚ 77
4. Innovative/sophisticated – personnel specialists are on the board, take part in inte-
grating HR and business strategies, and are recognized as making an important
contribution to organizational success. They develop and deliver sophisticated
services in each of the main HR areas.
John Storey (1992a)
Storey’s model suggests a two-dimensional map: interventionary/non-interven-
tionary and strategic/tactical, as illustrated in Figure 4.1. From this he identifies four
roles:
1. Change masters (interventionary/strategic), which is close to the HRM model.
2. Advisers (non-interventionary/strategic) who act as internal consultants, leaving
much of HR practice to line managers.
3. Regulators (interventionary/tactical) who are ‘managers of discontent’ concerned
with formulating and monitoring employment rules.
4. Handmaidens (non-interventionary/tactical) who merely provide a service to
meet the demands of line managers.
78 ❚ Managing people
Strategic
Tactical
CHANGEMAKERS ADVISERS
REGULATORS HANDMAIDENS
Interventionary Non-interventionary
Figure 4.1 Types of personnel management (Source: Storey, 1992a)
Paul Reilly (2000)
The different roles that practitioners can play as described by Reilly are illustrated in
Figure 4.2. He suggests that it is the ‘strategist/integrator’ who is most likely to make
the longest-term strategic contribution. The ‘administrator/controller’ is likely to
make a largely tactical short-term contribution, while the ‘adviser/consultant’ falls
between the two.
Dave Ulrich and Wayne Brockbank (2005a and 2005b)
In 1997 Dave Ulrich produced his model in which he suggested that as champions of
competitiveness in creating and delivering value, HR professionals carry out the roles
of strategic partners, administrative experts, employee champions and change
agents. The response to this formulation concentrated on the business partner role.
Ulrich, in conjunction with Brockbank, reformulated the 1997 model in 2005, listing
the following roles:
The role of the HR practitioner ❚ 79
strategist/integrator
adviser/consultant
administrator/controller
strategic
Contribution
tactical
short long
Time orientation
Figure 4.2 The changing role of the HR practitioner (Source: Reilly, 2000)
● Employee advocate – focuses on the needs of today’s employees through listening,
understanding and empathizing.
● Human capital developer – in the role of managing and developing human capital
(individuals and teams), focuses on preparing employees to be successful in the
future.
● Functional expert – concerned with the HR practices that are central to HR value,
acting with insight on the basis of the body of knowledge they possess. Some are
delivered through administrative efficiency (such as technology or process
design), and others through policies, menus and interventions. Necessary to
distinguish between the foundation HR practices – recruitment, learning and
development, rewards, etc – and the emerging HR practices such as communica-
tions, work process and organization design, and executive leadership develop-
ment.
● Strategic partner – consists of multiple dimensions: business expert, change agent,
strategic HR planner, knowledge manager and consultant, combining them to
align HR systems to help accomplish the organization’s vision and mission,
helping managers to get things done, and disseminating learning across the orga-
nization.
● Leader – leading the HR function, collaborating with other functions and
providing leadership to them, setting and enhancing the standards for strategic
thinking and ensuring corporate governance.
Ulrich and Brockbank (2005b) explained that the revised formulation is in response to
the changes in HR roles they have observed recently. They commented on the impor-
tance of the employee advocate role, noting that HR professionals spend on average
about 19 per cent of their time on employee relations issues and that caring for,
listening to and responding to employees remains a centrepiece of HR work. They
noted that as a profession, HR possesses a body of knowledge that allows HR people
to act with insight. Functional expertise enables them to create menus of choice for
their business and thus identify options that are consistent with business needs rather
than those that are merely ones they are able to provide. The additional heading of
‘human capital developer’ was introduced because of the increased emphasis on
viewing people as critical assets and to recognize the significance of HR’s role in
developing the workforce. The concept of strategic partner remains broadly the same
as before, but the additional heading of ‘HR leader’ has been introduced to highlight
the importance of leadership by HR specialists of their own function – ‘before they
can develop other leaders, HR professionals must exhibit the leadership skills they
expect in others’.
The 2005 Ulrich and Brockbank model focuses on the multifaceted role of HR
80 ❚ Managing people
people. It serves to correct the impression that Ulrich was simply focusing on them as
business partners. This has had the unfortunate effect of implying that that was their
only worthwhile function and has led to undue emphasis on this aspect of their role,
important though it is, rather than a significant service delivery role. However, Ulrich
cannot be blamed for this. In 1998 he gave equal emphasis to the need for administra-
tive efficiency.
GAINING SUPPORT AND COMMITMENT
HR practitioners mainly get results by persuasion based on credibility and expertise.
As Guest and Hoque (1994) note: ‘By exerting influence, HR managers help to shape
the framework of HR policy and practice.’ Although line managers may make the
day-to-day decisions, influencing skills are necessary for HR specialists. But there is a
constant danger of HR professionals being so overcome by the beauty and truth of
their bright idea that they expect everyone else – management and employees alike –
to fall for it immediately. This is not how it is. Management and employees can create
blockages and barriers and their support and commitment needs to be gained, which
is not always easy.
Blockages and barriers within management
Managers will block or erect barriers to what the HR function believes to be progress
if they are not persuaded that it will benefit both the organization and themselves at
an acceptable cost (money and their time and trouble).
Blockages and barriers from employees
Employees will block or set up barriers to ‘progress’ or innovations if they feel they
conflict with their own interests. They are likely, with reason, to be cynical about
protestations that what is good for the organization will always be good for them.
Gaining support from top management
The support of top management is achievable by processes of marketing the HR func-
tion and persuasion. Boards and senior managers, like anyone else, are more likely to
be persuaded to take a course of action if:
● it can be demonstrated that it will meet both the needs of the organization and
their own personal needs;
The role of the HR practitioner ❚ 81
● the proposal is based on a persuasive and realistic business case that spells out the
benefits and the costs and, as far as possible, is justified either in added value
terms (ie the income generated by the proposal will significantly exceed the cost
of implementing it), and/or on the basis of a return on investment (ie the cost of
the investment, say in training, is justified by the financial returns in such terms
as increased productivity);
● there is proof that the innovation has already worked well within the organiza-
tion (perhaps as a pilot scheme) or represents ‘good practice’, which is likely to be
transferable to the organization;
● it can be shown that the proposal will increase the business’s competitive
edge, for example enlarging the skill base or multi-skilling to ensure that it can
achieve competitive advantage through innovation and/or reducing time-to-
market;
● it can be implemented without too much trouble, for example not taking up a lot
of managers’ time, or not meeting with strong opposition from line managers,
employees or trade unions (it is as well to check the likely reaction before
launching a proposal);
● it will add to the reputation of the company by showing that it is a ‘world class’
organization, ie what it does is as good as, if not better than, the world leaders in
the sector in which the business operates (a promise that publicity will be
achieved through articles in professional journals, press releases and conference
presentations, will help);
● it will enhance the ‘employer brand’ of the company by making it a ‘best place to
work’;
● the proposal is brief, to the point and well argued – it should take no more than
five minutes to present orally and should be summarized in writing on the
proverbial one side of one sheet of paper (supplementary details can be included
in appendices).
Gaining the support and commitment of front line managers
This can sometimes be more difficult than gaining the support of top management.
Front line managers can be cynical or realistic about innovation – they have seen it all
before and/or they believe it won’t work (sometimes with good reason). Innovations
pushed down from the top can easily fail.
Gaining line management support requires providing an answer to the question,
‘What’s in it for me’? in terms of how the innovation will help them to achieve better
results without imposing unacceptable additional burdens on them. New employ-
ment practices that take up precious time and involve paperwork will be treated with
82 ❚ Managing people
particular suspicion. Many line managers, often from bitter experience, resent the
bureaucracy that can surround and, indeed, engulf systems favoured by HR people,
such as traditional performance appraisal schemes.
Obtaining support requires market research and networking – getting around to
talk to managers about their needs and testing new ideas to obtain reactions. The aim
is to build up a body of information that will indicate approaches that are likely to be
most acceptable, and therefore will most probably work, or at least to suggest areas
where particular efforts will need to be made to persuade and educate line manage-
ment. It is also useful to form ‘strategic alliances’ with influential managers who are
enthusiastic about the innovation and will not only lend it vocal support but will also
co-operate in pilot-testing it.
On the principle that ‘nothing succeeds like success’, support for new HR practices
can often be achieved by demonstrating that it has worked well elsewhere in the
organization.
Gaining commitment will be easier if managers have been consulted and know
that their opinions have been listened to and acted upon. It is even better to involve
them as members of project teams or task forces in developing the new process or
system. This is the way to achieve ownership and therefore commitment.
Gaining the support and commitment of employees
When it comes to new employment practices, employees generally react in exactly
the same way as managers: they will tend to resist change, wanting to know, ‘What’s
in it for us?’ They also want to know the hidden agenda – why is the company really
wanting to introduce a performance management process? Will it simply be used as a
means of gaining evidence for disciplinary proceedings? Or is it even going to
provide the information required to select people for redundancy? As far as possible
this kind of question needs to be answered in advance.
Sounding out employee opinion can be conducted through attitude surveys or
focus groups. The latter method involves getting groups of people together to discuss
(to ‘focus’ on) various issues and propositions. A well-run focus group can generate
valid information on employees’ feelings about and reaction to an initiative.
Employee commitment is also more likely if they are kept well informed of what
is proposed, why it has been proposed and how it will affect them. It will be
further enhanced if they participate in the development of the new employment
practice and if they know that their contributions have been welcomed and acted
upon.
The role of the HR practitioner ❚ 83
ETHICAL CONSIDERATIONS
HR specialists are concerned with ethical standards in three ways: their conduct as
professionals, the values that govern their behaviour, and the ethical standards of
their firms.
Professional conduct
The CIPD Code of Professional Conduct states that:
In the public interest and in the pursuit of its objects, the Chartered Institute of Personnel
and Development is committed to the highest possible standards of professional
conduct and competency. To this end members:
● are required to exercise integrity, honesty, diligence and appropriate behaviour in all
their business, professional and related personal activities;
● must act within the law and must not encourage, assist or act in collusion with
employees, employers or others who may be engaged in unlawful conduct.
Values
HR professionals are part of management. They are not there to act as surrogate
representatives of the interests of employees. But there will be occasions when in their
professional capacity HR specialists should speak out and oppose plans or actions
that are clearly at variance with the values of the organization. And they should do
their best to influence changes in those values where they feel they are necessary.
They must not tolerate injustice or inequality of opportunity. If redundancies are
inevitable as a result of business-led ‘slimming down’ or ‘taking costs out of the busi-
ness’ processes, they must ensure that the organization takes whatever steps it can to
mitigate detrimental effects by, for example, relying primarily on natural wastage and
voluntary redundancy or, if people have to go involuntarily, doing whatever they can
to help them find other jobs (outplacement).
HR specialists may often find themselves acting within a support function in a
hard-nosed, entrepreneurial environment. But this does not mean that they can
remain unconcerned about developing and helping to uphold the core values of
the organization in line with their own values on how people should be managed.
These may not always be reconcilable, and if this is strongly the case, the HR
professional may have to make a choice on whether he or she can remain with the
organization.
84 ❚ Managing people
Ethical standards in the firm
More and more companies are, rightly, developing and publishing value statements
and codes of ethics. The focus on such codes was encouraged by the Cadbury Report
on corporate governance, which in 1992 recommended that companies should adopt
one.
An ethics code may include the guiding principles the organization follows in
conducting its business and relating to its stakeholders – employees, customers,
shareholders (or other providers of finance), suppliers, and society in general. A code
will also summarize the ethical standards expected of employees. These may include
conflicts of interest, the giving and receiving of gifts, confidentiality, environmental
pollution, health and safety, equal opportunities, managing diversity, sexual harass-
ment, moonlighting and political activity.
As suggested by Pickard (1995), HR practitioners can contribute to enhancing
awareness of ethical issues by:
● deploying professional expertise to develop and communicate an ethics policy
and field the response to it, holding training sessions to help people think through
the issues and monitoring the policy;
● contributing to the formation of company strategy, especially touching on mission
and values;
● setting an example through professional conduct, on issues such as fairness, equal
treatment and confidentiality.
PROFESSIONALISM IN HRM
If the term is used loosely, HR specialists are ‘professional’ because they display
expertise in doing their work. A professional occupation such as medicine or law
could, however, be defined as one that gives members of its association exclusive
rights to practise their profession. A profession is not so much an occupation as a
means of controlling an occupation. Human resource management is obviously not in
this category.
The nature of professional work was best defined by the Hayes Committee (1972)
as follows:
Work done by the professional is usually distinguished by its reference to a framework of
fundamental concepts linked with experience rather than by impromptu reaction to
events or the application of laid down procedures. Such a high level of distinctive
The role of the HR practitioner ❚ 85
competence reflects the skilful application of specialized education, training and expe-
rience. This should be accompanied by a sense of responsibility and an acceptance of
recognized standards.
A ‘profession’ may be identified on the basis of the following criteria:
● skills based on theoretical knowledge;
● the provision of training and education;
● a test of the competence of members administered by a professional body;
● a formal professional organization that has the power to regulate entry to the
profession;
● a professional code of conduct.
By these standards an institution such as the CIPD carries out most of the functions of
a professional body.
Another approach to the definition of a profession is to emphasize the service ethic
– the professional is there to serve others. This, however, leads to confusion when
applied to HR specialists. Whom do they serve? The organization and its values, or
the people in the organization and their needs? (Organizational values and personal
needs do not necessarily coincide.) As Tyson and Fell (1986) have commented:
In recent years the personnel manager seems to be encouraged to make the line
manager his (sic) client, while trying simultaneously to represent wider social standards,
and to possess a sense of service to employees. This results in confusion and difficulty
for the personnel executive.
In the face of this difficulty, the question has to be asked, why bother? The answer
was suggested by Watson (1977), who asserted that the adoption of a professional
image by personnel managers is a strategic response to their felt lack of authority.
They are in an ambiguous situation and sometimes feel they need all the help they
can get to clarify and, indeed, strengthen their authority and influence.
If a profession is defined rigidly as a body of people who possess a particular area
of competence, who control entry so that only members of the association can prac-
tise in that area, who unequivocally adopt the ‘service ethic’ and who are recognized
by themselves and others as belonging to a profession, then HR practitioners are not
strictly working in a profession. This is the case even when a professional institution
like the CIPD exists with the objective of acting as a professional body in the full sense
of the word, an aim that it does its best to fulfil.
On the basis of their research, Guest and Horwood (1981) expressed their doubts
about the professional model of personnel management as follows:
86 ❚ Managing people
The (research) data also highlights the range of career types in personnel management.
Given the diversity of personnel roles and organizational contexts, this is surely some-
thing to be welcomed. It is tempting but wrong to view personnel managers as homoge-
neous. Their different backgrounds and fields of operations raise doubts about the value
of a professional model and of any attempt to view personnel problems as amenable to
solution through a primary focus on professionalism.
However, a broader definition of professionalism as the practice of specific skills
based upon a defined body of knowledge in accordance with recognized standards of
behaviour would entitle the practice of HRM to be regarded as a profession.
The debate continues, but it is an academic one. What matters is that HR ‘profes-
sionals’ need expertise and have to use it responsibly. In other words, they should act
professionally but do not have to be members of a professional association to do so.
Such associations, however, have an important part to play in setting and improving
professional standards.
If this definition is accepted, then those who do practise specific HRM skills based
upon a defined body of knowledge in accordance with recognized standards of
behaviour can be regarded as members of a profession.
AMBIGUITIES IN THE ROLE OF HR PRACTITIONERS
The activities and roles of HR specialists and the demands made upon them as
described above appear to be quite clear cut but, in Thurley’s (1981) words, HR prac-
titioners can be ‘specialists in ambiguity’. This may arise because their role is ill-
defined (they are unsure of where they stand), their status is not fully recognized, or
top management and line managers have equivocal views about their value to the
organization.
Ambiguity in the role of HR people can result in confusion between ideals and
reality. Tyson and Fell (1986) see a contrast between the ideologies and actual realities
of organizational life to which HR managers, ‘as organization men or women’, have
to conform.
This ambiguity is reflected in the comments that have been made about the role of
the HR function. For example, Mackay and Torrington (1986) suggested that:
‘Personnel management is never identified with management interests, as it becomes
ineffective when not able to understand and articulate the aspirations of the work-
force.’ In complete contrast, Tyson and Fell (1986) believe that:
The role of the HR practitioner ❚ 87
Classical personnel management has not been granted a position in decision-making
circles because it has frequently not earned one. It has not been concerned with the
totality of the organization but often with issues that have not only been parochial but
esoteric to boot.
The debate on HRM versus personnel management has been generated by, but has
also contributed to this ambiguity. HRM is management-oriented, and sees people as
a key resource to be used to further the objectives of the business. Traditional
personnel management, however, has tended to be more people-oriented, taking the
view that if their needs are satisfied, the organization as well as its members will
benefit. HR professionals can find themselves being pulled in both directions. It does
not make their life any easier.
CONFLICT IN THE HR CONTRIBUTION
One of the questions HR practitioners sometimes have to ask themselves is, ‘Who is
the client – the company or the employee?’ HR professionals may have to walk a fine
line between serving the company that pays their salary and serving individual
employees. They may be involved in counselling employees over work problems.
This can only be carried out successfully if the employee trusts the HR practitioner
to maintain confidentiality. But something might be revealed which is of interest to
management and that places the counsellor in a dilemma – to betray or not to
betray the trust? There is no pat answer to this question, but the existence of a code of
professional conduct, a set of values and a company ethical code can provide guid-
ance.
HR specialists, as Thurley (1981) put it, often ‘work against the grain’. Their values
may be different from those of line managers and this is a potential cause of conflict.
But conflict is inevitable in organizations that are pluralistic societies, the members of
which have different frames of reference and interests, particularly self-interest.
Management may have their own priorities: ‘Increase shareholder value’, ‘Keep the
City happy’, ‘Innovate’, ‘Get the work done’. Employees might have a completely
different set: ‘Pay me well and equitably’, ‘Give me security’, ‘Provide good working
conditions’, ‘Treat me fairly’. HR specialists, as noted above, may find themselves
somewhere in the middle.
Conflicts in the HR contribution can arise in the following ways:
● A clash of values – line managers may simply regard their workers as factors of
production to be used, exploited and dispensed with in accordance with organi-
zational imperatives.
88 ❚ Managing people
● Different priorities – management’s priority may be to add value – make more out
of less – and if this involves getting rid of people, that’s too bad. HR people may
recognize the need to add value but not at the expense of employees.
● Freedom versus control – line managers may want the freedom to get on with things
their own way, interpreting company policies to meet their needs; the thrust for
devolution has encouraged such feelings. But HR specialists will be concerned
about the achievement of a consistent and equitable approach to managing
people and implementing HR policies. They will also be concerned with the
attainment of a proper degree of compliance to employment and health and
safety law. They may be given the responsibility for exercising control, and
conflict is likely if they use this authority too rigidly.
● Disputes – if unions are recognized, HR specialists may be involved in conflict
during the process of resolution. Even when there are no unions, there may be
conflict with individuals or groups of employees about the settlement of griev-
ances.
As Follett (1924) wrote, there is the possibility that conflict can be creative if an inte-
grative approach is used to settle it. This means clarifying priorities, policies and
roles, using agreed procedures to deal with grievances and disputes, bringing differ-
ences of interpretation out into the open and achieving consensus through a solution
that recognizes the interests of both parties – a win-win process. Resolving conflict by
the sheer exercise of power (win-lose) will only lead to further conflict. Resolving
conflict by compromise may lead to both parties being dissatisfied (lose-lose).
THE COMPETENCIES REQUIRED BY HR PROFESSIONALS
A competency framework for HR professionals is set out in Table 4.1.
An alternative formulation, as shown in Table 4.2, established by research conduc-
ted at the University of Michigan Business School (Brockbank et al, 1999) shows the
key competency areas (domains) and their components are set out in Table 4.2.
The CIPD professional standards
The CIPD has produced the following list of competencies required by its profes-
sional members:
● Personal drive and effectiveness. The existence of a positive ‘can do’ mentality,
anxious to find ways round obstacles and willing to exploit all the available
resources to accomplish objectives.
The role of the HR practitioner ❚ 89
90 ❚ Managing people
Business and Understands: (1) the business environment, the competitive pressures
cultural awareness the organization faces and the drivers of high performance, (2) the
business’ key activities and processes and how these affect business
strategies, (3) the culture (core values and norms) of the business, (4) how
HR policies and practices impact on business performance, and puts
this to good use.
Strategic capability (1) Seeks involvement in business strategy formulation and contributes
to the development of the strategy, (2) contributes to the development
for the business of a clear vision and a set of integrated values, (3)
develops and implements coherent HR strategies which are aligned to
the business strategy and integrated with one another, (4) understands
the importance of human capital measurement, introduces
measurement systems and ensures that good use is made of them.
Organizational (1) Contributes to the analysis and diagnosis of people issues and
effectiveness proposes practical solutions, (2) helps to develop resource capability by
ensuring that the business has the skilled, committed and engaged
workforce it needs, (3) helps to develop process capability by influencing
the design of work systems to make the best use of people, (4) contributes
to the development of knowledge management processes.
Internal (1) Carries out the analysis and diagnosis of people issues and proposes
consultancy practical solutions, (2) adopts interventionist style to meet client needs,
acts as a catalyst, facilitator and expert as required, (uses process
consultancy approaches to resolve people problems, (4) coaches clients
to deal with their own problems, transfers skills.
Service delivery (1) Anticipates requirements and sets up and operates appropriate
services, (2) provides efficient and cost-effective services in each HR
area; (3) responds promptly and efficiently to requests for HR services,
help and advice, (4) promotes the empowerment of line managers to
make HR decisions but provides guidance as required.
Continuous (1) Continually develops professional knowledge and skills, (2)
professional benchmarks good HR practice, (3) keeps in touch with new HR
development concepts, practices and techniques, (keeps up-to-date with HR research
and its practical implications.
Table 4.1 Competency framework for HR professionals
● People management and leadership. The motivation of others (whether subordinates,
seniors or project team members) towards the achievement of shared goals, not
through the application of formal authority but rather by personal role modelling,
the establishment of professional credibility, and the creation of reciprocal trust.
● Professional competence. Possession of the professional skills and technical capabil-
ities associated with successful achievement in personnel and development.
● Adding value through people. A desire not only to concentrate on tasks, but rather to
select meaningful outputs which will produce added-value outcomes for the
organization, or eliminate/reduce the existence of performance inhibitors, whilst
simultaneously complying with all legal and ethical considerations.
● Continuing learning. Commitment to continuous improvement and change by the
application of self-managed learning techniques, supplemented where appro-
priate by deliberate planned exposure to external learning sources (mentoring,
coaching, etc).
● Thinking and applied resourcefulness. Application of a systematic approach to situa-
tional analysis, development of convincing, business-focused action plans, and
The role of the HR practitioner ❚ 91
Competency domain Components
1 Personal credibility Live the firm’s values, maintain relationships founded on trust,
act with an ‘attitude’ (a point of view about how the business can
win, backing up opinion with evidence).
2 Ability to manage Drive change: ability to diagnose problems, build relationships
change with clients, articulate a vision, set a leadership agenda, solve
problems, and implement goals.
3 Ability to manage Act as ‘keepers of the culture’, identify the culture required to
culture meet the firm’s business strategy, frames culture in a way that
excites employees, translates desired culture into specific
behaviours, encourages executives to behave consistently with
the desired culture.
4 Delivery of human Expert in speciality, able to deliver state-of-the-art innovative
resource practices HR practices in such areas as recruitment, employee development,
compensation and communication.
5 Understanding of the Strategy, organization, competitors, finance, marketing, sales,
business operations and IT.
Table 4.2 Key competency areas (Source: Brockbank et al, 1999)
(where appropriate) the deployment of intuitive/creative thinking to generate
innovative solutions and proactively seize opportunities.
● ‘Customer’ focus. Concern for the perceptions of personnel’s customers, including
(principally) the central directorate of the organization, a willingness to solicit
and act upon ‘customer’ feedback as one of the foundations for performance
improvement.
● Strategic capability. The capacity to create an achievable vision for the future, to
foresee longer-term developments, to envisage options (and their probable conse-
quences), to select sound courses of action, to rise above the day-to-day detail, to
challenge the status quo.
● Influencing and interpersonal skills. The ability to transmit information to others,
especially in written (report) form, both persuasively and cogently; display of
listening, comprehension and understanding skills, plus sensitivity to the
emotional, attitudinal and political aspects of corporate life.
An important competency that the CIPD has omitted from this list is service delivery,
ie the capacity to provide effective levels of service that meet the needs of internal
customers. Ultimately, this is what HR professionals are there to do, bearing in mind
that the services they provide will be concerned with the development and imple-
mentation of value-adding and integrated HR strategies as well as operational
services.
HR professionals as ‘thinking performers’
The CIPD has stated that:
All personnel and development specialists must be thinking performers. That is, their
central task is to be knowledgeable and competent in their various fields and to be able
to move beyond compliance to provide a critique of organizational policies and proce-
dures and to advise on how organizations should develop in the future.
This concept can be interpreted as meaning that HR professionals have to think care-
fully about what they are doing in the context of their organization and within the
framework of a recognized body of knowledge, and they have to perform effectively
in the sense of delivering advice, guidance and services which will help the organiza-
tion to achieve its strategic goals. Legge (1995) made a similar point when she
referred to HRM as a process of ‘thinking pragmatism’.
92 ❚ Managing people
Role of the front-line manager
Front-line managers are crucial to the success of HR policies and practices. This
chapter starts with an analysis of their role generally and their people management
responsibilities particularly. It continues with an examination of the respective roles
of HR and line management and a discussion of the line manager’s role in imple-
menting HR. The chapter concludes with suggestions on how to improve front-line
managers as people managers.
THE BASIC ROLE
Front-line managers as defined by Hutchinson and Purcell (2003) are managers who
are responsible for a work group to a higher level of management hierarchy, and are
placed in the lower layers of the management hierarchy, normally at the first level.
They tend to have employees reporting to them who themselves do not have any
management or supervisory responsibility and are responsible for the day-to-day
running of their work rather than strategic matters. The roles of such managers
typically include a combination of the following activities:
● people management;
● managing operational costs;
5
● providing technical expertise;
● organizing, such as planning work allocation and rotas;
● monitoring work processes;
● checking quality;
● dealing with customers/clients;
● measuring operational performance.
Hutchinson and Purcell noted that in all the 12 organizations in which they conduc-
ted their research, the most common people management activity handled by front-
line managers was absence management. This could include not just monitoring
absence and lateness but also phoning (and even visiting) absent staff at home,
conducting back-to-work interviews, counselling staff and conducting disciplinary
hearings. Other people management activities were coaching and develop-
ment, performance appraisal, involvement and communication (thus providing a
vital link between team members and more senior managers), and discipline and
grievances. In many organizations, recruitment and selection was also carried out
by line managers, often in conjunction with HR. Thus in all these organizations front-
line managers were carrying out activities that traditionally had been the bread
and butter of personnel or HR departments. These people-management duties
were larger and encompassed more responsibilities than the traditional supervisory
role.
THE LINE MANAGER AND PEOPLE MANAGEMENT
The CIPD research on employee well-being and the psychological contract (Guest
and Conway, 2005) established that too many line managers are failing to motivate
and improve the performance of the people they manage. Under half of respondents
to the CIPD survey reported that they were regularly motivated by their line
manager, only 45 per cent were happy with the level of feedback they received and
just 37 per cent said that their manager helped them to improve their performance.
This suggests that the organizations concerned were failing to get managers to under-
stand their role in motivating people and were also failing to manage performance
as effectively as they might. As the report emphasizes, ‘One of the biggest chal-
lenges for HR is to support line managers in managing and developing their people
and this means that the respective roles of line and HR managers need to be under-
stood.’
94 ❚ Managing people
THE RESPECTIVE ROLES OF HR AND LINE
MANAGEMENT
It has been the accepted tradition of HR management that HR specialists are there to
provide support and services to line managers, not to usurp the latter’s role of
‘getting things done through people’ – their responsibility for managing their own
HR affairs. In practice, the HR function has frequently had the role of ensuring that
HR policies are implemented consistently throughout the organization, as well as the
more recent onerous responsibility for ensuring that both the letter and the spirit of
employment law are implemented consistently. The latter responsibility has often
been seen as a process of ensuring that the organization does not get involved in
tedious, time-wasting and often expensive employment tribunal proceedings.
Carrying out this role has often led to the HR function ‘policing’ line management,
which can be a cause of tension and ambiguity. To avoid this, HR specialists may have
to adopt a reasonably light touch: providing advice rather than issuing dicta, except
when a manager is clearly contravening the law or when his or her actions are likely
to lead to an avoidable dispute or an employment tribunal case that the organization
will probably lose.
It has also frequently been the case that, in spite of paying lip-service to the prin-
ciple that ‘line managers must manage’, HR departments have usurped the line
managers’ true role of being involved in key decisions concerning the recruitment,
development and remuneration of their people, thus diminishing the managers’
capacity to manage their key resource effectively. This situation has arisen most
frequently in large bureaucratic organizations and/or those with a powerful central-
ized HR function. It still exists in some quarters, but as decentralization and devolu-
tion increase and organizations are finding that they are having to operate more
flexibly, it is becoming less common.
It is necessary to reconcile what might be called the ‘functional control’ aspects of
an HR specialist’s role (achieving the consistent application of policies and acting as
the guardian of the organization’s values concerning people) and the role of
providing services, support and, as necessary, guidance to managers, without issuing
commands or relieving them of their responsibilities. However, the distinction
between giving advice and telling people what to do, or between providing help and
taking over can be blurred, and the relationship is one that has to be developed and
nurtured with great care. The most appropriate line for HR specialists to take is that
of emphasizing that they are there to help line managers achieve their objectives
through their people, not to do their job for them.
In practice, however, some line managers may be only too glad to let the HR
department do its people management job for them, especially the less pleasant
Role of the front-line manager ❚ 95
aspects like handling discipline and grievance problems. A delicate balance has there-
fore to be achieved between providing help and advice when it is clearly needed and
creating a ‘dependency culture’ that discourages managers from thinking and acting
for themselves on people matters for which they are responsible. Managers will not
learn about dealing with people if they are over-dependent on HR specialists. The
latter therefore have to stand off sometimes and say, in effect, ‘That’s your problem.’
How HR and the line work together
Research into HR management and the line conducted by the IPD (Hutchinson and
Wood, 1995) produced the following findings:
● Most organizations reported a trend towards greater line management responsi-
bility for HR management without it causing any significant tension between HR
and the line.
● Devolution offered positive opportunities for the HR function to become
involved in strategic, proactive and internal consultancy roles because they were
less involved in day-to-day operational HR activities.
● Both HR and line management were involved in operational HR activities. Line
managers were more heavily involved in recruitment, selection and training deci-
sions and in handling discipline issues and grievances. HR were still largely
responsible for such matters as analysing training needs, running internal courses
and pay and benefits.
● There is an underlying concern that line managers are not sufficiently competent
to carry out their new roles. This may be for a number of reasons including lack of
training, pressures of work, because managers have been promoted for their tech-
nical rather than managerial skills, or because they are used to referring certain
issues to the HR department.
● Some HR specialists also have difficulty in adopting their new roles because they
do not have the right skills (such as an understanding of the business) or because
they see devolution as a threat to their own job security.
● Other problems over devolution include uncertainty on the part of line managers
about the role of the HR function, lack of commitment by line managers to
performing their new roles, and achieving the right balance between providing
line managers with as much freedom as possible and the need to retain core
controls and direction.
The conclusions reached by the researchers were that:
96 ❚ Managing people
If line managers are to take an effective greater responsibility for HR management activ-
ities then, from the outset, the rules and responsibilities of personnel and line managers
must be clearly defined and understood. Support is needed from the personnel depart-
ment in terms of providing a procedural framework, advice and guidance on all
personnel management matters, and in terms of training line managers so they have the
appropriate skills and knowledge to carry out their new duties.
The research conducted by Hope-Hailey et al (1998) in eight UK-based organizations
revealed that all of them were shifting responsibility for people management down
the line. In practice, this often meant that responsibility for decision-making on HR
issues had been devolved to line managers, but that the HR function continued to be
responsible for operational functions such as recruitment and pay systems. As they
commented: ‘There seemed to be little indication that this move had reduced in any
way the level of necessary bureaucracy associated with the implementation of
personnel policies and procedures.’ However, they noted that ‘personnel was no
longer seen as a rule maker or enforcer, but it was still regarded – in part – as an
administrative function’. With reference to the activities of the HR functions in these
organizations, the research established that there was ‘more emphasis on achieving
behavioural change through a more “nuts and bolts” systems approach rather than
large scale organizational development activities’.
THE LINE MANAGER’S ROLE IN IMPLEMENTING HR
POLICIES
HR can initiate new policies and practices but it is the line that has the main responsi-
bility for implementing them. In other words, ‘HR proposes but the line disposes.’ If
line managers are not disposed favourably towards what HR wants them to do they
won’t do it, or if compelled to, they will be half-hearted about it. As pointed out by
Purcell et al (2003), high levels of organizational performance are not achieved simply
by having a range of well-conceived HR policies and practices in place. What makes
the difference is how these policies and practices are implemented. That is where the
role of line managers in people management is crucial: ‘The way line managers
implement and enact policies, show leadership in dealing with employees and in
exercising control come through as a major issue.’ Purcell et al noted that dealing with
people is perhaps the aspect of their work in which line managers can exercise the
greatest amount of discretion. If they use their discretion not to put HR’s ideas into
practice, the result is that the rhetoric is unlikely to be converted into reality.
Performance management schemes often fail because of the reluctance of managers
Role of the front-line manager ❚ 97
to carry out reviews. It is, as Purcell et al point out, line managers who bring HR poli-
cies to life.
A further factor affecting the role of line management is their ability to do the HR
tasks assigned to them. People-centred activities such as defining roles, interviewing,
reviewing performance, providing feedback, coaching and identifying learning and
development needs all require special skills. Some managers have them, many don’t.
Performance-related pay schemes sometimes fail because of untrained line managers.
Further research and analysis at Bath University (Hutchinson and Purcell, 2003)
confirmed that: ‘The role of line managers in bringing policy to life and in leading
was one of the most important of all factors in explaining the difference between
success and mediocrity in people management.’
HOW TO IMPROVE FRONT-LINE MANAGERS AS PEOPLE
MANAGERS
The following suggestions were made by Hutchinson and Purcell (2003) on how to
improve the quality of front-line managers in people management:
● Front-line managers need time to carry out their people management duties,
which are often superseded by other management duties.
● They need to be carefully selected with much more attention being paid to the
behavioural competencies required.
● They need the support of strong organizational values concerning leadership and
people management.
● They need a good working relationship with their own managers.
● They need to receive sufficient skills training to enable them to perform their
people management activities, such as performance management.
98 ❚ Managing people
International HRM
INTERNATIONAL HRM DEFINED
International human resource management is the process of employing, developing
and rewarding people in international or global organizations. It involves the world-
wide management of people, not just the management of expatriates.
An international firm is one in which operations take place in subsidiaries over-
seas, which rely on the business expertise or manufacturing capacity of the parent
company. International firms may be highly centralized with tight controls. A multi-
national firm is one in which a number of businesses in different countries are
managed as a whole from the centre. The degree of autonomy they have will vary.
Global firms offer products or services that are rationalized and standardized to
enable production or provision to be carried out locally in a cost-efficient way. Their
subsidiaries are not subject to rigid control except over the quality and presentation
of the product or service. They rely on the technical know-how of the parent
company, but carry out their own manufacturing, service delivery or distribution
activities.
ISSUES IN INTERNATIONAL HRM
Bartlett and Goshal (1991) argue that the main issue for multinational companies is
6
the need to manage the challenges of global efficiency and multinational flexibility –
‘the ability of an organization to manage the risks and exploit the opportunities that
arise from the diversity and volatility of the global environment’. The dilemma facing
all multinational corporations is that of achieving a balance between international
consistency and local autonomy. Laurent (1986) commented that:
In order to build, maintain and develop the corporate identity, multinational organiza-
tions need to strive for consistency in their ways of managing people on a worldwide
basis. Yet, and in order to be effective locally, they also need to adapt those ways to the
specific cultural requirements of different societies. While the global nature of business
may call for increased consistency, the variety of cultural environments may be calling
for differentiation.
International HRM involves a number of issues not present when the activities of the
firm are confined to one country. These issues comprise the variety of international
organizational models that exist, the extent to which HRM policy and practice should
vary in different countries (convergence or divergence), the problems of managing in
different cultures and environments, and the approaches used to select, deploy,
develop and reward expatriates who could be nationals of the parent company or
‘third-country nationals’ (TCNs) – nationals of countries other than the parent
company who work abroad in subsidiaries of that company.
INTERNATIONAL ORGANIZATIONAL MODELS
Four international organizational models have been identified by Bartlett and Goshal
(1993):
1. Decentralized federation in which each national unit is managed as a separate
entity that seeks to optimize its performance in the local environment. This is the
traditional multinational corporation.
2. Coordinated federation in which the centre develops sophisticated management
systems enabling it to maintain overall control, although scope is given to local
management to adopt practices that recognize local market conditions.
3. Centralized hub in which the focus is on the global market rather than on local
markets. Such organizations are truly global rather than multinational, which is
the case when adopting a federated approach.
4. Transnational in which the corporation develops multi-dimensional strategic
capabilities directed towards competing globally but also allows local respon-
siveness to market requirements.
100 ❚ Managing people
Perkins and Hendry (1999) argue that notwithstanding this fourfold model, interna-
tional firms seem to be polarizing around two organizational approaches: 1) regional-
ization, where local customer service is important; and 2) global business streams,
which involve setting up centrally controlled business segments that deal with a
related range of products worldwide.
CONVERGENCE AND DIVERGENCE
An issue facing all international firms is the extent to which their HR policies should
either ‘converge’ worldwide to be basically the same in each location, or ‘diverge’ to
be differentiated in response to local requirements. There is a natural tendency for
managerial traditions in the parent company to shape the nature of key decisions, but
there are strong arguments for giving as much local autonomy as possible in order to
ensure that local requirements are sufficiently taken into account.
As noted by Adler and Ghader (1990), organizations have to follow very different
HRM policies and practices according to the relevant stage of international corporate
evolution: domestic, international, multinational and global. Harris and Brewster
(1999) refer to this as ‘the global/local dilemma’, the issue being the extent to which
operating units across the world are to be differentiated and at the same time inte-
grated, controlled and coordinated. They suggest that the alternative strategies are
the global approach in which the company’s culture predominates and HRM is
centralized and relatively standardized (an ‘ethnocentric’ policy), or the decentral-
ized approach in which HRM responsibility is devolved to subsidiaries. They state
that the factors affecting choice are:
● the extent to which there are well-defined local norms;
● the degree to which an operating unit is embedded in the local environment;
● the strength of the flow of resources – finance, information and people – between
the parent and the subsidiary;
● the orientation of the parent to control;
● the nature of the industry – the extent to which it is primarily a domestic industry
at local level;
● the specific organizational competences including HRM that are critical for
achieving competitive advantage in a global environment.
Brewster (2004) believes that convergence may be increasing as a result of the
power of the markets, the importance of cost, quality and productivity pressures,
the emergence of transaction cost economies and the development of like-minded
international cadres. The widespread practice of benchmarking ‘best practice’ may
have contributed to convergence.
International HRM ❚ 101
However, Brewster considers that European firms at least are so locked into their
respective national institutional settings that no common model is likely to emerge in
the foreseeable future. Since HR systems reflect national institutional contexts and
cultures, they do not respond readily to the imperatives of technology or the market.
Managers in each country operate within a national institutional context and share a
set of cultural assumptions. Neither institutions nor cultures change quickly and
rarely in ways that are the same as other countries. As Hofstede (1980) points out, it
follows that managers in one country behave in a way that is noticeably different
from managers in other countries.
Brewster (2004) concludes on the basis of his research that there is some conver-
gence in Europe in the general direction of developments (directional convergence)
such as the decreasing size of the HR function, increases in training and development
and the increasing provision of information about strategy and finances. But there is
little evidence of final convergence in the sense of companies becoming more alike in
the way in which they manage their human resources.
Developing an international approach
Laurent (1986) proposes that a truly international approach to human resource
management would require the following steps:
1. An explicit recognition by the parent organization that its own peculiar ways of
managing human resources reflect some of the assumptions and values of its
home culture.
2. An explicit recognition by the parent organization that its peculiar ways are
neither universally better nor worse than others, but are different and likely to
exhibit strengths and weaknesses, particularly abroad.
3. An explicit recognition by the parent organization that its foreign subsidiaries
may have other preferred ways of managing people that are neither intrinsically
better nor worse, but could possibly be more effective locally.
4. Willingness from headquarters not only to acknowledge cultural differences, but
also to take action in order to make them discussable and therefore useable.
5. The building of a genuine belief by all parties that more creative and effective
ways of managing people could be developed as a result of cross-cultural
learning.
CULTURAL DIVERSITY
Cultural and environmental diversity is a key issue in international HRM. As Haley
(1999) remarks:
102 ❚ Managing people
In cultures where people are emphasized, it is the quality of interpersonal relationships
which is important. In cultures where ideologies are emphasized, sharing common
beliefs is more important than group membership. In cultures where action is empha-
sized, what is done is more important than what is said.
Hofstede (1980) emphasizes that there are a number of cultural dimensions that affect
international operations. His framework has been adapted by Bento and Ferreira
(1992) to produce the following cultural dualities:
● equality versus inequality;
● certainty versus uncertainty;
● controllability versus uncontrollability;
● individualism versus collectivism;
● materialistic versus personalization.
Sparrow and Hiltrop (1997) note the following HR areas that may be affected by
national culture:
● decisions on what makes an effective manager;
● giving face-to-face feedback;
● readiness to accept international assignments;
● pay systems and different concepts of social justice;
● approaches to organizational structuring and strategic dynamics.
Harris et al (2003) provide the following instance of cultural differences:
A performance management system based on openness between manager and subordi-
nate, each explaining plainly how they feel the other has done well or badly in the job,
may work in some European countries, but is unlikely to fit with the greater hierarchical
assumptions and ‘loss of face’ fears of some of the Pacific countries.
Sparrow (1999a) gives examples of different approaches to managerial qualities. The
Anglo-Saxon sees management as something separate and definable, based on
general and transferable skills, especially interpersonal skills. In Germany, an entirely
opposite view is adopted: value is placed on entrepreneurial skills, technical compe-
tence, functional expertise and creativity, and managers rely more on formal
authority than in other European countries. In France, management is seen as an
intellectually demanding task and management development systems are elitist.
Brewster (1999) comments that the ‘universalistic’ approach to HRM prevalent in
the USA is rejected in Europe where the basic functions of HRM are given different
International HRM ❚ 103
weights between countries and are carried out differently. If a convergent and
therefore universalistic approach is adopted by a US international company, it might
be difficult to get it accepted in Europe. Divergences to respect cultural differences
may be more appropriate if the full potential of the overseas company is to be
realized.
THINK GLOBALLY AND ACT LOCALLY
The cultural differences mentioned above have produced the slogan ‘think globally
and act locally’. This means that an international balancing act is required, which
leads to the fundamental assumption made by Bartlett and Ghoshal (1991) that:
‘Balancing the needs of co-ordination, control and autonomy and maintaining the
appropriate balance are critical to the success of the multinational company.’
Ulrich (1998) suggests that to achieve this balancing act, there are six capabilities
that enable firms to integrate and concentrate international activities and also
separate and adopt local activities:
1. being able to determine core activities and non-core activities;
2. achieving consistency while allowing flexibility;
3. building global brand equity while honouring local customs;
4. obtaining leverage (bigger is better) while achieving focus (smaller is better);
5. sharing learning and creating new knowledge;
6. engendering a global perspective while ensuring local accountability.
INTERNATIONAL HR POLICIES
International HR policies will deal with the extent to which there should be conver-
gence or divergence in the HR practices adopted in overseas subsidiaries or units.
These will have to take account of differences in employment law, the character of the
labour market, different employee relations processes and any cultural differences in
the ways in which people are treated.
MANAGING EXPATRIATES
The management of expatriates is a major factor determining success or failure in an
international business. Expatriates are expensive; they can cost three or four times as
104 ❚ Managing people
much as the employment of the same individual at home. They are difficult to
manage because of the problems associated with adapting to and working in unfa-
miliar environments, concerns about their development and careers, difficulties
encountered when they re-enter their parent company after an overseas assignment,
and how they should be remunerated. Policies to address all these issues are
required, as described below.
Resourcing policies
The challenge is that of resourcing international operations with people of the right
calibre. As Perkins (1997) points out, it is necessary for businesses to ‘remain compet-
itive with their employment offering in the market place, to attract and retain high
quality staff with worldwide capabilities’.
Policies are required on the employment of local nationals and the use of expatri-
ates for long periods or shorter assignments. The advantages of employing local
nationals are that they:
● are familiar with local markets, the local communities, the cultural setting and the
local economy;
● speak the local language and are culturally assimilated;
● can take a long-term view and contribute for a long period (as distinct from expa-
triates who are likely to take a short-term perspective);
● do not take the patronizing (neo-colonial) attitude that expatriates sometimes
adopt.
Expatriates (nationals of the parent company or third-country nationals) may be
required to provide the experience and expertise that local nationals lack, at least for
the time being. But there is much to be said for a long-term resourcing policy that
states that the aim is to fill all or the great majority of posts with local people. Parent
companies who staff their overseas subsidiaries with local nationals always have the
scope to ‘parachute in’ specialist staff to deal with particular issues such as the start-
up of a new product or service.
Recruitment and selection policies
Policies for recruitment and selection should deal with specifying requirements,
providing realistic previews and preparation for overseas assignments.
International HRM ❚ 105
Role specifications
Role specifications should take note of the behaviours required for those who work
internationally. Leblanc (2001) suggested that they should be able to:
● recognize the diversity of overseas countries;
● accept differences between countries as a fact and adjust to these differences effec-
tively;
● tolerate and adjust to local conditions;
● cope in the long term with a large variety of foreign contexts;
● manage local operations and personnel abroad effectively;
● gain acceptance as a representative of one’s company abroad;
● obtain and interpret information about foreign national contexts (institutions,
legislations, practices, market specifics, etc);
● inform and communicate effectively with a foreign environment about the home
company’s policies;
● take into account the foreign environment when negotiating contracts and part-
nerships;
● identify and accept adjustments to basic product specifications in order to meet
the needs of the foreign market;
● develop elements of a common framework for company strategies, policies and
operations;
● accept that the practices that will operate best in an overseas environment will not
necessarily be the same as the company’s ‘home’ practices.
Realistic previews
At interviews for candidates from outside the organization, and when talking to
internal staff about the possibility of an overseas assignment, it is advisable to have a
policy of providing a realistic preview of the job. The preview should provide infor-
mation on the overseas operation, any special features of the work, what will need to
be done to adjust to local conditions, career progression overseas, re-entry policy on
completion of the assignment, pay, and special benefits such as home leave and chil-
dren’s education.
Preparation policy
The preparation policy for overseas assignments should include the provision of
cultural familiarization for the country(ies) in which the expatriate will work (some-
times called ‘acculturization’), the preferred approach to leading and working in
international teams, and the business and HR policies that will apply.
106 ❚ Managing people
Training
Tarique and Calligiri (1995) propose that the following steps should be taken to
design a training programme for expatriates:
1. Identify the type of global assignment, eg technical, functional, tactical, develop-
mental or strategic/executive.
2. Conduct a cross-cultural training needs analysis covering organizational analysis
and requirements, assignment analysis of key tasks and individual analysis of
skills.
3. Establish training goals and measures – cognitive (eg understanding the role of
cultural values and norms) and affective (modifying perception about culture
and increasing confidence in dealing with individual behaviours to form adap-
tive behaviours such as interpersonal skills).
4. Develop the programme – the content should cover both general and specific
cultural orientation; a variety of methods should be used.
5. Evaluate training given.
Assimilation and review policies
Assimilation policies will provide for the adaptation of expatriates to overseas posts
and their progress in them to be monitored and reviewed. This may take the form of
conventional performance management processes, but additional information may
be provided on potential and the ability of individuals to cope with overseas condi-
tions. Where a number of expatriates are employed it is customary for someone at
headquarters to have the responsibility of looking after them.
Re-entry policies
Re-entry policies should be designed to minimize the problems that can arise when
expatriates return to their parent company after an overseas posting. They want to be
assured that they will be given a position appropriate to their qualifications, and they
will be concerned about their careers, suspecting that their overseas experience will
not be taken into account. Policies should allow time for expatriates to adjust. The
provision of mentors or counsellors is desirable.
Pay and allowances policies
The factors that are likely to impact on the design of reward systems as suggested by
Bradley et al (1999) are the corporate culture of the multinational enterprise, expa-
triate and local labour markets, local cultural sensitivities and legal and institutional
International HRM ❚ 107
factors. They refer to the choice that has to be made between seeking internal
consistency by developing common reward policies in order to facilitate the move-
ment of employees across borders and preserve internal equity, and responding to
pressures to conform to local practices. But they point out that: ‘Studies of cultural
differences suggest that reward system design and management need to be tailored
to local values to enhance the performance of overseas operations.’ As Sparrow
(1999b) asserts: ‘Differences in international reward are not just a consequence of
cultural differences, but also of differences in international influences, national busi-
ness systems and the role and competence of managers in the sphere of HRM.’
The policy of most organizations is to ensure that expatriates are no worse off
because they have been posted abroad. In practice, various additional allowances or
payments, such as hardship allowances, mean that they are usually better off finan-
cially than if they had stayed at home. The basic choice is whether to adopt a home-
based or host-based policy for expatriates.
Home-based pay
The home-based pay approach aims to ensure that the value of the salary of expatri-
ates is the same as in their home country. The home-base salary may be a notional one
for long-term assignments (ie the salary which it is assumed would be paid to expa-
triates were they employed in a job of equivalent level at the parent company). For
shorter-term assignments it may be the actual salary of the individual. The notional
or actual home-base salary is used as the foundation upon which the total remunera-
tion package is built. This is sometimes called the ‘build-up’ or ‘balance sheet’
approach.
The salary ‘build-up’ starts with the actual or notional home-base salary. To it is
added a cost of living adjustment, which is applied to ‘spendable income’ – the
portion of salary that would be used at home for everyday living. It usually excludes
income tax, social security, pensions and insurance and can exclude discretionary
expenditure on major purchases or holidays on the grounds that these do not consti-
tute day-to-day living expenses.
The expatriate’s salary would then consist of the actual or notional home-base
salary plus the cost of living adjustment. In addition, it may be necessary to adjust
salaries to take account of the host country’s tax regime in order to achieve tax equal-
ization. Moves of less than a year that might give rise to double taxation require
particular attention.
Some or all of the following allowances may be added to this salary:
● ‘incentive to work abroad’ premium;
● hardship and location;
108 ❚ Managing people
● housing and utilities;
● school fees;
● ‘rest and recuperation’ leave.
Host-based pay
The host-based pay approach provides expatriates with salaries and benefits such as
company cars and holidays that are in line with those given to nationals of the host
country in similar jobs. This method ensures equity between expatriates and host
country nationals. It is adopted by companies using the so-called ‘market rate’
system, which ensures that the salaries of expatriates match the market levels of pay
in the host country.
Companies using the host-based approach commonly pay additional allowances
such as school fees, accommodation and medical insurance. They may also fund
long-term benefits like social security, life assurance and pensions from home.
The host-based method is certainly equitable from the viewpoint of local nationals,
and it can be less expensive than home-based pay. But it may be much less attractive
as an inducement for employees to work abroad, especially in unpleasant locations,
and it can be difficult to collect market rate data locally to provide a basis for setting
pay levels.
International HRM ❚ 109
Human resource
management processes
Human resource management processes are those concerned with the development of
HR strategies (strategic HRM), policies and practices that affect all aspects of HR and
employment management. This part also covers other processes that affect most
aspects of HRM, namely competency-based approaches, knowledge management and
role and competency analysis.
Part II
Strategic HRM
An important defining characteristic of human resource management is that it is
strategic. This characteristic is expressed by the concept of strategic HRM – an inte-
grated approach to the development of HR strategies that enable the organization to
achieve its goals. To understand the notion of strategic HRM it is necessary to appre-
ciate the concept of strategy upon which it is based, and this is considered in the first
section of the chapter. This leads into a definition of the concept of strategic HRM
followed by expositions of its aims and approaches.
THE CONCEPT OF STRATEGY
Strategy has been defined by Johnson and Scholes (1993) as: ’The direction and scope
of an organization over the longer term, which ideally matches its resources to its
changing environment, and in particular, to its markets, customers and clients to
meet stakeholder expectations.’
Strategy determines the direction in which the organization is going in relation to
its environment. It is the process of defining intentions (strategic intent) and allocating
or matching resources to opportunities and needs (resource-based strategy). Busi-
ness strategy is concerned with achieving competitive advantage. The effective
development and implementation of strategy depends on the strategic capability of the
7
organization’s managers. As expressed in the Professional Standards of the CIPD, this
means the capacity to create an achievable vision for the future, to foresee longer-
term developments, to envisage options (and their probable consequences), to select
sound courses of action, to rise above the day-to-day detail, to challenge the status
quo. Strategy is expressed in strategic goals and developed and implemented in
strategic plans through the process of strategic management. Strategy is about imple-
mentation, which includes the management of change, as well as planning. An
important aspect of strategy is the need to achieve strategic fit. This is used in three
senses:
1. matching the organization’s capabilities and resources to the opportunities avail-
able in the external environment;
2. matching one area of strategy, eg human resource management, to the business
strategy; and
3. ensuring that different aspects of a strategy area cohere and are mutually
supportive.
The concept of strategy is not a straightforward one. There are many different theo-
ries about what it is and how it works. Mintzberg et al (1988) suggest that strategy can
have a number of meanings, namely:
● A plan, or something equivalent – a direction, a guide, a course of action.
● A pattern, that is, consistency in behaviour over time.
● A perspective, an organization’s fundamental way of doing things.
● A ploy, a specific ’manoeuvre’ intended to outwit an opponent or a competitor.
The formulation of corporate strategy can be defined as a process for developing and
defining a sense of direction. It has often been described as a logical, step-by-step
affair, the outcome of which is a formal written statement that provides a definitive
guide to the organization’s long-term intentions. Many people still believe that this is
the case, but it is a misrepresentation of reality. In practice the formulation of strategy
is never as rational and linear a process as some writers describe it or as some
managers attempt to make it.
Mintzberg (1987) believes that strategy formulation is not necessarily rational
and continuous. In theory, he says, strategy is a systematic process: first we think,
then we act; we formulate then we implement. But we also ’act in order to think’. In
practice, ’a realized strategy can emerge in response to an evolving situation’ and the
strategic planner is often ’a pattern organizer, a learner if you like, who manages a
process in which strategies and visions can emerge as well as be deliberately
114 ❚ HRM processes
conceived’. He has emphasized the concept of ’emergent strategies’, and a key aspect
of this process is the production of something that is new to the organization even if
it is not developed as logically as the traditional corporate planners believed to be
appropriate.
Tyson (1997) confirms that:
● strategy has always been emergent and flexible – it is always ’about to be’, it
never exists at the present time;
● strategy is not only realized by formal statements but also comes about by actions
and reactions;
● strategy is a description of a future-oriented action that is always directed
towards change;
● the management process itself conditions the strategies that emerge.
STRATEGIC HRM DEFINED
Strategic HRM is an approach to making decisions on the intentions and plans of the
organization in the shape of the policies, programmes and practices concerning the
employment relationship, resourcing, learning and development, performance
management, reward, and employee relations. The concept of strategic HRM is
derived from the concepts of HRM and strategy. It takes the HRM model with its
focus on strategy, integration and coherence and adds to that the key notions of
strategy, namely, strategic intent, resource-based strategy, competitive advantage,
strategic capability and strategic fit.
Strategic HRM and HR strategies
Strategic HRM is an approach to the strategic management of human resources in
accordance with the intentions of the organization on the future direction it wants to
take. What emerges from this process is a stream of decisions over time that form the
pattern adopted by the organization for managing its human resources and which
define the areas in which specific HR strategies need to be developed. These focus on
the decisions of the organization on what needs to be done and what needs to be
changed in particular areas of people management.
The meaning of strategic HRM
According to Hendry and Pettigrew (1986), strategic HRM has four meanings:
Strategic HRM ❚ 115
1. the use of planning;
2. a coherent approach to the design and management of personnel systems based
on an employment policy and manpower strategy and often underpinned by a
’philosophy’;
3. matching HRM activities and policies to some explicit business strategy;
4. seeing the people of the organization as a ’strategic resource’ for the achievement
of ’competitive advantage’.
Purcell (2001) draws attention to the implications for strategic HRM of the concept of
strategy as an emerging rather than a deliberate process:
Big strategies in HRM are most unlikely to come, ex cathedra, from the board as a fully
formed, written strategy or planning paper. Strategy is much more intuitive and often
only ’visible’ after the event, seen as ’emerging patterns of action’. This is especially the
case when most of the strategy, as in HRM, is to do with internal implementation and
performance strategies, not exclusively to do with external market ploys.
Strategic HRM as an integrated process
Strategic HRM is essentially an integrated process that aims to achieve ’strategic fit’.
A strategic HRM approach produces HR strategies that are integrated vertically with
the business strategy and are ideally an integral part of that strategy, contributing to
the business planning process as it happens. Walker (1992) defines strategic HRM as
’the means of aligning the management of human resources with the strategic content
of the business’. Vertical integration is necessary to provide congruence between
business and human resource strategy so that the latter supports the accomplishment
of the former and, indeed, helps to define it. Strategic HRM is also about horizontal
integration, which aims to ensure that the different elements of the HR strategy fit
together and are mutually supportive.
AIMS OF STRATEGIC HRM
The fundamental aim of strategic HRM is to generate a perspective on the way in
which critical issues relating to people can be addressed. It enables strategic decisions
to be made that have a major and long-term impact on the behaviour and success of
the organization by ensuring that the organization has the skilled, committed and
well-motivated employees it needs to achieve sustained competitive advantage. Its
rationale is the advantage of having an agreed and understood basis for developing
approaches to people management in the longer term by providing a sense of
116 ❚ HRM processes
direction in an often turbulent environment. As Dyer and Holder (1998) remark,
strategic HRM should provide ’unifying frameworks which are at once broad, contin-
gency based and integrative’.
When examining the aims of strategic HRM it is necessary to consider the need for
HR strategy to take into account the interests of all the stakeholders in the organiza-
tion, employees in general as well as owners and management. In Storey’s (1989)
terms, ’soft strategic HRM’ will place greater emphasis on the human relations aspect
of people management, stressing continuous development, communication, involve-
ment, security of employment, the quality of working life and work-life balance.
Ethical considerations will be important. ’Hard strategic HRM’ on the other hand will
emphasize the yield to be obtained by investing in human resources in the interests of
the business. This is also the philosophy of human capital management.
Strategic HRM should attempt to achieve a proper balance between the hard and
soft elements. All organizations exist to achieve a purpose and they must ensure that
they have the resources required to do so, and that they use them effectively. But they
should also take into account the human considerations contained in the concept of
soft strategic HRM. In the words of Quinn Mills (1983) they should plan with people
in mind, taking into account the needs and aspirations of all the members of the orga-
nization. The problem is that hard considerations in many businesses will come first,
leaving soft ones some way behind.
APPROACHES TO STRATEGIC HRM
Strategic HRM adopts an overall resource-based philosophy, as described below.
Within this framework there are three possible approaches, namely, high-perfor-
mance management (high-performance working), high-commitment management
and high-involvement management.
Resource-based strategic HRM
A resource-based approach to strategic HRM focuses on satisfying the human capital
requirements of the organization. The notion of resource-based strategic HRM is
based on the ideas of Penrose (1959), who wrote that the firm is ’an administrative
organization and a collection of productive resources’. It was developed by Hamel
and Prahalad (1989), who declared that competitive advantage is obtained if a firm
can obtain and develop human resources that enable it to learn faster and apply its
learning more effectively than its rivals. Barney (1991) states that sustained competi-
tive advantage stems from the acquisition and effective use of bundles of distinctive
resources that competitors cannot imitate. As Purcell et al (2003) suggest, the values
Strategic HRM ❚ 117
and HR policies of an organization constitute an important non-imitable resource.
This is achieved by ensuring that:
● the firm has higher quality people than its competitors;
● the unique intellectual capital possessed by the business is developed and
nurtured;
● organizational learning is encouraged;
● organization-specific values and a culture exist which ’bind the organization
together (and) gives it focus’.
The aim of a resource-based approach is to improve resource capability – achieving
strategic fit between resources and opportunities and obtaining added value from the
effective deployment of resources. In line with human capital theory, resource-based
theory emphasizes that investment in people adds to their value to the firm. Re-
source-based strategy, as Barney (1991) indicates, can develop strategic capability and
produce what Boxall and Purcell (2003) refer to as ’human resource advantage’.
The high-performance management approach
High-performance working involves the development of a number of interrelated
processes which together make an impact on the performance of the firm through its
people in such areas as productivity, quality, levels of customer service, growth,
profits and, ultimately, the delivery of increased shareholder value. This is achieved
by ’enhancing the skills and engaging the enthusiasm of employees’ (Stevens, 1998).
According to Stevens, the starting point is leadership, vision and benchmarking to
create a sense of momentum and direction. Progress must be measured constantly. He
suggests that the main drivers, support systems and culture are:
● decentralized, devolved decision-making made by those closest to the customer –
so as constantly to renew and improve the offer to customers;
● development of people capacities through learning at all levels, with particular
emphasis on self-management and team capabilities – to enable and support
performance improvement and organizational potential;
● performance, operational and people management processes aligned to organiza-
tional objectives – to build trust, enthusiasm and commitment to the direction
taken by the organization;
● fair treatment for those who leave the organization as it changes, and engagement
with the needs of the community outside the organization – this is an important
component of trust and commitment-based relationships both within and outside
the organization.
118 ❚ HRM processes
High-performance management practices include rigorous recruitment and selection
procedures, extensive and relevant learning and development activities, incentive
pay systems and performance management processes.
The strategy may be expressed as a drive to develop a performance culture in an
organization. In the box below is an example of the high-performance strategy
formulated by the Corporation of London.
The high-commitment management model
One of the underpinning characteristics of HRM is its emphasis on the importance of
enhancing mutual commitment (Walton, 1985b). High-commitment management has
been described by Wood (1996) as:
A form of management which is aimed at eliciting a commitment so that behaviour is
primarily self-regulated rather than controlled by sanctions and pressures external to the
individual, and relations within the organization are based on high levels of trust.
The approaches to creating a high-commitment organization as defined by Beer et al
(1984) and Walton (1985b) are:
Strategic HRM ❚ 119
The fundamental business need the strategy should meet is to develop and main-
tain a high performance culture. The characteristics of such a culture are:
● a clear line of sight exists between the strategic aims of the authority and those
of its departments and its staff at all levels;
● management defines what it requires in the shape of performance improve-
ments, sets goals for success and monitors performance to ensure that the
goals are achieved;
● leadership from the top, which engenders a shared belief in the importance of
continuing improvement;
● focus on promoting positive attitudes that result in a committed and moti-
vated workforce;
● performance management processes aligned to the authority’s objectives to
ensure that people are engaged in achieving agreed goals and standards;
● capacities of people developed through learning at all levels to support
performance improvement;
● people provided with opportunities to make full use of their skills and abili-
ties;
● people valued and rewarded according to their contribution.
● the development of career ladders and emphasis on trainability and commitment
as highly valued characteristics of employees at all levels in the organization;
● a high level of functional flexibility with the abandonment of potentially rigid job
descriptions;
● the reduction of hierarchies and the ending of status differentials;
● a heavy reliance on team structure for disseminating information (team briefing),
structuring work (team working) and problem solving (quality circles).
Wood and Albanese (1995) added to this list:
● job design as something management consciously does in order to provide jobs
that have a considerable level of intrinsic satisfaction;
● a policy of no compulsory lay-offs or redundancies and permanent employment
guarantees, with the possible use of temporary workers to cushion fluctuations in
the demand for labour;
● new forms of assessment and payment systems and, more specifically, merit pay
and profit sharing;
● a high involvement of employees in the management of quality.
Approaches to achieving commitment are described in Chapter 19.
High-involvement management
This approach involves treating employees as partners in the enterprise whose inter-
ests are respected and who have a voice on matters that concern them. It is concerned
with communication and involvement. The aim is to create a climate in which a
continuing dialogue between managers and the members of their teams take place to
define expectations and share information on the organization’s mission, values and
objectives. This establishes mutual understanding of what is to be achieved and a
framework for managing and developing people to ensure that it will be achieved.
The following high-involvement work practices have been identified by Pil and
McDuffie (1999):
● ‘on-line’ work teams;
● ‘off-line’ employee involvement activities and problem-solving groups;
● job rotation;
● suggestion programmes;
● decentralization of quality efforts.
120 ❚ HRM processes
IMPLEMENTING STRATEGIC HRM
The implementation of strategic HRM is carried out within the framework of the
approaches described above. The overarching imperative will be to achieve human
resource advantage. A high-performance approach will emphasize the importance of
creating and maintaining a performance culture, and both high-commitment and
high-involvement management will contribute to the development of a committed
and engaged workforce. Strategic HRM involves the formulation and implementa-
tion of specific strategies in each area of HRM as described in the next two chapters.
Strategic HRM ❚ 121
HR strategies
Strategic HRM leads to the formulation of HR strategies. In this chapter:
● HR strategies are defined;
● the purpose of HR strategies is examined;
● the distinction is made between strategic HRM and HR strategies;
● types of HR strategies are described with examples;
● criteria for an effective HR strategy are given.
HR STRATEGIES DEFINED
HR strategies set out what the organization intends to do about the different aspects
of its human resource management policies and practices. They will be integrated
with the business strategy and each other. HR strategies are described by Dyer and
Reeves (1995) as ‘internally consistent bundles of human resource practices’, and in
the words of Boxall (1996), they provide ‘a framework of critical ends and means’.
Richardson and Thompson (1999) suggest that:
A strategy, whether it is an HR strategy or any other kind of management strategy must
have two key elements: there must be strategic objectives (ie things the strategy is
supposed to achieve), and there must be a plan of action (ie the means by which it is
proposed that the objectives will be met.
8
PURPOSE
The purpose of HR strategies is to guide HRM development and implementation
programmes. They provide a means of communicating to all concerned the intentions
of the organization about how its human resources will be managed. They provide
the basis for strategic plans and enable the organization to measure progress and
evaluate outcomes against objectives. HR strategies provide visions for the future but
they are also vehicles that define the actions required and how the vision should be
realized. As Gratton (2000) commented: ‘There is no great strategy, only great execu-
tion.’
THE DISTINCTION BETWEEN STRATEGIC HRM AND HR
STRATEGIES
Strategic HRM as described in the last chapter is the process that results in the formu-
lation of HR strategies. The terms ‘strategic HRM’ and ‘HR strategy’ are often used
interchangeably, but a distinction can be made between them.
Strategic HRM can be regarded as a general approach underpinned by a philos-
ophy to the strategic management of human resources in accordance with the inten-
tions of the organization on the future direction it wants to take. What emerges from
this process is a stream of decisions over time that form the pattern adopted by the
organization for managing its human resources and define the areas in which specific
HR strategies need to be developed. HR strategies will focus on the intentions of the
organization on what needs to be done and what needs to be changed.
TYPES OF HR STRATEGIES
Because all organizations are different, all HR strategies are different. Research into
HR strategy conducted by Armstrong and Long (1994) and Armstrong and Baron
(2002) revealed many variations. Some strategies are simply very general declarations
of intent; others go into much more detail. But two basic types of HR strategies can be
identified: 1) overarching strategies; and 2) specific strategies relating to the different
aspects of human resource management.
Overarching HR strategies
Overarching strategies describe the general intentions of the organization about how
people should be managed and developed, what steps should be taken to ensure that
124 ❚ HRM processes
the organization can attract and retain the people it needs, and ensure so far as
possible that employees are committed, motivated and engaged. They are likely to be
expressed as broad-brush statements of aims and purpose that set the scene for more
specific strategies. They are concerned with overall organizational effectiveness –
achieving human resource advantage by, as Boxall and Purcell (2003) explain,
employing ‘better people in organizations with better process’, developing high-
performance work systems and generally creating a great place to work.
The following are some examples of overarching HR strategy statements.
Aegon
‘The Human Resources Integrated Approach aims to ensure that from whatever angle
staff now look at the elements of pay management, performance, career development
and reward, they are consistent and linked.’
B&Q
‘Enhance employee commitment and minimize the loss of B&Q’s best people.
Position B&Q as one of the best employers in the UK.’
Egg
‘The major factor influencing HR strategy was the need to attract, maintain and retain
the right people to deliver it. The aim was to introduce a system that complemented
the business, that reflected the way we wanted to treat our customers – treating our
people the same. What we would do for our customers we would also do for our
people. We wanted to make an impact on the culture – the way people do business.’
(HR Director)
GlaxoSmithKline
‘We want GSK to be a place where the best people do their best work.’
An insurance company
‘Without the people in this business we don’t have anything to deliver. We are driven
to getting the people issues right in order to deliver the strategy. To a great extent it’s
the people that create and implement the strategy on behalf of the organization. We
put people very much at the front of our strategic thought process. If we have the
right people, the right training, the right qualifications and the right sort of culture
then we can deliver our strategy. We cannot do it otherwise.’ (Chief Executive)
HR strategies ❚ 125
Lands’ End
‘Based on the principle that staff who are enjoying themselves, are being supported
and developed, and who feel fulfilled and respected at work, will provide the best
service to customers.’
Pilkington Optronics
‘The business strategy defines what has to be done to achieve success and that HR
strategy must complement it, bearing in mind that one of the critical success factors
for the company is its ability to attract and retain the best people. HR strategy must be
in line with what is best in industry.’
A public utility
‘The only HR strategy you really need is the tangible expression of values and the
implementation of values… unless you get the human resource values right you can
forget all the rest’. (Managing Director)
A manufacturing company
‘The HR strategy is to stimulate changes on a broad front aimed ultimately at
achieving competitive advantage through the efforts of our people. In an industry of
fast followers, those who learn quickest will be the winners.’ (HR Director)
A retail stores group
‘The biggest challenge will be to maintain (our) competitive advantage and to do that
we need to maintain and continue to attract very high calibre people. The key differ-
entiator on anything any company does is fundamentally the people, and I think that
people tend to forget that they are the most important asset. Money is easy to get hold
of, good people are not. All we do in terms of training and manpower planning is
directly linked to business improvement.’ (Managing Director)
Specific HR strategies
Specific HR strategies set out what the organization intends to do in areas such as:
● Talent management – how the organization intends to ‘win the war for talent’.
● Continuous improvement – providing for focused and continuous incremental
innovation sustained over a period of time.
126 ❚ HRM processes
● Knowledge management – creating, acquiring, capturing, sharing and using knowl-
edge to enhance learning and performance.
● Resourcing – attracting and retaining high quality people.
● Learning and developing – providing an environment in which employees are
encouraged to learn and develop.
● Reward – defining what the organization wants to do in the longer term to
develop and implement reward policies, practices and processes that will further
the achievement of its business goals and meet the needs of its stakeholders.
● Employee relations – defining the intentions of the organization about what needs
to be done and what needs to be changed in the ways in which the organization
manages its relationships with employees and their trade unions.
The following are some examples of specific HR strategies.
The Children’s Society
● Implement the rewards strategy of the Society to support the corporate plan and
secure the recruitment, retention and motivation of staff to deliver its business
objectives.
● Manage the development of the human resources information system to secure
productivity improvements in administrative processes.
● Introduce improved performance management processes for managers and staff
of the Society.
● Implement training and development which supports the business objectives of
the Society and improves the quality of work with children and young people.
Diageo
There are three broad strands to the ‘Organization and People Strategy’:
1. Reward and recognition: use recognition and reward programmes to stimulate
outstanding team and individual performance contributions.
2. Talent management: drive the attraction, retention and professional growth of a
deep pool of diverse, talented employees.
3. Organizational effectiveness: ensure that the business adapts its organization to
maximize employee contribution and deliver performance goals.
It provides direction to the company’s talent, operational effectiveness and perfor-
mance and reward agendas. The company’s underlying thinking is that the people
strategy is not for the human resource function to own but is the responsibility of the
whole organization, hence the title ‘Organization and People Strategy’.
HR strategies ❚ 127
A government agency
The key components of the HR strategy are:
● Investing in people – improving the level of intellectual capital.
● Performance management – integrating the values contained in the HR strategy
into performance management processes and ensuring that reviews concentrate
on how well people are performing those values.
● Job design – a key component concerned with how jobs are designed and how
they relate to the whole business.
● The reward system – in developing rewards strategies, taking into account that
this is a very hard driven business.
HR strategies for higher education institutions (The Higher Education Funding
Council)
1. Address recruitment and retention difficulties in a targeted and cost-effective
manner.
2. Meet specific staff development and training objectives that not only equip staff
to meet their current needs but also prepare them for future changes, such as
using new technologies for learning and teaching. This would include manage-
ment development.
3. Develop equal opportunity targets with programmes to implement good practice
throughout an institution. This would include ensuring equal pay for work of
equal value, using institution-wide systems of job evaluation. This could involve
institutions working collectively – regionally or nationally.
4. Carry out regular reviews of staffing needs, reflecting changes in market
demands and technology. The reviews would consider overall numbers and the
balance of different categories of staff.
5. Conduct annual performance reviews of all staff, based on open and objective
criteria, with reward connected to the performance of individuals including,
where appropriate, their contribution to teams.
6. Take action to tackle poor performance.
A local authority
The focus is on the organization of excellence. The strategy is broken down into eight
sections: employee relations, recruitment and retention, training, performance
management, pay and benefits, health and safety, absence management and equal
opportunities.
128 ❚ HRM processes
CRITERIA FOR AN EFFECTIVE HR STRATEGY
An effective HR strategy is one that works in the sense that it achieves what it sets out
to achieve. In particular, it:
● will satisfy business needs;
● is founded on detailed analysis and study, not just wishful thinking;
● can be turned into actionable programmes that anticipate implementation
requirements and problems;
● is coherent and integrated, being composed of components that fit with and
support each other;
● takes account of the needs of line managers and employees generally as well as
those of the organization and its other stakeholders. As Boxall and Purcell (2003)
emphasize: ‘HR planning should aim to meet the needs of the key stakeholder
groups involved in people management in the firm.’
Here is a comment from a chief executive (Peabody Trust) on what makes a good HR
strategy:
A good strategy is one which actually makes people feel valued. It makes them knowl-
edgeable about the organization and makes them feel clear about where they sit as a
group, or team, or individual. It must show them how what they do either together or
individually fits into that strategy. Importantly, it should indicate how people are going to
be rewarded for their contribution and how they might be developed and grow in the
organization.
HR strategies ❚ 129
Developing and implementing
HR strategies
There is an ever-present risk that the concept of strategic HRM can become somewhat
nebulous – nice to have but hard to realize. The danger of creating a rhetoric/reality
gap is acute. Broad and often bland statements of strategic intent can be readily
produced. What is much more difficult is to turn them into realistic plans that are
then implemented effectively. Strategic HRM is more about getting things done than
thinking about them. It leads to the formulation of HR strategies that first define what
an organization intends to do in order to attain defined goals in overall human
resource management policy and in particular areas of HR process and practice, and
secondly set out how they will be implemented.
Difficult though it may be, a strategic approach is desirable in order to give a sense
of direction and purpose and as a basis for the development of relevant and coherent
HR policies and practices.
This chapter starts by giving general consideration to the development process,
setting out various propositions and describing the levels of strategic decision-
making. Reference is also made to the existence of strategic options and choices. This
provides the background against which the approaches to formulating and imple-
menting HR strategies are described.
9
PROPOSITIONS ABOUT THE DEVELOPMENT
PROCESS
The following propositions about the formulation of HR strategy have been drawn
up by Boxall (1993) from the literature:
● the strategy formation process is complex, and excessively rationalistic models
that advocate formalistic linkages between strategic planning and HR planning
are not particularly helpful to our understanding of it;
● business strategy may be an important influence on HR strategy but it is only one
of several factors;
● implicit (if not explicit) in the mix of factors that influence the shape of HR strate-
gies is a set of historical compromises and trade-offs from stakeholders.
It is also necessary to stress that coherent and integrated HR strategies are only likely
to be developed if the top team understands and acts upon the strategic imperatives
associated with the employment, development and motivation of people. This will be
achieved more effectively if there is an HR director who is playing an active and
respected role as a business partner. A further consideration is that the effective
implementation of HR strategies depends on the involvement, commitment and
cooperation of line managers and staff generally. Finally, there is too often a wide gap
between the rhetoric of strategic HRM and the reality of its impact, as Gratton et al
(1999) emphasize. Good intentions can too easily be subverted by the harsh realities
of organizational life. For example, strategic objectives such as increasing commit-
ment by providing more security and offering training to increase employability may
have to be abandoned or at least modified because of the short-term demands made
on the business to increase shareholder value.
The development process as described below takes place at different levels and
involves analysing options and making choices. A methodology is required for the
process that can be conducted by means of a strategic review. The methodology can
be applied in three different ways. One of the most important aims in the develop-
ment programme will be to align the HR strategy to the organizational culture and
the business strategy by achieving vertical integration or fit.
LEVELS OF STRATEGIC DECISION-MAKING
Ideally, the formulation of HR strategies is conceived as a process, which is closely
aligned to the formulation of business strategies. HR strategy can influence as well as
132 ❚ HRM processes
be influenced by business strategy. In reality, however, HR strategies are more likely
to flow from business strategies, which will be dominated by product/market and
financial considerations. But there is still room for HR to make a useful, even essential
contribution at the stage when business strategies are conceived, for example by
focusing on resource issues. This contribution may be more significant if strategy
formulation is an emergent or evolutionary process – HR strategic issues will then be
dealt with as they arise during the course of formulating and implementing the
corporate strategy.
A distinction is made by Purcell (1989) between:
● ‘upstream’ first-order decisions, which are concerned with the long-term direction of
the enterprise or the scope of its activities;
● ‘downstream’ second-order decisions, which are concerned with internal operating
procedures and how the firm is organized to achieve its goals;
● ‘downstream’ third-order decisions, which are concerned with choices on human
resource structures and approaches and are strategic in the sense that they estab-
lish the basic parameters of employee relations management in the firm.
It can indeed be argued that HR strategies, like other functional strategies such as
product development, manufacturing and the introduction of new technology, will
be developed within the context of the overall business strategy, but this need not
imply that HR strategies come third in the pecking order. Observations made by
Armstrong and Long (1994) during research into the strategy formulation processes
of 10 large UK organizations suggested that there were only two levels of strategy
formulation: 1) the corporate strategy relating to the vision and mission of the organi-
zation but often expressed in terms of marketing and financial objectives; 2) the
specific strategies within the corporate strategy concerning product-market develop-
ment, acquisitions and divestments, human resources, finance, new technology, orga-
nization, and such overall aspects of management as quality, flexibility, productivity,
innovation and cost reduction.
STRATEGIC OPTIONS AND CHOICES
The process of developing HR strategies involves generating strategic HRM options
and then making appropriate strategic choices. It has been noted by Cappelli (1999)
that: ‘The choice of practices that an employer pursues is heavily contingent on a
number of factors at the organizational level, including their own business and
production strategies, support of HR policies, and co-operative labour relations.’ The
Developing and implementing HR strategies ❚ 133
process of developing HR strategies involves the adoption of a contingent approach
in generating strategic HRM options and then making appropriate strategic choices.
There is seldom if ever one right way forward.
Choices should relate to but also anticipate the critical needs of the business. They
should be founded on detailed analysis and study, not just wishful thinking, and
should incorporate the experienced and collective judgement of top management
about the organizational requirements while also taking into account the needs of line
managers and employees generally. The emerging strategies should anticipate the
problems of implementation that may arise if line managers are not committed to the
strategy and/or lack the skills and time to play their part, and the strategies should be
capable of being turned into actionable programmes.
APPROACHES TO HR STRATEGY DEVELOPMENT
The starting point of HR strategy development is the alignment of HR strategy to the
business strategy and the organizational culture – the achievement of vertical inte-
gration. This provides the necessary framework for the three approaches to the de-
velopment of HR strategies that have been identified by Delery and Doty (1996)
as the ‘universalistic’, the ‘contingency’ and the ‘configurational’. Richardson and
Thompson (1999) redefined the first two approaches as best practice and best fit, and
retained the word ‘configurational’, meaning the use of ‘bundles’, as the third
approach.
Aligning HR strategy
A fundamental requirement in developing HR strategy is that it should be aligned to
the business strategy (vertical integration) and should fit the organizational culture.
Everything else flows from this process of alignment.
Integration with the business strategy
The key business issues that may impact on HR strategies include:
● intentions concerning growth or retrenchment, acquisitions, mergers, divest-
ments, diversification, product/market development;
● proposals on increasing competitive advantage through innovation leading to
product/service differentiation, productivity gains, improved quality/customer
service, cost reduction (downsizing);
134 ❚ HRM processes
● the felt need to develop a more positive, performance-oriented culture and any
other culture management imperatives associated with changes in the philoso-
phies of the organization in such areas as gaining commitment, mutuality,
communications, involvement, devolution and teamworking.
Business strategies may be influenced by HR factors, although not excessively so. HR
strategies are concerned with making business strategies work. But the business
strategy must take into account key HR opportunities and constraints.
Wright and Snell (1998) suggest that seeking fit requires knowledge of the skills
and behaviour needed to implement the strategy, knowledge of the HRM practices
necessary to elicit those skills and behaviours, and the ability quickly to implement
the desired system of HRM practices.
A framework for aligning HR and business strategies is provided by a competitive
strategy approach that relates the different HR strategies to the firm’s competitive
strategies, including those listed by Porter (1985). An illustration of how this might be
expressed is given in Table 9.1.
Culture fit
HR strategies need to be congruent with the existing culture of the organization, or
designed to produce cultural change in specified directions. This will be a necessary
factor in the formulation stage but could be a vital factor when it comes to implemen-
tation. In effect, if what is proposed is in line with ‘the way we do things around here’,
then it will be more readily accepted. However, in the more likely event that it
changes ‘the way we do things around here’, then careful attention has to be given to
the real problems that may occur in the process of trying to embed the new initiative
in the organization.
The best practice approach
This approach is based on the assumption that there is a set of best HRM practices
and that adopting them will inevitably lead to superior organizational performance.
Four definitions of best practice are given in Table 9.2.
The ‘best practice’ rubric has been attacked by a number of commentators. Cappelli
and Crocker-Hefter (1996) comment that the notion of a single set of best practices has
been overstated: ‘There are examples in virtually every industry of firms that have
very distinctive management practices… Distinctive human resource practices shape
the core competencies that determine how firms compete.’
Purcell (1999) has also criticized the best practice or universalist view by pointing
out the inconsistency between a belief in best practice and the resource-based view
Developing and implementing HR strategies ❚ 135
136 ❚ HRM processes
Competitive Strategy
HR Strategy
Resourcing HR Development Reward
Achieve competitive Recruit and retain Develop strategic Provide financial
advantage through high quality people capability and provide incentives and
innovation with innovative skills encouragement and rewards and
and a good track facilities for enhancing recognition for
record in innovation. innovative skills and successful
enhancing the innovations.
intellectual capital of
the organization.
Achieve competitive Use sophisticated Encourage the Link rewards to
advantage through selection procedures development of a quality performance
quality to recruit people who learning organization, and the achievement
are likely to deliver develop and of high standards of
quality and high implement knowledge customer service.
levels of customer management
service. processes, support
total quality and
customer care
initiatives with
focused training.
Achieve competitive Develop core/ Provide training Review all reward
advantage through periphery designed to improve practices to ensure
cost-leadership employment productivity; that they provide
structures; recruit inaugurate just-in-time value for money
people who are likely training that is closely and do not lead to
to add value; if linked to immediate unnecessary
unavoidable, plan and business needs and expenditure.
manage downsizing can generate
humanely measurable
improvements in
cost-effectiveness.
Achieve competitive Use sophisticated Develop Develop performance
advantage by recruitment and organizational management
employing people selection procedures learning processes; processes which
who are better than based on a rigorous encourage self- enable both financial
those employed analysis of the managed learning and non-financial
by competitors special capabilities through the use of rewards to be related
required by the personal development to competence and
organization. plans as part of a skills; ensure that
performance pay levels are
management process. competitive.
Table 9.1 Linking HR and competitive strategies
Developing and implementing HR strategies ❚ 137
Guest (1999a) Patterson et al (1997) Pfeffer (1994) US Department of
Labor (1993)
● Selection and the ● Sophisticated ● Employment ● Careful and
careful use of selection and security extensive systems
selection tests to recruitment ● Selective hiring for recruitment,
identify those with processes ● Self-managed selection and
potential to make a ● Sophisticated teams training
contribution induction ● High compensation ● Formal systems for
● Training, and in programmes contingent on sharing information
particular a ● Sophisticated performance with employees
recognition that training ● Training to provide ● Clear job design
training is an on- ● Coherent appraisal a skilled and ● High-level
going activity systems motivated participation
● Job design to ensure ● Flexibility of workforce processes
flexibility, workforce skills ● Reduction of status ● Monitoring of
commitment and ● Job variety on shop differentials attitudes
motivation, floor ● Sharing ● Performance
including steps to ● Use of formal teams information appraisals
ensure that ● Frequent and ● Properly
employees have the comprehensive functioning
responsibility and communication to grievance
autonomy fully to workforce procedures
use their knowledge ● Use of quality ● Promotion and
and skills. improvement teams compensation
● Communication to ● Harmonized terms schemes that
ensure that a two- and conditions provide for the
way process keeps ● Basic pay higher recognition and
everyone fully than competition reward of high-
informed ● Use of incentive performing
● Employee share schemes employees
ownership
programmes to
increase employees’
awareness of the
implications of their
actions, for the
financial
performance of the
firm.
Table 9.2 HRM best practices
which focuses on the intangible assets, including HR, that allow the firm to do better
than its competitors. He asks how can ‘the universalism of best practice be squared
with the view that only some resources and routines are important and valuable by
being rare and imperfectly imitable?’ The danger, as Legge (1995) points out, is that of
‘mechanistically matching strategy with HRM policies and practices’.
In accordance with contingency theory, which emphasizes the importance of inter-
actions between organizations and their environments so that what organizations do
is dependent on the context in which they operate, it is difficult to accept that there is
any such thing as universal best practice. What works well in one organization will
not necessarily work well in another because it may not fit its strategy, culture,
management style, technology or working practices. As Becker et al (1997) remark,
‘Organizational high-performance work systems are highly idiosyncratic and must
be tailored carefully to each firm’s individual situation to achieve optimum results.’
But knowledge of best practice can inform decisions on what practices are most likely
to fit the needs of the organization as long as it is understood why it is best practice.
And Becker and Gerhart (1996) argue that the idea of best practice might be more
appropriate for identifying the principles underlying the choice of practices, as
opposed to the practices themselves.
The best fit approach
The best fit approach emphasizes the importance of ensuring that HR strategies are
appropriate to the circumstances of the organization, including its culture, opera-
tional processes and external environment. HR strategies have to take account of the
particular needs of both the organization and its people. For the reasons given above,
it is accepted by most commentators that ‘best fit’ is more important than ‘best prac-
tice’. There can be no universal prescriptions for HRM policies and practices. It all
depends. This is not to say that ‘good practice’, or ‘leading edge practice’ ie practice
that does well in one successful environment, should be ignored. ‘Benchmarking’
(comparing what the organization does with what is done elsewhere) is a valuable
way of identifying areas for innovation or development that are practised to good
effect elsewhere by leading companies. But having learnt about what works and,
ideally, what does not work in comparable organizations, it is up to the firm to decide
what may be relevant in general terms and what lessons can be learnt that can be
adapted to fit its particular strategic and operational requirements. The starting point
should be an analysis of the business needs of the firm within its context (culture,
structure, technology and processes). This may indicate clearly what has to be done.
Thereafter, it may be useful to pick and mix various ‘best practice’ ingredients, and
develop an approach that applies those that are appropriate in a way that is aligned
to the identified business needs.
138 ❚ HRM processes
But there are problems with the best fit approach, as stated by Purcell (1999):
Meanwhile, the search for a contingency or matching model of HRM is also limited by
the impossibility of modelling all the contingent variables, the difficulty of showing their
interconnection, and the way in which changes in one variable have an impact on
others.
In Purcell’s view, organizations should be less concerned with best fit and best prac-
tice and much more sensitive to processes of organizational change so that they can
‘avoid being trapped in the logic of rational choice’.
The configurational approach (bundling)
As Richardson and Thompson (1999) comment, ‘A strategy’s success turns on
combining “vertical” or external fit and “horizontal” or internal fit.’ They conclude
that a firm with bundles of HR practices should have a higher level of performance,
provided it also achieves high levels of fit with its competitive strategy. Emphasis is
given to the importance of ‘bundling’ – the development and implementation of
several HR practices together so that they are interrelated and therefore complement
and reinforce each other. This is the process of horizontal integration, which is also
referred to as the adoption of a ‘configurational mode’ (Delery and Doty, 1996) or the
use of ‘complementarities’ (MacDuffie, 1995), who explained the concept of bundling
as follows:
Implicit in the notion of a ‘bundle’ is the idea that practices within bundles are interre-
lated and internally consistent, and that ‘more is better’ with respect to the impact on
performance, because of the overlapping and mutually reinforcing effect of multiple
practices.
Dyer and Reeves (1995) note that: ‘The logic in favour of bundling is straightfor-
ward… Since employee performance is a function of both ability and motivation, it
makes sense to have practices aimed at enhancing both.’ Thus there are several ways
in which employees can acquire needed skills (such as careful selection and training)
and multiple incentives to enhance motivation (different forms of financial and non-
financial rewards). A study by Dyer and Reeves (1995) of various models listing HR
practices which create a link between HRM and business performance found that the
activities appearing in most of the models were involvement, careful selection, exten-
sive training and contingent compensation.
The aim of bundling is to achieve coherence, which is one of the four ‘meanings’ of
strategic HRM defined by Hendry and Pettigrew (1986). Coherence exists when a
Developing and implementing HR strategies ❚ 139
mutually reinforcing set of HR policies and practices have been developed that
jointly contribute to the attainment of the organization’s strategies for matching re-
sources to organizational needs, improving performance and quality and, in commer-
cial enterprises, achieving competitive advantage.
The process of bundling HR strategies (horizontal integration or fit) is an important
aspect of the concept of strategic HRM. In a sense, strategic HRM is holistic; it is
concerned with the organization as a total entity and addresses what needs to be
done across the organization as a whole in order to enable it to achieve its corporate
strategic objectives. It is not interested in isolated programmes and techniques, or in
the ad hoc development of HR practices.
In their discussion of the four policy areas of HRM (employee influence, human
resource management flow, reward systems and work systems) Beer et al (1984)
suggested that this framework can stimulate managers to plan how to accomplish the
major HRM tasks ‘in a unified, coherent manner rather than in a disjointed approach
based on some combination of past practice, accident and ad hoc response to outside
pressures’.
The problem with the bundling approach is that of deciding which is the best
way to relate different practices together. There is no evidence that one bundle
is generally better than another, although the use of performance management
practices and competence frameworks are two ways that are typically adopted to
provide for coherence across a range of HR activities. Pace the findings of MacDuffie,
there is no conclusive proof that in the UK bundling has actually improved
performance.
METHODOLOGY FOR STRATEGY DEVELOPMENT
A methodology for formulating HR strategies was developed by Dyer and Holder
(1998) as follows:
1. Assess feasibility – from an HR point of view, feasibility depends on whether the
numbers and types of key people required to make the proposal succeed can be
obtained on a timely basis and at a reasonable cost, and whether the behavioural
expectations assumed by the strategy are realistic (eg retention rates and produc-
tivity levels).
2. Determine desirability – examine the implications of strategy in terms of sacrosanct
HR policies (eg, a strategy of rapid retrenchment would have to be called into
question by a company with a full employment policy).
140 ❚ HRM processes
3. Determine goals – these indicate the main issues to be worked on and they derive
primarily from the content of the business strategy. For example, a strategy to
become a lower-cost producer would require the reduction of labour costs. This
in turn translates into two types of HR goals: higher performance standards
(contribution) and reduced headcounts (composition).
4. Decide means of achieving goals – the general rule is that the closer the external and
internal fit, the better the strategy, consistent with the need to adapt flexibly to
change. External fit refers to the degree of consistency between HR goals on the
one hand and the exigencies of the underlying business strategy and relevant
environmental conditions on the other. Internal fit measures the extent to which
HR means follow from the HR goals and other relevant environmental condi-
tions, as well as the degree of coherence or synergy among the various HR
means.
But many different routes may be followed when formulating HR strategies – there is
no one right way. On the basis of their research in 30 well-known companies, Tyson
and Witcher (1994) commented that: ‘The different approaches to strategy formation
reflect different ways to manage change and different ways to bring the people part of
the business into line with business goals.’
In developing HR strategies, process may be as important as content. Tyson and
Witcher (1994) also noted from their research that: ‘The process of formulating HR
strategy was often as important as the content of the strategy ultimately agreed. It
was argued that by working through strategic issues and highlighting points of
tension, new ideas emerged and a consensus over goals was found.’
Although HR strategies can and will emerge over a period of time, there is much to
be said for adopting a systematic approach by conducting a strategic review.
CONDUCTING A STRATEGIC REVIEW
A strategic review systematically assesses strategy requirements in the light of an
analysis of present and future business and people needs. Such a review provides
answers to three basic questions:
1. Where are we now?
2. Where do we want to be in one, two or three years’ time?
3. How are we going to get there?
The stages of a strategic review are illustrated in Figure 9.1.
Developing and implementing HR strategies ❚ 141
142 ❚ HRM processes
Figure 9.1 Strategic review sequence
Analysis:
● What is the business strategy and the business needs emerging from it?
● What are the cultural and environmental factors we need to take into account?
● What are the key HR weaknesses and issues?
● What are the gaps between what we are doing and what we ought to do?
Diagnosis:
● Why do the HR weaknesses and issues exist?
● What is the cause of any gaps?
● What factors are influencing the situation (cultural, environmental, competition,
political etc)?
Conclusions and recommendations:
● What are our conclusions from the analysis/diagnosis?
● What do we need to do to fill the gaps?
● What alternative strategies are available?
● Which alternative is recommended and why?
Action planning:
● What actions do we need to take to implement the proposals?
● What problems might we meet and how will we overcome them?
● Who takes the action and when?
● How do we ensure that we have the committed and capable line managers
required?
Resource planning:
● What resources will we need (money, people, time)?
● How will we obtain these resources?
● How do we convince management that these resources are required?
● What supporting processes are required?
Costs and benefits:
● What are the costs and benefits to the organization of implementing these
proposals?
● How do they benefit individual employees?
● How do they satisfy business needs?
SETTING OUT THE STRATEGY
A strategic review can provide the basis for setting out the strategy. There is no stan-
dard model for doing this, but the following headings are typical.
1. Basis
– business needs in terms of the key elements of the business strategy;
– analysis of business and environmental factors (SWOT/PESTLE);
– cultural factors – possible helps or hindrances to implementation.
2. Content – details of the proposed HR strategy.
3. Rationale – the business case for the strategy against the background of business
needs and environmental/cultural factors.
4. Implementation plan
– action programme;
– responsibility for each stage;
– resources required;
– proposed arrangements for communication, consultation, involvement and
training;
– project management arrangements.
5. Costs and benefits analysis – an assessment of the resource implications of the plan
(costs, people and facilities) and the benefits that will accrue, for the organization
as a whole, for line managers and for individual employees (so far as possible
these benefits should be quantified in value-added terms).
IMPLEMENTING HR STRATEGIES
Getting HR strategies into action is not easy even if they have been developed by
means of a systematic review and set out within a clear framework. Because strate-
gies tend to be expressed as abstractions, they must be translated into programmes
with clearly stated objectives and deliverables. The term ‘strategic HRM’ has been
devalued in some quarters, sometimes to mean no more than a few generalized ideas
about HR policies, at other times to describe a short-term plan, for example, to
increase the retention rate of graduates. It must be emphasized that HR strategies are
not just ad hoc programmes, policies, or plans concerning HR issues that the HR
department happens to feel are important. Piecemeal initiatives do not constitute
strategy.
The problem, as noted by Gratton et al (1999), is that too often there is a gap
between what the strategy states will be achieved and what actually happens to it. As
they put it:
Developing and implementing HR strategies ❚ 143
One principal strand that has run through this entire book is the disjunction between
rhetoric and reality in the area of human resource management, between HRM theory
and HRM practice, between what the HR function says it is doing and how that practice
is perceived by employees, and between what senior management believes to be the
role of the HR function, and the role it actually plays.
The factors identified by Gratton et al that contributed to creating this gap include:
● the tendency of employees in diverse organizations only to accept initiatives they
perceive to be relevant to their own areas;
● the tendency of long-serving employees to cling to the status quo;
● complex or ambiguous initiatives may not be understood by employees or will be
perceived differently by them, especially in large, diverse organizations;
● it is more difficult to gain acceptance of non-routine initiatives;
● employees will be hostile to initiatives if they are believed to be in conflict with
the organization’s identity, eg downsizing in a culture of ‘job-for-life’;
● the initiative is seen as a threat;
● inconsistencies between corporate strategies and values;
● the extent to which senior management is trusted;
● the perceived fairness of the initiative;
● the extent to which existing processes could help to embed the initiative;
● a bureaucratic culture that leads to inertia.
Barriers to the implementation of HR strategies
Each of the factors listed by Gratton et al can create barriers to the successful imple-
mentation of HR strategies. Other major barriers include failure to understand the
strategic needs of the business, inadequate assessment of the environmental and
cultural factors that affect the content of the strategies, and the development of ill-
conceived and irrelevant initiatives, possibly because they are current fads or because
there has been a poorly digested analysis of best practice that does not fit the organi-
zation’s requirements. These problems are compounded when insufficient attention
is paid to practical implementation problems, the important role of line managers in
implementing strategies, and the need to have established supporting processes for
the initiative (eg, performance management to support performance pay).
Overcoming the barriers
To overcome these barriers it is necessary to:
144 ❚ HRM processes
● conduct a rigorous preliminary analysis of needs and requirements;
● formulate the strategy;
● enlist support for the strategy;
● assess barriers and deal with them;
● prepare action plans;
● project-manage implementation;
● follow up and evaluate progress so that remedial action can be taken as necessary.
Developing and implementing HR strategies ❚ 145
HRM policies
WHAT HUMAN RESOURCE POLICIES ARE
HR policies are continuing guidelines on the approach the organization intends to
adopt in managing its people. They define the philosophies and values of the organi-
zation on how people should be treated, and from these are derived the principles
upon which managers are expected to act when dealing with HR matters. HR policies
therefore serve as reference points when employment practices (described in Chapter
57) are being developed, and when decisions are being made about people. They help
to define ‘the way things are done around here’.
HR policies should be distinguished from procedures, as discussed in Chapter 58.
A policy provides generalized guidance on the approach adopted by the organiza-
tion, and therefore its employees, concerning various aspects of employment. A
procedure spells out precisely what action should be taken in line with the policy.
WHY HAVE HR POLICIES
HR or employment policies help to ensure that when dealing with matters
concerning people, an approach in line with corporate values is adopted throughout
the organization. They serve as the basis for enacting values – converting espoused
values into values in use. They provide frameworks within which consistent
10
decisions are made, and promote equity in the way in which people are treated.
Because they provide guidance on what managers should do in particular circum-
stances they facilitate empowerment, devolution and delegation. While they should
fit the corporate culture, they can also help to shape it.
DO POLICIES NEED TO BE FORMALIZED?
All organizations have HR policies. Some, however, exist implicitly as a philosophy
of management and an attitude to employees that is expressed in the way in which
HR issues are handled; for example, the introduction of new technology. The advan-
tage of explicit policies in terms of consistency and understanding may appear to be
obvious, but there are disadvantages: written policies can be inflexible, constrictive,
platitudinous or all three. To a degree, policies have often to be expressed in abstract
terms, and managers do not care for abstractions. But they do prefer to know where
they stand – people like structure – and formalized HR policies can provide the
guidelines they need.
Formalized HR policies can be used in induction, team leader and management
training to help participants understand the philosophies and values of the organiza-
tion, and how they are expected to behave within that context. They are a means for
defining the employment relationship and the psychological contract (see Chapters
15 and 16).
Although written policies are important, their value is reduced if they are not
backed up by a supportive culture. This particularly applies to work-life balance poli-
cies.
HR POLICY AREAS
HR policies can be expressed as overall statements of the values of the organization.
The main points that can be included in an overall policy statement and specific
policy areas are set out below.
Overall policy
The overall policy defines how the organization fulfils its social responsibilities for its
employees and sets out its attitudes towards them. It is an expression of its values or
beliefs about how people should be treated. Peters and Waterman (1982) wrote that if
they were asked for one all-purpose bit of advice for management, one truth that
148 ❚ HRM processes
they could distil from all their research on what makes an organization excellent, it
would be, ‘Figure out your value system. Decide what the organization stands for.’
Selznick (1957) emphasized the key role of values in organizations, when he wrote
‘The formation of an institution is marked by the making of value commitments, that
is, choices which fix the assumptions of policy makers as to the nature of the enter-
prise, its distinctive aims, methods and roles.’
The values expressed in an overall statement of HR policies may explicitly or
implicitly refer to the following concepts:
● Equity: treating employees fairly and justly by adopting an ‘even handed’
approach. This includes protecting individuals from any unfair decisions made
by their managers, providing equal opportunities for employment and promo-
tion, and operating an equitable payment system.
● Consideration: taking account of individual circumstances when making decisions
that affect the prospects, security or self-respect of employees.
● Organizational learning: a belief in the need to promote the learning and develop-
ment of all the members of the organization by providing the processes and
support required.
● Performance through people: the importance attached to developing a performance
culture and to continuous improvement; the significance of performance manage-
ment as a means of defining and agreeing mutual expectations; the provision of
fair feedback to people on how well they are performing.
● Work-life balance: striving to provide employment practices that enable people to
balance their work and personal obligations.
● Quality of working life: consciously and continually aiming to improve the quality
of working life. This involves increasing the sense of satisfaction people obtain
from their work by, so far as possible, reducing monotony, increasing variety,
autonomy and responsibility, and avoiding placing people under too much stress.
● Working conditions: providing healthy, safe and so far as practicable pleasant
working conditions.
These values are espoused by many organizations in one form or another, but to
what extent are they practised when making ‘business-led’ decisions, which can
of course be highly detrimental to employees if, for example, they lead to redun-
dancy? One of the dilemmas facing all those who formulate HR policies is, how can
we pursue business-led policies focusing on business success, and also fulfil our
obligations to employees in such terms as equity, consideration, work-life balance,
quality of working life and working conditions? To argue, as some do, that HR strate-
gies should be entirely business-led seems to imply that human considerations are
HRM policies ❚ 149
unimportant. Organizations have obligations to all their stakeholders, not just their
owners.
It may be difficult to express these policies in anything but generalized terms, but
employers are increasingly having to recognize that they are subject to external as
well as internal pressures, which act as constraints on the extent to which they can
disregard the higher standards of behaviour towards their employees that are
expected of them.
Specific policies
The specific policies should cover the following areas as described below: equal
opportunity, managing diversity, age and employment, promotion, work-life balance,
employee development, reward, involvement and participation, employee relations,
new technology, health and safety, discipline, grievances, redundancy, sexual harass-
ment, bullying, substance abuse, smoking, AIDS, and e-mails.
Equal opportunity
The equal opportunity policy should spell out the organization’s determination to
give equal opportunities to all, irrespective of sex, race, creed, disability, age or
marital status. The policy should also deal with the extent to which the organization
wants to take ‘affirmative action’ to redress imbalances between numbers employed
according to sex or race, or to differences in the levels of qualifications and skills they
have achieved.
The policy could be set out as follows:
1. We are an equal opportunity employer. This means that we do not permit direct
or indirect discrimination against any employee on the grounds of race, nation-
ality, sex, sexual orientation, disability, religion, marital status or age.
2. Direct discrimination takes place when a person is treated less favourably than
others are, or would be, treated in similar circumstances.
3. Indirect discrimination takes place when, whether intentionally or not, a condi-
tion is applied that adversely affects a considerable proportion of people of one
race, nationality, sex, sexual orientation, religion or marital status, those with
disabilities, or older employees.
4. The firm will ensure that equal opportunity principles are applied in all its HR
policies, and in particular to the procedures relating to the recruitment, training,
development and promotion of its employees.
5. Where appropriate and where permissible under the relevant legislation and
codes of practice, employees of under-represented groups will be given positive
training and encouragement to achieve equal opportunity.
150 ❚ HRM processes
Managing diversity
A policy on managing diversity recognizes that there are differences among
employees and that these differences, if properly managed, will enable work to be
done more efficiently and effectively. It does not focus exclusively on issues of dis-
crimination, but instead concentrates on recognizing the differences between people.
As Kandola and Fullerton (1994) express it, the concept of managing diversity ‘is
founded on the premise that harnessing these differences will create a productive
environment in which everyone will feel valued, where their talents are fully utilized,
and in which organizational goals are met’.
Managing diversity is a concept that recognizes the benefits to be gained from
differences. It differs from equal opportunity, which aims to legislate against discrim-
ination, assumes that people should be assimilated into the organization, and often
relies on affirmative action.
A management of diversity policy could:
● acknowledge cultural and individual differences in the workplace;
● state that the organization values the different qualities people bring to their jobs;
● emphasize the need to eliminate bias in such areas as selection, promotion,
performance assessment, pay and learning opportunities;
● focus attention on individual differences rather than group differences.
Age and employment
The policy on age and employment should take into account the following facts as
listed by the CIPD:
● Age is a poor predictor of job performance.
● It is misleading to equate physical and mental ability with age.
● More of the population are living active, healthy lives as they get older.
The policy should define the approach the organization adopts to engaging,
promoting and training older employees. It should emphasize that the only criterion
for selection or promotion should be ability to do the job; and for training, the belief
that the employee will benefit, irrespective of age. The policy should also state that
age requirements should not be set out in external or internal job advertisements.
Promotion
A promotion policy could state the organization’s intention to promote from within
HRM policies ❚ 151
wherever this is appropriate as a means of satisfying its requirements for high quality
staff. The policy could, however, recognize that there will be occasions when the orga-
nization’s present and future needs can only be met by recruitment from outside. The
point could be made that a vigorous organization needs infusions of fresh blood from
time to time if it is not to stagnate. In addition, the policy might state that employees
will be encouraged to apply for internally advertised jobs, and will not be held back
from promotion by their managers, however reluctant the latter may be to lose them.
Work-life balance
Work-life balance policies define how the organization intends to allow employees
greater flexibility in their working patterns so that they can balance what they do at
work with the responsibilities and interests they have outside work. The policy will
indicate how flexible work practices can be developed and implemented. It will
emphasize that the numbers of hours worked must not be treated as a criterion for
assessing performance. It will set out guidelines on specific arrangements that can be
made, such as flexible hours, compressed working week, term-time working
contracts, working at home, special leave for parents and carers, career breaks and
various kinds of child care.
Employee development
The employee development policy could express the organization’s commitment to
the continuous development of the skills and abilities of employees in order to maxi-
mize their contribution and to give them the opportunity to enhance their skills,
realize their potential, advance their careers and increase their employability both
within and outside the organization.
Reward
The reward policy could cover such matters as:
● providing an equitable pay system;
● equal pay for work of equal value;
● paying for performance, competence, skill or contribution;
● sharing in the success of the organization (gain sharing or profit sharing);
● the relationship between levels of pay in the organization and market rates;
● the provision of employee benefits, including flexible benefits if appropriate;
● the importance attached to the non-financial rewards resulting from recognition,
accomplishment, autonomy, and the opportunity to develop.
152 ❚ HRM processes
Involvement and participation
The involvement and participation (employee voice policy) should spell out the orga-
nization’s belief in giving employees an opportunity to have a say in matters that
affect them. It should define the mechanisms for employee voice, such as joint consul-
tation and suggestion schemes.
Employee relations
The employee relations policy will set out the organization’s approach to the rights of
employees to have their interests represented to management through trade unions,
staff associations or some other form of representative system. It will also cover the
basis upon which the organization works with trade unions, for example, empha-
sizing that this should be regarded as a partnership.
New technology
A new technology policy statement could state that there will be consultation about
the introduction of new technology, and the steps that would be taken by the organi-
zation to minimize the risk of compulsory redundancy or adversely affect other terms
and conditions or working arrangements.
Health and safety
Health and safety policies cover how the organization intends to provide healthy and
safe places and systems of work (see Chapter 55).
Discipline
The disciplinary policy should state that employees have the right to know what is
expected of them and what could happen if they infringe the organization’s rules. It
would also make the point that, in handling disciplinary cases, the organization will
treat employees in accordance with the principles of natural justice.
Grievances
The policy on grievances could state that employees have the right to raise their
grievances with their manager, to be accompanied by a representative if they so wish,
and to appeal to a higher level if they feel that their grievance has not been resolved
satisfactorily.
HRM policies ❚ 153
Redundancy
The redundancy policy could state that it is the organization’s intention to use its
best endeavours to avoid involuntary redundancy through its redeployment
and retraining procedures. However, if redundancy is unavoidable those affected
will be given fair and equitable treatment, the maximum amount of warning, and
every help that can be provided by the organization to obtain suitable alternative
work.
Sexual harassment
The sexual harassment policy should state that:
1. Sexual harassment will not be tolerated.
2. Employees subjected to sexual harassment will be given advice, support and
counselling as required.
3. Every attempt will be made to resolve the problem informally with the person
complained against.
4. Assistance will be given to the employee to complain formally if informal discus-
sions fail.
5. A special process will be available for hearing complaints about sexual harass-
ment. This will provide for employees to bring their complaint to someone of
their own sex if they so wish.
6. Complaints will be handled sensitively and with due respect for the rights of
both the complainant and the accused.
7. Sexual harassment is regarded as gross industrial misconduct and, if proved,
makes the individual liable for instant dismissal. Less severe penalties may be
reserved for minor cases but there will always be a warning that repetition will
result in dismissal.
Bullying
An anti-bullying policy will state that bullying will not be tolerated by the organiza-
tion and that those who persist in bullying their staff will be subject to disciplinary
action, which could be severe in particularly bad cases. The policy will make it clear
that individuals who are being bullied should have the rights to discuss the problem
with a management representative or a member of the HR function, and to make a
complaint. The policy should emphasize that if a complaint is received it will be thor-
oughly investigated.
154 ❚ HRM processes
Substance abuse
A substance abuse policy could include assurances that:
● Employees identified as having substance abuse problems will be offered advice
and help.
● Any reasonable absence from work necessary to receive treatment will be granted
under the organization’s sickness scheme provided that there is full cooperation
from the employee.
● An opportunity will be given to the employee to discuss the matter once it has
become evident or suspected that work performance is being affected by
substance-related problems.
● The employee has the right to be accompanied by a friend or employee represen-
tative in any such discussion.
● Agencies will be recommended to which the employee can go for help if neces-
sary.
● Employment rights will be safeguarded during any reasonable period of treat-
ment.
Smoking
The smoking policy would define no-smoking rules including where, if at all,
smoking is permitted.
AIDS
An AIDS policy could include the following points:
● The risks of infection in most workplaces are negligible.
● Where the occupation involves blood contact, as in hospitals, doctors’ surgeries
and laboratories, the special precautions advised by the Health and Safety
Commission will be implemented.
● Employees who know that they are infected with AIDS will not be obliged to
disclose the fact to the company, but if they do, the fact will remain completely
confidential.
● There will be no discrimination against anyone with or at risk of acquiring AIDS.
● Employees infected by HIV or suffering from AIDS will be treated no differently
from anyone else suffering a severe illness.
HRM policies ❚ 155
E-mails
The policy on e-mails could state that the sending or downloading of offensive e-
mails is prohibited, and that those sending or downloading such messages will be
subject to normal disciplinary procedures. They may also prohibit any browsing or
downloading of material not related to the business, although this can be difficult to
enforce. Some companies have always believed that reasonable use of the telephone
is acceptable, and that policy may be extended to e-mails.
If it is decided that employees’ e-mails should be monitored to check on excessive
or unacceptable use, then this should be included in an e-mail policy which would
therefore be part of the contractual arrangements. A policy statement could be
included to the effect that ‘The company reserves the right to access and monitor all e-
mail messages created, sent, received or stored on the company’s system’.
FORMULATING HR POLICIES
The following steps should be taken to formulate and implement HR policies:
1. Gain understanding of the corporate culture and its core values.
2. Analyse existing policies, written and unwritten. HR policies will exist in any
organization, even if they are implicit rather than expressed formally.
3. Analyse external influences. HR policies are subject to the influence of UK
employment legislation, European Community Employment Regulations, and
the official codes of practice issued by bodies in the UK such as ACAS (Advisory,
Conciliation and Arbitration Service), the EOC (Equal Opportunities
Commission), the CRR (Commission on Racial Relations) and the Health and
Safety Executive. The codes of practice issued by relevant professional institu-
tions, such as the CIPD, should also be consulted.
4. Assess any areas where new policies are needed or existing policies are inade-
quate.
5. Check with managers, preferably starting at the top, on their views about HR
policies and where they think they could be improved.
6. Seek the views of employees about the HR policies, especially the extent to
which they are inherently fair and equitable and are implemented fairly and
consistently. Consider doing this through an attitude survey.
7. Seek the views of union representatives.
8. Analyse the information obtained in the first seven steps and prepare draft
policies.
156 ❚ HRM processes
9. Consult, discuss and agree policies with management and union representa-
tives.
10. Communicate the policies, with guidance notes on their implementation as
required (although they should be as self-explanatory as possible). Supplement
this communication with training.
IMPLEMENTING HR POLICIES
The aim will be to implement policies fairly and consistently. Line managers have a
key role in doing this. As pointed out by Purcell et al (2003), ‘there is a need for HR
policies to be designed for and focused on front line managers’. It is they who will be
largely responsible for policy implementation. Members of the HR can give guidance,
but it is line managers who are on the spot and have to make decisions about people.
The role of HR is to communicate and interpret the policies, convince line managers
that they are necessary, and provide training and support that will equip managers to
implement them. As Purcell et al emphasize, it is line managers who bring HR poli-
cies to life.
HRM policies ❚ 157
Competency-based HRM
Competency-based HRM is about using the concept of competency and the results of
competency analysis to inform and improve the processes of performance manage-
ment, recruitment and selection, employee development and employee reward. The
language has dominated much of HR thinking and practice in recent years.
The concept of competency has achieved this degree of prominence because it is
essentially about performance. Mansfield (1999) defines competency as ‘an under-
lying characteristic of a person that results in effective or superior performance’.
Rankin (2002) describes competencies as ‘definitions of skills and behaviours that
organizations expect their staff to practice in their work’ and explains that:
Competencies represent the language of performance. They can articulate both the
expected outcomes from an individual’s efforts and the manner in which these activities
are carried out. Because everyone in the organization can learn to speak this language,
competencies provide a common, universally understood means of describing expected
performance in many different contexts.
Competency-based HR is primarily based on the concepts of behavioural and tech-
nical competencies as defined in the first section of this chapter. But it is also associ-
ated with the use of National and Scottish Vocational qualifications (NVQs/SNVQs)
as also examined in the first section. The next five sections of the chapter concentrate
on the application and use of behavioural and technical competencies under the
following headings:
11
● competency frameworks;
● reasons for using competencies;
● use of competencies;
● guidelines on the development of competency frameworks;
● keys to success in using competencies.
The final section describes the associated concept of emotional intelligence.
TYPES OF COMPETENCIES
The three types of competencies are behavioural competencies, technical competen-
cies and NVQs and SNVQs.
Behavioural competencies
Behavioural competencies define behavioural expectations, ie the type of behaviour
required to deliver results under such headings as teamworking, communication,
leadership and decision-making. They are sometimes known as ‘soft skills’.
Behavioural competencies are usually set out in a competency framework.
The behavioural competency approach was first advocated by McClelland (1973).
He recommended the use of criterion-referenced assessment. Criterion referencing or
validation is the process of analysing the key aspects of behaviour that differentiate
between effective and less effective performance.
But the leading figure in defining and popularizing the concept of competency in
the USA and elsewhere was Boyatzis (1982). He conducted research that established
that there was no single factor but a range of factors that differentiated successful
from less successful performance. These factors included personal qualities, motives,
experience and behavioural characteristics. Boyatzis defined competency as:
‘capacity that exists in a person that leads to behaviour that meets the job demands
within the parameters of the organizational environment and that, in turn, brings
about desired results’.
The ‘clusters’ of competencies he identified were goal and action management,
directing subordinates, human resource management and leadership. He made a
distinction between threshold competencies, which are the basic competencies
required to do a job, and performance competences, which differentiate between high
and low performance.
160 ❚ HRM processes
Technical competencies
Technical competencies define what people have to know and be able to do (knowl-
edge and skills) to carry out their roles effectively. They are related to either generic
roles (groups of similar jobs), or individual roles (as ‘role-specific competencies’).
The term ‘technical competency’ has been adopted fairly recently to avoid the
confusion that existed between the terms ‘competency’ and ‘competence’. Com-
petency, as mentioned above, is about behaviours, while competence as defined by
Woodruffe (1990) is: ‘A work-related concept which refers to areas of work at which
the person is competent. Competent people at work are those who meet their perfor-
mance expectations.’ Competences are sometimes known as ‘hard skills’. The terms
technical competencies and competences are closely related although the latter has a
particular and more limited meaning when applied to NVQs/SNVQs, as discussed
below.
NVQ/SNVQ competences
The concept of competence was conceived in the UK as a fundamental part of the
process of developing standards for NVQs/SNVQs. These specify minimum stan-
dards for the achievement of set tasks and activities expressed in ways that can be
observed and assessed with a view to certification. An element of competence in
NVQ language is a description of something that people in given work areas should
be able to do. They are assessed on being competent or not yet competent. No attempt
is made to assess the degree of competence.
COMPETENCY FRAMEWORKS
A competency framework contains definitions of all the behavioural competencies
used in the whole or part of an organization. It provides the basis for the use of
competencies in such areas as recruitment, employee development and reward. The
2003/4 Competency and Emotional Intelligence survey established that the 49 frame-
works reviewed had a total of 553 competency headings. Presumably, many of these
overlapped. The most common number of competencies was eight.
Competency headings
The competency headings included in the frameworks of 20 per cent or more of the
organizations responding to the survey are shown in Table 11.1. The first seven of
these are used in over 50 per cent of the respondents.
Competency-based HRM ❚ 161
162 ❚ HRM processes
Competency heading Summary definition % used
Team orientation The ability to work co-operatively and flexibly with other 85
members of the team with a full understanding of the role to
be played as a team member.
Communication The ability to communicate clearly and persuasively, orally 73
or in writing.
People management The ability to manage and develop people and gain their 67
trust and cooperation to achieve results.
Customer focus The exercise of unceasing care in looking after the interests 65
of external and internal customers to ensure that their wants,
needs and expectations are met or exceeded.
Results orientation The desire to get things done well and the ability to set and 59
meet challenging goals, create own measures of excellence
and constantly seek ways of improving performance.
Problem-solving The capacity to analyse situations, diagnose problems, 57
identify the key issues, establish and evaluate alternative
courses of action and produce a logical, practical and
acceptable solution.
Planning and The ability to decide on courses of action, ensuring that the 51
organizing resources required to implement the action will be available
and scheduling the programme of work required to achieve
a defined end-result.
Technical skills Possession of the knowledge, understanding and expertise 49
required to carry out the work effectively.
Leadership The capacity to inspire individuals to give of their best to 43
achieve a desired result and to maintain effective
relationships with individuals and the team as a whole.
Business awareness The capacity continually to identify and explore business 37
opportunities, understand the business needs and priorities of
of the organization and constantly to seek methods of
ensuring that the organization becomes more business-like.
Decision-making The capacity to make sound and practical decisions which 37
deal effectively with the issues and are based on thorough
analysis and diagnosis.
Change-orientation The ability to manage and accept change. 33
Table 11.1 Incidence of different competency headings
continued
REASONS FOR USING COMPETENCIES
The two prime reasons for organizations to use competencies, as established by
Miller et al (2001) were first, that the application of competencies to appraisal, training
and other personnel processes will help to increase the performance of employees;
and second, that competencies provide a means of articulating corporate values so
that their requirements can be embodied in HR practices and be readily understood
by individuals and teams within the organization. Other reasons include the use of
competencies as a means of achieving cultural change and of raising skill levels.
Competency-based HRM ❚ 163
Developing others The desire and capacity to foster the development of 33
members of his or her team, providing feedback, support,
encouragement and coaching.
Influence and The ability to convince others to agree on or to take a 33
persuasion course of action.
Initiative The capacity to take action independently and to assume 29
responsibility for one’s actions.
Interpersonal skills The ability to create and maintain open and constructive 29
relationships with others, to respond helpfully to their
requests and to be sensitive to their needs.
Strategic orientation The capacity to take a long-term and visionary view of the 29
direction to be followed in the future.
Creativity The ability to originate new practices, concepts and ideas. 26
Information The capacity to originate and use information effectively. 26
management
Quality focus The focus on delivering quality and continuous 24
improvement.
Self-confidence and Belief in oneself and standing up for one’s own rights. 24
assertiveness
Self-development Managing one’s own learning and development. 22
Managing Managing resources, people, programmes and projects. 20
Table 11.1 continued
COVERAGE OF COMPETENCIES
The Miller et al research found that employers adopted different approaches to the
parts of the workforce covered by competencies:
● 22 per cent covered the whole workforce with a single set or framework of core
competencies (modified in a further 10 per cent of employers by the incorporation
of additional behavioural competencies for managers and other staff);
● 48 per cent confined competencies to specific work groups, functions or depart-
ments;
● 20 per cent have a core competency framework that covers all staff in respect of
behavioural competencies, alongside sets of technical/functional or departments.
Subsequent research (Rankin, 2002) found that:
● 25 per cent of employers using behavioural competencies had a core framework;
● 19 per cent supplemented the core framework with additional competencies for
single groups such as managers.
The ‘menu’ approach
Rankin notes that 21 per cent of respondents adopted a ‘menu’ approach. This
enables competencies to be selected that are relevant to generic or individual roles.
Approaches vary. Some organizations provide guidelines on the number of compe-
tencies to be selected (eg four to eight) and others combine their core framework with
a menu so that users are required to select the organization-wide core competencies
and add a number of optional ones.
Role-specific competencies
Role-specific competencies are also used by some organizations for generic or indi-
vidual roles. These may be incorporated in a role profile in addition to information
about the key output or result areas of the role. This approach is likely to be adopted
by employers who use competencies in their performance management processes,
but role-specific competencies also provide the basis for person specifications used in
recruitment and for the preparation of individual learning programmes.
Graded competencies
A further, although less common, application of competencies is in graded career or
164 ❚ HRM processes
job family structures (career or job families consist of jobs in a function or occupation
such as marketing, operations, finance, IT, HR, administration or support services,
which are related through the activities carried out and the basic knowledge and
skills required, but in which the levels of responsibility, knowledge, skill or compe-
tence needed differ). In such families, the successive levels in each family are defined
in terms of competencies as well as the key activities carried out. (Career and job
family structures are described in Chapter 46.)
USE OF COMPETENCIES
The Competency and Emotional Intelligence 2003/4 survey found that 95 per cent of
respondents used behavioural competencies and 66 per cent used technical compe-
tencies. It was noted that because the latter deal with specific activities and tasks they
inevitably result in different sets of competencies for groups of related roles, func-
tions or activities. The top four uses of competencies were:
1. Performance management – 89 per cent.
2. Training and development – 85 per cent.
3. Selection – 85 per cent.
4. Recruitment – 81 per cent.
Only 35 per cent of organizations link competencies to reward. The ways in which
these competencies are used are described below.
Performance management
Competencies in performance management are used to ensure that performance
reviews do not simply focus on outcomes but also consider the behavioural aspects of
how the work is carried out that determine those outcomes. Performance reviews
conducted on this basis are used to inform personal improvement and development
plans and other learning and development initiatives.
As noted by Competency and Emotional Intelligence (2003/4): ‘Increasingly,
employers are extending their performance management systems to assess not only
objectives but also qualitative aspects of the job.’ The alternative approaches are: 1)
the assessment has to be made by reference to the whole set of core competencies in
the framework; or 2) the manager and the individual carry out a joint assessment of
the latter’s performance and agree on the competencies to be assessed, selecting those
most relevant to the role. The joint assessments may be guided by examples known as
‘behavioural indicators’ of how the competency may be demonstrated in the
Competency-based HRM ❚ 165
employee’s day-to-day work and in some cases the assessment is linked to defined
levels of competency (see Chapter 33 for further details of how this process works).
Learning and development
Role profiles, which are either generic (covering a range of similar jobs) or individual
(role-specific), can include statements of the technical competencies required. These
can be used as the basis for assessing the levels of competency achieved by individ-
uals and so identifying their learning and development needs.
Career family grade structures (see Chapter 46) can define the competencies
required at each level in a career family. These definitions provide a career map
showing the competencies people need to develop in order to progress their career.
Competencies are also used in development centres (see Chapter 40), which help
participants build up their understanding of the competencies they require now and
in the future so that they can plan their own self-directed learning programmes.
Recruitment and selection
The language of competencies is used in many organizations as a basis for the person
specification, which is set out under competency headings as developed through role
analysis. The competencies defined for a role are used as the framework for recruit-
ment and selection.
A competencies approach can help to identify which selection techniques such as
psychological testing are most likely to produce useful evidence. It provides the
information required to conduct a structured interview in which questions can focus
on particular competency areas to establish the extent to which candidates meet the
specification as set out in competency terms.
In assessment centres, competency frameworks are used to define the competency
dimensions that distinguish high performance. This indicates what exercises or simu-
lations are required and the assessment processes that should be used.
Reward management
In the 1990s, when the competency movement came to the fore, the notion of linking
pay to competencies – competency-related pay – emerged. But it has never taken off;
only 8 per cent of the respondents to the e-reward 2004 survey of contingent pay used
it. However, more recently, the concept of contribution-related pay has emerged,
which provides for people to be rewarded according to both the results they achieve
and their level of competence, and the e-reward 2004 survey established that 33 per
cent of respondents had introduced it.
166 ❚ HRM processes
Another application of competencies in reward management is that of career
family grade and pay structures.
DEVELOPING A COMPETENCY FRAMEWORK
The language used in competency frameworks should be clear and jargon-
free. Without clear language and examples it can be difficult to assess the level of
competency achieved. When defining competencies, especially when they are used
for performance management or competency-related pay, it is essential to ensure
that they can be assessed. They must not be vague or overlap with other competen-
cies and they must specify clearly the sort of behaviour that is expected and the
level of technical or functional skills (competencies) required to meet acceptable stan-
dards. As Rankin (2002) suggests, it is helpful to address the user directly (’you
will…’) and give clear and brief examples of how the competency needs to be
performed.
Developing a behavioural competency framework that fits the culture and purpose
of the organization and provides a sound basis for a number of key HR processes is
not an undertaking to be taken lightly. It requires a lot of hard work, much of it
concerned with involving staff and communicating with them to achieve under-
standing and buy-in. The steps required are described below.
Step 1. Programme launch
Decide on the purpose of the framework and the HR processes for where it will be
used. Make out a business case for its development, setting out the benefits to the
organization in such areas as improved performance, better selection outcomes, more
focused performance management, employee development and reward processes.
Prepare a project plan that includes an assessment of the resources required and the
costs.
Step 2. Involvement and communication
Involve line managers and employees in the design of the framework (stages 3 and 4)
by setting up a task force. Communicate the objectives of the exercise to staff.
Step 3. Framework design – competency list
First, get the task force to draw up a list of the core competencies and values of the
business – what it should be good at doing and the values it believes should influence
Competency-based HRM ❚ 167
behaviour. This provides a foundation for an analysis of the competencies required
by people in the organization. The aim is to identify and define the behaviours that
contribute to the achievement of organizational success, and there should be a
powerful link between these people competencies and the organization’s core compe-
tencies (more guidance on defining competencies is provided in Chapter 13).
The production of the list may be done by brainstorming. The list should be
compared with examples of other competency frameworks. The purpose of this
comparison is not to replicate other lists. It is essential to produce a competency
framework that fits and reflects the organization’s own culture, values, core compe-
tencies and operations. But referring to other lists will help to clarify the conclusions
reached in the initial analysis and serve to check that all relevant areas of competency
have been included. When identifying competencies care must be taken to avoid bias
because of sex or race.
Step 4. Framework design – definition of competencies
Care needs to be exercised to ensure that definitions are clear and unambiguous and
that they will serve their intended purpose. If, for example, one of the purposes is to
provide criteria for conducting performance reviews, then it is necessary to be certain
that the way the competency is defined, together with supporting examples, will
enable fair assessments to be made. The following four questions have been
produced by Mirabile (1998) to test the extent to which a competency is valid and can
be used:
1. Can you describe the competency in terms that others understand and agree
with?
2. Can you observe it being demonstrated or failing to be demonstrated?
3. Can you measure it?
4. Can you influence it in some way, eg by training, coaching or some other method
of development?
It is also important at this stage to ensure that definitions are not biased.
Step 5. Define uses of competency framework
Define exactly how it is intended the competency framework should be used,
covering such applications as performance management, recruitment, learning and
development, and reward.
168 ❚ HRM processes
Step 6. Test the framework
Test the framework by gauging the reactions of a balanced selection of line managers
and other employees to ensure that they understand it and believe that it is relevant
to their roles. Also pilot test the framework in live situations for each of its proposed
applications.
Step 7. Finalize the framework
Amend the framework as necessary following the tests and prepare notes for guid-
ance on how it should be used.
Step 8. Communicate
Let everyone know the outcome of the project – what the framework is, how it will be
used and how people will benefit. Group briefings and any other suitable means
should be used.
Step 9. Train
Give line managers and HR staff training in how to use the framework.
Step 10. Monitor and evaluate
Monitor and evaluate the use of the framework and amend it as required.
DEFINING TECHNICAL COMPETENCIES
Technical competencies are most often produced for generic roles within job families
or functions, although they can be defined for individual roles as ‘role-specific
competencies’. They are not usually part of a behaviour-based competency frame-
work, although of course the two are closely linked when considering and assessing
role demands and requirements. Guidelines on defining technical competencies are
provided in Chapter 13.
KEYS TO SUCCESS IN USING COMPETENCIES
The keys to success in using competencies are:
Competency-based HRM ❚ 169
● frameworks should not be over-complex;
● there should not be too many headings in a framework – seven or eight will often
suffice;
● the language used should be clear and jargon-free;
● competencies must be selected and defined in ways that ensure they can be
assessed by managers – the use of ‘behavioural indicators’ is helpful;
● frameworks should be regularly updated.
EMOTIONAL INTELLIGENCE
Goleman (1995) has defined emotional intelligence as: ‘The capacity for recognizing
our own feelings and that of others, for motivating ourselves, for managing emotions
well in ourselves as well as others.’ The four components of emotional intelligence
are:
1. Self-management – the ability to control or redirect disruptive impulses and
moods and regulate your own behaviour coupled with a propensity to pursue
goals with energy and persistence. The six competencies associated with this
component are self-control, trustworthiness and integrity, initiative, adaptability
– comfort with ambiguity, openness to change and strong desire to achieve.
2. Self-awareness – the ability to recognize and understand your moods, emotions
and drives as well as their effect on others. This is linked to three competencies:
self-confidence, realistic self-assessment and emotional self-awareness.
3. Social awareness – the ability to understand the emotional makeup of other people
and skill in treating people according to their emotional reactions. This is linked
to six competencies: empathy, expertise in building and retaining talent, organi-
zational awareness, cross-cultural sensitivity, valuing diversity and service to
clients and customers.
4. Social skills – proficiency in managing relationships and building networks to get
the desired result from others and reach personal goals, and the ability to find
common ground and build rapport. The five competencies associated with this
component are: leadership, effectiveness in leading change, conflict manage-
ment, influence/communication, and expertise in building and leading teams.
According to Goleman it is not enough to have a high IQ (intelligence quotient);
emotional intelligence is also required.
In 1998 Goleman defined emotional intelligence in a way that encompasses many
of the areas covered by typical competency frameworks. Miller et al (2001) found that
170 ❚ HRM processes
one-third of employers covered by their survey had consciously included emotional
intelligence-type factors such as interpersonal skills in their frameworks.
Dulewicz and Higgs (1999) have produced a detailed analysis of how the
emotional intelligence elements of self-awareness, emotional management, empathy,
relationships, communication and personal style correspond to competencies such as
sensitivity, flexibility, adaptability, resilience, impact, listening, leadership, persua-
siveness, motivating others, energy, decisiveness and achievement motivation. They
conclude that there are distinct associations between competency modes and
elements of emotional intelligence.
As noted by Miller et al (2001), a quarter of the employers they surveyed have
provided or funded training that is based on emotional intelligence. The most
common areas are in leadership skills, people management skills and teamworking.
The application of emotional intelligence concepts to management development is
dealt with in Chapter 40.
Competency-based HRM ❚ 171
Knowledge management
Knowledge management is concerned with storing and sharing the wisdom, under-
standing and expertise accumulated in an organization about its processes, tech-
niques and operations. It treats knowledge as a key resource. As Ulrich (1998)
comments, ‘Knowledge has become a direct competitive advantage for companies
selling ideas and relationships.’ There is nothing new about knowledge management.
Hansen et al (1999) remark that ‘For hundreds of years, owners of family businesses
have passed on their commercial wisdom to children, master craftsmen have
painstakingly taught their trades to apprentices, and workers have exchanged ideas
and know-how on the job.’ But they also remark that, ‘As the foundation of industri-
alized economies has shifted from natural resources to intellectual assets, executives
have been compelled to examine the knowledge underlying their business and how
that knowledge is used.’
Knowledge management deals as much with people and how they acquire,
exchange and disseminate knowledge as with information technology. That is why it
has become an important area for HR practitioners, who are in a strong position to
exert influence in this aspect of people management. Scarborough et al (1999) believe
that they should have ‘the ability to analyse the different types of knowledge
deployed by the organization… [and] to relate such knowledge to issues of organiza-
tional design, career patterns and employment security.’
The concept of knowledge management is closely associated with intellectual
capital theory as described in Chapter 2 in that it refers to the notions of human, social
12
and organizational or structural capital. It is also linked to the concepts of organiza-
tional learning and the learning organization as discussed in Chapter 36. Knowledge
management is considered in this chapter under the following headings:
● definition of the process of knowledge management;
● the concept of knowledge;
● types of knowledge;
● the purpose and significance of knowledge management;
● approaches to knowledge management;
● knowledge management issues;
● the contribution of HR to knowledge management.
KNOWLEDGE MANAGEMENT DEFINED
Knowledge management is ‘any process or practice of creating, acquiring, capturing,
sharing and using knowledge, wherever it resides, to enhance learning and perfor-
mance in organizations’ (Scarborough et al, 1999). They suggest that it focuses on the
development of firm-specific knowledge and skills that are the result of organiza-
tional learning processes. Knowledge management is concerned with both stocks and
flows of knowledge. Stocks included expertise and encoded knowledge in computer
systems. Flows represent the ways in which knowledge is transferred from people to
people or from people to a knowledge database. Knowledge management has also
been defined by Tan (2000) as: ‘The process of systematically and actively managing
and leveraging the stores of knowledge in an organization’.
Knowledge management involves transforming knowledge resources by identi-
fying relevant information and then disseminating it so that learning can take place.
Knowledge management strategies promote the sharing of knowledge by linking
people with people, and by linking them to information so that they learn from docu-
mented experiences.
Knowledge can be stored in databanks and found in presentations, reports,
libraries, policy documents and manuals. It can be moved around the organization
through information systems and by traditional methods such as meetings,
workshops, courses, ‘master classes’, written publications, videos and tapes. The
intranet provides an additional and very effective medium for communicating
knowledge.
174 ❚ HRM processes
THE CONCEPT OF KNOWLEDGE
A distinction was made by Ryle (1949) between ‘knowing how’ and ‘knowing that’.
Knowing how is the ability of a person to perform tasks, and knowing that is holding
pieces of knowledge in one’s mind.
Blackler (1995) notes that ‘Knowledge is multifaceted and complex, being both
situated and abstract, implicit and explicit, distributed and individual, physical and
mental, developing and static, verbal and encoded. He categorizes forms of knowl-
edge as:
● embedded in technologies, rules and organizational procedures;
● encultured as collective understandings, stories, values and beliefs;
● embodied into the practical activity-based competencies and skills of key members
of the organization (ie practical knowledge or ‘know-how’);
● embraced as the conceptual understanding and cognitive skills of key members (ie
conceptual knowledge or ‘know-how’).
Nonaka (1991) suggests that knowledge is held either by individuals or collectively.
In Blackler’s terms, embodied or embraced knowledge is individual and embedded,
and cultural knowledge is collective.
It can be argued (Scarborough and Carter, 2000) that knowledge emerges from the
collective experience of work and is shared between members of a particular group or
community.
It is useful to distinguish between data, information and knowledge:
● data consists of the basic facts – the building blocks for information and knowl-
edge;
● information is data that have been processed in a way which is meaningful to
individuals, it is available to anyone entitled to gain access to it; as Drucker (1988)
wrote, ‘information is data endowed with meaning and purpose’;
● knowledge is information put to productive use; it is personal and often intangible
and it can be elusive – the task of tying it down, encoding it and distributing it is
tricky.
Explicit and tacit knowledge
Nonaka (1991) and Nonaka and Takeuchi (1995) stated that knowledge is either
explicit or tacit. Explicit knowledge can be codified: it is recorded and available,
and is held in databases, in corporate intranets and intellectual property portfolios.
Knowledge management ❚ 175
Tacit knowledge exists in people’s minds. It is difficult to articulate in writing and is
acquired through personal experience. As suggested by Hansen et al (1999), it
includes scientific or technological expertise, operational know-how, insights about
an industry, and business judgement. The main challenge in knowledge management
is how to turn tacit knowledge into explicit knowledge.
THE PURPOSE AND SIGNIFICANCE OF KNOWLEDGE
MANAGEMENT
As explained by Blake (1998), the purpose of knowledge management is to capture a
company’s collective expertise and distribute it to ‘wherever it can achieve the
biggest payoff’. This is in accordance with the resource-based view of the firm which,
as argued by Grant (1991), suggests that the source of competitive advantage lies
within the firm (ie in its people and their knowledge), not in how it positions itself in
the market. Trussler (1998) comments that ‘the capability to gather, lever, and use
knowledge effectively will become a major source of competitive advantage in many
businesses over the next few years’. A successful company is a knowledge-creating
company.
Knowledge management is about getting knowledge from those who have it to
those who need it in order to improve organizational effectiveness. In the information
age, knowledge rather than physical assets or financial resources is the key to
competitiveness. In essence, as pointed out by Mecklenberg et al (1999), ‘Knowledge
management allows companies to capture, apply and generate value from their
employees’ creativity and expertise’.
APPROACHES TO KNOWLEDGE MANAGEMENT
The codification and personalization approaches
Two approaches to knowledge management have been identified by Hansen et al
(1999):
1. The codification strategy – knowledge is carefully codified and stored in databases
where it can be accessed and used easily by anyone in the organization.
Knowledge is explicit and is codified using a ‘people-to-document’ approach.
This strategy is therefore document driven. Knowledge is extracted from the
person who developed it, made independent of that person and re-used for
176 ❚ HRM processes
various purposes. It will be stored in some form of electronic repository for
people to use. This allows many people to search for and retrieve codified knowl-
edge without having to contact the person who originally developed it. This
strategy relies largely on information technology to manage databases and also
on the use of the intranet.
2. The personalization strategy – knowledge is closely tied to the person who has
developed it and is shared mainly through direct person-to-person contacts. This
is a ‘person-to-person’ approach which involves sharing tacit knowledge. The
exchange is achieved by creating networks and encouraging face-to-face commu-
nication between individuals and teams by means of informal conferences, work-
shops, brainstorming and one-to-one sessions.
Hansen et al state that the choice of strategy should be contingent on the organization;
what it does, how it does it, and its culture. Thus consultancies such as Ernst &
Young, using knowledge to deal with recurring problems, may rely mainly on codifi-
cation so that recorded solutions to similar problems are easily retrievable. Strategy
consultancy firms such as McKinsey or Bains, however, will rely mainly on a person-
alization strategy to help them to tackle the high-level strategic problems they are
presented with, which demand the provision of creative, analytically rigorous advice.
They need to channel individual expertise, and they find and develop people who are
able to use a person-to-person knowledge-sharing approach effectively. In this sort of
firm, directors or experts can be established who can be approached by consultants
by telephone, e-mail or personal contact.
The research conducted by Hansen et al established that companies which use
knowledge effectively pursue one strategy predominantly and use the second
strategy to support the first. Those who try to excel at both strategies risk failing at
both.
The knowledge-creating company
In the opinion of Nonaka and Takeuchi (1995), a core competitive activity of organi-
zations is knowledge creation – ‘an organic, fluid and socially constructed process in
which different knowledges are blended to produce innovative outcomes that are
predicted or predictable’. Fundamental to knowledge creation is the blending of tacit
and explicit knowledge through processes of socialization (tacit to tacit), externaliza-
tion (tacit to explicit), internalization (explicit to tacit) and combination (explicit to
explicit).
Knowledge management ❚ 177
The resource-based approach
Scarborough and Carter (2000) describe knowledge management as ‘the attempt by
management to actively create, communicate and exploit knowledge as a resource for
the organization’. They suggest that this attempt has technical, social and economic
components:
● In technical terms knowledge management involves centralizing knowledge that
is currently scattered across the organization and codifying tacit forms of knowl-
edge.
● In social and political terms, knowledge management involves collectivizing
knowledge so that it is no longer the exclusive property of individuals or groups.
● In economic terms, knowledge management is a response by organizations to the
need to intensify their creation and exploitation of knowledge.
KNOWLEDGE MANAGEMENT SYSTEMS
A survey of 431 US and European firms by Ruggles (1998) found that the following
systems were used:
● Creating an intranet (47 per cent).
● Creating ‘data warehouses’, large physical databases that hold information from a
wide variety of sources (33 per cent).
● Using decision support systems which combine data analysis and sophisticated
models to support non-routine decision making (33 per cent).
● Using ‘groupware’, information communication technologies such as e-mail or
Lotus Notes discussion bases, to encourage collaboration between people to share
knowledge (33 per cent).
● Creating networks and communities of interest or practice of knowledge workers
to share knowledge (24 per cent).
● Mapping sources of internal expertise by, for example, producing ‘expert yellow
pages’ and directories of communities (18 per cent).
KNOWLEDGE MANAGEMENT ISSUES
The various approaches referred to above do not provide easy answers. The issues
that need to be addressed in developing knowledge management processes are
discussed below.
178 ❚ HRM processes
The pace of change
One of the main issues in knowledge management is how to keep up with the pace of
change and identify what knowledge needs to be captured and shared.
Relating knowledge management strategy to business strategy
As Hansen et al (1999) show, it is not knowledge per se but the way it is applied to
strategic objectives that is the critical ingredient in competitiveness. They point out
that ‘competitive strategy must drive knowledge management strategy’, and that
managements have to answer the question: ‘How does knowledge that resides in the
company add value for customers?’ Mecklenberg et al (1999) argue that organizations
should ‘start with the business value of what they gather. If it doesn’t generate value,
drop it.’
Technology and people
Technology may be central to companies adopting a codification strategy but for
those following a personalization strategy, IT is best used in a supportive role. As
Hansen et al (1999) comment:
In the codification model, managers need to implement a system that is much like a
traditional library – it must contain a large cache of documents and include search
engines that allow people to find and use the documents they need. In the personaliza-
tion model, it’s more important to have a system that allows people to find other people.
Scarborough et al (1999) suggest that ‘technology should be viewed more as a means
of communication and less as a means of storing knowledge’. Knowledge manage-
ment is more about people than technology. As research by Davenport (1996) estab-
lished, managers get two-thirds of their information from face-to-face or telephone
conversations.
There is a limit to how much tacit knowledge can be codified. In organizations
relying more on tacit than explicit knowledge, a person-to-person approach works
best, and IT can only support this process; it cannot replace it.
The significance of process and social capital and culture
A preoccupation with technology may mean that too little attention is paid to the
processes (social, technological and organizational) through which knowledge
combines and interacts in different ways (Blackler, 1995). The key process is the inter-
actions between people. This constitutes the social capital of an organization, ie the
Knowledge management ❚ 179
‘network of relationships [that] constitute a valuable resource for the conduct of
social affairs’ (Nahpiet and Ghoshal, 1998). Social networks can be particularly
important in ensuring that knowledge is shared. What is also required is another
aspect of social capital: trust. People will not be willing to share knowledge with
those whom they do not trust.
The culture of the company may inhibit knowledge sharing. The norm may be for
people to keep knowledge to themselves as much as they can because ‘knowledge is
power’. An open culture will encourage people to share their ideas and knowledge.
Knowledge workers
Knowledge workers as defined by Drucker (1993) are individuals who have high
levels of education and specialist skills combined with the ability to apply these skills
to identify and solve problems. As Argyris (1991) points out: ‘The nuts and bolts of
management… increasingly consists of guiding and integrating the autonomous but
interconnected work of highly skilled people.’ Knowledge management is about the
management and motivation of knowledge workers who create knowledge and will
be the key players in sharing it.
THE CONTRIBUTION OF HR TO KNOWLEDGE
MANAGEMENT
HR can make an important contribution to knowledge management simply because
knowledge is shared between people; it is not just a matter of capturing explicit
knowledge through the use of information technology. The role of HR is to ensure
that the organization has the intellectual capital it needs. The resource-based view of
the firm emphasizes, in the words of Cappelli and Crocker-Hefter (1996), that
‘distinctive human resource practices help to create unique competencies that differ-
entiate products and services and, in turn, drive competitiveness’.
Ten ways in which HR can contribute
The main ways in which HR can contribute to knowledge management are summa-
rized below and described in more detail in the rest of this section.
1. Help to develop an open culture in which the values and norms emphasize the
importance of sharing knowledge.
2. Promote a climate of commitment and trust.
180 ❚ HRM processes
3. Advise on the design and development of organizations which facilitate knowl-
edge sharing through networks and communities of practice (groups of people
who share common concerns about aspects of their work), and teamwork.
4. Advise on resourcing policies and provide resourcing services which ensure that
valued employees who can contribute to knowledge creation and sharing are
attracted and retained.
5. Advise on methods of motivating people to share knowledge and rewarding
those who do so.
6. Help in the development of performance management processes which focus on
the development and sharing of knowledge.
7. Develop processes of organizational and individual learning which will
generate and assist in disseminating knowledge.
8. Set up and organize workshops, conferences, seminars and symposia which
enable knowledge to be shared on a person-to-person basis.
9. In conjunction with IT, develop systems for capturing and, as far as possible,
codifying explicit and tacit knowledge.
10. Generally, promote the cause of knowledge management with senior managers
to encourage them to exert leadership and support knowledge management
initiatives.
Culture development
An open culture is one in which as Schein (1985) suggests, people contribute out of a
sense of commitment and solidarity. Relationships are characterized by mutuality
and trust. In such a culture, organizations place a high priority on mutual support,
collaboration and creativity, and on constructive relationships. There is no ‘quick fix’
way in which a closed culture where these priorities do not exist can be converted
into an open culture. Long-established cultures are difficult to change. HR can
encourage management to develop purpose and value statements which spell out
that an important aim of the organization is to achieve competitive advantage by
developing and effectively using unique resources of knowledge and expertise, and
that to achieve the aim, sharing knowledge is core value. Such statements may be
rhetoric but they can be converted into reality through the various processes
described below.
Promote a climate of commitment and trust
Gaining commitment is a matter of trying to get everyone to identify with the
purpose and values of the organization, which will include processes for developing
and sharing knowledge. Commitment can be enhanced by developing a strategy
Knowledge management ❚ 181
which will include the implementation of communication, education and training
programmes, initiatives to increase involvement and ‘ownership’, and the introduc-
tion of performance and reward processes.
Developing a high-trust organization means creating trust between management
and employees as a basis for encouraging trust between individual employees or
groups of employees. People are more likely to trust management if its actions are
fair, equitable, consistent and transparent, and if it keeps its word.
It is difficult although not impossible to develop trust between management and
employees. But it is not possible to make individual employees trust one another, and
such trust is important if knowledge is to be shared. Developing a climate of trust in
the organization helps, otherwise it is a matter of developing social capital in the
sense of putting people into positions where they have to work together, and encour-
aging interaction and networking so that individuals recognize the value of sharing
knowledge because it helps achieve common and accepted aims. This process can be
helped by team-building activities. Trust may also be enhanced if knowledge is
exchanged as a matter of course in forums, conferences etc. Dialogue occurs between
people who want to connect and are given opportunities to do so in a collaborative,
creative and adaptive culture.
Organization design and development
HR can contribute to effective knowledge management by advising on the design of
process-based organizations in which the focus is on horizontal processes that cut
across organizational boundaries. Such organizations rely largely on networking and
cross-functional or inter-disciplinary project teams or task forces, and knowledge-
sharing is an essential part of the operation. Attention is paid to identifying and
encouraging ‘communities of practice’ which, as defined by Wenger and Snyder
(2000), are ‘groups of people informally bound together by shared expertise and
a passion for joint enterprise’. They are seen as important because it is within
such communities that much of the organization’s tacit knowledge is created and
shared.
The role definitions that emerge from organization design activities should empha-
size knowledge-sharing as both an accountability (a key result area) and a compe-
tency (an expected mode of behaviour). Thus it can become an accepted part of the
fabric and therefore the culture of the organization.
Organizational development activities can focus on team-building in communities
with an emphasis on processes of interaction, communication and participation. The
aims would be to develop a ‘sharing’ culture.
182 ❚ HRM processes
Resourcing
HR contributes to enhancing knowledge management processes by advising on how
to attract and retain people with the required skills and abilities, including those who
are likely to exhibit the behaviours needed in a knowledge-sharing culture. This
means devising competency frameworks for recruitment and development purposes
which include knowledge-sharing as a key behaviour. Such a competency could be
defined as ‘The disposition to share knowledge fully and willingly with other
members of the community’. Questions would be asked at the interview stage on the
approach adopted by candidates to sharing knowledge in their present organization.
Other questions along the lines of the one given below could be put to test candidates
on their views:
This organization relies to a considerable extent on achieving success through the devel-
opment of new products and techniques. We believe that it is important to ensure that
the knowledge generated by such developments is spread around the business as widely
as possible to those who might put it to good use. What part do you think you could play
as an individual in this process?
Posing this sort of question at the interview stage helps to define expectations as part
of the psychological contract.
Assessment centres can also include exercises and tests designed to test the dispo-
sition and ability of individuals to share knowledge.
Retaining knowledge workers is a matter of providing a supportive workplace
environment and motivating them through both tangible and intangible rewards as
discussed below.
Motivation
A study by Tampoe (1993) identified four key motivators for knowledge workers:
1. Personal growth – the opportunity for individuals to fully realize their potential.
2. Occupational autonomy – a work environment in which knowledge workers can
achieve the task assigned to them.
3. Task achievement – a sense of accomplishment from producing work that is of
high quality and relevance to the organization.
4. Money rewards – an income that is a just reward for their contribution to corpo-
rate success and that symbolizes their contribution to that success.
Hansen et al (1999) state that in their ‘codification model’, managers need to develop
a system that encourages people to write down what they know and to get these
Knowledge management ❚ 183
documents into the electronics depository. They believe that real incentives – not just
enticements – are required to get people to take these steps. In companies following
the personalization model, rewards for sharing knowledge directly with other people
may have to be different. Direct financial rewards for contributing to the codification
and sharing of knowledge may often be inappropriate, but this could be a subject for
discussion in a performance review as part of a performance management process.
Performance management
The promotion and development of performance management processes by HR can
make an important contribution to knowledge management, by providing for behav-
ioural expectations which are related to knowledge-sharing to be defined, and
ensuring that actual behaviours are reviewed and, where appropriate, rewarded by
financial or non-financial means. Performance management reviews can identify
weaknesses and development needs in this aspect and initiate personal development
plans which are designed to meet these needs.
One starting point for the process could be the cascading of corporate core values
for knowledge-sharing to individuals, so that they understand what they are
expected to do to support those core values. As mentioned earlier, knowledge-
sharing can be included as an element of a competency framework, and the desired
behaviour would be spelt out and reviewed. For example, positive indicators such as
those listed below could be used as a basis for agreeing competency requirements
and assessing the extent to which they are met. The following are examples of posi-
tive behaviour in meeting competency expectations for knowledge-sharing:
● is eager to share knowledge with colleagues;
● takes positive steps to set up group meetings to exchange relevant information
and knowledge;
● builds networks which provide for knowledge sharing;
● ensures as appropriate that knowledge is captured, codified, recorded and
disseminated through the intranet and/or other means of communication.
Hansen et al mention that at Ernst & Young, consultants are evaluated at performance
reviews along five dimensions, one of which is their ‘contribution to and utilization
of the knowledge asset of the firm’. At Bain, partners are evaluated each year on a
variety of dimensions, including how much direct help they have given colleagues.
In a 360-degree feedback process (see Chapter 34), one of the dimensions for an
assessment by colleagues and direct reports could be the extent to which an indi-
vidual shares knowledge.
184 ❚ HRM processes
Organizational and individual learning
Organizational learning takes place when people learn collaboratively (Hoyle, 1995).
It involves accumulating, analysing and utilizing knowledge resources which
contribute to the achievement of business objectives. Knowledge management
approaches as described in the chapter can make a major contribution to the enhance-
ment of learning in an organization. Practices associated with creating the right envi-
ronment for sharing knowledge will in particular promote organizational learning by
creating a ‘rich landscape of learning and development opportunities’ (Kessels, 1996).
The concept of a learning organization (see Chapter 36) is also relevant. As defined
by Miller and Stewart (1999), one of the characteristics of such an organization is that
‘there are well-defined processes for defining, creating, capturing, sharing and acting
on knowledge’. And Garvin (1993) postulates that learning organizations ‘transfer
knowledge quickly and efficiently throughout the organization by means of formal
training programmes linked to implementation’.
Organizational learning, however, is based on individual learning, and the signifi-
cance of knowledge management and the techniques available to support it can be
learnt in formal training sessions or monitoring programmes designed and facilitated
by the HR function.
Workshops and conferences etc
HR can play an important part in knowledge management by setting up and facili-
tating workshops, conferences, seminars and forums in which members exchange
information and ideas, discuss what they have learnt and agree on what use can be
made of the knowledge they have acquired. Apart from their value in disseminating
knowledge, such gatherings can help to develop an environment in which knowl-
edge-sharing is accepted as a natural and continuing activity.
Working with IT
Knowledge management is neither the preserve of the IT function nor that of HR. The
two functions need to work together. IT ensures that knowledge is recorded and
made acceptable through means such as the intranet. HR collaborates by providing
means for tacit knowledge to be collected and, where feasible, codified.
Promoting the cause
Some organizations such as ICL have appointed a ‘knowledge programme director’
to develop corporate knowledge assets. Others have relied upon IT or business
Knowledge management ❚ 185
teams. But HR can make a major contribution not only in the specific activities
referred to above, but also in generally promoting the cause of knowledge manage-
ment, emphasizing to senior management at every opportunity the importance of
developing a culture in which the significance of knowledge management is recog-
nized.
186 ❚ HRM processes
Analysing roles, competencies
and skills
Role analysis is a fundamental HR process. It provides the information needed to
produce role profiles and for use in recruitment, learning and development, perfor-
mance management and job evaluation. For reasons given below, the terms ‘role
analysis’ and ‘role profile’ are rapidly replacing the terms ‘job analysis’ and ‘job
description’. However, role analysis uses basically the same techniques as job
analysis and many features of role profiles are found in more traditional job descrip-
tions. Job analysis is also still used to provide the data for job evaluation, as explained
in Chapter 44.
In this chapter, role analysis is covered first and the chapter continues with descrip-
tions of the associated techniques of competency and skills analysis.
ROLE ANALYSIS
Role analysis defined
Role analysis is the process of finding out what people are expected to achieve when
carrying out their work and the competencies and skills they need to meet these
expectations.
13
Role profiles
The result of role analysis is a role profile, which defines the outcomes role holders
are expected to deliver in terms of key result areas or accountabilities. It also lists the
competencies required to perform effectively in the role – what role holders need to
know and be able to do. Profiles can be individual or generic (covering similar roles).
Roles and jobs
If it is used in its strictest sense, the term ‘role’ refers to the part people play in their
work – the emphasis is on their behaviour. For example, a role profile may stress the
need for flexibility. In this sense, a role can be distinguished from a job, which consists
of a group of prescribed tasks/activities to be carried out or duties to be performed.
Job analysis defines those tasks or duties in order to produce a job description. This
is usually prescriptive and inflexible. It spells out exactly what job holders are
required to do. It gives people the opportunity to say: ‘It’s not in my job description’,
meaning that they only feel they have to do the tasks listed there.
Increasingly, the practice is to refer to roles, role analysis and role profiles rather
than to jobs, job analysis and job descriptions. The latter are no longer in favour
because they tend to be prescriptive, restrict flexibility and do not focus on outcomes
or the competencies needed to achieve them. Role profiles are preferred because they
are concerned with performance, results, and knowledge and skill requirements and
are therefore in accord with the present-day emphasis on high-performance working,
outcomes and competencies.
Purpose of role analysis
Role analysis aims to produce the following information about a role for use in
recruitment, performance management and learning and development evaluation:
● Overall purpose – why the role exists and, in essence, what the role holder is
expected to contribute.
● Organization – to whom the role holder reports and who reports to the role holder.
● Key result areas or accountabilities – what the role holder is required to achieve in
each of the main elements of the role.
● Competency requirements – the specific technical competencies attached to the role;
what the role holder is expected to know and to be able to do.
For job evaluation purposes, the role will also be analysed in terms of the factors used
in the job evaluation scheme.
188 ❚ HRM processes
Role analysis may be carried out by HR or other trained people acting as role
analysts. But line managers can also carry out role analysis in conjunction with indi-
vidual members of their teams as an important part of their performance manage-
ment responsibilities (see Chapter 33).
Approach to role analysis by specialized role analysts
The essence of role analysis is the application of systematic methods to the collection
of the information required to produce a role profile under the headings set out
above. The steps required to collect this information are:
1. Obtain documents such as the organization structure, existing job descriptions
(treat these with caution, they are likely to be out of date), and procedure or
training manuals that give information about the job.
2. Ask managers for fundamental information concerning the overall purpose of
the role, the key result areas and the technical competencies required.
3. Ask the role holders similar questions about their roles.
The methods that can be used are interviews, questionnaires or observation.
Interviews
To obtain the full flavour of a role, it is best to interview role holders and check
the findings with their managers or team leaders. The aim of the interview is to
obtain all the relevant facts about the role to provide the information required for a
role profile. It is helpful to use a checklist when conducting the interview. Elaborate
checklists are not necessary; they only confuse people. The basic questions to be
answered are:
1. What is the title of your role?
2. To whom are you responsible?
3. Who is responsible to you? (An organization chart is helpful.)
4. What is the main purpose of your role, ie in overall terms, what are you expected
to do?
5. What are the key activities you have to carry out in your role? Try to group them
under no more than 10 headings.
6. What are the results you are expected to achieve in each of those key activities?
7. What are you expected to know to be able to carry out your role?
8. What skills should you have to carry out your role?
Analysing roles, competencies and skills ❚ 189
The answers to these questions may need to be sorted out – they can often result in a
mass of jumbled information that has to be analysed so that the various activities can
be distinguished and refined to seven or eight key areas.
The advantages of the interviewing method are that it is flexible, can provide in-
depth information and is easy to organize and prepare. It is therefore the most
common approach. But interviewing can be time-consuming, which is why in large
role analysis exercises, questionnaires as described below may be used to provide
advance information about the job. This speeds up the interviewing process or even
replaces the interview altogether, although this means that much of the ‘flavour’ of
the job – ie what it is really like – may be lost.
Questionnaire
Questionnaires about their roles can be completed by role holders and approved by
the role holder’s manager or team leader. They are helpful when a large number of
roles have to be covered. They can also save interviewing time by recording purely
factual information and by enabling the analyst to structure questions in advance to
cover areas that need to be explored in greater depth. The simpler the questionnaire
the better. It need only cover the eight questions listed above.
The advantage of questionnaires is that they can produce information quickly and
cheaply for a large number of jobs. But a substantial sample is needed, and the
construction of a questionnaire is a skilled job that should only be carried out on the
basis of some preliminary fieldwork. It is highly advisable to pilot test questionnaires
before launching into a full-scale exercise. The accuracy of the results also depends on
the willingness and ability of job holders to complete questionnaires. Many people
find it difficult to express themselves in writing about their work.
Observation
Observation means studying role holders at work, noting what they do, how they do
it, and how much time it takes. This method is most appropriate for routine adminis-
trative or manual roles, but it is seldom used because of the time it takes.
Role analysis as part of a performance management process
As explained in more detail in Chapter 33, the basis of performance planning and
review processes is provided by a role profile. To develop a role profile it is necessary
for the line manager and the individual to get together and agree the key result areas
and competencies. The questions are similar to those that would be put by a role
analyst, but for line managers can be limited to the following:
190 ❚ HRM processes
● What do you think are the most important things you have to do?
● What do you believe you are expected to achieve in each of these areas?
● How will you – or anyone else – know whether or not you have achieved them?
● What do you have to know and be able to do to perform effectively in these areas?
● What knowledge and skills in terms of qualifications, technical and procedural
knowledge, problem-solving, planning and communication skills, etc do role
holders need to carry out the role effectively?
This process requires some skill, which needs to be developed by training followed
by practice. It is an area in which HR specialists can usefully coach and follow-up on
a one-to-one basis after an initial training session.
Role profile content
Role profiles are set out under the following headings:
● Role title.
● Department.
● Responsible to.
● Responsible to role holder.
● Purpose of the role – defined in one reasonably succinct sentence that defines why
the role exists in terms of the overall contribution the role holder makes.
● Key result areas – if at all possible these should be limited to seven or eight,
certainly not more than 10. Each key result area should be defined in a single
sentence beginning with an active verb (eg, identify, develop, support), which
provides a positive indication of what has to be done and eliminates unnecessary
wording. Describe the object of the verb (what is done) as succinctly as possible,
for example: test new systems, post cash to the nominal and sales ledgers,
schedule production, ensure that management accounts are produced, prepare
marketing plans. State briefly the purpose of the activity in terms of outputs or
standards to be achieved, for example: test new systems to ensure they meet
agreed systems specifications, post cash to the nominal and sales ledgers in order
to provide up-to-date and accurate financial information, schedule production in
order to meet output and delivery targets, ensure that management accounts are
produced that provide the required level of information to management and indi-
vidual managers on financial performance against budget and on any variances,
prepare marketing plans that support the achievement of the marketing strategies
of the enterprise, are realistic, and provide clear guidance on the actions to be
taken by the development, production, marketing and sales departments.
Analysing roles, competencies and skills ❚ 191
● Need to know – the knowledge required overall or in specific key result areas of the
business and its competitors and customers, techniques, processes, procedures or
products.
● Need to be able to do – the skills required in each area of activity.
● Expected behaviour – the behaviours particularly expected of the role holder
(behavioural competencies), which may be extracted from the organization’s
competency framework.
An example of a role profile is given in Figure 13.1.
192 ❚ HRM processes
Role title: Database administrator
Department: Information systems
Purpose of role: Responsible for the development and support of databases and their underlying environ-
ment.
Key result areas
➢ Identify database requirements for all projects that require data management in order to meet the
needs of internal customers.
➢ Develop project plans collaboratively with colleagues to deliver against their database needs.
➢ Support underlying database infrastructure.
➢ Liaise with system and software providers to obtain product information and support.
➢ Manage project resources (people and equipment) within predefined budget and criteria, as agreed
with line manager and originating department.
➢ Allocate work to and supervise contractors on day-to-day basis.
➢ Ensure security of the underlying database infrastructure through adherence to established protocols
and to develop additional security protocols where needed.
Need to know
➢ Oracle database administration.
➢ Operation of Designer 2000 and oracle forms SQL/PLSQL, Unix administration, shell programming.
Able to:
➢ Analyse and choose between options where the solution is not always obvious.
➢ Develop project plans and organize own workload on a timescale of 1–2 months.
➢ Adapt to rapidly changing needs and priorities without losing sight of overall plans and priorities.
➢ Interpret budgets in order to manage resources effectively within them.
➢ Negotiate with suppliers.
➢ Keep abreast of technical developments and trends, bring these into day-to-day work when feasible
and build them into new project developments.
Behavioural competencies
➢ Aim to get things done well and set and meet challenging goals, create own measures of excellence
and constantly seek ways of improving performance.
➢ Analyse information from range of sources and develop effective solutions/recommendations.
➢ Communicate clearly and persuasively, orally or in writing, dealing with technical issues in a non-
technical manner.
➢ Work participatively on projects with technical and non-technical colleagues.
➢ Develop positive relationships with colleagues as the supplier of an internal service.
Figure 13.1 Example of a role profile
COMPETENCY ANALYSIS
Competency analysis uses behavioural analysis to establish the behavioural dimen-
sions that affect role performance and produce competency frameworks. Functional
analysis or a version of it can be used to define technical competencies.
Analysing behavioural competencies
There are six approaches to behavioural competency analysis. In ascending order of
complexity these are:
1. expert opinion;
2. structured interview;
3. workshops;
4. critical-incident technique;
5. repertory grid analysis;
6. job competency assessment.
Expert opinion
The basic, crudest and least satisfactory method is for an ‘expert’ member of the HR
department, possibly in discussion with other ‘experts’ from the same department, to
draw up a list from their own understanding of ‘what counts’ coupled with an
analysis of other published lists, such as those given in Chapter 11.
This is unsatisfactory because the likelihood of the competencies being appro-
priate, realistic and measurable in the absence of detailed analysis, is fairly remote.
The list tends to be bland and, because line managers and job holders have not been
involved, unacceptable.
Structured interview
This method begins with a list of competencies drawn up by ‘experts’ and pro-
ceeds by subjecting a number of role holders to a structured interview. The inter-
viewer starts by identifying the key result areas of the role and goes on to analyse the
behavioural characteristics that distinguish performers at different levels of compe-
tence.
The basic question is: ‘What are the positive or negative indicators of behaviour
that are conducive or non-conducive to achieving high levels of performance?’ These
may be analysed under such headings as:
Analysing roles, competencies and skills ❚ 193
● personal drive (achievement motivation);
● impact on results;
● analytical power;
● strategic thinking;
● creative thinking (ability to innovate);
● decisiveness;
● commercial judgement;
● team management and leadership;
● interpersonal relationships;
● ability to communicate;
● ability to adapt and cope with change and pressure;
● ability to plan and control projects.
In each area instances will be sought which illustrate effective or less effective behav-
iour.
One of the problems with this approach is that it relies too much on the ability of
the expert to draw out information from interviewees. It is also undesirable to use a
deductive approach, which pre-empts the analysis with a prepared list of competency
headings. It is far better to do this by means of an inductive approach that starts from
specific types of behaviour and then groups them under competence headings. This
can be done in a workshop by analysing positive and negative indicators to gain an
understanding of the competence dimensions of an occupation or job, as described
below.
Workshops
Workshops bring a group of people together who have ‘expert’ knowledge or experi-
ence of the role – managers and role holders as appropriate – with a facilitator,
usually but not necessarily a member of the HR department or an outside consultant.
The members of the workshop begin by getting agreement to the overall purpose
of the role and its key result areas. They then develop examples of effective and less
effective behaviour for each area, which are recorded on flipcharts. For example, one
of the key result areas for a divisional HR director might be human resource plan-
ning, defined as: Prepares forecasts of human resource requirements and plans for the acqui-
sition, retention and effective utilization of employees, which ensure that the company’s needs
for people are met.
The positive indicators for this competence area could include:
● seeks involvement in business strategy formulation;
194 ❚ HRM processes
● contributes to business planning by taking a strategic view of longer-term human
resource issues that are likely to affect business strategy;
● networks with senior management colleagues to understand and respond to the
human resource planning issues they raise;
● suggests practical ways to improve the use of human resources, for example the
introduction of annual hours.
Negative indicators could include:
● takes a narrow view of HR planning – does not seem to be interested in or under-
stand the wider business context;
● lacks the determination to overcome problems and deliver forecasts;
● fails to anticipate skills shortages, for example unable to meet the multiskilling
requirements implicit in the new computer integrated manufacturing system;
● does not seem to talk the same language as line management colleagues – fails to
understand their requirements;
● slow in responding to requests for help.
When the positive and negative indicators have been agreed the next step is to distil
the competency dimensions that can be inferred from the lists. In this example they
could be:
● strategic capability;
● business understanding;
● achievement motivation;
● interpersonal skills;
● communication skills;
● consultancy skills.
These dimensions might also be reflected in the analysis of other areas of competency
so that, progressively, a picture of the competencies is built up that is linked to actual
behaviour in the workplace.
The facilitator’s job is to prompt, help the group to analyse its findings and assist
generally in the production of a set of competence dimensions that can be illustrated
by behaviour-based examples. The facilitator may have some ideas about the sort of
headings that may emerge from this process, but should not try to influence the
group to come to a conclusion that it has not worked out for itself, albeit with some
assistance from the facilitator.
Workshops can use the critical incident or repertory grid techniques, as described
below.
Analysing roles, competencies and skills ❚ 195
Critical-incident technique
The critical-incident technique is a means of eliciting data about effective or less effec-
tive behaviour that is related to examples of actual events – critical incidents. The
technique is used with groups of job holders and/or their managers or other ‘experts’
(sometimes, less effectively, with individuals) as follows:
● Explain what the technique is and what it is used for, ie, ‘to assess what consti-
tutes good or poor performance by analysing events that have been observed to
have a noticeably successful or unsuccessful outcome, thus providing more
factual and “real” information than by simply listing tasks and guessing perfor-
mance requirements’.
● Agree and list the key result in the role to be analysed. To save time, the analyst
can establish these prior to the meeting but it is necessary to ensure that they are
agreed provisionally by the group, which can be told that the list may well be
amended in the light of the forthcoming analysis.
● Take each area of the role in turn and ask the group for examples of critical inci-
dents. If, for instance, one of the job responsibilities is dealing with customers, the
following request could be made: ‘I want you to tell me about a particular occa-
sion at work which involved you – or that you observed – in dealing with a
customer. Think about what the circumstances were, for example who took part,
what the customer asked for, what you or the other member of the staff did and
what the outcome was.’
● Collect information about the critical incident under the following headings:
what the circumstances were; what the individual did; the outcome of what the
individual did.
● Record this information on a flipchart.
● Continue this process for each key result area.
● Refer to the flipchart and analyse each incident by obtaining ratings of the
recorded behaviour on a scale such as 1 for least effective to 5 for most effective.
● Discuss these ratings to get initial definitions of effective and ineffective perfor-
mance for each of the key result areas.
● Refine these definitions as necessary after the meeting – it can be difficult to get a
group to produce finished definitions.
● Produce the final analysis, which can list the competencies required and include
performance indicators or standards of performance for each key result area.
Repertory grid
Like the critical incident technique, the repertory grid can be used to identify the
196 ❚ HRM processes
dimensions that distinguish good from poor standards of performance. The tech-
nique is based on Kelly’s (1955) personal construct theory. Personal constructs are the
ways in which we view the world. They are personal because they are highly indi-
vidual and they influence the way we behave or view other people’s behaviour. The
aspects of the role to which these ‘constructs’ or judgements apply are called
‘elements’.
To elicit judgements, a group of people are asked to concentrate on certain
elements, which are the tasks carried out by role holders, and develop constructs
about these elements. This enables them to define the qualities that indicate the essen-
tial requirements for successful performance.
The procedure followed by the analyst is known as the ‘triadic method of elicita-
tion’ (a sort of three-card trick) and involves the following steps:
1. Identify the tasks or elements of the role to be subjected to repertory grid
analysis. This is done by one of the other forms of job analysis, eg interviewing.
2. List the tasks on cards.
3. Draw three cards at random from the pack and ask the members of the group to
nominate which of the three tasks is the odd one out from the point of view of the
qualities and characteristics needed to perform it.
4. Probe to obtain more specific definitions of these qualities or characteristics in the
form of expected behaviour. If, for example, a characteristic has been described as
the ‘ability to plan and organize’, ask questions such as: ‘What sort of behaviour
or actions indicate that someone is planning effectively?’ or, ‘How can we tell if
someone is not organizing his or her work particularly well?’
5. Draw three more cards from the pack and repeat steps 3 and 4.
6. Repeat this process until all the cards have been analysed and there do not
appear to be any more constructs left to be identified.
7. List the constructs and ask the group members to rate each task on every quality,
using a six or seven point scale.
8. Collect and analyse the scores in order to assess their relative importance. This
can be done statistically, as described by Markham (1987).
Like the critical-incident technique, repertory grid analysis helps people to articulate
their views by reference to specific examples. An additional advantage is that the
repertory grid makes it easier for them to identify the behavioural characteristics or
competencies required in a job by limiting the area of comparison through the triadic
technique.
Although a full statistical analysis of the outcome of a repertory grid exercise is
helpful, the most important results that can be obtained are the descriptions of what
constitute good or poor performance in each element of the job.
Analysing roles, competencies and skills ❚ 197
Both the repertory grid and the critical incident techniques require a skilled analyst
who can probe and draw out the descriptions of job characteristics. They are quite
detailed and time-consuming, but even if the full process is not followed, much of the
methodology is of use in a less elaborate approach to competency analysis.
Choice of approach
Workshops are probably the best approach. They get people involved and do not rely
on ‘expert’ opinion. Critical incident or repertory grid techniques are more sophisti-
cated but they take more time and expertise to run.
Analysing technical competencies (functional analysis)
The approach to the definition of technical competencies differs from that used for
behavioural competencies. As technical competencies are in effect competences, a
functional analysis process can be used. This methodology was originally developed
by Mansfield and Mitchell (1986) and Fine (1988). In essence, functional analysis
focuses on the outcomes of work performance. Note that the analysis is not simply
concerned with outputs in the form of quantifiable results but deals with the broader
results that have to be achieved by role holders. An outcome could be a satisfied
customer, a more highly motivated subordinate or a better-functioning team.
Functional analysis deals with processes such as developing staff, providing feedback
and monitoring performance as well as tasks. As described by Miller et al (2001) it
starts with an analysis of the roles fulfilled by an individual in order to arrive at a
description of the separate components or ‘units’ of performance that make up that
role. The resulting units consist of performance criteria, described in terms of
outcomes, and a description of the knowledge and skill requirements that underpin
successful performance.
Functional analysis is the method used to define competence-based standards for
NVQs/SNVQs.
SKILLS ANALYSIS
Skills analysis determines the skills required to achieve an acceptable standard of
performance. It is mainly used for technical, craft, manual and office jobs to provide
the basis for devising learning and training programmes. Skills analysis starts from a
broad job analysis but goes into details of not only what job holders have to do but
also the particular abilities and skills they need to do it. Skills analysis techniques are
described below.
198 ❚ HRM processes
Job breakdown
The job breakdown technique analyses a job into separate operations, processes, or
tasks, which can be used as the elements of an instruction sequence. A job breakdown
analysis is recorded in a standard format of three columns:
1. The stage column in which the different steps in the job are described – most semi-
skilled jobs can easily be broken down into their constituent parts.
2. The instruction column in which a note is made against each step of how the task
should be done. This, in effect, describes what has to be learnt by the trainee.
3. The key points column in which any special points such as quality standards or
safety instructions are noted against each step so that they can be emphasized to
a trainee learning the job.
Manual skills analysis
Manual skills analysis is a technique developed from work study. It isolates for
instructional purposes the skills and knowledge employed by experienced workers
in performing tasks that require manual dexterity. It is used to analyse short-cycle,
repetitive operations such as assembly tasks and other similar factory work.
The hand, finger and other body movements of experienced operatives are
observed and recorded in detail as they carry out their work. The analysis concen-
trates on the tricky parts of the job which, while presenting no difficulty to the expe-
rienced operative, have to be analysed in depth before they can be taught to trainees.
Not only are the hand movements recorded, but particulars are also noted of the cues
(visual and other senses) that the operative absorbs when performing the tasks.
Explanatory comments are added when necessary.
Task analysis
Task analysis is a systematic analysis of the behaviour required to carry out a task
with a view to identifying areas of difficulty and the appropriate training techniques
and learning aids necessary for successful instruction. It can be used for all types of
jobs but is specifically relevant to administrative tasks.
The analytical approach used in task analysis is similar to those adopted in the job
breakdown and manual skills analysis techniques. The results of the analysis are
usually recorded in a standard format of four columns as follows:
1. Task – a brief description of each element.
2. Level of importance – the relative significance of each task to the successful perfor-
mance of the role.
Analysing roles, competencies and skills ❚ 199
3. Degree of difficulty – the level of skill or knowledge required to perform each
task.
4. Training method – the instructional techniques, practice and experience required.
Faults analysis
Faults analysis is the process of analysing the typical faults that occur when per-
forming a task, especially the more costly faults. It is carried out when the incidence
of faults is high. A study is made of the job and, by questioning workers and team
leaders, the most commonly occurring faults are identified. A faults specification is
then produced, which provides trainees with information on what faults can be
made, how they can be recognized, what causes them, what effect they have, who is
responsible for them, what action the trainees should take when a particular fault
occurs, and how a fault can be prevented from recurring.
Job learning analysis
Job learning analysis, as described by Pearn and Kandola (1993), concentrates on the
inputs and process rather than the content of the job. It analyses nine learning skills
that contribute to satisfactory performance. A learning skill is one used to increase
other skills or knowledge and represents broad categories of job behaviour that need
to be learnt. The learning skills are the following:
1. physical skills requiring practice and repetition to get right;
2. complex procedures or sequences of activity that are memorized or followed
with the aid of written material such as manuals;
3. non-verbal information such as sight, sound, smell, taste and touch, which is
used to check, assess or discriminate, and which usually takes practice to get
right;
4. memorizing facts or information;
5. ordering, prioritizing and planning, which refer to the degree to which a role
holder has any responsibility for and flexibility in determining the way a partic-
ular activity is performed;
6. looking ahead and anticipating;
7. diagnosing, analysing and problem-solving, with or without help;
8. interpreting or using written manuals and other sources of information such as
diagrams or charts;
9. adapting to new ideas and systems.
200 ❚ HRM processes
In conducting a job learning analysis interview, the interviewer obtains information
on the main aims and principal activities of the job and then, using question cards for
each of the nine learning skills, analyses each activity in more depth, recording
responses and obtaining as many examples as possible under each heading.
Analysing roles, competencies and skills ❚ 201
Work and employment
This part of the handbook is concerned with the factors affecting employment in
organizations. It explores the nature of work, the employment relationship and the
important concept of the psychological contract.
Part III
The nature of work
In this chapter the nature of work is explored – what it is, the various theories about
work, the organizational factors that affect it and attitudes towards work.
WHAT IS WORK?
Work is the exertion of effort and the application of knowledge and skills to achieve a
purpose. Most people work to earn a living – to make money. But they also work
because of the other satisfactions it brings, such as doing something worthwhile, a
sense of achievement, prestige, recognition, the opportunity to use and develop abili-
ties, the scope to exercise power, and companionship. Within organizations, the
nature of the work carried out by individuals and what they feel about it are
governed by the employment relationship as discussed in Chapter 15 and the psycho-
logical contract as considered in Chapter 16.
In this chapter the various theories of work are summarized in the first section. The
following sections deal with the organizational factors that affect work such as the
‘lean’ and ‘flexible’ organization, changes in the pattern of working, unemployment,
careers and attitudes to work.
14
THEORIES ABOUT WORK
The theories about work described in this section consist of labour process theory,
agency theory and exchange theory. The concept of the pluralist and unitarist frame
of reference is also considered.
Labour process theory
Labour process theory was originally formulated by Karl Marx (translated in 1976).
His thesis was that surplus is appropriated from labour by paying it less than the
value it adds to the labour process. Capitalists therefore design the labour process to
secure the extraction of surplus value. The human capacity to produce is subordi-
nated to the exploitative demands of the capitalist, which is an alien power
confronting the worker who becomes a ‘crippled monstrosity by furthering his skill
as if in a forcing house through the suppression of a whole world of productive drives
and inclinations’.
Considerably later, a version of labour process theory was set out by Braverman
(1974). His view was that the application of modern management techniques, in
combination with mechanization and automation, secures the real subordination of
labour and de-skilling of work in the office as well as the shop-floor. He stated that
the removal of all forms of control from the worker is ‘the ideal towards which
management tends, and in pursuit of which it uses every productive innovation
shaped by science’. He saw this as essentially the application of ‘Taylorism’ (ie F. W
Taylor’s concept of scientific management, meaning the use of systematic observation
and measurement, task specialism and, in effect, the reduction of workers to the level
of efficiently functioning machines).
Braverman’s notion of labour process theory has been criticized as being simplistic
by subsequent commentators such as Littler and Salaman (1982) who argue that there
are numerous determinants in the control of the labour process. And Friedman (1977)
believes that Braverman’s version neglects the diverse and sophisticated character of
management control as it responds not only to technological advances but also to
changes in the degree and intensity of worker resistance and new product and labour
market conditions. Storey (1995) has commented that ‘the labour process band-
wagon… is now holed and patched beyond repair’.
But more recent commentators such as Newton and Findlay (1996) believe that
labour process theory explains how managements have at their disposal a range
of mechanisms through which control is exercised: ‘Job performance and its assess-
ment is at the heart of the labour process.’ Managements, according to Newton
and Findlay, are constantly seeking ways to improve the effectiveness of control
206 ❚ Work and employment
mechanisms to achieve compliance. They ‘try to squeeze the last drop of surplus
value’ out of their labour.
Agency theory
Agency or principal agent theory indicates that principals (owners and managers)
have to develop ways of monitoring and controlling the activities of their agents
(staff). Agency theory suggests that principals may have problems in ensuring that
agents do what they are told. It is necessary to clear up ambiguities by setting objec-
tives and monitoring performance to ensure that objectives are achieved.
Agency theory has been criticized by Gomez-Mejia and Balkin (1992) as ‘manageri-
alist’. As Armstrong (1996) wrote: ‘It looks at the employment relationship purely
from management’s point of view and regards employees as objects to be motivated
by the carrot and stick. It is a dismal theory, which suggests that people cannot be
trusted.’
Exchange theory
Exchange theory sets out to explain organizational behaviour in terms of the rewards
and costs incurred in the interaction between employers and employees. There are
four concepts:
● Rewards – payoffs that satisfy needs emerging from the interactions between indi-
viduals and their organizations.
● Costs – fatigue, stress, anxiety, punishments and the value of rewards that people
have lost because of lack of opportunity.
● Outcomes – rewards minus costs: if positive, the interaction yields a ‘profit’ and
this is satisfactory as long as it exceeds the minimum level of expectation.
● Level of comparisons – people evaluate the outcome of an interaction against the
profit they are foregoing elsewhere.
Unitary and pluralist frames of reference
One of the often expressed aims of human resource management is to increase the
commitment of people to the organization by getting them to share its views and
values and integrate their own work objectives with those of the organization. This
concept adopts a unitary frame of reference; in other words, as expressed by Gennard
and Judge (1997), organizations are assumed to be ‘harmonious and integrated, all
employees sharing the organisational goals and working as members of one team’.
The nature of work ❚ 207
Alternatively, the pluralist perspective as expressed by Cyert and March (1963) sees
organizations as coalitions of interest groups and recognizes the legitimacy of
different interests and values. Organizational development programmes, which,
amongst other things, aim to increase commitment and teamwork, adopt a unitary
framework. But it can be argued that this is a managerialist assumption and that the
legitimate interests of the other members of a pluralist society – the stakeholders –
will have their own interests, which should be respected.
ORGANIZATIONAL FACTORS AFFECTING WORK
The nature of work changes as organizations change in response to new demands
and environmental pressures. Business-process engineering, downsizing and delay-
ering all have significant effects on the type of work carried out, on feelings of secu-
rity and on the career opportunities available in organizations. Three of the most
important factors – the ‘lean’ organization, the changing role of the process worker
and the flexible firm – are discussed below.
The lean organization
The term ‘lean production’ was popularized by Womack and Jones (1970) in The
Machine That Changed the World. But the drive for leaner methods of working was
confined initially to the car industry. In the classic case of Toyota, one of the pioneers
of lean production, or more loosely, ‘world class manufacturing’, seven forms of
waste were identified, which had to be eliminated. These were overproduction,
waiting, transporting, over-processing, inventories, moving, and making defective
parts or products. Lean production aims to add value by minimizing waste in
terms of materials, time, space and people. Production systems associated with lean-
ness include just-in-time, supply chain management, material resources planning
and zero defects/right first time. Business process re-engineering programmes often
accompany drives for leaner methods of working and total quality management
approaches are used to support drives for greater levels of customer satisfaction and
service.
The concept of ‘leanness’ has since been extended to non-manufacturing organiza-
tions. This can often be number driven and is implemented by means of a reduction
in headcounts (downsizing) and a reduction in the number of levels of management
and supervision (delayering). But there is no standard model of what a lean organi-
zation looks like. According to the report on the research conducted by the Institute
of Personnel and Development (IPD) on lean and responsive organizations (IPD,
208 ❚ Work and employment
1998b), firms select from a menu the methods that meet their particular business
needs. These include, other than delayering or the negative approach of downsizing,
positive steps such as:
● team-based work organizations;
● shop-floor empowerment and problem-solving practices;
● quality built in, not inspected in;
● emphasis on horizontal business processes rather than vertical structures;
● partnership relationships with suppliers;
● cross-functional management and development teams;
● responsiveness to customer demand;
● human resource management policies aimed at high motivation and commitment
and including communication programmes and participation in decision-
making.
The IPD report emphasizes that qualitative change through people is a major feature
of lean working but that the issue is not just that of launching change. The key
requirement is to sustain it. The report also noted that HR practitioners can play a
number of important roles in the process of managing change. These include that of
supporter, interpreter, champion, monitor, resourcer, and anticipator of potential
problems.
A question posed by Purcell et al (1998) was: ‘Are lean organizations usually mean
organizations?’ But they commented that the IPD research did not indicate that leaner
methods of work have positive implications for employees. The evidence suggested
that the impact on people is often negative, particularly when restructuring means
downsizing and re-engineering. Employees work longer hours, stress rises, career
opportunities are reduced and morale and motivation fall. They also made the point
that it is clear that many initiatives fail because they do not take into account the
people implications, and that the first and most significant barrier was middle
management resistance.
The changing role of the process worker
A report published on a research project into process working by the Institute of
Employment Studies (Giles et al 1997) revealed that management structures designed
in response to technological advances and competitive pressures are transforming the
role of process workers.
Increasing automation and the application of new technologies to the production
process mean that low-skilled manual jobs continue to disappear, and that process
The nature of work ❚ 209
workers are becoming progressively less involved in manual operating tasks. Instead,
they are being given more responsibility for the processes they work on, while being
expected to become more customer and business oriented and, in many cases, to
carry out simple engineering and maintenance tasks.
The flexible firm
The concept of the ‘flexible firm’ was originated by Atkinson (1984) who claimed that
there is a growing trend for firms to seek various forms of structural and operational
flexibility. The three kinds of flexibility areas follow:
● Functional flexibility is sought so that employees can be redeployed quickly and
smoothly between activities and tasks. Functional flexibility may require multi-
skilling – craft workers who possess and can apply a number of skills covering,
for example, both mechanical and electrical engineering, or manufacturing and
maintenance activities.
● Numerical flexibility is sought so that the number of employees can be quickly and
easily increased or decreased in line with even short-term changes in the level of
demand for labour.
● Financial flexibility provides for pay levels to reflect the state of supply and
demand in the external labour market and also means the use of flexible pay
systems that facilitate either functional or numerical flexibility.
The new structure in the flexible firm involves the break-up of the labour force
into increasingly peripheral, and therefore numerically flexible, groups of workers
clustered around a numerically stable core group that will conduct the organization’s
key, firm-specific activities. At the core, the focus is on functional flexibility. Shifting
to the periphery, numerical flexibility becomes more important. As the market grows,
the periphery expands to take up slack; as growth slows, the periphery contracts.
At the core, only tasks and responsibilities change; the workers here are insulated
from medium-term fluctuations in the market and can therefore enjoy job security,
whereas those in the periphery are exposed to them.
CHANGING PATTERNS OF WORK
The most important developments over the past decade have been a consider-
able increase in the use of part-timers, a marked propensity for organizations to
subcontract work and to outsource services, and a greater requirement for specialists
(knowledge workers) and professionals in organizations. Teleworking has increased
210 ❚ Work and employment
(working at home with a computer terminal link to the firm) and call centre work has
expanded.
Under the pressures to be competitive and to achieve ‘cost leadership’, organiza-
tions are not only ‘downsizing’ but are also engaging people on short-term contracts
and make no pretence that they are there to provide careers. They want specific
contributions to achieving organizational goals now and, so far as people are
concerned, they may let the future take care of itself, believing that they can purchase
the talent required as and when necessary. This may be short-sighted, but it is the
way many businesses now operate.
When preparing and implementing human resource plans, HR practitioners need
to be aware of these factors and trends within the context of their internal
and external environments. A further factor that affects the way in which the
labour market operates, and therefore human resource planning decisions, is unem-
ployment.
In general there is far less security in employment today, and the old tradition of
the life-long career is no longer so much in evidence. Employers are less likely to be
committed to their employees. At the same time, employees tend to be less
committed to their employers and more committed to their careers, which they may
perceive are likely to progress better if they change jobs rather than remain with their
present employer. They are concerned with their employability, and are determined
to extract as much value as possible from their present employment to provide for
their future elsewhere.
The Economic and Social Research Council and the Tomorrow Project (2005)
reported that, today, more than 5 million people, almost a fifth of employees,
spend some time working at home or on the move. The report predicts the rise of the
‘mobile worker’, moving – laptop and mobile in tow – between office, home, airport
lounge or motorway service station as the needs of a job demand. As stated in the
report:
Individuals at work will not necessarily see themselves as working from home. They
could equally be working from the office. But they will be on the move from place to
place… There will be a shift from personalized space to personalized time and the
boundaries between work and leisure time will be less distinct.
The report says that managers will have to find new ways to control these mobile
workers, possibly based on capturing workers’ hearts and minds to create a culture of
hard work even at a distance.
The nature of work ❚ 211
UNEMPLOYMENT
Economists are unable to agree on the causes of or cures for unemployment (or
anything else, it seems). The essence of the Keynesian explanation is that firms
demand too little labour because individuals demand too few goods. The classical
view was that unemployment was voluntary and could be cleared by natural market
forces. The neo-classical theory is that there is a natural rate of unemployment, which
reflects a given rate of technology, individual preferences and endowments. With
flexible wages in a competitive labour market, wages adjust to clear the market and
any unemployment that remains is voluntary. The latter view was that held by Milton
Friedman and strongly influenced government policy in the early 1980s, but without
success. There is, of course, no simple explanation of unemployment and no simple
solution.
ATTITUDES TO WORK
The IPD research into employee motivation and the psychological contract (Guest
et al, 1996; Guest and Conway, 1997) obtained the following responses from the
people they surveyed:
● Work remains a central interest in the lives of most people.
● If they won the lottery, 39 per cent would quit work, but most of the others would
continue working.
● Asked to cite the three most important things they look for in a job, 70 per cent of
respondents cited pay, 62 per cent wanted interesting and varied work and only
22 per cent were looking for job security.
● 35 per cent claimed that they were putting in so much effort that they could not
work any harder and a further 34 per cent claimed they were working very hard.
JOB-RELATED WELL-BEING
The 2004 Workplace Employee Relations Survey (WERS, 2005) covering 700,000
workplaces and 22.5 million employees surveyed 21,624 employees in workplaces
employing more than 10 people on how they felt at work. The results are summarized
in Table 14.1.
This does not present an unduly gloomy picture. The percentage of people feeling
either tense or calm some, more or all of the time was much the same. An equal
212 ❚ Work and employment
number of people were never relaxed or worried, and rather more were never uneasy.
Sixty-nine per cent were content all, most or part of the time. The WERS survey also
revealed that job-related well-being was higher in small organizations and work-
places than in large ones, higher among union members, fell with increased educa-
tion and is U-shaped with regard to age (ie higher amongst younger and older
employees than amongst the middle-aged).
The nature of work ❚ 213
The job All of the Most of the Some of the Occasionally Never %
makes you time % time % time % %
feel:
Tense 4 15 42 27 12
Calm 3 30 29 27 11
Relaxed 2 10 35 32 21
Worried 2 10 35 32 21
Uneasy 2 8 28 33 29
Content 5 33 30 22 11
Table 14.1 Feelings at work (WERS, 2005)
The employment relationship
This chapter explores the nature of the employment relationship and the creation of a
climate of trust within that relationship.
THE EMPLOYMENT RELATIONSHIP DEFINED
The term employment relationship describes the interconnections that exist between
employers and employees in the workplace. These may be formal, eg contracts of
employment, procedural agreements. Or they may be informal, in the shape of the
psychological contract, which expresses certain assumptions and expectations about
what managers and employer have to offer and are willing to deliver (Kessler and
Undy, 1996). They can have an individual dimension, which refers to individual
contracts and expectations, or a collective dimension, which refers to relationships
between management and trade unions, staff associations or members of joint consul-
tative bodies such as works councils.
NATURE OF THE EMPLOYMENT RELATIONSHIP
The dimensions of the employment relationship as described by Kessler and Undy
(1996) are shown in Figure 15.1.
15
The parties are managers, employees and employee representatives. The ‘substance’
incorporates the job, reward and career of individuals and the communications and
culture of the organization as it affects them. It can also include collective agreements
and joint employee relations machinery (works councils and the like). The formal
dimensions include rules and procedures, and the informal aspect covers under-
standing, expectations and assumptions. Finally, the employment relationship exists
at different levels in the organization (management to employees generally, and
managers to individual employees and their representatives or groups of people).
The operation of the relationship will also be affected by processes such as communi-
cations and consultation, and by the management style prevailing throughout the
organization or adopted by individual managers.
216 ❚ Work and employment
Figure 15.1 Dimensions of the employment relationship
(Source: S Kessler and R Undy, The New Employment Relationship: Examining the psychological
contract, Institute of Personnel and Development, London, 1996)
Parties
● Managers
● Employees
● Employees’
representatives
Operation
● Level
● Process
● Style
Structure
● Formal
rules/procedures
● Informal
understandings,
expectations
Substance
Individual:
● job
● reward
● career
● communications
● culture
Collective
The employment relationship
BASIS OF THE EMPLOYMENT RELATIONSHIP
The starting point of the employment relationship is an undertaking by an employee
to provide skill and effort to the employer in return for which the employer provides
the employee with a salary or a wage. Initially the relationship is founded on a legal
contract. This may be a written contract but the absence of such a contract does not
mean that no contractual relationship exists. Employers and employees still have
certain implied legal rights and obligations. The employer’s obligations include the
duty to pay salary or wages, to provide a safe workplace, to act in good faith towards
the employee and not to act in such a way as to undermine the trust and confidence
of the employment relationship. The employee has corresponding obligations, which
include obedience, competence, honesty and loyalty.
An important factor to remember about the employment relationship is that, gener-
ally, it is the employer who has the power to dictate the contractual terms unless they
have been fixed by collective bargaining. Individuals, except when they are much in
demand, have little scope to vary the terms of the contract imposed upon them by
employers.
DEFINING THE EMPLOYMENT RELATIONSHIP
Two types of contracts defining the employment relationship have been distin-
guished by Macneil (1985) and Rousseau and Wade-Benzoni (1994):
● Transactional contracts have well-described terms of exchange, which are usually
expressed financially. They are of limited duration, with specified performance
requirements.
● Relational contracts are less well defined with more abstract terms and refer to an
open-ended membership of the organization. Performance requirements attached
to this continuing membership are incomplete or ambiguous.
However, the employment relationships can also be expressed in terms of a psycholog-
ical contract, which, according to Guzzo and Noonan (1994), has both transactional
and relational qualities. The concept of a psychological contract expresses the view
that at its most basic level the employment relationship consists of a unique combina-
tion of beliefs held by an individual and his or her employer about what they expect
of one another. This concept is discussed in more detail in Chapter 16.
The employment relationship ❚ 217
SIGNIFICANCE OF THE EMPLOYMENT RELATIONSHIP
CONCEPT
The concept of the employment relationship is significant to HR specialists because it
governs much of what organizations need to be aware of in developing and applying
HR processes, policies and procedures. These need to be considered in terms of what
they will or will not contribute to furthering a productive and rewarding employ-
ment relationship between all the parties concerned.
CHANGES IN THE EMPLOYMENT RELATIONSHIP
As noted by Gallie et al (1998) in their analysis of the outcome of their ‘employment in
Britain’ research programme, while there have been shifts in the ways in which
people are employed: ‘The evidence for a major change in the nature of the employ-
ment relationship was much less convincing.’ But they did note the following charac-
teristics of employment as revealed by the survey:
● New forms of management, often based explicitly or implicitly on HRM princi-
ples and emphasizing individual contracts rather than collective bargaining.
● There was some increase in task discretion but there was no evidence of a signifi-
cant decline in managerial control; indeed, in some important respects control
was intensified.
● Supervisory activity was still important.
● Integrative forms of management policy were centred on non-manual employees.
● The great majority of employees continued to attach a high level of importance to
the intrinsically motivating aspects of work.
● The higher the level of skill, the more people were involved with their work.
● The raising of skill levels and the granting of increased discretion to employers
are key factors in improving the quality of work experience.
● High levels of commitment to the organization can reduce absenteeism and
labour turnover but there was no evidence that organizational commitment
‘added anything over and above other organizational and task characteristics
with regard to the quality of work performance’.
MANAGING THE EMPLOYMENT RELATIONSHIP
The dynamic and often nebulous nature of the employment relationship increases the
difficulty of managing it. The problem is compounded because of the multiplicity of
218 ❚ Work and employment
factors that influence the contract: the culture of the organization; the prevailing
management style; the values, espoused and practised, of top management; the exis-
tence or non-existence of a climate of trust; day-to-day interactions between
employees and line managers; and the HR policies and practices of the business.
The latter are particularly important. The nature of the employment relationship
is strongly influenced by HR actions. These cover all aspects of HR management.
But how people are treated in such areas as recruitment, performance reviews,
promotion, career development, reward, involvement and participation, grievance
handling, disciplinary procedures and redundancy will be particularly important.
How people are required to carry out their work (including flexibility and
multi-skilling), how performance expectations are expressed and communicated,
how work is organized and how people are managed will also make a signifi-
cant impact on the employment relationship. HR specialists can contribute to the
development of a positive and productive employment relationship in the following
ways:
● during recruitment interviews – presenting the unfavourable as well as the
favourable aspects of a job in a ‘realistic job preview’;
● in induction programmes – communicating to new starters the organization’s
personnel policies and procedures and its core values, indicating to them the stan-
dards of performance expected in such areas as quality and customer service, and
spelling out requirements for flexibility;
● by issuing and updating employee handbooks that reinforce the messages delivered
in induction programmes;
● by encouraging the development of performance management processes that ensure
that performance expectations are agreed and reviewed regularly;
● by encouraging the use of personal development plans that spell out how continuous
improvement of performance can be achieved, mainly by self-managed learning;
● by using learning and development programmes to underpin core values and define
performance expectations;
● by ensuring through manager and team leader training that managers and team
leaders understand their role in managing the employment relationship through
such processes as performance management and team leadership;
● by encouraging the maximum amount of contact between managers and team
leaders and their team members to achieve mutual understanding of expectations
and to provide a means of two-way communications;
● by adopting a general policy of transparency – ensuring that in all matters that
affect them, employees know what is happening, why it is happening and the
impact it will make on their employment, development and prospects;
The employment relationship ❚ 219
● by developing HR procedures covering grievance handling, discipline, equal
opportunities, promotion and redundancy and ensuring that they are imple-
mented fairly and consistently;
● developing and communicating HR policies covering the major areas of employ-
ment, development, reward and employee relations;
● by ensuring that the reward system is developed and managed to achieve equity,
fairness and consistency in all aspects of pay and benefits;
● generally, by advising on employee relations procedures, processes and issues that
further good collective relationships.
These approaches to managing the employment relationship cover all aspects of
people management. It is important to remember, however, that this is a continuous
process. The effective management of the relationship means ensuring that values are
upheld and that a transparent, consistent and fair approach is adopted in dealing
with all aspects of employment.
TRUST AND THE EMPLOYMENT RELATIONSHIP
The IPD suggested in its statement People Make the Difference (1994) that building trust
is the only basis upon which commitment can be generated. The IPD commented
that: ‘In too many organizations inconsistency between what is said and what is done
undermines trust, generates employee cynicism and provides evidence of contradic-
tions in management thinking.’
It has also been suggested by Herriot et al (1998) that trust should be regarded as
social capital – the fund of goodwill in any social group that enables people within it
to collaborate with one another. Thompson (1998) sees trust as a ‘unique human
resource capability that helps the organization fulfil its competitive advantage’ – a
core competency that leads to high business performance. Thus there is a business
need to develop a climate of trust, as there is a business need to introduce effective
pay-for-contribution processes, which are built on trust.
The meaning of trust
Trust, as defined by the Oxford English Dictionary, is a firm belief that a person may
be relied on. An alternative definition has been provided by Shaw (1997) to the effect
that trust is the ‘belief that those on whom we depend will meet our expectations of
them’. These expectations are dependent on ‘our assessment of another’s responsi-
bility to meet our needs’.
220 ❚ Work and employment
A climate of trust
A high-trust organization has been described by Fox (1973) as follows:
Organizational participants share certain ends or values; bear towards each other a
diffuse sense of long-term obligations; offer each other spontaneous support without
narrowly calculating the cost or anticipating any short-term reciprocation; communicate
honestly and freely; are ready to repose their fortunes in each other’s hands; and
give each other the benefit of any doubt that may arise with respect to goodwill or
motivation.
This ideal state may seldom, if ever, be attained, but it does represent a picture of an
effective organization in which, as Thompson (1998) notes, trust ‘is an outcome of
good management’.
When do employees trust management?
Management is more likely to be trusted by employees when the latter:
● believe that the management means what it says;
● observe that management does what it says it is going to do – suiting the action to
the word;
● know from experience that management, in the words of David Guest (Guest and
Conway, 1998), ‘delivers the deal – it keeps its word and fulfils its side of the
bargain’;
● feel they are treated fairly, equitable and consistently.
Developing a high-trust organization
As Thompson (1998) comments, a number of writers have generally concluded that
trust is ‘not something that can, or should, be directly managed’. He cites Sako (1994)
who wrote that: ‘Trust is a cultural norm which can rarely be created intentionally
because attempts to create trust in a calculative manner would destroy the effective
basis of trust.’
It may not be possible to ‘manage’ trust but, as Thompson argues, trust is an
outcome of good management. It is created and maintained by managerial behaviour
and by the development of better mutual understanding of expectations – employers
of employees, and employees of employers. But Herriot et al (1998) point out that
issues of trust are not in the end to do with managing people or processes, but are
more about relationships and mutual support through change.
The employment relationship ❚ 221
Clearly, the sort of behaviour that is most likely to engender trust is when manage-
ment is honest with people, keeps its word (delivers the deal) and practises what it
preaches. Organizations that espouse core values (‘people are our greatest asset’) and
then proceed to ignore them will be low-trust organizations.
More specifically, trust will be developed if management acts fairly, equitably and
consistently, if a policy of transparency is implemented, if intentions and the reasons
for proposals or decisions are communicated both to employees generally and to
individuals, if there is full involvement in developing HR processes, and if mutual
expectations are agreed through performance management.
Failure to meet these criteria, wholly or in part, is perhaps the main reason
why so many performance-related pay schemes have not lived up to expectations.
The starting point is to understand and apply the principles of distributive and
procedural justice.
Justice
To treat people justly is to deal with them fairly and equitably. Leventhal
(1980), following Adams (1965), distinguished between distributive and procedural
justice.
Distributive justice refers to how rewards are distributed. People will feel that they
have been treated justly in this respect if they believe that rewards have been distrib-
uted in accordance with their contributions, that they receive what was promised to
them and that they get what they need.
Procedural justice refers to the ways in which managerial decisions are made and
HR procedures are managed. People will feel that they have been treated justly if
management’s decisions and procedures are fair, consistent, transparent, non-
discriminatory and properly consider the views and needs of employees.
Renewing trust
As suggested by Herriot et al (1998), if trust is lost, a four-step programme is required
for its renewal:
1. admission by top management that it has paid insufficient attention in the past to
employees’ diverse needs;
2. a limited process of contracting whereby a particular transition to a different way
of working for a group of employees is done in a form that takes individual
needs into account;
222 ❚ Work and employment
3. establishing ‘knowledge-based’ trust, which is based not on a specific transac-
tional deal but on a developing perception of trustworthiness;
4. achieving trust based on identification in which each party empathizes with each
other’s needs and therefore takes them on board themselves (although this final
state is seldom reached in practice).
The employment relationship ❚ 223
The psychological contract
The employment relationship, as described in Chapter 15, is a fundamental feature of
all aspects of people management. At its most basic level, the employment relation-
ship consists of a unique combination of beliefs held by an individual and his or her
employer about what they expect of one another. This is the psychological contract,
and to manage the employment relationship effectively it is necessary to understand
what the psychological contract is, how it is formed and its significance.
THE PSYCHOLOGICAL CONTRACT DEFINED
Fundamentally, the psychological contract expresses the combination of beliefs held
by an individual and his or her employer about what they expect of one another. It
can be described as the set of reciprocal but unarticulated expectations that exist
between individual employees and their employers. As defined by Schein (1965):
‘The notion of a psychological contract implies that there is an unwritten set of expec-
tations operating at all times between every member of an organization and the
various managers and others in that organization.’
This definition was amplified by Rousseau and Wade-Benzoni (1994) who stated
that:
16
Psychological contracts refer to beliefs that individuals hold regarding promises made,
accepted and relied upon between themselves and another. (In the case of organiza-
tions, these parties include an employee, client, manager, and/or organization as a
whole.) Because psychological contracts represent how people interpret promises and
commitments, both parties in the same employment relationship (employer and
employee) can have different views regarding specific terms.
Sparrow (1999b) defined the psychological contract as:
an open-ended agreement about what the individual and the organization expect to give
and receive in return from the employment relationship… psychological contracts
represent a dynamic and reciprocal deal… New expectations are added over time as
perceptions about the employer’s commitment evolve. These unwritten individual
contracts are therefore concerned with the social and emotional aspects of the exchange
between employer and employee.
Within organizations, as Katz and Kahn (1966) pointed out, every role is basically
a set of behavioural expectations. These expectations are often implicit – they are
not defined in the employment contract. Basic models of motivation such as
expectancy theory (Vroom, 1964) and operant conditioning (Skinner, 1974) maintain
that employees behave in ways they expect will produce positive outcomes. But
they do not necessarily know what to expect. As Rousseau and Greller (1994)
comment:
The ideal contract in employment would detail expectations of both employee and
employer. Typical contracts, however, are incomplete due to bounded rationality, which
limits individual information seeking, and to a changing organizational environment
that makes it impossible to specify all conditions up front. Both employee and employer
are left to fill up the blanks.
The notion of bounded rationality expresses the belief that while people often try to
act rationally, the extent to which they do so is limited by their emotional reactions to
the situation they are in.
Employees may expect to be treated fairly as human beings, to be provided with
work that uses their abilities, to be rewarded equitably in accordance with their
contribution, to be able to display competence, to have opportunities for further
growth, to know what is expected of them and to be given feedback (preferably posi-
tive) on how they are doing. Employers may expect employees to do their best on
behalf of the organization – ‘to put themselves out for the company’ – to be fully
committed to its values, to be compliant and loyal, and to enhance the image of the
226 ❚ Work and employment
organization with its customers and suppliers. Sometimes these assumptions are
justified – often they are not. Mutual misunderstandings can cause friction and stress
and lead to recriminations and poor performance, or to a termination of the employ-
ment relationship.
To summarize, in the words of Guest and Conway (1998), the psychological
contract lacks many of the characteristics of the formal contract: ‘It is not generally
written down, it is somewhat blurred at the edges, and it cannot be enforced in a
court or tribunal.’ They believe that: ‘The psychological contract is best seen as a
metaphor; a word or phrase borrowed from another context which helps us make
sense of our experience. The psychological contract is a way of interpreting the state
of the employment relationship and helping to plot significant changes.’
THE SIGNIFICANCE OF THE PSYCHOLOGICAL
CONTRACT
As suggested by Spindler (1994): ‘A psychological contract creates emotions and atti-
tudes which form and control behaviour.’ The significance of the psychological
contract was further explained by Sims (1994) as follows: ‘A balanced psychological
contract is necessary for a continuing, harmonious relationship between the
employee and the organization. However, the violation of the psychological contract
can signal to the participants that the parties no longer share (or never shared) a
common set of values or goals.’
The concept highlights the fact that employee/employer expectations take the
form of unarticulated assumptions. Disappointments on the part of management as
well as employees may therefore be inevitable. These disappointments can, however,
be alleviated if managements appreciate that one of their key roles is to manage
expectations, which means clarifying what they believe employees should achieve,
the competencies they should possess and the values they should uphold. And this is
a matter not just of articulating and stipulating these requirements but of discussing
and agreeing them with individuals and teams.
The psychological contract governs the continuing development of the employ-
ment relationship, which is constantly evolving over time. But how the contract
is developing and the impact it makes may not be fully understood by any of the
parties involved. Spindler (1994) comments that: ‘In a psychological contract the
rights and obligations of the parties have not been articulated, much less agreed to.
The parties do not express their expectations and, in fact, may be quite incapable of
doing so.’
The psychological contract ❚ 227
People who have no clear idea about what they expect may, if such unexpressed
expectations have not been fulfilled, have no clear idea why they have been disap-
pointed. But they will be aware that something does not feel right. And a company
staffed by ‘cheated’ individuals who expect more than they get is heading for trouble.
The importance of the psychological contract was emphasized by Schein (1965)
who suggested that the extent to which people work effectively and are committed to
the organization depends on:
● the degree to which their own expectations of what the organization will provide
to them and what they owe the organization in return match that organization’s
expectations of what it will give and get in return;
● the nature of what is actually to be exchanged (assuming there is some agreement) –
money in exchange for time at work; social need satisfaction and security in
exchange for hard work and loyalty; opportunities for self-actualization and chal-
lenging work in exchange for high productivity, high-quality work, and creative
effort in the service of organizational goals; or various combinations of these and
other things.
The research conducted by Guest and Conway (2002) led to the conclusion that ‘The
management of the psychological contract as Schalk and Rousseau (2001) suggest, is
a core task of management and acknowledged as such by many senior HR and
employment relations managers, and shows that it has a positive association with a
range of outcomes within the employment relationship and is a useful way of concep-
tualising that relationship.’
THE NATURE OF THE PSYCHOLOGICAL CONTRACT
A psychological contract is a system of beliefs that may not have been articulated. It
encompasses the actions employees believe are expected of them and what response
they expect in return from their employer. As described by Guest et al (1996): ‘It is
concerned with assumptions, expectations, promises and mutual obligations.’ It
creates attitudes and emotions that form and govern behaviour. A psychological
contract is implicit. It is also dynamic – it develops over time as experience accumu-
lates, employment conditions change and employees re-evaluate their expectations.
The psychological contract may provide some indication of the answers to the two
fundamental employment relationship questions that individuals pose: ‘What can
I reasonably expect from the organization?’ and ‘What should I reasonably be
expected to contribute in return?’ But it is unlikely that the psychological contract
228 ❚ Work and employment
and therefore the employment relationship will ever be fully understood by either
party.
The aspects of the employment relationship covered by the psychological contract
will include, from the employee’s point of view:
● how they are treated in terms of fairness, equity and consistency;
● security of employment;
● scope to demonstrate competence;
● career expectations and the opportunity to develop skills;
● involvement and influence;
● trust in the management of the organization to keep their promises;
● safe working environment.
From the employer’s point of view, the psychological contract covers such aspects of
the employment relationship as:
● competence;
● effort;
● compliance;
● commitment;
● loyalty.
As Guest et al (1996) point out:
While employees may want what they have always wanted – security, a career, fair
rewards, interesting work and so on – employers no longer feel able or obliged to
provide these. Instead, they have been demanding more of their employees in terms of
greater input and tolerance of uncertainty and change, while providing less in return, in
particular less security and more limited career prospects.
An operational model of the psychological contract
An operational model of the psychological contract as formulated by Guest et al
(1996) suggests that the core of the contract can be measured in terms of fairness of
treatment, trust, and the extent to which the explicit deal or contract is perceived to be
delivered. The full model is illustrated in Figure 16.1.
HOW PSYCHOLOGICAL CONTRACTS DEVELOP
Psychological contracts are not developed by means of a single transaction. There are
many contract makers who exert influence over the whole duration of an employee’s
involvement with an organization. As Spindler (1994) comments:
The psychological contract ❚ 229
Every day we create relationships by means other than formal contracts… As individuals
form relationships they necessarily bring their accumulated experience and developed
personalities with them. In ways unknown to them, what they expect from the relation-
ship reflects the sum total of their conscious and unconscious learning to date.
The problem with psychological contracts is that employees are often unclear about
what they want from the organization or what they can contribute to it. Some
employees are equally unclear about what they expect from their employees.
Because of these factors, and because a psychological contract is essentially
implicit, it is likely to develop in an unplanned way with unforeseen consequences.
Anything that management does or is perceived as doing that affects the interests of
employees will modify the psychological contract. Similarly the actual or perceived
behaviour of employees, individually or collectively, will affect an employer’s
concept of the contract.
230 ❚ Work and employment
Organizational
culture
HRM policy
and practice
Experience
Expectations
Alternatives
Organizational
citizenship
Organizational
commitment
Motivation
Satisfaction
and well-being
Fairness
Trust
The delivery of the deal
Causes Content Consequences
Figure 16.1 A model of the psychological contract
(Source: D Guest, N Conway, R Briner and M Dickman, The State of the Psychological Contract in
Employment: Issues in people management, Institute of Personnel and Development, London,
1996)
THE CHANGING NATURE OF THE PSYCHOLOGICAL
CONTRACT
Many commentators have delivered warnings about changes to the psychological
contract that are not all advantageous to employees. And the nature of the psycho-
logical contract is changing in many organizations in response to changes in their
external and internal environments. This is largely because of the impact of global
competition and the effect this has had on how businesses operate, including moves
into ‘lean’ forms of operation.
The psychological contract has not been an issue in the past because usually it did
not change much. This is no longer the case because:
● business organizations are neither stable nor long-lived – uncertainty prevails, job
security is no longer on offer by employers who are less anxious to maintain a
stable workforce – as Mirvis and Hall (1994) point out, organizations are making
continued employment explicitly contingent on the fit between people’s compe-
tences and business needs;
● flexibility, adaptability and speed of response are all-important and individual
roles may be subject to constant change – continuity and predictability are no
longer available for employees;
● leaner organizations mean that careers may mainly develop laterally – expecta-
tions that progress will be made by promotion through the hierarchy are no
longer so valid;
● leaner organizations may make greater demands on employees and are less likely
to tolerate people who no longer precisely fit their requirements.
But, more positively, some organizations are realizing that steps have to be taken to
increase mutuality and to provide scope for lateral career development and improve-
ment in knowledge and skills through opportunities for learning. They recognize that
because they can no longer guarantee long-term employment they have the responsi-
bility to help people to continue to develop their careers if they have to move on. In
other words they take steps to improve employability. Even those that have fully
embraced the ‘core–periphery’ concept may recognize that they still need to obtain
the commitment of their core employees and pay attention to their continuous devel-
opment, although in most organizations the emphasis is likely to be on self-
development.
Kissler (1994) summed up the differences between old and new employment
contracts as follows:
The psychological contract ❚ 231
Old New
Relationship is pre- Relationship is mutual
determined and imposed and negotiated
You are who you work You are defined by multiple
for and what you do roles, many external to the
organization
Loyalty is defined by Loyalty is defined by
performance output and quality
Leaving is treason People and skills only
needed when required
Employees who do what Long-term employment
they are told will work is unlikely; expect and
until retirement prepare for multiple
relationships
The following ways in which psychological contracts are changing have been
suggested by Hiltrop (1995):
From To
Imposed relationship (compliance, Mutual relationship
command and control) (commitment, participation and
involvement)
Permanent employment Variable employment
relationship relationship – people and
skills only obtained or
retained when required
Focus on promotion Focus on lateral career
development
Finite job duties Multiple roles
Meet job requirements Add value
Emphasis on job security Emphasis on employability
and loyalty to company and loyalty to own career
and skills
Training provided by Opportunities for self-
organization managed learning
232 ❚ Work and employment
Hiltrop suggests that a new psychological contract is emerging – one that is more
situational and short term and which assumes that each party is much less dependent
on the other for survival and growth. He believes that in its most naked form, the new
contract could be defined as follows:
There is no job security. The employee will be employed as long as he or she adds value
to the organization, and is personally responsible for finding new ways to add value. In
return, the employee has the right to demand interesting and important work, has the
freedom and resources to perform it well, receives pay that reflects his or her contribu-
tion, and gets the experience and training needed to be employable here or elsewhere.
But this could hardly be called a balanced contract. To what extent do employees in
general have ‘the right to demand interesting and important work’? Employers still
call the shots, except when dealing with the special cases of people who are much in
demand and in short supply. In Britain, as Mant (1996) pointed out, ‘people often
really are regarded as merely “resources” to be acquired or divested according to
short-term economic circumstances’. It is the employer who has the power to dictate
contractual terms unless they have been fixed by collective bargaining. Individuals,
except when they are highly sought after, have little scope to vary the terms of the
contract imposed upon them by employers.
Perhaps one of the most important trends in the employment relationship as
expressed by the psychological contract is that employees are now being required to
bear risks that were previously carried by the organization. As Elliott (1996) notes:
‘The most profound change in the labour market over the past two decades has been
the massive shift in power from employee to employer. This has not only meant that
workers have had their rights eroded, but also that much of the risk involved in a
business has been shifted from capital to labour.’
THE STATE OF THE PSYCHOLOGICAL CONTRACT
But the dire warnings about the state of the psychological contract referred to above
were not borne out by three research projects commissioned by the Institute of
Personnel and Development. The research conducted by Guest et al (1996) established
that the psychological contract (defined in terms of workers’ judgements of fairness,
trust and organizational delivery of ‘the deal’) was in better shape than many pundits
suggest. A follow-up survey (Guest and Conway, 1997) found that a very high
proportion of employees (90 per cent) believe that on balance they are fairly treated
by their employers and 79 per cent say they trust management ‘a lot’ or ‘somewhat’ to
keep its promises. Job security is not a major concern – 86 per cent feel very or fairly
The psychological contract ❚ 233
secure in their jobs. A majority (62 per cent) believe that management and workers are
on the same side and only 18 per cent disagree. However, job satisfaction was only
moderate (38 per cent express high satisfaction, but 22 per cent express low satisfac-
tion), although commitment to the organization was high (49 per cent felt ‘a lot’ and
36 per cent ‘some’ loyalty to their organization).
A further survey (Guest and Conway, 1998) established that:
● there had been no significant changes in attitudes and behaviour since the
previous survey;
● workers continue to believe that they are fairly treated – 67 per cent report fair
treatment by management and 64 per cent say that they get a fair day’s pay for a
fair day’s work;
● the number of progressive HRM practices in place is the key determinant of
whether workers believe they are fairly treated, because they exert a major influ-
ence on work attitudes;
● people report that home is for relaxation, work is for challenge;
● feelings of security remain high – 88 per cent felt very or fairly secure in their
jobs;
● people still expect a career – 60 per cent believe that their employer has made a
career promise and of these, 65 per cent think that management has largely kept
its promise (these feelings are more prevalent amongst younger workers).
The overall conclusion of the researchers in 1998 was that ‘the psychological contract
is very healthy’. On the whole, management is seen as fair, trustworthy and likely to
keep its promises. The key influences on a healthy psychological contract are the use
of progressive human resource practices, scope for direct participation at work and
working in a smaller organization.
DEVELOPING AND MAINTAINING A POSITIVE
PSYCHOLOGICAL CONTRACT
As Guest et al (1996) point out: ‘A positive psychological contract is worth taking seri-
ously because it is strongly linked to higher commitment to the organization, higher
employee satisfaction and better employment relations. Again this reinforces the
benefits of pursuing a set of progressive HRM practices.’ They also emphasize the
importance of a high-involvement climate and suggest in particular that HRM prac-
tices such as the provision of opportunities for learning, training and development,
focus on job security, promotion and careers, minimizing status differentials, fair
234 ❚ Work and employment
reward systems and comprehensive communication and involvement processes will
all contribute to a positive psychological contract.
Steps taken to manage the employment relationship as specified in Chapter 15 will
also help to form a positive psychological contract. These include:
● defining expectations during recruitment and induction programmes;
● communicating and agreeing expectations as part of the continuing dialogue
implicit in good performance management practices;
● adopting a policy of transparency on company policies and procedures and on
management’s proposals and decisions as they affect people;
● generally treating people as stakeholders, relying on consensus and cooperation
rather than control and coercion.
STATE OF THE PSYCHOLOGICAL CONTRACT 2004
The 2004 Workplace Employee Relations Survey (WERS, 2005) covering 700,000
workplaces and 22.5 million employees, surveyed 21,624 employees in workplaces
employing more than 10 people about their level of job satisfaction. The results are
shown in Table 16.1.
The psychological contract ❚ 235
Very Satisfied Neither Dissatisfied Very
satisfied % % % dissatisfied
% %
Sense of achievement 18 52 19 8 3
Scope for using initiative 20 52 19 8 3
Influence over job 12 15 28 11 3
Training 11 40 26 16 7
Pay 4 31 26 28 13
Job security 13 50 22 11 5
Work itself 17 55 19 7 3
Involvement in 8 30 39 17 6
decision-making
Table 16.1 Job satisfaction (WERS, 2005)
The only area in which there was more dissatisfaction than satisfaction was pay. A
higher proportion than might have been expected (72 per cent) were satisfied or very
satisfied with the work itself, and equally high percentages were satisfied with regard
to having a sense of achievement and scope for using initiative.
People will feel that they have been treated justly if management’s decisions and
procedures are fair, consistent, transparent and non-discriminatory, and properly
consider the views and needs of employees.
236 ❚ Work and employment
Organizational
behaviour
People perform their roles within complex systems called organizations. The study of
organizational behaviour is concerned with how people within organizations act,
individually or in groups, and how organizations function, in terms of their structure
and processes. All managers and HR specialists are in the business of influencing
behaviour in directions that will meet business needs. An understanding of organiza-
tional processes and skills in the analysis and diagnosis of patterns of organizational
behaviour are therefore important. As Nadler and Tushman (1980) have said:
The manager needs to be able to understand the patterns of behaviour that are
observed to predict in what direction behaviour will move (particularly in the light
of managerial action), and to use this knowledge to control behaviour over the
course of time. Effective managerial action requires that the manager be able to
diagnose the system he or she is working in.
The purpose of this part of the book is to outline a basic set of concepts and to provide
analytical tools which will enable HR specialists to diagnose organizational behaviour
and to take appropriate actions. This purpose is achieved by initially (Chapter 17)
providing a general analysis of the characteristics of individuals at work. The concepts
Part IV
of individual motivation, job satisfaction, commitment and job engagement are then
explored in Chapters 18 and 19 before reviewing generally in Chapter 20 the ways in
which organizations function – formal and informal structures – and how people work
together in groups. The cultural factors that affect organizational behaviour are then
examined in Chapter 21.
238 ❚ Organizational behaviour
Characteristics of people
To manage people effectively, it is necessary to understand the factors that affect how
people behave at work. This means taking into account the fundamental characteris-
tics of people as examined in this chapter under the following headings:
● individual differences – as affected by people’s abilities, intelligence, personality,
background and culture, gender and race;
● attitudes – causes and manifestations;
● influences on behaviour – personality and attitudes;
● attribution theory – how we make judgements about people;
● orientation – the approaches people adopt to work;
● roles – the parts people play in carrying out their work.
INDIVIDUAL DIFFERENCES
The management of people would be much easier if everyone were the same, but
they are, of course, different because of their ability, intelligence, personality, back-
ground and culture (the environment in which they were brought up), as discussed
below. Gender, race and disability are additional factors to be taken into account.
Importantly, the needs and wants of individuals will also differ, often fundamentally,
and this affects their motivation, as described in the next chapter.
17
The headings under which personal characteristics can vary have been classified
by Mischel (1981) as follows:
● competencies – abilities and skills;
● constructs – the conceptual framework which governs how people perceive their
environment;
● expectations – what people have learned to expect about their own and others’
behaviour;
● values – what people believe to be important;
● self-regulatory plans – the goals people set themselves and the plans they make to
achieve them.
Environmental or situational variables include the type of work individuals carry
out; the culture, climate and management style in the organization, the social group
within which individuals work; and the ‘reference groups‘ that individuals use for
comparative purposes (eg comparing conditions of work between one category of
employee and another).
Ability
Ability is the quality that makes an action possible. Abilities have been analysed by
Burt (1954) and Vernon (1961). They classified them into two major groups:
● V:ed – standing for verbal, numerical, memory and reasoning abilities;
● K:m – standing for spatial and mechanical abilities, as well as perceptual
(memory) and motor skills relating to physical operations such as eye/hand coor-
dination and mental dexterity.
They also suggested that overriding these abilities there is a ‘g’ or general intelligence
factor which accounts for most variations in performance.
Alternative classifications have been produced by
● Thurstone (1940) – spatial ability, perceptual speed, numerical ability, verbal
meaning, memory, verbal fluency and inductive reasoning;
● Gagne (1977) – intellectual skills, cognitive (understanding and learning) skills,
verbal and motor skills;
● Argyle (1989) – judgement, creativity and social skills.
240 ❚ Organizational behaviour
Intelligence
Intelligence has been defined as:
● ‘the capacity to solve problems, apply principles, make inferences and perceive
relationships’ (Argyle, 1989);
● ‘the capacity for abstract thinking and reasoning with a range of different
contents and media’ (Toplis et al 1991);
● ‘the capacity to process information’ (Makin et al, 1996);
● ‘what is measured by intelligence tests’ (Wright and Taylor, 1970).
The last, tautological definition is not facetious. As an operational definition, it can be
related to the specific aspects of reasoning, inference, cognition (ie knowing,
conceiving) and perception (ie understanding, recognition) that intelligence tests
attempt to measure.
General intelligence, as noted above, consists of a number of mental abilities that
enable a person to succeed at a wide variety of intellectual tasks that use the faculties
of knowing and reasoning. The mathematical technique of factor analysis has been
used to identify the constituents of intelligence, such as Thurstone’s (1940) multiple
factors listed above. But there is no general agreement among psychologists as to
what these factors are or, indeed, whether there is such a thing as general intelligence.
An alternative approach to the analysis of intelligence was put forward by Guilford
(1967), who distinguished five types of mental operation: thinking, remembering,
divergent production (problem-solving which leads to unexpected and original solu-
tions), convergent production (problem-solving which leads to the one, correct solu-
tion) and evaluating.
Personality
Definition
As defined by Toplis et al (1991), the term personality is all-embracing in terms of the
individual’s behaviour and the way it is organized and coordinated when he or she
interacts with the environment. Personality can be described in terms of traits or
types.
The trait concept of personality
Personality can be defined as the relatively stable and enduring aspects of individuals
that distinguish them from other people. This is the ‘trait‘ concept, traits being predis-
Characteristics of people ❚ 241
positions to behave in certain ways in a variety of different situations. The assump-
tion that people are consistent in the ways they express these traits is the basis for
making predictions about their future behaviour. We all attribute traits to people in
an attempt to understand why they behave in the way they do. As Chell (1987)
says: ‘This cognitive process gives a sense of order to what might otherwise appear to
be senseless uncoordinated behaviours. Traits may therefore be thought of as classifi-
cation systems, used by individuals to understand other people’s and their own
behaviour.’
The so-called big five personality traits as defined by Deary and Matthews (1993)
are:
● neuroticism – anxiety, depression, hostility, self-consciousness, impulsiveness,
vulnerability;
● extraversion – warmth, gregariousness, assertiveness, activity, excitement seeking,
positive emotions;
● openness – feelings, actions, ideas, values;
● agreeableness – trust, straightforwardness, altruism, compliance, modesty, tender-
mindedness;
● conscientiousness – competence, order, dutifulness, achievement-striving, self-
discipline, deliberation.
A widely used instrument for assessing traits is Cattell’s (1963) 16PF test. But the trait
theory of personality has been attacked by people such as Mischel (1981), Chell (1985)
and Harre (1979). The main criticisms have been as follows:
● People do not necessarily express the same trait across different situations or even
the same trait in the same situation. Different people may exhibit consistency in
some traits and considerable variability in others.
● Classical trait theory as formulated by Cattell (1963) assumes that the manifesta-
tion of trait behaviour is independent of the situations and the persons with
whom the individual is interacting – this assumption is questionable, given that
trait behaviour usually manifests itself in response to specific situations.
● Trait attributions are a product of language – they are devices for speaking about
people and are not generally described in terms of behaviour.
Type theories of personality
Type theory identifies a number of types of personality that can be used to categorize
people and may form the basis of a personality test. The types may be linked to
descriptions of various traits.
242 ❚ Organizational behaviour
One of the most widely used type theories is that of Jung (1923). He identified four
major preferences of people:
● relating to other people – extraversion or introversion;
● gathering information – sensing (dealing with facts that can be objectively veri-
fied) or intuitive (generating information through insight);
● using information – thinking (emphasizing logical analysis as the basis for deci-
sion-making) or feeling (making decisions based on internal values and beliefs);
● making decisions – perceiving (collecting all the relevant information before
making a decision) or judging (resolving the issue without waiting for a large
quantity of data).
This theory of personality forms the basis of personality tests such as the Myers-
Briggs Types Indicator.
Eysenck (1953) identified three personality traits: extroversion/introversion,
neuroticism and psychoticism, and classified people as stable or unstable extroverts
or introverts. For example, a stable introvert is passive, careful, controlled and
thoughtful, while a stable extrovert is lively, outgoing, responsive and sociable.
As Makin et al (1996) comment, studies using types to predict work-related behav-
iours are less common and may be difficult to interpret: ‘In general it would be fair to
say that their level of predictability is similar to that for trait measures.’
The influence of background
Individual differences may be a function of people’s background, which will include
the environment and culture in which they have been brought up and now exist.
Levinson (1978) suggested that ‘individual life structure‘ is shaped by three types of
external event:
● the socio-cultural environment;
● the roles they play and the relationships they have;
● the opportunities and constraints that enable or inhibit them to express and
develop their personality.
Differences arising from gender, race or disability
It is futile, dangerous and invidious to make assumptions about inherent differences
between people because of their sex, race or degree of disability. If there are differ-
ences in behaviour at work, these are more likely to arise from environmental and
cultural factors than from differences in fundamental personal characteristics. The
Characteristics of people ❚ 243
work environment undoubtedly influences feelings and behaviour for each of these
categories. Research cited by Arnold et al (1991) established that working women
as a whole ‘experienced more daily stress, marital dissatisfaction, and ageing worries,
and were less likely to show overt anger than either housewives or men’. Ethnic
minorities may find that the selection process is biased against them, promotion
prospects are low and that they are subject to other overt or subtle forms of discrimi-
nation. The behaviour of people with disabilities can also be affected by the fact
that they are not given equal opportunities. There is, of course, legislation against
discrimination in each of those areas but this cannot prevent the more covert forms of
prejudice.
ATTITUDES
An attitude can broadly be defined as a settled mode of thinking. Attitudes are evalu-
ative. As described by Makin et al (1996), ‘Any attitude contains an assessment of
whether the object to which it refers is liked or disliked.’ Attitudes are developed
through experience but they are less stable than traits and can change as new experi-
ences are gained or influences absorbed. Within organizations they are affected by
cultural factors (values and norms), the behaviour of management (management
style), policies such as those concerned with pay, recognition, promotion and the
quality of working life, and the influence of the ‘reference group’ (the group with
whom people identify).
INFLUENCES ON BEHAVIOUR AT WORK
Factors affecting behaviour
Behaviour at work is dependent on both the personal characteristics of individuals
(personality and attitudes) and the situation in which they are working. These factors
interact, and this theory of behaviour is sometimes called interactionism. It is because
of this process of interaction and because there are so many variables in personal
characteristics and situations that behaviour is difficult to analyse and predict. It is
generally assumed that attitudes determine behaviour, but there is not such a direct
link as most people suppose. As Arnold et al (1991) comment, research evidence has
shown that: ‘People’s avowed feelings and beliefs about someone or something
seemed only loosely related to how they behaved towards it.’
Behaviour will be influenced by the perceptions of individuals about the situation
they are in. The term psychological climate has been coined by James and Sells (1981) to
244 ❚ Organizational behaviour
describe how people’s perceptions of the situation give it psychological significance
and meaning. They suggested that the key environmental variables are:
● role characteristics such as role ambiguity and conflict (see the last section in this
chapter);
● job characteristics such as autonomy and challenge;
● leader behaviours, including goal emphasis and work facilitation;
● work group characteristics, including cooperation and friendliness;
● organizational policies that directly affect individuals, such as the reward system.
ATTRIBUTION THEORY – HOW WE MAKE JUDGEMENTS
ABOUT PEOPLE
The ways in which we perceive and make judgements about people at work are
explained by attribution theory, which concerns the assignment of causes to events.
We make an attribution when we perceive and describe other people’s actions and try
to discover why they behaved in the way they did. We can also make attributions
about our own behaviour. Heider (1958) has pointed out that: ‘In everyday life we
form ideas about other people and about social situations. We interpret other people’s
actions and we predict what they will do under certain circumstances.’
In attributing causes to people’s actions we distinguish between what is in the
person’s power to achieve and the effect of environmental influence. A personal
cause, whether someone does well or badly, may, for example, be the amount of effort
displayed, while a situational cause may be the extreme difficulty of the task. Kelley
(1967) has suggested that there are four criteria that we apply to decide whether
behaviour is attributable to personal rather than external (situational) causes:
● distinctiveness – the behaviour can be distinguished from the behaviour of other
people in similar situations;
● consensus – if other people agree that the behaviour is governed by some personal
characteristic;
● consistency over time – whether the behaviour is repeated;
● consistency over modality (ie the manner in which things are done) – whether or not
the behaviour is repeated in different situations.
Attribution theory is also concerned with the way in which people attribute success
or failure to themselves. Research by Weiner (1974) and others has indicated that
when people with high achievement needs have been successful, they ascribe this to
internal factors such as ability and effort. High achievers tend to attribute failure to
Characteristics of people ❚ 245
lack of effort and not lack of ability. Low achievers tend not to link success with effort
but to ascribe their failures to lack of ability.
ORIENTATION TO WORK
Orientation theory examines the factors that are instrumental, ie serve as a means, in
directing people’s choices about work. An orientation is a central organizing prin-
ciple that underlies people’s attempts to make sense of their lives. In relation to work,
as defined by Guest (1984): ‘An orientation is a persisting tendency to seek certain
goals and rewards from work which exists independently of the nature of the work
and the work content.’ The orientation approach stresses the role of the social envi-
ronment factor as a key factor affecting motivation.
Orientation theory is primarily developed from fieldwork carried out by sociolo-
gists rather than from laboratory work conducted by psychologists. Goldthorpe et al
(1968) studied skilled and semi-skilled workers in Luton, and, in their findings, they
stressed the importance of instrumental orientation, that is, a view of work as a
means to an end, a context in which to earn money to purchase goods and leisure.
According to Goldthorpe, the ‘affluent’ worker interviewed by the research team
valued work largely for extrinsic reasons.
In their research carried out with blue-collar workers in Peterborough, Blackburn
and Mann (1979) found a wider range of orientations. They suggested that different
ones could come into play with varying degrees of force in different situations. The
fact that workers, in practice, had little choice about what they did contributed to this
diversity – their orientations were affected by the choice or lack of choice presented to
them and this meant that they might be forced to accept alternative orientations.
But Blackburn and Mann confirmed that pay was a key preference area, the top
preferences being:
1. pay;
2. security;
3. workmates;
4. intrinsic job satisfaction;
5. autonomy.
They commented that: ‘An obsession with wages clearly emerged… A concern to
minimize unpleasant work was also widespread.’ Surprisingly, perhaps, they also
revealed that the most persistent preference of all was for outside work, ‘a fairly clear
desire for a combination of fresh air and freedom’.
246 ❚ Organizational behaviour
ROLES
When faced with any situation, eg carrying out a job, people have to enact a role in
order to manage that situation. This is sometimes called the ‘situation-act model’. As
described by Chell (1985), the model indicates that: ‘The person must act within situ-
ations: situations are rule-governed and how a person behaves is often prescribed by
these socially acquired rules. The person thus adopts a suitable role in order to
perform effectively within the situation.’
At work, the term role describes the part to be played by individuals in fulfilling
their job requirements. Roles therefore indicate the specific forms of behaviour
required to carry out a particular task or the group of tasks contained in a position or
job. Work role profiles primarily define the requirements in terms of the ways tasks
are carried out rather than the tasks themselves. They may refer to broad aspects of
behaviour, especially with regard to working with others and styles of management.
A distinction can therefore be made between a job description, which simply lists the
main tasks an individual has to carry out, and a role profile, which is more concerned
with the behavioural aspects of the work and the outcomes the individual in the role
is expected to achieve. The concept of a role emphasizes the fact that people at work
are, in a sense, always acting a part; they are not simply reciting the lines but inter-
preting them in terms of their own perceptions of how they should behave in relation
to the context in which they work, especially with regard to their interactions with
other people and their discretionary behaviour.
Role theory, as formulated by Katz and Kahn (1966) states that the role individuals
occupy at work – and elsewhere – exists in relation to other people – their role set.
These people have expectations about the individuals’ role, and if they live up to
these expectations they will have successfully performed the role. Performance in a
role is a product of the situation individuals are in (the organizational context and the
direction or influence exercised from above or elsewhere in the organization) and
their own skills, competences, attitudes and personality. Situational factors are
important, but the role individuals perform can both shape and reflect their personal-
ities. Stress and inadequate performance result when roles are ambiguous, incompat-
ible, or in conflict with one another.
Role ambiguity
When individuals are unclear about what their role is, what is expected of them,
or how they are getting on, they may become insecure or lose confidence in
themselves.
Characteristics of people ❚ 247
Role incompatibility
Stress and poor performance may be caused by roles having incompatible elements,
as when there is a clash between what other people expect from the role and what
individuals believe is expected of them.
Role conflict
Role conflict results when, even if roles are clearly defined and there is no incompati-
bility between expectations, individuals have to carry out two antagonistic roles. For
example, conflict can exist between the roles of individuals at work and their roles at
home.
IMPLICATIONS FOR HR SPECIALISTS
The main implications for HR specialists of the factors that affect individuals at work
are as follows:
● Individual differences – when designing jobs, preparing learning programmes,
assessing and counselling staff, developing reward systems and dealing with
grievances and disciplinary problems, it is necessary to remember that all people
are different. This may seem obvious but it is remarkable how many people
ignore it. What fulfils one person may not fulfil another. Abilities, aptitudes and
intelligence differ widely and particular care needs to be taken in fitting the right
people into the right jobs and giving them the right training. Personalities and
attitudes also differ. It is important to focus on how to manage diversity as
described in Chapter 57. This should take account of individual differences,
which will include any issues arising from the employment of women, people
from different ethnic groups, those with disabilities and older people.
● Personalities should not be judged simplistically in terms of stereotyped traits.
People are complex and they change, and account has to be taken of this. The
problem for HR specialists and managers in general is that, while they have to
accept and understand these differences and take full account of them, they have
ultimately to proceed on the basis of fitting them to the requirements of the situa-
tion, which are essentially what the organization needs to achieve. There is
always a limit to the extent to which an organization, which relies on collective
effort to achieve its goals, can adjust itself to the specific needs of individuals. But
the organization has to appreciate that the pressures it makes on people can result
in stress and therefore become counter-productive.
248 ❚ Organizational behaviour
● Judgements about people (attribution theory) – we all ascribe motives to other
people and attempt to establish the causes of their behaviour. We must be careful,
however, not to make simplistic judgements about causality (ie what has moti-
vated someone’s behaviour) – for ourselves as well as in respect of others – espe-
cially when we are assessing performance.
● Orientation theory – the significance of orientation theory is that it stresses the
importance of the effect of environmental factors on the motivation to work.
● Role theory – role theory helps us to understand the need to clarify with individ-
uals what is expected of them in behavioural and outcome terms and to ensure
when designing roles that they do not contain any incompatible elements. We
must also be aware of the potential for role conflict so that steps can be taken to
minimize stress.
Characteristics of people ❚ 249
Motivation
All organizations are concerned with what should be done to achieve sustained high
levels of performance through people. This means giving close attention to how
individuals can best be motivated through such means as incentives, rewards, leader-
ship and, importantly, the work they do and the organization context within which
they carry out that work. The aim is to develop motivation processes and a work
environment that will help to ensure that individuals deliver results in accordance
with the expectations of management.
Motivation theory examines the process of motivation. It explains why people at
work behave in the way they do in terms of their efforts and the directions they are
taking. It describes what organizations can do to encourage people to apply their
efforts and abilities in ways that will further the achievement of the organization’s
goals as well as satisfying their own needs. It is also concerned with job satisfaction –
the factors that create it and its impact on performance.
In understanding and applying motivation theory, the aim is to obtain added value
through people in the sense that the value of their output exceeds the cost of gener-
ating it. This can be achieved through discretionary effort. In most if not all roles there
is scope for individuals to decide how much effort they want to exert. They can do
just enough to get away with it, or they can throw themselves into their work and
deliver added value. Discretionary effort can be a key component in organizational
performance.
18
Unfortunately, approaches to motivation are too often underpinned by simplistic
assumptions about how it works. The process of motivation is much more complex
than many people believe. People have different needs, establish different goals to
satisfy those needs and take different actions to achieve those goals. It is wrong to
assume that one approach to motivation fits all. That is why the assumptions under-
lying belief in the virtues of performance-related pay as a means of providing a moti-
vational incentive are simplistic. Motivational practices are most likely to function
effectively if they are based on proper understanding of what is involved. This
chapter therefore covers the following:
● the process of motivation;
● the various theories of motivation which explain and amplify the basic process;
● the practical implications of motivation theory;
● job satisfaction.
THE PROCESS OF MOTIVATION
What is motivation? A motive is a reason for doing something. Motivation is
concerned with the factors that influence people to behave in certain ways. The three
components of motivation as listed by Arnold et al (1991) are:
● direction – what a person is trying to do;
● effort – how hard a person is trying;
● persistence – how long a person keeps on trying.
Motivating other people is about getting them to move in the direction you want
them to go in order to achieve a result. Motivating yourself is about setting the direc-
tion independently and then taking a course of action which will ensure that you get
there. Motivation can be described as goal-directed behaviour. People are motivated
when they expect that a course of action is likely to lead to the attainment of a goal
and a valued reward – one that satisfies their needs.
Well-motivated people are those with clearly defined goals who take action that
they expect will achieve those goals. Such people may be self-motivated, and as long
as this means they are going in the right direction to achieve what they are there to
achieve, then this is the best form of motivation. Most people, however, need to be
motivated to a greater or lesser degree. The organization as a whole can provide the
context within which high levels of motivation can be achieved by providing incen-
tives and rewards, satisfying work, and opportunities for learning and growth. But
252 ❚ Organizational behaviour
managers still have a major part to play in using their motivating skills to get people
to give of their best, and to make good use of the motivational processes provided by
the organization. To do this it is necessary to understand the process of motivation –
how it works and the different types of motivation that exist.
A needs-related model of the process of motivation is shown in Figure 18.1. This
suggests that motivation is initiated by the conscious or unconscious recognition of
unsatisfied needs. These needs create wants, which are desires to achieve or obtain
something. Goals are then established which it is believed will satisfy these needs and
wants and a behaviour pathway is selected which it is expected will achieve the goal.
If the goal is achieved, the need will be satisfied and the behaviour is likely to be
repeated the next time a similar need emerges. If the goal is not achieved, the same
action is less likely to be repeated. This process of repeating successful behaviour or
actions is called reinforcement or the law of effect (Hull, 1951). It has, however, been
criticised by Allport (1954) as ignoring the influence of expectations and therefore
constituting ‘hedonism of the past’.
TYPES OF MOTIVATION
Motivation at work can take place in two ways. First, people can motivate themselves
by seeking, finding and carrying out work (or being given work) that satisfies their
needs or at least leads them to expect that their goals will be achieved. Secondly,
people can be motivated by management through such methods as pay, promotion,
praise, etc.
Motivation ❚ 253
establish
goal
attain
goal
need
take
action
Figure 18.1 The process of motivation
There are two types of motivation as originally identified by Herzberg et al (1957):
● Intrinsic motivation – the self-generated factors that influence people to behave in
a particular way or to move in a particular direction. These factors include
responsibility (feeling that the work is important and having control over one’s
own resources), autonomy (freedom to act), scope to use and develop skills and
abilities, interesting and challenging work and opportunities for advancement.
● Extrinsic motivation – what is done to or for people to motivate them. This includes
rewards, such as increased pay, praise, or promotion, and punishments, such as
disciplinary action, withholding pay, or criticism.
Extrinsic motivators can have an immediate and powerful effect, but it will not neces-
sarily last long. The intrinsic motivators, which are concerned with the ‘quality of
working life’ (a phrase and movement that emerged from this concept), are likely to
have a deeper and longer-term effect because they are inherent in individuals and not
imposed from outside.
MOTIVATION THEORY
Approaches to motivation are underpinned by motivation theory. The most influen-
tial theories are classified as follows:
● Instrumentality theory, which states that rewards or punishments (carrots or sticks)
serve as the means of ensuring that people behave or act in desired ways.
● Content theory, which focuses on the content of motivation. It states that motiva-
tion is essentially about taking action to satisfy needs, and identifies the main
needs that influence behaviour. Needs theory was originated by Maslow (1954),
and in their two-factor model, Herzberg et al (1957) listed needs which they
termed ‘satisfiers’.
● Process theory, which focuses on the psychological processes which affect motiva-
tion, by reference to expectations (Vroom, 1964), goals (Latham and Locke, 1979)
and perceptions of equity (Adams, 1965).
These are summarized in Table 18.1 on page 256.
INSTRUMENTALITY THEORY
‘Instrumentality’ is the belief that if we do one thing it will lead to another. In its
crudest form, instrumentality theory states that people only work for money.
254 ❚ Organizational behaviour
The theory emerged in the second half of the nineteenth century with its emphasis
on the need to rationalize work and on economic outcomes. It assumes that a person
will be motivated to work if rewards and penalties are tied directly to his or
her performance, thus the awards are contingent upon effective performance.
Instrumentality theory has its roots in Taylorism, ie the scientific management
methods of F W Taylor (1911), who wrote: ‘It is impossible, through any long period
of time, to get workmen to work much harder than the average men around them
unless they are assured a large and permanent increase in their pay.’
This theory is based on the principle of reinforcement as influenced by Skinner’s
(1974) concept of conditioning – the theory that people can be ‘conditioned’ to act in
certain ways if they are rewarded for behaving as required. It is also called the law of
effect. Motivation using this approach has been, and still is, widely adopted and can
be successful in some circumstances. But it is based exclusively on a system of
external controls and fails to recognize a number of other human needs. It also fails to
appreciate the fact that the formal control system can be seriously affected by the
informal relationship existing between workers.
CONTENT (NEEDS) THEORY
The basis of this theory is the belief that the content of motivation consists of needs.
An unsatisfied need creates tension and a state of disequilibrium. To restore the
balance, a goal that will satisfy the need is identified, and a behaviour pathway that
will lead to the achievement of the goal is selected. All behaviour is therefore moti-
vated by unsatisfied needs.
Not all needs are equally important for a person at any one time – some may
provide a much more powerful drive towards a goal than others, depending on the
individual’s background and present situation. Complexity is further increased
because there is no simple relationship between needs and goals. The same need can
be satisfied by a number of different goals and the stronger the need and the longer
its duration, the broader the range of possible goals. At the same time, one goal may
satisfy a number of needs – a new car provides transport as well as an opportunity to
impress the neighbours.
Needs theory was developed originally by Maslow (1954), who postulated the
concept of a hierarchy of needs which he believed were fundamental to the person-
ality. Herzberg et al’s (1957) two-factor model (see page 262) cannot strictly be classi-
fied as needs theory but he did identify a number of fundamental needs.
Motivation ❚ 255
256 ❚ Organizational behaviour
Category Type Theorist(s) Summary of theory Implications
Instrumentality Taylorism Taylor If we do one thing it Basis of crude attempts
leads to another. People to motivate people by
will be motivated to incentives. Often used
work if rewards and as the implied rationale
punishments are for performance-
directly related to related pay although
their performance this is seldom an
effective motivator
Content Hierarchy Maslow A hierarchy of five Focuses attention
(needs) of needs needs exist: on the various needs
theory physiological, that motivate people
safety, social, and the notion that
esteem, self-fulfilment. a satisfied need is no
Needs at a higher longer a motivator.
level only emerge The concept of a
when a lower need hierarchy has no
is satisfied practical significance
Two-factor Satisfiers/ Herzberg Two groups of factors Identifies a number of
model dissatisfiers affect job satisfaction: fundamental needs,
(1) those intrinsic to ie achievement,
the job (intrinsic recognition,
motivators or advancement,
satisfiers) such as autonomy and the
achievement, work itself. Strongly
recognition, the work influences approaches
itself, responsibility to job design (job
and growth; (2) those enrichment). Drew
extrinsic to the job attention to the
(extrinsic motivators or concept of intrinsic
hygiene factors) such as and extrinsic motivation
pay and working and the fact that
conditions intrinsic motivation
mainly derived from the
work itself will have a
longer-lasting effect.
Therefore underpins
the proposition that
reward systems should
provide for both
financial and non-
financial rewards
Table 18.1 Summary of motivation theories
continued
In addition, Alderfer (1972) developed his ERG theory, which refers to the need for
existence, relatedness and growth. Maslow’s theory has been most influential.
Maslow’s hierarchy of needs
The most famous classification of needs is the one formulated by Maslow (1954). He
suggested that there are five major need categories which apply to people in general,
starting from the fundamental physiological needs and leading through a hierarchy
of safety, social and esteem needs to the need for self-fulfilment, the highest need of
all. Maslow‘s hierarchy is as follows:
1. Physiological – the need for oxygen, food, water and sex.
Motivation ❚ 257
Table 18.1 continued
Process/ Expectancy Vroom, Motivation and The key theory
cognitive theory Porter and performance are informing approaches
theory Lawler influenced by: (1) the to rewards, ie that
perceived link there must be a link
between effort and between effort and
performance, (2) the reward (line of sight),
perceived link the reward should be
between performance achievable and
and outcomes, and should be
(3) the significance worthwhile
(valence) of the
outcome to the person.
Effort (motivation)
depends on the
likelihood that rewards
will follow effort and
that the reward is
worthwhile
Goal Latham Motivation and Provides the rationale
theory and Locke performance will for performance
improve if people have management
difficult but agreed goals processes, goal
and receive feedback setting and feedback
Equity Adams People are better Need to develop
theory motivated if treated equitable reward and
equitably employment practices
2. Safety – the need for protection against danger and the deprivation of physiolog-
ical needs.
3. Social – the need for love, affection and acceptance as belonging to a group.
4. Esteem – the need to have a stable, firmly based, high evaluation of oneself (self-
esteem) and to have the respect of others (prestige). These needs may be classi-
fied into two subsidiary sets: first, the desire for achievement, for adequacy, for
confidence in the face of the world, and for independence and freedom, and,
second, the desire for reputation or status defined as respect or esteem from other
people, and manifested by recognition, attention, importance, or appreciation.
5. Self-fulfilment (self-actualization) – the need to develop potentialities and skills, to
become what one believes one is capable of becoming.
Maslow’s theory of motivation states that when a lower need is satisfied, the next
highest becomes dominant and the individual’s attention is turned to satisfying
this higher need. The need for self-fulfilment, however, can never be satisfied. He
said that ‘man is a wanting animal’; only an unsatisfied need can motivate behaviour
and the dominant need is the prime motivator of behaviour. Psychological develop-
ment takes place as people move up the hierarchy of needs, but this is not necessarily
a straightforward progression. The lower needs still exist, even if temporarily
dormant as motivators, and individuals constantly return to previously satisfied
needs.
One of the implications of Maslow’s theory is that the higher-order needs for
esteem and self-fulfilment provide the greatest impetus to motivation – they grow in
strength when they are satisfied, while the lower needs decline in strength on satis-
faction. But the jobs people do will not necessarily satisfy their needs, especially
when they are routine or deskilled.
Maslow’s needs hierarchy has an intuitive appeal and has been very influential.
But it has not been verified by empirical research and it has been criticized for its
apparent rigidity – different people may have different priorities and it is difficult to
accept that people’s needs progress steadily up the hierarchy. In fact, Maslow himself
expressed doubts about the validity of a strictly ordered hierarchy.
PROCESS THEORY
In process theory, the emphasis is on the psychological processes or forces that affect
motivation, as well as on basic needs. It is also known as cognitive theory because it is
concerned with people’s perceptions of their working environment and the ways in
which they interpret and understand it. According to Guest (1992a), process theory
258 ❚ Organizational behaviour
provides a much more relevant approach to motivation than the theories of Maslow
and Herzberg, which, he suggests, have been shown by extensive research to be
wrong.
Process or cognitive theory can certainly be more useful to managers than needs
theory because it provides more realistic guidance on motivation techniques. The
processes are:
● expectations (expectancy theory);
● goal achievement (goal theory);
● feelings about equity (equity theory).
Expectancy theory
The concept of expectancy was originally contained in the valency–instrumen-
tality–expectancy (VIE) theory which was formulated by Vroom (1964). Valency
stands for value, instrumentality is the belief that if we do one thing it will lead to
another, and expectancy is the probability that action or effort will lead to an out-
come. This concept of expectancy was defined in more detail by Vroom as follows:
Where an individual chooses between alternatives which involve uncertain outcomes, it
seems clear that his behaviour is affected not only by his preferences among these
outcomes but also by the degree to which he believes these outcomes to be possible. An
expectancy is defined as a momentary belief concerning the likelihood that a particular
act will be followed by a particular outcome. Expectancies may be described in terms of
their strength. Maximal strength is indicated by subjective certainty that the act will be
followed by the outcome, while minimal (or zero) strength is indicated by subjective
certainty that the act will not be followed by the outcome.
The strength of expectations may be based on past experiences (reinforcement), but
individuals are frequently presented with new situations – a change in job, payment
system, or working conditions imposed by management – where past experience is
not an adequate guide to the implications of the change. In these circumstances, moti-
vation may be reduced.
Motivation is only likely when a clearly perceived and usable relationship exists
between performance and outcome, and the outcome is seen as a means of satisfying
needs. This explains why extrinsic financial motivation – for example, an incentive or
bonus scheme – works only if the link between effort and reward is clear (in the
words of Lawler (1990) there is a ‘line of sight’) and the value of the reward is worth
the effort. It also explains why intrinsic motivation arising from the work itself can be
Motivation ❚ 259
more powerful than extrinsic motivation. Intrinsic motivation outcomes are more
under the control of individuals, who can place greater reliance on their past experi-
ences to indicate the extent to which positive and advantageous results are likely to
be obtained by their behaviour.
This theory was developed by Porter and Lawler (1968) into a model, illustrated in
Figure 18.2, which follows Vroom’s ideas by suggesting that there are two factors
determining the effort people put into their jobs:
1. the value of the rewards to individuals in so far as they satisfy their needs for
security, social esteem, autonomy, and self-actualization;
2. the probability that rewards depend on effort, as perceived by individuals – in
other words, their expectations about the relationships between effort and
reward.
Thus, the greater the value of a set of awards and the higher the probability that
receiving each of these rewards depends upon effort, the greater the effort that will be
put forth in a given situation.
But, as Porter and Lawler emphasize, mere effort is not enough. It has to be effec-
tive effort if it is to produce the desired performance. The two variables additional to
effort which affect task achievement are:
● ability – individual characteristics such as intelligence, manual skills, know-how;
● role perceptions – what the individual wants to do or thinks he or she is required to
do. These are good from the viewpoint of the organization if they correspond
with what it thinks the individual ought to be doing. They are poor if the views of
the individual and the organization do not coincide.
260 ❚ Organizational behaviour
Value of rewards Abilities
Effort Performance
Probability that
reward depends
upon effort
Role expectations
Figure 18.2 Motivation model (Porter and Lawler, 1968)
Goal theory
Goal theory as developed by Latham and Locke (1979) states that motivation
and performance are higher when individuals are set specific goals, when goals
are difficult but accepted, and when there is a feedback on performance. Participation
in goal setting is important as a means of getting agreement to the setting of
higher goals. Difficult goals must be agreed and their achievement reinforced by
guidance and advice. Finally, feedback is vital in maintaining motivation, particularly
towards the achievement of even higher goals.
Erez and Zidon (1984) emphasized the need for acceptance of and commitment to
goals. They found that, as long as they are agreed, demanding goals lead to better
performance than easy ones. Erez (1977) also emphasized the importance of feed-
back. As Robertson et al (1992) point out:
Goals inform individuals to achieve particular levels of performance, in order for them
to direct and evaluate their actions; while performance feedback allows the individual
to track how well he or she has been doing in relation to the goal, so that, if necessary,
adjustments in effort, direction or possibly task strategies can be made.
Goal theory is in line with the 1960s concept of management by objectives. The latter
approach, however, often failed because it was tackled bureaucratically without
gaining the real support of those involved and, importantly, without ensuring that
managers were aware of the significance of the processes of agreement, reinforcement
and feedback, and were skilled in practising them.
Goal theory, however, plays a key part in the performance management process
which was evolved from the largely discredited management-by-objectives
approach. Performance management is dealt with in Part VII.
Equity theory
Equity theory is concerned with the perceptions people have about how they are
being treated compared with others. To be dealt with equitably is to be treated fairly
in comparison with another group of people (a reference group) or a relevant other
person. Equity involves feelings and perceptions and is always a comparative
process. It is not synonymous with equality, which means treating everyone the same,
since this would be inequitable if they deserve to be treated differently.
Equity theory states, in effect, that people will be better motivated if they are
treated equitably and demotivated if they are treated inequitably. It explains only one
aspect of the process of motivation and job satisfaction, although it may be significant
in terms of morale.
Motivation ❚ 261
As suggested by Adams (1965), there are two forms of equity: distributive equity,
which is concerned with the fairness with which people feel they are rewarded in
accordance with their contribution and in comparison with others; and procedural
equity, or procedural justice, which is concerned with the perceptions employees
have about the fairness with which procedures in such areas as performance
appraisal, promotion and discipline are being operated.
Interpersonal factors are closely linked to feelings about procedural fairness. Five
factors that contribute to perceptions of procedural fairness have been identified by
Tyler and Bies (1990). These are:
1. adequate considerations of an employee’s viewpoint;
2. suppression of personal bias towards the employee;
3. applying criteria consistently across employees;
4. providing early feedback to employees concerning the outcome of decisions;
5. providing employees with an adequate explanation of the decision made.
HERZBERG’S TWO-FACTOR MODEL
The two-factor model of satisfiers and dissatisfiers was developed by Herzberg et al
(1957) following an investigation into the sources of job satisfaction and dissatisfac-
tion of accountants and engineers. It was assumed that people have the capacity to
report accurately the conditions that made them satisfied and dissatisfied with their
jobs. Accordingly, the subjects were asked to tell their interviewers about the times
during which they felt exceptionally good and exceptionally bad about their jobs and
how long their feelings persisted. It was found that the accounts of ‘good’ periods
most frequently concerned the content of the job, particularly achievement, recogni-
tion, advancement, autonomy, responsibility, and the work itself. On the other hand,
accounts of ‘bad’ periods most frequently concerned the context of the job. Company
policy and administration, supervision, salary and working conditions more
frequently appeared in these accounts than in those told about ‘good’ periods. The
main implications of this research, according to Herzberg, are that:
The wants of employees divide into two groups. One group revolves around the need to
develop in one’s occupation as a source of personal growth. The second group operates
as an essential base to the first and is associated with fair treatment in compensation,
supervision, working conditions and administrative practices. The fulfilment of the
needs of the second group does not motivate the individual to high levels of job satis-
faction and to extra performance on the job. All we can expect from satisfying this
second group of needs is the prevention of dissatisfaction and poor job performance.
262 ❚ Organizational behaviour
Motivation ❚ 263
These groups form the two factors in Herzberg’s model: one consists of the satisfiers
or motivators, because they are seen to be effective in motivating the individual to
superior performance and effort. The other consists of the dissatisfiers, which essen-
tially describe the environment and serve primarily to prevent job dissatisfaction,
while having little effect on positive job attitudes. The latter were named the hygiene
factors in the medical use of the term, meaning preventive and environmental.
Reservations about Herzberg’s theory
Herzberg’s two-factor model has been attacked. The research method has been criti-
cized because no attempt was made to measure the relationship between satisfaction
and performance. It has been suggested that the two-factor nature of the theory is an
inevitable result of the questioning method used by the interviewers. It has also been
suggested that wide and unwarranted inferences have been drawn from small and
specialized samples and that there is no evidence to suggest that the satisfiers do
improve productivity.
In spite of these criticisms (or perhaps because of them, as they are all from acade-
mics), the Herzberg theory continues to thrive; partly because for the layman it is
easy to understand and seems to be based on ‘real-life’ rather than academic abstrac-
tion, and partly because it fits in well with the highly respected ideas of Maslow
(1954) and McGregor (1960) in its emphasis on the positive value of the intrinsic moti-
vating factors. It is also in accord with a fundamental belief in the dignity of labour
and the Protestant ethic – that work is good in itself. As a result, Herzberg had
immense influence on the job enrichment movement, which sought to design jobs in
a way that would maximize the opportunities to obtain intrinsic satisfaction from
work and thus improve the quality of working life. His emphasis on the distinction
between intrinsic and extrinsic motivation is also important.
THE RELATIONSHIP BETWEEN MOTIVATION, JOB
SATISFACTION AND MONEY
The basic requirements for job satisfaction may include comparatively higher pay,
an equitable payment system, real opportunities for promotion, considerate and
participative management, a reasonable degree of social interaction at work, inter-
esting and varied tasks and a high degree of autonomy: control over work pace
and work methods. The degree of satisfaction obtained by individuals, however,
depends largely upon their own needs and expectations, and the working environ-
ment.
JOB SATISFACTION
The term ‘job satisfaction’ refers to the attitudes and feelings people have about their
work. Positive and favourable attitudes towards the job indicate job satisfaction.
Negative and unfavourable attitudes towards the job indicate job dissatisfaction.
Morale is often defined as being equivalent to job satisfaction. Thus Guion (1958)
defines morale as ‘the extent to which an individual’s needs are satisfied and the
extent to which the individual perceives that satisfaction as stemming from his (sic)
total work situation’. Other definitions stress the group aspects of morale. Gilmer
(1961) suggests that morale ‘is a feeling of being accepted by and belonging to a
group of employees through adherence to common goals’. He distinguishes between
morale as a group variable, related to the degree to which group members feel
attracted to their group and desire to remain a member of it, and job attitude as an
individual variable related to the feelings employees have about their job.
Factors affecting job satisfaction
The level of job satisfaction is affected by intrinsic and extrinsic motivating factors,
the quality of supervision, social relationships with the work group and the degree to
which individuals succeed or fail in their work. Purcell et al (2003) believe that discre-
tionary behaviour which helps the firm to be successful is most likely to happen
when employees are well motivated and feel committed to the organization and
when the job gives them high levels of satisfaction. Their research found that the key
factors affecting job satisfaction were career opportunities, job influence, teamwork
and job challenge.
Job satisfaction and performance
It is a commonly held and a seemingly not unreasonable belief that an increase in job
satisfaction will result in improved performance. But research has not established any
strongly positive connection between satisfaction and performance. A review of the
extensive literature on this subject by Brayfield and Crockett (1955) concluded that
there was little evidence of any simple or appreciable relationship between employee
attitudes and their performance. An updated review of their analysis by Vroom (1964)
covered 20 studies, in each of which one or more measures of job satisfaction or
employee attitudes was correlated with one or more criteria of performance. The
median correlation of all these studies was 0.14, which is not high enough to suggest
a marked relationship between satisfaction and performance. Brayfield and Crockett
concluded that:
264 ❚ Organizational behaviour
Productivity is seldom a goal in itself but a means to goal attainment. Therefore we
might expect high satisfaction and high productivity to occur together when productivity
is perceived as a path to certain important goals and when these goals are achieved.
Under such conditions, satisfaction and productivity might be unrelated or even nega-
tively related.
It can be argued that it is not job satisfaction that produces high performance but high
performance that produces job satisfaction, and that a satisfied worker is not neces-
sarily a productive worker and a high producer is not necessarily a satisfied worker.
People are motivated to achieve certain goals and will be satisfied if they achieve
these goals through improved performance. They may be even more satisfied if they
are then rewarded by extrinsic recognition or an intrinsic sense of achievement. This
suggests that performance improvements can be achieved by giving people the
opportunity to perform, ensuring that they have the knowledge and skill required to
perform, and rewarding them by financial or non-financial means when they do
perform. It can also be argued that some people may be complacently satisfied with
their job and will not be inspired to work harder or better. They may find other ways
to satisfy their needs.
Measuring job satisfaction
The level of job satisfaction can be measured by the use of attitude surveys. There are
four methods of conducting them:
1. By the use of structured questionnaires. These can be issued to all or a sample of
employees. The questionnaires may be standardized ones, such as the Brayfield
and Rothe Index of Job Satisfaction, or they may be developed specially for the
organization. The advantage of using standardized questionnaires is that they
have been thoroughly tested and in many cases norms are available against
which results can be compared. Benchmarking can be carried out with other
organizations, possibly using the services provided by the Saratoga Institute.
Additional questions especially relevant to the company can be added to the
standard list. A tailor-made questionnaire can be used to highlight particular
issues, but it may be advisable to obtain professional help from an experienced
psychologist, who can carry out the skilled work of drafting and pilot-testing the
questionnaire and interpreting the results. Questionnaires have the advantage of
being relatively cheap to administer and analyse, especially when there are large
numbers involved. An example of a questionnaire is given in the Appendix.
2. By the use of interviews. These may be ‘open-ended’ or depth interviews in which
the discussion is allowed to range quite freely. Or they may be semi-structured in
Motivation ❚ 265
that there is a checklist of points to be covered, although the aim of the inter-
viewer should be to allow discussion to flow around the points so that the frank
and open views of the individual are obtained. Alternatively, and more rarely,
interviews can be highly structured so that they become no more than the spoken
application of a questionnaire. Individual interviews are to be preferred because
they are more likely to be revealing, but they are expensive and time-consuming
and not so easy to analyse. Discussions through ‘focus groups’ (ie groups of
employees convened to focus their attention on particular issues) are a quicker
way of reaching a large number of people, but the results are not so easy to quan-
tify and some people may have difficulty in expressing their views in public.
3. By a combination of questionnaire and interview. This is the ideal approach because it
combines the quantitative data from the questionnaire with the qualitative data
from the interviews. It is always advisable to accompany questionnaires with
some depth interviews, even if time permits only a limited sample. An alterna-
tive approach is to administer the questionnaire to a group of people and then
discuss the reactions to each question with the group. This ensures that a quanti-
fied analysis is possible but enables the group, or at least some members of it, to
express their feelings more fully.
4. By the use of focus groups. A focus group is a representative sample of employees
whose attitudes and opinions are sought on issues concerning the organization
and their work. The essential features of a focus group are that it is structured,
informed, constructive and confidential.
Assessing results
It is an interesting fact that when people are asked directly if they are satisfied with
their job, many will say that on the whole they are. This can be regardless of the work
being done and in spite of strongly held grievances. The possible reason for this
phenomenon is that while most people are willing to admit to having grievances – in
fact, if invited to complain, they will complain – they may be reluctant to admit, even
to themselves, to being dissatisfied with a job that they have no immediate intention
of leaving. Many employees have become reconciled to their work, even if they do
not like some aspects of it, and have no real desire to do anything else. So they are, in
a sense, satisfied enough to continue, even if they have complaints. Finally, many
people are satisfied with their job overall, although they may grumble about some
aspects of it.
Overall measures of satisfaction do not, therefore, always reveal anything really
interesting. It is more important to look at particular aspects of satisfaction or dissat-
isfaction to decide whether or not anything needs to be done. In these circumstances,
266 ❚ Organizational behaviour
the questionnaire will indicate only a line to be followed up. It will not provide the
answers, hence the advantage of individual meetings or focus group discussions to
explore in depth any issue raised.
MOTIVATION AND MONEY
Money, in the form of pay or some other sort of remuneration, is the most obvious
extrinsic reward. Money provides the carrot that most people want.
Doubts have been cast by Herzberg et al (1957) on the effectiveness of money
because, they claimed, while the lack of it can cause dissatisfaction, its provision does
not result in lasting satisfaction. There is something in this, especially for people on
fixed salaries or rates of pay who do not benefit directly from an incentive scheme.
They may feel good when they get an increase; apart from the extra money, it is a
highly tangible form of recognition and an effective means of helping people to feel
that they are valued. But this feeling of euphoria can rapidly die away. Other dissatis-
factions from Herzberg’s list of hygiene factors, such as working conditions or the
quality of management, can loom larger in some people’s minds when they fail to get
the satisfaction they need from the work itself. However, it must be re-emphasized
that different people have different needs and wants and Herzberg’s two-factor
theory has not been validated. Some will be much more motivated by money than
others. What cannot be assumed is that money motivates everyone in the sameway
and to the same extent. Thus it is naive to think that the introduction of a
performance-related pay (PRP) scheme will miraculously transform everyone over-
night into well-motivated, high-performing individuals.
Nevertheless, money provides the means to achieve a number of different ends. It
is a powerful force because it is linked directly or indirectly to the satisfaction of
many needs. It clearly satisfies basic needs for survival and security, if it is coming in
regularly. It can also satisfy the need for self-esteem (as noted above, it is a visible
mark of appreciation) and status – money can set you in a grade apart from your
fellows and can buy you things they cannot to build up your prestige. Money satisfies
the less desirable but still prevalent drives of acquisitiveness and cupidity.
Money may in itself have no intrinsic meaning, but it acquires significant moti-
vating power because it comes to symbolize so many intangible goals. It acts as a
symbol in different ways for different people, and for the same person at different
times. As noted by Goldthorpe et al (1968) from their research into the ‘affluent
worker’, pay is the dominant factor in the choice of employer and considerations of
pay seem most powerful in binding people to their present job.
Do financial incentives motivate people? The answer is yes, for those people who
Motivation ❚ 267
are strongly motivated by money and whose expectations that they will receive a
financial reward are high. But less confident employees may not respond to incen-
tives that they do not expect to achieve. It can also be argued that extrinsic rewards
may erode intrinsic interest – people who work just for money could find their tasks
less pleasurable and may not, therefore, do them so well. What we do know is that a
multiplicity of factors are involved in performance improvements and many of those
factors are interdependent.
Money can therefore provide positive motivation in the right circumstances, not
only because people need and want money but also because it serves as a highly
tangible means of recognition. It can also be argued that money may be an important
factor in attracting people to organizations and is one of the factors that will influence
their retention. But badly designed and managed pay systems can demotivate.
Another researcher in this area was Jaques (1961), who emphasized the need for such
systems to be perceived as being fair and equitable. In other words, the reward
should be clearly related to effort or level of responsibility and people should not
receive less money than they deserve compared with their fellow workers. Jaques
called this the ‘felt-fair’ principle.
MOTIVATION STRATEGIES
The factors that affect motivational strategies and the contribution that HR can make
to achieving higher levels of motivation are summarized in Table 18.2.
268 ❚ Organizational behaviour
Motivation ❚ 269
Table 18.2 Motivation strategies
Factors affecting motivation strategies The HR contribution
● The complexity of the process of ● Avoid the trap of developing or supporting
motivation means that simplistic strategies that offer prescriptions for motivation
approaches based on instrumentality based on a simplistic view of the process or
theory are unlikely to be successful fail to recognize individual differences
● People are more likely to be motivated ● Encourage the development of performance
if they work in an environment in management processes which provide
which they are valued for what opportunities to agree expectations and give
they are and what they do. This positive feedback on accomplishments
means paying attention to the basic ● Develop reward systems which provide
need for recognition opportunities for both financial and non-
financial rewards to recognize achievements.
Bear in mind, however, that financial rewards
systems are not necessarily appropriate and the
lessons of expectancy, goal and equity theory
need to be taken into account in designing and
operating them
● The need for work which provides ● Advise on processes for the design of jobs
people with the means to achieve which take account of the factors affecting the
their goals, a reasonable degree of motivation to work, providing for job enrichment
autonomy, and scope for the use of in the shape of variety, decision-making
skills and competencies should be responsibility and as much control as possible
recognized in carrying out the work
● The need for the opportunity to grow ● Provide facilities and opportunities for learning
by developing abilities and careers. through such means as personal development
planning processes as well as more formal
training
● Develop career planning processes
● The cultural environment of the ● Advise on the development of a culture which
organization in the shape of its values supports processes of valuing and rewarding
and norms will influence the impact employees
of any attempts to motivate people
by direct or indirect means
● Motivation will be enhanced by ● Devise competency frameworks which focus
leadership which sets the direction, on leadership qualities and the behaviours
encourages and stimulates expected of managers and team leaders
achievement, and provides support ● Ensure that leadership potential is identified
to employees in their efforts to reach through performance management and
goals and improve their performance assessment centres
generally ● Provide guidance and training to develop
leadership qualities
Organizational commitment and
engagement
In this chapter the topics of organizational commitment and job engagement are
examined. They are important because independently or in association with one
another, they can significantly affect organizational performance. But there is some
confusion about their respective meanings, and the chapter starts by examining these.
THE CONCEPTS OF COMMITMENT AND ENGAGEMENT
Commitment and engagement are closely related concepts. In fact, some people use
the terms interchangeably or refer to engagement as an alternative, more up-to-date
and, maybe, a more sophisticated term for commitment. The various definitions
available of commitment and engagement do not help. The Oxford English Dictionary
states that someone is committed when they are morally dedicated (to doctrine or
cause), while someone is engaged when they are employed busily.
The meaning of organizational commitment
As defined by Porter et al (1974), commitment refers to attachment and loyalty. It is
the relative strength of the individual’s identification with, and involvement in, a
particular organization. It consists of three factors:
19
1. A strong desire to remain a member of the organization.
2. A strong belief in, and acceptance of, the values and goals of the organization.
3. A readiness to exert considerable effort on behalf of the organization.
An alternative, although closely related, definition of commitment emphasizes the
importance of behaviour in creating commitment. As Salancik (1977) put it:
‘Commitment is a state of being in which an individual becomes bound by his (sic)
actions to beliefs that sustain his activities and his own involvement.’ Three features
of behaviour are important in binding individuals to their acts: the visibility of the
acts, the extent to which the outcomes are irrevocable, and the degree to which the
person undertakes the action voluntarily. Commitment, according to Salancik, can be
increased and harnessed ‘to obtain support for organizational ends and interests’
through such ploys as participation in decisions about actions.
The meaning of engagement
As defined by Chiumento (2004):
Engagement is a positive, two-way, relationship between an employee and their organi-
zation. Both parties are aware of their own and the other’s needs, and the way they
support each other to fulfil those needs. Engaged employees and organizations will go
the extra mile for each other because they see the mutual benefit of investing in their
relationship.
The Royal Bank of Scotland (2005) defines engagement as the state of emotional and
intellectual commitment to the group and lists its components as satisfaction (how
much I like working here), commitment (how much I want to be here) and perfor-
mance (how much I want to and actually do in achieving results).
The Hay Group, as reported by Thompson (2002), refers to their concept of
‘engaged performance’ which is ‘about understanding why working for a particular
organization is attractive to different kinds of individuals… And which looks at the
hearts and mind reasons why people work for you’.
The Institute of Employment Studies (Bevan et al, 1997) defines engagement as: ‘A
positive attitude held by the employee towards the organization and its values. An
engaged employee is aware of business context, and works closely with colleagues to
improve performance within the job for the benefit of the organization.’
These all overlap with the traditional definition of commitment as being concerned
with attachment to the organization. There is no reason why this should not be the
case – the two concepts are after all closely connected – but there is some value in
distinguishing between commitment to the organization and commitment to the job,
272 ❚ Organizational behaviour
and treating the former as organizational commitment and the latter as job engage-
ment.
Many people are more committed to their work than the organization that provides
the work, for example researchers in universities or research establishments. Others
take a transient view of their organization as a stepping stone in their career that
provides them with the sort of experience they want but to which they feel no partic-
ular loyalty. If the organization wants people in the latter categories to work harder
and better, it may well want to focus on the work they provide and opportunities for
development they offer and place less emphasis on organizational commitment. If
the organization wants to concentrate more on retention, loyalty and people putting
themselves out for the organization rather than themselves, then policies to encour-
age commitment come to the fore. Best of all, it is recognized that both commitment
and engagement need attention but that different approaches may be necessary
although they can be mutually supportive – increased commitment to the organiza-
tion can produce higher levels of job engagement; more job engagement can increase
commitment to the organization. The rest of this chapter is devoted to exploring both
concepts.
ORGANIZATIONAL COMMITMENT
The concept of organizational commitment plays an important part in HRM philos-
ophy. As Guest (1987) has suggested, HRM policies are designed to ‘maximise orga-
nizational integration, employee commitment, flexibility and quality of work’. The
next five sections of this chapter consider the meaning and significance of organiza-
tional commitment, the problems associated with the concept, factors affecting
commitment, developing a commitment strategy, and measuring commitment.
Organizational commitment is the relative strength of the individual’s identifica-
tion with, and involvement in, a particular organization. It consists of three factors:
● a strong desire to remain a member of the organization;
● a strong belief in, and acceptance of, the values and goals of the organization;
● a readiness to exert considerable effort on behalf of the organization.
An alternative, although closely related, definition of commitment emphasizes the
importance of behaviour in creating commitment. As Salancik (1977) put it,
‘Commitment is a state of being in which an individual becomes bound by his actions
to beliefs that sustain his activities and his own involvement.’ Three features of
behaviour are important in binding individuals to their acts: the visibility of the acts,
Organizational commitment and engagement ❚ 273
the extent to which the outcomes are irrevocable, and the degree to which the person
undertakes the action voluntarily. Commitment, according to Salancik, can be
increased and harnessed ‘to obtain support for organizational ends and interests’
through such ploys as participation in decisions about actions.
The significance of organizational commitment
There have been two schools of thought about commitment. One, the ‘from control to
commitment’ school, was led by Walton (1985a and b), who saw commitment
strategy as a more rewarding approach to human resource management, in contrast
to the traditional control strategy. The other, ‘Japanese/excellence’ school, is repre-
sented by writers such as Pascale and Athos (1981) and Peters and Waterman (1982),
who looked at the Japanese model and related the achievement of excellence to
getting the wholehearted commitment of the workforce to the organization.
From control to commitment
The importance of commitment was highlighted by Walton (1985a and b). His theme
was that improved performance would result if the organization moved away from
the traditional control-oriented approach to workforce management, which relies
upon establishing order, exercising control and ‘achieving efficiency in the applica-
tion of the workforce’. He proposed that this approach should be replaced by a
commitment strategy. Workers respond best – and most creatively – not when they
are tightly controlled by management, placed in narrowly defined jobs, and treated
like an unwelcome necessity, but instead when they are given broader responsibili-
ties, encouraged to contribute and helped to achieve satisfaction in their work.
Walton (1985b) suggested that in the new commitment-based approach:
Jobs are designed to be broader than before, to combine planning and implementation,
and to include efforts to upgrade operations, not just to maintain them. Individual
responsibilities are expected to change as conditions change, and teams, not individ-
uals, often are the organizational units accountable for performance. With management
hierarchies relatively flat and differences in status minimized, control and lateral coordi-
nation depend on shared goals. And expertise rather than formal position determines
influence.
Put like this, a commitment strategy may sound idealistic but does not appear to be a
crude attempt to manipulate people to accept management’s values and goals, as
some have suggested. In fact, Walton does not describe it as being instrumental in this
manner. His prescription is for a broad HRM approach to the ways in which people
274 ❚ Organizational behaviour
are treated, jobs are designed and organizations are managed. He believes that the
aim should be to develop ‘mutuality’, a state that exists when management and
employees are interdependent and both benefit from this interdependency.
The Japanese/excellence school
Attempts made to explain the secret of Japanese business success in the 1970s by such
writers as Ouchi (1981) and Pascale and Athos (1981) led to the theory that the best
way to motivate people is to get their full commitment to the values of the organiza-
tion by leadership and involvement. This might be called the ‘hearts and minds’
approach to motivation, and among other things it popularized such devices as
quality circles.
The baton was taken up by Peters and Waterman (1982) and their imitators later in
the 1980s. This approach to excellence was summed up by Peters and Austin (1985)
when they wrote, again somewhat idealistically, ‘Trust people and treat them like
adults, enthuse them by lively and imaginative leadership, develop and demonstrate
an obsession for quality, make them feel they own the business, and your workforce
will respond with total commitment.’
Problems with the concept of commitment
A number of commentators have raised questions about the concept of commitment.
These relate to three main problem areas: first, its unitary frame of reference; second,
commitment as an inhibitor of flexibility; and third, whether high commitment does
in practice result in improved organizational performance.
Unitary frame of reference
A comment frequently made about the concept of commitment is that it is too
simplistic in adopting a unitary frame of reference; in other words, it assumes unreal-
istically that an organization consists of people with shared interests. It has been
suggested by people like Cyert and March (1963), Mangham (1979) and Mintzberg
(1983a) that an organization is really a coalition of interest groups, where political
processes are an inevitable part of everyday life. The pluralistic perspective recog-
nizes the legitimacy of different interests and values, and therefore asks the question
‘Commitment to what?’ Thus, as Coopey and Hartley (1991) put it, ‘commitment is
not an all-or-nothing affair (though many managers might like it to be) but a question
of multiple or competing commitments for the individual’.
Legge (1989) also raises this question in her discussion of strong culture as a key
requirement of HRM through ‘a shared set of managerially sanctioned values’.
Organizational commitment and engagement ❚ 275
However, values concerned with performance, quality, service, equal opportunity
and innovation are not necessarily wrong because they are managerial values. But
it is not unreasonable to believe that pursuing a value such as innovation could
work against the interests of employees by, for example, resulting in redundancies.
And it would be quite reasonable for any employee, encouraged to behave in
accordance with a value supported by management, to ask ‘What’s in it for me?’ It
can also be argued that the imposition of management’s values on employees
without their having any part to play in discussing and agreeing them is a form of
coercion.
Commitment and flexibility
It was pointed out by Coopey and Hartley (1991) that ‘The problem for a unitarist
notion of organizational commitment is that it fosters a conformist approach
which not only fails to reflect organizational reality, but can be narrowing and
limiting for the organization.’ They argue that if employees are expected and encour-
aged to commit themselves tightly to a single set of values and goals they will not be
able to cope with the ambiguities and uncertainties that are endemic in organiza-
tional life in times of change. Conformity to ‘imposed’ values will inhibit creative
problem solving, and high commitment to present courses of action will increase
both resistance to change and the stress that invariably occurs when change takes
place.
If commitment is related to tightly defined plans then this will become a real
problem. To avoid it, the emphasis should be on overall strategic directions. These
would be communicated to employees with the proviso that changing circumstances
will require their amendment. In the meantime, however, everyone can at least be
informed in general terms where the organization is heading and, more specifically,
the part they are expected to play in helping the organization to get there. And if they
can be involved in the decision making processes on matters that affect them (which
include management’s values for performance, quality and customer service), so
much the better.
Values need not necessarily be restrictive. They can be defined in ways that allow
for freedom of choice within broad guidelines. In fact, the values themselves can refer
to such processes as flexibility, innovation and responsiveness to change. Thus, far
from inhibiting creative problem solving, they can encourage it.
The impact of high commitment
A belief in the positive value of commitment has been confidently expressed by
Walton (1985b): ‘Underlying all these (human resource) policies is a management
276 ❚ Organizational behaviour
philosophy, often embedded in a published statement, that acknowledges the legiti-
mate claims of a company’s multiple stakeholders – owners, employees, customers
and the public. At the centre of this philosophy is a belief that eliciting employee
commitment will lead to enhanced performance. The evidence shows this belief to be
well founded.’ However, a review by Guest (1991) of the mainly North American
literature, reinforced by the limited UK research available, led him to the conclusion
that ‘High organizational commitment is associated with lower labour turnover and
absence, but there is no clear link to performance.’
It is probably wise not to expect too much from commitment as a means of making
a direct and immediate impact on performance. It is not the same as motivation.
Commitment is a wider concept, and tends to be more stable over a period of time
and less responsive to transitory aspects of an employee’s job, hence the importance
of the concept of job engagement, which is immediate. It is possible to be dissatisfied
with a particular feature of a job while retaining a reasonably high level of commit-
ment to the organization as a whole.
In relating commitment to motivation it is useful to distinguish, as do Buchanan
and Huczynski (1985), three perspectives:
● The goals towards which people aim. From this perspective, goals such as the
good of the company, or effective performance at work, may provide a degree of
motivation for some employees, who could be regarded as committed in so far as
they feel they own the goals.
● The process by which goals and objectives at work are selected, which is quite
distinct from the way in which commitment arises within individuals.
● The social process of motivating others to perform effectively. From this view-
point, strategies aimed at increasing motivation also affect commitment. It may be
true to say that, where commitment is present, motivation is likely to be strong,
particularly if a long term view is taken of effective performance.
It is reasonable to believe that strong commitment to work is likely to result in consci-
entious and self-directed application to do the job, regular attendance, nominal
supervision and a high level of effort. Commitment to the organization will certainly
be related to the intention to stay – in other words, loyalty to the company.
Factors affecting commitment
Kochan and Dyer (1993) have indicated that the factors affecting the level of commit-
ment in what they call mutual commitment firms are as follows:
Organizational commitment and engagement ❚ 277
● Strategic level:
– supportive business strategies;
– top management value commitment;
– effective voice for HR in strategy making and governance.
● Functional (human resource policy) level:
– staffing based on employment stabilization;
– investment in training and development;
– contingent compensation that reinforces cooperation, participation and
contribution.
● Workplace level:
– selection based on high standards’
– broad task design and teamwork’
– employee involvement in problem solving’
– climate of cooperation and trust.
The research carried out by Purcell et al (2003) established that the key policy and
practice factors influencing levels of commitment were:
● received training last year;
● are satisfied with career opportunities;
● are satisfied with the performance appraisal system;
● think managers are good in people management (leadership);
● find their work challenging;
● think their form helps them achieve a work-life balance;
● are satisfied with communication or company performance.
Developing a commitment strategy
A commitment strategy will be based on the high commitment model described in
Chapter 7. It will aim to develop commitment using, as appropriate, approaches such
as those described below. When formulating the strategy, account should be taken of
the reservations expressed earlier in this chapter, and too much should not be
expected from it. The aim will be to increase identification with the organization,
develop feelings of loyalty among its employees, provide a context within which
motivation and therefore performance will increase, and reduce employee turnover.
Steps to create commitment will be concerned with both strategic goals and values.
They may include initiatives to increase involvement and ‘ownership’, communica-
tion, leadership development, developing a sense of excitement in the job, and devel-
oping various HR policy and practice initiatives.
278 ❚ Organizational behaviour
Developing ownership
A sense of belonging is enhanced if there is a feeling of ‘ownership’ among
employees, not just in the literal sense of owning shares (although this can help) but
in the sense of believing they are genuinely accepted by management as key stake-
holders in the organization. This concept of ‘ownership’ extends to participating in
decisions on new developments and changes in working practices that affect the indi-
viduals concerned. They should be involved in making those decisions, and feel that
their ideas have been listened to and that they have contributed to the outcome.
Communication programmes
It may seem to be strikingly obvious that commitment will only be gained if people
understand what they are expected to commit to, but managements too often fail to
pay sufficient attention to delivering the message in terms that recognize that the
frame of reference for those who receive it is likely to be quite different from their
own. Management’s expectations will not necessarily coincide with those of
employees. Pluralism prevails. And in delivering the message, the use of different
and complementary channels of communication such as newsletters, briefing groups,
videos and notice boards is often neglected.
Leadership development
Commitment is enhanced if managers can gain the confidence and respect of their
teams, and development programmes to improve the quality of leadership should
form an important part of any strategy for increasing commitment. Management
training can also be focused on increasing the competence of managers in specific
areas of their responsibility for gaining commitment, such as performance manage-
ment.
INFLUENCES ON COMMITMENT AND EMPLOYEE
SATISFACTION
An IRS survey (IRS, 2004) established that the following were the top five influences
on employee satisfaction and commitment and employee satisfaction:
1. Relationship with manager – 63 per cent.
2. Relationship with colleagues – 60 per cent.
Organizational commitment and engagement ❚ 279
3. Quality of line management – 62 per cent.
4. Recognition of contribution – 56 per cent.
5. Leadership: visibility and confidence – 55 per cent.
The survey also obtained examples from organizations of what they were doing to
increase commitment:
● Bacardi-Martini – focus groups, team briefings, consultation with union, joint
consultative committee, attitude surveys, road shows.
● Eversheds – ‘have your say’ communication sessions involving all employees,
key business discussions.
● Lefarge Cement – joint partnership training courses with managers and trade
union representatives, regular business updates, bonus scheme linked to jointly
agreed performance indicators, team development workshops.
● North Herts District Council – introduction of staff consultation forums, new
policies for complaints resolution and dignity at work.
● West Bromwich Building Society – various focus groups, social club, away-days
by department.
● Yorkshire Water – active and comprehensive communications, involvement in
business planning, face-to-face meetings with directors, consultation on change,
celebration of business success, rewards and recognition.
Developing HR practices that enhance organizational commitment
The policies and practices that may contribute to the increase of commitment are
training, career planning, performance management, work-life balance policies and
job design.
The HR function can play a major part in developing a high commitment organiza-
tion. The ten steps it can take are:
● Advise on methods of communicating the values and aims of management and
the achievements of the organization, so that employees are more likely to iden-
tify with it as one they are proud to work for.
● Emphasize to management that commitment is a two-way process; employees
cannot be expected to be committed to the organization unless management
demonstrates that it is committed to them and recognizes their contribution as
stakeholders.
● Impress on management the need to develop a climate of trust by being honest
with people, treating them fairly, justly and consistently, keeping its word, and
280 ❚ Organizational behaviour
showing willingness to listen to the comments and suggestions made by
employees during processes of consultation and participation.
● Develop a positive psychological contract (see Chapter 16) by treating people as
stakeholders, relying on consensus and cooperation rather than control and coer-
cion, and focusing on the provision of opportunities for learning, development
and career progression.
● Advise on and assist in the establishment of partnership agreements with trade
unions which emphasize unity of purpose, common approaches to working
together and the importance of giving employees a voice in matters that concern
them.
● Recommend and take part in the achievement of single status for all employees
(often included in a partnership agreement) so that there is no longer an ‘us and
them’ culture.
● Encourage management to declare a policy of employment security, and ensure
that steps are taken to avoid involuntary redundancies.
● Develop performance management processes that provide for the alignment of
organizational and individual objectives.
● Advise on means of increasing employee identification with the company
through rewards related to organizational performance (profit sharing or gain-
sharing) or employee share ownership schemes.
● Develop ‘job engagement’ (identification of employees with the job they are
doing) through job design processes that aim to create higher levels of job satis-
faction (job enrichment).
ENGAGEMENT
Engagement takes place when people are committed to their work. They are inter-
ested, indeed excited, about what they do. Job engagement can exist even when
individuals are not committed to the organization, except in so far as it gives them the
opportunity and scope to perform and to develop their skills and potential. They may
be more attached to the type of work they carry out than to the organization that
provides that work, especially if they are knowledge workers.
Enhancing job engagement starts with job design or ‘role development’ as
discussed in Chapter 23. This will focus on the provision of:
● interest and challenge – the degree to which the work is interesting in itself and
creates demanding goals to people;
● variety – the extent to which the activities in the job call for a selection of skills and
abilities;
Organizational commitment and engagement ❚ 281
282 ❚ Organizational behaviour
● autonomy – the freedom and independence the job holder has, including discre-
tion to make decisions, exercise choice, schedule the work and decide on the
procedures to carry it out, and the job holder’s personal responsibility for
outcomes;
● task identity – the degree to which the job requires completion of a whole and
identifiable piece of work;
● task significance – the extent to which the job contributes to a significant end result
and has a substantial impact on the lives and work of other people.
All these factors are affected by the organization structure, the system of work and
the quality of leadership. The latter is vital. The degree to which jobs provide variety,
autonomy, task identity and task significance depends more on the way in which job
holders are managed and led than any formal process of job design. Managers and
team leaders often have considerable discretion on how they allocate work, and the
extent to which they delegate. They can provide feedback that recognizes the contri-
bution of people, and they can spell out the significance of the work they do.
The Hay Group has developed a model for what they call ‘engaged performance’,
which is made up of six elements, and is summarized in Table 19.1.
1 Inspiration/values 4 Tangible rewards
● reputation of organization ● competitive pay
● organizational values and behaviours ● good benefits
● quality of leadership ● incentives for higher performance
● risk sharing ● ownership potential
● recognition ● recognition awards
● communication ● fairness of reward
2 Quality of work 5 Work–life balance
● perception of the value of the work ● supportive environment
● challenge/interest ● recognition of life cycle needs/flexibility
● opportunities for achievement ● security of income
● freedom and autonomy ● social support
● workload
● quality of work relationship
3 Enabling environment 6 Future growth/opportunity
● physical environment ● learning and development beyond
● tools and equipment current job
● job training (current position) ● career advancement opportunities
● information and processes ● performance improvement and
● safety/personal security feedback
Table 19.1 The Hay Group model of engaged performance
How organizations function
BASIC CONSIDERATIONS
The two factors that determine how an organization functions in relation to its
internal and external environment are its structure and the processes that operate
within it. Organizations are also affected by the culture they develop, that is, the
values and norms that affect behaviour (see Chapter 21).
Much has been written to explain how organizations function and the first part of
this chapter summarizes the various theories of organization. These theories provide
the background to the last three sections of the chapter which deal with organization
structure, types of organizations and organizational processes.
ORGANIZATION THEORIES
The classical school
The classical or scientific management school, as represented by Fayol (1916), Taylor
(1911) and Urwick (1947), believed in control, order and formality. Organizations
need to minimize the opportunity for unfortunate and uncontrollable informal rela-
tions, leaving room only for the formal ones.
20
The bureaucratic model
The bureaucratic model of organization as described by Perrow (1980) is a way of
expressing how organizations function as machines and can therefore be associated
with some of the ideas generated by the classical school. It is based on the work of
Max Weber (1946) who coined the term ‘bureaucracy’ as a label for a type of formal
organization in which impersonality and rationality are developed to the highest
degree. Bureaucracy, as he conceived it, was the most efficient form of organization
because it is coldly logical and because personalized relationships and non-rational,
emotional considerations do not get in its way.
The human relations school
The classical, and by implication, the bureaucratic model were first challenged by
Barnard (1938). He emphasized the importance of the informal organization – the
network of informal roles and relationships which, for better or worse, strongly
influences the way the formal structure operates. He wrote: ‘Formal organizations
come out of and are necessary to informal organizations: but when formal organiza-
tions come into operation, they create and require informal organizations.’ More
recently, Child (1977) has pointed out that it is misleading to talk about a clear
distinction between the formal and the informal organization. Formality and infor-
mality can be designed into structure.
Roethlisberger and Dickson (1939) reported on the Hawthorne studies – which
highlighted the importance of informal groups and decent, humane leadership.
The behavioural science school
In the 1960s the focus shifted completely to the behaviour of people in organizations.
Behavioural scientists such as Argyris (1957), Herzberg et al (1957), McGregor (1960)
and Likert (1961) adopted a humanistic point of view which is concerned with what
people can contribute and how they can best be motivated.
● Argyris believed that individuals should be given the opportunity to feel that they
have a high degree of control over setting their own goals and over defining the
paths to these goals.
● Herzberg suggested that improvements in organization design must centre on the
individual job as the positive source of motivation. If individuals feel that the job
is stretching them, they will be moved to perform it well.
● McGregor developed his theory of integration (theory Y) which emphasizes the
importance of recognizing the needs of both the organization and the individual
284 ❚ Organizational behaviour
and creating conditions that will reconcile these needs so that members of the
organization can work together for its success and share in its rewards.
● Likert stated that effective organizations function by means of supportive relation-
ships which, if fostered, will build and maintain people’s sense of personal worth
and importance.
The concepts of these and other behavioural scientists provided the impetus for the
organization development (OD) movement as described in Chapter 22.
The systems school
Another important insight into how organizations function was provided by Miller
and Rice (1967) who stated that organizations should be treated as open systems
which are continually dependent upon and influenced by their environments. The
basic characteristic of the enterprise as an open system is that it transforms inputs
into outputs within its environment.
As Katz and Kahn (1966) wrote: ‘Systems theory is basically concerned with prob-
lems of relationship, of structure and of interdependence.’ As a result, there is a
considerable emphasis on the concept of transactions across boundaries – between
the system and its environment and between the different parts of the system. This
open and dynamic approach avoided the error of the classical, bureaucratic and
human relations theorists, who thought of organizations as closed systems and
analysed their problems with reference to their internal structures and processes of
interaction, without taking account either of external influences and the changes they
impose or of the technology in the organization.
The socio-technical model
The concept of the organization as a system was extended by the Tavistock Institute
researchers into the socio-technical model of organizations. The basic principle of this
model is that in any system of organization, technical or task aspects are interrelated
with the human or social aspects. The emphasis is on interrelationships between, on
the one hand, the technical processes of transformation carried out within the
organization, and, on the other, the organization of work groups and the manage-
ment structures of the enterprise. This approach avoided the humanistic generaliza-
tions of the behavioural scientists without falling into the trap of treating the
organization as a machine.
How organizations function ❚ 285
The contingency school
The contingency school consists of writers such as Burns and Stalker (1961),
Woodward (1965) and Lawrence and Lorsch (1976) who have analysed a variety of
organizations and concluded that their structures and methods of operation are a
function of the circumstances in which they exist. They do not subscribe to the view
that there is one best way of designing an organization or that simplistic classifica-
tions of organizations as formal or informal, bureaucratic or non-bureaucratic are
helpful. They are against those who see organizations as mutually opposed social
systems (what Burns and Stalker refer to as the ‘Manichean world of the Hawthorne
studies’) that set up formal against informal organizations. They disagree with
those who impose rigid principles of organization irrespective of the technology or
environmental conditions.
More recent contributions to understanding how organizations
function
Kotter (1995) developed the following overall framework for examining organiza-
tions:
● key organizational processes – the major information gathering, communication,
decision-making, matter/energy transporting and matter/energy converting
actions of the organization’s employees and machines;
● external environment – an organization’s ‘task’ environment includes suppliers,
markets and competitors; the wider environment includes factors such as public
attitudes, economic and political systems, laws etc;
● employees and other tangible assets – people, plant, and equipment;
● formal organizational requirements – systems designed to regulate the actions of
employees (and machines);
● the social system – culture (values and norms) and relationships between
employees in terms of power, affiliation and trust;
● technology – the major techniques people use while engaged in organizational
processes and that are programmed into machines;
● the dominant coalition – the objectives, strategies, personal characteristics and
internal relationships of those who oversee the organization as a whole and
control its basic policy making.
286 ❚ Organizational behaviour
Mintzberg (1983b) analysed organizations into five broad types or configurations:
● simple structures, which are dominated by the top of the organization with central-
ized decision making;
● machine bureaucracy, which is characterized by the standardization of work
processes and the extensive reliance on systems;
● professional bureaucracy, where the standardization of skills provides the prime
coordinating mechanism;
● divisionalized structures, in which authority is drawn down from the top and activ-
ities are grouped together into units which are then managed according to their
standardized outputs;
● adhocracies, where power is decentralized selectively to constellations of work that
are free to coordinate within and between themselves by mutual adjustments.
Drucker (1988) points out that organizations have established, through the develop-
ment of new technology and the extended use of knowledge workers, ‘that
whole layers of management neither make decisions nor lead. Instead, their main,
if not their only, function, is to serve as relays – human boosters for the faint,
unfocused signals that pass for communications in the traditional pre-information
organization’.
Pascale (1990) believes that the new organizational paradigm functions as
follows:
● from the image of organizations as machines, with the emphasis on concrete
strategy, structure and systems, to the idea of organizations as organisms, with the
emphasis on the ‘soft’ dimensions – style, staff and shared values;
● from a hierarchical model, with step-by-step problem solving, to a network model,
with parallel nodes of intelligence which surround problems until they are elimi-
nated;
● from the status-driven view that managers think and workers do as they are told,
to a view of managers as ‘facilitators’, with workers empowered to initiate
improvements and change;
● from an emphasis on ‘vertical tasks’ within functional units, to an emphasis on
‘horizontal tasks’ and collaboration across units;
● from a focus on ‘content’ and the prescribed use of specific tools and techniques, to
a focus on ‘process’ and a holistic synthesis of techniques;
● from the military model to a commitment model.
Handy (1989) describes two types of organization: the ‘shamrock’ and the federal.
How organizations function ❚ 287
The shamrock organization consists of three elements: 1) the core workers (the
central leaf of the shamrock) – professionals, technicians and managers; 2) the
contractual fringe – contract workers; and 3) the flexible labour force consisting of
temporary staff.
The federal organization takes the process of decentralization one stage further by
establishing every key operational, manufacturing or service provision activity as a
distinct, federated unit.
ORGANIZATION STRUCTURE
Each of the members of the various schools was, in effect, commenting on the factors
affecting organization structure as considered below.
Organization structure defined
All organizations have some form of more or less formalized structure which has
been defined by Child (1977) as comprising ‘all the tangible and regularly occurring
features which help to shape their members’ behaviour’. Structures incorporate a
network of roles and relationships and are there to help in the process of ensuring
that collective effort is explicitly organized to achieve specified ends.
Organizations vary in their complexity, but it is always necessary to divide the
overall management task into a variety of activities, to allocate these activities to the
different parts of the organization and to establish means of controlling, coordinating
and integrating them.
The structure of an organization can be regarded as a framework for getting things
done. It consists of units, functions, divisions, departments and formally constituted
work teams into which activities related to particular processes, projects, products,
markets, customers, geographical areas or professional disciplines are grouped
together. The structure indicates who is accountable for directing, coordinating and
carrying out these activities and defines management hierarchies – the ‘chain of
command’ – thus spelling out, broadly, who is responsible to whom for what at each
level in the organization.
Organization charts
Structures are usually described in the form of an organization chart. This places
individuals in boxes that denote their job and their position in the hierarchy and
traces the direct lines of authority (command and control) through the management
hierarchies.
288 ❚ Organizational behaviour
Organization charts are vertical in their nature and therefore misrepresent reality.
They do not give any indication of the horizontal and diagonal relationships that
exist within the framework between people in different units or departments, and
do not recognize the fact that within any one hierarchy, commands and control infor-
mation do not travel all the way down and up the structure as the chart implies. In
practice, information jumps (especially computer-generated information) and
managers or team leaders will interact with people at levels below those immediately
beneath them.
Organization charts have their uses as means of defining – simplistically – who
does what and hierarchical lines of authority. But even if backed up by organization
manuals (which no one reads and which are, in any case, out of date as soon as they
are produced), they cannot convey how the organization really works. They may, for
example, lead to definitions of jobs – what people are expected to do – but they
cannot convey the roles these people carry out in the organization; the parts they play
in interacting with others and the ways in which, like actors, they interpret the parts
they are given.
TYPES OF ORGANIZATION
The basic types of organization are described below.
Line and staff
The line and staff organization was the type favoured by the classical theorists.
Although the term is not so much used today, except when referring to line managers,
it still describes many structures. The line hierarchy in the structure consists of func-
tions and managers who are directly concerned in achieving the primary purposes of
the organization, for example manufacturing and selling or directing the organiza-
tion as a whole. ‘Staff’ in functions such as finance, personnel and engineering
provide services to the line to enable them to get on with their job.
Divisionalized organizations
The process of divisionalization, as first described by Sloan (1963) on the basis of
his experience in running General Motors, involves structuring the organization
into separate divisions, each concerned with discrete manufacturing, sales, dis-
tribution or service functions, or with serving a particular market. At group head-
quarters, functional departments may exist in such areas as finance, planning,
How organizations function ❚ 289
personnel, legal and engineering to provide services to the divisions and, impor-
tantly, to exercise a degree of functional control over their activities. The amount of
control exercised will depend on the extent to which the organization has decided to
decentralize authority to strategic business units positioned close to the markets they
serve.
Decentralized organizations
Some organizations, especially conglomerates, decentralize most of their activities
and retain only a skeleton headquarters staff to deal with financial control matters,
strategic planning, legal issues and sometimes, but not always, personnel issues,
especially those concerned with senior management on an across the group basis
(recruitment, development and remuneration).
Matrix organizations
Matrix organizations are project based. Development, design or construction projects
will be controlled by project directors or managers, or, in the case of a consultancy,
assignments will be conducted by project leaders. Project managers will have no
permanent staff except, possibly, some administrative/secretarial support. They will
draw the members of their project teams from discipline groups, each of which will
be headed up by a director or manager who is responsible on a continuing basis for
resourcing the group, developing and managing its members and ensuring that they
are assigned as fully as possible to project teams. These individuals are assigned to a
project team and they will be responsible to the team leader for delivering the
required results, but they will continue to be accountable generally to the head of
their discipline for their overall performance and contribution.
Flexible organizations
Flexible organizations may conform broadly to the Mintzberg (1983b) category of an
adhocracy in the sense that they are capable of adapting quickly to new demands and
operate fluidly. They may be organized along the lines of Handy’s (1989) ‘shamrock’
with core workers carrying out the fundamental and continuing activities of the orga-
nization and contract workers and temporary staff being employed as required. This
is also called a core–periphery organization. An organization may adopt a policy of
numerical flexibility, which means that the number of employees can be quickly
increased or decreased in line with changes in activity levels. The different types of
flexibility as defined by Atkinson (1984) are described in Chapter 14.
290 ❚ Organizational behaviour
The process-based organization
A process-based organization is one in which the focus is on horizontal processes that
cut across organizational boundaries. Traditional organization structures consist of a
range of functions operating semi-independently and each with its own, usually
extended, management hierarchy. Functions acted as vertical ‘chimneys’ with bound-
aries between what they did and what happened next door. Continuity of work
between functions and the coordination of activities were prejudiced. Attention was
focused on vertical relationships and authority-based management – the ‘command
and control’ structure. Horizontal processes received relatively little attention. It was,
for example, not recognized that meeting the needs of customers by systems of order
processing could only be carried out satisfactorily if the flow of work from sales
through manufacturing to distribution was treated as a continuous process and not as
three distinct parcels of activity. Another horizontal process that drew attention to the
need to reconsider how organizations should be structured was total quality. This is
not a top-down system. It cuts across the boundaries separating organizational units
to ensure that quality is built into the organization’s products and services. Business
process re-engineering exercises have also demonstrated the need for
businesses to integrate functionally separated tasks into unified horizontal work
processes.
The result, as indicated by Ghoshal and Bartlett (1993), has been that:
… managers are beginning to deal with their organizations in different ways. Rather than
seeing them as a hierarchy of static roles, they think of them as a portfolio of dynamic
processes. They see core organizational processes that overlay and often dominate the
vertical, authority-based processes of the hierarchical structure.
In a process-based organization there will still be designated functions for, say,
manufacturing, sales and distribution. But the emphasis will be on how these areas
work together on multi-functional projects to deal with new demands such as
product/market development. Teams will jointly consider ways of responding to
customer requirements. Quality and continuous improvement will be regarded as a
common responsibility shared between managers and staff from each function. The
overriding objective will be to maintain a smooth flow of work between functions
and to achieve synergy by pooling resources from different functions in task forces or
project teams.
How organizations function ❚ 291
ORGANIZATIONAL PROCESSES
The structure of an organization as described in an organization chart does not give
any real indication of how it functions. To understand this, it is necessary to consider
the various processes that take place within the structural framework: those of group
behaviour, teamwork, leadership, power, politics and conflict, interaction and
networking and communications.
Group behaviour
Organizations consist of groups of people working together. Interactions take place
within and between groups and the degree to which these processes are formalized
varies according to the organizational context. To understand and influence organiza-
tional behaviour, it is necessary to appreciate how groups behave. In particular, this
means considering the nature of:
● formal and informal groups;
● the processes that take place within groups;
● channels of communication;
● task and maintenance functions;
● group ideology and cohesion;
● the concept of a reference group and its impact on group members;
● the factors that make for group effectiveness;
● the stages of group development;
● group identification.
Formal groups
Formal groups are set up by organizations to achieve a defined purpose. People are
brought together with the necessary skills to carry out the tasks and a system
exists for directing, coordinating and controlling the group’s activities. The structure,
composition and size of the group will depend largely on the nature of the task,
although tradition, organizational culture and management style may exert consider-
able influence. The more routine or clearly defined the task is, the more structured the
group will be. In a highly structured group the leader will have a positive role and
may well adopt an authoritarian style. The role of each member of the group will be
precise and a hierarchy of authority is likely to exist. The more ambiguous the task,
the more difficult it will be to structure the group. The leader’s role is more likely to
be supportive – he or she will tend to concentrate on encouragement and coordina-
tion rather than on issuing orders. The group will operate in a more democratic way
and individual roles will be fluid and less clearly defined.
292 ❚ Organizational behaviour
Informal groups
Informal groups are set up by people in organizations who have some affinity for one
another. It could be said that formal groups satisfy the needs of the organization
while informal groups satisfy the needs of their members. One of the main aims of
organization design and development should be to ensure, so far as possible, that the
basis upon which activities are grouped together and the way in which groups are
allowed or encouraged to behave satisfy both these needs. The values and norms
established by informal groups can work against the organization. This was first
clearly established in the Hawthorne studies, which revealed that groups could
regulate their own behaviour and output levels irrespective of what management
wanted. An understanding of the processes that take place within groups can,
however, help to make them work for, rather than against, what the organization
needs.
Group processes
As mentioned above, the way in which groups function is affected by the task and by
the norms in the organization. An additional factor is size. There is a greater diversity
of talent, skills and knowledge in a large group, but individuals find it more difficult
to make their presence felt. According to Handy (1981), for best participation and for
highest all-round involvement, the optimum size is between five and seven. But to
achieve the requisite breadth of knowledge the group may have to be considerably
larger, and this makes greater demands on the skills of the leader in getting participa-
tion. The term ‘group dynamics’ is sometimes used loosely to describe the ways in
which group members interact, but properly it refers to the work of Lewin (1947).
This was mainly concerned with the improvement of group processes through
various forms of training, eg T-groups, team building and interactive skills training.
The main processes that take place in groups as described below are interaction, task
and maintenance functions, group ideology, group cohesion, group development and
identification.
Channels of communication
Three basic channels of communication within groups were identified by Leavitt
(1951) and are illustrated in Figure 20.1.
The characteristics of these different groups are as follows:
● Wheel groups, where the task is straightforward, work faster, need fewer messages
to solve problems and make fewer errors than circle groups, but they are inflex-
ible if the task changes.
How organizations function ❚ 293
● Circle groups are faster in solving complex problems than wheel groups.
● All-channel groups are the most flexible and function well in complex, open-ended
situations.
The level of satisfaction for individuals is lowest in the circle group, fairly high in the
all-channel group and mixed in the wheel group, where the leader is more satisfied
than the outlying members.
Task and maintenance functions
The following functions need to be carried out in groups:
● task – initiating, information seeking, diagnosing, opinion-seeking, evaluating,
decision-managing;
● maintenance – encouraging, compromising, peace-keeping, clarifying, summa-
rizing, standard-setting.
It is the job of the group leader or leaders to ensure that these functions operate effec-
tively. Leaderless groups can work, but only in special circumstances. A leader is
almost essential – whether official or self-appointed. The style adopted by a leader
affects the way the group operates. If the leader is respected, this will increase group
cohesiveness and its ability to get things done. An inappropriately authoritarian style
creates tension and resentment. An over-permissive style means that respect for the
leader diminishes and the group does not function so effectively.
294 ❚ Organizational behaviour
Figure 20.1 Channels of communication within groups
Wheel Circle All-channel
A
B
B
B
C
C
D
D
E
EA
A
C
D
E
Group ideology
In the course of interacting and carrying out its task and maintenance functions, the
group develops an ideology which affects the attitudes and actions of its members
and the degree of satisfaction which they feel.
Group cohesion
If the group ideology is strong and individual members identify closely with the
group, it will become increasingly cohesive. Group norms or implicit rules will be
evolved, which define what is acceptable behaviour and what is not. The impact of
group cohesion can, however, result in negative as well as positive results. Janis’s
(1972) study of the decision-making processes of US foreign policy groups estab-
lished that a cohesive group of individuals, sharing a common fate, exerts a strong
pressure towards conformity. He coined the term ‘group think’ to describe the exag-
geration of irrational tendencies that appears to occur in groups and argued that a
group setting can magnify weakness of judgement.
To be ‘one of us’ is not always a good thing in management circles. A sturdy spirit
of independence, even a maverick tendency, may be more conducive to correct deci-
sion-making. Team-working is a good thing, but so is flexibility and independent
judgement. These need not be incompatible with team membership, but could be if
there is too much emphasis on cohesion and conformity within the group.
Reference group
A reference group consists of the group of people with whom an individual identifies.
This means that the group’s norms are accepted and if in doubt about what to do or
say, reference is made to these norms or to other group members before action is
taken. Most people in organizations belong to a reference group and this can signifi-
cantly affect the ways in which they behave.
Impact on group members
The reference group will also affect individual behaviour. This may be through overt
pressure to conform or by more subtle processes. Acceptance of group norms
commonly goes through two stages – compliance and internalization. Initially, a
group member complies in order not to be rejected by the group, although he or she
may behave differently when away from the group. Progressively, however, the
individual accepts the norm whether with the group or not – the group norm has
been internalized. As noted by Chell (1987), pressure on members to conform can
cause problems when:
How organizations function ❚ 295
● there is incompatibility between a member’s personal goals and those of the
group;
● there is no sense of pride from being a member of the group;
● the member is not fully integrated with the group;
● the price of conformity is too high.
Group development
Tuckman (1965) has identified four stages of group development:
1. forming, when there is anxiety, dependence on the leader and testing to find out
the nature of the situation and the task, and what behaviour is acceptable;
2. storming, where there is conflict, emotional resistance to the demands of the task,
resistance to control and even rebellion against the leader;
3. norming, when group cohesion is developed, norms emerge, views are
exchanged openly, mutual support and cooperation increase and the group
acquires a sense of its identity;
4. performing, when interpersonal problems are resolved, roles are flexible and func-
tional, there are constructive attempts to complete tasks and energy is available
for effective work.
Identification
Individuals will identify with their groups if they like the other members, approve of
the purpose and work of the group and wish to be associated with the standing of the
group in the organization. Identification will be more complex if the standing of the
group is good.
Teamwork
Definition of a team
As defined by Katzenbach and Smith (1993):
A team is a small number of people with complementary skills who are committed to a
common purpose, performance goals and approach for which they hold themselves
mutually accountable.
Characteristics of effective teams
The characteristics of teams as described by Katzenbach and Smith are:
296 ❚ Organizational behaviour
● Teams are the basic units of performance for most organizations. They meld
together the skills, experiences and insights of several people.
● Teamwork applies to the whole organization as well as specific teams. It repre-
sents ‘a set of values that encourage behaviours such as listening and responding
co-operatively to points of view expressed by others, giving others the benefit of
the doubt, providing support to those who need it and recognising the interests
and achievements of others’.
● Teams are created and energized by significant performance challenges.
● Teams outperform individuals acting alone or in large organizational groupings,
especially when performance requires multiple skills, judgements and experi-
ences.
● Teams are flexible and responsive to changing events and demands. They can
adjust their approach to new information and challenges with greater speed,
accuracy and effectiveness than can individuals caught in the web of larger
organizational conventions.
● High-performance teams invest much time and effort exploring, shaping and
agreeing on a purpose that belongs to them, both collectively and individually.
They are characterized by a deep sense of commitment to their growth and
success.
Dysfunctional teams
The specification set out above is somewhat idealistic. Teams do not always work like
that. They can fail to function effectively in the following ways:
● The atmosphere can be strained and over-formalized.
● Either there is too much discussion that gets nowhere or discussion is inhibited by
dominant members of the team.
● Team members do not really understand what they are there to do and the objec-
tives or standards they are expected to achieve.
● People don’t listen to one another.
● Disagreements are frequent and often relate to personalities and differences of
opinion rather than a reasoned discussion of alternative points of view.
● Decisions are not made jointly by team members.
● There is evidence of open personal attacks or hidden personal animosities.
● People do not feel free to express their opinions.
● Individual team members opt out or are allowed to opt out, leaving the others to
do the work.
How organizations function ❚ 297
● There is little flexibility in the way in which team members operate – people tend
to use a limited range of skills or specific tasks, and there is little evidence of
multi-skilling.
● The team leader dominates the team; more attention is given to who takes control
rather than to getting the work done.
● The team determines its own standards and norms, which may not be in accord
with the standards and norms of the organization.
Team roles
The different types of roles played by team members have been defined by Belbin
(1981) as follows:
● chairmen who control the way the team operates;
● shapers who specify the ways the team should work;
● company workers who turn proposals into practical work procedures;
● plants who produce ideas and strategies;
● resource investigators who explore the availability of resources, ideas and develop-
ments outside the team;
● monitor-evaluators who analyse problems and evaluate ideas;
● team workers who provide support to team members, improve team communica-
tions and foster team spirit;
● completer-finishers who maintain a sense of urgency in the team.
An alternative classification of roles has been developed by Margerison and McCann
(1986). The eight roles are:
● reporter-advisor: gathers information and expresses it in an easily understandable
form;
● creator-innovator: enjoys thinking up new ideas and ways of doing things;
● explorer-promoter: takes up ideas and promotes them to others;
● assessor-developer: takes ideas and makes them work in practice;
● thruster-organizer: gets things done, emphasizing targets, deadlines and
budgets;
● concluder-producer: sets up plans and standard systems to ensure outputs are
achieved;
● controller-inspector: concerned with the details and adhering to rules and regula-
tions;
● upholder-maintainer: provides guidance and help in meeting standards.
298 ❚ Organizational behaviour
According to Margerison and McCann, a balanced team needs members with prefer-
ences for each of these eight roles.
Leadership, power, politics and conflict
The main processes that affect how organizations function are leadership, power,
politics and conflict.
Leadership
Leadership can be defined as the ability to persuade others willingly to behave differ-
ently. The function of team leaders is to achieve the task set for them with the help of
the group. Leaders and their groups are therefore interdependent.
Leaders have two main roles. First, they must achieve the task. Secondly, they have
to maintain effective relationships between themselves and the group and the indi-
viduals in it – effective in the sense that they are conducive to achieving the task. As
Adair (1973) pointed out, in fulfilling their roles, leaders have to satisfy the following
needs:
1. Task needs. The group exists to achieve a common purpose or task. The leader’s
role is to ensure that this purpose is fulfilled. If it is not, they will lose the confi-
dence of the group and the result will be frustration, disenchantment, criticism
and, possibly, the ultimate disintegration of the group.
2. Group maintenance needs. To achieve its objectives, the group needs to be
held together. The leader’s job is to build up and maintain team spirit and
morale.
3. Individual needs. Individuals have their own needs, which they expect to be satis-
fied at work. The leader’s task is to be aware of these needs so that where neces-
sary they can take steps to harmonize them with the needs of the task and the
group.
These three needs are interdependent. The leader’s actions in one area affect both the
others; thus successful achievement of the task is essential if the group is to be held
together and its members motivated to give their best effort to the job. Action directed
at meeting group or individual needs must be related to the needs of the task. It is
impossible to consider individuals in isolation from the group or to consider the
group without referring to the individuals within it. If any need is neglected, one of
the others will suffer and the leader will be less successful.
The kind of leadership exercised will be related to the nature of the task and the
people being led. It will also depend on the environment and, of course, on the actual
How organizations function ❚ 299
leader. Analysing the qualities of leadership in terms of intelligence, initiative,
self-assurance and so on has only limited value. The qualities required may be
different in different situations. It is more useful to adopt a contingency approach and
take account of the variables leaders have to deal with; especially the task, the group
and their own position relative to the group.
Power
Organizations exist to get things done and in the process of doing this, people or
groups exercise power. Directly or indirectly, the use of power in influencing behav-
iour is a pervading feature of organizations, whether it is exerted by managers,
specialists, informal groups or trade union officials.
Power is the capacity to secure the dominance of one’s goals or values over others.
Four different types of power have been identified by French and Raven (1959):
● reward power – derived from the belief of individuals that compliance brings
rewards; the ability to distribute rewards contributes considerably to an execu-
tive’s power;
● coercive power – making it plain that non-compliance will bring punishment;
● expert power – exercised by people who are popular or admired and with whom
the less powerful can identify;
● legitimized power – power conferred by the position in an organization held by an
executive.
Politics
Power and politics are inextricably mixed, and in any organization there will
inevitably be people who want to achieve their satisfaction by acquiring power, legit-
imately or illegitimately. Kakabadse (1983) defines politics as ‘a process, that of influ-
encing individuals and groups of people to your point of view, where you cannot rely
on authority’.
Organizations consist of individuals who, while they are ostensibly there to
achieve a common purpose, are, at the same time, driven by their own needs to
achieve their own goals. Effective management is the process of harmonizing indi-
vidual endeavour and ambition to the common good. Some individuals genuinely
believe that using political means to achieve their goals will benefit the organization
as well as themselves. Others rationalize this belief. Yet others unashamedly pursue
their own ends.
300 ❚ Organizational behaviour
Conflict
Conflict is inevitable in organizations because they function by means of adjustments
and compromises among competitive elements in their structure and membership.
Conflict also arises when there is change, because it may be seen as a threat to be
challenged or resisted, or when there is frustration – this may produce an aggressive
reaction; fight rather than flight. Conflict is not to be deplored. It is an inevitable
result of progress and change and it can and should be used constructively.
Conflict between individuals raises fewer problems than conflict between groups.
Individuals can act independently and resolve their differences. Members of groups
may have to accept the norms, goals and values of their group. The individual’s
loyalty will usually be to his or her own group if it is in conflict with others.
Interaction and networking
Interactions between people criss-cross the organization, creating networks for
getting things done and exchanging information, which is not catered for in the
formal structure. ‘Networking’ is an increasingly important process in flexible and
delayered organizations where more fluid interactions across the structure are
required between individuals and teams. Individuals can often get much more done
by networking than by going through formal channels. At least this means that they
can canvass opinion and enlist support to promote their projects or ideas and to share
their knowledge.
People also get things done in organizations by creating alliances – getting agree-
ment on a course of action with other people and joining forces to get things done.
Communications
The communications processes used in organizations have a marked effect on how
they function, especially if they take place through the network, which can then turn
into the ‘grapevine’. E-mails in intranets encourage the instant flow of information
(and sometimes produce information overload) but may inhibit face-to-face interac-
tions, which are often the best ways of getting things done.
How organizations function ❚ 301
Organizational culture
This chapter starts with definitions of organizational culture and the associated
concept of organizational climate. The notion of management style as a way of
describing how managers behave within the culture of their organizations is
also defined. The chapter continues with comments on the significance of the
concept to organizations and how culture develops. The components of culture and
methods of analysing and describing culture and the climate are then considered.
The chapter concludes with a review of approaches to supporting or changing
cultures.
DEFINITIONS
Organizational culture
Organizational or corporate culture is the pattern of values, norms, beliefs, attitudes
and assumptions that may not have been articulated but shape the ways in which
people behave and things get done. Values refer to what is believed to be important
about how people and the organizations behave. Norms are the unwritten rules of
behaviour.
The definition emphasizes that organizational culture is concerned with abstrac-
tions such as values and norms which pervade the whole or part of an organization.
21
They may not be defined, discussed or even noticed. Put another way, culture can be
regarded as a ‘code word for the subjective side of organizational life’ (Meyerson and
Martin, 1987). Nevertheless, culture can have a significant influence on people’s
behaviour.
The following are some other definitions of culture:
The culture of an organization refers to the unique configuration of norms, values,
beliefs and ways of behaving that characterize the manner in which groups and individ-
uals combine to get things done.
Eldridge and Crombie (1974)
Culture is a system of informal rules that spells out how people are to behave most of the
time.
Deal and Kennedy (1982)
Culture is the commonly held beliefs, attitudes and values that exist in an organization.
Put more simply, culture is ‘the way we do things around here’.
Furnham and Gunter (1993)
A system of shared values and beliefs about what is important, what behaviours are
important and about feelings and relationships internally and externally.
Purcell et al (2003)
Summing up the various definitions of culture, Furnham and Gunter (1993) list,
amongst others, the following areas of agreement on the concept:
● It is difficult to define (often a pointless exercise).
● It is multi-dimensional, with many different components at different levels.
● It is not particularly dynamic, and ever changing (being relatively stable over
short periods of time).
● It takes time to establish and therefore time to change a corporate culture.
Problems with the concept
Furnham and Gunter refer to a number of problems with the concept, including:
● how to categorize culture (what terminology to use);
● when and why corporate culture should be changed and how this takes place;
● what is the healthiest, most optimal or desirable culture.
304 ❚ Organizational behaviour
They also point out that it is dangerous to treat culture as an objective entity ‘as if
everyone in the world would be able to observe the same phenomenon, whereas this
is patently not the case’.
Organizational climate
The term organizational climate is sometimes confused with organizational culture
and there has been much debate on what distinguishes the concept of climate from
that of culture. In his analysis of this issue, Denison (1996) believed that culture refers
to the deep structure of organizations, which is rooted in the values, beliefs and
assumptions held by organizational members. In contrast, climate refers to those
aspects of the environment that are consciously perceived by organizational
members. Rousseau (1988) stated that climate is a perception and is descriptive.
Perceptions are sensations or realizations experienced by an individual. Descriptions
are what a person reports of these sensations.
The debate about the meanings of these terms can become academic. It is easiest to
regard organizational climate as how people perceive (see and feel about) the culture
existing in their organization. As defined by French et al (1985), it is ‘the relatively
persistent set of perceptions held by organization members concerning the character-
istics and quality of organizational culture’. They distinguish between the actual situ-
ations (ie culture) and the perception of it (climate).
THE SIGNIFICANCE OF CULTURE
As Furnham and Gunter (1993) suggest:
Culture represents the ‘social glue’ and generates a ‘we-feeling’, thus counteracting
processes of differentiations which are an unavoidable part of organizational life.
Organizational culture offers a shared system of meanings which is the basis for commu-
nications and mutual understanding. If these functions are not fulfilled in a satisfactory
way, culture may significantly reduce the efficiency of an organization.
Purcell et al (2005) found in their previous research (2003) that in some organizations
there was a certain something – christened the ‘big idea’ – that seemed to give them a
competitive edge. The big idea consisted of a few words or statements that very
clearly summed up the organization, what it was about and what it was like to work
there. In turn this enabled the organization to manage its corporate culture and estab-
lish a set of shared values, which recognized and reinforced the sort of organization it
wanted to be. Thus it was able to establish a strong shared culture within which
Organizational culture ❚ 305
particular practices that encouraged better performance would be embedded and
flourish.
HOW ORGANIZATIONAL CULTURE DEVELOPS
The values and norms that are the basis of culture are formed in four ways. First,
culture is formed by the leaders in the organization, especially those who have
shaped it in the past. Schein (1990) indicates that people identify with visionary
leaders – how they behave and what they expect. They note what such leaders pay
attention to and treat them as role models. Second, as Schein also points out, culture
is formed around critical incidents – important events from which lessons are learnt
about desirable or undesirable behaviour. Third, as proposed by Furnham and
Gunter (1993), culture develops from the need to maintain effective working relation-
ships among organization members, and this establishes values and expectations.
Finally, culture is influenced by the organization’s environment. The external envi-
ronment may be relatively dynamic or unchanging.
Culture is learned over a period of time. Schein (1984) stated that there are two
ways in which this learning takes place. First, the trauma model, in which members
of the organization learn to cope with some threat by the erection of defence mecha-
nisms. Second, the positive reinforcement model, where things that seem to work
become embedded and entrenched. Learning takes place as people adapt to and
cope with external pressures, and as they develop successful approaches and mecha-
nisms to handle the internal challenges, processes and technologies in their organiza-
tion.
Where culture has developed over long periods of time and has become firmly
embedded, it may be difficult to change quickly, if at all, unless a traumatic event
occurs.
THE DIVERSITY OF CULTURE
The development process described above may result in a culture that characterizes
the whole organization. But there may be different cultures within organizations. For
example, the culture of an outward-looking marketing department may be substan-
tially different from that of an internally focused manufacturing function. There may
be some common organizational values or norms, but in some respects these will
vary between different work environments.
306 ❚ Organizational behaviour
THE COMPONENTS OF CULTURE
Organizational culture can be described in terms of values, norms, artefacts and lead-
ership or management style.
Values
Schiffman and Kanuk (1994) state that: ‘Values help to determine what we think is
right or wrong, what is important and what is desirable.’
Values are beliefs in what is best or good for the organization and what should or
ought to happen. The ‘value set’ of an organization may only be recognized at top
level, or it may be shared throughout the business, in which case it could be described
as value driven.
The stronger the values, the more they will influence behaviour. This does not
depend upon their having been articulated. Implicit values that are deeply embedded
in the culture of an organization and are reinforced by the behaviour of management
can be highly influential, while espoused values that are idealistic and are not
reflected in managerial behaviour may have little or no effect. It is ‘values in use’,
values that drive desirable behaviour, that are important.
Some of the most typical areas in which values can be expressed, implicitly or
explicitly, are:
● performance;
● competence;
● competitiveness;
● innovation;
● quality;
● customer service;
● teamwork;
● care and consideration for people.
Values are translated into reality (enacted) through norms and artefacts as described
below. They may also be expressed through the media of language (organizational
jargon), rituals, stories and myths.
Norms
Norms are the unwritten rules of behaviour, the ‘rules of the game’ that provide
informal guidelines on how to behave. Norms tell people what they are supposed to
be doing, saying, believing, even wearing. They are never expressed in writing – if
Organizational culture ❚ 307
they were, they would be policies or procedures. They are passed on by word of
mouth or behaviour and can be enforced by the reactions of people if they are
violated. They can exert very powerful pressure on behaviour because of these reac-
tions – we control others by the way we react to them.
Norms refer to such aspects of behaviour as:
● how managers treat the members of their teams (management style) and how the
latter relate to their managers;
● the prevailing work ethic, eg ‘work hard, play hard’, ‘come in early, stay late’, ‘if
you cannot finish your work during business hours you are obviously inefficient’,
‘look busy at all times’, ‘look relaxed at all times’;
● status – how much importance is attached to it; the existence or lack of obvious
status symbols;
● ambition – naked ambition is expected and approved of, or a more subtle
approach is the norm;
● performance – exacting performance standards are general; the highest praise
that can be given in the organization is to be referred to as very professional;
● power – recognized as a way of life; executed by political means, dependent on
expertise and ability rather than position; concentrated at the top; shared at
different levels in different parts of the organization;
● politics – rife throughout the organization and treated as normal behaviour; not
accepted as overt behaviour;
● loyalty – expected, a cradle to grave approach to careers; discounted, the
emphasis is on results and contribution in the short term;
● anger – openly expressed; hidden, but expressed through other, possibly political,
means;
● approachability – managers are expected to be approachable and visible; every-
thing happens behind closed doors;
● formality – a cool, formal approach is the norm; forenames are/are not used at all
levels; there are unwritten but clearly understood rules about dress.
Artefacts
Artefacts are the visible and tangible aspects of an organization that people hear, see
or feel. Artefacts can include such things as the working environment, the tone and
language used in letters or memoranda, the manner in which people address each
other at meetings or over the telephone, the welcome (or lack of welcome) given to
visitors and the way in which telephonists deal with outside calls. Artefacts can be
very revealing.
308 ❚ Organizational behaviour
Leadership style
Leadership style, often called management style, describes the approach managers
use to deal with people in their teams. There are many styles of leadership, and
leaders can be classified in extremes as follows:
● Charismatic/non-charismatic. Charismatic leaders rely on their personality, their
inspirational qualities and their ‘aura’. They are visionary leaders who are
achievement-oriented, calculated risk-takers and good communicators. Non-
charismatic leaders rely mainly on their know-how (authority goes to the person
who knows), their quiet confidence and their cool, analytical approach to dealing
with problems.
● Autocratic-democratic. Autocratic leaders impose their decisions, using their posi-
tion to force people to do as they are told. Democratic leaders encourage people to
participate and involve themselves in decision-taking.
● Enabler-controller. Enablers inspire people with their vision of the future and
empower them to accomplish team goals. Controllers manipulate people to
obtain their compliance.
● Transactional-transformational. Transactional leaders trade money, jobs and secu-
rity for compliance. Transformational leaders motivate people to strive for higher-
level goals.
Most managers adopt an approach somewhere between the extremes. Some will vary
it according to the situation or their feelings at the time, others will stick to the same
style whatever happens. A good case can be made for using an appropriate style
according to the situation, but it is undesirable to be inconsistent in the style used in
similar situations. Every manager has his or her own style but this will be influenced
by the organizational culture, which may produce a prevailing management style
that represents the behavioural norm for managers that is generally expected and
adopted.
CLASSIFYING ORGANIZATIONAL CULTURE
There have been many attempts to classify or categorize organizational culture as a
basis for the analysis of cultures in organizations and for taking action to support or
change them. Most of these classifications are expressed in four dimensions and some
of the best-known ones are summarized below.
Organizational culture ❚ 309
Harrison
Harrison (1972) categorized what he called ‘organization ideologies’. These are:
● power-orientated – competitive, responsive to personality rather than expertise;
● people-orientated – consensual, management control rejected;
● task-orientated – focus on competency, dynamic;
● role-orientated – focus on legality, legitimacy and bureaucracy.
Handy
Handy (1981) based his typology on Harrison’s classification, although Handy
preferred the word ‘culture’ to ‘ideology’ as culture conveyed more of the feeling of a
pervasive way of life or set of norms. His four types of culture are:
● The power culture is one with a central power source that exercises control. There
are few rules or procedures and the atmosphere is competitive, power-orientated
and political.
● The role culture is one in which work is controlled by procedures and rules and the
role, or job description, is more important than the person who fills it. Power is
associated with positions, not people.
● The task culture is one in which the aim is to bring together the right people and let
them get on with it. Influence is based more on expert power than on position or
personal power. The culture is adaptable and teamwork is important.
● The person culture is one in which the individual is the central point. The organi-
zation exists only to serve and assist the individuals in it.
Schein
Schein (1985) identified the following four cultures:
● The power culture is one in which leadership resides in a few and rests on their
ability and which tends to be entrepreneurial.
● The role culture is one in which power is balanced between the leader and the
bureaucratic structure. The environment is likely to be stable and roles and rules
are clearly defined.
● The achievement culture is one in which personal motivation and commitment are
stressed and action, excitement and impact are valued.
● The support culture is one in which people contribute out of a sense of commit-
ment and solidarity. Relationships are characterized by mutuality and trust.
310 ❚ Organizational behaviour
Williams, Dobson and Walters
Williams et al (1989) redefined the four categories listed by Harrison and Handy as
follows:
● Power orientation – organizations try to dominate their environment and those
exercising power strive to maintain absolute control over subordinates.
● Role orientation emphasizes legality, legitimacy and responsibility. Hierarchy and
status are important.
● Task orientation focuses on task accomplishment. Authority is based on appro-
priate knowledge and competence.
● People orientation – the organization exists primarily to serve the needs of its
members. Individuals are expected to influence each other through example and
helpfulness.
ASSESSING ORGANIZATIONAL CULTURE
A number of instruments exist for assessing organizational culture. This is not easy
because culture is concerned with both subjective beliefs and unconscious assump-
tions (which might be difficult to measure), and with observed phenomena such as
behavioural norms and artefacts. Two of the better-known instruments are summa-
rized below.
Organizational ideology questionnaire (Harrison, 1972)
This questionnaire deals with the four orientations referred to earlier (power, role,
task, self). The questionnaire is completed by ranking statements according to views
on what is closest to the organization’s actual position. Statements include:
● A good boss is strong, decisive and firm but fair.
● A good subordinate is compliant, hard-working and loyal.
● People who do well in the organization are shrewd and competitive, with a strong
need for power.
● The basis of task assignment is the personal needs and judgements of those in
authority.
● Decisions are made by people with the most knowledge and expertise about the
problem.
Organizational culture ❚ 311
Organizational culture inventory (Cooke and Lafferty, 1989)
This instrument assesses organizational culture under 12 headings:
1. Humanistic-helpful – organizations managed in a participative and person-
centred way.
2. Affiliative – organizations that place a high priority on constructive relationships.
3. Approval – organizations in which conflicts are avoided and interpersonal rela-
tionships are pleasant – at least superficially.
4. Conventional – conservative, traditional and bureaucratically controlled organi-
zations.
5. Dependent – hierarchically controlled and non-participative organizations.
6. Avoidance – organizations that fail to reward success but punish mistakes.
7. Oppositional – organizations in which confrontation prevails and negativism is
rewarded.
8. Power – organizations structured on the basis of the authority inherent in
members’ positions.
9. Competitive – a culture in which winning is valued and members are rewarded
for out-performing one another.
10. Competence/perfectionist – organizations in which perfectionism, persistence and
hard work are valued.
11. Achievement – organizations that do things well and value members who set and
accomplish challenging but realistic goals.
12. Self-actualization – organizations that value creativity, quality over quantity, and
both task accomplishment and individual growth.
MEASURING ORGANIZATIONAL CLIMATE
Organizational climate measures attempts to assess organizations in terms of dimen-
sions that are thought to capture or describe perceptions about the climate.
Perceptions about climate can be measured by questionnaires such as that developed
by Litwin and Stringer (1968) which covers eight categories:
1. Structure – feelings about constraints and freedom to act and the degree of
formality or informality in the working atmosphere.
2. Responsibility – the feeling of being trusted to carry out important work.
3. Risk – the sense of riskiness and challenge in the job and in the organization; the
relative emphasis on taking calculated risks or playing it safe.
4. Warmth – the existence of friendly and informal social groups.
312 ❚ Organizational behaviour
5. Support – the perceived helpfulness of managers and co-workers; the emphasis
(or lack of emphasis) on mutual support.
6. Standards – the perceived importance of implicit and explicit goals and perfor-
mance standards; the emphasis on doing a good job; the challenge represented in
personal and team goals.
7. Conflict – the feeling that managers and other workers want to hear different
opinions; the emphasis on getting problems out into the open rather than
smoothing them over or ignoring them.
8. Identity – the feeling that you belong to a company; that you are a valuable
member of a working team.
A review of a number of questionnaires was carried out by Koys and De Cotiis (1991),
which produced the following eight typical dimensions:
● autonomy – the perception of self-determination with respect to work procedures,
goals and priorities;
● cohesion – the perception of togetherness or sharing within the organization
setting, including the willingness of members to provide material risk;
● trust – the perception of freedom to communicate openly with members at higher
organizational levels about sensitive or personal issues, with the expectation that
the integrity of such communications will not be violated;
● resource – the perception of time demands with respect to task competition and
performance standards;
● support – the perception of the degree to which superiors tolerate members’
behaviour, including willingness to let members learn from their mistakes
without fear of reprisal;
● recognition – the perception that members’ contributions to the organization are
acknowledged;
● fairness – the perception that organizational policies are non-arbitrary or capri-
cious;
● innovation – the perception that change and creativity are encouraged, including
risk-taking into new areas where the member has little or no prior experience.
APPROPRIATE CULTURES
It could be argued that a ‘good’ culture exerts a positive influence on organizational
behaviour. It could help to create a ‘high-performance’ culture, one that will produce
a high level of business performance. As described by Furnham and Gunter (1993), ‘a
Organizational culture ❚ 313
good culture is consistent in its components and shared amongst organizational
members, and it makes the organization unique, thus differentiating it from other
organizations’.
However, a high-performance culture means little more than any culture that will
produce a high level of business performance. The attributes of cultures vary tremen-
dously by context. The qualities of a high-performance culture for an established
retail chain, a growing service business and a consumer products company that is
losing market share may be very different. Further, in addition to context differences,
all cultures evolve over time. Cultures that are ‘good’ in one set of circumstances or
period of time may be dysfunctional in different circumstances or different times.
Because culture is developed and manifests itself in different ways in different
organizations, it is not possible to say that one culture is better than another, only that
it is dissimilar in certain ways. There is no such thing as an ideal culture, only an
appropriate culture. This means that there can be no universal prescription for
managing culture, although there are certain approaches that can be helpful, as
described in the next section.
SUPPORTING AND CHANGING CULTURES
While it may not be possible to define an ideal structure or to prescribe how it can be
developed, it can at least be stated with confidence that embedded cultures exert
considerable influence on organizational behaviour and therefore performance. If
there is an appropriate and effective culture it would be desirable to take steps to
support or reinforce it. If the culture is inappropriate, attempts should be made to
determine what needs to be changed and to develop and implement plans for
change.
Culture analysis
In either case, the first step is to analyse the existing culture. This can be done through
questionnaires, surveys and discussions in focus groups or workshops. It is often
helpful to involve people in analysing the outcome of surveys, getting them to
produce a diagnosis of the cultural issues facing the organization and participate in
the development and implementation of plans and programmes to deal with any
issues. This could form part of an organizational development programme as
described in Chapter 24. Groups can analyse the culture through the use of measure-
ment instruments. Extra dimensions can be established by the use of group exercises
such as ‘rules of the club’ (participants brainstorm the ‘rules’ or norms that govern
314 ❚ Organizational behaviour
behaviour) or ‘shield’ (participants design a shield, often quartered, which illustrates
major cultural features of the organization). Joint exercises like this can lead to discus-
sions on appropriate values, which are much more likely to be ‘owned’ by people if
they have helped to create them rather than having them imposed from above.
While involvement is highly desirable, there will be situations when management
has to carry out the analysis and determine the actions required without the initial
participation of employees. But the latter should be kept informed and brought into
discussion on developments as soon as possible.
Culture support and reinforcement
Culture support and reinforcement programmes aim to preserve and underpin what
is good and functional about the present culture. Schein (1985) has suggested that the
most powerful primary mechanisms for culture embedding and reinforcement are:
● what leaders pay attention to, measure and control;
● leaders’ reactions to critical incidents and crises;
● deliberate role modelling, teaching and coaching by leaders;
● criteria for allocation of rewards and status;
● criteria for recruitment, selection, promotion and commitment.
Other means of underpinning the culture are:
● re-affirming existing values;
● operationalizing values through actions designed, for example, to implement
total quality and customer care programmes, to provide financial and non-finan-
cial rewards for expected behaviour, to improve productivity, to promote and
reward good teamwork, to develop a learning organization (see Chapter 36);
● using the value set as headings for reviewing individual and team performance –
emphasizing that people are expected to uphold the values;
● ensuring that induction procedures cover core values and how people are
expected to achieve them;
● reinforcing induction training on further training courses set up as part of a
continuous development programme.
Culture change
Focus
In theory, culture change programmes start with an analysis of the existing culture.
The desired culture is then defined, which leads to the identification of a ‘culture gap’
Organizational culture ❚ 315
that needs to be filled. This analysis can identify behavioural expectations so that
development and reward processes can be used to define and reinforce them. In real
life, it is not quite as simple as that.
A comprehensive change programme may be a fundamental part of an organiza-
tional transformation programme as described in Chapter 24. But culture change
programmes can focus on particular aspects of the culture, for example performance,
commitment, quality, customer service, teamwork, organizational learning. In each
case the underpinning values would need to be defined. It would probably be neces-
sary to prioritize by deciding which areas need the most urgent attention. There is a
limit to how much can be done at once except in crisis conditions.
Levers for change
Having identified what needs to be done, and the priorities, the next step is to
consider what levers for change exist and how they can be used. The levers could
include, as appropriate:
● performance – performance-related or contribution-related pay schemes; perfor-
mance management processes; gainsharing; leadership training, skills develop-
ment;
● commitment – communication, participation and involvement programmes;
developing a climate of cooperation and trust; clarifying the psychological
contract;
● quality – total quality and continuous improvement programmes;
● customer service – customer care programmes;
● teamwork – team building; team performance management; team rewards;
● organizational learning – taking steps to enhance intellectual capital and the organi-
zation’s resource-based capability by developing a learning organization;
● values – gaining understanding, acceptance and commitment through involve-
ment in defining values, performance management processes and employee
development interventions.
Change management
The effectiveness of culture change programmes largely depends on the quality of
change management processes. These are described in Chapter 24.
316 ❚ Organizational behaviour
Organization, design and
development
This part is concerned with the practical applications of organizational behaviour
theory. It starts by looking at the processes of organizational design and development
and then deals with job and role development.
Part V
Organization design
The management of people in organizations constantly raises questions such as ‘Who
does what?’, ‘How should activities be grouped together?’, ‘What lines and means of
communication need to be established?’, ‘How should people be helped to under-
stand their roles in relation to the objectives of the organization and the roles of their
colleagues?’, ‘Are we doing everything that we ought to be doing and nothing that
we ought not to be doing?’ and ‘Have we got too many unnecessary layers of
management in the organization?’
These are questions involving people which must concern HR practitioners in their
capacity of helping the business to make the best use of its people. HR specialists
should be able to contribute to the processes of organization design or redesign as
described below because of their understanding of the factors affecting organiza-
tional behaviour and because they are in a position to take an overall view of how the
business is organized, which it is difficult for the heads of other functional depart-
ments to obtain.
THE PROCESS OF ORGANIZING
The process of organizing can be described as the design, development and mainte-
nance of a system of coordinated activities in which individuals and groups of people
22
work cooperatively under leadership towards commonly understood and accepted
goals. The key word in that definition is ‘system’. Organizations are systems which,
as affected by their environment, have a structure which has both formal and
informal elements.
The process of organizing may involve the grand design or redesign of the total
structure, but most frequently it is concerned with the organization of particular func-
tions and activities and the basis upon which the relationships between them are
managed.
Organizations are not static things. Changes are constantly taking place in the busi-
ness itself, in the environment in which the business operates, and in the people who
work in the business. There is no such thing as an ‘ideal’ organization. The most that
can be done is to optimize the processes involved, remembering that whatever struc-
ture evolves it will be contingent on the environmental circumstances of the organi-
zation, and one of the aims of organization is to achieve the ‘best fit’ between the
structure and these circumstances.
An important point to bear in mind is that organizations consist of people working
more or less cooperatively together. Inevitably, and especially at managerial levels,
the organization may have to be adjusted to fit the particular strengths and attributes
of the people available. The result may not conform to the ideal, but it is more likely
to work than a structure that ignores the human element. It is always desirable to
have an ideal structure in mind, but it is equally desirable to modify it to meet partic-
ular circumstances, as long as there is awareness of the potential problems that may
arise. This may seem an obvious point, but it is frequently ignored by management
consultants and others who adopt a doctrinaire approach to organization, often with
disastrous results.
AIM
Bearing in mind the need to take an empirical and contingent approach to organizing,
as suggested above, the aim of organization design could be defined as being to
optimize the arrangements for conducting the affairs of the business. To do this it is
necessary, as far as circumstances allow, to:
● clarify the overall purposes of the organization – the strategic thrusts that govern
what it does and how it functions;
● define as precisely as possible the key activities required to achieve that purpose;
● group these activities logically together to avoid unnecessary overlap or duplica-
tion;
320 ❚ Organization, design and development
● provide for the integration of activities and the achievement of cooperative effort
and teamwork in pursuit of a common purpose;
● build flexibility into the system so that organizational arrangements can adapt
quickly to new situations and challenges;
● provide for the rapid communication of information throughout the organization;
● define the role and function of each organizational unit so that all concerned
know how it plays its part in achieving the overall purpose;
● clarify individual roles, accountabilities and authorities;
● design jobs to make the best use of the skills and capacities of the job holders and
to provide them with high levels of intrinsic motivation (job design is considered
in Chapter 23);
● plan and implement organization development activities to ensure that the
various processes within the organization operate in a manner that contributes to
organizational effectiveness;
● set up teams and project groups as required to be responsible for specific
processing, development, professional or administrative activities or for the
conduct of projects.
CONDUCTING ORGANIZATION REVIEWS
Organization reviews are conducted in the following stages:
1. An analysis, as described below, of the existing arrangements and the factors that
may affect the organization now and in the future.
2. A diagnosis of what needs to be done to improve the way in which the organiza-
tion is structured and functions.
3. A plan to implement any revisions to the structure emerging from the diagnosis,
possibly in phases. The plan may include longer-term considerations about the
structure and the type of managers and employees who will be required to
operate within it.
4. Implementation of the plan.
ORGANIZATION ANALYSIS
The starting point for an organization review is an analysis of the existing circum-
stances, structure and processes of the organization and an assessment of the strategic
issues that might affect it in the future. This covers:
Organization design ❚ 321
● The external environment. The economic, market and competitive factors that may
affect the organization. Plans for product-market development will be significant.
● The internal environment. The mission, values, organization climate, management
style, technology and processes of the organization as they affect the way it func-
tions and should be structured to carry out those functions. Technological devel-
opments in such areas as cellular manufacturing may be particularly important as
well as the introduction of new processes such as just-in-time or the development
of an entirely new computer system.
● Strategic issues and objectives. As a background to the study it is necessary to iden-
tify the strategic issues facing the organization and its objectives. These may be
considered under such headings as growth, competition and market position and
standing. Issues concerning the availability of the required human, financial and
physical resources would also have to be considered.
● Activities. Activity analysis establishes what work is done and what needs to be
done in the organization to achieve its objectives within its environment. The
analysis should cover what is and is not being done, who is doing it and where,
and how much is being done. An answer is necessary to the key questions: ‘Are
all the activities required properly catered for?’, ‘Are there any unnecessary activ-
ities being carried out, ie those that do not need to be done at all or those that
could be conducted more economically and efficiently by external contractors or
providers?’
● Structure. The analysis of structure covers how activities are grouped together, the
number of levels in the hierarchy, the extent to which authority is decentralized to
divisions and strategic business units (SBUs), where functions such as finance,
personnel and research and development are placed in the structure (eg as central
functions or integrated into divisions or SBUs) and the relationships that exist
between different units and functions (with particular attention being given to the
way in which they communicate and cooperate with one another). Attention
would be paid to such issues as the logic of the way in which activities are
grouped and decentralized, the span of control managers (the number of separate
functions or people they are directly responsible for), any overlap between func-
tions or gaps leading to the neglect of certain activities, and the existence of
unnecessary departments, units, functions or layers of management.
ORGANIZATION DIAGNOSIS
The diagnosis should be based on the analysis and an agreement by those concerned
with what the aims of the organization should be. The present arrangements can be
322 ❚ Organization, design and development
considered against these aims and future requirements to assess the extent to which
they meet them or fall short.
It is worth repeating that there are no absolute standards against which an organi-
zation structure can be judged. There is never one right way of organizing anything
and there are no absolute principles that govern organizational choice. The fashion
for delayering organizations has much to commend it, but it can go too far, leaving
units and individuals adrift without any clear guidance on where they fit into the
structure and how they should work with one another, and making the management
task of coordinating activities more difficult.
Organization guidelines
There are no ‘rules’ or ‘principles’ of organization but there are certain guidelines that
are worth bearing in mind in an organization study. These are:
● Allocation of work. The work that has to be done should be defined and allocated to
functions, units, departments, work teams, project groups and individual posi-
tions. Related activities should be grouped together, but the emphasis should be
on process rather than hierarchy, taking into account the need to manage
processes that involve a number of different work units or teams.
● Differentiation and integration. It is necessary to differentiate between the different
activities that have to be carried out, but it is equally necessary to ensure that
these activities are integrated so that everyone in the organization is working
towards the same goals.
● Teamwork. Jobs should be defined and roles described in ways that facilitate and
underline the importance of teamwork. Areas where cooperation is required
should be emphasized. The organization should be designed and operated across
departmental or functional boundaries. Wherever possible, self-managing teams
should be set up and given the maximum amount of responsibility to run their
own affairs, including planning, budgeting and exercising quality control.
Networking should be encouraged in the sense of people communicating openly
and informally with one another as the need arises. It is recognized that these
informal processes can be more productive than rigidly ‘working through chan-
nels’ as set out in the organization chart.
● Flexibility. The organization structure should be flexible enough to respond
quickly to change, challenge and uncertainty. Flexibility should be enhanced by
the creation of core groups and by using part-time, temporary and contract
workers to handle extra demands. At top management level and elsewhere, a
collegiate approach to team operation should be considered in which people
Organization design ❚ 323
share responsibility and are expected to work with their colleagues in areas
outside their primary function or skill.
● Role clarification. People should be clear about their roles as individuals and as
members of a team. They should know what they will be held accountable for and
be given every opportunity to use their abilities in achieving objectives to which
they have agreed and are committed. Role profiles should define key result areas
but should not act as straitjackets, restricting initiative and unduly limiting
responsibility.
● Decentralization. Authority to make decisions should be delegated as close to the
scene of action as possible. Profit centres should be set up as strategic business
units which operate close to their markets and with a considerable degree of
autonomy. A multiproduct or market business should develop a federal organiza-
tion with each federated entity running its own affairs, although they will be
linked together by the overall business strategy.
● Delayering. Organizations should be ‘flattened’ by removing superfluous layers of
management and supervision in order to promote flexibility, facilitate swifter
communication, increase responsiveness, enable people to be given more respon-
sibility as individuals or teams and reduce costs.
Organization design leads into organization planning.
ORGANIZATION PLANNING
Organization planning is the process of converting the analysis into the design. It
determines structure, relationships, roles, human resource requirements and the lines
along which changes should be implemented. There is no one best design. There is
always a choice between alternatives. Logical analysis will help in the evaluation of
the alternatives but Mary Parker Follet’s (1924) law of the situation will have to
prevail. The final choice will be contingent upon the present and future circumstances
of the organization. It will be strongly influenced by personal and human considera-
tions – the inclinations of top management, the strengths and weaknesses of manage-
ment generally, the availability of people to staff the new organization and the need
to take account of the feelings of those who will be exposed to change. Cold logic may
sometimes have to override these considerations. If it does, then it must be deliberate
and the consequences must be appreciated and allowed for when planning the imple-
mentation of the new organization.
It may have to be accepted that a logical regrouping of activities cannot be intro-
duced in the short term because no one with the experience is available to manage the
324 ❚ Organization, design and development
new activities, or because capable individuals are so firmly entrenched in one area
that to uproot them would cause serious damage to their morale and would reduce
the overall effectiveness of the new organization.
The worst sin that organization designers can commit is that of imposing their own
ideology on the organization. Their job is to be eclectic in their knowledge, sensitive
in their analysis of the situation and deliberate in their approach to the evaluation of
alternatives.
Having planned the organization and defined structures, relationships and roles, it
is necessary to consider how the new organization should be implemented. It may be
advisable to stage implementation over a number of phases, especially if new people
have to be found and trained.
RESPONSIBILITY FOR ORGANIZATION DESIGN
Organization design may be carried out by line management with or without the help
of members of the HR function acting as internal consultants, or it may be done by
outside consultants. HR management should always be involved because organiza-
tion design is essentially about people and the work they do. The advantage of using
outside consultants is that an independent and dispassionate view is obtained. They
can cut through internal organizational pressures, politics and constraints and bring
experience of other organizational problems they have dealt with. Sometimes, regret-
tably, major changes can be obtained only by outside intervention. But there is a
danger of consultants suggesting theoretically ideal organizations that do not take
sufficient account of the problems of making them work with existing people. They
do not have to live with their solutions, as do line and HR managers. If outside
consultants are used, it is essential to involve people from within the organization so
they can ensure that they are able to implement the proposals smoothly.
Organization design ❚ 325
Job design and role development
JOBS AND ROLES
A job consists of a related set of tasks that are carried out by a person to fulfil a
purpose. It can be regarded as a unit in an organization structure that remains
unchanged whoever is in the job. A job in this sense is a fixed entity, part of a machine
that can be ‘designed’ like any other part of a machine. Routine or machine-controlled
jobs do indeed exist in most organizations but, increasingly, the work carried out by
people is not mechanistic. What is done, how it is done and the results achieved
depend more and more on the capabilities and motivation of individuals and their
interactions with one another and their customers or suppliers.
The rigidity inherent in the notion of a job is not in accord with the realities of orga-
nizational life for many people. A flexible approach is often required to use and
develop their skills in order to respond swiftly to the new demands they face every
day.
The concept of a role conveys these realities more than that of a job. Essentially, a
role is the part people play in carrying out their work. Individual roles are those carried
out by one person. Generic roles are those in which essentially similar activities are
carried out by a number of people. They may cover a whole occupation. A role can be
described in behavioural terms – given certain expectations, this is how the person
needs to behave to meet them. A role profile will not spell out the tasks to be carried
out but will instead indicate expectations in the form of outputs and outcomes
23
and competency requirements in the shape of the inputs of skill and behaviours
required to fulfil these expectations. The definition may be broad. It will not be
prescriptive. Scope will be allowed for people to use their skills in accordance with
their interpretation of the situation. Encouragement will be given for them both to
grow in their roles and to grow their roles by developing their competencies and by
extending the range of their responsibilities so that their contributions exceed expec-
tations. The need for flexibility will also be recognised.
Roles are therefore more about people than jobs and this means that the extent to
which a role can be ‘designed’ may be limited or even non-existent where flexibility
and growth are important. This may apply particularly to knowledge workers.
There are, however, certain considerations that affect the ways in which roles can
be developed in order to increase satisfaction with the work and to encourage
growth. These considerations can also apply to jobs and this chapter therefore starts
with a general review of the factors that affect job design and that are also relevant to
role building. Attention is then directed to approaches to job design, which include
the notion of job enrichment. Consideration is next given to the characteristics of
team roles and what can be done to set up and maintain effective self-managed teams
and high-performance work design. Finally, the focus is on roles and how they can be
developed rather than designed in today’s flexible organizations on the basis of an
understanding of what role holders are expected to achieve, the scope they have to go
beyond these basic expectations and the capabilities they need to carry out and
extend their role.
FACTORS AFFECTING JOB DESIGN
The content of jobs is affected by the purpose of the organization or the organiza-
tional unit, the particular demands that achieving that purpose makes on the people
involved, the structure of the organization, the processes and activities carried out in
the organization, the technology of the organization, the changes that are taking place
in that technology and the environment in which the organization operates. Job
design has therefore to be considered within the context of organizational design, as
described in Chapter 22, but it must also take into account the following factors:
● the process of intrinsic motivation;
● the characteristics of task structure;
● the motivating characteristics of jobs;
● the significance of the job characteristics model;
● providing intrinsic motivation.
328 ❚ Organization, design and development
The process of intrinsic motivation
The case for using job design techniques is based on the premise that effective perfor-
mance and genuine satisfaction in work follow mainly from the intrinsic content of
the job. This is related to the fundamental concept that people are motivated when
they are provided with the means to achieve their goals. Work provides the means to
earn money, which as an extrinsic reward satisfies basic needs and is instrumental in
providing ways of satisfying higher-level needs. But work also provides intrinsic
rewards, which are under the direct control of the worker.
Characteristics of task structure
Job design requires the assembly of a number of tasks into a job or a group of jobs. An
individual may carry out one main task, which consists of a number of interrelated
elements or functions. Or task functions may be allocated to a team working closely
together in a manufacturing ‘cell’ or customer service unit, or strung along an
assembly line. In more complex jobs, individuals may carry out a variety of
connected tasks, each with a number of functions, or these tasks may be allocated to a
team of workers or divided between them. In the latter case, the tasks may require a
variety of skills, which have to be possessed by all members of the team (multi-skill-
ing) in order to work flexibly.
Complexity in a job may be a reflection of the number and variety of tasks to be
carried out, the different skills or competences to be used, the range and scope of the
decisions that have to be made, or the difficulty of predicting the outcome of deci-
sions.
The internal structure of each task consists of three elements: planning (deciding on
the course of action, its timing and the resources required), executing (carrying out
the plan), and controlling (monitoring performance and progress and taking correc-
tive action when required). A completely integrated job includes all these elements
for each of the tasks involved. The worker, or group of workers, having been given
objectives in terms of output, quality and cost targets, decides on how the work is to
be done, assembles the resources, performs the work, and monitors output, quality
and cost standards. Responsibility in a job is measured by the amount of authority
someone has to do all these things.
Motivating characteristics of jobs
The ideal arrangement from the point of view of intrinsic motivation is to provide for
fully integrated jobs containing all three task elements. In practice, management and
team leaders are often entirely responsible for planning and control, leaving the
Job design and role development ❚ 329
worker responsible for execution. To a degree, this is inevitable, but one of the aims of
job design is often to extend the responsibility of workers into the functions of plan-
ning and control. This can involve empowerment – giving individuals and teams
more responsibility for decision making and ensuring that they have the training,
support and guidance to exercise that responsibility properly.
The job characteristics model
A useful perspective on the factors affecting job design and motivation is provided by
Hackman and Oldham’s (1974) job characteristics model. They suggest that the ‘crit-
ical psychological states’ of ‘experienced meaningfulness of work, experienced
responsibility for outcomes of work and knowledge of the actual outcomes of work’
strongly influence motivation, job satisfaction and performance.
As Robertson et al (1992) point out: ‘This element of the model is based on the
notion of personal reward and reinforcement… Reinforcement is obtained when a
person becomes aware (knowledge of results) that he or she has been responsible for
(experienced responsibility) and good performance on a task that he or she cares
about (experienced meaningfulness).’
Providing intrinsic motivation
Three characteristics have been distinguished by Lawler (1969) as being required in
jobs if they are to be intrinsically motivating:
● Feedback – individuals must receive meaningful feedback about their perfor-
mance, preferably by evaluating their own performance and defining the feed-
back. This implies that they should ideally work on a complete product, or a
significant part of it that can be seen as a whole.
● Use of abilities – the job must be perceived by individuals as requiring them to use
abilities they value in order to perform the job effectively.
● Self-control – individuals must feel that they have a high degree of self-control
over setting their own goals and over defining the paths to these goals.
JOB DESIGN
Job design has been defined by Davis (1966) as: ‘The specification of the contents,
methods, and relationships of jobs in order to satisfy technological and organizational
requirements as well as the social and personal requirements of the job holder’.
330 ❚ Organization, design and development
Job design has two aims: first, to satisfy the requirements of the organization for
productivity, operational efficiency and quality of product or service, and second, to
satisfy the needs of the individual for interest, challenge and accomplishment, thus
providing for ‘job engagement’ – commitment to carrying out the job well. Clearly,
these aims are interrelated and the overall objective of job design is to integrate the
needs of the individual with those of the organization.
The process of job design starts, as described in Chapter 13, from an analysis of
what work needs to be done – the tasks that have to be carried out if the purpose of
the organization or an organizational unit is to be achieved. The job designer can then
consider how the jobs can be set up to provide the maximum degree of intrinsic moti-
vation for those who have to carry them out with a view to improving performance
and productivity. Consideration has also to be given to another important aim of job
design: to fulfil the social responsibilities of the organization to the people who work
in it by improving the quality of working life, an aim which, as stated in Wilson’s
(1973) report on this subject, ‘depends upon both efficiency of performance and satis-
faction of the worker’. The outcome of job design may be a job description, as
explained in Chapter 13, although as noted in that chapter, the emphasis today is
more on roles and the development of role profiles.
Principles of job design
Robertson and Smith (1985) suggest the following five principles of job design:
● To influence skill variety, provide opportunities for people to do several tasks and
combine tasks.
● To influence task identity, combine tasks and form natural work units.
● To influence task significance, form natural work units and inform people of the
importance of their work.
● To influence autonomy, give people responsibility for determining their own
working systems.
● To influence feedback, establish good relationships and open feedback channels.
Turner and Lawrence (1965) identified six important characteristics, which they
called ‘requisite task characteristics‘, namely: variety, autonomy, required interac-
tions, optional interactions, knowledge and skill, and responsibility. And Cooper
(1973) outlined four conceptually distinct job dimensions: variety, discretion, contri-
bution and goal characteristics.
An integrated view suggests that the following motivating characteristics are of
prime importance in job design:
Job design and role development ❚ 331
● autonomy, discretion, self-control and responsibility;
● variety;
● use of abilities;
● feedback;
● belief that the task is significant.
These are the bases of the approach used in job enrichment, as described later in this
chapter.
Approaches to job design
The main job design approaches are:
● Job rotation, which comprises the movement of employees from one task to
another to reduce monotony by increasing variety.
● Job enlargement, which means combining previously fragmented tasks into one
job, again to increase the variety and meaning of repetitive work.
● Job enrichment, which goes beyond job enlargement to add greater autonomy and
responsibility to a job and is based on the job characteristics approach.
● Self-managing teams (autonomous work groups) – these are self-regulating teams
who work largely without direct supervision. The philosophy on which this tech-
nique is based is a logical extension of job enrichment.
● High-performance work design, which concentrates on setting up working groups in
environments where high levels of performance are required.
Of these five approaches, it is generally recognized that, although job rotation and job
enlargement have their uses in developing skills and relieving monotony, they do not
go to the root of the requirements for intrinsic motivation and for meeting the various
motivating characteristics of jobs as described above. These are best satisfied by
using, as appropriate, job enrichment, autonomous work groups or high-perfor-
mance work design.
JOB ENRICHMENT
Job enrichment aims to maximize the interest and challenge of work by providing the
employee with a job that has these characteristics:
● It is a complete piece of work in the sense that the worker can identify a series of
tasks or activities that end in a recognizable and definable product.
332 ❚ Organization, design and development
● It affords the employee as much variety, decision-making responsibility and
control as possible in carrying out the work.
● It provides direct feedback through the work itself on how well the employee is
doing his or her job.
Job enrichment as proposed by Herzberg (1968) is not just increasing the number or
variety of tasks; nor is it the provision of opportunities for job rotation. It is claimed
by supporters of job enrichment that these approaches may relieve boredom, but they
do not result in positive increases in motivation.
SELF-MANAGING TEAMS
A self-managing team or autonomous work group is allocated an overall task and
given discretion over how the work is done. This provides for intrinsic motivation by
giving people autonomy and the means to control their work, which will include
feedback information. The basis of the autonomous work group approach to job
design is socio-technical systems theory, which suggests that the best results are
obtained if grouping is such that workers are primarily related to each other by way
of task performance and task interdependence. As Emery (1980) has stated:
In designing a social system to efficiently operate a modern capital-intensive plant the
key problem is that of creating self-managing groups to man the interface with the tech-
nical system.
A self-managing team:
● enlarges individual jobs to include a wider range of operative skills (multi-
skilling);
● decides on methods of work and the planning, scheduling and control of work;
● distributes tasks itself among its members.
The advocates of self-managing teams or autonomous work groups claim that this
approach offers a more comprehensive view of organizations than the rather
simplistic individual motivation theories that underpin job rotation, enlargement
and enrichment. Be that as it may, the strength of this system is that it does take
account of the social or group factors and the technology as well as the individual
motivators.
Job design and role development ❚ 333
HIGH-PERFORMANCE WORK DESIGN
High-performance work design, as described by Buchanan (1987), requires the
following steps:
● Management clearly defines what it needs in the form of new technology or
methods of production and the results expected from its introduction.
● Multi-skilling is encouraged – that is, job demarcation lines are eliminated as far
as possible and encouragement and training are provided for employees to
acquire new skills.
● Equipment that can be used flexibly is selected and is laid out to allow freedom of
movement and vision.
● Self-managed teams or autonomous working groups are established, each with
around a dozen members and with full ‘back-to-back’ responsibility for product
assembly and testing, fault-finding and some maintenance.
● Managers and team leaders adopt a supportive rather than an autocratic style
(this is the most difficult part of the system to introduce).
● Support systems are provided for kit-marshalling and material supply, which
help the teams to function effectively as productive units.
● Management sets goals and standards for success.
● The new system is introduced with great care by means of involvement and
communication programmes.
● Thorough training is carried out on the basis of an assessment of training needs.
● The payment system is specially designed with employee participation to fit their
needs as well as those of management.
● Payment may be related to team performance (team pay), but with skill-based
pay for individuals.
● In some cases, a ‘peer performance review’ process may be used which involves
team members assessing one another’s performance as well as the performance of
the team as a whole.
ROLE DEVELOPMENT
Job design as described above takes place when a new job is created or an existing job
is substantially changed, often following a reorganization. But the part people play in
carrying out their jobs – their roles – can evolve over time as people grow into them
and grow with them, and as incremental changes take place in the scope of the work
and the degree to which individuals are free to act (their autonomy). Roles will be
334 ❚ Organization, design and development
developed as people develop in them, responding to opportunities and changing
demands, acquiring new skills and developing competencies.
Role development is a continuous process which takes place in the context of day
to day work, and it is therefore a matter between managers and the members of their
teams. It involves agreeing definitions of key results areas and competency require-
ments as they evolve. When these change – as they probably will in all except the
most routine jobs – it is desirable to achieve mutual understanding of new expecta-
tions. The forces should be on role flexibility – giving people the chance to develop
their roles by making better and extended use of their skills and capabilities.
The process of understanding how roles are developing and agreeing the implica-
tions can take place within the framework of performance management as described
in Part VII, where the performance agreement, which is updated regularly, spells out
the outcomes (key result areas) and the competency requirements. It is necessary to
ensure that managers, team leaders and employees generally acquire the skills neces-
sary to define roles within the performance management framework, taking into
account the principles of job design set out earlier in this chapter. Ways in which role
profiles can be set out are described in Chapter 13.
Job design and role development ❚ 335
Organizational development,
change and transformation
This chapter starts with a definition and critical review of the overall concept of orga-
nizational development (OD). Approaches to change management are then exam-
ined. These have sometimes been treated as an aspect of organizational development,
but in fact they are used in any organization that is concerned with the effective intro-
duction of changed structures, policies or practices. They therefore exist in their own
right. The chapter continues with a discussion of organizational transformation prin-
ciples and practice which are an extension of change management methodology into
comprehensive programmes for managing fundamental changes to the culture and
operations of an organization. The final section of the chapter deals with specific
approaches to organizational development or change, namely: team building, culture
change management, total quality management, continual improvement processes,
business process re-engineering and performance management.
WHAT IS ORGANIZATIONAL DEVELOPMENT?
Organizational development is concerned with the planning and implementation
of programmes designed to enhance the effectiveness with which an organization
functions and responds to change. Overall, the aim is to adopt a planned and
24
coherent approach to improving organizational effectiveness. An effective organiza-
tion can be defined broadly as one that achieves its purpose by meeting the wants
and needs of its stakeholders, matching its resources to opportunities, adapting flex-
ibly to environmental changes and creating a culture that promotes commitment,
creativity, shared values and mutual trust.
Organizational development is concerned with process, not structure or systems –
with the way things are done rather than what is done. Process refers to the ways in
which people act and interact. It is about the roles they play on a continuing basis to
deal with events and situations involving other people and to adapt to changing
circumstances.
Organizational development is an all-embracing term for the approaches described
in this chapter to changing processes, culture and behaviour in the organization. The
changes may take place within the framework of an overall programme of organiza-
tion development (OD). Within this programme, or taking place as separate activities,
one or more of the following approaches may be used.
● organization development (OD);
● change management;
● team building;
● culture change or management;
● total quality management;
● continuous improvement;
● business process re-engineering;
● performance management;
● organizational transformation.
ORGANIZATION DEVELOPMENT
Defined
Organization development (OD) has been defined by French and Bell (1990) as:
A planned systematic process in which applied behavioural science principles and prac-
tices are introduced into an ongoing organization towards the goals of effecting organi-
zational improvement, greater organizational competence, and greater organizational
effectiveness. The focus is on organizations and their improvement or, to put it another
way, total systems change. The orientation is on action – achieving desired results as a
result of planned activities.
338 ❚ Organization, design and development
The classic and ambitious approach to OD was described by Bennis (1960) as follows:
‘Organization development (OD) is a response to change, a complex educational
strategy intended to change the beliefs, attitudes, values, and structure of organiza-
tions so that they can better adapt to new technologies, markets, and challenges, and
the dizzying rate of change itself.’
A short history of OD
Origins of OD
The origin of OD can be traced to the work of Kurt Lewin (1947, 1951), who devel-
oped the concept of group dynamics (the phrase was first coined in 1939). Group
dynamics is concerned with the ways in which groups evolve and how people in
groups behave and interact. Lewin founded the Research Centre for Group Dynamics
in 1945 and out of this emerged the process of ‘T-group’ or sensitivity training, in
which participants in an unstructured group learn from their own interaction and the
evolving dynamics of the group. T-group laboratory training became one of the
fundamental OD processes. Lewin also pioneered action research approaches.
The formative years of OD
During the 1950s and 1960s behavioural scientists such as Argyris, Beckhard, Bennis,
Blake, McGregor, Schein, Shepart and Tannenbaum developed the concepts and
approaches that together represented ‘OD’. They defined the scope, purpose and
philosophy of OD, methods of conducting OD ‘interventions’, approaches to
‘process consulting’ and methodologies such as action research and survey
feedback.
OD – the glory years
The later 1960s and the 1970s were the days when behavioural science reigned and
OD was seen, at least by behavioural scientists, as the answer to the problem of
improving organizational effectiveness. Comprehensive programmes using the
various approaches described below were introduced in a number of American busi-
nesses such as General Motors and Corning Glass and a few UK companies such as
ICI. US research quoted by French and Bell (1990) found that positive impacts were
made in between 70 and 80 per cent of the cases studied.
OD in decline
Doubt about the validity of OD as a concept was first expressed in the 1970s. Kahn
Organizational development, change and transformation ❚ 339
(1974) wrote that: ‘It is not a concept, at least not in the scientific sense of the word: it
is not precisely defined; it is not reducible to specific, uniform, observable behaviour.’
A typical criticism of OD was made later by McLean (1981) who wrote that: ‘There
seems to be a growing awareness of the inappropriateness of some of the funda-
mental values, stances, models and prescriptions inherited from the 1960s. Writers
are facing up to the naivete of early beliefs and theories in what might be termed a
climate of sobriety and new realism.’
New approaches to improving organizational effectiveness
During the 1980s and 1990s the focus shifted from OD as a behavioural science
concept to a number of other approaches. Some of these, such as organizational
transformation, are not entirely dissimilar to OD. Others, such as team building,
change management and culture change or management, are built on some of the
basic ideas developed by writers on organization development and OD practitioners.
Yet other approaches, such as total quality management, continuous improvement,
business process re-engineering and performance management, could be described
as holistic processes that attempt to improve overall organizational effectiveness from
a particular perspective. The tendency now is to rely more on specific interventions
such as performance management, team pay or total quality management, than on
all-embracing but somewhat nebulous OD programmes which were often owned by
the HR department and its consultants, and not by line management.
Characteristics of the traditional approach to OD
OD concentrated on how things are done as well as what they do. It was a form of
applied behavioural science that was concerned with system-wide change. The orga-
nization was considered as a total system and the emphasis was on the interrelation-
ships, interactions and interdependencies of different aspects of how systems operate
as they transform inputs and outputs and use feedback mechanisms for self-regula-
tion. OD practitioners talked about ‘the client system’ – meaning that they were
dealing with the total organizational system.
OD as originally conceived was based upon the following assumptions and
values:
● Most individuals are driven by the need for personal growth and development as
long as their environment is both supportive and challenging.
● The work team, especially at the informal level, has great significance for feelings
of satisfaction and the dynamics of such teams have a powerful effect on the
behaviour of their members.
340 ❚ Organization, design and development
● OD programmes aimed to improve the quality of working life of all members of
the organization.
● Organizations can be more effective if they learn to diagnose their own strengths
and weaknesses.
● But managers often do not know what is wrong and need special help in diag-
nosing problems, although the outside ‘process consultant’ ensures that decision
making remains in the hands of the client.
The three main features of OD programmes were:
● They were managed, or at least strongly supported, from the top but often made
use of third parties or ‘change agents’ to diagnose problems and to manage
change by various kinds of planned activity or ‘intervention’.
● The plans for organization development were based upon a systematic analysis
and diagnosis of the circumstances of the organization and the changes and prob-
lems affecting it.
● They used behavioural science knowledge and aimed to improve the way the
organization copes in times of change through such processes as interaction,
communications, participation, planning and conflict.
The activities that may be incorporated in a traditional OD programme are summa-
rized below.
● Action research. This is an approach developed by Lewin (1947) which takes the
form of systematically collecting data from people about process issues and feeds
it back in order to identify problems and their likely causes so that action can be
taken cooperatively by the people involved to deal with the problem. The essen-
tial elements of action research are data collection, diagnosis, feedback, action
planning, action and evaluation.
● Survey feedback. This is a variety of action research in which data are systemati-
cally collected about the system and then fed back to groups to analyse and inter-
pret as the basis for preparing action plans. The techniques of survey feedback
include the use of attitude surveys and workshops to feed back results and
discuss implications.
● Interventions. The term ‘intervention’ in OD refers to core structured activities
involving clients and consultants. The activities can take the form of action
research, survey feedback or any of those mentioned below. Argyris (1970)
summed up the three primary tasks of the OD practitioner or interventionist as
being to:
Organizational development, change and transformation ❚ 341
– generate and help clients to generate valid information that they can under-
stand about their problems;
– create opportunities for clients to search effectively for solutions to their prob-
lems, to make free choices;
– create conditions for internal commitment to their choices and opportunities
for the continual monitoring of the action taken.
● Process consultation. As described by Schein (1969), this involves helping clients to
generate and analyse information that they can understand and, following a thor-
ough diagnosis, act upon. The information will relate to organizational processes
such as inter-group relations, interpersonal relations and communications. The
job of the process consultant was defined by Schein as being to ‘help the organi-
zation to solve its own problems by making it aware of organizational processes,
of the consequences of these processes, and of the mechanisms by which they can
be changed’.
● Team-building interventions as discussed later in this chapter. These deal with
permanent work teams or those set up to deal with projects or to solve particular
problems. Interventions are directed towards the analysis of the effectiveness of
team processes such as problem solving, decision making and interpersonal rela-
tionships, a diagnosis and discussion of the issues and joint consideration of the
actions required to improve effectiveness.
● Inter-group conflict interventions. As developed by Blake et al (1964), these aim to
improve inter-group relations by getting groups to share their perceptions of one
another and to analyse what they have learned about themselves and the other
group. The groups involved meet each other to share what they have learnt, to
agree on the issues to be resolved and the actions required.
● Personal interventions. These include sensitivity training laboratories (T-groups),
transactional analysis and, more recently, neuro-linguistic programming (NLP).
Another approach is behaviour modelling, which is based on Bandura’s (1977)
social learning theory. This states that for people to engage successfully in a
behaviour they 1) must perceive a link between the behaviour and certain
outcomes, 2) must desire those outcomes (this is termed ‘positive valence’), and 3)
must believe they can do it (termed ‘self-efficacy’). Behaviour-modelling training
involves getting a group to identify the problem and develop and practise the
skills required by looking at DVDs showing what skills can be applied, role
playing, practising the use of skills on the job and discussing how well they have
been applied.
342 ❚ Organization, design and development
Use of OD
The decline of traditional OD, as described above, has been partly caused by disen-
chantment with the jargon used by consultants and the unfulfilled expectations of
significant improvements in organizational effectiveness. There was also a reaction in
the hard-nosed 1980s against the perceived softness of the messages preached by the
behavioural scientists. Managements in the later 1980s and 1990s wanted more
specific prescriptions which would impact on processes they believed to be important
as means of improving performance, such as total quality management, business
process re-engineering and performance management. The need to manage change to
processes, systems or culture was still recognized as long as it was results driven,
rather than activity centred. Team-building activities in the new process-based orga-
nizations were also regarded favourably as long as they were directed towards
measurable improvements in the shorter term. It was also recognized that organiza-
tions were often compelled to transform themselves in the face of massive challenges
and external pressures, and traditional OD approaches would not make a sufficient
or speedy impact. A survey of the views of chief executives about organizational
development, (IPD, 1999a) found that a large proportion of them are expecting
greater team contributions, more sophisticated people management practices and
processes for managing knowledge. As the IPD commented, ‘HR has a pivotal role in
developing the behaviours and culture to support the delivery of these strategies.’
CHANGE MANAGEMENT
The change process
Conceptually, the change process starts with an awareness of the need for change. An
analysis of this situation and the factors that have created it leads to a diagnosis of
their distinctive characteristics and an indication of the direction in which action
needs to be taken. Possible courses of action can then be identified and evaluated and
a choice made of the preferred action.
It is then necessary to decide how to get from here to there. Managing change
during this transition state is a critical phase in the change process. It is here that the
problems of introducing change emerge and have to be managed. These problems
can include resistance to change, low stability, high levels of stress, misdirected
energy, conflict and loss of momentum. Hence the need to do everything possible to
anticipate reactions and likely impediments to the introduction of change.
The installation stage can also be painful. When planning change there is a
tendency for people to think that it will be an entirely logical and linear process of
Organizational development, change and transformation ❚ 343
going from A to B. It is not like that at all. As described by Pettigrew and Whipp
(1991), the implementation of change is an ‘iterative, cumulative and reformulation-
in-use process’.
To manage change, it is first necessary to understand the types of change and why
people resist change. It is important to bear in mind that while those wanting change
need to be constant about ends, they have to be flexible about means. This
requires them to come to an understanding of the various models of change that
have been developed. In the light of an understanding of these models they will be
better equipped to make use of the guidelines for change set out at the end of this
section.
Types of change
There are two main types of change: strategic and operational.
Strategic change
Strategic change is concerned with organizational transformation as described in the
last section of this chapter. It deals with broad, long-term and organization-wide
issues. It is about moving to a future state, which has been defined generally in terms
of strategic vision and scope. It will cover the purpose and mission of the organiza-
tion, its corporate philosophy on such matters as growth, quality, innovation and
values concerning people, the customer needs served and the technologies
employed. This overall definition leads to specifications of competitive positioning
and strategic goals for achieving and maintaining competitive advantage and for
product-market development. These goals are supported by policies concerning
marketing, sales, manufacturing, product and process development, finance and
human resource management.
Strategic change takes place within the context of the external competitive,
economic and social environment, and the organization’s internal resources, capabil-
ities, culture, structure and systems. Its successful implementation requires thorough
analysis and understanding of these factors in the formulation and planning stages.
The ultimate achievement of sustainable competitive advantage relies on the qualities
defined by Pettigrew and Whipp (1991), namely: ‘The capacity of the firm to identify
and understand the competitive forces in play and how they change over time, linked
to the competence of a business to mobilize and manage the resources necessary for
the chosen competitive response through time.’
Strategic change, however, should not be treated simplistically as a linear process
of getting from A to B which can be planned and executed as a logical sequence of
events. Pettigrew and Whipp (1991) issued the following warning based on their
344 ❚ Organization, design and development
research into competitiveness and managing change in the motor, financial services,
insurance and publishing industries:
The process by which strategic changes are made seldom moves directly through neat,
successive stages of analysis, choice and implementation. Changes in the firm’s envi-
ronment persistently threaten the course and logic of strategic changes: dilemma
abounds… We conclude that one of the defining features of the process, in so far as
management action is concerned, is ambiguity; seldom is there an easily isolated logic
to strategic change. Instead, that process may derive its motive force from an amalgam
of economic, personal and political imperatives. Their introduction through time
requires that those responsible for managing that process make continual assessments,
repeated choices and multiple adjustments.
Operational change
Operational change relates to new systems, procedures, structures or technology
which will have an immediate effect on working arrangements within a part of the
organization. But their impact on people can be more significant than broader
strategic change and they have to be handled just as carefully.
Resistance to change
Why people resist change
People resist change because it is seen as a threat to familiar patterns of behaviour as
well as to status and financial rewards. Joan Woodward (1968) made this point
clearly:
When we talk about resistance to change we tend to imply that management is always
rational in changing its direction, and that employees are stupid, emotional or irrational
in not responding in the way they should. But if an individual is going to be worse off,
explicitly or implicitly, when the proposed changes have been made, any resistance is
entirely rational in terms of his own best interest. The interests of the organization and
the individual do not always coincide.
Specifically, the main reasons for resisting change are as follows:
● The shock of the new – people are suspicious of anything which they perceive will
upset their established routines, methods of working or conditions of employ-
ment. They do not want to lose the security of what is familiar to them. They may
not believe statements by management that the change is for their benefit as well
Organizational development, change and transformation ❚ 345
as that of the organization; sometimes with good reason. They may feel that
management has ulterior motives and, sometimes, the louder the protestations of
managements, the less they will be believed.
● Economic fears – loss of money, threats to job security.
● Inconvenience – the change will make life more difficult.
● Uncertainty – change can be worrying because of uncertainty about its likely
impact.
● Symbolic fears – a small change that may affect some treasured symbol, such as a
separate office or a reserved parking space, may symbolize big ones, especially
when employees are uncertain about how extensive the programme of change
will be.
● Threat to interpersonal relationships – anything that disrupts the customary social
relationships and standards of the group will be resisted.
● Threat to status or skill – the change is perceived as reducing the status of individ-
uals or as de-skilling them.
● Competence fears – concern about the ability to cope with new demands or to
acquire new skills.
Overcoming resistance to change
Resistance to change can be difficult to overcome even when it is not detrimental to
those concerned. But the attempt must be made. The first step is to analyse the poten-
tial impact of change by considering how it will affect people in their jobs. The
analysis should indicate which aspects of the proposed change may be supported
generally or by specified individuals and which aspects may be resisted. So far as
possible, the potentially hostile or negative reactions of people should be identified,
taking into account all the possible reasons for resisting change listed above. It is
necessary to try to understand the likely feelings and fears of those affected so that
unnecessary worries can be relieved and, as far as possible, ambiguities can be
resolved. In making this analysis, the individual introducing the change, who is
sometimes called the ‘change agent’, should recognize that new ideas are likely to be
suspect and should make ample provision for the discussion of reactions to proposals
to ensure complete understanding of them.
Involvement in the change process gives people the chance to raise and resolve
their concerns and make suggestions about the form of the change and how it should
be introduced. The aim is to get ‘ownership’ – a feeling amongst people that the
change is something that they are happy to live with because they have been
involved in its planning and introduction – it has become their change.
Communications about the proposed change should be carefully prepared and
346 ❚ Organization, design and development
worded so that unnecessary fears are allayed. All the available channels as described
in Chapter 54 should be used, but face-to-face communications direct from managers
to individuals or through a team briefing system are best.
Change models
The best-known change models are those developed by Lewin (1951) and Beckhard
(1969). But other important contributions to an understanding of the mechanisms for
change have been made by Thurley (1979), Quinn (1980), Nadler and Tushman
(1980), Bandura (1986) and Beer et al (1990).
Lewin
The basic mechanisms for managing change, according to Lewin (1951), are as
follows:
● Unfreezing – altering the present stable equilibrium which supports existing
behaviours and attitudes. This process must take account of the inherent threats
that change presents to people and the need to motivate those affected to attain
the natural state of equilibrium by accepting change.
● Changing – developing new responses based on new information.
● Refreezing – stabilizing the change by introducing the new responses into the
personalities of those concerned.
Lewin also suggested a methodology for analysing change which he called ‘field
force analysis’. This involves:
● analysing the restraining or driving forces that will affect the transition to the
future state; these restraining forces will include the reactions of those who see
change as unnecessary or as constituting a threat;
● assessing which of the driving or restraining forces are critical;
● taking steps both to increase the critical driving forces and to decrease the critical
restraining forces.
Beckhard
According to Beckhard (1969), a change programme should incorporate the following
processes:
● setting goals and defining the future state or organizational conditions desired
after the change;
Organizational development, change and transformation ❚ 347
● diagnosing the present condition in relation to these goals;
● defining the transition state activities and commitments required to meet the
future state;
● developing strategies and action plans for managing this transition in the light of
an analysis of the factors likely to affect the introduction of change.
Thurley
Thurley (1979) described the following five approaches to managing change:
● Directive – the imposition of change in crisis situations or when other methods
have failed. This is done by the exercise of managerial power without consulta-
tion.
● Bargained – this approach recognizes that power is shared between the employer
and the employed and that change requires negotiation, compromise and agree-
ment before being implemented.
● ‘Hearts and minds’ – an all-embracing thrust to change the attitudes, values and
beliefs of the whole workforce. This ‘normative’ approach (ie one that starts from
a definition of what management thinks is right or ‘normal’) seeks ‘commitment’
and ‘shared vision’ but does not necessarily include involvement or participation.
● Analytical – a theoretical approach to the change process using models of
change such as those described above. It proceeds sequentially from the
analysis and diagnosis of the situation, through the setting of objectives, the
design of the change process, the evaluation of the results and, finally, the
determination of the objectives for the next stage in the change process. This
is the rational and logical approach much favoured by consultants – external
and internal. But change seldom proceeds as smoothly as this model would
suggest. Emotions, power politics and external pressures mean that the
rational approach, although it might be the right way to start, is difficult to
sustain.
● Action-based – this recognizes that the way managers behave in practice bears little
resemblance to the analytical, theoretical model. The distinction between
managerial thought and managerial action blurs in practice to the point of invisi-
bility. What managers think is what they do. Real life therefore often results in a
‘ready, aim, fire’ approach to change management. This typical approach to
change starts with a broad belief that some sort of problem exists, although it may
not be well defined. The identification of possible solutions, often on a trial and
error basis, leads to a clarification of the nature of the problem and a shared
understanding of a possible optimal solution, or at least a framework within
which solutions can be discovered.
348 ❚ Organization, design and development
Quinn
According to Quinn (1980), the approach to strategic change is characterized as a
process of artfully blending ‘formal analysis, behavioural techniques and power poli-
tics to bring about cohesive step-by-step movement towards ends which were
initially conceived, but which are constantly refined and reshaped as new informa-
tion appears. Their integrating methodology can best be described as “logical incre-
mentation”.’ Quinn emphasizes that it is necessary to:
● create awareness and commitment incrementally;
● broaden political support;
● manage coalitions;
● empower champions.
Nadler and Tushman
The guidelines produced by Nadler and Tushman (1980) on implementing change
were:
● Motivate in order to achieve changes in behaviour by individuals.
● Manage the transition by making organizational arrangements designed to assure
that control is maintained during and after the transition, and by developing and
communicating a clear image of the future.
● Shape the political dynamics of change so that power centres develop that support
the change rather than block it.
● Build in stability of structures and processes to serve as anchors for people to hold
on to. Organizations and individuals can only stand so much uncertainty and
turbulence (hence the emphasis by Quinn (1980) on the need for an incremental
approach).
Bandura
The ways in which people change were described by Bandura (1986) as follows:
1. People make conscious choices about their behaviours.
2. The information people use to make their choices comes from their environ-
ment.
3. Their choices are based upon:
– the things that are important to them;
– the views they have about their own abilities to behave in certain ways;
Organizational development, change and transformation ❚ 349
– the consequences they think will accrue to whatever behaviour they decide to
engage in.
For those concerned in change management, the implications of this theory are
that:
● the tighter the link between a particular behaviour and a particular outcome, the
more likely it is that we will engage in that behaviour;
● the more desirable the outcome, the more likely it is that we will engage in behav-
iour that we believe will lead to it;
● the more confident we are that we can actually assume a new behaviour, the more
likely we are to try it.
To change people’s behaviour, therefore, we have first to change the environment
within which they work, secondly, convince them that the new behaviour is some-
thing they can accomplish (training is important) and, thirdly, persuade them that it
will lead to an outcome that they will value. None of these steps is easy.
Beer, Eisenstat and Spector
Michael Beer (1990) and his colleagues suggested in a seminal Harvard Business
Review article, ‘Why change programs don’t produce change’, that most such
programmes are guided by a theory of change that is fundamentally flawed. This
theory states that changes in attitudes lead to changes in behaviour. ‘According to
this model, change is like a conversion experience. Once people “get religion”,
changes in their behaviour will surely follow.’ They believe that this theory gets the
change process exactly backwards:
In fact, individual behaviour is powerfully shaped by the organizational roles people
play. The most effective way to change behaviour, therefore, is to put people into a new
organizational context, which imposes new roles, responsibilities and relationships on
them. This creates a situation that in a sense ’forces‘ new attitudes and behaviour on
people.
They prescribe six steps to effective change, which concentrate on what they call ‘task
alignment’ – reorganizing employees’ roles, responsibilities and relationships to solve
specific business problems in small units where goals and tasks can be clearly
defined. The aim of following the overlapping steps is to build a self-reinforcing cycle
of commitment, coordination and competence. The steps are:
350 ❚ Organization, design and development
1. Mobilize commitment to change through the joint analysis of problems.
2. Develop a shared vision of how to organize and manage to achieve goals such as
competitiveness.
3. Foster consensus for the new vision, competence to enact it, and cohesion to
move it along.
4. Spread revitalization to all departments without pushing it from the top –
don’t force the issue, let each department find its own way to the new organiza-
tion.
5. Institutionalize revitalization through formal policies, systems and structures.
6. Monitor and adjust strategies in response to problems in the revitalization
process.
Guidelines for change management
● The achievement of sustainable change requires strong commitment and
visionary leadership from the top.
● Understanding is necessary of the culture of the organization and the levers for
change that are most likely to be effective in that culture.
● Those concerned with managing change at all levels should have the tempera-
ment and leadership skills appropriate to the circumstances of the organization
and its change strategies.
● It is important to build a working environment that is conducive to change. This
means developing the firm as a ‘learning organization’.
● People support what they help to create. Commitment to change is improved if
those affected by change are allowed to participate as fully as possible in planning
and implementing it. The aim should be to get them to ‘own’ the change as some-
thing they want and will be glad to live with.
● The reward system should encourage innovation and recognize success in
achieving change.
● Change will always involve failure as well as success. The failures must be
expected and learned from.
● Hard evidence and data on the need for change are the most powerful tools for its
achievement, but establishing the need for change is easier than deciding how to
satisfy it.
● It is easier to change behaviour by changing processes, structure and systems
than to change attitudes or the corporate culture.
● There are always people in organizations who can act as champions of change.
They will welcome the challenges and opportunities that change can provide.
They are the ones to be chosen as change agents.
Organizational development, change and transformation ❚ 351
● Resistance to change is inevitable if the individuals concerned feel that they are
going to be worse off – implicitly or explicitly. The inept management of change
will produce that reaction.
● In an age of global competition, technological innovation, turbulence, disconti-
nuity, even chaos, change is inevitable and necessary. The organization must do
all it can to explain why change is essential and how it will affect everyone.
Moreover, every effort must be made to protect the interests of those affected by
change.
ORGANIZATIONAL TRANSFORMATION
Defined
Transformation, according to Webster’s Dictionary, is: ’A change in the shape,
structure, nature of something‘. Organizational transformation is the process of
ensuring that an organization can develop and implement major change programmes
that will ensure that it responds strategically to new demands and continues to func-
tion effectively in the dynamic environment in which it operates. Organizational
transformation activities may involve radical changes to the structure, culture
and processes of the organization – the way it looks at the world. This may be in
response to competitive pressures, mergers, acquisitions, investments, disinvest-
ments, changes in technology, product lines, markets, cost reduction exercises and
decisions to downsize or outsource work. Transformational change may be forced on
an organization by investors or government decisions. It may be initiated by a new
chief executive and top management team with a remit to ‘turn round’ the business.
Transformational change means that significant and far-reaching developments are
planned and implemented in corporate structures and organization-wide processes.
The change is neither incremental (bit by bit) nor transactional (concerned solely with
systems and procedures). Transactional change, according to Pascale (1990), is merely
concerned with the alteration of ways in which the organization does business and
people interact with one another on a day-to-day basis, and ‘is effective when what
you want is more of what you’ve already got’. He advocates a ‘discontinuous
improvement in capability’ and this he describes as transformation.
The distinction between organizational transformation and
organization development
Organizational transformation programmes are business-led. They focus on what
needs to be done to ensure that the business performs more effectively in adding
352 ❚ Organization, design and development
value, especially for its owners, and achieving competitive advantage. They will
be concerned with building strategic capability and improving the ways in which
the business reaches its goals. This means considering what needs to be done
to ensure that people work and interact well, but they are not dominated by
the concepts of behavioural science, as was the case in traditional OD interven-
tions.
Types of transformational change
The four types of transformational change as identified by Beckhard (1989) are:
● a change in what drives the organization – for example, a change from being produc-
tion-driven to being market-driven would be transformational;
● a fundamental change in the relationships between or among organizational parts – for
example, decentralization;
● a major change in the ways of doing work – for example, the introduction of new tech-
nology such as computer-integrated manufacturing;
● a basic, cultural change in norms, values or research systems – for example, developing
a customer-focused culture.
Transformation through leadership
Transformation programmes are led from the top within the organization. They
do not rely on an external ‘change agent’ as did traditional OD interven-
tions, although specialist external advice might be obtained on aspects of the trans-
formation such as strategic planning, reorganization or developing new reward
processes.
The prerequisite for a successful programme is the presence of a transformational
leader who, as defined by Burns (1978), motivates others to strive for higher-order
goals rather than merely short-term interest. Transformational leaders go beyond
dealing with day-to-day management problems; they commit people to action
and focus on the development of new levels of awareness of where the futur lies, and
commitment to achieving that future. Burns contrasts transformational leaders with
transactional leaders who operate by building up a network of interpersonal transac-
tions in a stable situation and who enlist compliance rather than commitment
through the reward system and the exercise of authority and power. Transactional
leaders may be good at dealing with here-and-now problems but they will not
provide the vision required to transform the future.
Organizational development, change and transformation ❚ 353
Managing the transition
The transition from where the organization is to where the organization wants to be is
the critical part of a transformation programme. It is during the transition period of
getting from here to there that change takes place. Transition management starts from
a definition of the future state and a diagnosis of the present state. It is then necessary
to define what has to be done to achieve the transformation. This means deciding on
the new processes, systems, procedures, structures, products and markets to be
developed. Having defined these, the work can be programmed and the resources
required (people, money, equipment and time) can be defined. The plan for
managing the transition should include provisions for involving people in the
process and for communicating to them about what is happening, why it is
happening and how it will affect them. Clearly the aims are to get as many people as
possible committed to the change.
The transformation programme
The eight steps required to transform an organization have been summed up by
Kotter (1995) as follows:
1. Establishing a sense of urgency
– Examining market and competitive realities
– Identifying and discussing crises, potential crises, or major opportunities
2. Forming a powerful guiding coalition
– Assembling a group with enough power to lead the change effort
– Encouraging the group to work together as a team
3. Creating a vision
– Creating a vision to help direct the change effort
– Developing strategies for achieving that vision
4. Communicating the vision
– Using every vehicle possible to communicate the new vision and strategies
– Teaching new behaviours by the example of the guiding coalition
5. Empowering others to act on the vision
– Getting rid of obstacles to change
– Changing systems or structures that seriously undermine the vision
– Encouraging risk taking and non-traditional ideas, activities and actions
6. Planning for and creating short-term wins
– Planning for visible performance improvement
– Creating those improvements
– Recognizing and rewarding employees involved in the improvements
354 ❚ Organization, design and development
7. Consolidating improvements and producing still more change
– Using increased credibility to change systems, structures and policies that
don’t fit the vision
– Hiring, promoting and developing employees who can implement the
vision
– Reinvigorating the process with new projects, themes and change agents
8. Institutionalizing new approaches
– Articulating the connections between the new behaviours and corporate
success
– Developing the means to ensure leadership development and succession.
The role of HR in organizational transformation
HR can and should play a key role in organizational transition and transformation
programmes. It can provide help and guidance in analysis and diagnosis, high-
lighting the people issues that will fundamentally affect the success of the
programme. HR can advise on resourcing the programme and planning and imple-
menting the vital training, reward, communications and involvement aspects of the
process. It can anticipate people problems and deal with them before they become
serious. If the programme does involve restructuring and downsizing, HR can advise
on how this should be done humanely and with the minimum disruption to people’s
lives.
DEVELOPMENT AND CHANGE PROCESSES
Team building
Team-building activities aim to improve and develop the effectiveness of a group of
people who work (permanently or temporarily) together. This improvement may be
defined in terms of outputs, for example the speed and quality of the decisions and
actions produced by the team. It may also be defined in more nebulous terms, such as
the quality of relationships or greater cooperation. The activities in team-building
programmes can:
● increase awareness of the social processes that take place within teams;
● develop the interactive or interpersonal skills that enable individuals to function
effectively as team members;
● increase the overall effectiveness with which teams operate in the organization.
Organizational development, change and transformation ❚ 355
To be effective, team-building programmes should be directly relevant to the res-
ponsibilities of the participants and be seen as relevant by all participants. They need
to support business objectives, fit in with practical working arrangements and reflect
the values the organization wishes to promote. Approaches such as action learning,
group dynamics, group exercises, interactive skills training, interactive video, role-
playing and simulation can be used. Team-building training is often based on either
Belbin or Margerison and McCann classifications of team roles as listed in Chapter 20.
Outdoor learning (outdoor-based development) is another good method of
providing team-building training. It can offer a closer approximation to reality than
other forms of training. Participants tend to behave more normally and, paradoxi-
cally, it is precisely because the tasks are unrelated to work activities and are rela-
tively simple that they highlight the processes involved in teamwork and provide a
good basis for identifying how these processes can be improved.
Total quality management
Total quality management is an intensive, long-term effort directed at the creation
and maintenance of the high standards of product quality and services expected by
customers. As such, it can operate as a major influence in developing the culture and
processes of the organization. The object is significantly to increase the awareness of
all employees that quality is vital to the organization’s success and their future. The
business must be transformed into an entity that exists to deliver value to customers
by satisfying their needs.
Continuous improvement
Continuous improvement is a management philosophy that contends that things can
be done better. Continuous improvement is defined by Bessant et al (1994) as ‘a
company-wide process of focused and continuous incremental innovation sustained
over a period of time’. The key words in this definition are:
● Focused – continuous improvement addresses specific issues where the effective-
ness of operations and processes needs to be improved, where higher quality
products or services should be provided and, importantly, where the levels of
customer service and satisfaction need to be enhanced.
● Continuous – the search for improvement is never-ending; it is not a one-off
campaign to deal with isolated problems.
● Incremental – continuous improvement is not about making sudden quantum
leaps in response to crisis situations; it is about adopting a steady, step-by-step
approach to improving the ways in which the organization goes about doing
things.
356 ❚ Organization, design and development
● Innovation – continuous improvement is concerned with developing new ideas
and approaches to deal with new and sometimes old problems and requirements.
Business process re-engineering
Business process re-engineering as a panacea emerged in the 1990s. It examines
processes horizontally in organizations to establish how they can be integrated more
effectively and streamlined. Re-engineering exercises can provide an overall
approach to developing an organization but they often promise more than they
achieve and they have been criticized because they pay insufficient attention to the
human element.
Performance management
Performance management as a holistic – all-embracing – process for managing
performance throughout an organization is one of the most commonly used instru-
ments for improving organizational effectiveness. It is described in Part VII.
Organizational development, change and transformation ❚ 357
People resourcing
PEOPLE RESOURCING DEFINED
People resourcing is concerned with ensuring that the organization obtains and
retains the human capital it needs and employs them productively. It is also about
those aspects of employment practice that are concerned with welcoming people to the
organization and, if there is no alternative, releasing them. It is a key part of the HRM
process.
PEOPLE RESOURCING AND HRM
HRM is fundamentally about matching human resources to the strategic and opera-
tional needs of the organization and ensuring the full utilization of those resources. It
is concerned not only with obtaining and keeping the number and quality of staff
required but also with selecting and promoting people who ‘fit’ the culture and the
strategic requirements of the organization.
HRM places more emphasis than traditional personnel management on finding
people whose attitudes and behaviour are likely to be congruent with what manage-
ment believes to be appropriate and conducive to success. In the words of Townley
(1989), organizations are concentrating more on ‘the attitudinal and behavioural
Part VI
characteristics of employees’. This tendency has its dangers. Innovative and adaptive
organizations need non-conformists, even mavericks, who can ‘buck the system’. If
managers recruit people ‘in their own image’ there is the risk of staffing the organiza-
tion with conformist clones and of perpetuating a dysfunctional culture – one that
may have been successful in the past but is no longer appropriate (nothing fails like
success).
The HRM approach to resourcing therefore emphasizes that matching resources to
organizational requirements does not simply mean maintaining the status quo and
perpetuating a moribund culture. It can and often does mean radical changes in
thinking about the competencies required in the future to achieve sustainable growth
and to achieve cultural change. HRM resourcing policies address two fundamental
questions:
1. What kind of people do we need to compete effectively, now and in the foreseeable
future?
2. What do we have to do to attract, develop and keep these people?
Integrating business and resourcing strategies
The philosophy behind the HRM approach to resourcing is that it is people who imple-
ment the strategic plan. As Quinn Mills (1983) has put it, the process is one of ‘plan-
ning with people in mind’.
The integration of business and resourcing strategies is based on an understanding
of the direction in which the organization is going and of the resulting human
resource needs in terms of:
● numbers required in relation to projected activity levels;
● skills required on the basis of technological and product/market developments and
strategies to enhance quality or reduce costs;
● the impact of organizational restructuring as a result of rationalization, decen-
tralization, delayering, mergers, product or market development, or the introduc-
tion of new technology – for example, cellular manufacturing;
● plans for changing the culture of the organization in such areas as ability to
deliver, performance standards, quality, customer service, team working and
flexibility which indicate the need for people with different attitudes, beliefs and
personal characteristics.
These factors will be strongly influenced by the type of business strategies adopted by
the organization and the sort of business it is in. These may be expressed in such terms
360 ❚ People resourcing
as the Boston Consulting Group’s classification of businesses as wild cat, star, cash
cow or dog; or Miles and Snow’s (1978) typology of defender, prospector and analyser
organizations.
Resourcing strategies exist to provide the people and skills required to support the
business strategy, but they should also contribute to the formulation of that strategy.
HR directors have an obligation to point out to their colleagues the human resource
opportunities and constraints that will affect the achievement of strategic plans. In
mergers or acquisitions, for example, the ability of management within the company
to handle the new situation and the quality of management in the new business will be
important considerations.
PLAN
This part deals with the following aspects of employee resourcing:
● human resource planning;
● talent management;
● recruitment;
● selection interviewing;
● selection testing;
● introduction to the organization;
● release from the organization.
People resourcing ❚ 361
Human resource planning
THE ROLE OF HUMAN RESOURCE PLANNING
Definition
Human resource planning determines the human resources required by the organiza-
tion to achieve its strategic goals. As defined by Bulla and Scott (1994) it is ‘the
process for ensuring that the human resource requirements of an organization are
identified and plans are made for satisfying those requirements’. Human resource
planning is based on the belief that people are an organization’s most important
strategic resource. It is generally concerned with matching resources to business
needs in the longer term, although it will sometimes address shorter term require-
ments. It addresses human resource needs both in quantitative and qualitative terms,
which means answering two basic questions: first, how many people, and second,
what sort of people? Human resource planning also looks at broader issues relating to
the ways in which people are employed and developed in order to improve organiza-
tional effectiveness. It can therefore play an important part in strategic human
resource management.
Human resource planning and business planning
Conceptually, human resource planning should be an integral part of business plan-
ning. The strategic planning process should define projected changes in the scale and
25
types of activities carried out by the organization. It should identify the core compe-
tences the organization needs to achieve its goals and therefore its skill requirements.
But there are often limitations to the extent to which such plans are made, and indeed
the clarity of the plans, and these may restrict the feasibility of developing integrated
human resource plans that flow from them.
In so far as there are articulated strategic business plans, human resource planning
interprets them in terms of people requirements. But it may influence the business
strategy by drawing attention to ways in which people could be developed and
deployed more effectively to further the achievement of business goals as well as
focusing on any problems that might have to be resolved in order to ensure that the
people required will be available and will be capable of making the necessary contri-
bution. As Quinn Mills (1983) indicates, human resource planning is ‘a decision-
making process that combines three important activities: (1) identifying and
acquiring the right number of people with the proper skills, (2) motivating them to
achieve high performance, and (3) creating interactive links between business objec-
tives and people-planning activities’. In situations where a clear business strategy
does not exist, human resource planning may have to rely more on making broad
assumptions about the need for people in the future, based on some form of scenario
planning. Alternatively, the planning process could focus on specific areas of activity
within the organization where it is possible to forecast likely future people require-
ments in terms of numbers and skills; for example, scientists in a product develop-
ment division.
Hard and soft human resource planning
A distinction can be made between ‘hard’ and ‘soft’ human resource planning. The
former is based on quantitative analysis in order to ensure that the right number of
the right sort of people are available when needed. Soft human resource planning is
concerned with ensuring the availability of people with the right type of attitudes
and motivation who are committed to the organization and engaged in their work,
and behave accordingly. It is based on assessments of the requirement for these qual-
ities, and measurements of the extent to which they exist, by the use of staff surveys,
the analysis of the outcomes of performance management reviews and opinions
generated by focus groups.
These assessments and analyses can result in plans for improving the work envi-
ronment, providing opportunities to develop skills and careers and adopting a ‘total
reward’ approach which focuses on non-financial ‘relational’ rewards as well as
the financial ‘transactional’ rewards. They can also lead to the creation of a high
commitment management strategy which incorporates such approaches as creating
364 ❚ People resourcing
functional flexibility, designing jobs to provide intrinsic motivation, emphasizing
team working, de-emphasizing hierarchies and status differentials, increasing
employment security, rewarding people on the basis of organizational performance,
and enacting organization-specific values and a culture that bind the organization
together and give it focus. As described by Marchington and Wilkinson (1996), soft
human resource planning ‘is more explicitly focused on creating and shaping the
culture of the organization so that there is a clear integration between corporate goals
and employee values, beliefs and behaviours’. But as they point out, the soft version
becomes virtually synonymous with the whole subject of human resource manage-
ment.
Human resource planning and manpower planning
Human resource planning is indeed concerned with broader issues about the
employment of people than the traditional quantitative approaches of manpower
planning. Such approaches, as Liff (2000) comments, derive from a rational top-down
view of planning in which well tested quantitative techniques are applied to long
term assessments of supply and demand. She notes that ‘there has been a shift from
reconciling numbers of employees available with predictable stable jobs, towards a
greater concern with skills, their development and deployment’.
Limitations of human resource planning
Human resource planning is said to consist of three clear steps:
● Forecasting future people needs (demand forecasting).
● Forecasting the future availability of people (supply forecasting).
● Drawing up plans to match supply to demand.
But as Casson (1978) pointed out, this conventional wisdom represents human
resource planning as an ‘all-embracing, policy-making activity producing, on a
rolling basis, precise forecasts using technically sophisticated and highly integrated
planning systems’. He suggests that it is better regarded as, first, a regular monitoring
activity, through which human resource stocks and flows and their relationship to
business needs can be better understood, assessed and controlled, problems high-
lighted and a base established from which to respond to unforeseen events; and
second, an investigatory activity by which the human resource implications of partic-
ular problems and change situations can be explored and the effects of alternative
policies and actions investigated.
Human resource planning ❚ 365
He points out that the spurious precision of quantified staffing level plans ‘has little
value when reconciled with the complex and frequently changing nature of
manpower, the business and the external environment’. The typical concept of
human resource planning as a matter of forecasting the long term demand and
supply of people fails because the ability to make these estimates must be severely
limited by the difficulty of predicting the influence of external events. There is a risk,
in the words of Heller (1972), that ‘Sensible anticipation gets converted into foolish
numbers, and their validity depends on large, loose assumptions.’
Human resource planning today is more likely to concentrate on what skills will
be needed in the future, and may do no more than provide a broad indication of
the numbers required in the longer term, although in some circumstances it
might involve making short term forecasts when it is possible to predict activity
levels and skills requirements with a reasonable degree of accuracy. Such predictions
will often be based on broad scenarios rather than on specific supply and demand
forecasts.
The incidence of and rationale for human resource planning
Although the notion of human resource planning is well established in the HRM
vocabulary, it does not seem to be commonly practised as a key HR activity. As
Rothwell (1995) suggests, ‘Apart from isolated examples, there has been little
research evidence of increased use or of its success.’ She explains the gap between
theory and practice as arising from:
● the impact of change and the difficulty of predicting the future – ‘the need for
planning may be in inverse proportion to its feasibility’;
● the ‘shifting kaleidoscope’ of policy priorities and strategies within organizations;
● the distrust displayed by many managers of theory or planning – they often
prefer pragmatic adaptation to conceptualization;
● the lack of evidence that human resource planning works.
Be that as it may, it is difficult to reject out of hand the belief that some attempt should
be made broadly to forecast future human resource requirements as a basis for plan-
ning and action. Heller refers to ‘sensible anticipation’, and perhaps this is what
human resource planning is really about, bearing in mind that major changes in the
operations of an organization can usually be foreseen. If that is the case, it does make
sense to keep track of developments so that the organization is in a better position to
deal with resourcing problems in good time.
On the basis of research conducted by the Institute for Employment Studies, Reilly
366 ❚ People resourcing
(1999) has suggested a number of reasons why organizations choose to engage
in some form of human resource planning. These fall into the following three
groups.
● Planning for substantive reasons: that is, to have a practical effect by optimizing the
use of resources and/or making them more flexible, acquiring and nurturing
skills that take time to develop, identifying potential problems and minimizing
the chances of making a bad decision.
● Planning because of the process benefits which involves understanding the present in
order to confront the future, challenging assumptions and liberating thinking,
making explicit decisions which can later be challenged, standing back and
providing an overview, and ensuring that long term thinking is not driven out by
short term focus.
● Planning for organizational reasons which involves communicating plans so as to
obtain support/adherence to them, linking HR plans to business plans so as to
influence them, (re)gaining corporate control over operating units, and coordi-
nating and integrating organizational decision making and actions.
The organizational context of human resource planning
Human resource planning takes place within the context of the organization. The
extent to which it is used, and the approach adopted, will be contingent on the extent
to which management recognizes that success depends on forecasting future people
requirements and implementing plans to satisfy those requirements. The approach
will also be affected by the degree to which it is possible to make accurate forecasts.
Organizations operating in turbulent environments in which future activity levels are
difficult to predict may rely on ad hoc and short term measures to recruit and keep
people. However, even these businesses may benefit from those aspects of human
resource planning that are concerned with policies for attracting and retaining key
staff.
The labour market context
The context for obtaining the people required will be the labour markets in which the
organization is operating which are, first, the internal labour market – the stocks and
flows of people within the organization who can be promoted, trained, or redeployed
to meet future needs – and second, the external labour market – the external local,
regional, national and international markets from which different sorts of people can
be recruited. There are usually a number of markets, and the labour supply in these
markets may vary considerably. Likely shortages will need to be identified so that
Human resource planning ❚ 367
steps can be taken to deal with them, for example by developing a more attractive
‘employment proposition’.
As part of the human resource planning process, an organization may have to
formulate ‘make or buy’ policy decisions. A ‘make’ policy means that the organiza-
tion prefers to recruit people at a junior level or as trainees, and rely mainly on
promotion from within and training programmes to meet future needs. A ‘buy’ policy
means that more reliance will be placed on recruiting from outside – ‘bringing fresh
blood into the organization’. In practice, organizations tend to mix the two choices
together to varying degrees, depending on the situation of the firm and the type of
people involved. A highly entrepreneurial company operating in turbulent condi-
tions, or one which has just started up, will probably rely almost entirely on external
recruitment. When dealing with knowledge workers, there may be little choice – they
tend to be much more mobile, and resourcing strategy may have to recognize that
external recruitment will be the main source of supply. Management consultancies
typically fall into this category. Firms that can predict people requirements fairly
accurately may rely more on developing their own staff once they have been
recruited.
AIMS OF HUMAN RESOURCE PLANNING
The aims of human resource planning in any organization will depend largely on its
context but in general terms, the typical aims might be to:
● attract and retain the number of people required with the appropriate skills,
expertise and competencies;
● anticipate the problems of potential surpluses or deficits of people;
● develop a well trained and flexible workforce, thus contributing to the organiza-
tion’s ability to adapt to an uncertain and changing environment;
● reduces dependence on external recruitment when key skills are in short supply
by formulating retention, as well as employee development strategies;
● improve the utilization of people by introducing more flexible systems of work.
THE PROCESS OF HUMAN RESOURCE PLANNING
The process of human resource planning as illustrated in Figure 25.1 is not necessarily
a linear one, starting with the business strategy and flowing logically through to
resourcing, flexibility and retention plans. It may, as Hendry (1995) suggests, be
368 ❚ People resourcing
circular rather than linear, with the process starting anywhere in the cycle. For
example, scenario planning may impact on resourcing strategy which in turn may
influence the business strategy. Alternatively, the starting point could be demand and
supply forecasts which form the basis for the resourcing strategy. The analysis of
labour turnover may feed into the supply forecast, but it could also lead directly to
the development of retention plans.
It cannot be assumed that there will be a well articulated business plan as a basis
for the HR plans. The business strategy may be evolutionary rather than deliberate; it
may be fragmented, intuitive and incremental. Resourcing decisions may be based on
scenarios riddled with assumptions that may or may not be correct and cannot be
tested. Resourcing strategy may be equally vague, or based on unproven beliefs
about the future. It may contain statements, about for example building the skills
base, that are little more than rhetoric.
There is much to be said for a systematic approach to developing resourcing
strategy, scenario planning, demand and supply forecasting and labour turnover
analysis as discussed in the rest of this chapter. But because of the factors mentioned
above, there will often be reservations about the extent to which this process can be
formalized. What may emerge is simply a broad statement of intent, although this
could be sufficient to guide resourcing practice generally and would be better than
nothing at all. The degree to which human resource planning can be carried out
systematically will depend on the nature of the organization. If the future is fairly
predictable, then formal planning might be appropriate. If it is not, the approach to
human resource planning might have to rely on broad scenarios rather than precise
forecasts.
These processes are summarized below.
● Business strategic plans: defining future activity levels and initiatives demanding
new skills.
● Resourcing strategy: planning to achieve competitive advantage by developing
intellectual capital – employing more capable people than rivals, ensuring that
they develop organization specific knowledge and skills, and taking steps to
become an ‘employer of choice’.
● Scenario planning: assessing in broad terms where the organization is going in its
environment and the implications for human resource requirements.
● Demand/supply forecasting: estimating the future demand for people (numbers and
skills), and assessing the number of people likely to be available from within and
outside the organization.
● Labour turnover analysis: analysing actual labour turnover figures and trends as an
input to supply forecasts.
Human resource planning ❚ 369
● Work environment analysis: analysing the environment in which people work in
terms of the scope it provides for them to use and develop their skills and achieve
job satisfaction.
● Operational effectiveness analysis: analysing productivity, the utilization of
people and the scope for increasing flexibility to respond to new and changing
demands.
370 ❚ People resourcing
Figure 25.1 The process of human resource planning
Business
strategic plans
Resourcing strategy
Demand/supply
forecasting
Human resource
plans
Scenario planning
Work environment
analysis
Resourcing ProductivityRetention Flexibility
Work environment
Operational
effectiveness
analysis
Labour turnover
analysis
RESOURCING STRATEGY
Objective
The objective of HRM resourcing strategy, as expressed by Keep (1989), is ‘To obtain
the right basic material in the form of a workforce endowed with the appropriate
qualities, skills, knowledge and potential for future training. The selection and
recruitment of workers best suited to meeting the needs of the organization ought to
form a core activity upon which most other HRM policies geared towards develop-
ment and motivation could be built.’
The concept that the strategic capability of a firm depends on its resource capability
in the shape of people (resource based strategy, as explained in Chapter 7) provides
the rationale for resourcing strategy. The aim of this strategy is therefore to ensure
that a firm achieves competitive advantage by employing more capable people
than its rivals. These people will have a wider and deeper range of skills, and
behave in ways that maximize their contribution. The organization attracts
such people by being ‘the employer of choice’. It retains them by providing better
opportunities and rewards than others, and by developing a positive psychological
contract which increases commitment and creates mutual trust. Furthermore,
the organization deploys its people in ways that maximize the added value they
supply.
Checklist
The resourcing strategy should attempt to provide answers to the following ques-
tions:
● In the light of the business plan, how many people are we likely to need in each of
our key operational or functional areas in the short and longer term?
● What skills are we likely to need in the future?
● Will we be able to meet the needs from our existing resources?
● If not, where will we be able to find them?
● What do we need to do to develop or extend our skills base?
● What should we do about identifying people with potential and developing their
abilities?
● Do we have a problem in attracting or retaining key staff? If so, what do we need
to do about it?
● Is there scope to make better use of people by increasing employment flexibility?
● Is there any danger of downsizing? If so, how are we going to deal with it?
Human resource planning ❚ 371
The components of resourcing strategy
These are:
● Resourcing plans: preparing plans for finding people from within the organization
and/or for training programmes to help people learn new skills. If needs cannot
be satisfied from within the organization, preparing longer term plans for
meeting them by attracting high quality candidates as the ‘employer of choice’.
● Flexibility plans: planning for increased flexibility in the use of human resources to
enable the organization to make the best use of people and adapt swiftly to
changing circumstances.
● Retention plans: preparing plans for retaining the people the organization needs.
Resourcing strategy provides the basis for these plans within the framework of busi-
ness needs. It will, however, be more strongly based if it is underpinned by a process
of scenario planning.
SCENARIO PLANNING
Scenario planning is sometimes described as a formal strategic planning technique,
but it can also be regarded as an informal approach to thinking about the future in
broad terms, based upon an analysis of likely changes in the internal and external
environment.
A scenario can be defined as ‘an imagined sequence of future events’ (Oxford
English Dictionary). Scenario planning is simply a more or less formalized process for
establishing a view about any changes that can be foreseen to the scale and type of
activities in the organization and to its structure, and for identifying any external
environmental changes that are likely to affect it. The aim is to obtain a better under-
standing of the possible situations that may have to be dealt with in the future. It is
described by Reilly (1999) as follows: ‘Scenario planning tries to open minds to a
range of possibilities that organizations may have to confront. These possibilities are
then ordered to produce a series of internally consistent pictures of alternative
futures… It is an intellectual process that seeks to identify issues and examine the
possible consequences of events.’
The creation of a scenario involves making broad assessments of likely internal
developments – the direction in which the organization is going and the implications
this has on people requirements. The assessments may have to be made in the
absence of any articulated business plan, and thus involve questioning top manag-
ment and key line managers on how they see the future, and asking them to interpret
372 ❚ People resourcing
what this means in terms of their human resource needs. Assessments also have to be
made on likely changes in the external environment as it may affect the labour
market.
ESTIMATING FUTURE HUMAN RESOURCE
REQUIREMENTS
Scenario planning is in some situations as far as it is possible to go in estimating
future people requirements, but where it is feasible and appropriate, attempts can be
made to produce demand and supply forecasts, and to determine what action needs
to be taken if the forecasts indicate the possibility of a human resource deficit or
surplus.
Demand forecasting
Demand forecasting is the process of estimating the future numbers of people
required and the likely skills and competences they will need. The ideal basis of the
forecast is an annual budget and longer term business plan, translated into activity
levels for each function and department, or decisions on ‘downsizing’. In a manufac-
turing company the sales budget would be translated into a manufacturing plan
giving the numbers and types of products to be made in each period. From this infor-
mation the number of hours to be worked by each skill category to make the quota for
each period would be computed.
Details are required of any plans or projects that would result in demands for addi-
tional employees or different skills: for example setting up a new regional organiza-
tion, creating a new sales department, carrying out a major project or developing new
products or services. So far as possible, plans should also be reviewed that could
result in rationalization, and possibly downsizing, as a result of a cost reduction
drive, a business process re-engineering exercise, new technology leading to
increased productivity, or a merger or acquisition.
The demand forecasting techniques that can be used to produce quantitative esti-
mates of future requirements are described below.
Managerial or expert judgement
This is the most typical method of forecasting and may be linked to some form of
scenario planning. It simply requires managers or specialists to sit down, think about
Human resource planning ❚ 373
future workloads, and decide how many people are needed. This can be no more than
guesswork unless there is reliable evidence available of forecast increases in activity
levels or new demands for skills.
Ratio trend analysis
This is carried out by studying past ratios between, say, the number of direct (produc-
tion) workers and indirect (support) workers in a manufacturing plant, and fore-
casting future ratios, having made some allowance for changes in organization or
methods. Activity level forecasts are then used to determine (in this example) direct
labour requirements, and the forecast ratio of indirects to directs would be used to
calculate the number of indirect workers needed.
Work study techniques
Work study techniques can be used when it is possible to apply work measurement to
calculate how long operations should take and the number of people required. Work
study techniques for direct workers can be combined with ratio trend analysis to
calculate the number of indirect workers needed.
Forecasting skill and competence requirements
Forecasting skill requirements is largely a matter of managerial judgement. This
judgement should, however, be exercised on the basis of a careful analysis of the
impact of projected product market developments and the introduction of new tech-
nology, either information technology or computerized manufacturing.
Supply forecasting
Supply forecasting measures the number of people likely to be available from within
and outside the organization, having allowed for attrition (labour wastage and retire-
ments), absenteeism, internal movements and promotions, and changes in hours and
other conditions of work. The forecast will be based on:
● an analysis of existing human resources in terms of numbers in each occupation,
skills and potential;
● forecast losses to existing resources through attrition (the analysis of labour
wastage as described in the next main section of this chapter is an important
aspect of human resource planning because it provides the basis for plans to
improve retention rates);
374 ❚ People resourcing
● forecast changes to existing resources through internal promotions;
● effect of changing conditions of work and absenteeism;
● sources of supply from within the organization;
● sources of supply from outside the organization in the national and local labour
markets.
Mathematical modelling techniques aided by computers can help in the preparation
of supply forecasts in situations where comprehensive and reliable data on stocks and
flows can be provided. As this is rarely the case, they are seldom used.
Analysing demand and supply forecasts
The demand and supply forecasts can then be analysed to determine whether there
are any deficits or surpluses. This provides the basis for recruitment, retention, and if
unavoidable downsizing, plans. Computerized planning models can be used for this
purpose. It is, however, not essential to rely on a software planning package. The
basic forecasting calculations can be carried out with a spreadsheet that sets out and
calculates the number required for each occupation where plans need to be made, as
in the following example:
1. Number currently employed 70
2. Annual wastage rate based on past records 10 per cent
3. Expected losses during the year 7
4. Balance at end year 63
5. Number required at end year 75
6. Number to be obtained during year (5–4) 12
LABOUR TURNOVER
The analysis of the numbers of people leaving the organization (labour turnover or
wastage) provides data for use in supply forecasting, so that calculations can be made
on the number of people lost who may have to be replaced. More importantly,
however, the analysis of the numbers of leavers and the reasons why they leave
provides information that will indicate whether any action is required to improve
retention rates. It can prompt further investigations to establish underlying causes
and identify remedies.
In this section, consideration is given to the following aspects of labour turn-
over:
Human resource planning ❚ 375
● its significance;
● methods of measurement;
● the reasons for turnover;
● what it costs;
● its incidence;
● how to benchmark rates of turnover.
The significance of labour turnover
The point was made by IRS (2000) that ‘rates of labour turnover provide a graphic
illustration of the turbulence within an organization. High rates of attrition can desta-
bilize a business and demotivate those who attempt to maintain levels of service and
output against a background of vacant posts, inexperienced staff and general discon-
tent.’ Obviously recruitment, induction and training costs all rise with an increase in
labour turnover. As the CIPD (2000) has commented, ‘Turnover may be a function of
negative job attitudes, low job satisfaction, combined with an ability to secure
employment elsewhere, ie the state of the labour market. On the other hand, turnover
is a normal part of organizational functioning, and while excessively high turnover
may be dysfunctional, a certain level of turnover is to be expected and can be benefi-
cial to an organization.’
Methods of measurement
There are a number of ways of measuring labour turnover, as described below.
The labour turnover index
The labour turnover index (sometimes referred to as the employee or labour wastage
index) is the traditional formula for measuring wastage. It has been described by the
CIPD (2000) as the ‘crude wastage method’. It is calculated as follows:
Number of leavers in a specified period (usually 1 year) × 100
Average number of employees during the same period
This method is commonly used because it is easy to calculate and to understand. For
human resource planning purposes, it is a simple matter to work out that if a
company wants to increase its workforce by 50 people from 150 to 200, and the labour
turnover rate is 20 per cent (leading to a loss of 30 people), then if this trend
continues, the company would have to recruit 90 employees during the following
year in order to increase and to hold the workforce at 200 in that year (50 extra
376 ❚ People resourcing
employees, plus 40 to replace the 20 per cent wastage of the average 200 employees
employed). It can also be used to make comparisons with other organizations which
will typically adopt this method.
This wastage formula may be simple to use but it can be misleading. The main
objection to the measurement of turnover in terms of the proportion of those who
leave in a given period is that the figure may be inflated by the high turnover of a
relatively small proportion of the workforce, especially in times of heavy recruitment.
Thus, a company employing 150 people might have had an annual wastage rate of 20
per cent, meaning that 30 jobs had become vacant during the year, but this could have
been spread throughout the company, covering all occupations and long as well as
short service employees. Alternatively, it could have been restricted to a small sector
of the workforce – only 20 jobs might have been affected, although each of these had
to be filled 10 times during the year. These are totally different situations, and unless
they are understood, inaccurate forecasts would be made of future requirements and
inappropriate actions would be taken to deal with the problem. The turnover index is
also suspect if the average number of employees upon which the percentage is based
is unrepresentative of recent trends because of considerable increases or decreases
during the period in the numbers employed. When assembling and analysing labour
turnover figures, it is important to obtain information on the incidence for different
categories of employee, especially those who are most difficult to attract and retain,
such as knowledge or highly skilled workers.
Survival rate
A method of analysing turnover that is particularly useful for human resource plan-
ners is the survival rate: the proportion of employees engaged within a certain period
who remain with the organization after so many months or years of service. Thus, an
analysis of trainees who have completed their training might show that after two
years, 10 of the original cohort of 20 trainees are still with the company, a survival rate
of 50 per cent.
The distribution of losses for each entry group, or cohort, can be plotted in the form
of a ‘survival curve’ as shown in Figure 25.2. The basic shape of this curve has been
found to be similar in many situations, although it has been observed that the peak of
the curve may occur further along the time scale and/or may be lower when it relates
to more highly skilled or trained entry cohorts. Table 25.1 tells human resource plan-
ners that unless they do something about the situation, they will have to allow for
half the number of recruits in any one year to be lost over the next five years. Thus, to
ensure that 50 trained staff in five years’ time, 100 people would have to be engaged
this year. Stark figures like this can prompt action, especially when the costs of
recruitment and induction are taken into account.
Human resource planning ❚ 377
378 ❚ People resourcing
Time
Leavers as a
percentage of
total entrants
Figure 25.2 A survival curve
Table 25.1 Survival rate analysis
Number surviving to end of year after engagement
Entry Original
Cohort strength Year 1 Year 2 Year 3 Year 4 Year 5
A 40 35 28 26 22 20
B 32 25 24 19 18 17
C 48 39 33 30 25 23
D 38 32 27 24 22 19
E 42 36 30 26 23 21
Total 200 167 142 125 110 100
Average
survival 100% 83% 71% 62% 55% 50%
rate
Half-life index
A simpler concept derived from survival rate analysis is the half-life index, which is
defined as the time taken for a group or cohort of starters to reduce to half its original
size through wastage (five years in the above example). Comparisons can then be
made for successive entry years or between different groups of employees, in order to
show where action may have to be taken to counter undesirable wastage trends.
Stability index
The stability index is considered by many to be an improvement on the turnover
index. The formula is:
Number with 1 year’s service or more × 100
Number employed 1 year ago
This index provides an indication of the tendency for longer service employees to
remain with the company, and therefore shows the degree to which there is conti-
nuity of employment. But this too can be misleading because the index will not reveal
the vastly different situations that exist in a company or department with a high
proportion of long serving employees, in comparison with one where the majority of
employees are short service.
Length of service analysis
This disadvantage of the stability index can be partly overcome if an analysis is also
made of the average length of service of people who leave, as in Table 25.2. This
analysis is still fairly crude, because it deals only with those who leave. A more
refined analysis would compare for each service category the numbers leaving with
the numbers employed. If, in the example shown, the total numbers employed with
fewer than three months’ service were 100 and the total with more than five years
were also 100, the proportion of leavers in each category would be 28 per cent and 11
per cent respectively – more revealing figures, especially if previous periods could be
analysed to reveal adverse trends.
Choice of measurement
It is difficult to avoid using the conventional employee (labour) turnover index as the
easiest and most familiar of all methods of measurement, but it needs to be supple-
mented with some measure of stability. An analysis of turnover or wastage as part of
Human resource planning ❚ 379
a human resource planning exercise requires detailed information on the length of
service of leavers, to identify problem areas and to provide a foundation for supply
forecasts.
Reasons for turnover
An analysis of the reasons for leaving derived from exit interviews will provide
useful information on which to base retention plans. Exit interviews aim to establish
why people are leaving, not to persuade them to stay. The reasons for leaving can be
classified under the following headings:
● more pay;
● better prospects (career move);
● more security;
● more opportunity to develop skills;
● better working conditions;
● poor relationships with manager/team leader;
● poor relationship with colleagues;
● bullying or harassment;
● personal – pregnancy, illness, moving away from area etc.
Exit interviews should aim to elicit opinions on any specific reasons for dissatis-
faction under any of the above non-personal headings. Some leavers will be
380 ❚ People resourcing
Table 25.2 Leavers by length of service
Leavers by length of service
Occupation Total Average Index of
Less 3–6 6 1–2 3–5 5 or number number labour
than 3 months months years years more leaving employed turnover
months –1 year years %
A 5 4 3 3 2 3 20 220 10
B 15 12 10 6 3 4 50 250 20
C 8 6 5 4 3 4 30 100 30
Totals 28 22 18 13 8 11 100 550 18
forthcoming, others will not. It is up to the interviewer to probe skilfully and sensi-
tively to establish reasons for dissatisfaction or unhappiness, so that where those feel-
ings are justified, something can be done about them. Judgement is required to sort
out genuine complaints from unjustified or exaggerated ones. An analysis of reasons
should take place and trends be noted. General issues can be addressed by reviewing
employment and reward policies and practices. Issues affecting particular managers
should also be tackled. This may be difficult if it is a behavioural matter, such as
bullying, but if there is a build-up of information that suggests this may be the case,
the problem cannot be ignored.
However, exit interviews are not completely reliable, and it is desirable to gain a
more comprehensive picture of the views of existing employees through attitude
surveys (see Chapter 53).
The cost of labour turnover
Labour turnover can be costly. The following factors should be considered:
● leaving costs – payroll costs and personnel administration of leaver;
● direct cost of recruiting replacements (advertising, interviewing, testing etc);
● opportunity cost of time spent by HR and line managers in recruitment;
● direct cost of introducing replacements (induction course, cost of induction
manuals etc);
● opportunity cost of time spent by HR and managers in introducing new starters;
● direct cost of training replacements in the necessary skills;
● opportunity cost of time spent by line managers and other staff in providing
training;
● loss of the input from those leaving before they are replaced in terms of contribu-
tion, output, sales, customer satisfaction and support etc;
● loss arising from reduced input from new starters until they are fully trained.
The CIPD 2005 Recruitment, Retention and Turnover survey established that the
average cost per leaver was £4,625. This is a typical figure, and the calculation of the
costs of labour turnover in an organization can produce alarming sums if labour
turnover is high, especially among managers and knowledge workers. The informa-
tion can be used by HR as a powerful argument in support of changes in employment
and reward policies.
Human resource planning ❚ 381
The incidence of labour turnover
The labour turnover rate for all employees as revealed by the CIPD 2005 UK survey
was 15.7 per cent. The turnover of different categories of employees were: staff 31.1
per cent, manual workers 16.7 per cent, secretarial and administrative staff 16.7 per
cent and professional staff and managers 9.1 per cent.
Benchmarking labour turnover
Labour turnover rates provide a valuable means of benchmarking the effectiveness of
HR policies and practices in organizations. They do not tell the whole story, but if
turnover is significantly higher than in comparable organizations, this should stimu-
late action to investigate why this is the case and to do something about it.
Benchmarking can be carried out by networking with other organizations, possibly
forming a ‘club’ to exchange information regularly. There are also a number of bench-
marking agencies as listed by the IRS (2000), and the European Foundation for
Quality Management (EFQM) survey which uses the internet. National sources of
data include the government’s Labour Force and Learning and Training at Work
surveys, and the annual survey of labour turnover conducted by the CIPD.
ACTION PLANNING
Action plans are derived from broad resourcing strategies and more detailed analysis
of demand and supply factors. However, the plans often have to be short term and
flexible because of the difficulty of making firm predictions about human resource
requirements in times of rapid change. Plans need to be prepared in the areas of
resourcing, flexibility and downsizing, as described below.
The resourcing plan
This needs to consider approaches to obtaining people from within the organization,
to recruiting them externally, and to attracting high quality candidates (becoming ‘the
employer of choice’).
Internal resourcing
The first step is to analyse the availability of suitable people from within the organi-
zation, by reference to assessments of potential and a skills database. The latter
should contain a regularly updated list of employees with the sort of skills needed by
382 ❚ People resourcing
the organization. Decisions are then made on what steps should be taken to promote,
redeploy, and as necessary provide additional experience and training to, eligible
staff. Plans can also be made to make better use of existing employees, which may
include flexibility arrangements as discussed later, or home working.
The recruitment plan
This will incorporate:
● the numbers and types of employees required to make up any deficits, when they
are needed;
● the likely sources of candidates – schools, colleges of further education, universi-
ties, advertising, the internet etc;
● plans for tapping alternative sources, such as part-timers, or widening the
recruitment net to include, for example, more women re-entering the labour
market;
● how the recruitment programme will be conducted.
Employer of choice plans
The recruitment plan should include plans for attracting good candidates by
ensuring that the organization will become an ‘employer of choice’. This could be
achieved by such means as generally improving the image of the company as an
employer (the employer brand) and by offering:
● better remuneration packages;
● more opportunities for learning, development and careers;
● enhanced future employability because of the reputation of the organization as
one that employs and develops high quality people, well as the learning opportu-
nities it provides;
● employment conditions which address work–life balance issues by, for example,
adapting working hours and arrangements and leave policies, and providing
child care facilities or vouchers to meet the needs of those with domestic respon-
sibilities;
● better facilities and scope for knowledge workers, such as research and develop-
ment scientists or engineers or IT specialists;
● ‘golden hellos’ (sums of money paid upfront to recruits);
● generous relocation payments.
Human resource planning ❚ 383
Flexibility plan
The aims of the flexibility plan should be to:
● provide for greater operational flexibility;
● improve the utilization of employees’ skills and capacities;
● reduce employment costs;
● help to achieve downsizing smoothly and in a way which avoids the need for
compulsory redundancies;
● increase productivity.
The plan can be based on a radical look at traditional employment patterns. This
means identifying the scope for using alternatives to full-time permanent staff, which
could include increasing the number of part-timers, job sharing, the expansion of
home working or teleworking, or employing more temporary workers. The two main
new trends in temporary working are first, to establish permanent staffing levels to
meet minimum or normal levels of demand and rely on temporary staff to cover
peaks, and second, to develop a ‘two-tier’ workforce in order to provide greater
job security for the core workers, by employing a certain percentage of temporary
staff at the periphery. Consideration can also be given to making more use of subcon-
tractors or outsourcing work, and to the introduction of more flexible working
arrangements.
Use of part-time workers
The advantages of using part-time workers are as follows:
● more scope for flexing hours worked;
● better utilization of plant and equipment by, for example, the introduction of a
‘twilight shift’;
● lower unit labour costs because overtime levels for full-time workers are reduced;
● higher productivity on repetitive work because part-time workers can give more
attention to their work during their shorter working day.
The disadvantages are:
● part-timers are generally less willing to undertake afternoon or evening work,
may find it more difficult to vary their hours of work, and may be less mobile;
● rates of labour turnover may be higher among part-timers;
● part-timers may be less committed than full-time employees.
384 ❚ People resourcing
It should be remembered that the Part-time Regulations 1999 require that part-timers
should not be treated less favourably than full-time workers, and should be paid pro
rata.
Job sharing
Job sharing is an arrangement whereby two employees share the work of one full-
time position, dividing pay and benefits between them according to the time each
works. Job sharing can involve splitting days or weeks, or less frequently working
alternate weeks. The advantages of job sharing include reduced employee turnover
and absenteeism because it suits the needs of individuals. Greater continuity results
because if one-half of the job sharing team is ill or leaves, the sharer will continue
working for at least half the time. Job sharing also means that a wider employment
pool can be tapped, of those who cannot work full-time but want permanent employ-
ment. The disadvantages are the administrative costs involved and the risk of respon-
sibility being divided.
Home working and teleworking
Home-based employees can be employed in such jobs as consultants, analysts,
designers, programmers or various kinds of administrative work. The advantages of
these arrangements are:
● flexibility to respond rapidly to fluctuations in demand;
● reduced overheads;
● lower employment costs if the home workers are self-employed (care, however,
has to be taken to ensure that they are regarded as self-employed for income tax
and national insurance purposes).
Teleworking involves people working at home with a terminal which is linked to
the main company or networked with other outworkers. Its aim is to achieve
greater flexibility, rapid access to skills and the retention of skilled employees
who would otherwise be lost to the company. Teleworkers can be used in a number
of functions such as marketing, finance and IT. The arrangement does, how-
ever, depend for its success on the involvement and education of all employees
(full-time and teleworkers), the careful selection and training of teleworkers,
allocating adequate resources to them and monitoring the operation of the
system.
Human resource planning ❚ 385
Subcontracting
Subcontracting enables:
● resources to be concentrated on core business activities;
● employment costs to be reduced;
● flexibility and productivity to be increased;
● job security for core employees to be enhanced.
The potential drawbacks include:
● The legal status of subcontractors. This has to be clarified for income tax, national
insurance and employment legislation purposes.
● The degree to which subcontractors will be able to meet delivery and quality
requirements – it may be more difficult to control their work.
● Negative reactions from employees and trade unions who prefer work to be kept
within the company.
The decision on how much work can be subcontracted is mainly an operational one,
but the flexibility plan should cover the implications of subcontracting on employ-
ment levels and employee relations.
Flexible hour arrangements
Flexible hour arrangements can be included in the flexibility plan in one or more of
the following ways:
● Flexible daily hours. These may follow an agreed pattern day by day according to
typical or expected work loads (eg flexitime systems).
● Flexible weekly hours, providing for longer weekly hours to be worked at certain
peak periods during the year.
● Flexible daily and weekly hours: varying daily or weekly hours or a combination
of both to match the input of hours to achieve the required output. Such working
times, unlike daily or weekly arrangements, may fluctuate between a minimum
and a maximum.
● Compressed working weeks in which employees work fewer than the five stan-
dard days.
● Annual hours: scheduling employee hours on the basis of the number of hours to
be worked, with provisions for the increase or reduction of hours in any given
period, according to the demand for goods or services.
386 ❚ People resourcing
Overtime arrangements
A flexibility plan can contain proposals to reduce overtime costs by the use of flexible
hours, new shift arrangements (as for twilight shifts), time off in lieu and overtime
limitation agreements. The reduction of overtime is often catered for in formal
productivity deals which include a quid pro quo in the form of increased pay for the
elimination of overtime payments and the introduction of flexible work patterns.
Shift working arrangements
These can be introduced or modified to meet demand requirements, reduce overtime
or provide for better plant or equipment utilization.
The downsizing plan
If all else fails, it may be necessary to deal with unacceptable employment costs or
surplus numbers of employees by what has euphemistically come to be known as
‘downsizing’. The downsizing plan should be based on the timing of reductions and
forecasts of the extent to which these can be achieved by natural wastage or voluntary
redundancy. The plan should set out:
● the total number of people who have to go, and when and where this needs to
take place;
● arrangements for informing and consulting with employees and their trade
unions;
● a forecast of the number of losses that can be taken up by natural wastage;
● any financial or other inducements to encourage voluntary redundancy;
● a forecast of the likely numbers who will volunteer to leave;
● a forecast of the balance of employees, if any, who will have to be made redun-
dant (the plan should, of course, aim to avoid this through natural wastage and
voluntary redundancy);
● the redundancy terms;
● any financial inducements to be offered to key employees whom the company
wishes to retain;
● any arrangements for retraining employees and finding them work elsewhere in
the organization;
● the steps to be taken to help redundant employees find new jobs by counselling,
contacting other employers or offering the services of outplacement consultants;
● the arrangements for telling individual employees about the redundancies and
how they are affected, and for keeping the trade unions informed.
Human resource planning ❚ 387
THE CONTRIBUTION OF HR TO HUMAN RESOURCE
PLANNING
Human resource planning, in the broader meaning of the term, is one of the funda-
mental strategic roles of the HR function. HR can make a major contribution to devel-
oping the resource capability of the firm and therefore its strategic capability by
systematically reviewing the firm’s strategic objectives and by ensuring that plans are
made that will ensure that the human resources are available to meet those objectives.
Thus HR is focusing on the acquisition and development of the human capital
required by the organization.
To make this contribution, heads of HR and their colleagues in the HR function
need to:
● ensure that they are aware of the strategic plans of the business, and can provide
advice on the human resource implications of those plans;
● point out to management the strengths and weaknesses of the human resources of
the organization, and the opportunities and threats they present, so that these can
be considered when developing business plans;
● be capable of scenario planning in the sense that they can identify future issues
concerning the acquisition, retention and employment of people, and advise on
methods of addressing those issues;
● understand the extent to which quantitative assessments of the future demand for
and supply of people may be feasible and useful, and know the methods that can
be used to prepare such forecasts;
● be aware of the scope to deal with future requirements by introducing various
forms of flexibility;
● be capable of preparing relevant and practical resourcing plans and strategies for
retaining people, based upon an understanding of the internal and external envi-
ronment of the organization, and the implications of analyses of labour turnover.
388 ❚ People resourcing
Talent management
Talent management consisting of talent planning and development is a relatively new
concept, only emerging in the 2000s. It derives from the phrase ‘the war for talent’,
which originated in the late 1990s as a means of highlighting the problems that orga-
nizations were having in attracting and retaining talented people. However O’Reilly
and Pfeffer (2000) point out that: ‘Companies that adopt a “talent war” mindset may
place too much value on outsiders and downplay the talent already in the company.’
The approach should be one that emphasizes the ability of everyone to succeed and
thereby ‘achieve extraordinary results with ordinary people’. And Pfeffer (2001)
warns that the war for talent is the wrong metaphor because it overlooks the extent to
which teams of people will often operate more effectively than mere collections of
individuals.
There is nothing new about the various approaches contained in the concept
of talent management – attraction, retention, motivation and engagement, develop-
ment, and succession planning. But they are bundled together to produce a more
coherent whole that can be a vehicle for the development and implementation of
coordinated and mutually supporting approaches that help the organization to get
and to keep the talented people it needs. It is closely associated with the notion of
creating ‘a best place to work’, which has again become prominent in the 2000s.
In this chapter talent management is dealt with under the following headings:
26
● talent management defined;
● the elements of talent management;
● creating a ‘best place to work’;
● attraction policies;
● retention policies;
● career management (career and succession planning) policy and practice;
● talent management for knowledge workers;
● conclusions – the practice of talent management.
TALENT MANAGEMENT DEFINED
Talent management is the use of an integrated set of activities to ensure that the orga-
nization attracts, retains, motivates and develops the talented people it needs now
and in the future. The aim is to secure the flow of talent, bearing in mind that talent is
a major corporate resource.
It is sometimes assumed that talent management is only concerned with key
people – the high flyers. For example, Smilansky (2005) states that it is ‘aimed at
improving the calibre, availability and flexible utilization of exceptionally capable
(high potential) employees who can have a disproportionate impact on business
performance’. But everyone in an organization has talent, even if some have more
talent than others. Talent management processes should not be limited to the
favoured few. This point was made by deLong and Vijayaraghavan (2003) when they
suggested that the unsung heroes of corporate performance are the capable, steady
performers.
THE ELEMENTS OF TALENT MANAGEMENT
The elements of talent management and their interrelationships are shown in Figure
26.1.
Talent management starts with the business strategy and what it signifies in terms
of the talented people required by the organization. Ultimately, its aim is to develop
and maintain a talent pool consisting of a skilled, engaged and committed workforce.
Its elements are described below.
The resourcing strategy
The business plan provides the basis for human resource planning, which defines
390 ❚ People resourcing
human capital requirements and leads to attraction and retention policies and pro-
grammes for internal resourcing (identifying talent within the organization and
developing and promoting it).
Attraction and retention policies and programmes
These policies and programmes describe the approach to ensuring that the organiza-
tion both gets and keeps the talent it needs. Attraction policies lead to programmes
for external resourcing (recruitment and selection of people from outside the organi-
zation). Retention policies are designed to ensure that people remain as committed
members of the organization. The outcome of these policies is a talent flow that
creates and maintains the talent pool. Both attraction and retention policies as
Talent management ❚ 391
Attraction
and retention
policies
Continuing
talent audit
Business
strategy
Resourcing
strategy
Role
Career
management
External
resourcing
Talent
relationship
management
Management
development
Management
succession
Internal
resourcing
Performance
management Learning and
development
Total reward
Engagement/
commitment
The talent
pool: a
skilled,
engaged and
committed
workforce
Figure 26.1 The elements of talent management
discussed in greater detail later in this chapter will be included amongst the steps
required to make the organization ‘a great place to work’, also considered in the next
main section of this chapter.
Talent audit
A talent audit identifies those with potential and provides the basis for career plan-
ning and development – ensuring that talented people have the sequence of experi-
ence supplemented by coaching and learning programmes that will fit them to carry
out more demanding roles in the future. Talent audits can also be used to indicate the
possible danger of talented people leaving (risk analysis) and what action may need
to be taken to retain them.
Role development
Talent management is concerned with the roles people carry out. This involves role
development – ensuring that roles provide the responsibility, challenge and
autonomy required to create role engagement and motivation. It also involves taking
steps to ensure that people have the opportunity and are given the encouragement to
learn and develop in their roles. Talent management policies also focus on role flexi-
bility – giving people the chance to develop their roles by making better and
extended use of their talents.
Talent relationship management
Talent relationship management is the process of building effective relationships with
people in their roles. It is concerned generally with creating a great place to work (see
later), but particularly it is about treating individual employees fairly, recognizing
their value, giving them a voice and providing opportunities for growth. The aim is
to achieve ‘talent engagement’, ensuring that people are committed to their work and
the organization. As Sears (2003) points out, it is ‘better to build an existing relation-
ship rather than try to create a new one when someone leaves’.
Performance management
Performance management processes provide a means of building relationships with
people, identifying talent and potential, planning learning and development activi-
ties and making the most of the talent possessed by the organization. Line managers
can be asked to carry out separate ‘risk analyses’ for any key staff to assess the likeli-
hood of their leaving. Properly carried out, performance management is a means of
392 ❚ People resourcing
increasing the engagement and motivation of people by providing positive feedback
and recognition. This is part of a total reward system.
Total reward
Total reward strategies (see Chapter 43), which provide for both financial and non-
financial rewards, can contribute to the engagement and commitment of talented
people by demonstrating that they are valued for their contribution and by operating
fairly and consistently. Paying competitive rates will affect the ability of organizations
to attract and retain people, but there is a limit to the extent to which companies can
compete with the ‘pull of the market’ as Cappelli (2000) points out. Retention or
loyalty bonuses (golden handcuffs) are used by some companies, but again, as
stressed by Cappelli there is a limit to their effectiveness as bribes. If talented people
want to go they will go.
Learning and development
Learning and development policies and programmes are essential components in the
process of developing talent – ensuring that people acquire and enhance the skills
and competencies they need. Policies should be formulated by reference to ‘employee
success profiles’, which are described in terms of competencies and define the quali-
ties that need to be developed. Employee success profiles can be incorporated in role
profiles.
Learning and development activities are also important means of developing
managers and gaining the engagement and commitment of talented staff by
giving them opportunities to grow in their present roles and to progress to higher-
level roles.
Career management
Career management consists of the processes of career planning and management
succession. Career planning shapes the progression of individuals within an organi-
zation in accordance with assessments of organizational needs, defined employee
success profiles and the performance, potential and preferences of individual
members of the enterprise.
Management succession planning takes place to ensure that, as far as possible, the
organization has the managers it requires to meet future business needs. Career
management is dealt with in more detail in the last section of this chapter.
Talent management ❚ 393
CREATING A GREAT PLACE TO WORK
Ensuring that the organization is perceived as being ‘a great place to work’ means
that it becomes an ‘employer of choice’, ie one for whom people want to work. There
is a desire to join the organization and once there, to want to stay. Employees are
committed to the organization and engaged in the work they do. To acquire a
national, even a local reputation as a good employer takes time. But it’s worth the
effort.
On the basis of their longitudinal research in 12 companies, Purcell et al (2003)
concluded that:
What seems to be happening is that successful firms are able to meet people’s needs
both for a good job and to work ‘in a great place’. They create good work and a
conducive working environment. In this way they become an ‘employer of choice’.
People will want to work there because their individual needs are met – for a good job
with prospects linked to training, appraisal, and working with a good boss who listens
and gives some autonomy but helps with coaching and guidance.
The criteria used by the Sunday Times in identifying the ‘100 Best Companies to Work
For’, 2005 were:
● leadership at senior management level;
● my manager – local management on a day-to-day basis;
● personal growth – opportunities to learn, grow and be challenged;
● well-being – balanced work-life issues;
● my team – immediate colleagues;
● giving something back – to society and the local community;
● my company – the way it treats staff;
● fair deal – pay and benefits.
The factors used in the Financial Times 2005 best workplaces report were:
● have a range of management practices that help staff to feel valued, productive
and listened to;
● support at home – step in when people are suffering from personal problems;
● maintain a balance between work and family;
● effective employee development programme;
● staff trusted to do their jobs properly.
394 ❚ People resourcing
Creating a great place to work starts with developing the image of the organization so
that it is recognized as one that achieves results, delivers quality products and ser-
vices, behaves ethically and provides good conditions of employment. Organizations
with a clear vision and a set of integrated and enacted values are likely to project
themselves as being well worth working for.
ATTRACTION STRATEGIES
The overall strategy should be to become an employer of choice. As Scarborough and
Elias (2002) put it: ‘The recruitment of key individuals who will contribute signifi-
cantly to the value-creating capacity of the firm is crucial to success.’ The aims are to
establish the brand image of the organization – how others perceive it (employee
branding), to become an employer of choice, and to target recruitment and selection
to obtain the sort of people the organization needs.
Employer branding
Employer branding is the creation of a brand image of the organization for prospec-
tive employees. It will be influenced by the reputation of the organization as a busi-
ness or provider of services as well as its reputation as an employer. As described by
Alan Reed, Founder and Chief Executive of Reed Executive plc, in 2001: ‘Employer
branding is the concept of applying to the recruitment process the same marketing
coherence used in the management of customers.’ He suggests that the approaches
required to develop an employer brand are:
● analyse what ideal candidates need and want and take this into account in
deciding what should be offered and how it should be offered;
● establish how far the core values of the organization support the creation of an
attractive brand and ensure that these are incorporated in the presentation of the
brand as long as they are ‘values in use’ (lived by members of the organization)
rather than simply espoused;
● define the features of the brand on the basis of an examination and review of
each of the areas that affect the perceptions of people about the organization as ‘a
great place to work’ – the way people are treated, the provision of a fair deal,
opportunities for growth, work-life balance, leadership, the quality of manage-
ment, involvement with colleagues and how and why the organization is
successful;
Talent management ❚ 395
● benchmark the approaches of other organizations (the Sunday Times list of the 100
best companies to work for is useful) to obtain ideas about what can be done to
enhance the brand;
● be honest and realistic.
Employer of choice
The aim is to become an ‘employer of choice’, a place where people prefer to work.
This means developing what Sears (2003) calls ‘a value proposition’, which commu-
nicates what the organization can offer its employees as a ‘great place to work’. The
factors that contribute to being an employer of choice are the provision of:
● interesting and rewarding work;
● opportunities for learning, development and career progression;
● a reasonable degree of security;
● enhanced future employability because of the reputation of the organization as
one that employs and develops high quality people, as well as the learning oppor-
tunities it provides;
● better facilities and scope for knowledge workers, eg research and development
scientists or engineers and IT specialists;
● employment conditions that satisfy work-life balance needs;
● a reward system that recognizes and values contribution and provides competi-
tive pay and benefits.
This all adds up to an employee value proposition which, as a means of attracting and
retaining high potential employees, recognizes that they will be looking for strong
values and expecting to be well managed, to have freedom and autonomy, high job
challenge and career opportunities. A powerful method of retention is simply to
ensure that people feel they are valued.
Targeted recruitment and selection
The first step is to identify what sort of people the organization needs with regard to
their qualifications and experience and the extent to which they are likely to fit
the culture of the organization – its values and norms. This involves analysing
and assessing work requirements and defining what cultural fit means. The most
important characteristics of those who are already thriving – what separates
successful from unsuccessful employees – should be determined so that others like
them can be recruited. Attitudes to work, careers and the company are important;
behaviour can be influenced later as people become familiar with the culture so long
396 ❚ People resourcing
as their attitudes are right. As Leary-Joyce (2004) says: ‘Recruit for attitude, induct for
culture.’
RETENTION STRATEGIES
The turnover of key employees can have a disproportionate impact on the business
and the people organizations wish to retain are probably the ones most likely to leave.
Reed (2001) claims that:
Every worker is five minutes away from handing in his or her notice, and 150 working
hours away from walking out of the door to a better offer. There is no such thing as a ‘job
for life’ and today’s workers have few qualms about leaving employers for greener
pastures… The average permanent job in the UK lasts six years.
Concerted action is required to retain talented people, but there are limits to what any
organization can do. It is also necessary to encourage the greatest contribution from
existing talent and to value them accordingly.
Factors affecting retention
Retention strategies should be based on an understanding of the factors that affect
them. For early career employees (30 years and under) career advancement is signifi-
cant. For mid-career employees (age 31–50) the ability to manage their careers and
satisfaction from their work are important. Late career employees (over 50) will be
interested in security. It is also the case that a younger workforce will change jobs and
employers more often than an older workforce, and workforces with a lot of part-
timers are less stable than those with predominately full-time staff. The specific
factors that affect retention are:
● company image;
● recruitment, selection and deployment;
● leadership – ‘employees join companies and leave managers’;
● learning opportunities;
● performance recognition and rewards.
A study of high flyers by Holbeche (1998) found that the factors that aided the reten-
tion and motivation of high performers included providing challenge and achieve-
ment opportunities (eg assignments), mentors, realistic self-assessment and feedback
processes.
Talent management ❚ 397
Basis of the strategy
A retention strategy takes into account the particular retention issues the organization
is facing and sets out ways in which these issues can be dealt with. This may mean
accepting the reality, as mentioned by Cappelli (2000), that the market, not the
company will ultimately determine the movement of employees. Cappelli believes
that it may be difficult to counter the pull of the market – ‘you can’t shield your
people from attractive opportunities and aggressive recruiters’, and suggests that:
‘The old goal of HR management – to minimize overall employee turnover – needs to
be replaced by a new goal: to influence who leaves and when.’ This, as proposed by
Bevan et al (1997), could be based on risk analysis to quantify the seriousness of losing
key people, or of key posts becoming vacant.
Risk analysis
Risk analysis can be carried out initially by identifying potential risk areas – the key
people who may leave and, for each of them as individuals or groups, estimating:
● the likelihood of this occurring;
● how serious the effects of a loss would be on the business;
● the ease with which a replacement could be made and the replacement costs.
Each of the estimates could be expressed on a scale, say: very high, high, medium,
low, very low. An overview of the ratings under each heading could then indicate
where action may need to be taken to retain key people or groups of people.
Analysis of reasons for leaving
Risk analysis provides specific information on areas for concern. More generally,
some indication of the reasons for leaving and therefore where action needs to be
taken may be provided by exit interviews, but they are fallible. More reliance can be
placed on the results of attitude or opinion surveys to identify any areas of dissatis-
faction. The retention plan should propose actions that would focus on each of the
areas in which lack of commitment and dissatisfaction can arise.
Areas for action
Depending on the outcome of the risk analysis and the overall assessment of reasons
for leaving, the possible actions that can be taken are as follows:
398 ❚ People resourcing
● Deal with uncompetitive, inequitable or unfair pay systems. But as Cappelli
(2000) points out, there is a limit to the extent to which people can be bribed to
stay. Remember that while money might attract, you can’t buy love – it is often
other things that get people to stay (how they are treated).
● Design jobs to maximize skill variety, task significance, autonomy, control over
their work and feedback, and ensure that they provide opportunities for learning
and growth. Some roles can be ‘customized’ to meet the needs of particular indi-
viduals.
● Develop commitment to the work (job engagement) not only through job design
but also by organizing work around projects with which people can identify more
readily than the company as a whole.
● Encourage the development of social ties within the company. In the words of
Cappelli (2000), ‘loyalty to companies may be disappearing but loyalty to
colleagues is not’.
● Ensure that selection and promotion procedures match the capacities of individ-
uals to the demands of the work they have to do. Rapid turnover can result
simply from poor selection or promotion decisions.
● Reduce the losses of people who cannot adjust to their new job – the ‘induction
crisis’ – by giving them proper training and support when they join the organiza-
tion.
● Take steps to improve work-life balance by developing policies including flexible
working that recognize the needs of employees outside work.
● Eliminate as far as possible unpleasant working conditions or the imposition of
too much stress on employees.
● Select, brief and train managers and team leaders so that they appreciate the posi-
tive contribution they can make to improving retention by the ways in which they
lead their teams. Bear in mind that people often leave their managers rather than
their organization.
CAREER MANAGEMENT
Career management defined
Career management is concerned with providing opportunities for people to pro-
gress and develop their careers and ensuring that the organization has the flow of
talent it needs. The elements of career management are the provision of learning
and development opportunities, career planning and management succession
planning.
Talent management ❚ 399
Aims
For employees, the aims of career management policies are first, to give individuals
the guidance, support and encouragement they need if they are to fulfil their poten-
tial and achieve a successful career with the organization in tune with their talents
and aspirations. Secondly, the aim is to provide men and women of promise with a
sequence of learning activities and experience that will equip them for whatever level
of responsibility they have the ability to reach.
For the organization, the aim of career management is to meet the objectives of its
talent management policies, which are to ensure that there is a talent flow that creates
and maintains the required talent pool.
Career management calls for an approach that explicitly takes into account both
organizational needs and employee interests. As described by Hirsh and Carter
(2002), it encompasses recruitment, personal development plans, lateral moves,
special assignments at home or abroad, development positions, career bridges, lateral
moves, and support for employees who want to develop. It calls for creativity in iden-
tifying ways to provide development opportunities and enhance employee loyalty.
Career dynamics
Career planning should be based on an understanding of career dynamics. This is
concerned with how careers progress – the ways in which people move through their
careers either upwards when they are promoted, or by enlarging or enriching their
roles to take on greater responsibilities or make more use of their skills and abilities.
The three stages of career progression – expanding, establishing and maturing – are
illustrated in Figure 26.2. This also shows how individuals progress or fail to progress
at different rates through these stages.
The process of career management
The process of career management is illustrated in Figure 26.3.
Career management policies
The organization needs to decide on the extent to which it ‘makes or buys’ talented
people. Should it grow its own talent (a promotion from within policy) or should it
rely on external recruitment (bringing ‘fresh blood’ into the organization)? The policy
may be to recruit potentially high performers who will be good at their present job
and are rewarded accordingly. If they are really good, they will be promoted and the
enterprise will get what it wants. Deliberately to train managers for a future that may
400 ❚ People resourcing
Talent management ❚ 401
Growth
Plateau
Decline
Expanding Establishing Maturing
20 30 40 50 60
Figure 26.2 Career progression curves
Career management
policies
Performance and
potential assessment
Talent audits
Demand/supply
forecasts
Succession planning Career planning
Development processes
and programmes
Figure 26.3 The process of career management
P
ro
g
re
ss
never happen is considered a waste of time. In contrast and less frequently,
employers who believe in long-term career planning develop structured approaches
to career management. These include elaborate reviews of performance and poten-
tial, assessment centres to identify talent or confirm that it is there, ‘high-flyer’
schemes, and planned job moves in line with a predetermined programme.
There may also be policies for dealing with the ‘plateaued’ manager who has got so
far but will get no further. Some managers in this position may be reconciled to
reaching the end of the ‘rat race’ but continue to work effectively. Others will become
bored, frustrated and unproductive, especially rising stars on the wane. The policy
may be to provide for steps to be taken to reshape their careers so that they still have
challenging work at the same level, even if this does not involve promotion up the
hierarchy. Alternatively, the policy may need to recognize that some managers will
have to be encouraged to start new careers elsewhere. In the latter case, career coun-
selling advice should be provided, possibly through ‘outplacement’ consultants who
provide such a service.
Talent audits
These review the stocks of talent available and the flows required by reference to
demand and supply forecasts and performance and potential assessments. They
provide the basis for succession and career planning.
Performance and potential assessments
The aim of performance and potential assessment is to identify training and develop-
ment needs, provide guidance on possible directions in which an individual’s career
might go, and indicate who has potential for promotion. This information can be
obtained from performance management processes, as described in Part VII.
Assessment of potential can be carried out formally by managers following a
performance review. They may be asked to identify people who have very high
potential, some potential, or no potential at all. They may also be asked to indicate
when individuals will be ready for promotion and how far they are likely to get. The
problem with this sort of assessment is that managers find it difficult to forecast the
future for the people they are reviewing – good performance in the current job does
not guarantee that individuals will be able to cope with wider responsibilities, espe-
cially if this involves moving into management. And managers may not necessarily
be aware of the qualities required for longer-term promotion. But the organization
does need information on those with potential and assessors should be encouraged in
their comments section at least to indicate that this is someone who is not only
performing well in the present job but may well perform well in higher-level jobs.
402 ❚ People resourcing
This information can identify those who may be nominated to attend development
centres (see Chapter 40), which can be used to establish potential and discuss career
plans.
Demand and supply forecasts
Demand and supply forecasts are provided by the use of human resource planning
and modelling techniques (see Chapter 25). In larger organizations, modelling is a
particularly fruitful method to use because it allows for sensitivity analysis of the
impact of different assumptions about the future (answering ‘What if?’ questions).
Expert systems, as described in Chapter 59, can also be used where this is an exten-
sive database on flows, attribute requirements (person specifications), and perfor-
mance and potential assessments. Such systems can establish relationships between
the opportunities and the personal attributes they demand, so that careers advisers
can take a set of personal attributes and identify the most appropriate available
opportunities. At the career planning stage, they can also identify people with the
correct abilities and skills for particular jobs and provide information on the career
management programmes required to ensure that attributes and jobs are matched
and careers progress at an appropriate rate. Career management systems such as
ExecuGROW (Control Data) have been specially developed for this purpose.
There is a limit, however, to sophistication. There are so many variables and unpre-
dictable changes in both supply and demand factors that it may be possible to
conduct only an annual check to see what the relationship is between the numbers of
managers who will definitely retire over the next four or five years and the numbers
at the next level who have the potential to succeed them. If this comparison reveals a
serious imbalance, then steps can be taken to reduce or even eliminate the deficit, or
to consider other types of deployment for those who are unlikely to progress.
Succession planning
Succession planning is the process of assessing and auditing the talent in the organi-
zation in order to answer three fundamental questions:
1. Are there enough potential successors available – a supply of people coming
through who can take key roles in the longer term?
2. Are they good enough?
3. Do they have the right skills and attributes for the future?
Succession planning is based on the information supplied by talent audits, supply
and demand forecasts and performance and potential reviews. In some large
Talent management ❚ 403
organizations in which demand and supply forecasts can be made accurately, highly
formalized succession planning processes exist based on the sort of management
succession schedule illustrated in Figure 26.4.
However, Hirsh (2000) points out that the focus of succession planning has shifted
from identifying successors for posts towards providing for the development of those
successors by creating ‘talent pools’. This is because it is difficult in the changeable
environment in which most organizations exist to predict succession requirements.
There is also the problem of making reliable assessments of potential or ‘promota-
bility’. Another issue raised by Hirsh is that organizations fear that too much talk of
‘careers’ gives employees unrealistic expectations of promotion. It can be difficult to
talk about the future in a volatile business. ‘The result has been that many managers
feel no one wants to talk about their career prospects and the organization would
secretly like them to stay just where they are. This situation leads to frustration and
demotivation.’
Career planning
Career planning uses all the information provided by the organization’s assessments
of requirements, the assessments of performance, and potential and management
succession plans, and translates it into the form of individual career development
programmes and general arrangements for management development, career coun-
selling and mentoring.
404 ❚ People resourcing
MANAGEMENT SUCCESSION SCHEDULE Department Director/manager:
Existing managers Potential successors
Name Position Due for Rating If promotable, Names: Positions When
replacement Performance Potential to what position 1st and
and when? 2nd
choice
Figure 26.4 Management succession schedule
It is possible to define career progression in terms of what people are required to
know and be able to do to carry out work at progressive levels of responsibility or
contribution. These levels can be described as competency bands. For each band, the
experience and training needed to achieve the competency level would be defined in
order to produce a career map incorporating ‘aiming points’ for individuals, as illus-
trated in Figure 26.5, who would be made aware of the competency levels they must
reach in order to achieve progress in their careers. This would help them to plan their
own development, although support and guidance should be provided by their
managers, HR specialists and, if they exist, management development advisers or
mentors. The provision of additional experience and training could be arranged as
appropriate, but it would be important to clarify what individual employees need to
do for themselves if they want to progress within the organization.
Talent management ❚ 405
Competence band 1 definition Competence band 1 definition Competence band 1 definition
Basic training and experience Continuation training and Advanced training and
experience experience
Aiming point
Aiming point
Figure 26.5 Competence band career progression system
Career family grade structures, as described in Chapter 46, can define levels of
competency in each career family and show career paths upwards within families or
between families, as illustrated in Figure 26.6.
406 ❚ People resourcing
Level 6 Level 6 Level 6
Level 5 Level 5 Level 5
Level 4 Level 4 Level 4
Level 3 Level 3 Level 3
Level 2 Level 2 Level 2
Level 1 Level 1 Level 1
Career family A Career family B Career family C
Figure 26.6 Career paths in a career family structure
Formal career planning along these lines may be the ideal, but as noted by Hirsh et al
(2000), there has been a shift from managed career moves to more open internal job
markets. The process of internal job application has become the main way in which
employees manage their careers.
TALENT MANAGEMENT FOR KNOWLEDGE WORKERS
Knowledge workers are defined as workers whose skills or knowledge are inextri-
cably linked with the product or service of their employing organizations. The term
therefore embraces such diverse groups as lawyers, accountants, software designers,
web designers, academics, marketers and media workers. More and more work is
being defined by some kind of knowledge element. According to Swart and Kinnie
(2004) the effective management of knowledge workers presents organizations with a
number of dilemmas. Choices have to be made between the retention of knowledge
and knowledge workers, and the desire of knowledge workers to increase their
employability. Tension also exists between the need to develop organization-specific
knowledge and the wish of knowledge workers to develop transferable knowledge.
The firm may want to appropriate the value of that knowledge, but workers may
want to retain ownership of their knowledge.
Swart and Kinnie argue that understanding of these dilemmas is improved by a
greater appreciation of where professional workers get their primary source of identi-
fication – is it from their profession, the organization that employs them, the team or
the client? Their loyalty may be to their professional mission rather than their
employer. Professional research staff or academics may be committed to achieving
professional status and recognition above any forms of performance recognition that
the employing organization might be able to offer.
TALENT MANAGEMENT IN PRACTICE
As described in this chapter talent management consists of a wide range of activities.
Organizations differ hugely in the ways in which they manage their talent. Some aim
to integrate all or most of these activities, others concentrate on one or two such as
talent audits and succession planning. Centrica provides an example of a comprehen-
sive approach, illustrated in Figure 26.7.
Talent management ❚ 407
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Recruitment and selection
THE RECRUITMENT AND SELECTION PROCESS
The overall aim of the recruitment and selection process should be to obtain at
minimum cost the number and quality of employees required to satisfy the human
resource needs of the company. The three stages of recruitment and selection dealt
with in this chapter are:
1. defining requirements – preparing job descriptions and specifications; deciding
terms and conditions of employment;
2. attracting candidates – reviewing and evaluating alternative sources of applicants,
inside and outside the company, advertising, using agencies and consultants;
3. selecting candidates – sifting applications, interviewing, testing, assessing candi-
dates, assessment centres, offering employment, obtaining references; preparing
contracts of employment.
Selection interviewing and selection testing are dealt with in Chapters 28 and 29.
DEFINING REQUIREMENTS
The number and categories of people required should be specified in the recruitment
27
programme, which is derived from the human resource plan. In addition, there will
be demands for replacements or for new jobs to be filled, and these demands should
be checked to ensure that they are justified. It may be particularly necessary to check
on the need for a replacement or the level or type of employee that is specified.
Requirements for particular positions are set out in the form of role profiles and
person specifications. These provide the basic information required to draft adver-
tisements, brief agencies or recruitment consultants, and assess candidates. A role
profile listing competence, skill, educational and experience requirements produces
the job criteria against which candidates will be assessed at the interview or by means
of psychological tests.
Role profiles for recruitment purposes
Role profiles, as described in Chapter 13, define the overall purpose of the role, its
reporting relationships and key result areas. They may also include a list of the
competencies required. These will be technical competencies (knowledge and skills)
and any specific behavioural competencies attached to the role. The latter would be
selected from the organization’s competency framework and modified as required to
fit the demands made on role holders. For recruiting purposes, the profile is extended
to include information on terms and conditions (pay, benefits, hours of work), special
requirements such as mobility, travelling or unsocial hours, and training, develop-
ment and career opportunities. The recruitment role profile provides the basis for a
person specification.
Person specifications
A person specification, also known as a recruitment, personnel or job specification,
defines the education, training, qualifications and experience. The technical compe-
tencies as set out in the role profile may also be included.
A person specification can be set out under the following headings:
● technical competencies – what the individual needs to know and be able to do to
carry out the role, including any special aptitudes or skills required;
● behavioural and attitudinal requirements – the types of behaviours required for
successful performance in the role will be related to the core values and compe-
tency framework of the organization to ensure that cultural fit is achieved when
selecting people. But role-specific information is also needed, which should be
developed by analysing the characteristics of existing employees who are
carrying out their roles effectively. By defining behavioural requirements it is
410 ❚ People resourcing
possible to elicit information about attitudinal requirements, ie what sort of atti-
tudes are likely to result in appropriate behaviours and successful performance.
● qualifications and training – the professional, technical or academic qualifications
required, or the training that the candidate should have undertaken;
● experience – in particular, categories of work or organizations; the types of achieve-
ments and activities that would be likely to predict success;
● specific demands – where the role holder will be expected to achieve in specified
areas, eg develop new markets, improve sales, or introduce new systems;
● organizational fit – the corporate culture (eg formal or informal) and the need for
candidates to be able to work within it;
● special requirements – travelling, unsocial hours, mobility, etc;
● meeting candidate expectations – the extent to which the organization can meet
candidates’ expectations in terms of career opportunities, training, security etc.
The behavioural and attitudinal parts of the person specification are used as the basis
for structured interviews (see Chapter 28). As reported by Competency and Emotional
Intelligence (2004), Britannia Building Society recruits on the basis of the candidates’
attitudes first, and skills and abilities second. Developing the process involved
mapping the Society’s values to its core competencies, identifying the sort of compe-
tency-based questions that should be asked by interviewers, defining the typical
types of responses that candidates might make, and tracking those back to the
values.
A role profile (see Chapter 12) will set out output expectations and competency
requirements for interviewing purposes (competency-based recruitment is consid-
ered in more detail below). But more information may be required to provide the
complete picture for advertising and briefing candidates on terms and conditions and
career prospects. An example of a person specification is given in Figure 27.1.
The biggest danger to be avoided at this stage is that of overstating the competen-
cies and qualifications required. It is natural to go for the best, but setting an unrealis-
tically high level for candidates increases the problems of attracting them, and results
in dissatisfaction when they find their talents are not being used. Understating
requirements can be equally dangerous, but it happens much less frequently. The best
approach is to distinguish between essential and desirable requirements.
When the requirements have been agreed, they should be analysed under suitable
headings. There are various ways of doing this. A basic approach is to set out and
define the essential or desirable requirements under the key headings of competen-
cies, qualifications and training and experience. Additional information can be pro-
vided on specific demands. It is necessary to spell out separately the terms and
conditions of the job.
Recruitment and selection ❚ 411
Alternatively, there are the traditional classification schemes although, these are no
longer so popular. The most familiar are the seven-point plan developed by Rodger
(1952) and the fivefold grading system produced by Munro Fraser (1954).
The seven-point plan
The seven-point plan covers:
1. physical make-up – health, physique, appearance, bearing and speech;
2. attainments – education, qualifications, experience;
3. general intelligence – fundamental intellectual capacity;
4. special aptitudes – mechanical, manual dexterity, facility in the use of words or
figures;
412 ❚ People resourcing
1. Technical competencies:
● Essential in:
– all aspects of recruitment including test administration;
– interviewing techniques;
– job analysis;
– inputting data to computers;
– administering fairly complex paperwork processes.
● Desirable in:
– administering OPQ test;
– job evaluation;
– counselling techniques;
– conducting training sessions.
2. Behavioural competencies:
● able to relate well to others and use interpersonal skills to achieve desired objectives;
● able to influence the behaviour and decisions of people on matters concerning recruitment and
other personnel or individual issues;
● able to cope with change, to be flexible and to handle uncertainty;
● able to make sense of issues, identify and solve problems and ‘think on one’s feet’;
● focus on achieving results;
● able to maintain appropriately directed energy and stamina, to exercise self-control and to learn new
behaviours;
● able to communicate well, orally and on paper.
3. Qualifications/experience:
● Graduate Member of the Chartered Institute of Personnel and Development plus relevant experi-
ence in each aspect of the work.
Figure 27.1 Person specification for an HR officer
5. interests – intellectual, practical, constructional, physically active, social, artistic;
6. disposition – acceptability, influence over others, steadiness, dependability,
self-reliance;
7. circumstances – domestic circumstances, occupations of family.
The fivefold grading system
The fivefold grading system covers:
1. impact on others – physical make-up, appearance, speech and manner;
2. acquired qualifications – education, vocational training, work experience;
3. innate abilities – natural quickness of comprehension and aptitude for learning;
4. motivation – the kinds of goals set by the individual, his or her consistency and
determination in following them up, and success in achieving them;
5. adjustment – emotional stability, ability to stand up to stress and ability to get on
with people.
Choice of system
Of these two systems, the seven-point plan has the longer pedigree. The five-
fold grading scheme is simpler, in some ways, and places more emphasis on the
dynamic aspects of the applicant’s career. Both can provide a good framework for
interviewing, but increasingly, interviewers are using a competency-based approach.
Using a competency-based approach
A competency-based approach means that the competencies defined for a role are
used as the framework for the selection process. As described by Taylor (2002): ‘A
competency approach is person-based rather than job-based. The starting point is
thus not an analysis of jobs but an analysis of people and what attributes account for
their effective and superior performance.’ Roberts (1997) suggests that:
The benefit of taking a competencies approach is that people can identify and isolate the
key characteristics which would be used as the basis for selection, and that those
characteristics will be described in terms which both can understand and agree… . The
competencies therefore become a fundamental part of the selection process.
A competencies approach can help to identify which selection techniques, such as
psychological testing or assessment centres, are most likely to produce useful
evidence. It provides the information required to conduct a structured interview in
Recruitment and selection ❚ 413
which questions can focus on particular competency areas to establish the extent to
which candidates meet the specification as set out in competency terms.
The advantages of a competency-based approach have been summarized by Wood
and Payne (1998) as follows:
● It increases the accuracy of predictions about suitability.
● It facilitates a closer match between the person’s attributes and the demands of
the job.
● It helps to prevent interviewers making ‘snap’ judgements.
● It can underpin the whole range of recruitment techniques – application forms,
interviews, tests and assessment centres.
The framework can be defined in terms of technical or work-based competencies,
which refer to expectations of what people have to be able to do if they are going to
achieve the results required in the job. It can also include definitions of required
behavioural competencies, which refer to the personal characteristics and behaviour
required for successful performance in such areas as interpersonal skills, leadership,
personal drive, communication skills, team membership and analytical ability.
The competencies used for recruitment and selection purposes should meet the
following criteria:
● They should focus on areas in which candidates will have demonstrated
their competency in their working or academic life – eg leadership, teamwork,
initiative.
● They are likely to predict successful job performance, eg achievement motivation.
● They can be assessed in a targeted behavioural event interview in which, for
example, if team management is a key competence area, candidates can be asked
to give examples of how they have successfully built a team and got it into action.
● They can be used as criteria in an assessment centre (see below).
A competency approach along these lines can provide the most effective means of
identifying suitable candidates as part of a systematic selection process.
ATTRACTING CANDIDATES
Attracting candidates is primarily a matter of identifying, evaluating and using the
most appropriate sources of applicants. However, in cases where difficulties in
attracting or retaining candidates are being met or anticipated, it may be necessary to
414 ❚ People resourcing
carry out a preliminary study of the factors that are likely to attract or repel candi-
dates – the strengths and weaknesses of the organization as an employer.
Analysis of recruitment strengths and weaknesses
The analysis of strengths and weaknesses should cover such matters as the
national or local reputation of the organization, pay, employee benefits and working
conditions, the intrinsic interest of the job, security of employment, opportunities for
education and training, career prospects, and the location of the office or plant. These
need to be compared with the competition in order that a list of what are, in effect,
selling points can be drawn up as in a marketing exercise, in which the preferences of
potential customers are compared with the features of the product in order that those
aspects that are likely to provide the most appeal to the customers can be empha-
sized. Candidates are, in a sense, selling themselves, but they are also buying what
the organization has to offer. If, in the latter sense, the labour market is a buyer’s
market, then the company that is selling itself to candidates must study their needs in
relation to what it can provide.
The aim of the study might be to prepare a better image of the organization (the
employer brand) for use in advertisements, brochures or interviews. Or it might have
the more con- structive aim of showing where the organization needs to improve as
an employer if it is to attract more or better candidates and to retain those selected.
The study could make use of an attitude survey to obtain the views of existing
employees. One such survey mounted by the writer in an engineering company
wishing to attract science graduates established that the main concern of the gradu-
ates was that they would be able to use and develop the knowledge they had gained
at university. As a result, special brochures were written for each major discipline
giving technical case histories of the sort of work graduates carried out. These
avoided the purple passages used in some brochures (which the survey established
were distinctly off-putting to most students) and proved to be a most useful recruit-
ment aid. Strong measures were also taken to ensure that research managers made
proper use of the graduates they recruited.
Sources of candidates
First consideration should be given to internal candidates, although some organiza-
tions with powerful equal opportunity policies (often local authorities) insist that all
internal candidates should apply for vacancies on the same footing as external candi-
dates. If there are no people available within the organization the main sources of
candidates, as described below, are advertising, the internet, and outsourcing to
consultants or agencies.
Recruitment and selection ❚ 415
ADVERTISING
Advertising is the most obvious method of attracting candidates. Nevertheless, the
first question to ask is whether an advertisement is really justified. This means
looking at the alternative sources mentioned above and confirming, preferably on the
basis of experience, that they will not do. Consideration should be given as to
whether it might be better to use an agency or a selection consultant. When making
the choice, refer to the three criteria of cost, speed and the likelihood of providing
good candidates. The objectives of an advertisement should be to:
● attract attention – it must compete for the interest of potential candidates against
other employers;
● create and maintain interest – it has to communicate in an attractive and interesting
way information about the job, the company, the terms and conditions of employ-
ment and the qualifications required;
● stimulate action – the message needs to be conveyed in a manner that will not only
focus people’s eyes on the advertisement but also encourage them to read to the
end, as well as prompt a sufficient number of replies from good candidates.
To achieve these aims, it is necessary to carry out the actions set out below.
Analyse the requirement, likely sources and job features
First it is necessary to establish how many jobs have to be filled and by when. Then
turn to the job description and person specification to obtain information on respon-
sibilities, qualifications and experience required.
The next step is to consider where suitable candidates are likely to come from; the
companies, jobs or education establishments they are in; and the parts of the country
where they can be found.
Finally, define the terms and conditions of the job (pay and benefits) and think
about what about the job or the organization is likely to attract good candidates so
that the most can be made of these factors in the advertisement. Consider also what
might put them off, for example the location of the job, in order that objections can be
anticipated. Analyse previous successes or failures to establish what does or does not
work.
Decide who does what
When planning a campaign or recruiting key people, there is much to be said for
using an advertising agency. An agency can provide expertise in producing
416 ❚ People resourcing
eye-catching headlines and writing good copy. It can devise an attractive house style
and prepare layouts that make the most of the text, the logo and any ‘white space’
round the advertisement. Moreover, it can advise on ways of achieving visual impact
by the use of illustrations and special typographical features. Finally, an agency can
advise on media, help in response analysis and take up the burden of placing adver-
tisements.
The following steps should be taken when choosing an advertising agency:
● Check its experience in handling recruitment advertising.
● See examples of its work.
● Check with clients on the level of service provided.
● Meet the staff who will work on the advertisements.
● Check the fee structure.
● Discuss methods of working.
Write the copy
A recruitment advertisement should start with a compelling headline and then
contain information on:
● the organization;
● the job;
● the person required – qualifications, experience etc;
● the pay and benefits offered;
● the location;
● the action to be taken.
The headline is all-important. The simplest and most obvious approach is to
set out the job title in bold type. To gain attention, it is advisable to quote the salary
(if it is worth quoting) and to put ‘plus car’ if a company car is provided. Salaries
and cars are major attractions and should be stated clearly. Applicants are
rightly suspicious of clauses such as ‘salary will be commensurate with age and
experience’ or ‘salary negotiable’. This usually means either that the salary is so
low that the company is afraid to reveal it, or that salary policies are so incoherent
that the company has no idea what to offer until someone tells them what he or she
wants.
The name of the company should be given. Do not use box numbers – if you want
to remain anonymous, use a consultant. Add any selling points, such as growth or
diversification, and any other areas of interest to potential candidates, such as career
Recruitment and selection ❚ 417
prospects. The essential features of the job should be conveyed by giving a brief
description of what the job holder will do and, as far as space permits, the scope and
scale of activities. Create interest in the job but do not oversell it.
The qualifications and experience required should be stated as factually as
possible. There is no point in overstating requirements and seldom any point in spec-
ifying exactly how much experience is wanted. This will vary from candidate to
candidate, and the other details about the job and the rate of pay should provide
them with enough information about the sort of experience required. Be careful about
including a string of personal qualities such as drive, determination and initiative.
These have no real meaning to candidates. Phrases such as ‘proven track record’ and
‘successful experience’ are equally meaningless. No one will admit to not having
either of them.
The advertisement should end with information on how the candidate should
apply. ‘Brief but comprehensive details’ is a good phrase. Candidates can be asked to
write, but useful alternatives are to ask them to telephone or to come along for an
informal chat at a suitable venue.
Remember that the Sex Discrimination Act 1975 makes it unlawful to discriminate
in an advertisement by favouring either sex, the only exceptions being a few jobs that
can be done only by one sex. Advertisements must therefore avoid sexist job titles
such as ‘salesman’ or ‘stewardess’. They must refer to a neutral title such as ‘sales
representative’, or amplify the description to cover both sexes by stating ‘steward or
stewardess’. It is accepted, however, that certain job titles are unisex and therefore
non-discriminatory. These include director, manager, executive and officer. It is best
to avoid any reference to the sex of the candidate by using neutral or unisex titles and
referring only to the ‘candidate’ or the ‘applicant’. Otherwise you must specify ‘man
or woman’ or ‘he or she’.
The Race Relations Act 1976 has similar provisions, making unlawful an advertise-
ment that discriminates against any particular race. As long as race is never
mentioned or even implied in an advertisement, you should have no problem in
keeping within the law.
Choose type of advertisement
The main types of advertisement are the following:
● Classified/run-on, in which copy is run on, with no white space in or around the
advertisement and no paragraph spacing or indentation. They are cheap but suit-
able only for junior or routine jobs.
418 ❚ People resourcing
● Classified/semi-display, in which the headings can be set in capitals, paragraphs
can be indented and white space is allowed round the advertisement. They are
fairly cheap, and semi-display can be much more effective than run-on advertise-
ments.
● Full display, which are bordered and in which any typeface and illustrations can
be used. They can be expensive but obviously make the most impact for manage-
rial, technical and professional jobs.
Plan the media
An advertising agency can advise on the choice of media (press, radio, television) and
its cost. British Rates and Data (BRAD) can be consulted to give the costs of advertising
in particular media.
The so-called ‘quality papers’ are best for managerial, professional and technical
jobs. The popular press, especially evening papers, can be used to reach staff such as
sales representatives and technicians. Local papers are obviously best for recruiting
office staff and manual workers. Professional and trade journals can reach your audi-
ence directly, but results can be erratic and it may be advisable to use them to supple-
ment a national campaign.
Avoid Saturdays and be cautious about repeating advertisements in the same
medium. Diminishing returns can set in rapidly.
Evaluate the response
Measure response to provide guidance on the relative cost-effectiveness of different
media. Cost per reply is the best ratio.
Successful recruitment advertisements
To summarize, a panel of creative experts (IRS, 2004f) made the following suggestions
on what makes a recruitment advertisement successful:
● Do the groundwork – consider and analyse the recruiter’s potential audience and
the perceptions of existing employees.
● Prepare a thorough brief for the advertising agency, which expresses clearly the
employer’s idea of what to feed into the creative process – get the views of the
employing manager on what is the strong selling point for the post.
● Have ‘a good idea’ behind the advertisement that contains a promise of a poten-
tial benefit for a jobseeker – there has to be a unique selling proposition.
Recruitment and selection ❚ 419
● Remember that self-selection on the part of potential candidates is an important
aim that can be achieved through careful presentation of information about the
job and the success criteria.
● Ensure that the core information about the vacancy is included – a specification of
the qualifications, experience, skills and attributes required, who jobseekers will
be working for, where they will be working, and how much they will be earning.
Consider providing enough hard data about the role to attract interest and then
direct them to the corporate website where more information can be obtained.
● Project a realistic picture of the job, otherwise the result might be retention prob-
lems.
● Develop and communicate an employer brand that conveys a clear and positive
image of the organization to attract job seekers and, incidentally but importantly,
retain existing members of staff. Do not rely on the strength of the consumer
brand in the market place – it is necessary to develop an employer brand that will
communicate the fact that the organization offers a positive and rewarding
employment experience.
● Consider the online approach (job boards, corporate websites) but remember that
there will be a lot of potential candidates, especially older ones, who may not use
the web and can best be attracted by traditional media. A multimedia approach
may therefore be necessary.
● Bear in mind the considerable costs of media advertising (up to £17,000 for a fairly
modest advertisement in The Guardian).
● Select an agency that fits the organization’s culture, goals and values.
● Take care to act in accordance with equal opportunities and anti-discrimination
legislation (sex, race, religion, marital status, disability and age). The Equal
Opportunities Commission (1994) recommends that: ‘Each advertisement needs
to be considered as a whole in terms of the job advertised, the words used in the
job description and the message that the advertiser is attempting to portray
through the addition of an illustration.’
● Monitor the effectiveness of advertisements to establish which approach pro-
duced the best results.
E-RECRUITMENT
E-recruitment or online recruitment uses web-based tools such as a firm’s public
internet site or its own intranet to recruit staff. The processes of e-recruitment consist
of attracting, screening and tracking applicants, selecting, and offering jobs or
rejecting candidates. It has been estimated by Cappelli (2001) that it costs only about
420 ❚ People resourcing
one-twentieth as much to hire someone online, if that is the only method used, as it
does to hire the same person through traditional methods.
Advantages
E-recruitment not only saves costs but also enables organizations to provide much
more information to applicants, which can easily be updated. There is more scope to
present the ‘employment proposition’ in terms that increase the attractiveness of the
company as a place in which to work.
The options available for online selection include self-assessments, online
screening and psychometric testing online. Online tests can be standardized and
scored easily.
Usage
An IRS (2004a) survey established that 84 per cent of employers made some use of
electronic recruitment. It was noted by IRS that the internet is now a fundamental
part of the recruitment process. At the very least, employers are utilizing the internet
and e-mail systems to communicate with candidates and support their existing hiring
practices. Many organizations also use their corporate website.
The IRS survey found that organizations have made a strategic decision to cut the
costs of their recruitment processes and get better value for money, and have turned
to the internet to achieve this. However, a significant proportion of users still en-
counter problems with the use of e-recruitment, generally receiving too many unsuit-
able candidates. Some organizations address this through the use of self-selection
tools such as a self-selection questionnaire to discourage unsuitable applicants. IRS
comments that this approach means that: ‘Subtly and sensitively, organizations can
let candidates know that this may not be the role for them, while maintaining their
goodwill and self-esteem.’
Some organizations use ‘job boards’ to advertise vacancies (a job board is an
internet site that hosts recruitment advertisements from a range of employers), often
as a portal to their corporate website. Most companies are prepared to communicate
with candidates by e-mail about their applications.
The IRS survey established that almost all private sector firms using e-recruiting
accepted CVs. Organizations in the public sector were more likely to despatch appli-
cation forms by e-mail.
The National Online Recruitment Survey (2003) found that the average online job
seeker is 33 years old with more than 11 years’ work experience; he or she has been
with the same employer for more than four years, and has visited more than five
online sites in a quest for new employment.
Recruitment and selection ❚ 421
An IRS (2004a) survey of recruitment methods for managers established that the
top three methods of recruitment, based on the quality of the applications received,
were the use of commercial employment agencies (32 per cent), advertising in
specialist journals (23 per cent), and national newspaper advertising (22 per cent).
Only 3 per cent rated e-recruiting as the best method, although 56 per cent used it.
The favourite method of recruitment remains interviewing (53 per cent) followed by
assessment centres (23 per cent).
Typical approach
A typical approach is to advertise the vacancy on an online recruitment site. This will
provide job details and information about the company together with an online appli-
cation form. A job seeker returns the completed application electronically and
computer software reviews the application forms for an initial match with the organ-
isation’s requirements. For example, a job offer for a business development manager
in a computer firm might specify the following competencies as a basis for matching
on the site against a CV, or by the employer against details provided by the candidate
for each of the competence areas:
● Minimum 10 years’ business and sales experience in the computer, networking or
communications industry.
● Good exposure to the network consulting world, within UK.
● Formal sales training very desirable.
● Self-motivated to succeed in position.
● Ability to lead and manage small group of sales personnel.
● Strong organizational and prioritization skills.
● Ability to drive opportunities to closure.
Sites
The main types of online recruitment sites are:
● Job sites – these are operated by specialized firms and can contain over 100,000
vacancies with 6 or 7 million ‘hits’ a month. Companies pay to have their jobs
listed on the sites, which are not usually linked to agencies.
● Agency sites – are run by established recruitment agencies. Candidates register
online but may be expected to discuss their details in person before their details
are forwarded to a prospective employer.
● Media sites – which may simply contain a copy of an advertisement appearing in
the press, but may include an external description of the vacancy and the com-
pany and provide a link to the company’s website.
422 ❚ People resourcing
OUTSOURCING RECRUITMENT
There is much to be said for outsourcing recruitment – getting agencies or consultants
to carry out at least the preliminary work of submitting suitable candidates or
drawing up a short list. It costs money, but it can save a lot of time and trouble.
Using agencies
Most private agencies deal with secretarial and office staff. They are usually quick
and effective but quite expensive. Agencies can charge a fee of 15 per cent or more of
the first year’s salary for finding someone. It can be cheaper to advertise, especially
when the company is in a buyer’s market. Shop around to find the agency that suits
the organization’s needs at a reasonable cost.
Agencies should be briefed carefully on what is wanted. They produce unsuitable
candidates from time to time but the risk is reduced if they are clear about your
requirements.
Using recruitment consultants
Recruitment consultants generally advertise, interview and produce a short list. They
provide expertise and reduce workload. The organization can be anonymous if it
wishes. Most recruitment consultants charge a fee based on a percentage of the basic
salary for the job, usually ranging from 15 to 20 per cent.
The following steps should be taken when choosing a recruitment consultant:
● Check reputation with other users.
● Look at the advertisements of the various firms in order to obtain an idea of the
quality of a consultancy and the type and level of jobs with which it deals.
● Check on special expertise – the large accountancy firms, for example, are obvi-
ously skilled in recruiting accountants.
● Meet the consultant who will work on the assignment to assess his or her quality.
● Compare fees, although the differences are likely to be small, and the other
considerations are usually more important.
When using recruitment consultants it is necessary to:
● agree terms of reference;
● brief them on the organization, where the job fits in, why the appointment is to be
made, terms and conditions and any special requirements;
Recruitment and selection ❚ 423
● give them every assistance in defining the job and the person specification,
including any special demands that will be made on the successful candidate in
the shape of what he or she will be expected to achieve – they will do much better
if they have comprehensive knowledge of what is required and what type of
person is most likely to fit well into the organization;
● check carefully the proposed programme and the draft text of the advertisement;
● clarify the arrangements for interviewing and short-listing;
● clarify the basis upon which fees and expenses will be charged;
● ensure that arrangements are made to deal directly with the consultant who will
handle the assignment.
Using executive search consultants
Use an executive search consultant, or ‘head-hunter’, for senior jobs where there are
only a limited number of suitable people and a direct lead to them is wanted. They
are not cheap. Head-hunters charge a fee of 30 to 50 per cent or so of the first year’s
salary, but they can be quite cost-effective.
Executive search consultants first approach their own contacts in the industry or
profession concerned. The good ones have an extensive range of contacts and their
own data bank. They will also have researchers who will identify suitable people who
may fit the specification or can provide a lead to someone else who may be suitable.
The more numerous the contacts, the better the executive search consultant.
When a number of potentially suitable and interested people have been assembled,
a fairly relaxed and informal meeting takes place and the consultant forwards a short
list with full reports on candidates to the client.
There are some good and some not-so-good executive search consultants. Do not
use one unless a reliable recommendation is obtained.
EDUCATIONAL AND TRAINING ESTABLISHMENTS
Many jobs can, of course, be filled by school leavers. For some organizations the
major source of recruits for training schemes will be universities and training estab-
lishments as well as schools. Graduate recruitment is a major annual exercise for
some companies, which go to great efforts to produce glossy brochures, visit cam-
puses on the ‘milk run’ and use elaborate sifting and selection procedures to vet
candidates, including ‘biodata’ and assessment centres, as described later in this
chapter, and the internet.
424 ❚ People resourcing
APPLICATION FORMS
Application forms set out the information on a candidate in a standardized format.
They provide a structured basis for drawing up short lists, the interview itself and for
the subsequent actions in offering an appointment and in setting up personnel
records. An example of a form is given in Figure 27.2.
The following suggestions have been made by Pioro and Baum (2005) on how to
use application forms more effectively:
● Decide what the criteria for selection are and how these will be assessed by use of
the application form.
● Keep questions clear, relevant and non-discriminatory.
● Ask for only the bare minimum of personal details.
● Widen your pool of applicants by offering different options and guidance for
completing and viewing application forms.
● Develop a consistent and effective sifting process.
● Use a team of sifters from a range of backgrounds to represent the diversity of
your candidates.
● Review how effective you have been at the end of the process and once the
successful candidates are in their roles.
SIFTING APPLICATIONS
When the vacancy or vacancies have been advertised and a fair number of replies
received, the typical sequence of steps required to process and sift applications is as
follows:
1. List the applications on a control sheet, setting out name, date the application
was received and the actions taken (reject, hold, interview, short list, offer).
2. Send a standard acknowledgement letter to each applicant unless an instant deci-
sion can be made to interview or reject.
3. The applicant may be asked to complete and return an application form to
supplement a letter or CV which may be on paper or in electronic format. This
ensures that all applicants are considered on the same basis – it can be very diffi-
cult to plough through a pile of letters, often ill-written and badly organized.
Even CVs may be difficult to sift, although their quality is likely to be higher if
the applicant has been receiving advice from an ‘outplacement’ consultant, ie one
who specializes in finding people jobs. However, to save time, trouble, expense
and irritation, many recruiters prefer to make a decision on the initial letter plus
Recruitment and selection ❚ 425
426 ❚ People resourcing
APPLICATION FORM
Surname: First name:
Address:
Tel: (home) Tel: (work) e-mail (personal)
Position applied for:
Education
Dates Name of Main subjects taken Qualifications
From To secondary
school, college or
university
Specialized training received
Other qualifications and skills (including languages, keyboard skills, current driving licence etc
Employment history
(give details of all positions held since completing full-time education, start with your present or most recent
position and work back)
Dates Name of Position and Starting Reasons
From To
employer, address summary of main and leaving rate for leaving or
and nature of duties of pay wanting to leave
business including
any service in the
armed forces
Figure 27.2 Example of an application form (compressed)
CV, where it is quite clear that an applicant meets or does not meet the specifica-
tion, rather than ask for a form. It is generally advisable for more senior jobs to
ask for a CV.
4. Compare the applications with the key criteria in the job specification and sort
them initially into three categories: possible, marginal and unsuitable.
5. Scrutinize the possibles again to draw up a short list for interview. This
scrutiny could be carried out by the personnel or employment specialist and,
preferably, the manager. The numbers on the short list should ideally be between
four and eight. Fewer than four leaves relatively little choice (although such a
limitation may be forced on you if an insufficient number of good applications
have been received). More than eight will mean that too much time is spent on
interviewing and there is a danger of diminishing returns setting in.
6. Draw up an interviewing programme. The time you should allow for the inter-
view will vary according to the complexity of the job. For a fairly routine job, 30
minutes or so should suffice. For a more senior job, 60 minutes or more is
required. It is best not to schedule too many interviews in a day – if you try to
carry out more than five or six exacting interviews you will quickly run out of
steam and do neither the interviewee nor your company any justice. It is advis-
able to leave about 15 minutes between interviews to write up notes and prepare
for the next one.
7. Invite the candidates to interview, using a standard letter where large numbers
are involved. At this stage, candidates should be asked to complete an
Recruitment and selection ❚ 427
Add any comments you wish to make to support your application
I confirm that the information given on this application form is correct
Signature of
applicant …………………………………………………………………………… Date ………………………………………..
Figure 27.2 continued
application form, if they have not already done so. There is much to be said at
this stage for sending candidates some details of the organization and the job so
that you do not have to spend too much time going through this information at
the interview.
8. Review the remaining possibles and marginals and decide if any are to be held in
reserve. Send reserves a standard ‘holding’ letter and send the others a standard
rejection letter. The latter should thank candidates for the interest shown and
inform them briefly, but not too brusquely, that they have not been successful. A
typical reject letter might read as follows:
Since writing to you on… we have given careful consideration to your application for
the above position. I regret to inform you, however, that we have decided not to ask
you to attend for an interview. We should like to thank you for the interest you have
shown.
The process described above should be controlled by an applicant tracking system
(ATS) as part of a computerized recruitment control process.
Biodata
A highly structured method of sifting applications is provided by the use of biodata.
These are items of biographical data which are criterion based (ie they relate to estab-
lished criteria in such terms as qualifications and experience which indicate that indi-
viduals are likely to be suitable). These are objectively scored and, by measurements
of past achievements, predict future behaviour.
The items of biodata consist of demographic details (sex, age, family circum-
stances), education and professional qualifications, previous employment history
and work experience, positions of responsibility outside work, leisure interests and
career/job motivation. These items are weighted according to their relative impor-
tance as predictors, and a range of scores is allocated to each one. The biodata ques-
tionnaire (essentially a detailed application form) obtains information on each item,
which is then scored.
Biodata are most useful when a large number of applicants are received for a
limited number of posts. Cut-off scores can then be determined, based on previous
experience. These scores would indicate who should be accepted for the next stage of
the selection process and who should be rejected, but they would allow for some
possible candidates to be held until the final cut-off score can be fixed after the first
batch of applicants have been screened.
Biodata criteria and predictors are selected by job and functional analysis, which
produces a list of competences. The validity of these items as predictors and the
428 ❚ People resourcing
weighting to be given to them are established by analysing the biodata of existing
employees who are grouped into high or low performers. Weights are allocated to
items according to the discriminating power of the response.
Biodata questionnaires and scoring keys are usually developed for specific jobs in
an organization. Their validity compares reasonably well with other selection instru-
ments, but they need to be developed and validated with great care and they are only
applicable when large groups of applicants have to be screened.
Electronic CVs
Electronic CVs are associated with internet recruiting. Computers can read CVs by
means of high-grade, high-speed scanners using optical character recognition (OCR)
software. CVs are scanned and converted into basic text format. The system’s artifi-
cial intelligence reads the text and extracts key data such as personal details, skills,
educational qualifications, previous employers and jobs, and relevant dates. Search
criteria are created listing mandatory and preferred requirements such as qualifica-
tions, companies in which applicants have worked and jobs held. The system carries
out an analysis of the CVs against these criteria, lists the candidates that satisfy all the
mandatory requirements and ranks them by the number of these requirements each
one meets. The recruiter can then use this ranking as a short list or can tighten the
search criteria to produce a shorter list. Essentially, the computer is looking for the
same key words as human recruiters, but it can carry out this task more systemati-
cally and faster, cross-referencing skills. Any recruiter knows the problem of dealing
with a large number of applications and trying, often against the odds, to extract a
sensible short list.
SELECTION METHODS
The main selection methods are the interview, assessment centres and tests. The
various types of interviews and assessment centres are described in the next
two sections of this chapter. Interviewing techniques are dealt with separately in
Chapter 28. Tests are described in Chapter 29. Another and much more dubious
method, used by a few firms in the UK and more extensively in the rest of Europe, is
graphology.
Recruitment and selection ❚ 429
TYPES OF INTERVIEWS
Individual interviews
The individual interview is the most familiar method of selection. It involves
face-to-face discussion and provides the best opportunity for the establishment of
close contact – rapport – between the interviewer and the candidate. If only one inter-
viewer is used, there is more scope for a biased or superficial decision, and this is one
reason for using a second interviewer or an interviewing panel.
Interviewing panels
Two or more people gathered together to interview one candidate may be described
as an interviewing panel. The most typical situation is that in which a personnel
manager and line managers see the candidate at the same time. This has the advan-
tage of enabling information to be shared and reducing overlaps. The interviewers
can discuss their joint impressions of the candidate’s behaviour at the interview and
modify or enlarge any superficial judgements.
Selection boards
Selection boards are more formal and, usually, larger interviewing panels, convened
by an official body because there are a number of parties interested in the selection
decision. Their only advantage is that they enable a number of different people to
have a look at the applicants and compare notes on the spot. The disadvantages are
that the questions tend to be unplanned and delivered at random, the prejudices of a
dominating member of the board can overwhelm the judgements of the other
members, and the candidates are unable to do justice to themselves because they are
seldom allowed to expand. Selection boards tend to favour the confident and articu-
late candidate, but in doing so they may miss the underlying weaknesses of a super-
ficially impressive individual. They can also underestimate the qualities of those who
happen to be less effective in front of a formidable board, although they would be
fully competent in the less formal or less artificial situations that would face them in
the job.
ASSESSMENT CENTRES
A more comprehensive approach to selection is provided by the use of assessment
centres. These incorporate a range of assessment techniques and typically have the
following features:
430 ❚ People resourcing
● The focus of the centre is on behaviour.
● Exercises are used to capture and simulate the key dimensions of the job. These
include one-to-one role-plays and group exercises. It is assumed that performance
in these simulations predicts behaviour on the job.
● Interviews and tests will be used in addition to group exercises.
● Performance is measured in several dimensions in terms of the competencies
required to achieve the target level of performance in a particular job or at a
particular level in the organization.
● Several candidates or participants are assessed together to allow interaction and
to make the experience more open and participative.
● Several assessors or observers are used in order to increase the objectivity of
assessments. Involving senior managers is desirable to ensure that they ‘own’ the
process. Assessors must be carefully trained.
Assessment centres provide good opportunities for indicating the extent to which
candidates match the culture of the organization. This will be established by observa-
tion of their behaviour in different but typical situations, and by the range of the tests
and structured interviews that are part of the proceedings. Assessment centres also
give candidates a better feel for the organization and its values so that they can decide
for themselves whether or not they are likely to fit.
A well-conducted assessment centre can achieve a better forecast of future perfor-
mance and progress than judgements made by line or even personnel managers in
the normal, unskilled way.
GRAPHOLOGY
Graphology can be defined as the study of the social structure of a human being
through his or her writing. Its use in selection is to draw conclusions about a
candidate’s personality from his or her handwriting as a basis for making predictions
about future performance in a role. The use of graphology as a selection aid is
extensive on the Continent but relatively uncommon in the UK – Fowler (1991a)
quotes research findings that indicate that only between 0.5 and 1.0 per cent of
employers use it in the UK. This very small proportion may be attributed to the
suspicion the great majority of recruiters have that graphology is in some way
spurious and using it as a predictor will be a waste of time and money. In an extensive
review of the research literature, Fowler (1991a) established that some studies had
indicated a predictive validity coefficient in the range of 0.1 to 0.3, although zero
results have also been obtained. These are low figures, which achieve only a poor
level of validity. Fowler’s conclusion was that clues about personality characteristics
Recruitment and selection ❚ 431
may be deduced by skilled graphologists but that the use of graphology as a single or
standard predictor cannot be recommended. He also suspects that, for some people,
the real attraction of graphology is that it can be used without the subject’s knowl-
edge.
CHOICE OF SELECTION METHODS
There is a choice between the main selection methods. What Cook (1993) refers to as
the classic trio consists of application forms, interviews and references. These can be
supplemented or replaced by biodata, assessment centres and, as described in
Chapter 29, psychological tests. It has been demonstrated again and again that
interviews are an inefficient method of predicting success in a job. Smart (1983), for
example, claims that only 94 out of 1,000 interviewees respond honestly in conven-
tional interviews. Validity studies such as those quoted by Taylor (1998), as illustrated
in Figure 27.3, produce equally dubious figures for conventional interviews and indi-
cate that assessment centres, psychometric tests, biodata and structured interviews
are more accurate methods of selection. For good and not so good reasons, organiza-
tions will retain interviews as the main method of selection where assessment centres
are inappropriate. But there is a very powerful case for structuring the interview and
a strong case for supplementing it with tests. The more evidence that can be produced
to help in making crucial selection decisions, the better.
IMPROVING THE EFFECTIVENESS OF RECRUITMENT
AND SELECTION
An HRM approach can be adopted to recruitment, which involves taking much more
care in matching people to the requirements of the organization as a whole as well as
to the particular needs of the job. And these requirements will include commitment
and ability to work effectively as a member of a team.
Examples of this approach in Japanese companies in the UK include the establish-
ment of the Nissan plant in Washington and Kumatsu in Newcastle. As described by
Townley (1989), both followed a conscious recruitment policy with rigorous selection
procedures. Aptitude tests, personality questionnaires and group exercises were used
and the initial pre-screening device was a detailed ‘biodata’-type questionnaire,
which enabled the qualifications and work history of candidates to be assessed and
rated systematically. Subsequent testing of those who successfully completed the first
stage was designed to assess individual attitudes as well as aptitude and ability. As
432 ❚ People resourcing
Recruitment and selection ❚ 433
1.0 Perfect prediction
0.9
0.8
0.7
Assessment centres (promotion)
0.6
Work sample tests
Ability tests
0.5
Assessment centres (performance)
Personality tests (combination)
0.4
Bio-data
Structured interviews
0.3
0.2
Typical interviews
References
0.1
0
Graphology, astrology, chance prediction
–0.1
Figure 27.3 Accuracy of some methods of selection
(Reproduced with permission from Stephen Taylor (1998) Employee Resourcing, Institute of
Personnel and Development)
Wickens (1987) said of the steps taken at Nissan to achieve commitment and team
working: ‘It is something which develops because management genuinely believes
in it and acts accordingly – and recruits or promotes people who have the same
belief.’
The need for a more sophisticated approach to recruitment along these lines is
characteristic of HRM. The first requirement is to take great care in specifying the
competences and behavioural characteristics required of employees. The second is to
use a wider range of methods to identify candidates who match the specification. As
noted earlier in this chapter, the predictive quality of the traditional interview is very
limited. At the very least, structured interviewing techniques should be adopted as
described in Chapter 28. Wherever possible, psychological tests should be used to
extend the data obtained from the interview. Well-planned and administered assess-
ment centres are the best predictors of success in a job, but they are only practical for
a limited number of more complex or demanding jobs or for selecting graduates and
entrants to training programmes.
REFERENCES, QUALIFICATIONS AND OFFERS
After the interviewing and testing procedure has been completed, a provisional deci-
sion to make an offer by telephone or in writing can be made. This is normally
‘subject to satisfactory references’ and the candidate should, of course, be told that
these will be taken up. If there is more than one eligible candidate for a job it may be
advisable to hold one or two people in reserve. Applicants often withdraw, especially
those whose only purpose in applying for the job was to carry out a ‘test marketing’
operation, or to obtain a lever with which to persuade their present employers to
value them more highly.
References – purpose and method
The purpose of a reference is to obtain in confidence factual information about
a prospective employee and opinions about his or her character and suitability
for a job.
The factual information is straightforward and essential. It is simply necessary to
confirm the nature of the previous job, the period of time in employment, the reason
for leaving (if relevant), the salary or rate of pay and, possibly, the attendance record.
Opinions about character and suitability are less reliable and should be treated
with caution. The reason is obvious. Previous or present employers who give
references tend to avoid highly detrimental remarks either out of charity or because
they think anything they say or write may be construed as slanderous or libellous
434 ❚ People resourcing
(references are, in fact, privileged as long as they are given without malice and are
factually correct).
Personal referees are, of course, entirely useless. All they prove is that the applicant
has at least one or two friends.
Written references save time, especially if they are standardized. They may take the
form of an invitation to write a letter confirming the employment record and
commenting on the applicant’s character in general. If brief details about the job are
included (these may be an extract from the advertisement – they should certainly not
be an over-elaborate job description), previous employers can be asked to express
their views about the suitability of the individual for the job. But this is asking a lot.
Unless the job and companies are identical, how well can existing or ex-employers
judge the suitability of someone they may not know particularly well for another job
in a different environment?
More factual answers may be obtained if a standard form is provided for the
employer to complete. The questions asked on this form could include:
● What was the period of employment?
● What was the job title?
● What work was carried out?
● What was the rate of pay or salary?
● How many days’ absence over the last 12 months?
● Would you re-employ (if not, why not)?
Telephone references may be used as an alternative or in addition to written refer-
ences. The great advantage of a telephone conversation is that people are more likely
to give an honest opinion orally than if they have to commit themselves in writing. It
may also save time to use the telephone.
Employer references are necessary to check on the facts given by the prospective
employee. Opinions have to be treated with more caution. A very glowing reference
may arouse suspicion, and it is worth comparing it with a reference from another
employer (two employment references are desirable in any case). Poor or grudging
references must create some alarm, if only because they are so infrequent. But
allowance should be made for prejudice and a check should be made, by telephone if
possible.
References – legal aspects
The key legal points that should be considered when asking for or giving references
are:
Recruitment and selection ❚ 435
● Once the decision has been made to make an offer, the letter should state that ‘this
is a provisional offer subject to references satisfactory to the company being
received’.
● It has been generally held that there is no common law duty on an employer to
provide references for a serving or past employee unless there is a term to that
effect in the employment contract. But it has been ruled (Spring v Guardian
Assurance 1994) that there might be a ‘contractual duty’ to provide a reference
where it is ‘natural practice’ to require a reference from a previous employer
before offering employment, and where the employee could not expect to enter
that type of employment without a reference.
● If a reference contains a false or unsubstantiated statement that damages the
reputation of the individual, action for damages may result.
● It is possible to succeed in a claim for damages if it can be shown that the refer-
ence provided was negligent because, if the facts had been checked, they would
have been found to be groundless.
● Referees have a legal liability to the prospective employer not to give a reference
that contains ‘material factors’ which were known to be untrue. If an employer
appointed someone on the basis of a reference and found that the employee was
unsuitable in respect of a material factor given in that reference, the employer can
initiate legal action alleging ‘deceit’. Employers can try to protect themselves by
adding the phrase ‘without legal responsibility’ to any references given, but this
does not provide a certain defence.
Qualifications
It has been estimated by the CIPD (2005c) that one in eight candidates exaggerate or
falsify their qualifications. One in four companies had to withdraw a job offer because
of CV fraud in 2004, and a similar number sacked someone for the same offence. If a
qualification is a necessary requirement for the job, it is always worth checking with
the university or college concerned, or asking the candidate to produce evidence in
the shape of a certificate or diploma.
FINAL STAGES
Confirming the offer
The final stage in the selection procedure is to confirm the offer of employment after
satisfactory references have been obtained, and the applicant has passed the medical
examination required for pension and life assurance purposes or because a certain
436 ❚ People resourcing
standard of physical fitness is required for the work. The contract of employment
should also be prepared at this stage.
Contracts of employment
The basic information that should be included in a written contract of employment
varies according to the level of job. Contracts of employment are dealt with in
Chapter 57.
Follow-up
It is essential to follow up newly engaged employees to ensure that they have settled
in and to check on how well they are doing. If there are any problems, it is much
better to identify them at an early stage rather than allowing them to fester.
Following up is also important as a means of checking on the selection procedure.
If by any chance a mistake has been made, it is useful to find out how it happened so
that the selection procedure can be improved. Misfits can be attributed to a number of
causes; for example, inadequate job description or specification, poor sourcing of
candidates, weak advertising, poor interviewing techniques, inappropriate or invali-
dated tests, or prejudice on the part of the selector. If any of these are identified, steps
can be taken to prevent their recurrence.
Recruitment and selection ❚ 437
Selection interviewing
The techniques and skills of selection interviewing are described in this chapter
under the following headings:
● purpose;
● advantages and disadvantages of interviews;
● nature of an interview;
● interviewing arrangements;
● preparation;
● timing;
● planning and structuring interviews;
● interviewing approaches;
● interview techniques – starting and finishing;
● interviewing techniques – asking questions;
● selection interviewing skills;
● coming to a conclusion;
● dos and don’ts of selection interviewing.
PURPOSE
The purpose of the selection interview is to obtain and assess information about a
28
candidate which will enable a valid prediction to be made of his or her future perfor-
mance in the job in comparison with the predictions made for any other candidates.
Interviewing therefore involves processing and evaluating evidence about the capa-
bilities of a candidate in relation to the person specification. Some of the evidence will
be on the application form, but the aim of the interview is to supplement this data
with the more detailed or specific information about competencies, attitudes, experi-
ence and personal characteristics that can be obtained in a face-to-face meeting. Such
a meeting also provides an opportunity for judgements by the interviewer on
whether the individual will ‘fit’ the organization, and by both parties as to how they
would get on together. Although these judgements are entirely subjective and are
often biased or prejudiced, it has to be recognized that they will be made.
In particular, selection interviews aim to provide answers to these questions:
● Can individuals do the job – are they competent?
● Will individuals do the job – are they well motivated?
● How will individuals fit into the organization?
The interview forms a major part of the ‘classic trio’ of selection techniques, the other
two being the application form and references. Further evidence may be obtained
from psychological tests as described in Chapter 29 but, in spite of the well-publi-
cized inadequacies of interviews as reliable means of predicting success in a job, they
are still an inevitable part of a selection procedure for most people. This chapter
focuses on the advantages and disadvantages of interviews, the nature of an inter-
view and methods of carrying out effective interviews, effective in that they provide
reliable and valid predictions.
ADVANTAGES AND DISADVANTAGES OF INTERVIEWS
The advantages of interviews as a method of selection are that they:
● provide opportunities for interviewers to ask probing questions about the candi-
date’s experience and to explore the extent to which the candidate’s competences
match those specified for the job;
● enable interviewers to describe the job (a ‘realistic job preview’) and the organiza-
tion in more detail, suggesting some of the terms of the psychological contract;
● provide opportunities for candidates to ask questions about the job and to clarify
issues concerning training, career prospects, the organization and terms and
conditions of employment;
440 ❚ People resourcing
● enable a face-to-face encounter to take place so that the interviewer can make an
assessment of how the candidate would fit into the organization and what he or
she would be like to work with;
● give the candidate the same opportunity to assess the organization, the inter-
viewer and the job.
The disadvantages of interviews are that they:
● can lack validity as a means of making sound predictions of performance, and
lack reliability in the sense of measuring the same things for different candidates;
● rely on the skill of the interviewer; but many people are poor at interviewing,
although most think that they are good at it;
● do not necessarily assess competence in meeting the demands of the particular
job;
● can lead to biased and subjective judgements by interviewers.
However, these disadvantages can be alleviated if not entirely removed, first, by
using a structured approach that focuses on the competences and attitudes required
for successful performance and, secondly, by training interviewers. The use of
another opinion or other opinions can also help to reduce bias, especially if the same
structured approach is adopted by all the interviewers.
THE NATURE OF AN INTERVIEW
An interview can be described as a conversation with a purpose. It is a conversation
because candidates should be induced to talk freely with their interviewers about
themselves, their experience and their careers. But the conversation has to be
planned, directed and controlled to achieve the main purpose of the interview, which
is to make an accurate prediction of the candidate’s future performance in the job for
which he or she is being considered.
However, interviews also provide a valuable opportunity for an exchange of infor-
mation, which will enable both parties to make a decision: to offer or not to offer a job;
to accept or not to accept the offer. It may be better for the candidates to ‘de-select’
themselves at this stage if they do not like what they hear about the job or the
company rather than take on a disagreeable job. Interviews are often used to give the
candidates a favourable impression of the organization and the job. But this must be
realistic – a ‘realistic job preview’ will spell out any special demands that will be
made on the successful applicant in terms of the standards they will be expected to
achieve, the hours they may have to work, the travelling they have to do and any
Selection interviewing ❚ 441
requirement for mobility in the UK or abroad. Clearly, if these are onerous, it will be
necessary to convince good candidates that the rewards will be commensurate with
the requirements. If poor candidates are put off, so much the better.
Good interviewers know what they are looking for and how to set about finding it.
They have a method for recording their analyses of candidates against a set of assess-
ment criteria, which will be spelt out in a person specification.
INTERVIEWING ARRANGEMENTS
The interviewing arrangements will depend partly on the procedure being used,
which may consist of individual interviews, an interviewing panel, a selection board
or some form of assessment centre, sometimes referred to as a group selection proce-
dure. In most cases, however, the arrangements for the interviews should conform
broadly to the following pattern:
● The candidate who has applied in writing or by telephone should be told where
and when to come and for whom to ask. The interview time should be arranged
to fit in with the time it will take to get to the company. It may be necessary to
adjust times for those who cannot get away during working hours. If the
company is difficult to find, a map should be sent with details of public transport.
The receptionist or security guard should be told who is coming. Candidates are
impressed to find that they are expected
● Applicants should have somewhere quiet and comfortable in which to wait for
the interview, with reading material available and access to cloakroom facilities.
● The interviewers or interviewing panel should have been well briefed on the
programme. Interviewing rooms should have been booked and arrangements
made, as necessary, for welcoming candidates, for escorting them to interviews,
for meals and for a conducted tour round the company.
● Comfortable private rooms should be provided for interviews with little, if any,
distractions around them. Interviewers should preferably not sit behind their
desks, as this creates a psychological barrier.
● During the interview or interviews, some time, but not too much, should be
allowed to tell candidates about the company and the job and to discuss with
them conditions of employment. Negotiations about pay and other benefits may
take place after a provisional offer has been made, but it is as well to prepare the
ground during the interviewing stage.
● Candidates should be told what the next step will be at the end of the interview.
They may be asked at this stage if they have any objections to references being
taken up.
442 ❚ People resourcing
● Follow-up studies should be carried out, comparing the performance of
successful candidates in their jobs with the prediction made at the selection stage.
These studies should be used to validate the selection procedure and to check on
the capabilities of interviewers.
Briefing interviewers
When making arrangements for an interview it is essential that the people who are
going to conduct the interview are properly briefed on the job and the procedures
they should use. There is everything to be said for including training in interviewing
techniques as an automatic part of the training programmes for managers and team
leaders.
It is particularly important that everyone is fully aware of the provisions of the Sex,
Race and Disability Discrimination Acts. It is essential that any form of prejudiced
behaviour or any prejudiced judgements are eliminated completely from the inter-
view and the ensuing discussion. Even the faintest hint of a sexist or racist remark
must be totally avoided. When recording a decision following an interview it is also
essential to spell out the reasons why someone was rejected, making it clear that this
was absolutely on the grounds of their qualifications for the job and had nothing to
do with their sex, race or disability.
Ethical considerations
Another important consideration in planning and executing a recruitment
programme is to behave ethically towards candidates. They have the right to be
treated with consideration and this includes acknowledging replies and informing
them of the outcome of their application without undue delay.
Planning the interview programme
It is best to leave some time, say 15 minutes, between interviews to allow for com-
ments to be made. There is a limit to how many interviews can be conducted in a day
without running out of steam, and holding more than six demanding interviews of,
say, one hour each in a day is unwise. Even with less demanding half-hour interviews
it is preferable to limit the number to eight or so in a day.
PREPARATION
Careful preparation is essential and this means a careful study of the person specifi-
cation and the candidate’s application form and/or CV. It is necessary at this stage to
Selection interviewing ❚ 443
identify those features of the applicant that do not fully match the specification so
that these can be probed more deeply during the interview. It can be assumed that the
candidate is only being considered because there is a reasonable match, but it is most
unlikely that this match will be perfect. It is also necessary to establish if there are any
gaps in the job history or items that require further explanation.
There are three fundamental questions that need to be answered at this stage:
● What are the criteria to be used in selecting the candidate – these may be classified
as essential or desirable and will refer to the experience, qualifications, and
competency and skill requirements as set out in the person specification.
● What more do I need to find out at the interview to ensure that the candidate
meets the essential selection criteria?
● What further information do I need to obtain at the interview to ensure that I have
an accurate picture of how well the candidate meets the criteria?
The preparation should include making notes of the specific questions the inter-
viewer needs to ask to establish the relevance of the candidate’s experience and the
extent to which he or she has the skills, knowledge, levels of competency and atti-
tudes required. These may be quite detailed if a highly structured approach is being
adopted as described below – it is essential to probe during an interview to establish
what the candidate really can do and has achieved. Applicants will generally aim to
make the most of themselves and this can lead to exaggerated, even false, claims
about their experience and capabilities.
TIMING
The length of time allowed for an interview will be related to the seniority and
complexity of the job. For relatively routine jobs, 20 to 30 minutes may suffice. For
more demanding jobs, up to an hour may be necessary. Interviews should rarely, if
ever, exceed an hour.
PLANNING AND STRUCTURING INTERVIEWS
The problem with interviews is that they are often inadequate as predictors of perfor-
mance – an hour’s interview may not cover the essential points unless it is
carefully planned and, sadly, the general standard of interviewing is low. This is not
simply a result of many people using poor interviewing techniques (eg they talk
rather than listen). More importantly, it is a result of not carrying out a proper
444 ❚ People resourcing
analysis of the competencies required, with the result that interviewers do not know
the information they need to obtain from the candidate as a basis for structuring the
interview.
There are a number of methods of conducting interviews. At their worst, inter-
viewers adopt an entirely unstructured approach, which involves asking random
questions that are not based on any understanding of what they are looking for. At
best, they are clearly structured and related to a thorough analysis of role require-
ments in terms of skills and competencies.
Generally, an interview can be divided into five parts:
1. the welcome and introductory remarks;
2. the major part concerned with obtaining information about the candidate to
assess against the person specification;
3. the provision of information to candidates about the organization and the job;.
4. answering questions from the candidate;
5. closing the interview with an indication of the next step.
The bulk of the time – at least 80 per cent – should be allocated to obtaining informa-
tion from the candidate. The introduction and conclusion should be brief, though
friendly.
The two traditional ways of planning an interview are to adopt a biographical
approach or to follow the assessment headings in, for example, the seven-point plan.
These approaches are sometimes classified as ‘unstructured interviews’ in contrast to
the ‘structured interview’, which is generally regarded as best practice. The latter
term usually has the special meaning of referring to interviews that are structured
around situational-based or behavioural-based questions, focusing on one or other or
both. The common element is that the questions are prepared in advance and are
related to the role analysis and person specification in terms of the things candidates
will be expected to do and/or the behaviour they will be expected to demonstrate.
But it could be argued that a biographical or assessment heading approach is ‘struc-
tured’, although they may not relate so specifically to identified role requirements. A
further but less common variety of structured interview is psychometric-based. All
these approaches are examined below.
INTERVIEWING APPROACHES
The biographical interview
The traditional biographical interview either starts at the beginning (education) and
Selection interviewing ❚ 445
goes on in sequence to the end (the current or last job or the most recent educational
experience), or proceeds in the opposite direction, starting with the present job and
going backwards to the first job and the candidate’s education or training. Many
interviewers prefer to go backwards with experienced candidates, spending most
time on the present or recent jobs, giving progressively less attention to the earlier
experience, and only touching on education lightly.
There is no one best sequence to follow but it is important to decide in advance
which to adopt. It is also important to get the balance right. You should concentrate
most on recent experience and not dwell too much on the distant past. You should
allow time not only to the candidate to talk about his or her career but also to ask
probing questions as necessary. You should certainly not spend too much time at the
beginning of the interview talking about the company and the job. It is highly desir-
able to issue that information in advance to save interview time and simply
encourage the candidate to ask questions at the end of the interview (the quality of
the questions can indicate something about the quality of the candidate).
This form of plan is logical but it will not produce the desired information unless
interviewers are absolutely clear about what they are looking for and are prepared
with questions that will elicit the data they need to make a selection decision.
Interview planned by reference to a person specification
The person specification as described in Chapter 27 provides a sound basis for a
structured interview. The aim is to obtain information under each of the main head-
ings to indicate the extent to which the candidate matches the specification. Typical
headings are:
● knowledge, skills and expertise – what the candidate is expected to know and be able
to do as a result of experience, education and training (work-based competen-
cies), for example, technical or professional knowledge, numeracy, manual skills,
and experience at the appropriate level in carrying out relevant work;
● personal qualities – how the candidate will be expected to behave in carrying out
the job, such as working with other people, exercising leadership, influencing
people, communicating (eg report writing, making presentations) achieving
results, decision-making, taking the initiative, and being self-reliant (behavioural
competencies);
● qualifications – essential academic or professional qualifications.
A ‘person specification’ setting out such requirements can be sent to candidates (or
posted on an online recruitment site). The applicant is asked to respond with infor-
446 ❚ People resourcing
mation on how they believe they match these requirements. This approach can make
it much easier to sift applications.
Interviews planned by reference to assessment headings
Assessment headings such as those described in Chapter 27 can be used. They define
a number of areas in which information can be generated and assessed in a broadly
comparable way. But as Edenborough (1994) points out, they do not provide any clear
indication of which items of the data collected are likely to predict success in a job.
Structured situational-based interviews
In a situational-based interview (sometimes described as a critical-incident interview)
the focus is on a number of situations or incidents in which behaviour can be
regarded as being particularly indicative of subsequent performance. A typical situa-
tion is described and candidates are asked how they would deal with it. Follow-up
questions are asked to explore the response in more detail, thus gaining a better
understanding of how candidates might tackle similar problems.
Situational-based questions ask candidates how they would handle a hypothetical
situation that resembles one they may encounter in the job. For example, a sales assis-
tant might be asked how he or she would react to rudeness from a customer.
Situational questions can provide some insight into how applicants might respond to
particular job demands and have the advantage of being work-related. They can also
provide candidates with some insight into the sort of problems they might meet in
the job. But, because they are hypothetical and can necessarily only cover a limited
number of areas, they cannot be relied on by themselves. They could indicate that
candidates understand how they might handle one type of situation in theory but not
that they would be able to handle similar or other situations in practice.
An example of part of a situation-based set of questions is given in Figure 28.1.
Structured behavioural (competency) based interviews
In a behavioural-based interview (sometimes referred to as a criterion-referenced
interview) the interviewer progresses through a series of questions, each based on a
criterion, which could be a behavioural competency or a competence in the form of a
fundamental skill, capability or aptitude that is required to achieve an acceptable
level of performance in the job. These will have been defined by job or competency
analysis as described in Chapter 13 and will form the basis of a person specification.
The aim is to collect evidence about relevant aspects of experience in using skills
and competencies on the assumption that such evidence of past performance and
Selection interviewing ❚ 447
behaviour is the best predictor of future performance and behaviour as long as the
criteria are appropriate in relation to the specified demands of the job.
Behavioural-based questions ask candidates to describe how they dealt with
particular situations they have come across in their past experience. In effect they are
asked to indicate how they behaved in response to a problem and how well
that behaviour worked. Questions are structured around the key competencies
identified for the role. The definitions of these competencies should identify what
is regarded as effective behaviour as a basis for evaluating answers. A list of questions
can be drawn up in advance to cover the key competencies set out in the person
specification. For instance, if one of these competencies is concerned with behaviour
as a team member, questions such as: ‘Can you tell me about any occasions when you
have persuaded your fellow team members to do something which at first they didn’t
really want to do?’ An example of a set of behavioural questions is given in Figure
28.2.
Behavioural-based interviews can provide a clear and relevant framework. But
preparing for them takes time and interviewers need to be trained in the technique. A
fully behavioural or criterion-referenced structure is probably most appropriate for
jobs that have to be filled frequently. But even with one-off jobs, the technique of
having a set of competency-referenced questions to ask, which will be applied consis-
tently to all candidates, will improve the reliability of the prediction.
Structured psychometric interviews
Another type of structured interview consists of entirely predetermined questions as
448 ❚ People resourcing
LISTENING
Sometimes a customer won’t say directly what they want and you have to listen to the messages behind the
words. Tell me about a time when you were able to help the sale along.
● Why was the customer reluctant to say what was wanted?
● How did you check that you really did understand?
● How did you show that it was OK for the customer to have the concerns shown in the hidden message?
● Did you actually do a deal that day?
● Is the customer still on your books?
● Had others experienced difficulty with that particular customer?
Figure 28.1 Part of a critical-incident interview for sales people
(Source: R Edenborough (1994) Using Psychometrics, Kogan Page)
in a psychometric test (see Chapter 29). There is no scope to follow through questions
as in the other types of structured interviews referred to above. Responses to the
questions are coded so that results can be analysed and compared. The aim is to
obtain consistency between different interviews and interviewers. A typical ques-
tion would be: ‘Have you ever been in a situation where you have had to get some-
one to do something against their will?’; (if yes) ‘Please give me a recent example.’
This is a highly structured approach and, because of the research and training
required, it is probably only feasible when large numbers of candidates have to be
interviewed.
Choice of approach
The more the approach can be structured by the use of situational or behavioural-
based questions, the better. If the criteria have been properly researched, much more
insight will be obtained about candidates’ capabilities by reference to analysed and
specified role requirements. It is still useful, however, to review candidates’ sequence
of experience and the responsibilities exercised in successive jobs. It may be impor-
tant, for example, to establish the extent to which the career of candidates has
progressed smoothly or why there have been gaps between successive jobs. It is
useful to know what responsibilities candidates have had in recent jobs and the
extent to which this experience is useful and relevant. Candidates should also be
given the chance to highlight their achievements. This review provides a framework
within which more specific questions that refer to behavioural criteria or critical
incidents can be asked. It was noted by Latham et al (1980) that interviews using this
technique produced reasonably reliable and consistent assessments. A typical
Selection interviewing ❚ 449
PRACTICAL CREATIVITY
The ability to originate and realize effective solutions to everyday problems
1. Tell me about a time when you used previous experience to solve a problem new to you.
2. Do you ever make things, perhaps in your spare time, out of all sorts of odds and ends? (if necessary) Tell me
what you have done.
3. Tell me about a time when you got a piece of equipment or a new system to work when other people were
struggling with it.
4. Have you ever found an entirely new use for a hand or power tool? Do you often do that sort of thing? Tell me
more.
5. Do people come to you to help solve problems? (if so) Tell me about a problem you have solved recently.
Figure 28.2 Behavioural-based interview set
(Source: R Edenborough (1994) Using Psychometrics, Kogan Page)
interview may include about 10 or more, depending on the job, pre-prepared behav-
ioural event or ‘situational’ questions.
INTERVIEW TECHNIQUES – STARTING AND FINISHING
You should start interviews by putting candidates at their ease. You want them to
provide you with information and they are not going to talk freely and openly if they
are given a cool reception.
In the closing stages of the interview candidates should be asked if they have
anything they wish to add in support of their application. They should also be given
the opportunity to ask questions. At the end of the interview the candidate should be
thanked and given information about the next stage. If some time is likely to elapse
before a decision is made, the candidate should be informed accordingly so as not to
be left on tenterhooks. It is normally better not to announce the final decision during
the interview. It may be advisable to obtain references and, in any case, time is
required to reflect on the information received.
INTERVIEWING TECHNIQUES – ASKING QUESTIONS
The interviewee should be encouraged to do most of the talking – one of the besetting
sins of poor interviewers is that they talk too much. The interviewer’s job is to draw
the candidate out, at the same time ensuring that the information required is
obtained. To this end it is desirable to ask a number of open-ended questions – ques-
tions that cannot be answered by yes or no and that promote a full response. But a
good interviewer will have an armoury of other types of questions to be asked as
appropriate, as described below.
Open questions
Open questions are the best ones to use to get candidates to talk – to encourage a full
response. Single-word answers are seldom illuminating. It is a good idea to begin the
interview with one or two open questions, thus helping candidates to settle in.
Open questions or phrases inviting a response can be phrased as follows:
● I’d like you to tell me about the sort of work you are doing in your present job.
● What do you know about…?
● Could you give me some examples of…?
450 ❚ People resourcing
● In what ways do you think your experience fits you to do the job for which you
have applied?
● How have you tackled…?
● What have been the most challenging aspects of your job?
● Please tell me about some of the interesting things you have been doing at work
recently.
Open questions can give you a lot of useful information but you may not get exactly
what you want, and answers can go into too much detail. For example, the question:
‘What has been the main feature of your work in recent months?’ may result in a one-
word reply – ‘marketing’. Or it may produce a lengthy explanation that takes up too
much time. Replies to open questions can get bogged down in too much detail, or
miss out some key points. They can come to a sudden halt or lose their way. You need
to ensure that you get all the facts, keep the flow going and maintain control.
Remember that you are in charge. Hence the value of probing, closed and the other
types of questions which are discussed below.
Probing questions
Probing questions are used to get further details or to ensure that you are getting all
the facts. You ask them when answers have been too generalized or when you suspect
that there may be some more relevant information that candidates have not disclosed.
A candidate may claim to have done something and it may be useful to find out more
about exactly what contribution was made. Poor interviewers tend to let general and
uninformative answers pass by without probing for further details, simply because
they are sticking rigidly to a predetermined list of open questions. Skilled inter-
viewers are able to flex their approach to ensure they get the facts while still keeping
control to ensure that the interview is completed on time. A candidate could say to
you something like: ‘I was involved in a major business process re-engineering exer-
cise that produced significant improvements in the flow of work through the factory.’
This statement conveys nothing about what the candidate actually did. You have to
ask probing questions such as:
● What was your precise role in this project?
● What exactly was the contribution you made to its success?
● What knowledge and skills were you able to apply to the project?
● Were you responsible for monitoring progress?
● Did you prepare the final recommendations in full or in part? If in part, which
part?
Selection interviewing ❚ 451
The following are some other examples of probing questions:
● You’ve informed me that you have had experience in…. Could you tell me more
about what you did?
● Could you describe in more detail the equipment you use?
Closed questions
Closed questions aim to clarify a point of fact. The expected reply will be an explicit
single word or brief sentence. In a sense, a closed question acts as a probe but
produces a succinct factual statement without going into detail. When you ask a
closed question you intend to find out:
● what the candidate has or has not done – ‘What did you do then?’
● why something took place – ‘Why did that happen?’
● when something took place – ‘When did that happen?’
● how something happened – ‘How did that situation arise?’
● where something happened – ‘Where were you at the time?’
● who took part – ‘Who else was involved?’
Hypothetical questions
Hypothetical questions are used in structured situational-based interviews to put a
situation to candidates and ask them how they would respond. They can be prepared
in advance to test how candidates would approach a typical problem. Such questions
may be phrased: ‘What do you think you would do if…?’ When such questions lie
well within the candidate’s expertise and experience, the answers can be illumi-
nating. But it could be unfair to ask candidates to say how they would deal with a
problem without knowing more about the context in which the problem arose. It can
also be argued that what candidates say they would do and what they actually do
could be quite different. Hypothetical questions can produce hypothetical answers.
The best data upon which judgements about candidates can be made are what they
have actually done or achieved. You need to find out if they have successfully dealt
with the sort of issues and problems they may be faced with if they join your organi-
zation.
Behavioural event questions
Behavioural event questions as used in behavioural-based structured interviews aim
to get candidates to tell you how they would behave in situations that have been
identified as critical to successful job performance. The assumption upon which such
452 ❚ People resourcing
questions are based is that past behaviour in dealing with or reacting to events is the
best predictor of future behaviour.
The following are some typical behavioural event questions:
● Could you give an instance when you persuaded others to take an unusual course
of action?
● Could you describe an occasion when you completed a project or task in the face
of great difficulties?
● Could you describe any contribution you have made as a member of a team in
achieving an unusually successful result?
● Could you give an instance when you took the lead in a difficult situation in
getting something worthwhile done?
Capability questions
Capability questions aim to establish what candidates know, the skills they possess
and use and their competencies – what they are capable of doing. They can be open,
probing or closed but they will always be focused as precisely as possible on the
contents of the person specification referring to knowledge, skills and competencies.
Capability questions are used in behavioural-based structured interviews.
Capability questions should therefore be explicit – focused on what candidates
must know and be able to do. Their purpose is to obtain from candidates evidence
that shows the extent to which they meet the specification in each of its key areas.
Because time is always limited, it is best to concentrate on the most important aspects
of the work. And it is always best to prepare the questions in advance.
The sort of capability questions you can ask are:
● What do you know about…?
● How did you gain this knowledge?
● What are the key skills you are expected to use in your work?
● How would your present employer rate the level of skill you have reached in…?
● Could you please tell me exactly what sort and how much experience you have
had in…?
● Could you tell me more about what you have actually been doing in this aspect of
your work?
● Can you give me any examples of the sort of work you have done that would
qualify you to do this job?
● What are the most typical problems you have to deal with?
● Would you tell me about any instances when you have had to deal with an unex-
pected problem or a crisis?
Selection interviewing ❚ 453
Questions about motivation
The degree to which candidates are motivated is a personal quality to which it is
usually necessary to give special attention if it is to be properly assessed. This is best
achieved by inference rather than direct questions. ‘How well are you motivated?’ is
a leading question that will usually produce the response: ‘Highly.’
You can make inferences about the level of motivation of candidates by asking
questions about:
● Their career – replies to such questions as ‘Why did you decide to move on from
there?’ can give an indication of the extent to which they have been well moti-
vated in progressing their career.
● Achievements – not just ‘What did you achieve?’ but ‘How did you achieve it?’
and ‘What difficulties did you overcome?’
● Triumphing over disadvantages – candidates who have done well in spite of an
unpromising upbringing and relatively poor education may be more highly moti-
vated than those with all the advantages that upbringing and education can
bestow, but who have not made good use of these advantages.
● Spare time interests – don’t accept at its face value a reply to a question about
spare time interests that, for example, reveals that a candidate collects stamps.
Find out if the candidate is well motivated enough to pursue the interest with
determination and to achieve something in the process. Simply sticking stamps in
an album is not evidence of motivation. Becoming a recognized expert on 19th-
century stamps issued in Mexico is.
Continuity questions
Continuity questions aim to keep the flow going in an interview and encourage
candidates to enlarge on what they have told you, within limits. Here are some
examples of continuity questions:
● What happened next?
● What did you do then?
● Can we talk about your next job?
● Can we move on now to…?
● Could you tell me more about…?
It has been said that to keep the conversation going during an interview the best thing
an interviewer can do is to make encouraging grunts at appropriate moments. There
454 ❚ People resourcing
is more to interviewing than that, but single words or phrases like ‘good’, ‘fine’,
‘that’s interesting’, ‘carry on’ can help things along.
Play-back questions
Play-back questions test your understanding of what candidates have said by putting
to them a statement of what it appears they have told you, and asking them if they
agree or disagree with your version. For example, you could say: ‘As I understand it,
you resigned from your last position because you disagreed with your boss on a
number of fundamental issues – have I got that right?’ The answer might simply be
yes to this closed question, in which case you might probe to find out more about
what happened. Or the candidate may reply ‘not exactly’, in which case you ask for
the full story.
Career questions
As mentioned earlier, questions about the career history of candidates can provide
some insight into motivation as well as establishing how they have progressed in
acquiring useful and relevant knowledge, skills and experience. You can ask such
questions as:
● What did you learn from that new job?
● What different skills had you to use when you were promoted?
● Why did you leave that job?
● What happened after you left that job?
● In what ways do you think this job will advance your career?
Focused work questions
These are questions designed to tell you more about particular aspects of the candi-
date’s work history, such as:
● How many days’ absence from work did you have last year?
● How many times were you late last year?
● Have you been absent from work for any medical reason not shown on your
application form?
● Have you a clean driving licence? (For those whose work will involve driving.)
Selection interviewing ❚ 455
Questions about outside interests
You should not spend much time asking people with work experience about their
outside interests or hobbies. It is seldom relevant, although, as mentioned earlier, it
can give some insight into how well motivated candidates are if the depth and vigour
with which the interest is pursued is explored.
Active interests and offices held at school, colleges or universities can, however,
provide some insight into the attributes of candidates in the absence of any work
history except, possibly, vacation jobs. If, for example, a student has been on a long
back-pack trip, some information can be obtained about the student’s initiative, moti-
vation and determination if the journey has been particularly adventurous.
Unhelpful questions
There are two types of questions that are unhelpful:
● Multiple questions such as ‘What skills do you use most frequently in your job? Are
they technical skills, leadership skills, team-working skills or communicating
skills?’ will only confuse candidates. You will probably get a partial or misleading
reply. Ask only one question at a time.
● Leading questions that indicate the reply you expect are also unhelpful. If you ask a
question such as: ‘That’s what you think, isn’t it?’ you will get the reply: ‘Yes, I
do.’ If you ask a question such as: ‘I take it that you don’t really believe that….?’,
you will get the reply: ‘No, I don’t.’ Neither of these replies will get you
anywhere.
Questions to be avoided
Avoid any questions that could be construed as being biased on the grounds of sex,
race or disability. Don’t ask:
● Who is going to look after the children? This is no concern of yours, although it is
reasonable to ask if the hours of work pose any problems.
● Are you planning to have any more children?
● Would it worry you being a member of an ethnic minority here?
● With your disability, do you think you can cope with the job?
Ten useful questions
The following are 10 useful questions from which you can select any that are particu-
larly relevant in an interview you are conducting:
456 ❚ People resourcing
● What are the most important aspects of your present job?
● What do you think have been your most notable achievements in your career to
date?
● What sort of problems have you successfully solved recently in your job?
● What have you learned from your present job?
● What has been your experience in…?
● What do you know about…?
● What is your approach to handling…?
● What particularly interests you in this job and why?
● Now you have heard more about the job, would you please tell me which aspects
of your experience are most relevant?
● Is there anything else about your career that hasn’t come out yet in this interview
but that you think I ought to hear?
SELECTION INTERVIEWING SKILLS
Establishing rapport
Establishing rapport means establishing a good relationship with candidates –
getting on their wavelength, putting them at ease, encouraging them to respond and
generally being friendly. This is not just a question of being ‘nice’ to candidates. If you
achieve rapport you are more likely to get them to talk freely about both their
strengths and their weaknesses.
Good rapport is created by the way in which you greet candidates, how you start
the interview and how you put your questions and respond to replies. Questions
should not be posed aggressively or imply that you are criticizing some aspect of the
candidate’s career. Some people like the idea of ‘stress’ interviews, but they are
always counter-productive. Candidates clam up and gain a negative impression of
you and the organization.
When responding to answers you should be appreciative, not critical: ‘Thank you,
that was very helpful; now can we go on to…?’, not ‘Well, that didn’t show you in a
good light, did it?’
Body language can also be important. If you maintain natural eye contact, avoid
slumping in your seat, nod and make encouraging comments when appropriate, you
will establish better rapport and get more out of the interview
Listening
If an interview is a conversation with a purpose, as it should be, listening skills are
important. You need not only to hear but also to understand what candidates are
Selection interviewing ❚ 457
saying. When interviewing, you must concentrate on what candidates are telling you.
Summarizing at regular intervals forces you to listen because you have to pay atten-
tion to what they have been saying in order to get the gist of their replies. If you play
back to candidates your understanding of what they have told you for them to
confirm or amend, it will ensure that you have fully comprehended the messages
they are delivering.
Maintaining continuity
So far as possible, link your questions to a candidate’s last reply so that the interview
progresses logically and a cumulative set of data is built up. You can put bridging
questions to candidates such as: ‘Thank you, that was an interesting summary of
what you have been doing in that aspect of your work. Now, could you tell me some-
thing about your other key responsibilities?’
Keeping control
You want candidates to talk, but not too much. When preparing for the interview, you
should have drawn up an agenda and you must try to stick to it. Don’t cut candidates
short too brutally but say something like: ‘Thank you, I’ve got a good picture of that,
now what about…?’
Focus on specifics as much as you can. If candidates ramble on a bit, ask a pointed
question (a ‘probe’ question) that asks for an example illustrating the particular
aspect of their work that you are considering.
Note taking
You won’t remember everything that candidates tell you. It is useful to take notes of
the key points they make, discreetly, but not surreptitiously. However, don’t put
candidates off by frowning or tut-tutting when you are making a negative note.
It may be helpful to ask candidates if they would mind if you take notes. They can’t
really object but will appreciate the fact that they have been asked.
COMING TO A CONCLUSION
It is essential not to be beguiled by a pleasant, articulate and confident interviewee
who is in fact surface without substance in the shape of a good track record. Beware
of the ‘halo’ effect that occurs when one or two good points are seized upon, leading
to the neglect of negative indicators. The opposite ‘horns’ effect should also be
avoided.
458 ❚ People resourcing
Individual candidates should be assessed against the criteria. These could be set
under the headings of competence/skills, qualifications, experience, and overall suit-
ability. Ratings can be given against each heading, for example: very acceptable,
acceptable, marginally acceptable, unacceptable. The person specification should
indicate which of the requirements are essential and which are only desirable.
Clearly, to be considered for the job, candidates have to be acceptable or, perhaps
stretching a point, marginally acceptable, in all the essential requirements. Next,
compare your assessment of each of the candidates against one another. You can then
make a conclusion on those preferred by reference to their assessments under each
heading.
In the end, your decision between qualified candidates may well be judgemental.
There may be one outstanding candidate, but quite often there are two or three. In
these circumstances you have to come to a balanced view on which one is more likely
to fit the job and the organization and have potential for a long-term career, if thi
is possible. Don’t, however, settle for second best in desperation. It is better to try
again.
Remember to make and keep notes of the reasons for your choice and why candi-
dates have been rejected. These together with the applications should be kept for at
least six months just in case your decision is challenged as being discriminatory.
DOS AND DON’TS OF SELECTION INTERVIEWING
To conclude, here is a summary of the dos and don’ts of selection interviewing:
Do
● give yourself sufficient time;
● plan the interview so you can structure it properly;
● create the right atmosphere;
● establish an easy and informal relationship – start with open questions;
● encourage the candidate to talk;
● cover the ground as planned, ensuring that you complete a prepared agenda and
maintain continuity;
● analyse the candidate’s career to reveal strengths, weaknesses and patterns of
interest;
● ask clear, unambiguous questions;
● get examples and instances of the successful application of knowledge, skills and
the effective use of capabilities;
Selection interviewing ❚ 459
● make judgements on the basis of the factual information you have obtained about
candidates’ experience and attributes in relation to the person specification;
● keep control over the content and timing of the interview.
Don’t
● attempt too many interviews in a row;
● fall into the halo or horns effect trap;
● start the interview unprepared;
● plunge too quickly into demanding (probe) questions;
● ask multiple or leading questions;
● pay too much attention to isolated strengths or weaknesses;
● allow candidates to gloss over important facts;
● talk too much or allow candidates to ramble on;
● allow your prejudices to get the better of your capacity to make objective judge-
ments.
460 ❚ People resourcing
Selection tests
Selection tests are used to provide more valid and reliable evidence of levels of intel-
ligence, personality characteristics, abilities, aptitudes and attainments than can be
obtained from an interview. This chapter is mainly concerned with psychological
tests of intelligence or personality as defined below, but it also refers to the principal
tests of ability etc that can be used.
PSYCHOLOGICAL TESTS: DEFINITION
As defined by Smith and Robertson (1986), a psychological test is:
A carefully chosen, systematic and standardised procedure for evolving a sample of
responses from candidates which can be used to assess one or more of their psycholog-
ical characteristics with those of a representative sample of an appropriate population.
PURPOSE OF PSYCHOLOGICAL TESTS
Psychological tests are measuring instruments, which is why they are often referred
to as psychometric tests. Psychometric literally means ‘mental measurement’.
The purpose of a psychological test is to provide an objective means of measuring
29
individual abilities or characteristics. They are used to enable selectors to gain a
greater understanding of individuals so that they can predict the extent to which they
will be successful in a job.
CHARACTERISTICS OF A GOOD TEST
A good test is one that provides valid data that enable reliable predictions of behav-
iour to be made, and therefore assist in the process of making objective and reasoned
decisions when selecting people for jobs. It will be based on thorough research that
has produced standardized criteria that have been derived by using the same
measure to test a number of representative people to produce a set of ‘norms’. The
test should be capable of being objectively scored by reference to the normal or
average performance of the group.
The characteristics of a good test are:
● It is a sensitive measuring instrument that discriminates well between subjects.
● It has been standardized on a representative and sizeable sample of the population
for which it is intended so that any individual’s score can be interpreted in rela-
tion to that of others.
● It is reliable in the sense that it always measures the same thing. A test aimed at
measuring a particular characteristic, such as intelligence, should measure the
same characteristic when applied to different people at the same or a different
time, or to the same person at different times.
● It is valid in the sense that it measures the characteristic that the test is intended to
measure. Thus, an intelligence test should measure intelligence (however
defined) and not simply verbal facility. A test meant to predict success in a job or
in passing examinations should produce reasonably convincing (statistically
significant) predictions.
There are five types of validity:
● Predictive validity – the extent to which the test correctly predicts future behaviour.
To establish predictive validity it is necessary to conduct extensive research over a
period of time. It is also necessary to have accurate measures of performance so
that the prediction can be compared with actual behaviour.
● Concurrent validity – the extent to which a test score differentiates individuals in
relation to a criterion or standard of performance external to the test. This means
comparing the test scores of high and low performances as indicated by the
criteria and establishing the degree to which the test indicates who should fit into
the high or low performance groups.
462 ❚ People resourcing
● Content validity – the extent to which the test is clearly related to the characteristics
of the job or role for which it is being used as a measuring instrument.
● Face validity – the extent to which it is felt that the test ‘looks’ right, ie is measuring
what it is supposed to measure.
● Construct validity – the extent to which the test measures a particular construct or
characteristic. As Edenborough (1994) suggests, construct validity is in effect
concerned with looking at the test itself. If it is meant to measure numerical
reasoning, is that what it measures?
Measuring validity
A criterion-related approach is used to assess validity. This means selecting criteria
against which the validity of the test can be measured. These criteria must reflect
‘true’ performance at work as accurately as possible. This may be difficult and Smith
and Robertson (1986) emphasize that a single criterion is inadequate. Multiple criteria
should be used. The extent to which criteria can be contaminated by other factors
should also be considered and it should be remembered that criteria are dynamic –
they will change over time.
Validity can be expressed as a coefficient of correlation in which 1.0 would equal
perfect correlation between test results and subsequent behaviour, while 0.0 would
equal no relationship between the test and performance. The following rule of thumb
guide on whether a validity coefficient is big enough was produced by Smith (1984):
over 0.5 excellent
0.40-0.49 good
0.30-0.39 acceptable
less than 0.30 poor
On this basis, only ability tests, biodata and (according to Smith’s figures) personality
questionnaires reach acceptable levels of validity.
TYPES OF TEST
The main types of selection test as described below are intelligence, personality,
ability, aptitude and attainment tests.
A distinction can be made between psychometric tests and psychometric question-
naires. As explained by Toplis et al (1991), a psychometric test such as one on mental
ability has correct answers so that the higher the score, the better the performance.
Psychometric questionnaires such as personality tests assess habitual performance
Selection tests ❚ 463
and measure personality characteristics, interests, values or behaviour. With ques-
tionnaires, a high or low score signifies the extent to which a person has a certain
quality and the appropriateness of the replies depends on the particular qualities
required in the job to be filled.
Intelligence tests
Tests of intelligence such as Raven’s Progressive Matrices measure general intelli-
gence (termed ‘g’ by Spearman (1927), one of the pioneers of intelligence testing).
Intelligence is defined by Toplis et al (1991) as ‘the capacity for abstract thinking and
reasoning’. The difficulty with intelligence tests is that they have to be based on a
theory of what constitutes intelligence and then have to derive a series of verbal and
non-verbal instruments for measuring the different factors or constituents of intelli-
gence. But intelligence is a highly complex concept and the variety of theories about
intelligence and the consequent variations in the test instruments or batteries avail-
able make the choice of an intelligence test a difficult one.
For general selection purposes, an intelligence test that can be administered to
a group of candidates is the best, especially if it has been properly validated, and
it is possible to relate test scores to ‘norms’ in such a way as to indicate how the
individual taking the test compares with the rest of the population, in general or in a
specific area.
Personality tests
Personality tests attempt to assess the personality of candidates in order to make
predictions about their likely behaviour in a role. Personality is an all-embracing and
imprecise term that refers to the behaviour of individuals and the way it is organized
and coordinated when they interact with the environment. There are many different
theories of personality and, consequently, many different types of personality tests.
These include self-report personality questionnaires and other questionnaires that
measure interests, values or work behaviour.
One of the most generally accepted ways of classifying personality is the five-factor
model. As summarized by McCrae and Costa (1989), this model defines the key
personality characteristics. These ‘big five’, as Roberts (1997) calls them, are:
● extraversion/introversion – gregarious, outgoing, assertive, talkative and active
(extraversion); or reserved, inward-looking, diffident, quiet, restrained (introver-
sion);
● emotional stability – resilient, independent, confident, relaxed; or apprehensive,
dependent, under-confident, tense;
464 ❚ People resourcing
● agreeableness – courteous, cooperative, likeable, tolerant; or rude, uncooperative,
hostile, intolerant;
● conscientiousness – hard-working, persevering, careful, reliable; or lazy, dilettante,
careless, expedient;
● openness to experience – curious, imaginative, willingness to learn, broad-minded;
or blinkered, unimaginative, complacent, narrow-minded.
Research cited by Roberts (1997) has indicated that these factors are valid predictors
of work performance and that one factor in particular, ‘conscientiousness’, was very
effective.
Self-report personality questionnaires are the ones most commonly used. They
usually adopt a ‘trait’ approach, defining a trait as a fairly independent but enduring
characteristic of behaviour that all people display but to differing degrees. Trait theo-
rists identify examples of common behaviour, devise scales to measure these, and
then obtain ratings on these behaviours by people who know each other well. These
observations are analysed statistically, using the factor analysis technique to identify
distinct traits and to indicate how associated groups of traits might be grouped
loosely into ‘personality types’.
‘Interest’ questionnaires are sometimes used to supplement personality tests. They
assess the preferences of respondents for particular types of occupation and are there-
fore most applicable to vocational guidance, but can be helpful when selecting
apprentices and trainees.
‘Value’ questionnaires attempt to assess beliefs about what is ‘desirable or good’ or
what is ‘undesirable or bad’. The questionnaires measure the relative prominence of
such values as conformity, independence, achievement, decisiveness, orderliness and
goal-orientation.
Specific work behaviour questionnaires cover behaviours such as leadership or
selling.
Personality questionnaires were shown to have the low validity coefficient of 0.15
on the basis of research conducted by Schmitt et al (1984). But as Saville and Sik
(1992) point out, this was based on a rag-bag of tests, many developed for clinical
use and some using ‘projective’ techniques such as the Rorschach inkblots test, the
interpretation of which relies on a clinician’s judgement and is therefore quite out of
place in a modern selection procedure. Smith’s (1988) studies based on modern
self-report questionnaires revealed an average validity coefficient of 0.39, which is
reasonably high.
A vigorous attack was launched on personality tests by Blinkorn and Johnson
(1990). They commented: ‘We see precious little evidence of personality tests
predicting job performance.’ But Fletcher (1991) responded: ‘Like any other selection
Selection tests ❚ 465
procedure, they (psychometric tests) can be used well or badly. But it would be
foolish to dismiss all the evidence of the value of personality assessment in selection
on the basis of some misuse. Certainly the majority of applied psychologists feel the
balance of the evidence supports the use of personality inventories.’ Personality tests
can provide interesting supplementary information about candidates that is free from
the biased reactions that frequently occur in face-to-face interviews. But they have to
be used with great care. The tests should have been developed by a reputable
psychologist or test agency on the basis of extensive research and field testing and
they must meet the specific needs of the user. Advice should be sought from a
member of the British Psychological Society on what tests are likely to be appropriate.
Ability tests
Ability tests measure job-related characteristics such as number, verbal, perceptual or
mechanical ability.
Aptitude tests
Aptitude tests are job-specific tests that are designed to predict the potential an indi-
vidual has to perform tasks within a job. They can cover such areas as clerical apti-
tude, numerical aptitude, mechanical aptitude and dexterity.
Aptitude tests should be properly validated. The usual procedure is to determine
the aptitudes required by means of job and skills analysis. A standard test or a test
battery is then obtained from a test agency. Alternatively, a special test is devised by
or for the organization. The test is then given to employees already working on the
job and the results compared with a criterion, usually managers’ or team leaders’
ratings. If the correlation between test and criterion is sufficiently high, the test is then
given to applicants. To validate the test further, a follow-up study of the job perfor-
mance of the applicants selected by the test is usually carried out. This is a lengthy
procedure, but without it no real confidence can be attached to the results of any apti-
tude test. Many do-it-yourself tests are worse than useless because they have not been
properly validated.
Attainment tests
Attainment tests measure abilities or skills that have already been acquired by
training or experience. A typing test is the most typical example. It is easy to find out
how many words a minute a typist can type and compare that with the standard
required for the job.
466 ❚ People resourcing
INTERPRETING TEST RESULTS
The two main methods of interpreting test results are the use of norms and the
normal curve.
Norms
Tests can be interpreted in terms of how an individual’s results compare with the
scores achieved by a group on whom the task was standardized – the norm or refer-
ence group. A normative score is read from a norms table. The most common scale
indicates the proportion of the reference who scored less than the individual. Thus if
someone scored at the 70th percentile in a test, that person’s score would be better
than 65 per cent of the reference group.
The normal curve
The normal curve describes the relationship between a set of observations and
measures and the frequency of their occurrence. It indicates, as illustrated in
Figure 29.1, that on many things that can be measured on a scale, a few people will
produce extremely high or low scores and there will be a large proportion of people
in the middle.
The most important characteristic of the normal curve is that it is symmetrical –
there are an equal number of cases on either side of the mean, the central axis. The
normal curve is a way of expressing how scores will typically be distributed; for
example, that 60 per cent of the population are likely to get scores between x and y,
15 per cent are likely to get scores below x and 15 per cent are likely to get more
than y.
Selection tests ❚ 467
60 100 140
Figure 29.1 A normal curve
CHOOSING TESTS
It is essential to choose tests that meet the four criteria of sensitivity, standardization,
reliability and validity. It is very difficult to achieve the standards required if an
organization tries to develop its own test batteries unless it employs a qualified
psychologist or obtains professional advice from a member of the British
Psychological Society. This organization, with the support of the reputable test
suppliers, exercises rigorous control over who can use what tests and the standard of
training required and given. Particular care should be taken when selecting person-
ality tests – there are a lot of charlatans about.
Do-it-yourself tests are always suspect unless they have been properly validated
and realistic norms have been established. Generally speaking, it is best to avoid
using them.
THE USE OF TESTS IN A SELECTION PROCEDURE
Tests are often used as part of a selection procedure for occupations where a large
number of recruits are required, and where it is not possible to rely entirely on
examination results or information about previous experience as the basis for predict-
ing future performance. In these circumstances it is economical to develop and
administer the tests, and a sufficient number of cases can be built up for the essential
validation exercise. Tests usually form part of an assessment centre procedure.
Intelligence tests are particularly helpful in situations where intelligence is a key
factor, but there is no other reliable method of measuring it. It may, incidentally, be as
important to use an intelligence test to keep out applicants who are too intelligent for
the job as to use one to guarantee a minimal level of intelligence.
Aptitude and attainment tests are most useful for jobs where specific and measur-
able skills are required, such as typing or computer programming. Personality tests
are potentially of greatest value in jobs such as selling where ‘personality’ is impor-
tant, and where it is not too difficult to obtain quantifiable criteria for validation
purposes.
It is essential to evaluate all tests by comparing the results at the interview stage
with later achievements. To be statistically significant, these evaluations should be
carried out over a reasonable period of time and cover as large a number of candi-
dates as possible.
In some situations a battery of tests may be used, including various types of intelli-
gence, aptitude and personality tests. These may be a standard battery supplied by a
test agency, or a custom-built battery may be developed. The biggest pitfall to avoid
468 ❚ People resourcing
is adding extra tests just for the sake of it, without ensuring that they make a proper
contribution to the success of the predictions for which the battery is being used.
The six criteria for the use of psychological tests produced by the IPD (1997a) are:
1. Everyone responsible for the application of tests including evaluation, interpreta-
tion and feedback should be trained at least to the level of competence recom-
mended by the British Psychological Society.
2. Potential test users should satisfy themselves that it is appropriate to use tests at
all before incorporating tests into their decision-making processes.
3. Users must satisfy themselves that any tests they decide to use actively measure
factors which are directly relevant to the employment situation.
4. Users must satisfy themselves that all tests they use should have been rigorously
developed and that claims about their reliability, validity and effectiveness are
supported by statistical evidence (The Data Protection Act 1998 is relevant here. If
candidates are selected on the basis of a test they have the right to know the rationale for
the selection decision.)
5. Care must be taken to provide equality of opportunity among all individuals
required to take tests.
6. The results of single tests should not be used as the sole basis for decision-
making. This is particularly relevant with regard to personality tests.
Selection tests ❚ 469
Introduction to the organization
It is important to ensure that care is taken over introducing people to the organization
through effective induction arrangements as described in this chapter.
INDUCTION DEFINED
Induction is the process of receiving and welcoming employees when they first join a
company and giving them the basic information they need to settle down quickly and
happily and start work. Induction has four aims:
● to smooth the preliminary stages when everything is likely to be strange and
unfamiliar to the starter;
● to establish quickly a favourable attitude to the company in the mind of the new
employee so that he or she is more likely to stay;
● to obtain effective output from the new employee in the shortest possible time;
● to reduce the likelihood of the employee leaving quickly.
30
WHY TAKING CARE ABOUT INDUCTION IS
IMPORTANT
Induction is important for the reasons given below.
Reducing the cost and inconvenience of early leavers
As pointed out by Fowler (1996), employees are far more likely to resign during their
first months after joining the organization. The costs can include:
● recruitment costs of replacement;
● induction costs (training etc);
● costs of temporary agency replacement;
● cost of extra supervision and error correction;
● gap between the employee’s value to the company and the cost of the employee’s
pay and benefits.
These costs can be considerable. The cost for a professional employee could be
75 per cent of annual salary. For a support worker the cost could easily reach
50 per cent of pay. If 15 out of 100 staff paid an average of £12,500 a year leave
during the year, the total cost could amount to £90,000 – 7.5 per cent of the payroll. It
is worth making an effort to reduce that cost. First impressions are important, as
are the impact of the first four weeks of employment. Giving more attention to
induction pays off.
Increasing commitment
A committed employee is one who identifies with the organization, wants to
stay with it and is prepared to work hard on behalf of the organization. The first step
in achieving commitment is to present the organization as one that is worth working
for and to ensure that this first impression is reinforced during the first weeks of
employment.
Clarifying the psychological contract
The psychological contract, as described in Chapter 16, consists of implicit, unwritten
beliefs and assumptions about how employees are expected to behave and what
responses they can expect from their employer. It is concerned with norms, values
and attitudes. The psychological contract provides the basis for the employment
472 ❚ People resourcing
relationship, and the more this can be clarified from the outset, the better. Induction
arrangements can indicate what the organization expects in terms of behavioural
norms and the values that employees should uphold. Induction provides an
opportunity to inform people of ‘the way things are done around here’ so that
misapprehensions are reduced even if they cannot be eliminated.
Accelerating progress up the learning curve
New employees will be on a learning curve – they will take time to reach the required
level of performance. Clearly, the length of the learning curve and rates of learning
vary, but it is important to provide for it to take place in a planned and systematic
manner from the first day to maximize individual contributions as quickly as
possible.
Socialization
New employees are likely to settle in more quickly and enjoy working for the
organization if the process of socialization takes place smoothly. The social aspects of
work – relationships with colleagues – are very important for many people. The
extent to which employees can directly influence the quality of socialization may
often be limited, but it is a feature of introduction to the organization to which they
should pay attention, as far as this is possible, during the induction arrangements
described below, which are concerned with reception, documentation, initial briefing,
introduction to the workplace, formal induction courses and formal and informal
training activities.
RECEPTION
Most people suffer from some feelings of trepidation when they start a new job.
However outwardly confident they may appear, they may well be asking themselves
such questions as: What will the company be like? How will my boss behave to me?
Will I get on with the other workers? Will I be able to do the job?
These questions may not be answered immediately, but at least general fears may
be alleviated by ensuring that the first contacts are friendly and helpful.
The following checklist for reception is recommended by Fowler (1996):
● Ensure that the person whom the starter first meets (ie the receptionist, personnel
assistant or supervisor) knows of their pending arrival and what to do next.
Introduction to the organization ❚ 473
● Set a reporting time, which will avoid the risk of the starter turning up before the
reception or office staff arrive.
● Train reception staff in the need for friendly and efficient helpfulness towards
new starters.
● If the new starter has to go to another location immediately after reporting,
provide a guide, unless the route to the other location is very straightforward.
● Avoid keeping the new starter waiting; steady, unhurried, guided activity is an
excellent antidote to first-day nerves.
DOCUMENTATION
The new employee will be asked to hand over the P45 income tax form from the
previous employer. A variety of documents may then be issued to employees,
including safety rules and safety literature, a company rule book containing details of
disciplinary and grievance procedures and an employee handbook as described
below.
The employee handbook
An employee handbook is useful for this purpose. It need not be too glossy, but it
should convey clearly and simply what new staff need to know under the following
headings:
● a brief description of the company – its history, products, organization and
management;
● basic conditions of employment – hours of work, holidays, pension scheme,
insurance;
● pay – scales, when paid and how, deductions, queries;
● sickness – notification of absence, certificates, pay;
● leave of absence;
● company rules;
● disciplinary procedure;
● capability procedure;
● grievance procedure;
● promotion procedure;
● union and joint consultation arrangements;
● education and training facilities;
● health and safety arrangements;
● medical and first-aid facilities;
474 ❚ People resourcing
● restaurant and canteen facilities;
● social and welfare arrangements;
● telephone calls and correspondence;
● rules for using e-mail;
● travelling and subsistence expenses.
If the organization is not large enough to justify a printed handbook, the least that can
be done is to prepare a typed summary of this information.
COMPANY INDUCTION – INITIAL BRIEFING
Company induction procedures, however, should not rely on the printed word. The
member of the HR department or other individual who is looking after new
employees should run through the main points with each individual or, when larger
numbers are being taken on, with groups of people. In this way, a more personal
touch is provided and queries can be answered.
When the initial briefing has been completed, new employees should be taken to
their place of work and introduced to their manager or team leader for the depart-
mental induction programme. Alternatively, they may go straight to a training school
and join the department later.
INTRODUCTION TO THE WORKPLACE
New starters will be concerned about who they are going to work for (their
immediate manager or team leader), who they are going to work with, what work
they are going to do on their first day, and the geographical layout of their place of
work (location of entrances, exits, lavatories, restrooms and the canteen).
Some of this information may be provided by a member of the HR department, or
an assistant in the new employee’s place of work. But the most important source of
information is the immediate manager, supervisor or team leader.
The departmental induction programme should, wherever possible, start with the
departmental manager, not the immediate team leader. The manager may give only a
general welcome and a brief description of the work of the department before
handing new employees over to their team leaders for the more detailed induction.
But it is important for the manager to be involved at this stage so that he or she is not
seen as a remote figure by the new employee. And at least this means that the starter
will not be simply a name or a number to the manager.
Introduction to the organization ❚ 475
The detailed induction is probably best carried out by the immediate team leader,
who should have five main aims:
● to put the new employee at ease;
● to interest the employee in the job and the organization;
● to provide basic information about working arrangements;
● to indicate the standards of performance and behaviour expected from the
employee;
● to tell the employee about training arrangements and how he or she can progress
in the company.
The team leader should introduce new starters to their fellow team members. It is
best to get one member of the team to act as a guide or ‘starter’s friend’. As Fowler
suggests, there is much to be said for these initial guides to be people who have not
been long with the organization. As relative newcomers they are likely to remember
all the small points that were a source of worry to them when they started work, and
so help new employees to settle in quickly.
FORMAL INDUCTION COURSES
Reason for
Formal induction courses can provide for recruits to be assembled in groups so that a
number of people can be given consistent and comprehensive information at the
same time, which may not be forthcoming if reliance is placed solely on supervisors.
A formal course is an opportunity to deliver messages about the organization, its
products and services, its mission and values, using a range of media such as videos
and other visual aids that would not be available within departments. But formal
induction courses cannot replace informal induction arrangements at the workplace,
where the most important need – settling people well – can best be satisfied.
Arrangements
Decisions will have to be made about who attends and when. It is normal to mix
people from different departments but less common to have people from widely
different levels on the same course. In practice, managers and senior professional
staff are often dealt with individually.
Ideally, induction courses should take place as soon as possible after starting. If
there are sufficient new employees available, this could be half the first day or a half
476 ❚ People resourcing
or whole day during the first week. If a lot of information is to be conveyed, supple-
mentary half or one-day courses may be held later. However, the course may have to
be delayed until sufficient numbers of new starters are available. If such delays are
unavoidable, it is essential to ensure that key information is provided on the first day
by personnel and the departmental supervisor. Organizations with branches or a
number of different locations often hold formal induction courses at headquarters,
which helps employees to feel that they are part of the total business and gives an
opportunity to convey information about the role of head office.
Content
The content of formal induction courses may be selected according to the needs of the
organization from the following list of subject areas:
● information about the organization – its products/services, structure, mission and
core values;
● learning arrangements and opportunities – formal training, self-managed learning,
personal development plans;
● performance management processes – how they work and the parts people play;
● health and safety – occupational health, prevention of injuries and accidents,
protective clothing, basic safety rules;
● conditions of service – hours, holidays, leave, sick pay arrangements, maternity/
paternity leave;
● pay and benefits – arrangements for paying salaries or wages, the pay structure,
allowances, details of performance, competence- or skill-based pay schemes,
details of profit sharing, gainsharing or share ownership arrangements, pension
and life or medical insurance schemes;
● policies, procedures and working arrangements – equal opportunities policies, rules
regarding sexual and racial harassment and bullying, disciplinary and grievance
procedures, no-smoking arrangements;
● trade unions and employee involvement – trade union membership and recognition,
consultative systems, agreements, suggestion schemes.
ON-THE-JOB INDUCTION TRAINING
Most new starters other than those on formal training schemes will learn on the job,
although this may be supplemented with special off-the-job courses to develop
particular skills or knowledge. On-the-job training can be haphazard, inefficient and
wasteful. A planned, systematic approach is very desirable. This can incorporate:
Introduction to the organization ❚ 477
● job or skills analysis to prepare a learning specification;
● an initial assessment of what the new starter needs to learn;
● the use of designated colleagues to act as guides and mentors – these individuals
should be trained in how to carry out this role;
● coaching by team leaders or specially appointed and trained departmental
trainers;
● special assignments.
These on-the-job arrangements can be supplemented by self-managed learning
arrangements, e-learning and by providing advice on learning opportunities.
478 ❚ People resourcing
Release from the organization
GENERAL CONSIDERATIONS
The employment relationship may be ended voluntarily by someone moving else-
where. Or it may finish at the end of a career on retirement. Increasingly, however,
people are having to go involuntarily. Organizations are becoming mean as well as
lean. They are terminating the relationship through redundancy and they are tight-
ening up disciplinary procedures to handle not only cases of misconduct but also
those of incapability – as judged by the employer. Resourcing policies and practices
concerning release from the organization have also to cover voluntary turnover
and retirement.
Causes of redundancy
Redundancy, like the poor which it helps to create, has always been with us. At one
time, however, it was mainly a result of adverse trading conditions, especially during
times of recession. This is, of course, still a major cause of redundancy, exacerbated by
the pressures of global competition and international recession. But the drive for
competitive advantage has forced organizations to ‘take cost out of the business’ – a
euphemism for getting rid of people, employment costs being the ones on which
companies focus, as they are usually the largest element in their cost structures. The
result has been delayering (eliminating what are deemed to be unnecessary layers of
31
management and supervision) and ‘downsizing’ (another euphemism) or even
‘right-sizing’ (a yet more egregious euphemism).
The introduction of new technology has contributed hugely to the reduction in the
number of semi-skilled or unskilled people in offices and on the shop floor. But the
thrust for productivity (more from less) and added value (increasing the income
derived from the expenditure on people) has led to more use of such indices as added
value per £ of employment costs to measure business performance with regard to the
utilization of its ‘human resources’ (the use of human resources in this connection
implies a measure of exploitation). Business process re-engineering techniques are
deployed as instruments for downsizing. Benchmarking to establish which organiza-
tions are in fact doing more with less (and if so how they do it) is another popular
way of preparing the case for ‘downsizing’.
Setting higher performance standards
The pressure for improved performance to meet more intense global competition
explains why many organizations are setting higher standards for employees and are
not retaining those who do not meet those standards. This may be done through
disciplinary procedures, but performance management processes are being used to
identify under-performers. Properly administered, such processes will emphasize
positive improvement and development plans but they will inevitably highlight
weaknesses and, if these are not overcome, disciplinary proceedings may be invoked.
Voluntary release
Of course, people also leave organizations voluntarily to further their careers, get
more money, move away from the district or because they are fed up with the way
they feel they have been treated. They may also take early retirement (although this is
sometimes involuntary) or volunteer for redundancy (under pressure or because they
are being rewarded financially for doing so).
Managing organizational release – the role of the HR function
The HR function is usually given the task of managing organizational release and, in
its involuntary form, this is perhaps the most distasteful, onerous and stressful of all
the activities with which HR people get involved. In effect, the function is being
asked to go into reverse. Having spent a lot of positive effort on employees’
resourcing and development, it is now being placed in what appears to be an entirely
negative position. HR people are indeed acting, however unwillingly, as the agents of
the management who made the ‘downsizing’ decisions or want to ‘let someone go’
480 ❚ People resourcing
(there are more euphemisms in this area of management than the rest of the areas put
together). Being placed in this often invidious position means that there are ethical
and professional considerations to be taken into account, as discussed below.
A more positive aspect of the function’s involvement in organizational release is
the part HR people can play in easing retirement and analysing the reasons given by
employees for leaving the organization so that action can be taken to correct organi-
zational shortcomings.
Ethical and professional considerations
HR professionals may have no choice about taking part in a ‘downsizing’ exercise –
that is, if they wish to remain with the organization. But they can and should make an
important contribution to managing the process in order to minimize the distress and
trauma that badly handled redundancies can create, or the distress and bad feeling
that unfair or uncouth disciplinary practices can engender. They can press for policies
and actions that will minimize, even if they cannot eliminate, involuntary redun-
dancy. They can emphasize the need to handle redundancies sensitively, advising line
managers on the approach they adopt, helping them to communicate the decision to
employees, advising generally on communication within and outside the organiza-
tion and laying on counselling and outplacement services. Professionally, they should
ensure that there are proper redundancy procedures (including those relating to
consultation) which are in line with codes of practice and legal requirements, and
they must see that these practices are followed.
Similarly, a professional approach to discipline means that HR specialists should
ensure that there are disciplinary procedures which conform to codes of practice and
take into account legal implications. They have to communicate these procedures to
line managers, provide training in how they are applied and advise on their use.
Ethically, personnel professionals should do their best to see that people are treated
fairly in accordance with the principles of natural justice.
Career dynamics
Career dynamics is the term used to describe how careers progress within organiza-
tions or over a working life. As long ago as 1984 Charles Handy forecast that
many more people would not be working in organizations. Instead there would be
an increase in the number of outworkers and subcontractors facilitated by informa-
tion technology. He also predicted that there would be more requirements for special-
ists and professionals (knowledge workers) within organizations. In later books
(eg The Empty Raincoat, 1994) he developed his concept of a portfolio career – people
changing their careers several times during their working lives, either because
Release from the organization ❚ 481
they have been forced to leave their jobs or because they have seized new opportuni-
ties.
The national culture has changed too. High levels of unemployment seem set to
continue, more people are working for themselves (often because they have to) and
short-term contracts are becoming more common, especially in the public sector.
Some commentators believe that organizations are no longer in the business of
providing ‘life-long careers’ as they slim down, delayer and rely on a small core of
workers. Clearly, this is taking place in some companies, but employees do not all
necessarily see it this way. The IPD 1995 survey established that 46 per cent of their
respondents viewed their current job as a long-term one in which they intended to
stay. However, 16 per cent saw their present job as part of a career or profession that
would probably take them to different companies and 15 per cent saw their job as one
they would leave as it was not part of their career.
Organizational release activities
Against this background, organizational release activities as described in this
chapter deal with redundancy, outplacement, dismissal, voluntary turnover and
retirement.
REDUNDANCY
‘Downsizing’ is one of the most demanding areas of people management with
which HR professionals can become involved. Their responsibilities, as discussed
below, are to:
● plan ahead to achieve downsizing without involuntary redundancy;
● advise on and implement other methods of reducing numbers or avoiding redun-
dancy;
● encourage voluntary redundancy if other methods fail;
● develop and apply a proper redundancy procedure;
● deal with payment arrangements for releasing employees;
● advise on methods of handling redundancies and take part as necessary to ensure
that they are well managed.
HR specialists should also be involved in organizing outplacement services as
described in the next section of this chapter.
482 ❚ People resourcing
Plan ahead
Planning ahead means anticipating future reductions in people needs and allowing
natural wastage to take effect. A forecast is needed of the amount by which the work-
force has to be reduced and the likely losses through employee turnover. Recruitment
can then be frozen at the right moment to allow the surplus to be absorbed by
wastage.
The problem is that forecasts are often difficult to make, and in periods of high
unemployment, natural wastage rates are likely to be reduced. It is possible therefore
to overestimate the extent to which they will achieve the required reduction in
numbers. It is best to be pessimistic about the time it will take to absorb future losses
and apply the freeze earlier rather than later.
Ideally, steps should be taken to transfer people to other, more secure jobs and
retrain them where possible.
Use other methods to avoid redundancy
The other methods that can be used to avoid or at least minimize redundancy
include, in order or severity:
● calling in outside work;
● withdrawing all subcontracted labour;
● reducing or preferably eliminating overtime;
● developing worksharing: two people doing one job on alternate days or splitting
the day between them;
● reducing the number of part-timers, remembering that they also have employ-
ment rights;
● temporary lay-offs.
Voluntary redundancy
Asking for volunteers – with a suitable pay-off – is one way of relieving the number
of compulsory redundancies. The amount needed to persuade people to go is a
matter of judgement. It clearly has to be more than the statutory minimum, although
one inducement for employees to leave early may be the belief that they will get
another job more easily than if they hang on until the last moment. Help can be
provided to place them elsewhere.
One of the disadvantages of voluntary redundancy is that the wrong people might
go, ie good workers who are best able to find other work. It is sometimes necessary to
go into reverse and offer them a special loyalty bonus if they agree to stay on.
Release from the organization ❚ 483
Outplacement
Outplacement is the process of helping redundant employees to find other work or
start new careers. It may involve counselling, which can be provided by firms who
specialize in this area.
Redundancy procedure
If you are forced to resort to redundancy, the problems will be reduced if there is an
established procedure to follow. This procedure should have three aims:
● to treat employees as fairly as possible;
● to reduce hardship as much as possible;
● to protect management’s ability to run the business effectively.
These aims are not always compatible. Management will want to retain its key and
more effective workers. Trade unions, on the other hand, may want to adopt the
principle of last in, first out, irrespective of the value of each employee to the
company. An example of a procedure is given in Chapter 58.
Handling redundancy
The first step is to ensure that the redundancy selection policy has been applied fairly.
It is also necessary to make certain that the legal requirements for consultation have
been met. The information to be presented at any consultative meetings will need to
cover the reasons for the redundancy, what steps the company has taken or will take
to minimize the problem and the redundancy pay arrangements. An indication
should also be given of the time scale. The basis for selecting people for redundancy
as set out in the redundancy policy should be confirmed.
It will then be necessary to make a general announcement if it is a large-scale
redundancy or inform a unit or department if it is on a smaller scale. It is best
if the announcement is made in person by an executive or manager who is known
to the individuals concerned. It should let everyone know about the difficulties
the organization has been facing and the steps that have been taken to overcome
them. The announcement should also indicate in general how the redundancy
will take place, including arrangements for individuals to be informed (as soon
as possible after the general announcement), payment arrangements and, impor-
tantly, help to those affected in finding work through outplacement counselling
or a ‘job shop’.
484 ❚ People resourcing
If it is a fairly large redundancy, the media will have to be informed, but only after
the internal announcement. A press release will need to be prepared, again indicating
why the redundancy is taking place and how the company intends to tackle it.
The next step is to inform those affected. It is very important to ensure that every-
thing possible is done to ensure that the interviews with those who are to be made
redundant are handled sensitively. Managers should be given guidance and, possibly,
training on how to deal with what is sometimes called (another euphemism) a
‘release interview’. It may well be advisable for a member of the personnel function to
be present at all interviews, although it is best for the line manager to conduct them.
Advance information should be obtained on the reasons why individuals were
selected and how they may react. Their personal circumstances should also be
checked in case there are any special circumstances with which the interviewer
should be familiar.
The interview itself should explain as gently as possible why the individual has
been selected for redundancy and how it will affect him or her (payment, timing etc).
Time should be allowed to describe the help that the organization will provide to find
another job and to get initial reactions from the individual which may provide guid-
ance on the next steps.
OUTPLACEMENT
Outplacement is about helping redundant employees to find alternative work. It
involves assisting individuals to cope with the trauma of redundancy through coun-
selling, helping them to redefine their career and employment objectives and then
providing them with knowledgeable but sensitive guidance on how to attain those
objectives.
Job shops
Help may be provided by the organization on an individual basis, but in larger-scale
redundancies ‘job shops’ can be set up. The people who staff these scour the travel-to-
work area seeking job opportunities for those who are being made redundant. This is
often done by telephone. Further help may be given by matching people to suitable
jobs, arranging interviews, training in CV preparation and interview techniques. Job
shops are sometimes staffed by members of the personnel function (the writer
successfully organized one in an aerospace firm some years ago). Alternatively, the
organization may ask a firm of outplacement consultants to set up and run the job
shop and provide any other counselling or training services that may be required.
Release from the organization ❚ 485
Outplacement consultancy services
As described by Eggert (1991), the outplacement process usually takes place along the
following lines:
● initial counselling – gaining biographical data and discussing immediate issues of
concern;
● achievement list – clients write up all the achievements they can think of to do
with their career;
● skills inventory – clients develop from the achievement list a personal portfolio of
saleable skills;
● personal statement – clients develop a personal statement in 20 to 30 words about
what is being presented to the job market;
● personal success inventory – those recent or appropriate successes that can be
quantified and which support the personal profile;
● three jobs – identification of three possible types of job that can be searched
for;
● psychological assessment – development of a personality profile with a
psychologist;
● development and agreement of a CV (see below);
● identify job market opportunities;
● practice interview;
● plan job search campaign.
CVs
CVs provide the basic information for job searching and an outplacement consul-
tant will guide individuals on how to write their CVs. The traditional CV uses
what Eggert (1991) calls the ‘tombstone’ approach because it reads like an obituary.
It sets out personal details and education and employment history in chrono-
logical order.
Outplacement consultants prefer what they call the ‘achievement CV’ which is
structured on the principle of a sales brochure, providing information in simple, posi-
tive statements sequenced for the reader’s convenience. The CV lists the most impor-
tant areas of experience in reverse chronological order and sets out for each position a
list of achievements beginning with such words as ‘set up’, ‘developed’, ‘introduced’,
‘increased’, ‘reduced’ and ‘established’. This is designed to generate the thought in
the reader’s mind that ‘if the individual can do it for them, he or she will be able to do
it for us’. The career achievement history is followed by details of professional quali-
fications and education, and personal information.
486 ❚ People resourcing
Selecting an outplacement consultant
There are some highly reputable outplacement consultants around; there are also
some cowboys. It is advisable only to use firms that follow a code of practice such
as that produced by the CIPD or the Career Development and Outplacement Associa-
tion.
DISMISSAL
The legal framework
The legal framework is provided by employment statutory and case law relating to
unfair dismissal. Under current UK employment legislation, an employee who has
been employed for one year or more has the right not to be unfairly dismissed.
Complaints by an employee that he or she has been unfairly dismissed are heard by
employment tribunals.
Definition of dismissal
Legally, dismissal takes place when:
● the employer terminates the employee’s contract with or without notice – a
contract can be terminated as a result of a demotion or transfer as well as
dismissal;
● the employee terminates the contract (resigns) with or without notice by reason of
the employer’s behaviour in the sense that the employer’s conduct was such that
the employee could not be expected to carry on – this is termed ‘constructive
dismissal’;
● the employee is employed under a fixed-term contract of one year or more which
is not renewed by the employer when it expires;
● an employee resigns while under notice following dismissal;
● an employee is unreasonably refused work after pregnancy.
Fundamental questions
The legislation lays down that employment tribunals should obtain answers to two
fundamental questions when dealing with unfair dismissal cases:
1. Was there sufficient reason for the dismissal, ie was it fair or unfair?
2. Did the employer act reasonably in the circumstances?
Release from the organization ❚ 487
Fair dismissal
Dismissals may be held by an employment tribunal to be fair if the principal reason
was one of the following:
● incapability, which covers the employee’s skill, aptitude, health and physical or
mental qualities;
● misconduct;
● failure to have qualifications relevant to the job;
● a legal factor that prevents the employee from continuing work;
● redundancy – where this has taken place in accordance with a customary or
agreed redundancy procedure;
● the employee broke or repudiated his or her contract by going on strike – as long
as he or she was not singled out for this treatment, ie all striking employees were
treated alike and no selective re-engagement took place;
● the employee was taking part in an unofficial strike or some other form of indus-
trial action;
● some other substantial reason of a kind that would justify the dismissal of an
employee holding the position that the employee held.
Unfair dismissal
Dismissals may be unfair if:
● the employer has failed to show that the principal reason was one of the admis-
sible reasons as stated above, or if the dismissal was not reasonable in the circum-
stances (see below);
● a constructive dismissal has taken place;
● they are in breach of a customary or agreed redundancy procedure, and there are
no valid reasons for departing from that procedure.
The onus of proof is on employers to show that they had acted reasonably in treating
the reason for dismissal as sufficient. The employment tribunal is required, in consid-
ering the circumstances, to take into account the size and administrative resources of
the employer’s undertaking.
Reasonable in the circumstances
Even if the employer can show to a tribunal that there was good reason to dismiss the
employee (ie if it clearly fell into one of the categories listed above, and the degree of
488 ❚ People resourcing
incapability or misconduct was sufficient to justify dismissal), the tribunal still has to
decide whether or not the employer acted in a reasonable way at the time of
dismissal. The principles defining ‘reasonable’ behaviour on the part of an employer
are as follows:
● Employees should be informed of the nature of the complaint against them.
● The employee should be given the chance to explain.
● The employee should be given the opportunity to improve, except in particularly
gross cases of incapability or misconduct.
● Employees should be allowed to appeal.
● The employee should be warned of the consequences in the shape of dismissal if
specified improvements do not take place.
● The employer’s decision to dismiss should be based on sufficient evidence.
● The employer should take any mitigating circumstances into account.
● The employer should act in good faith.
● The offence or misbehaviour should merit the penalty of dismissal rather than
some lesser penalty.
A good disciplinary procedure (see the example in Chapter 58) will include arrange-
ments for informal and formal warnings and provisions to ensure that the other
aspects of discipline are handled reasonably.
Remedies
Employment tribunals that find that a dismissal was unfair can make an order for
reinstatement or re-engagement and state the terms on which this should take place.
The tribunal can consider the possibility of compensation for unfair dismissal, but
only after the possibility of reinstatement or re-engagement has been examined.
Approach to handling disciplinary cases
The approach should be governed by the following three principles of natural justice:
1. Individuals should know the standards of performance they are expected to
achieve and the rules to which they are expected to conform.
2. They should be given a clear indication of where they are failing or what rules
have been broken.
3. Except in cases of gross misconduct, they should be given an opportunity to
improve before disciplinary action is taken.
Release from the organization ❚ 489
There should be a disciplinary procedure which is understood and applied by all
managers and team leaders. The procedure should provide for the following three-
stage approach before disciplinary action is taken:
1. informal oral warnings;
2. formal oral warnings, which, in serious cases, may also be made in writing –
these warnings should set out the nature of the offence and the likely conse-
quences of further offences;
3. final written warnings, which should contain a statement that any recurrence
would lead to suspension, dismissal or some other penalty.
The procedure should provide for employees to be accompanied by a colleague
or employee representative at any hearing. There should also be an appeal system
and a list of offences that constitute gross misconduct and may therefore lead to
instant dismissal. Managers and supervisors should be told what authority they
have to take disciplinary action. It is advisable to have all final warnings and actions
approved by a higher authority. In cases of gross misconduct, team leaders and
junior managers should be given the right to suspend, if higher authority is not
immediately available, but not to dismiss. The importance of obtaining and recording
the facts should be emphasized. Managers should always have a colleague with them
when issuing a formal warning and should make a note to file of what was said on
the spot.
VOLUNTARY LEAVERS
When people leave of their own volition, two actions may be taken: conducting exit
interviews and analysing reasons for turnover as described in Chapter 25.
RETIREMENT
Retirement is a major change and should be prepared for. Retirement policies need to
specify:
● when people are due to retire;
● the circumstances, if any, in which they can work on beyond their normal retire-
ment date;
● the provision of pre-retirement training;
● the provision of advice to people about to retire.
490 ❚ People resourcing
Pre-retirement training can cover such matters as finance, insurance, State pension
rights, health, working either for money or in a voluntary organization during retire-
ment and sources of advice and help. The latter can be supplied by such charities as
Help the Aged and Age Concern.
Release from the organization ❚ 491
Performance
management
Performance management processes have become prominent in recent years as means
of providing a more integrated and continuous approach to the management of perfor-
mance than was provided by previous isolated and often inadequate merit rating or
performance appraisal schemes. Performance management is based on the principle of
management by agreement or contract rather than management by command. It
emphasizes development and the initiation of self-managed learning plans as well as
the integration of individual and corporate objectives. It can, in fact, play a major role
in providing for an integrated and coherent range of human resource management
processes which are mutually supportive and contribute as a whole to improving orga-
nizational effectiveness.
In this part, Chapter 32 covers the fundamental concepts of performance manage-
ment. The practice of performance management is described in Chapter 33 and the
part is completed in Chapter 34 by a review of the process of 360-degree feedback as a
multi-source method of assessing performance.
Part VII
The basis of performance
management
In this chapter the nature, aims, characteristics, concerns and guiding principles of
performance management are described. In addition, the differences between perfor-
mance appraisal and performance management are examined and reference is made
to the views of a selection of practitioners on performance management.
PERFORMANCE MANAGEMENT DEFINED
Performance management can be defined as a systematic process for improving
organizational performance by developing the performance of individuals and
teams. It is a means of getting better results by understanding and managing perfor-
mance within an agreed framework of planned goals, standards and competency
requirements. Processes exist for establishing shared understanding about what is to
be achieved, and for managing and developing people in a way that increases the
probability that it will be achieved in the short and longer term. It focuses people on
doing the right things by clarifying their goals. It is owned and driven by line
management.
32
AIMS OF PERFORMANCE MANAGEMENT
The overall aim of performance management is to establish a high performance
culture in which individuals and teams take responsibility for the continuous
improvement of business processes and for their own skills and contributions within
a framework provided by effective leadership.
Specifically, performance management is about aligning individual objectives to
organizational objectives and ensuring that individuals uphold corporate core values.
It provides for expectations to be defined and agreed in terms of role responsibilities
and accountabilities (expected to do), skills (expected to have) and behaviours
(expected to be). The aim is to develop the capacity of people to meet and exceed
expectations and to achieve their full potential to the benefit of themselves and the
organization. Importantly, performance management is concerned with ensuring that
the support and guidance people need to develop and improve are readily available.
The following are the aims of performance management as expressed by a variety
of organizations (source IRS, 2003):
● Empowering, motivating and rewarding employees to do their best. Armstrong
World Industries
● Focusing employee’s tasks on the right things and doing them right. Aligning
everyone’s individual goals to the goals of the organization. Eli Lilly & Co
● Proactively managing and resourcing performance against agreed accountabili-
ties and objectives. ICI Paints
● The process and behaviours by which managers manage the performance of their
people to deliver a high-achieving organization. Standard Chartered Bank
● Maximizing the potential of individuals and teams to benefit themselves and the
organization, focusing on achievement of their objectives. West Bromwich Building
Society
CHARACTERISTICS OF PERFORMANCE MANAGEMENT
Performance management is a planned process of which the primary elements are
agreement, measurement, feedback, positive reinforcement and dialogue. It is
concerned with measuring outputs in the shape of delivered performance compared
with expectations expressed as objectives. In this respect, it focuses on targets, stan-
dards and performance measures or indicators. It is based on the agreement of role
requirements, objectives and performance improvement and personal development
plans. It provides the setting for ongoing dialogues about performance that involves
496 ❚ Performance management
the joint and continuing review of achievements against objectives, requirements and
plans.
But it is also concerned with inputs and values. The inputs are the knowledge,
skills and behaviours required to produce the expected results. Developmental needs
are identified by defining these requirements and assessing the extent to which the
expected levels of performance have been achieved through the effective use of
knowledge and skills and through appropriate behaviour that upholds core values.
Performance management is a continuous and flexible process, which involves
managers and those whom they manage acting as partners within a framework that
sets out how they can best work together to achieve the required results. It is based
on the principle of management by contract and agreement rather than manage-
ment by command. It relies on consensus and co-operation rather than control or
coercion.
Performance management focuses on future performance planning and improve-
ment rather than on retrospective performance appraisal. It functions as a continuous
and evolutionary process, in which performance improves over time. It provides the
basis for regular and frequent dialogues between managers and individuals about
performance and development needs. It is mainly concerned with individual perfor-
mance but it can also be applied to teams. The emphasis is on development, although
performance management is an important part of the reward system through the
provision of feedback and recognition and the identification of opportunities for
growth. It may be associated with performance or contribution-related pay, but its
developmental aspects are much more important.
UNDERSTANDING PERFORMANCE MANAGEMENT
There are five issues that need to be considered to obtain a full understanding of
performance management:
1. the meaning of performance;
2. the significance of values;
3. the meaning of alignment;
4. managing expectations;
5. the significance of discretionary behaviour.
The meaning of performance
Performance is often defined simply in output terms – the achievement of quantified
The basis of performance management ❚ 497
objectives. But performance is a matter not only of what people achieve but how they
achieve it. The Oxford English Dictionary confirms this by including the phrase
‘carrying out’ in its definition of performance: ‘The accomplishment, execution,
carrying out, working out of anything ordered or undertaken.’ High performance
results from appropriate behaviour, especially discretionary behaviour, and the effec-
tive use of the required knowledge, skills and competencies. Performance manage-
ment must examine how results are attained because this provides the information
necessary to consider what needs to be done to improve those results.
The concept of performance has been expressed by Brumbrach (1988) as follows:
Performance means both behaviours and results. Behaviours emanate from the
performer and transform performance from abstraction to action. Not just the instru-
ments for results, behaviours are also outcomes in their own right – the product of
mental and physical effort applied to tasks – and can be judged apart from results.
This definition of performance leads to the conclusion that when managing perfor-
mance both inputs (behaviour) and outputs (results) need to be considered. It is not a
question of simply considering the achievement of targets, as used to happen in
‘management by objectives’ schemes. Competency factors need to be included in the
process. This is the so-called ‘mixed model’ of performance management, which
covers the achievement of expected levels of competence as well as objective setting
and review.
Performance management and values
Performance is about upholding the values of the organization – ‘living the values’
(an approach to which much importance is attached at Standard Chartered Bank).
This is an aspect of behaviour but it focuses on what people do to realize core values
such as concern for quality, concern for people, concern for equal opportunity and
operating ethically. It means converting espoused values into values in use: ensuring
that the rhetoric becomes reality.
The meaning of alignment
One of the most fundamental purposes of performance management is to align indi-
vidual and organizational objectives. This means that everything people do at work
leads to outcomes that further the achievement of organizational goals. This purpose
was well expressed by Fletcher (1993), who wrote:
498 ❚ Performance management
The real concept of performance management is associated with an approach to
creating a shared vision of the purpose and aims of the organization, helping each
employee understand and recognize their part in contributing to them, and in so doing,
manage and enhance the performance of both individuals and the organization.
Alignment can be attained by a cascading process so that objectives flow down from
the top and at each level team or individual objectives are defined in the light of
higher-level goals. But it should also be a bottom-up process, individuals and teams
being given the opportunity to formulate their own goals within the framework
provided by the defined overall purpose, strategy and values of the organization.
Objectives should be agreed not set, and this agreement should be reached through the
open dialogues that take place between managers and individuals throughout the
year. In other words, this needs to be seen as a partnership in which responsibility is
shared and mutual expectations are defined.
Managing expectations
Performance management is essentially about the management of expectations. It
creates a shared understanding of what is required to improve performance and how
this will be achieved by clarifying and agreeing what people are expected to do and
how they are expected to behave. It uses these agreements as the basis for measure-
ment and review, and the preparation of plans for performance improvement and
development.
Performance management and discretionary behaviour
Performance management is concerned with the encouragement of productive
discretionary behaviour. As defined by Purcell and his team at Bath University,
School of Management (2003): ‘Discretionary behaviour refers to the choices that
people make about how they carry out their work and the amount of effort, care,
innovation and productive behaviour they display.’ Purcell and his team, while
researching the relationship between HR practice and business performance, noted
that ‘the experience of success seen in performance outcomes helps reinforce positive
attitudes’.
GUIDING PRINCIPLES OF PERFORMANCE
MANAGEMENT
Egan (1995) proposes the following guiding principles for performance management:
The basis of performance management ❚ 499
Most employees want direction, freedom to get their work done, and encouragement
not control. The performance management system should be a control system only by
exception. The solution is to make it a collaborative development system, in two ways.
First, the entire performance management process – coaching, counselling, feedback,
tracking, recognition, and so forth – should encourage development. Ideally, team
members grow and develop through these interactions. Second, when managers and
team members ask what they need to be able to do to do bigger and better things, they
move to strategic development.
PERFORMANCE APPRAISAL AND PERFORMANCE
MANAGEMENT
It is sometimes assumed that performance appraisal is the same thing as performance
management. But there are significant differences. Performance appraisal can be
defined as the formal assessment and rating of individuals by their managers at,
usually, an annual review meeting. In contrast, performance management is a contin-
uous and much wider, more comprehensive and more natural process of manage-
ment that clarifies mutual expectations, emphasizes the support role of managers
who are expected to act as coaches rather than judges, and focuses on the future.
Performance appraisal has been discredited because too often it has been operated
as a top-down and largely bureaucratic system owned by the HR department rather
than by line managers. It has been perceived by many commentators such as Townley
(1989) as solely a means of exercising managerial control. Performance appraisal
tended to be backward looking, concentrating on what had gone wrong, rather than
looking forward to future development needs. Performance appraisal schemes
existed in isolation. There was little or no link between them and the needs of the
business. Line managers have frequently rejected performance appraisal schemes as
being time-consuming and irrelevant. Employees have resented the superficial
nature with which appraisals have been conducted by managers who lack the skills
required, tend to be biased and are simply going through the motions. As Armstrong
and Murlis (1998) assert, performance appraisal too often degenerated into ‘a
dishonest annual ritual’. The differences between them as summed up by Armstrong
and Baron (2004) are set out in Table 32.1.
VIEWS ON PERFORMANCE MANAGEMENT
The research conducted by the CIPD in 2003 (Armstrong and Baron, 2004) elicited the
following views from practitioners about performance management:
500 ❚ Performance management
● We expect line managers to recognize it (performance management) as a useful
contribution to the management of their teams rather than a chore. (Centrica)
● Managing performance is about coaching, guiding, motivating and rewarding
colleagues to help unleash potential and improve organizational performance.
Where it works well it is built on excellent leadership and high quality coaching
relationships between managers and teams. (Halifax BOS)
● Performance management is designed to ensure that what we do is guided by our
values and is relevant to the purposes of the organization. (Scottish Parliament)
The research conducted by the CIPD in 1997 (Armstrong and Baron, 1998) obtained
the following additional views from practitioners about performance management:
● A management tool which helps managers to manage.
● Driven by corporate purpose and values.
● To obtain solutions that work.
● Only interested in things you can do something about and get a visible improve-
ment.
● Focus on changing behaviour rather than paperwork.
● It’s about how we manage people – it’s not a system.
The basis of performance management ❚ 501
Performance appraisal Performance management
Top-down assessment Joint process through dialogue
Annual appraisal meeting Continuous review with one or more formal
reviews
Use of ratings Ratings less common
Monolithic system Flexible process
Focus on quantified objectives Focus on values and behaviours as well as
objectives
Often linked to pay Less likely to be a direct link to pay
Bureaucratic – complex paperwork Documentation kept to a minimum
Owned by the HR department Owned by line managers
Table 32.1 Performance appraisal compared with performance management
● Performance management is what managers do: a natural process of manage-
ment.
● Based on accepted principles but operates flexibly.
● Focus on development not pay.
● Success depends on what the organization is and needs to be in its performance
culture.
The processes of performance management are described in the next chapter.
502 ❚ Performance management
The process of performance
management
PERFORMANCE MANAGEMENT AS A PROCESS
Performance management should be regarded as a flexible process, not as a ‘system’.
The use of the term ‘system’ implies a rigid, standardized and bureaucratic approach
that is inconsistent with the concept of performance management as a flexible and
evolutionary, albeit coherent, process that is applied by managers working with their
teams in accordance with the circumstances in which they operate. As such, it
involves managers and those whom they manage acting as partners, but within a
framework that sets out how they can best work together.
PERFORMANCE MANAGEMENT AS A CYCLE
Performance management can be described as a continuous self-renewing cycle, as
illustrated in Figure 33.1.
33
This chapter deals with each of these parts of the cycle as follows:
● Planning: concluding a performance and development agreement.
● Acting: managing performance throughout the year.
● Reviewing: assessing progress and achievements so that action plans can be
prepared and agreed and, in many schemes, performance can be rated.
Consideration is also given to managing under-performers, and approaches to intro-
ducing performance management are considered at the end of the chapter.
PERFORMANCE AGREEMENTS
Performance agreements form the basis for development, assessment and feedback in
the performance management process. They define expectations in the form of a role
profile that sets out role requirements in terms of key result areas and the competen-
cies required for effective performance. The role profile provides the basis for
agreeing objectives and methods of measuring performance and assessing the level of
competency reached. The performance agreement incorporates any performance
improvement plans that may be necessary, and a personal development plan. It
describes what individuals are expected to do but also indicates what support they
will receive from their manager.
Performance agreements emerge from the analysis of role requirements and the
performance review. An assessment of past performance leads to an analysis of future
requirements. The two processes can take place at the same meeting.
504 ❚ Performance management
Performance and
development
agreement
Performance
review
Managing
performance
throughout the year
Figure 33.1 The performance management cycle
Defining role requirements
The foundation for performance management is a role profile that defines the role in
terms of the key results expected, what role holders need to know and be able to do
(competencies), and how they are expected to behave in terms of behavioural compe-
tencies and upholding the organization’s core values. Role profiles need to be
updated every time a formal performance agreement is developed. Guidelines on
preparing role profiles and an example are given in Chapter 13.
Objectives
Objectives describe something that has to be accomplished. Objective setting that
results in an agreement on what the role holder has to achieve is an important part of
the performance management processes of defining and managing expectations, and
forms the point of reference for performance reviews.
Types of objectives
The different types of objectives are:
● On-going role or work objectives – all roles have built-in objectives that may be
expressed as key result areas in a role profile.
● Targets – these define the quantifiable results to be attained as measured in such
terms as output, throughput, income, sales, levels of service delivery, cost reduc-
tion, reduction of reject rates.
● Tasks/projects – objectives can be set for the completion of tasks or projects by a
specified date or to achieve an interim result.
● Behaviour – behavioural expectations are often set out generally in competency
frameworks but they may also be defined individually under the frame-
work headings. Competency frameworks may deal with areas of behaviour asso-
ciated with core values, for example teamwork, but they often convert the
aspirations contained in value statements into more specific examples of desir-
able and undesirable behaviour, which can help in planning and reviewing
performance.
Criteria for objectives
Many organizations use the following ‘SMART’ mnemonic to summarize the criteria
for objectives:
The process of performance management ❚ 505
S = Specific/stretching – clear, unambiguous, straightforward, understandable and
challenging.
M = Measurable – quantity, quality, time, money.
A = Achievable – challenging but within the reach of a competent and committed
person.
R = Relevant – relevant to the objectives of the organization so that the goal of the
individual is aligned to corporate goals.
T = Time framed – to be completed within an agreed time scale.
Measuring performance in achieving objectives
Measurement is an important concept in performance management. It is the basis for
providing and generating feedback, it identifies where things are going well to
provide the foundations for building further success, and it indicates where things
are not going so well, so that corrective action can be taken.
Measuring performance is relatively easy for those who are responsible for
achieving quantified targets, for example sales. It is more difficult in the case of
knowledge workers, for example scientists. But this difficulty is alleviated if a distinc-
tion is made between the two forms of results – outputs and outcomes.
An output is a result that can be measured quantifiably, while an outcome is a
visible effect that is the result of effort but cannot necessarily be measured in quanti-
fied terms.
There are components in all jobs that are difficult to measure quantifiably as
outputs. But all jobs produce outcomes even if they are not quantified. It is therefore
often necessary to measure performance by reference to what outcomes have been
attained in comparison with what outcomes were expected, and the outcomes may be
expressed in qualitative terms as a standard or level of competency to be attained.
That is why it is important when agreeing objectives to answer the question: ‘How
will we know that this objective has been achieved?’ The answer needs to be
expressed in the form: ‘Because such and such will have happened.’ The ‘such and
such’ will be defined either as outputs in such forms as meeting or exceeding a quan-
tified target, completing a project or task satisfactorily (’satisfactory’ having been
defined), or as outcomes in such forms as reaching an agreed standard of perfor-
mance, or delivering an agreed level of service.
However, when assessing performance it is also necessary to consider inputs in the
shape of the degree of knowledge and skill attained and behaviour that is demon-
strably in line with the standards set out in competency frameworks and statements
of core values. Behaviour cannot be measured quantitatively but it can be assessed
against definitions of what constitutes good and not so good behaviour, and the
evidence that can be used to make that assessment can be identified.
506 ❚ Performance management
Use of performance measures
The CIPD survey of performance management in 2003 (Armstrong and Baron, 2004)
revealed that in order of importance, the following performance measures were used
by the respondents:
1. Achievement of objectives.
2. Competence.
3. Quality.
4. Contribution to team.
5. Customer care.
6. Working relationships.
7. Productivity.
8. Flexibility.
9. Skills/learning targets.
10. Aligning personal objectives with organizational goals.
11. Business awareness.
12. Financial awareness.
Performance planning
The performance planning part of the performance management sequence involves
agreement between the manager and the individual on what the latter needs to do to
achieve objectives, raise standards, improve performance and develop the required
competencies. It also establishes priorities – the key aspects of the job to which atten-
tion has to be given. The aim is to ensure that the meaning of the objectives, perfor-
mance standards and competencies as they apply to everyday work is understood.
They are the basis for converting aims into action.
Agreement is also reached at this stage on how performance will be measured and
the evidence that will be used to establish levels of competence. It is important that
these measures and evidence requirements should be identified and fully agreed now
because they will be used by individuals as well as managers to monitor and demon-
strate achievements.
Personal development planning
A personal development plan provides a learning action plan for which individuals
are responsible with the support of their managers and the organization. It may
include formal training but, more importantly, it will incorporate a wider set of
learning and development activities such as self-managed learning, coaching,
The process of performance management ❚ 507
mentoring, project work, job enlargement and job enrichment. If multi-source assess-
ment (360-degree feedback) is practised in the organization this will be used to
discuss development needs.
The development plan records the actions agreed to improve performance and to
develop knowledge, skills and capabilities. It is likely to focus on development in the
current job – to improve the ability to perform it well and also, importantly, to enable
individuals to take on wider responsibilities, extending their capacity to undertake a
broader role. This plan therefore contributes to the achievement of a policy of contin-
uous development that is predicated on the belief that everyone is capable of learning
more and doing better in their jobs. But the plan will also contribute to enhancing the
potential of individuals to carry out higher-level jobs.
MANAGING PERFORMANCE THROUGHOUT THE YEAR
Perhaps one of the most important concepts of performance management is that it is
a continuous process that reflects normal good management practices of setting
direction, monitoring and measuring performance and taking action accordingly.
Performance management should not be imposed on managers as something
‘special’ they have to do. It should instead be treated as a natural function that all
good managers carry out.
This approach contrasts with that used in conventional performance appraisal
systems, which were usually built around an annual event, the formal review, which
tended to dwell on the past. This was carried out at the behest of the personnel
department, often perfunctorily, and then forgotten. Managers proceeded to manage
without any further reference to the outcome of the review and the appraisal form
was buried in the personnel record system.
To ensure that a performance management culture is built and maintained, perfor-
mance management has to have the active support and encouragement of top
management who must make it clear that it is regarded as a vital means of achieving
sustained organizational success. They must emphasize that performance manage-
ment is what managers are expected to do and that their performance as managers
will be measured by reference to the extent to which they do it conscientiously and
well. Importantly, the rhetoric supporting performance management must be
converted into reality by the deeds as well as the words of the people who have the
ultimate responsibility for running the business.
The sequence of performance management activities as described in this chapter
does no more than provide a framework within which managers, individuals and
teams work together in whatever ways best suit them to gain better understanding of
508 ❚ Performance management
what is to be done, how it is to be done and what has been achieved. This framework
and the philosophy that supports it can form the basis for training newly appointed
or would-be managers in this key area of their responsibilities. It can also help in
improving the performance of managers who are not up to standard in this respect.
A formal, often annual, review is still an important part of a performance manage-
ment framework but it is not the most important part. Equal, if not more, prominence
is given to the performance agreement and the continuous process of performance
management.
REVIEWING PERFORMANCE
Although performance management is a continuous process it is still necessary to
have a formal review once or twice yearly. This provides a focal point for the consid-
eration of key performance and development issues. This performance review
meeting is the means through which the five primary performance management
elements of agreement, measurement, feedback, positive reinforcement and dialogue
can be put to good use.
The review should be rooted in the reality of the employee’s performance. It is
concrete, not abstract and it allows managers and individuals to take a positive look
together at how performance can become better in the future and how any problems
in meeting performance standards and achieving objectives can be resolved.
Individuals should be encouraged to assess their own performance and become
active agents for change in improving their results. Managers should be encouraged
to adopt their proper enabling role: coaching and providing support and guidance.
There should be no surprises in a formal review if performance issues have been
dealt with as they should have been – as they arise during the year. Traditional
appraisals are often no more than an analysis of where those involved are now, and
where they have come from. This static and historical approach is not what perfor-
mance management is about. The true role of performance management is to look
forward to what needs to be done by people to achieve the purpose of the job, to meet
new challenges, to make even better use of their knowledge, skills and abilities, to
develop their capabilities by establishing a self-managed learning agenda, and to
reach agreement on any areas where performance needs to be improved and how that
improvement should take place. This process also helps managers to improve their
ability to lead, guide and develop the individuals and teams for whom they are
responsible.
The most common practice is to have one annual review (65 per cent of respon-
dents to the 2003 CIPD survey). Twice-yearly reviews were held by 27 per cent of the
The process of performance management ❚ 509
respondents. These reviews led directly into the conclusion of a performance agree-
ment (at the same meeting or later). It can be argued that formal reviews are unneces-
sary and that it is better to conduct informal reviews as part of normal good
management practice to be carried out as and when required. Such informal reviews
are valuable as part of the continuing process of performance management
(managing performance throughout the year, as discussed in the previous chapter).
But there is everything to be said for an annual or half-yearly review that sums up the
conclusions reached at earlier reviews and provides a firm foundation for a new
performance agreement and a framework for reviewing performance informally,
whenever appropriate.
Criteria for assessing performance
The criteria for assessing performance should be balanced between:
● achievements in relation to objectives;
● the level of knowledge and skills possessed and applied (competences);
● behaviour in the job as it affects performance (competencies);
● the degree to which behaviour upholds the core values of the organization;
● day-to-day effectiveness.
The criteria should not be limited to a few quantified objectives, as has often been the
case in traditional appraisal schemes. In many cases the most important considera-
tion will be the job holders’ day-to-day effectiveness in meeting the continuing
performance standards associated with their key tasks. It may not be possible to agree
meaningful new quantified targets for some jobs every year. Equal attention needs to
be given to the behaviour that has produced the results as to the results themselves.
The review may be concluded with a performance rating (see page 512).
Conducting a performance review meeting
There are 12 golden rules for conducting performance review meetings.
1. Be prepared. Managers should prepare by referring to a list of agreed objectives
and their notes on performance throughout the year. They should form views
about the reasons for success or failure and decide where to give praise, which
performance problems should be mentioned and what steps might be under-
taken to overcome them. Thought should also be given to any changes that have
taken place or are contemplated in the individual’s role and to work and
personal objectives for the next period. Individuals should also prepare in order
510 ❚ Performance management
to identify achievements and problems, and to be ready to asses their own
performance at the meeting. They should also note any points they wish to raise
about their work and prospects.
2. Work to a clear structure. The meeting should be planned to cover all the points
identified during preparation. Sufficient time should be allowed for a full
discussion – hurried meetings will be ineffective. An hour or two is usually
necessary to get maximum value from the review.
3. Create the right atmosphere. A successful meeting depends on creating an informal
environment in which a full, frank but friendly exchange of views can take place.
It is best to start with a fairly general discussion before getting into any detail.
4. Provide good feedback. Individuals need to know how they are getting on.
Feedback should be based on factual evidence. It refers to results, events, critical
incidents and significant behaviours that have affected performance in specific
ways. The feedback should be presented in a manner that enables individuals to
recognize and accept its factual nature – it should be a description of what has
happened, not a judgement. Positive feedback should be given on the things that
the individual did well in addition to areas for improvement. People are more
likely to work at improving their performance and developing their skills if they
feel empowered by the process.
5. Use time productively. The reviewer should test understanding, obtain informa-
tion, and seek proposals and support. Time should be allowed for the individual
to express his or her views fully and to respond to any comments made by the
manager. The meeting should take the form of a dialogue between two inter-
ested and involved parties, both of whom are seeking a positive conclusion.
6. Use praise. If possible, managers should begin with praise for some specific
achievement, but this should be sincere and deserved. Praise helps people to
relax – everyone needs encouragement and appreciation.
7. Let individuals do most of the talking. This enables them to get things off their chest
and helps them to feel that they are getting a fair hearing. Use open-ended ques-
tions (ie questions that invite the individual to think about what to reply rather
than indicating the expected answer). This is to encourage people to expand.
8. Invite self-assessment. This is to see how things look from the individual’s point of
view and to provide a basis for discussion – many people underestimate them-
selves. Ask questions such as:
– How well do you feel you have done?
– What do you feel are your strengths?
– What do you like most/least about your job?
– Why do you think that project went well?
– Why do you think you didn’t meet that target?
The process of performance management ❚ 511
9. Discuss performance not personality. Discussions on performance should be based
on factual evidence, not opinion. Always refer to actual events or behaviour and
to results compared with agreed performance measures. Individuals should be
given plenty of scope to explain why something did or did not happen.
10. Encourage analysis of performance. Don’t just hand out praise or blame. Analyse
jointly and objectively why things went well or badly and what can be done to
maintain a high standard or to avoid problems in the future.
11. Don’t deliver unexpected criticisms. There should be no surprises. The discussion
should only be concerned with events or behaviours that have been noted at the
time they took place. Feedback on performance should be immediate. It should
not wait until the end of the year. The purpose of the formal review is to reflect
briefly on experiences during the review period and on this basis to look ahead.
12. Agree measurable objectives and a plan of action. The aim should be to end the
review meeting on a positive note.
These golden rules may sound straightforward and obvious enough, but they will
only function properly in a culture that supports this type of approach. Hence the
importance of getting and keeping top management support and the need to take
special care in developing and introducing the system and in training managers and
their staff.
RATING PERFORMANCE
Most performance management schemes include some form of rating. This indicates
the quality of performance or competence achieved or displayed by an employee by
selecting the level on a scale that most closely corresponds with the view of the
assessor on how well the individual has been doing. A rating scale is supposed to
assist in making judgements and it enables those judgements to be categorized to
inform performance or contribution pay decisions, or simply to produce an instant
summary for the record of how well or not so well someone is doing.
The rationale for rating
There are four arguments for rating:
1. It recognizes the fact that we all form an overall view of the performance of the
people who work for us and that it makes sense to express that view explicitly
against a framework of reference rather than hiding it. Managers can thus be held
to account for the ratings they make and be required to justify them.
512 ❚ Performance management
2. It is useful to sum up judgements about people – indicating who are the excep-
tional performers or under-performers and who are the reliable core performers
so that action can be taken (developmental or some form of reward).
3. It is impossible to have performance or contribution pay without ratings – there
has to be a method that relates the size of an award to the level of individual
achievement. However, this is not actually the case: many organizations with
contribution or performance pay do not include ratings as part of the perfor-
mance management process (23 per cent of the respondents to the e-reward 2005
survey).
4. It conveys a clear message to people on how they are doing and can motivate
them to improve performance if they seek an answer to the question: ‘What do I
have to do to get a higher rating next time?’
Types of rating scales
Rating scales can be defined alphabetically (a, b, c, etc), or numerically (1, 2, 3, etc).
Abbreviations or initials (ex for excellent, etc) are sometimes used in an attempt to
disguise the hierarchical nature of the scale. The alphabetical or numerical points
scale points may be described adjectivally, for example, a = excellent, b = good, c =
satisfactory and d= unsatisfactory.
Alternatively, scale levels may be spelt out, as in the following example:
● Exceptional performance: exceeds expectations and consistently makes an
outstanding contribution that significantly extends the impact and influence of
the role.
● Well-balanced performance: meets objectives and requirements of the role, consis-
tently performs in a thoroughly proficient manner.
● Barely effective performance: does not meet all objectives or role requirements of the
role; significant performance improvements are needed.
● Unacceptable performance: fails to meet most objectives or requirements of the role;
shows a lack of commitment to performance improvement, or a lack of ability,
which has been discussed prior to the performance review.
The CIPD 2004c survey found that the majority of organizations had five levels. Some
organizations are settling for three levels, but there is no evidence that any single
approach is clearly superior to another, although the greater the number of levels the
more is being asked of managers in the shape of discriminatory judgement. It does,
however, seem to be preferable for level definitions to be positive rather than nega-
tive and for them to provide as much guidance as possible on the choice of ratings. It
The process of performance management ❚ 513
is equally important to ensure that level definitions are compatible with the culture of
the organization and that close attention is given to ensuring that managers use them
as consistently as possible.
Problems with rating
Ratings are largely subjective and it is difficult to achieve consistency between the
ratings given by different managers (ways of achieving consistent judgements are
discussed below). Because the notion of ‘performance’ is often unclear, subjectivity
can increase. Even if objectivity is achieved, to sum up the total performance of a
person with a single rating is a gross over-simplification of what may be a complex
set of factors influencing that performance – to do this after a detailed discussion of
strengths and weaknesses suggests that the rating will be a superficial and arbitrary
judgement. To label people as ‘average’ or ‘below average’, or whatever equivalent
terms are used, is both demeaning and demotivating.
The whole performance review meeting may be dominated by the fact that it will
end with a rating, thus severely limiting the forward-looking and developmental
focus of the meeting, which is all-important. This is particularly the case if the rating
governs performance or contribution pay increases.
Achieving consistency in ratings
The problem with rating scales is that it is very difficult, if not impossible without
very careful management, to ensure that a consistent approach is adopted by
managers responsible for rating, and this means that performance or contribution
pay decisions will be suspect. It is almost inevitable that some people will be more
generous than others, while others will be harder on their staff. Some managers may
be inconsistent in the distribution of ratings to their staff because they are indulging
in favouritism or prejudice.
Ratings can, of course, be monitored and challenged if their distribution is signifi-
cantly out of line, and computer-based systems have been introduced for this
purpose in some organizations. But many managers want to do the best for their staff,
either because they genuinely believe that they are better or because they are trying to
curry favour. It can be difficult in these circumstances to challenge them.
The methods available for increasing consistency are described below.
Training
Training can take place in the form of ‘consistency’ workshops for managers who
discuss how ratings can be justified objectively and test rating decisions on simulated
514 ❚ Performance management
performance review data. This can build a level of common understanding about
rating levels.
Peer reviews
Groups of managers meet to review the pattern of each other’s ratings and challenge
unusual decisions or distributions. This process of moderation or calibration is time-
consuming but is possibly the best way to achieve a reasonable degree of consistency,
especially when the group members share some knowledge of the performances of
each other’s staff as internal customers.
Monitoring
The distribution of ratings is monitored by a central department, usually HR, which
challenges any unusual patterns and identifies and questions what appear to be
unwarrantable differences between departments’ ratings.
Consistency at a price can also be achieved by forced distribution or ranking, as
described later in this chapter.
Conclusions on ratings
Many organizations retain ratings because they perceive that the advantages
outweigh the disadvantages. However, those businesses that want to emphasize the
developmental aspect of performance management and play down, even eliminate,
the performance pay element, will be convinced by the objections to rating and will
dispense with them altogether, relying instead on overall analysis and assessment.
DEALING WITH UNDER-PERFORMERS
The improvement of performance is a fundamental part of the continuous process of
performance management. The aim should be the positive one of maximizing high
performance, although this involves taking steps to deal with under-performance.
When managing under-performers, remember the advice given by Handy (1989) that
this should be about ‘applauding success and forgiving failure’. He suggests that
mistakes should be used as an opportunity for learning – ‘something only possible if
the mistake is truly forgiven because otherwise the lesson is heard as a reprimand and
not as an offer of help’.
When dealing with poor performers, note should be made of the following
comments by Risher (2003): ‘Poor performance is best seen as a problem in which the
The process of performance management ❚ 515
employer and management are both accountable. In fact, one can argue that it is
unlikely to emerge if people are effectively managed.’ This is another way of putting
the old Army saying: ‘There are no bad soldiers, only bad officers.’
Managing under-performers is therefore a positive process that is based on feed-
back throughout the year and looks forward to what can be done by individuals to
overcome performance problems and, importantly, how managers can provide
support and help.
The five basic steps required to manage under-performers are as follows.
1. Identify and agree the problem. Analyse the feedback and, as far as possible, obtain
agreement from the individual on what the shortfall has been. Feedback may be
provided by managers but it can in a sense be built into the job. This takes place
when individuals are aware of their targets and standards, know what perfor-
mance measures will be used and either receive feedback/control information
automatically or have easy access to it. They will then be in a position to measure
and assess their own performance and, if they are well-motivated and well-
trained, take their own corrective actions. In other words, a self-regulating feed-
back mechanism exists. This is a situation that managers should endeavour to
create on the grounds that prevention is better than cure.
2. Establish the reason(s) for the shortfall. When seeking the reasons for any shortfalls
the manager should not crudely be trying to attach blame. The aim should be for
the manager and the individual jointly to identify the facts that have contributed
to the problem. It is on the basis of this factual analysis that decisions can be
made on what to do about it by the individual, the manager, or the two of them
working together.
It is necessary first to identify any causes that are external to the job and
outside the control of either the manager or the individual. Any factors that are
within the control of the individual and/or the manager can then be considered.
What needs to be determined is the extent to which the reason for the problem is
because the individual:
– did not receive adequate support or guidance from his or her manager;
– did not fully understand what he or she was expected to do;
– could not do it – ability;
– did not know how to do it – skill;
– would not do it – attitude.
3. Decide and agree on the action required. Action may be taken by the individual, the
manager, or both parties. This could include:
516 ❚ Performance management
– the individual taking steps to improve skills or change behaviour;
– the individual changing attitudes – the challenge is that people will not
change their attitudes simply because they are told to do so; they can only be
helped to understand that certain changes to their behaviour could be benefi-
cial not only to the organization but also to themselves;
– the manager providing more support or guidance;
– the manager and the individual working jointly to clarify expectations;
– the manager and the individual working jointly to develop abilities and
skills – this is a partnership in the sense that individuals will be expected to
take steps to develop themselves, but managers can give help as required in
the form of coaching, training and providing additional experience.
Whatever action is agreed, both parties must understand how they will know
that it has succeeded. Feedback arrangements can be made but individuals
should be encouraged to monitor their own performance and take further action
as required.
4. Resource the action. Provide the coaching, training, guidance, experience or facili-
ties required to enable agreed actions to happen.
5. Monitor and provide feedback. Both managers and individuals monitor perfor-
mance, ensure that feedback is provided or obtained and analysed, and agree on
any further actions that may be necessary.
INTRODUCING PERFORMANCE MANAGEMENT
The programme for introducing performance management should take into account
the fact that one of the main reasons why it fails is that line managers are not
interested, or they don’t have the skills, or both. It is important to get buy-in from
top management so that their leadership can encourage line managers to play their
part. To ensure buy-in, the process has to be simple (not too much paper) and
managers have to be convinced that the time they spend will pay off in terms of
improved performance. The demanding skills of concluding performance agree-
ments, setting objectives, assessing performance, giving feedback and coaching need
to be developed by formal training supplemented by coaching and the use of
mentors.
Excellent practical advice on introducing performance management or making
substantial changes to an existing scheme was given by the respondents to the e-
Reward 2005 survey. This is summarized below with quotations from respondents to
illustrate their views.
The process of performance management ❚ 517
Dos
The most frequently mentioned ‘dos’ in order of frequency were to:
● consult/involve;
● provide training;
● communicate (process and benefits);
● get buy-in from senior management;
● align and ensure relevance to organizational/business/stakeholder needs;
● keep it simple;
● get ownership from line managers;
● ensure clear purpose and processes;
● monitor and evaluate;
● align to culture;
● plan and prepare carefully;
● align with other HR processes;
● run a pilot scheme;
● clarify link to reward;
● treat as a business process;
● be realistic about the scale and pace of change;
● define performance expectations;
● make process mandatory.
Examples of comments
● You can never do enough training/coaching of both staff and line managers. You
can never do too much communication on the new changes.
● Ensure the process is seen as a business one, not an HR process.
● Keep it simple and concentrate on the quality going into the process rather than
the design of the process itself (although the design must be appropriate to the
organization).
● Engage all managers in why it is important and ensure that they have the neces-
sary understanding and skills to carry out the process. Get buy-in and tailor it to
the specific needs of the organization. Get the support of key stakeholders such as
the union from the start, and get them to work with you to sell the scheme. Agree
the overall objectives and guiding principles with all concerned. Keep employees
informed and ensure the message is consistent throughout.
● Understand clearly why you are doing it and the desired objectives. Engage
others in the design of the scheme. Communicate purpose, etc clearly.
518 ❚ Performance management
Don’ts
The most common ‘don’ts’ in order of frequency were:
● don’t just make it a form-filling, paper-intensive exercise;
● don’t make it too complicated;
● don’t rush in a new system;
● don’t underestimate the time it takes to introduce;
● don’t keep changing the system;
● don’t assume managers have the skills required;
● don’t link to pay;
● don’t blindly follow others;
● don’t neglect communication, consultation and training;
● don’t assume that everyone wants it.
Examples of comments
● Don’t expect that staff will leap for joy at the prospect of another way they would
see of criticizing them in their job. Start your change management process where
you think the staff are, not where you’ve assumed they are.
● Don’t assume that what seems obvious and logical to you, as an HR manager, will
also seem logical to other managers and staff. Don’t get caught up in HR-speak
and become pedantic about the differences between ‘performance management’
and ‘appraisals’, or between a ‘personal development/learning plan’ and a
‘training plan’. As HR professionals we may be able to argue eloquently the subtle
differences and merits of each – for most people the distinction is absolutely
meaningless!
● Don’t just make it a form-filling exercise – you need to gain the belief from
managers that the system is beneficial otherwise it won’t work.
● Don’t put in a lengthy complicated process – it will become a chore to do rather
than a meaningful exercise.
● Don’t make HR own the initiative – it is a business improvement model and one
that the business needs to manage.
● Don’t assume that managers have the requisite skills to manage performance
fairly and equitably, embark upon such an initiative without clear goals and
without the support of respected key players in the organization, set the wheels in
motion until extensive briefings/training have been completed.
● Don’t underestimate the amount of work involved!
● Don’t expect it to work quickly. It takes a few years to embed performance
management in the organization’s ethos.
The process of performance management ❚ 519
360-degree feedback
360-degree feedback is a relatively new feature of performance management,
although interest is growing. The Institute of Personnel and Development 2003
survey (Armstrong and Baron, 2004) found that only 11 per cent of the organizations
covered used it, but the e-reward 2005 survey established that 30 per cent did. This
chapter starts with a definition of 360-degree feedback and goes on to describe how it
is used and operated and to discuss its advantages and disadvantages and methods
of introduction.
360-DEGREE FEEDBACK DEFINED
360-degree feedback has been defined by Ward (1995) as: ‘The systematic collection
and feedback of performance data on an individual or group derived from a number
of the stakeholders on their performance.’
The data is usually fed back in the form of ratings against various performance
dimensions. 360-degree feedback is also referred to as multi-source assessment or
multi-rater feedback.
Performance data in a 360-degree feedback process, as shown in Figure 34.1, can be
generated for individuals from the person to whom they report, their direct reports,
their peers (who could be team members and/or colleagues in other parts of the orga-
nization) and their external and internal customers.
34
The range of feedback could be extended to include other stakeholders – external
customers, clients or suppliers (this is sometimes known as 540-degree feedback). A
self-assessment process may also be incorporated using for comparison purposes the
same criteria as the other generators of feedback.
Feedback can be initiated entirely by peers (in a team setting) or by both peers and
team leaders. It can also take the form of 180-degree or upward feedback where this is
given by subordinates to their managers. Feedback may be presented direct to indi-
viduals, or to their managers, or both. Expert counselling and coaching for individ-
uals as a result of the feedback may be provided by a member of the HR department
or by an outside consultant.
USE OF 360-DEGREE FEEDBACK
360-degree feedback is used for a number of purposes. Research conducted by the
Ashridge Management Research Group (Handy et al 1996) found that typically, 360-
degree feedback forms part of a self-development or management development
programme. The 45 users covered by the survey fell into the following groups:
● 71 per cent used it solely to support learning and development;
522 ❚ Performance management
Manager
Individual
Internal
customersPeers
Direct
reports
Figure 34.1 360-degree feedback model
● 23 per cent used it to support a number of HR processes such as appraisal,
resourcing and succession planning;
● 6 per cent used it to support pay decisions.
A 1997 survey by the Performance Management Group (unpublished) of 22 organiza-
tions using 360-degree feedback found that:
● 77 per cent either disagreed or strongly disagreed with the statement that it is ’a
personal development tool and should not be used for wider HR or organiza-
tional purposes’;
● 81 per cent disagreed or strongly disagreed that ’the natural use of 360-degree
feedback is to provide a basis for reward’.
The research conducted by Armstrong and Baron (1998) for the IPD also found that
the 51 organizations covered by the research predominantly used 360-degree feed-
back to help in assessing development needs, and as a basis for performance
coaching. Only one-fifth of the respondents used it to determine a performance grade
or pay award.
RATIONALE FOR 360-DEGREE FEEDBACK
The main rationale for 360-degree feedback has been expressed by Turnow (1993) as
follows:
360-degree activities are usually based on two key assumptions: (1) that awareness of
any discrepancy between how we see ourselves and how others see us increases self-
awareness, and (2) that enhanced self-awareness is a key to maximum performance as a
leader, and thus becomes a foundation block for management and leadership develop-
ment programmes.
London and Beatty (1993) have suggested that the justification for 360-degree feed-
back is as follows:
● 360-degree feedback can become a powerful organizational intervention to
increase awareness of the importance of aligning leader behaviour, work unit
results and customer expectations, as well as increasing employee participation in
leadership development and work unit effectiveness.
● 360-degree feedback recognizes the complexity of management and the value of
input from various sources – it is axiomatic that managers should not be assessing
360-degree feedback ❚ 523
behaviours they cannot observe, and the leadership behaviours of subordinates
may not be known to their managers.
● 360-degree feedback calls attention to important performance dimensions which
may hitherto have been neglected by the organization.
360-DEGREE FEEDBACK – METHODOLOGY
The questionnaire
360-degree feedback processes usually obtain data from questionnaires, which
measure from different perspectives the behaviours of individuals against a list of
competencies. In effect, they ask for an evaluation: ‘how well does… do…?’ The
competency model may be one developed within the organization or the competency
headings may be provided by the supplier of a questionnaire.
The dimensions may broadly refer to leadership, management and approaches to
work. The headings used in the Performance Management Group’s Orbit 360-degree
questionnaire are:
● leadership;
● team player/manage people;
● self-management;
● communication;
● vision;
● organizational skills;
● decision making;
● expertise;
● drive;
● adaptability.
The leadership heading, for example, is defined as: ‘Shares a clear vision and focuses
on achieving it. Demonstrates commitment to the organization’s mission. Provides a
coherent sense of purpose and direction, both internally and externally, harnessing
energy and enthusiasm of staff.’
Ratings
Ratings are given by the generators of the feedback on a scale against each heading.
This may refer both to importance and performance, as in the PILAT questionnaire
which asks those completing it to rate the importance of each item on a scale of 1 (not
524 ❚ Performance management
360-degree feedback ❚ 525
important) to 6 (essential), and performance on a scale of 1 (weak in this area) to 6
(outstanding).
Data processing
Questionnaires are normally processed with the help of software developed within
the organization or, most commonly, provided by external suppliers. This enables the
data collection and analysis to be completed swiftly, with the minimum of effort and
in a way that facilitates graphical as well as numerical presentation.
Graphical presentation is preferable as a means of easing the process of assimi-
lating the data. The simplest method is to produce a profile as illustrated in Figure
34.2.
Some of the proprietary software presents feedback data in a much more elaborate
form.
Feedback
The feedback is often anonymous and may be presented to the individual (most
commonly), to the individual’s manager (less common) or to both the individual and
the manager. Some organizations do not arrange for feedback to be anonymous.
Whether or not feedback is anonymous depends on the organization’s culture – the
more open the culture, the more likely is the source of feedback to be revealed.
Gives useful feedback
Established good working relationship
Open to new ideas
Values others’ opinions
Recognizes achievements
1 2 3 4 5 6
Figure 34.2 360-degree feedback profile
526 ❚ Performance management
Action
The action generated by the feedback will depend on the purposes of the process, ie
development, appraisal or pay. If the purpose is primarily developmental, the action
may be left to individuals as part of their personal development plans, but the plan-
ning process may be shared between individuals and their managers if they both
have access to the information. Even if the data only goes to the individual, it can be
discussed in a performance review meeting so that joint plans can be made, and there
is much to be said for adopting this approach.
DEVELOPMENT AND IMPLEMENTATION
To develop and implement 360-degree feedback the following steps need to be taken:
1. Define objectives – it is important to define exactly what 360-degree feedback is
expected to achieve. It will be necessary to spell out the extent to which it is
concerned with personal development, appraisal or pay.
2. Decide on recipients – who is to be at the receiving end of feedback. This may be an
indication of who will eventually be covered after a pilot scheme.
3. Decide on who will give the feedback – the individual’s manager, direct reports, team
members, other colleagues, internal and external customers. A decision will also
have to be made on whether HR staff or outside consultants should take part in
helping managers to make use of the feedback. A further decision will need to be
made on whether or not the feedback should be anonymous (it usually is).
4. Decide on the areas of work and behaviour on which feedback will be given – this
may be in line with an existing competency model or it may take the form of a list
of headings for development. Clearly, the model should fit the culture, values
and type of work carried out in the organization. But it might be decided that a
list of headings or questions in a software package would be acceptable, at least
to start with.
5. Decide on the method of collecting the data – the questionnaire could be designed in-
house or a consultant’s or software provider’s questionnaire could be adopted,
with the possible option of amending it later to produce better fit.
6. Decide on data analysis and presentation – again, the decision is on developing the
software in-house or using a package. Most organizations installing 360-degree
feedback do, in fact, purchase a package from a consultancy or software house.
But the aim should be to keep it as simple as possible.
7. Plan initial implementation programme – it is desirable to pilot the process, prefer-
ably at top level or with all the managers in a function or department. The pilot
scheme will need to be launched with communications to those involved about
the purpose of 360-degree feedback, how it will work and the part they will play.
The aim is to spell out the benefits and, as far as possible, allay any fears. Training
in giving and receiving feedback will also be necessary.
8. Analyse outcome of pilot scheme – the reactions of those taking part in a pilot
scheme should be analysed and necessary changes made to the process, the
communication package and the training.
9. Plan and implement full programme – this should include briefing, communicating,
training and support from HR and, possibly, the external consultants.
10. Monitor and evaluate – maintain a particularly close watch on the initial imple-
mentation of feedback, but monitoring should continue. This is a process that can
cause anxiety and stress, or produce little practical gain in terms of development
and improved performance for a lot of effort.
360-DEGREE FEEDBACK – ADVANTAGES AND
DISADVANTAGES
The survey conducted by the Performance Management Group in 1997 (unpub-
lished) revealed that respondents believed the following benefits resulted from using
360-degree feedback:
● Individuals get a broader perspective of how they are perceived by others than
previously possible.
● Increased awareness of and relevance of competencies.
● Increased awareness by senior management that they too have development
needs.
● More reliable feedback to senior managers about their performance.
● Gaining acceptance of the principle of multiple stakeholders as a measure of
performance.
● Encouraging more open feedback – new insights.
● Reinforcing the desired competencies of the business.
● Provided a clearer picture to senior management of individual’s real worth
(although there tended to be some ‘halo’-effect syndromes).
● Clarified to employees critical performance aspects.
● Opens up feedback and gives people a more rounded view of performance than
they had previously.
● Identifying key development areas for the individual, a department and the
organization as a whole.
360-degree feedback ❚ 527
● Identify strengths that can be used to the best advantage of the business.
● A rounded view of an individual’s/team’s/the organization’s performance and
what its strengths and weaknesses are.
● It has raised the self-awareness of people managers of how they personally
impact upon others – positively and negatively.
● It is supporting a climate of continuous improvement.
● It is starting to improve the climate/morale, as measured through our employee
opinion survey.
● Focused agenda for development. Forced line managers to discuss development
issues.
● Perception of feedback as more valid and objective, leading to acceptance of
results and actions required.
But there may be problems. These include:
● people not giving frank or honest feedback;
● people being put under stress in receiving or giving feedback;
● lack of action following feedback;
● over-reliance on technology;
● too much bureaucracy.
These can all be minimized if not avoided completely by careful design, communica-
tion, training and follow-up.
360-DEGREE FEEDBACK – CRITERIA FOR SUCCESS
360-degree feedback is most likely to be successful when:
● it has the active support of top management who themselves take part in giving
and receiving feedback and encourage everyone else to do the same;
● there is commitment everywhere else to the process based on briefing, training
and an understanding of the benefits to individuals as well as the organization;
● there is real determination by all concerned to use feedback data as the basis for
development;
● questionnaire items fit or reflect typical and significant aspects of behaviour;
● items covered in the questionnaire can be related to actual events experienced by
the individual;
● comprehensive and well-delivered communication and training programmes are
followed;
528 ❚ Performance management
● no one feels threatened by the process – this is usually often achieved by making
feedback anonymous and/or getting a third-party facilitator to deliver the feed-
back;
● feedback questionnaires are relatively easy to complete (not unduly complex or
lengthy, with clear instructions);
● bureaucracy is minimized;
● 360-degree feedback is not limited to pay – its main purpose is developmental,
not financial reward.
360-degree feedback ❚ 529
Human resource
development
Human resource development (HRD) is concerned with the provision of learning,
development and training opportunities in order to improve individual, team and
organizational performance. HRD is essentially a business-led approach to developing
people within a strategic framework.
This part considers human resource development under the following headings:
● Strategic human resource development – definition, aims and activities.
● Organizational learning – the process of organizational learning and the concept
of the learning organization.
● How people learn – a review of learning theory as it affects individual learning.
● Learning and development – how organizations make arrangements for appro-
priate learning and development to take place by various means, including
training.
● E-learning – the use of electronic methods of supporting learning.
● Management development – improving the performance of managers, encour-
aging self-development and giving them opportunities for growth; the concept of
emotional intelligence and its relevance to the development of effective managers.
● Formulating and implementing learning and development strategies.
Part VIII
Strategic human resource
development
STRATEGIC HRD DEFINED
Strategic human resource management was defined by Hall (1984) as: ‘The identifica-
tion of needed skills and active management of learning for the long range future in
relation to explicit corporate and business strategy.’ A later definition was provided
by Walton (1999) as follows:
Strategic human resource development involves introducing, eliminating, modifying,
directing and guiding processes in such a way that all individuals and teams are
equipped with the skills, knowledge and competences they require to undertake current
and future tasks required by the organization.
As described by Harrison (2000), strategic HRD is ‘development that arises from a
clear vision about people’s abilities and potential and operates within the overall
strategic framework of the business’. Strategic HRD takes a broad and long-term
view about how HRD policies and practices can support the achievement of business
strategies. It is business-led and the learning and development strategies that are
established as part of the overall strategic HRD approach flow from business strate-
gies and have a positive role in helping to ensure that the business attains its goals.
35
STRATEGIC HRD AIMS
The fundamental aim of strategic HRD is to enhance resource capability in accor-
dance with the belief that the human capital of an organization is a major source of
competitive advantage. It is therefore about ensuring that the right quality people are
available to meet present and future needs. This is achieved by producing a coherent
and comprehensive framework for developing people.
The specific objectives of strategic HRD are to develop intellectual capital and
promote organizational, team and individual learning by creating a learning culture –
an environment in which employees are encouraged to learn and develop and in
which knowledge is managed systematically.
Although strategic HRD is business-led, its policies have to take into account indi-
vidual aspirations and needs. The importance of increasing employability outside as
well as within the organization is an important HRD policy consideration.
COMPONENTS OF HRD
534 ❚ Human resource development
Human resource development
Organizational
learning
Blended
learning
Training
Knowledge
management
Self-directed
learning
Workplace
training
Learning
organization
E-learning
Formal off-
the-job
training
Coaching
Mentoring
Figure 35.1 Components of human resource development
Management
development
Individual
learning and
development
HRD AND HRM
HRD policies are closely associated with that aspect of HRM that is concerned with
investing in people and developing the organization’s human capital. As Keep (1989)
says:
One of the primary objectives of HRM is the creation of conditions whereby the latent
potential of employees will be realized and their commitment to the causes of the orga-
nization secured. This latent potential is taken to include, not merely the capacity to
acquire and utilize new skills and knowledge, but also a hitherto untapped wealth of
ideas about how the organization’s operations might be better ordered.
THE PROCESS OF LEARNING AND DEVELOPMENT
Learning and development was defined by the CIPD (2001) as follows:
The organizational process of developing people involves the integration of learning and
development processes, operations and relationships. Its most powerful outcomes for
the business are to do with enhanced organizational effectiveness and sustainability. For
the individual they are to do with enhanced personal competence, adaptability and
employability. It is therefore a critical business process in for-profit or not-for-profit orga-
nizations.
The elements of this process are:
● Learning – defined by Bass and Vaughan (1966) as ‘a relatively permanent change
in behaviour that occurs as a result of practice or experience’.
● Education – the development of the knowledge, values and understanding
required in all aspects of life rather than the knowledge and skills relating to
particular areas of activity.
● Development – the growth or realization of a person’s ability and potential through
the provision of learning and educational experiences.
● Training – the planned and systematic modification of behaviour through learning
events, programmes and instruction, which enable individuals to achieve the
levels of knowledge, skill and competence needed to carry out their work effec-
tively.
Strategic human resource development ❚ 535
STRATEGIES FOR HRD
Strategic priorities
The strategic priorities for human resource development as defined by Harrison
(2005) are to:
● raise awareness of the need for a learning culture that leads to continuous
improvement;
● develop the competence of managers to become actively involved in learning that
leads to knowledge creation;
● expand learning capacity throughout the organization;
● focus on all the organization’s knowledge workers, not just the key personnel;
● harness e-learning to knowledge sharing and knowledge creation.
Development steps
The steps required to develop a learning and development strategy as described by
Harrison (2005) are:
1. Agree on the strategy-making team.
2. Clarify organizational mission.
3. Explore core values.
4. Identify the strategic issues facing the organization.
5. Agree on strategy and strategic plan.
Models for the delivery of the strategy
Carter et al (2002) suggest that the following models are available to deliver HRD
strategy:
● centralized – all learning and development activities are conducted and
controlled from the centre;
● key account holder – a small corporate centre is responsible for career manage-
ment and management development processes; key account holders are respon-
sible to the centre for delivering learning and training in business units;
● devolved – all learning and development activities are devolved to business
units;
● business partner – key account holders report to business unit;
536 ❚ Human resource development
● shared service – business units share common learning and development services
and specify what they want to the corporate centre;
● outsourced – training outsourced to providers by corporate centre or business
units;
● stakeholder – small corporate centre engages in transformational learning activi-
ties, separate shared service facilities are used, learning and development practi-
tioners act as business partners and specialized learning is outsourced.
HUMAN RESOURCE DEVELOPMENT PHILOSOPHY
A human resource development philosophy could be expressed in the following
terms:
Strategic human resource development ❚ 537
We believe that:
● Human resource development makes a major contribution to the successful
attainment of the organization’s objectives and that investment in it benefits
all the stakeholders of the organization.
● Human resource development plans and programmes should be integrated
with and support the achievement of business and human resource strategies.
● Human resource development should always be performance-related –
designed to achieve specified improvements in corporate, functional, team
and individual performance, and make a major contribution to bottom-line
results.
● Everyone in the organization should be encouraged and given the opportu-
nity to learn – to develop their skills and knowledge to the maximum of their
capacity.
● Personal development processes provide the framework for individual
learning.
● While we recognize the need to invest in learning and development and to
provide appropriate learning opportunities and facilities, the prime responsi-
bility for development rests with the individual, who will be given the guid-
ance and support of his or her manager and, as necessary, members of the HR
department.
Organizational learning and the
learning organization
Organizational learning theory is concerned with how learning takes place in organi-
zations. It focuses on collective learning but takes into account the proposition made
by Argyris (1992) that organizations do not perform the actions that produce the
learning; it is individual members of the organization who behave in ways that lead
to it, although organizations can create conditions which facilitate such learning. The
concept of organizational learning as discussed in the first section of this chapter
recognizes that the way in which this takes place is affected by the context of the orga-
nization and its culture.
The concept of a learning organization, which is often associated with that of
organizational learning, has been defined by Scarborough and Carter (2000) as one
‘that is able to discover what is effective by reframing its own experiences and
learning from that process’. The notion of the learning organization is sometimes
confused with the concept of organizational learning. However, Harrison (2002)
points out that it is often assumed that ‘the learning organization’ and ‘organizational
learning’ are synonymous processes, yet they are not.
36
ORGANIZATIONAL LEARNING
Organizational learning is defined by Easterby-Smith and Araujo (1999) as an ‘effi-
cient procedure to process, interpret and respond to both internal and external infor-
mation of a predominantly explicit nature’. Organizational learning is concerned
with the development of new knowledge or insights that have the potential to influ-
ence behaviour (Mabey and Salaman, 1995). It takes place within the wide institu-
tional context of inter-organizational relationships (Geppert, 1996), and ‘refers
broadly to an organization’s acquisition of understanding, know-how, techniques
and practices of any kind and by any means’ (Argyris and Schon, 1996).
Organizational learning theory examines how in this context individual and team
learning can be translated into an organizational resource and is therefore linked to
processes of knowledge management (see Chapter 12).
Organizational learning has been defined by Marsick (1994) as a process of ‘co-
ordinated systems change, with mechanisms built in for individuals and groups to
access, build and use organizational memory, structure and culture to develop long-
term organizational capacity’.
It is emphasized by Harrison (2000) that organizational learning is not simply the
sum of the learning of individuals and groups across the organization. She comments
that: ‘Many studies (see for example Argyris and Schon, 1996) have confirmed that
without effective processes and systems linking individual and organizational
learning, the one has no necessary counterpart with the other’.
Outcomes of organizational learning
Organizational learning outcomes contribute to the development of a firm’s resource-
based capability. This is in accordance with one of the basic principles of human
resource management, namely that it is necessary to invest in people in order to
develop the intellectual capital required by the organization and thus increase its
stock of knowledge and skills. As stated by Ehrenberg and Smith (1994), human
capital theory indicates that: ‘The knowledge and skills a worker has – which comes
from education and training, including the training that experience brings – generate
productive capital’.
Pettigrew and Whipp (1991) believe that the focus of organizational learning
should be on developing ‘organizational capability’. This means paying attention to
the intricate and often unnoticed or hidden learning that takes place and influences
what occurs within the organization. ‘Hidden learning’ is acquired and developed in
the normal course of work by people acting as individuals and, importantly, in
groups or ‘communities of practice’ (Wenger and Snyder, 2000).
540 ❚ Human resource development
The process of organizational learning
Organizational learning can be characterized as an intricate three-stage process
consisting of knowledge acquisition, dissemination and shared implementation
(Dale, 1994). Knowledge may be acquired from direct experience, the experience of
others or organizational memory.
Argyris (1992) suggests that organizational learning occurs under two conditions:
first, when an organization achieves what is intended, and second, when a mismatch
between intentions and outcomes is identified and corrected. He distinguishes
between single-loop and double-loop learning. These two types of learning have
been described by West (1996) as adaptive or generative learning.
Single-loop or adaptive learning is sequential, incremental and focused on issues
and opportunities that are within the scope of the organization’s activities. As
described by Argyris (1992), organizations where single-loop learning is the norm
define the ‘governing variables’ – what they expect to achieve in terms of targets and
standards – and then monitor and review achievements, and take corrective action as
necessary, thus completing the loop. Double-loop learning occurs when the moni-
toring process initiates action to redefine the ‘governing variables’ to meet the new
situation, which may be imposed by the external environment. The organization has
learnt something new about what has to be achieved in the light of changed circum-
stances, and can then decide how this should be achieved. This learning is converted
into action. The process is illustrated in Figure 36.1.
Organizational learning and the learning organization ❚ 541
Define expectations
Take action
Single-loop learning
Double-loop learning
Decide on corrective
action as necessary
Redefine expectations
as necessary
Monitor and
review
Figure 36.1 Single- and double-loop learning
Argyris believes that single-loop learning is appropriate for routine, repetitive issues
– ‘it helps get the everyday job done’. Double-loop learning is more relevant for
complex, non-programmable issues. As Pickard (1997) points out, double-loop
learning questions why the problem occurred in the first place, and tackles its root
causes, rather than simply addressing its surface symptoms, as happens with single-
loop learning.
Organizational learning takes place in a learning cycle as shown in Figure 36.2.
542 ❚ Human resource development
Agreeing
Working with
others to
explore
learning needs
Reviewing and
consultation
By considering
broader organizational
implications and
changing practices
Implementation
By all parties
fulfilling
their part of the
agreement
Modelling
Identifying with
other types of
learning
opportunities to
help respond to
Questioning
Exploring with
others the
outcomes and
behaviour
required
Negotiation
To agree rights and
opportunities to support
personal and team change
Figure 36.2 Managing learning to add value; the learning cycle
(Source: New Learning for New Work Consortium, Managing Learning for Added Value, IPD,
1999)
Principles of organizational learning
Harrison (1997) has defined five principles of organizational learning:
1. The need for a powerful and cohering vision of the organization to be communi-
cated and maintained across the workforce in order to promote awareness of the
need for strategic thinking at all levels.
2. The need to develop strategy in the context of a vision that is not only powerful
but also open-ended and unambiguous. This will encourage a search for a wide
rather than a narrow range of strategic options, will promote lateral thinking and
will orient the knowledge creating activities of employees.
3. Within the framework of vision and goals, frequent dialogue, communication
and conversations are major facilitators of organizational learning.
4. It is essential continuously to challenge people to re-examine what they take for
granted.
5. It is essential to develop a conducive learning and innovation climate.
THE LEARNING ORGANIZATION
The philosophy underpinning the learning organization concept, as expressed by
Garvin (1993), is that learning is an essential ingredient if organizations are to
survive; that learning at operational, policy and strategic levels needs to be conscious,
continuous and integrated; and that management is responsible for creating an
emotional climate in which all staff can learn continuously.
Definition of a learning organization
Senge (1990), who created the term, described a learning organization as one ‘where
people continually expand their capacity to create the results they truly desire, where
new and expansive patterns of thinking are nurtured, where collective aspiration is
set free, and where people are continually learning how to learn together’.
There have been many other definitions of a learning organization, all of which are
aspirational in the vein of Senge. Pedler et al (1991) state that a learning organization
is one ‘which facilitates the learning of all its members and continually transforms
itself’. Wick and Leon (1995) refer to a learning organization as one that ‘continually
improves by rapidly creating and refining the capabilities required for future
success’.
Garvin (1993) defines a learning organization as one which is ‘skilled at creating,
acquiring, and transferring knowledge, and at modifying its behaviour to reflect new
Organizational learning and the learning organization ❚ 543
knowledge and insights’. He believes that learning organizations ensure that they
learn from experience, develop continuous improvement programmes, use system-
atic problem-solving techniques, and transfer knowledge quickly and efficiently
throughout the organization by means of formal training programmes linked to
implementation.
As Burgoyne (1994) has pointed out, learning organizations have to be able to
adapt to their context and develop their people to match the context. Many indi-
vidual jobs could be learnt by processes of ‘natural discovery’ rather than formula
learning. His definition (1988a) of a learning organization is that it channels the career
and life-planning activities of individual managers in a way that allows the organiza-
tion to meet its strategic needs. This is done by encouraging the identification of indi-
vidual needs, organic formulation of business strategy with inputs from training
departments on current skills, and continual organizational review and learning from
experience. In 1999 he suggested that a learning organization ‘provides a healthy
environment for natural learning’.
Key principles of the learning organization
Miller and Stewart (1999) propose the following key principles of the learning organi-
zation:
● learning and business strategy are closely linked;
● the organization consciously learns from business opportunities and threats;
● individuals, groups and the whole organization are not only learning but also
learning how to learn;
● information systems and technology serve to support learning rather than control
it;
● there are well-defined processes for defining, creating, capturing, sharing and
acting on knowledge;
● these various systems and dimensions are balanced and managed as a whole.
Corporate universities provide one way of putting these principles into effect – they
offer an educational experience tailored to the specific needs of the organization, the
emphasis being on employees constantly engaging with learning and on educators
designing courses that will continuously motivate them, usually and sometimes
wholly in a virtual environment. The emphasis is on employees learning continu-
ously and on transferring knowledge quickly.
544 ❚ Human resource development
Developing a learning organization
One approach to the development of a learning organization, as advocated by Senge
(1990), is to focus on collective problem-solving within an organization using team
learning and a ‘soft systems’ approach whereby all the possible causes of a problem
are considered in order to define more clearly those which can be dealt with and
those which are insoluble.
Garratt (1990) believes that managers have to develop learning abilities as individ-
uals, and work and learn as teams. He advocates the use of development activities
such as job enlargement, job enrichment, monitoring, and various forms of team and
project-based work.
The learning organization and knowledge management
Learning organizations are very much concerned with developing and sharing the
knowledge that is critical to their strategic success. The problem is that it is hard to
capture tacit knowledge in the form of the deeply embedded amalgam of wisdom
and know-how that competitors are unable to copy. Methods of sharing knowledge
were described in Chapter 12. One approach, as advocated by Wenger and Snyder
(2000), is to encourage the development of ‘communities of practice’ in which people
with similar concerns exchange ideas and knowledge and discuss shared problems.
Wenger and Snyder claim that a community of practice could be treated as a ‘learning
ecology’ with a life of its own in which there is scope to reflect jointly on experience so
that it can be converted into learning.
Scarborough and Carter (2000) suggest that although the concepts of the learning
organization and organizational learning have offered some valuable insights into
the way in which knowledge and learning are fostered by management practice, they
have been overshadowed, at least in terms of practitioner interest, by the explosive
growth of knowledge management activity. They comment that:
This may be attributable to the problems of translating their (knowledge management
and organizational learning) broad, holistic principles into practice. Knowledge
management initiatives by contrast, are often more specifically targeted and can there-
fore be identified more closely with business needs.
Problems with the concept of the learning organization
The notion of the learning organization remains persuasive because of its ‘rationality,
human attractiveness and presumed potential to aid organizational effectiveness and
advancement’ (Harrison, 1997). But the concept has been criticized by Harrison
Organizational learning and the learning organization ❚ 545
(2005) because, ‘as usually defined, it suggests that organizations have a life of their
own and are themselves capable of learning, which is not the case’. Scarborough et al
(1999) argue that ‘the dominant perspective (of the learning organization concept) is
that of organization systems and design’. Little attention seems to be paid to what
individuals want to learn or how they learn. The idea that individuals should be
enabled to invest in their own development (a fundamental theme of human capital
theory) seems to have escaped learning organization theorists, who are more inclined
to focus on the imposition of learning by the organization, rather than creating a
climate conducive to collaborative and self-managed learning.
Viewing organizations as learning systems is a limited notion. Argyris and Schon
(1996) contend that organizations are products of visions, ideas, norms and beliefs so
that their shape is much more fragile than the organization’s material structure.
People act as learning agents for the organization in ways that cannot easily be
systematized. They are not only individual learners but also have the capacity to
learn collaboratively (Hoyle, 1995). Organization learning theory analyses how this
happens and leads to the belief that it is the culture and environment that are impor-
tant, not the systems approach implied by the concept of the learning organization.
Argyris and Schon (1996) refer to the practice-orientated and prescriptive literature of
the learning organization, which is quite different from the concerns of organizational
learning theorists about collaborative and informal learning processes within organi-
zations.
The notion of a learning organization is somewhat nebulous. It incorporates
miscellaneous ideas about human resource development, systematic training, action
learning, organizational development and knowledge management, with an infusion
of the precepts of total quality management. But they do not add up to a convincing
whole. Easterby-Smith (1997) argues that attempts to create a single best-practice
framework for understanding the learning organization are fundamentally flawed.
Prescriptions from training specialists and management consultants abound but, as
Sloman (1999) asserts, they often fail to recognize that learning is a continuous
process, not a set of discrete training activities.
Burgoyne (1999), one of the earlier publicists for the idea of a learning organization,
has admitted that there has been some confusion about the concept and that there
have been substantial naiveties in most of the early thinking: ‘The learning organiza-
tion has not delivered its full potential or lived up to all our aspirations’. He also
mentioned that after a decade of working with the notion of the learning organization
there are distressingly few, if any, case studies of success with the idea on a large
scale. He believes that the concept should be integrated with knowledge manage-
ment initiatives so that different forms of knowledge can be linked, fed by organiza-
tional learning and used in adding value to goods and services. This, he states, will
546 ❚ Human resource development
replace the ‘soft’ organizational development tools of the 1970s that were pressed
hurriedly into service; ‘The learning organization ran ahead of the methods available
to implement it and into this vacuum were sucked traditional approaches such as
teamworking, leadership and personal development.’
At least, however, the learning organization movement has helped to emphasize
the importance of knowledge management as a practical proposition for promoting
organizational learning. In added-value terms, this is likely to provide more benefit
to organizations than pursuing the will-o’-the-wisp of the learning organization as
originally conceived.
Organizational learning and the learning organization ❚ 547
How people learn
An understanding of how people learn is necessary if learning is to take place effec-
tively in an organization. The aims of this chapter are to:
● define the concept of learning;
● describe the process of learning;
● summarize the different ways in which people in general learn (learning theory);
● describe how individuals learn – their learning styles and ‘learning to learn’;
● examine the concept of the learning curve – how people achieve required skill
levels;
● discuss the key topic of the motivation to learn;
● describe the practical implications of these theories, concepts and approaches;
● set out the conditions for effective learning.
LEARNING DEFINED
Learning has been defined by Kim (1993) as the process of ‘increasing one’s capacity
to take action’. As explained by Reynolds et al (2002) it should be distinguished from
training: ‘Learning is the process by which a person acquires new knowledge, skills
and capabilities whereas training is one of several responses an organization can take
to promote learning.’
37
A distinction was also made between learning and development by Pedler et al
(1989), who see learning as being concerned with an increase in knowledge or a
higher degree of an existing skill, whereas development is more towards a different
state of being or functioning. Argyris (1993) makes the point that ‘Learning is not
simply having a new insight or a new idea. Learning occurs when we take effective
action, when we detect and correct error. How do you know when you know some-
thing? When you can produce what it is you claim to know.’
THE LEARNING PROCESS
A number of leading authorities on learning in organizations (Honey, 1998) have
declared that ‘learning is complex and various, covering all sorts of things such as
knowledge, skills, insights, beliefs, values, attitudes and habits’. Individuals learn for
themselves and learn from other people. They learn as members of teams and by
interaction with their managers, co-workers and people outside the organization.
People learn by doing and by instruction. The ways in which individuals learn differ,
and the extent to which they learn depends largely on how well they are externally
motivated or self-motivated.
The effectiveness of learning will be strongly influenced by the context in which it
takes place. This includes the values of the organization. Is it truly believed that
learning is important as a means of developing a high performance culture and
achieving competitive advantage? Is this belief confirmed by actions that encourage
and support learning? Is the approach to learning delivery in line with the belief of
Birchall and Lyons (1995) that ‘For effective learning to take place at the individual
level it is essential to foster an environment where individuals are encouraged to take
risks and experiment, where mistakes are tolerated, but where means exist for those
involved to learn from their experiences’?
LEARNING THEORY
There are a number of learning theories, each of which focuses on different aspects of
the learning process as applied to people in general. The main theories are concerned
with:
● reinforcement;
● cognitive learning;
● experiential learning;
● social learning.
550 ❚ Human resource development
Reinforcement theory
Reinforcement theory is based on the work of Skinner (1974). It expresses the belief
that changes in behaviour take place as a result of an individual’s response to events
or stimuli, and the ensuing consequences (rewards or punishments). Individuals can
be ‘conditioned’ to repeat the behaviour by positive reinforcement in the form of
feedback and knowledge of results.
Gagne (1977) later developed his stimulus-response theory, which relates the
learning process to a number of factors, including reinforcement, namely:
● Drive – there must be a basic need or drive to learn.
● Stimulus – people must be stimulated by the learning process.
● Response – people must be helped by the learning process to develop appropriate
responses; in other words, the knowledge, skills and attitudes that will lead to
effective performance.
● Reinforcement – these responses need to be reinforced by feedback and experience
until they are learnt.
Cognitive learning theory
Cognitive learning involves gaining knowledge and understanding by absorbing
information in the form of principles, concepts and facts, and then internalizing it.
Learners can be regarded as powerful information processing machines
Experiential learning theory
People are active agents of their own learning (Reynolds et al 2002). Experiential
learning takes place when people learn from their experience by reflecting on it so
that it can be understood and applied. Learning is therefore a personal ‘construction’
of meaning through experience. ‘Constructivists’ such as Rogers (1983) believe that
experiential learning will be enhanced through facilitation – creating an environment
in which people can be stimulated to think and act in ways that help them to make
good use of their experience.
Social learning theory
Social learning theory states that effective learning requires social interaction. Wenger
(1998) suggested that we all participate in ‘communities of practice’ (groups of people
with shared expertise who work together) and that these are our primary sources of
learning. Bandura (1977) views learning as a series of information processing steps
set in train by social interactions.
How people learn ❚ 551
LEARNING STYLES
Learning theories describe in general terms how people learn, but individual learners
will have different styles – a preference for a particular approach to learning. The two
most familiar classifications of learning styles are those produced by Kolb and by
Honey and Mumford.
Kolb’s learning style inventory
Kolb et al (1974) identified a learning cycle consisting of four stages as shown in
Figure 37.1. He defined these stages as follows:
● Concrete experience – this can be planned or accidental.
● Reflective observation – this involves actively thinking about the experience and its
significance.
● Abstract conceptualization (theorizing) – generalizing from experience in order to
develop various concepts and ideas which can be applied when similar situations
are encountered.
● Active experimentation – testing the concepts or ideas in new situations. This gives
rise to a new concrete experience and the cycle begins again.
552 ❚ Human resource development
Observations
and reflections
Testing implications
of concepts in new
situations
Concrete
experience
Formation of
abstract concepts
and generalizations
Figure 37.1 The Kolb learning cycle
The key to Kolb’s model is that it is a simple description of how experience is
translated into concepts which are then used to guide the choice of new experiences.
To learn effectively, individuals must shift from being observers to participants,
from direct involvement to a more objective analytical detachment. Every person
has his or her own learning style, and one of the most important arts that trainers
have to develop is to adjust their approaches to the learning styles of trainees.
Trainers must acknowledge these learning styles rather than their own preferred
approach.
Kolb also defined the following learning styles of trainees:
● Accommodators who learn by trial and error, combining the concrete experience
and experimentation stages of the cycle.
● Divergers who prefer concrete to abstract learning situations, and reflection to
active involvement. Such individuals have great imaginative ability, and can view
a complete situation from different viewpoints.
● Convergers who prefer to experiment with ideas, considering them for their prac-
tical usefulness. Their main concern is whether the theory works in action, thus
combining the abstract and experimental dimensions.
● Assimilators who like to create their own theoretical models and assimilate a
number of disparate observations into an overall integrated explanation. Thus
they veer towards the reflective and abstract dimensions.
The Honey and Mumford learning styles
Another analysis of learning styles was made by Honey and Mumford (1996). They
identified four styles:
● Activists who involve themselves fully without bias in new experiences and revel
in new challenges.
● Reflectors who stand back and observe new experiences from different angles.
They collect data, reflect on it and then come to a conclusion.
● Theorists who adapt and apply their observations in the form of logical theories.
They tend to be perfectionists.
● Pragmatists who are keen to try out new ideas, approaches and concepts to see if
they work.
However, none of these four learning styles is exclusive. It is quite possible that one
person could be both a reflector and a theorist, and someone else could be an
activist/pragmatist, a reflector/pragmatist or even a theorist/pragmatist.
How people learn ❚ 553
LEARNING TO LEARN
People learn all the time, and through doing so acquire knowledge, skills and in-
sight. But they will learn more effectively if they ‘learn how to learn’. As defined
by Honey (1998), the process of learning to learn is the acquisition of knowledge,
skills and insights about the learning process itself. The aims, as described by Honey,
are to:
● provide a basis for organizing and planning learning;
● pinpoint precisely what has been learnt and what to do better or differently as a
consequence;
● share what has been learnt with other people so that they benefit;
● check on the quality of what has been learnt;
● transfer what has been learnt and apply it in different circumstances;
● improve the learning process itself so that how people learn, not just what people
learn, is given constant attention.
THE LEARNING CURVE
The concept of the learning curve refers to the time it takes an inexperienced person
to reach the required level of performance in a job or a task. This is sometimes called
the experienced worker’s standard (ESW). The standard learning curve is shown in
Figure 37.2, but rates of learning vary, depending on the effectiveness of the learning
process, the experience and natural aptitude of the learner, and the latter’s interest in
learning. Both the time taken to reach the experienced worker’s standard and the
variable speed with which learning takes place at different times affect the shape of
the curve, as shown in Figure 37.3.
Learning is often stepped, with one or more plateaux while further progress is
halted. This may be because learners cannot continually increase their skills or speeds
of work and need a pause to consolidate what they have already learnt. The existence
of steps such as those shown in Figure 37.4 can be used when planning skills training,
to provide deliberate reinforcement periods when newly acquired skills are practised
in order to achieve the expected standards.
When a training module is being prepared which describes what has to be learnt
and the training required to achieve the required levels of skill and speed, it is often
desirable to proceed step by step, taking one task or part of a task at a time, rein-
forcing it and then progressively adding other parts, consolidating at each stage. This
is called the progressive parts method of training.
554 ❚ Human resource development
THE MOTIVATION TO LEARN
People will learn more effectively if they are motivated to learn. The motivation to
learn can be defined as ‘those factors that energise and direct behavioural patterns
organized around a learning goal’ (Rogers, 1996). As Reynolds et al (2002) comment,
’The disposition and commitment of the learner – their motivation to learn – is one of
How people learn ❚ 555
EWS
Performance
Time
Figure 37.2 A standard learning curve
EWS
Performance
Time
Figure 37.3 Different rates of learning
the most critical factors affecting learning and training effectiveness. Under the right
conditions, a strong disposition to learn, enhanced by solid experience and a positive
attitude, can lead to exceptional performance.’
Two motivation theories (described in Chapter 18) are particularly relevant to
learning. Expectancy theory states that goal-directed behaviour is driven by the
expectation of achieving something the individual regards as desirable. If individuals
feel that the outcome of learning is likely to benefit them, they will be more inclined
to pursue it. When they find that their expectations have been fulfilled, their
belief that learning is worthwhile will be reinforced. Goal theory states that motiva-
tion is higher when individuals aim to achieve specific goals, when these goals are
accepted and, although difficult, are achievable, and when there is feedback on
performance. Learning goals may be set for individuals (but to be effective as motiva-
tors they must be agreed), or individuals may set their own goals (self-directed
learning).
THE IMPLICATIONS OF LEARNING THEORY AND
CONCEPTS
The practical implications of the learning theories and concepts described above are
summarized in Table 37.1.
556 ❚ Human resource development
EWS
Performance
Time
Figure 37.4 A stepped learning curve
How people learn ❚ 557
Theory/concept Content Practical implications
The process of Learning is complex and is Different learning needs require different
learning achieved in many different ways. learning methods, often in combination.
The context is important Learning effectiveness depends on the
extent to which the organization believes
in learning and supports it
Reinforcement Behaviours can be strengthened Reinforcement theory underpins
theory by reinforcing them with positive training programmes concerned with
feedback (conditioning) developing skills through instruction.
In these, the learner is conditioned to
make a response and receives immediate
feedback, and progress is made in
incremental steps, each directed to a
positive outcome
Cognitive Learners acquire understanding The knowledge and understanding of
learning theory which they internalize by being learners can be enriched and
exposed to learning materials internalized by presenting them with
and by solving problems learning materials (eg e-learning). Case
studies, projects and problem solving
activities can also be used for this
purpose. Self-directed learning, personal
development planning activities and
discovery learning processes with help
from facilitators, coaches or mentors are
underpinned by cognitive learning
theory
Experiential People learn by constructing Learning through experience can be
learning theory meaning and developing their enhanced by encouraging learners to
skills through experience reflect on and make better use of what
they learn through their own work and
from other people. Self-directed learning
and personal development planning
activities with help from facilitators,
coaches or mentors are also
underpinned by experiential learning
theory, as is action learning
Table 37.1 The implications of learning theory and concepts
continued
558 ❚ Human resource development
Social learning Learning is most effective in a Learning can be encouraged in
theory social setting. Individual communities of practice, and in project
understanding is shaped by teams and networks
active participation in real
situations
Learning styles Every person has his or her Learning programmes need to be
own learning style adjusted to cope with different learning
styles. Trainers have also to flex their
methods. People will learn more
effectively if they are helped to ‘learn
how to learn’ by making the best use of
their own style, but also by
experimenting with other styles
The learning The time required to reach Recognize that progress may vary and
curve an acceptable standard of may not be continuous. Enable learners
skills or competence which to consolidate their learning, and
varies between people. introduce reinforcement periods in
Learning may proceed in steps training programmes to recognize the
with plateaux, rather than existence of learning steps and
being a continuous process plateaux
The motivation People need to be motivated Learners should be helped to develop
to learn to learn effectively learning goals and to understand the
benefits to them of achieving them.
Performance management processes
leading to personal development plans
can provide a means of doing this
Table 37.1 continued
Learning and development
This chapter is about how organizations make arrangements for appropriate learning
and development to take place by various means, including training. It is divided
into three sections: learning, development and training.
The formulation and implementation of learning and development strategies is
dealt with in Chapter 41.
LEARNING
Defined
Learning is the process by which a person acquires and develops new knowledge,
skills, capabilities and attitudes. As Williams (1998) defined it, ‘learning is goal
directed, it is based on experience, it impacts behaviour and cognition, and the
changes brought about are relatively stable’. Honey and Mumford (1996) explained
that: ‘Learning has happened when people can demonstrate that they know some-
thing that they did not know before (insights, realizations as well as facts) and when
they can do something they could not do before (skills)’. Mumford and Gold (2004)
emphasized that: ‘Learning is both a process and an outcome concerned with knowl-
edge, skills and insight.’
38
There are four types of learning:
1. Instrumental learning – learning how to do the job better once the basic standard
of performance has been attained. Helped by learning on the job.
2. Cognitive learning – outcomes based on the enhancement of knowledge and
understanding.
3. Affective learning – outcomes based on the development of attitudes or feelings
rather than knowledge.
4. Self-reflective learning – developing new patterns of understanding, thinking and
behaving and therefore creating new knowledge (Harrison, 2005).
Aim
The aim of the learning policies and programmes of an organization is to provide the
skilled, knowledgeable and competent people required to meet its present and future
needs. To achieve this aim it is necessary to ensure that learners are ready to learn,
understand what they need to know and be able to do, and are able to take responsi-
bility for their learning by making good use of the learning resources available,
including the support and guidance of their line managers.
Philosophy
The philosophy of learning was expressed by Sloman (2003a) as follows:
Interventions and activities that are intended to improve knowledge and skills will
increasingly focus on the learner. Emphasis will shift to the individual learner (or team).
And he or she will be encouraged to take more responsibility for his or her learning.
Efforts will be made to develop a climate that supports effective and appropriate
learning. Such interventions and activities will form part of an integrated approach to
creating competitive advantage through people in the organization.
Learning and development
Learning is a continuous process that not only enhances existing capabilities but also
leads to the development of the skills, knowledge and attitudes that prepare people
for enlarged or higher-level responsibilities in the future.
Learning and training
The encouragement of learning makes use of a process model that is concerned with
facilitating the learning activities of individuals and providing learning resources for
560 ❚ Human resource development
them to use. Conversely, the provision of training involves the use of a content model,
which means deciding in advance the knowledge and skills that need to be enhanced
by training, planning the programme, deciding on training methods and presenting
the content in a logical sequence through various forms of instruction. A distinction is
made by Sloman (2003a) between learning that ‘lies within the domain of the indi-
vidual’ and training that ‘lies within the domain of the organization’. Today, the
approach is to focus on individual learning and ensure that it takes place when
required – ‘ just-for-you’ and ‘just-in-time’ learning.
Conditions for effective learning
The conditions required for learning to be effective, as derived from the learning
theories and concepts described in Chapter 37, are set out below.
Motivation to learn
Individuals must be motivated to learn. They should be aware that their present level
of knowledge, skill or competence, or their existing attitude or behaviour, need to be
developed or improved if they are to perform their work to their own and to others’
satisfaction. They must, therefore, have a clear picture of the behaviour they should
adopt. To be motivated, learners must gain satisfaction from learning. They are most
capable of learning if it satisfies one or more of their needs. Conversely, the best
learning programmes can fail if they are not seen as useful by those undertaking
them.
Self-directed learning
Self-directed or self-managed learning involves encouraging individuals to take
responsibility for their own learning needs, either to improve performance in their
present job or to develop their potential and satisfy their career aspirations. It can be
based on a process of recording achievement and action planning that involves indi-
viduals reviewing what they have learnt, what they have achieved, what their goals
are, how they are going to achieve those goals and what new learning they need to
acquire. The learning programme can be ‘self-paced’ in the sense that learners can
decide for themselves up to a point the rate at which they work and are encouraged
to measure their own progress and adjust the programme accordingly.
Self-directed learning is based on the principle that people learn and retain more if
they find things out for themselves. But they still need to be given guidance on what
to look for and help in finding it. Learners have to be encouraged to define, with
whatever help they may require, what they need to know to perform their job
Learning and development ❚ 561
effectively. They need to be provided with guidance on where they can get the
material or information that will help them to learn and how to make good use of it.
Personal development plans, as described later in this chapter, can provide a frame-
work for this process. They also need support from their manager and the organiza-
tion with the provision of coaching, mentoring and learning facilities, including
e-learning.
Self-directed learning can also be described as self-reflective learning (Mezirow,
1985), which is the kind of learning that involves encouraging individuals to develop
new patterns of understanding, thinking and behaving. It is a process which was
described by Argyris (1992) as double-loop learning, which is based on an examina-
tion of the root causes of problems and can create a new learning loop that goes far
deeper than the traditional learning loop provided by ‘instrumental learning’
(ie learning how to perform a job better) which tends only to focus on the surface
symptoms of a problem.
Learning goals, direction and feedback
Effective learning is more likely to be achieved if learners have learning goals. They
should have targets and standards of performance that they find acceptable and
achievable and can use to judge their own progress. They should be encouraged and
helped to set their own goals. The learning outcome must be clear.
Learners need a sense of direction and feedback on how they are doing. They
should receive reinforcement of correct behaviour. Self-motivated individuals may
provide much of this for themselves, but it is necessary to have a learning facilitator,
eg a mentor, who is available to encourage and help when necessary. Learners
usually need to know quickly how well they are doing. In a prolonged programme,
intermediate steps are required in which learning can be reinforced. The content of
the learning programme may therefore need to be broken down into small modules
or elements, each with an objective.
Learning methods
The learning goals and the particular needs and learning style of the learner should
indicate what learning method or methods should be used. Specific goals and under-
standing of individual needs help to select appropriate learning methods. It should
not be assumed that a single learning method will do. A combination of methods is
likely to produce better results. The use of a variety of methods, as long as they are all
appropriate, helps learning by engaging the interest of learners.
Learning is ‘personal, subjective and inseparable from activity’ (Reynolds, 2004). It
is an active, not a passive process. As far as possible, therefore, the learning process
562 ❚ Human resource development
should be active, although this may take more time than passive methods in which
the learner is at the receiving end of some form of training, eg instruction. The more
complex the skill to be mastered, the more the learning methods need to be active.
Learning requires time to assimilate, test and accept. This time should be provided in
the learning programme.
Levels of learning
Different levels of learning exist and these need different methods and take different
times. At the simplest level, learning requires direct physical responses, memoriza-
tion and basic conditioning. At a higher level, learning involves adapting existing
knowledge or skill to a new task or environment. At the next level, learning becomes
a complex process when principles are identified in a range of practices or actions,
when a series of isolated tasks have to be integrated, or when the process is about
developing interpersonal skills. The most complex form of learning takes place when
learning is concerned with the values and attitudes of people and groups. This is not
only the most complex area, but also the most difficult.
Blending learning
Blending different but appropriate types of learning produces the best results.
Spectrum of learning – from informal to formal
There is a spectrum of learning as defined by Watkins and Marsick (1993), from
informal to formal, as follows:
● unanticipated experiences and encounters that result in learning as an incidental
by-product, which may or may not be consciously recognized;
● new job assignments and participation in teams, or other job-related challenges
that provide for learning and self-development;
● self-initiated and self-planned experiences, including the use of media and
seeking out a coach or mentor;
● total quality or improvement groups/active learning designed to promote contin-
uous learning for continuous improvement;
● providing a framework for learning associated with personal development plan-
ning or career planning;
● the combination of less-structured with structured opportunities to learn from
these experiences;
● designed programmes of mentoring, coaching or workplace learning;
● formal training programmes or courses involving instruction.
Learning and development ❚ 563
Informal learning
Informal learning is experiential learning. Most learning does not take place in formal
training programmes. People can learn 70 per cent of what they know about their job
informally, through processes not structured or sponsored by the organization.
A study by Eraut et al (1998) established that in organizations adopting a learner-
centred perspective, formal education and training provided only a small part of
what was learnt at work. Most of the learning described to the researchers was non-
formal, neither clearly specified nor planned. It arose naturally from the challenges of
work. Effective learning was, however, dependent on the employees’ confidence,
motivation and capability. Some formal training to develop skills (especially induc-
tion training) was usually provided, but learning from experience and other people at
work predominated. Reynolds (2004) notes that:
The simple act of observing more experienced colleagues can accelerate learning;
conversing, swapping stories, co-operating on tasks and offering mutual support deepen
and solidify the process… This kind of learning – often very informal in nature – is
thought to be vastly more effective in building proficiency than more formalized training
methods.
The advantages of informal learning are that:
● learning efforts are relevant and focused in the immediate environment;
● understanding can be achieved in incremental steps rather than in indigestible
chunks;
● learners define how they will gain the knowledge they need – formal learning is
more packaged;
● learners can readily put their learning into practice.
The disadvantages are that:
● it may be left to chance – some people will benefit, some won’t;
● it can be unplanned and unsystematic, which means that it will not necessarily
satisfy individual or organizational learning needs;
● learners may simply pick up bad habits.
Workplace learning
Informal learning occurs in the workplace and, as explained by Stern and Sommerlad
(1999), this takes three forms:
564 ❚ Human resource development
1. The workshop as a site for learning. In this case, learning and working are spatially
separated with some form of structured learning activity occurring off or near the
job. This may be in a company training centre or a ‘training island’ on the shop
floor where the production process is reproduced for trainees.
2. The workplace as a learning environment. In this approach, the workplace itself
becomes an environment for learning. Various on-the-job training activities take
place, which are structured to different degrees. Learning is intentional and
planned, aimed at training employees by supporting, structuring and moni-
toring their learning.
3. Learning and working are inextricably mixed. In this case, learning is informal. It
becomes an everyday part of the job and is built into routine tasks. Workers
develop skills, knowledge and understanding through dealing with the chal-
lenges posed by the work. This can be described as continuous learning. As
Zuboff (1988) put it: ‘Learning is not something that requires time out from being
engaged in productive activity; learning is the heart of productive activity.’
Formal learning
Formal learning is planned and systematic and involves the use of structured training
programmes consisting of instruction and practice.
Informal and formal learning compared
A comparison between informal and formal learning is shown in Table 38.1.
Learning and development ❚ 565
Informal Formal
Highly relevant to individual needs Relevant to some, not so relevant to others
Learners learn according to need All learners learn the same thing
May be small gap between current and May be variable gaps between current and
target knowledge target knowledge
Learner decides how learning will occur Trainer decides how learning will occur
Immediate applicability (‘Just-in-time’ learning) Variable times, often distant
Learning readily transferable Problems may occur in transferring learning
to the workplace
Occurs in work setting Often occurs in non-work setting
Table 38.1 Characteristics of formal and informal learning
Learning programmes
Learning programmes are concerned with:
● defining the objectives of learning;
● creating an environment in which effective learning can take place (a learning
culture);
● making use of blended learning approaches;
● adopting a systematic, planned and balanced approach to the delivery of
learning;
● identifying learning and development needs;
● satisfying these needs by delivering blended different learning, development and
training processes including e-learning;
● evaluating the effectiveness of those processes.
As mentioned earlier, learning is a continuous process and much of it arises from day-
to-day experience in the workplace. But this learning may be haphazard, inappro-
priate and fail to meet the short and longer-term needs of either the individual or the
organization. A laissez-faire approach by the organization could be highly unsatisfac-
tory if it does not ensure that these needs are met by whatever means are available.
Experiential learning will be enhanced if the climate in the organization is supportive,
and an important aspect of a learning and development strategy will be creating such
a climate, as discussed later in this chapter. But it will also be extended if individuals
are helped to identify their own learning needs and provided with guidance on how
they can be met using various means. As described below, the learning programme
can concentrate on making the best use of workplace learning opportunities,
ensuring that people are aware of what they need to learn and providing them with
encouragement and support, agreeing learning contracts, and enhancing learning
through coaching or mentoring. These activities should be used as part of a blended
approach, which is discussed below.
Making the most of learning opportunities
Learning opportunities occur all the time and the challenge is to ensure that people
make the most of them. Some will need no encouragement. Others will have to be
helped. Line managers or team leaders have a crucial role in encouraging and
supporting learning. They can do this within the relatively formal setting of a
performance and development review. Or, better still, they can consciously promote
learning from day-to-day events when they discuss how a task might be done,
when they analyse information on outcomes with individuals, and when they ask
566 ❚ Human resource development
individuals to tell them what they have learnt from an event and what it tells them
about any additional learning required. But it is necessary to ensure that line
managers are aware of the need to promote learning and have the will and the skills
to do it.
Identifying and meeting learning needs
It is necessary to ensure that people are aware of what they need to learn to carry out
their present role and to develop in the future. This starts with induction and involves
the specification of learning programmes and the planning of learning events, with
an emphasis on self-directed learning accompanied by a blend of other learning
approaches as appropriate. It continues with performance and development reviews
that identify learning needs and define how they will be met, again by self-managed
learning as far as possible but making use of coaching, mentoring and formal training
courses as required.
Learning contract
A learning contract is a formal agreement between the manager and the individual on
what learning needs to take place, the objectives of such learning and what part the
individual, the manager, the training department or a mentor will play in ensuring
that learning happens. The partners to the contract agree on how the objectives will
be achieved and their respective roles. It will spell out learning programmes and indi-
cate what coaching, mentoring and formal training activities should be carried out. It
is, in effect, a blueprint for learning. Learning contracts can be part of a personal
development planning process, as described later in this chapter.
Coaching
The Industrial Society (1999) defines coaching as: ‘The art of facilitating the enhanced
performance, learning and development of others.’ It takes the form of a personal
(usually one-to-one) on-the-job approach to helping people develop their skills and
levels of competence. Hirsh and Carter (2002) state that coaching is aimed at the rapid
improvement of skills, behaviour and performance, usually for the present job. A
structured and purposeful dialogue is at the heart of coaching. The coach uses feed-
back and brings an objective perspective. They noted that the boundaries between
what a coach, mentor, counsellor or organization development consultant do are
inevitably blurred – they all use similar skills.
The need for coaching may arise from formal or informal performance reviews but
opportunities for coaching will emerge during normal day-to-day activities.
Coaching as part of the normal process of management consists of:
Learning and development ❚ 567
● making people aware of how well they are performing by, for example, asking
them questions to establish the extent to which they have thought through what
they are doing;
● controlled delegation – ensuring that individuals not only know what is expected
of them but also understand what they need to know and be able to do to
complete the task satisfactorily; this gives managers an opportunity to provide
guidance at the outset – guidance at a later stage may be seen as interference;
● using whatever situations may arise as opportunities to promote learning;
● encouraging people to look at higher-level problems and how they would tackle
them.
A common framework used by coaches is the GROW model:
‘G’ is for the goal of coaching, which needs to be expressed in specific measurable
terms that represent a meaningful step towards future development.
‘R’ is for the reality check – the process of eliciting as full a description as possible of
what the person being coached needs to learn.
‘O’ is for option generation – the identification of as many solutions and actions as
possible.
‘W’ is for wrapping up – when the coach ensures that the individual being coached is
committed to action.
Coaching will be most effective when the coach understands that his or her role is
to help people to learn and individuals are motivated to learn. They should be
aware that their present level of knowledge or skill or their behaviour needs to be
improved if they are going to perform their work satisfactorily. Individuals should be
given guidance on what they should be learning and feedback on how they are doing
and, because learning is an active not a passive process, they should be actively
involved with their coach who should be constructive, building on strengths and
experience.
Coaching may be informal but it has to be planned. It is not simply checking from
time to time on what people are doing and then advising them on how to do it better.
Nor is it occasionally telling people where they have gone wrong and throwing in a
lecture for good measure. As far as possible, coaching should take place within the
framework of a general plan of the areas and direction in which individuals will
benefit from further development. Coaching plans can and should be incorporated
into the personal development plans set out in a performance agreement.
Coaching should provide motivation, structure and effective feedback if managers
have the required skills and commitment. As coaches, managers believe that people
568 ❚ Human resource development
can succeed, that they can contribute to their success and that they can identify what
people need to be able to do to improve their performance.
Mentoring
Mentoring is the process of using specially selected and trained individuals to
provide guidance, pragmatic advice and continuing support, which will help the
person or persons allocated to them to learn and develop. It has been defined by
Clutterbuck (2004) as: ‘Off-line help from one person to another in making significant
transitions in knowledge, work or thinking.’ Hirsh and Carter (2002) suggest that
mentors prepare individuals to perform better in the future and groom them for
higher and greater things, ie career advancement.
Mentoring can be defined as a method of helping people to learn, as distinct from
coaching, which is a relatively directive means of increasing people’s competence. It
involves learning on the job, which must always be the best way of acquiring the
particular skills and knowledge the job holder needs. Mentoring also complements
formal training by providing those who benefit from it with individual guidance
from experienced managers who are ‘wise in the ways of the organization’.
Mentors provide people with:
● advice in drawing up self-development programmes or learning contracts;
● general help with learning programmes;
● guidance on how to acquire the necessary knowledge and skills to do a new job;
● advice on dealing with any administrative, technical or people problems individ-
uals meet, especially in the early stages of their careers;
● information on ‘the way things are done around here’ – the corporate culture and
its manifestations in the shape of core values and organizational behaviour
(management style);
● coaching in specific skills;
● help in tackling projects – not by doing it for them, but by pointing them in the
right direction: helping people to help themselves;
● a parental figure with whom individuals can discuss their aspirations and
concerns and who will lend a sympathetic ear to their problems.
There are no standard mentoring procedures, although it is essential to select mentors
who are likely to adopt the right non-directive but supportive help to the person or
persons they are dealing with. They must then be carefully briefed and trained in
their role.
Learning and development ❚ 569
Blended learning
Blended learning is defined by Sloman (2003b) as: ‘An approach to training design
that involves the use of a combination of delivery methods and in some cases
learning methodology.’ Schramm (2001) describes it as: ‘The combination of different
modes of delivery that take into account the learner’s environment, motivation and
learning styles with different theoretical approaches. This creates a multi-layered and
richer palette of learning methods.’ Blended learning aims to make the different parts
of the learning mix complementary and mutually supportive in meeting learning
needs.
Recognition of the need to blend learning avoids the pitfall of over-reliance on
one approach. It means using conventional instruction, e-learning and self-
directed learning as well as experiential learning. The aim is to inspire and motivate
learners over extended periods of time and through an appropriate mix of inputs and
outputs, individual and collaborative study, formal and informal processes, and a
blend of face-to-face and virtual contact. Focus on the learner is achieved by taking
special care to provide them with support and guidance from their managers,
coaches and mentors and to complement this with the provision of e-learning
material.
A blended programme might be planned for an individual using a mix of self-
managed learning activities defined in a personal development plan, e-learning facil-
ities, group action learning activities, coaching or mentoring, and instruction
provided in an in-company course or externally. Generic training for groups of
people might include e-learning, planned instruction programmes, planned experi-
ence, and selected external courses. Within a training course a complementary mix of
different training activities might take place; for example a skills development course
for managers or team leaders might include some instruction on basic principles but
much more time would be spent on case studies, simulations, role-playing and other
exercises.
DEVELOPMENT
Development is an unfolding process that enables people to progress from a present
state of understanding and capability to a future state in which higher-level
skills, knowledge and competencies are required. It takes the form of learning activi-
ties that prepare people to exercise wider or increased responsibilities. It does not
concentrate on improving performance in the present job. Development has been
defined by Harrison (2000) as: ‘Learning experiences of any kind, whereby individ-
uals and groups acquire enhanced knowledge, skills, values or behaviours. Its
570 ❚ Human resource development
outcomes unfold through time, rather than immediately, and they tend to be long-
lasting.’
In development programmes there is an emphasis on personal development plan-
ning and planned learning from experience. Use may be made of a ‘corporate univer-
sity’. Development can also focus on managers and take the form of action learning
or outdoor learning. To maximize the impact of development a balanced approach is
necessary, using a mix of learning methods as described in the previous section of this
chapter.
Personal development planning
Personal development planning is carried out by individuals with guidance, encour-
agement and help from their managers as required. A personal development plan sets
out the actions people propose to take to learn and to develop themselves. They take
responsibility for formulating and implementing the plan, but they receive support
from the organization and their managers in doing so. The purpose is to provide
what Tamkin et al (1995) call a ‘self-organized learning framework’.
Personal development planning consists of the following stages, as modelled in
Figure 38.1:
1. Analyse current situation and development needs. This can be done as part of a
performance management process.
2. Set goals. These could include improving performance in the current job,
improving or acquiring skills, extending relevant knowledge, developing speci-
fied areas of competence, moving across or upwards in the organization,
preparing for changes in the current role.
3. Prepare action plan. The action plan sets out what needs to be done and how it will
be done under headings such as outcomes expected (learning objectives), the
development activities, the responsibility for development (what individuals are
expected to do and the support they will get from their manager, the HR depart-
ment or other people), and timing. A variety of activities tuned to individual
needs should be included in the plan, for example: observing what others do,
project work, planned use of e-learning programmes and internal learning
resource centres, working with a mentor, coaching by the line manager or team
leader, experience in new tasks, guided reading, special assignments and action
learning. Formal training to develop knowledge and skills may be part of the
plan but it is not the most important part.
4. Implement. Take action as planned.
Learning and development ❚ 571
The plan can be expressed in the form of a learning contract as described earlier in this
chapter.
Planned experience
Experiential learning can take place by planning a sequence of experience that meets
a learning specification for acquiring knowledge and skills that will prepare people to
take on increased responsibilities in the same or different functions and occupations.
A programme is drawn up which sets down what people are expected to learn in each
department or job in which they are given experience. This should spell out what
they are expected to discover for themselves. A suitable person should be available to
see that people in a development programme are given the right experience and
opportunity to learn, and arrangements should be made to check progress. A good
way of stimulating people to find out for themselves is to provide them with a list of
questions to answer. It is essential, however, to follow up each segment of experience
to check what has been learnt and, if necessary, modify the programme.
Planned experience used to be known as ‘job rotation’, but was often an inefficient
and frustrating method of acquiring additional knowledge and skills. What
has sometimes been referred to as the ‘Cook’s tour’ method of moving trainees
from department to department has incurred much justified criticism because of
the time wasted by them in locations where no one knew what to do with them, or
cared.
572 ❚ Human resource development
Set goals
Assess current position
Implement
Plan action
▲
▲
▲
▲
Figure 38.1 Stages in preparing and implementing a personal development plan
Corporate university
A corporate university is an institution set up and run by an organization, often with
outside help, in which education and learning takes place. As Carter et al (2002) point
out:
The term ‘corporate university’ is interpreted in different ways. For some, it is specific
and refers to the use of academic terminology to describe and raise the status of training
and development and, perhaps, also implies a relationship with one or more ‘real’
conventional universities who co-design or accredit the company’s programmes. For
others, the term is interpreted more broadly as an umbrella that describes the creation
and marketing of internal brands for all the learning and development opportunities an
organization provides.
For example, BAe Systems operates a virtual university, which has a strategic part-
nership policy that allows them to co-design programmes with the help of conven-
tional universities. In contrast, Lloyds TSB runs its training function just as though it
were a university, with faculties for each development area, the aim being to align
training and development with business strategy and use the concept as an internal
brand, letting employees know that it is investing in them.
Action learning
Action learning, as developed by Revans (1971), is a method of helping managers
develop their talents by exposing them to real problems. They are required to analyse
them, formulate recommendations, and then take action. It accords with the belief
that managers learn best by doing rather than being taught.
In 1989 Revans produced the following formula to describe his concept: L
(learning) = P (programmed learning) + Q (questioning, insight). He suggests that the
concept is based on six assumptions:
1. Experienced managers have a huge curiosity to know how other managers
work.
2. We learn not as much when we are motivated to learn, as when we are motivated
to learn something.
3. Learning about oneself is threatening and is resisted if it tends to change one’s
self-image. However, it is possible to reduce the external threat to a level that no
longer acts as a total barrier to learning about oneself.
4. People learn only when they do something, and they learn more the more
responsible they feel the task to be.
Learning and development ❚ 573
5. Learning is deepest when it involves the whole person – mind, values, body,
emotions.
6. The learner knows better than anyone else what he or she has learnt. Nobody else
has much chance of knowing.
A typical action learning programme brings together a group, or ‘set’ of four or
five managers to solve the problem. They help and learn from each other, but an
external consultant, or ‘set adviser’, sits in with them regularly. The project may
last several months, and the set meets frequently, possibly one day a week. The
adviser helps the members of the set to learn from one another and clarifies the
process of action learning. This process involves change embedded in the web of rela-
tionships called ‘the client system’. The web comprises at least three separate
networks: the power network, the information network, and the motivational
network (this is what Revans means by ‘who can, who knows, and who cares’). The
forces for change are already there within the client system and it is the adviser’s role
to point out the dynamics of this system as the work of diagnosis and implementation
proceeds.
The group or set has to manage the project like any other project, deciding on objec-
tives, planning resources, initiating action and monitoring progress. But all the time,
with the help of their adviser, they are learning about the management processes
involved as they actually happen.
Outdoor learning
Outdoor learning involves exposing individuals to various ‘Outward Bound’ type
activities: sailing, mountain walking, rock climbing, canoeing, caving, etc. It means
placing participants, operating in teams, under pressure to carry out physical activi-
ties that are completely unfamiliar to them. The rationale is that these tests are para-
digms of the sort of challenges people have to meet at work, but their unfamiliar
nature means that they can learn more about how they act under pressure as team
leaders or team members. Outdoor learning involves a facilitator helping participants
to learn individually and collectively from their experiences.
Impact of development – a balanced approach
A balanced approach is required to maximize the impact of development on
engagement and performance. This is illustrated in Figure 38.2, adapted from Walker
(2004).
574 ❚ Human resource development
TRAINING
Training is the use of systematic and planned instruction activities to promote
learning. The approach can be summarized in the phrase ‘learner-based training’. It
involves the use of formal processes to impart knowledge and help people to acquire
the skills necessary for them to perform their jobs satisfactorily. It is described as one
of several responses an organization can undertake to promote learning.
As Reynolds (2004) points out, training has a complementary role to play in accel-
erating learning: ‘It should be reserved for situations that justify a more directed,
Learning and development ❚ 575
DEVELOPMENT IMPACT
● Training
● Workshops
● E-learning
● Leadership
● Co-workers
● Development
in role
● Transfor of
learning
● Development of
learning culture
● Feedback
● Coaching
● Mentoring
● Workplace
learning
● Projects
● Stretch
assignments
● Role
enlargement
● Job change
Training-based Relationship-based Experienced-based
10% 20% 70%
Figure 38.2 Impact of development
expert-led approach rather than viewing it as a comprehensive and all-pervasive
people development solution.’ He also commented that the conventional training
model has a tendency to ‘emphasize subject-specific knowledge, rather than trying to
build core learning abilities’.
The justification for training
Formal training is indeed only one of the ways of ensuring that learning takes place,
but it can be justified when:
● the work requires skills that are best developed by formal instruction;
● different skills are required by a number of people, which have to be developed
quickly to meet new demands and cannot be acquired by relying on experience;
● the tasks to be carried out are so specialized or complex that people are unlikely
to master them on their own initiative at a reasonable speed;
● critical information must be imparted to employees to ensure they meet their
responsibilities;
● a learning need common to a number of people has to be met, which can readily
be dealt with in a training programme, for example induction, essential IT skills,
communication skills.
Transferring training
It has been argued (Reynolds, 2004) that: ‘The transfer of expertise by outside experts
is risky since their design is often removed from the context in which work is created.’
This is a fundamental problem and applies equally to internally run training courses
where what has been taught can be difficult for people to apply in the entirely
different circumstances in their workplace. Training can seem to be remote from
reality and the skills and knowledge acquired can appear to be irrelevant. This partic-
ularly applies to management or supervisory training, but even the manual skills
learnt in a training centre may be difficult to transfer.
This problem can be tackled by making the training as relevant and realistic as
possible, anticipating and dealing with any potential transfer difficulties. Individuals
are more likely to apply learning when they do not find it too difficult, believe what
they learnt is relevant, useful and transferable, are supported by line managers, have
job autonomy, believe in themselves and are committed and engaged. Transfer is also
more likely if systematic training and ‘just-in-time training’ approaches are used, as
described below.
576 ❚ Human resource development
Systematic training
Training should be systematic in that it is specifically designed, planned and imple-
mented to meet defined needs. It is provided by people who know how to train and
the impact of training is carefully evaluated. The concept was originally developed
for the industrial training boards in the 1960s and consists of a simple four-stage
model, as illustrated in Figure 38.3:
1. Identify training needs.
2. Decide what sort of training is required to satisfy these needs.
3. Use experienced and trained trainers to implement training.
4. Follow up and evaluate training to ensure that it is effective.
Just-in-time training
Just-in-time training is training that is closely linked to the pressing and relevant
needs of people by its association with immediate or imminent work activities. It is
delivered as close as possible to the time when the activity is taking place. The
training will be based on an identification of the latest requirements, priorities and
plans of the participants, who will be briefed on the live situations in which their
learning has to be applied. The training programme will take account of any transfer
Learning and development ❚ 577
Techniques Facilities Locations Trainers
1 Identify training needs
2 Plan training programmes
3 Implement training
4 Evaluate training
Figure 38.3 Systematic training model
issues and aim to ensure that what is taught is seen to be applicable in the current
work situation.
Types of training
Training programmes or events can be concerned with any of the following:
● manual skills;
● IT skills;
● team leader or supervisory training;
● management training;
● interpersonal skills, eg leadership, teambuilding, group dynamics, neuro-
linguistic programming;
● personal skills, eg assertiveness, coaching, communicating, time management;
● training in organizational procedures or practices, eg induction, health and safety,
performance management, equal opportunity or managing diversity policy and
practice.
Effective training practices
Effective training uses the systematic approach defined above with an emphasis on
skills analysis. The purpose of the training should be clearly defined in terms of the
‘criterion behaviour’ required as a result of training, and the ‘terminal behaviour’
expected. The latter can be expressed as a statement along the lines of: ‘On
completing this training the participant will be able to…’. Defining criterion and
terminal behaviours will provide the basis for evaluation, which is an essential
element in the achievement of successful training.
The content of the training should be related to the work contexts of the partici-
pants. Ideally, their work should be made a central feature of the subject matter. Every
opportunity should be taken to embed learning at work.
The training techniques used should be appropriate to the purpose of the course
and to the characteristics of participants – their jobs, learning needs, previous experi-
ence, level of knowledge and skills, and how receptive they will be to being taught
(motivated to learn). A blend of different techniques should be used where appro-
priate. It is particularly important in management, supervisory and interpersonal
skills training to provide ample time for participation and active learning through
discussion, case studies and simulations. Lectures should form a minor part of the
course. Good instructional techniques as described below should be used in manual
skills training.
578 ❚ Human resource development
Training techniques
Instruction
Job instruction techniques should be based on skills analysis and learning theory,
as discussed in Chapters 13 and 37. The sequence of instruction should follow six
stages:
1. Preparation for each instruction period means that the trainer must have a plan
for presenting the subject matter and using appropriate teaching methods, visual
aids and demonstration aids. It also means preparing trainees for the instruction
that is to follow. They should want to learn. They must perceive that the learning
will be relevant and useful to them personally. They should be encouraged to
take pride in their job and to appreciate the satisfaction that comes from skilled
performance.
2. Presentation should consist of a combination of telling and showing – explana-
tion and demonstration.
3. Explanation should be as simple and direct as possible: the trainer explains
briefly the ground to be covered and what to look for. He or she makes the
maximum use of films, charts, diagrams and other visual aids. The aim should be
to teach first things first and then proceed from the known to the unknown, the
simple to the complex, the concrete to the abstract, the general to the particular,
the observation to reasoning, and the whole to the parts and back to the whole
again.
4. Demonstration is an essential stage in instruction, especially when the skill to be
learnt is mainly a ‘doing’ skill. Demonstration takes place in three steps:
– The complete operation is shown at normal speed to show the trainee how the
task should be carried out eventually.
– The operation is demonstrated slowly and in correct sequence, element by
element, to indicate clearly what is done and the order in which each task is
carried out.
– The operation is demonstrated again slowly, at least two or three times, to
stress the how, when and why of successive movements.
5. Practice consists of the learner imitating the instructor and then constantly
repeating the operation under guidance. The aim is to reach the target level of
performance for each element of the total task, but the instructor must constantly
strive to develop coordinated and integrated performance, that is, the smooth
combination of the separate elements of the task into a whole job pattern.
6. Follow-up continues during the training period for all the time required by the
learner to reach a level of performance equal to that of the normal experienced
Learning and development ❚ 579
worker in terms of quality, speed and attention to safety. During the follow-up
stage, the learner will continue to need help with particularly difficult tasks or
to overcome temporary setbacks that result in a deterioration of performance.
The instructor may have to repeat the presentation for the elements and
supervise practice more closely until the trainee regains confidence or masters
the task.
Lecture
A lecture is a talk with little or no participation except a question-and-answer session
at the end. It is used to transfer information to an audience with controlled content
and timing. When the audience is large, there may be no alternative to a ‘straight
lecture’ if there is no scope to break it up into discussion groups.
The effectiveness of a lecture depends on the ability of the speaker to present
material with the judicious use of visual aids. But there are several limits on the
amount an inert audience can absorb. However effective the speaker, it is unlikely
that more than 20 per cent of what was said will be remembered at the end of the day.
And after a week, all will be forgotten unless the listeners have put some of their
learning into practice. For maximum effectiveness, the lecture must never be longer
than 30 or 40 minutes; it must not contain too much information (if the speaker can
convey three new ideas that more than a half of the audience understands and
remembers, the lecture will have been successful); it must reinforce learning with
appropriate visual aids (but not too many); and it must clearly indicate the action that
should be taken to make use of the material.
Discussion
The objectives of using discussion techniques are to:
● get the audience to participate actively in learning;
● give people an opportunity of learning from the experience of others;
● help people to gain understanding of other points of view;
● develop powers of self-expression.
The aim of the trainer should be to guide the group’s thinking. He or she may, there-
fore, be more concerned with shaping attitudes than imparting new knowledge. The
trainer has unobtrusively to stimulate people to talk, guide the discussion along
predetermined lines (there must be a plan and an ultimate objective), and provide
interim summaries and a final summary.
The following techniques can be used to get active participation:
580 ❚ Human resource development
● Ask for contributions by direct questions.
● Use open-ended questions that will stimulate thought.
● Check understanding; make sure that everyone is following the argument.
● Encourage participation by providing support rather than criticism.
● Prevent domination by individual members of the group by bringing in other
people and asking cross-reference questions.
● Avoid dominating the group yourself. The leader’s job is to guide the discussion,
maintain control and summarize from time to time. If necessary, ‘reflect’ opinions
expressed by individuals back to the group to make sure they find the answer for
themselves. The leader’s job is to help them reach a conclusion, not to do it for
them.
● Maintain control – ensure that the discussion is progressing along the right lines
towards a firm conclusion.
Case study
A case study is a history or description of an event or set of circumstances that is
analysed by trainees in order to diagnose the causes of a problem and work out how
to solve it. Case studies are mainly used in courses for managers and team leaders
because they are based on the belief that managerial competence and understanding
can best be achieved through the study and discussion of real events.
Case studies should aim to promote enquiry, the exchange of ideas, and the
analysis of experience in order that the trainees can discover underlying principles
that the case study is designed to illustrate. They are not light relief. Nor are they a
means of reducing the load on the instructor. Trainers have to work hard to define the
learning points that must come out of each case, and they must work even harder to
ensure that these points do emerge.
The danger of case studies is that they are often perceived by trainees to be irrele-
vant to their needs, even if based on fact. Consequently, the analysis is superficial and
the situation is unrealistic. It is the trainer’s job to avoid these dangers by ensuring
that the participants are not allowed to get away with half-baked comments. Trainers
have to challenge assumptions and force people to justify their reasoning. Above all,
they have to seize every chance to draw out the principles they want to illustrate from
the discussion and to get the group to see how these are relevant to their own
working situation.
Role-playing
In role-playing, the participants act out a situation by assuming the roles of the char-
acters involved. The situation will be one in which there is interaction between two
Learning and development ❚ 581
people or within a group. It should be specially prepared with briefs written for each
participant explaining the situation and, broadly, their role in it. Alternatively, role-
playing could emerge naturally from a case study when the trainees are asked to test
their solution by playing the parts of those concerned.
Role-playing is used to give managers, team leaders or sales representatives prac-
tice in dealing with face-to-face situations such as interviewing, conducting a perfor-
mance review meeting, counselling, coaching, dealing with a grievance, selling,
leading a group or running a meeting. It develops interactive skills and gives people
insight into the way in which people behave and feel.
The technique of ‘role reversal’, in which a pair playing, say, a manager and a team
leader run through the case and then exchange roles and repeat it, gives extra insight
into the feelings involved and the skills required.
Role-playing enables trainees to get expert advice and constructive criticism from
the trainer and their colleagues in a protected training situation. It can help to
increase confidence as well as developing skills in handling people. The main diffi-
culties are either that trainees are embarrassed or that they do not take the exercise
seriously and overplay their parts.
Simulation
Simulation is a training technique that combines case studies and role-playing to
obtain the maximum amount of realism in classroom training. The aim is to facilitate
the transfer of what has been learnt off the job to on-the-job behaviour by repro-
ducing, in the training room, situations that are as close as possible to real life.
Trainees are thus given the opportunity to practise behaviour in conditions identical
to or at least very similar to those they will meet when they complete the course.
Group exercises
In a group exercise the trainees examine problems and develop solutions to them as a
group. The problem may be a case study or it could be one entirely unrelated to
everyday work. The aims of an exercise of this kind are to give members practice in
working together and to obtain insight into the way in which groups behave in tack-
ling problems and arriving at decisions.
Group exercises can be used as part of a team-building programme and to develop
interactive skills. They can be combined with other techniques such as the discovery
method, encouraging participants to find out things for themselves and work out the
techniques and skills they need to use.
582 ❚ Human resource development
E-learning
WHAT IS E-LEARNING?
E-learning is defined by Pollard and Hillage (2001) as ‘the delivery and administra-
tion of learning opportunities and support via computer, networked and web-based
technology to help individual performance and development’. E-learning enhances
learning by extending and supplementing face-to-face learning rather than replacing
it.
The term ‘e-learning’ first appeared in the US in the mid-1990s but became promi-
nent in the late 1990s. Like many HR practices, it was based on earlier developments
such as computer-based training, supported online training, open or distance
learning and informal e-learning derived from knowledge management approaches.
The main difference is that e-learning is essentially web-based, although it can
include the use of distributed technology products (mainly CD-ROMs), which do not
require the user’s computer to be networked.
E-learning is not so much about technology as about learning based on tech-
nology. However, it is the use of the intranet that has offered most scope for learn-
ing. In its fully developed form, e-learning is a more comprehensive approach to
learning than the earlier developments, especially when blended with other learning
methods.
The different types of e-learning are:
39
● self-paced e-learning when the learner is using technology but is not connected to
instructors or other learners at the same time;
● live e-learning in which by the use of technology, the instructor and the learner
are together at the same time but in different locations; and
● collaborative e-learning, which supports learning through the exchange and
sharing of information and knowledge amongst learners by means of discussion
forums, communities of practice, bulletin boards and chat rooms.
AIM OF E-LEARNING
In the words of Pollard and Hillage (2001) the objective is to provide for learning that
is ‘just in time, just enough and just for you’. It enables learning to take place when it
is most needed (’just in time’ as distinct from ‘just in case’) and when it is most conve-
nient. Learning can be provided in short segments or bites that focus on specific
learning objectives. It is ‘learner-centric’ in that it can be customized to suit an indi-
vidual’s learning needs – learners can choose different learning objects within an
overall package.
THE TECHNOLOGY OF E-LEARNING
E-learning can offer up-to-date information to learners who are widely distributed
geographically. Collaboration and the sharing of information between learners are
possible, but learners tend to work much of the time in isolation.
The basic principle of e-learning is ‘connectivity’ – the process by which computers
are networked, share information and connect people to people. This is provided for
by what is often called ‘the e-learning landscape or architecture’, which refers to the
hardware, software and connectivity components required to facilitate learning. In
designing the system, consideration has to be given to ‘functionality’ – what each part
is expected to do.
The main components of the e-learning ‘landscape’ are:
● The learning management system (LMS) – this provides users with access to various
learning processes and enables self-paced e-learning to take place. It can also
help with administration, including curriculum management, and course
publishing.
● The learning content management system (LCMS) – this provides an authoring
system for course or programme preparation, a collection of learning objects or
584 ❚ Human resource development
modules (sometimes called a repository), and a means of sending a completed
course to a delivery system (sometimes called a delivery interface).
● Learning portals – these are access points to learning information and services that
enable learners to locate content.
THE E-LEARNING PROCESS
The e-learning process comprises defining the system, encouraging access, advising
and assisting individual learners, and encouraging and facilitating the creation of
learning communities. E-learning focuses on the learner. It provides a means of satis-
fying individual learning needs. But individual learning may be supplemented by
participation in learning groups or communities of interest in which members both
gain and share knowledge.
The emphasis is on self-paced learning – learners control the rate at which they
learn, although they may be given targets for completion and guidance from tutors
on how they should learn. However, while self-directed learning is encouraged and
provided for, the impact of e-learning is strongly influenced by how well support is
provided to learners. It is the effectiveness of this support rather than the sophistica-
tion of the technology that counts. The quality of the content is important but it will
be enhanced by support from tutors or ‘e-moderators’. The latter as described by
Salmon (2001) preside over the activities of a learning group in ‘knowledge exchange
forums’, arranging contributions and information sharing and providing guidance
and comments as appropriate.
E-learning programme content
E-learning programmes may cover common business applications and processes,
induction programmes and, frequently, IT skills development. They are not so
effective for developing soft skills such as team building, communication or presen-
tation that rely on interpersonal contact. But programmes can still present basic prin-
ciples that can prepare people for practical face-to-face sessions, provide
reinforcement through post-event reading, help with self-assessment and lead to
chatroom support.
Programmes may consist of generic content purchased from suppliers, but
most organizations prefer customized web-based modules developed either in-house
or outsourced to software firms that produce material to a specified design.
The content should be constructed in accordance with the following pedagogic
principles:
E-learning ❚ 585
● learners must be stimulated by the learning process;
● the programme and content should be seen to be intrinsically relevant, the
method of presentation should be interesting, use should be made of graphics,
animations, audio, interactive simulations, scenarios, case studies, projects, ques-
tion and answer sessions and problem-solving activities where appropriate – the
programme should not simply involve ‘page turning’;
● learners must be encouraged to respond to stimuli and should be engaged in the
learning process;
● learners should understand their learning goals, preferably working them out for
themselves but with help where necessary;
● the programme should be constructed in incremental steps and presented in ‘bite-
sized chunks’ or modules, each with clear objectives and outcomes;
● learners should be able to plan their learning (self-paced learning);
● learners must be able to measure their own progress but should be given feed-
back as well;
● learners should be encouraged to reflect on what they are learning by reference to
their own experience.
The content can be prepared with the help of authoring tools such as Macromedia
(Authorware and Flash).
Delivery of e-learning
E-learning is delivered through websites and the intranet; CD-ROMs are also used
extensively. Provision can be made for online coaching and discussion forums. The
content can be delivered through PowerPoint, video and audio clips, drag and drop
questions, PDF files, links to websites, and web-enabled forums and learning
communities.
Blended e-learning
In a sense blended e-learning is balanced learning in that a balance needs to be struck
between electronic learning, face-to-face learning and informal group learning
through teams and communities of interest. An example of a blended programme is
shown in Figure 39.1
THE BUSINESS CASE FOR E-LEARNING
E-learning can enable flexibility of access and interrogation of high volumes of
diverse learning resources in different locations. It can speed up the learning process
586 ❚ Human resource development
by as much as 50 per cent and focus on critical learning needs in the organization. The
cost of training can be halved by decreasing the number of instructor hours. As stated
by van Dam (2004):
Self-paced e-learning can be taken any time and is therefore a just-in-time approach. E-
learning can be taken at any place – in the office, at home or other locations, which
eliminates the travel needs and costs. Skills acquisition and knowledge development
will take place at any pace and any path, as the learning experience is solely driven by
the participant, and therefore very personalized. Anyone in the organization can engage
in e-learning and participate and share experience and knowledge in e-learning collab-
oration sessions.
E-learning ❚ 587
Stage 1
Self-paced e-learning: initial
e-learning module
Stage 2
Self-paced practice using
e-learning modules and
simulations
Stage 3
Live e-learning: involvement
with tutors and other learners
Stage 4
Face-to-face learning
in classroom
Figure 39.1 A blended learning programme
DEVELOPING E-LEARNING PROCESSES
The main steps required to develop e-learning processes are described below.
Initial analysis
1. Define or re-define the human resource development strategy within the context
of the organization’s business strategy, external environment, culture and tech-
nologies.
2. Identify organizational learning needs – what should be invested in people in
order to develop the intellectual capital of the organization, extend its stock of
knowledge and skills and thus increase its organizational capability.
3. In the light of the above, assess the strengths and weaknesses of the present
arrangements for developing people.
Scope for e-learning
4. Identify the overall scope for developing e-learning systems. The need to
enhance present arrangements with a blended approach that uses complemen-
tary and mutually supportive methods of delivering learning also needs to be
assessed.
5. Identify any areas in which e-learning might be particularly appropriate because
there are well-established learning needs that can be met by electronic as well as
more traditional means. Establish what specific opportunities technology offers
to enhance knowledge. Establish the extent to which employees will have access
to computers.
Development programmes
6. For each aspect of learning in which scope for e-learning has been established,
produce a specification defining:
– the learning need;
– how e-learning will meet that need;
– the learning system that should be used;
– broadly, the content of the learning to be delivered;
– how e-learning will blend with other forms of training;
– the extent to which the programme is to cater for individual or group
learning; and
– who will be responsible within the organization for developing and deliv-
ering e-learning.
588 ❚ Human resource development
7. Decide on the extent to which learning systems, including the content of
e-learning programmes, should be developed in-house, or purchased from out-
side suppliers. The factors to be taken into consideration will be:
– the availability of resources within the organization to develop content;
– the degree to which the material needs to be tailor-made to fit the organiza-
tion;
– the likelihood of suitable material being available elsewhere; and
– the comparative costs of each option.
8. If it is decided that external suppliers should be used, identify possible organi-
zations (on the basis of recommendations, as far as possible). The criteria for
choice should be:
– understanding of the requirements;
– the learning methods employed (the pedagogic principles and theoretical
perspectives from which the methods are derived);
– the outcomes associated with the methods and how they will be measured;
– suitability of learning material (fit with requirements); and
– cost.
9. Select and train tutors and e-moderators.
10. Ensure that facilities for e-learning (computers, learning resource centres) are
available. Take into account the possible need to provide guidance to users of
learning resource centres on the use of the equipment.
Implementation
11. Prepare briefing material.
12. Ensure that everyone is aware of the facilities for e-learning, the part they and
their managers will play, and the support they will receive from tutors and
moderators.
13. Ensure e-learning arrangements are linked to other HR initiatives, eg perfor-
mance management, career planning and knowledge management.
14. Launch e-learning, possibly starting with a pilot scheme in a department or a
specific area of learning, eg IT.
Evaluation
15. Monitor and evaluate the performance and impact of e-learning.
E-learning ❚ 589
Examples
B&Q
All the content of the B&Q e-learning system was produced as customized learning
modules focusing on the needs of store-based employees. For example, the ‘show-
room’ module, which deals with selling kitchens and bathrooms, uses both audio and
visual components with options for different customer types. All modules are deliv-
ered in bite-sized chunks and provide learners with information on their progress.
Black & Decker
The blended programme for sales representatives consists of 16 self-paced e-learning
courses, on-the-job training, classroom training and mentoring.
Prudential Financial
New starters take part in the Life Centre new starters’ programme for seven weeks.
Sixty per cent of the programme time is self-paced e-learning using simulations
extensively, and 40 per cent is instructor-led classroom learning.
Unilever
Unilever operates a leadership development blended programme that balances on-
line work with classroom sessions and coaching. A web-enabled community tool is
used, which begins with a virtual, experiential module in order to develop the
thinking and dialogue prior to the face-to-face programme. It continues to support
virtual teamwork and encourages participants to engage in learning beyond the
programme itself. Assignments and projects are used throughout the programme.
These include individual projects focused on personal development and business
improvement, and a team business proposal project.
590 ❚ Human resource development
Management development
Management development is concerned with improving managers’ performance in
their present roles and preparing them for greater responsibilities in the future. It has
been described by Mumford and Gold (2004) as ‘an attempt to improve managerial
effectiveness through a learning process’. In this chapter, the following aspects of
management development are considered:
● its aims, needs and priorities;
● its requirements, nature as a business-led process and the elements involved in a
management development processes;
● the main management development activities of analysis, assessment and
strategy formulation;
● approaches to management development with an emphasis on integration, expe-
riential and self-managed learning and personal development planning, and the
use of competency-frameworks and development centres;
● the concept of emotional intelligence and its use in the development of leadership
skills;
● the responsibility for management development.
40
AIMS OF MANAGEMENT DEVELOPMENT
Management development contributes to business success by helping the organiza-
tion to grow the managers it requires to meet its present and future needs. It improves
managers’ performance, gives them development opportunities, and provides for
management succession. Development processes may be anticipatory (so that
managers can contribute to long-term objectives), reactive (intended to resolve or pre-
empt performance difficulties) or motivational (geared to individual career aspira-
tions). The particular aims are to:
● ensure that managers understand what is expected of them; agreeing with them
objectives against which their performance will be measured and the level of
competence required in their roles;
● improve the performance of managers in their present roles as a means of
preparing them for greater responsibilities;
● identify managers with potential, encouraging them to prepare and implement
personal development plans and ensuring that they receive the required develop-
ment, training and experience to equip them for more demanding responsibilities
within their own locations and elsewhere in the organization;
● provide for management succession, creating a system to keep this under
review.
MANAGEMENT DEVELOPMENT: NEEDS AND
PRIORITIES
Needs
A systematic approach to management development is necessary because the increas-
ingly onerous demands made on line managers mean that they require a wider range
of developed skills than ever before. Tamkin et al (2003) suggest that managers need
the ability to:
● empower and develop people – understand and practise the process of delivering
through the capability of others;
● manage people and performance – managers increasingly need to maintain
morale whilst also maximizing performance;
● work across boundaries, engaging with others, working as a member of a team,
thinking differently about problems and their solutions;
592 ❚ Human resource development
● develop relationships and a focus on the customer, building partnerships with
both internal and external customers;
● balance technical and generic skills – the technical aspects of management and the
management of human relationships.
Priorities
Hirsh et al (2000) suggest a number of priorities for management development. These
are:
● combining a strong corporate architecture for management development with a
capability for ‘just in time’ and local delivery to meet specific business needs;
● providing better information and advice for individual managers on how to think
about their future direction in career terms and their learning needs;
● mainstreaming the skills required to manage self-development and to support the
development of others; these skills include those of ‘manager as coach’ but also go
wider and include informal career mentoring;
● finding ways of delivering more stretching and stimulating management devel-
opment to the whole population of managers, not just those in very senior posts
or identified as ‘high potential’.
THE REQUIREMENTS, NATURE AND ELEMENTS OF
MANAGEMENT DEVELOPMENT
Requirements
The CIPD (2002) sets out three key and mutually reinforcing requirements for
connecting business challenges and management development:
1. Making the case for developing managers: convincing key stakeholders of the
significance of management to business practice.
2. Making the connection between business strategies, organization and manage-
ment development: clarifying the business purpose and outcomes for investing
in management.
3. Managing the learning – getting the implementation right: designing, specifying,
implementing and evaluating management development strategies that are ‘fit
for purpose’.
Management development ❚ 593
Nature
The most important thing to remember about the process of management develop-
ment is that it must be business led even though it will be concerned with the devel-
opment of individual performance and potential. The business has to decide what
sort of managers it needs to achieve its strategic goals and the business must decide
how it can best obtain and develop these managers. Even when the emphasis is on
self-development, as it should be, the business must still indicate the directions in
which self-development should go, possibly in the broadest of terms.
Elements
It has been suggested by Mumford (1993) that three elements have to be combined to
produce an effective management development system:
● self-development – a recognition that individuals can learn but are unlikely to be
taught, and that the initiative for development often rests with the individual;
● organization-derived development – the development of the systems of formal devel-
opment beloved of personnel and management development specialists;
● boss-derived development – those actions undertaken by a senior manager with
others, most frequently around real problems at work.
Mumford also makes the point that managers think in terms of activities, not learning
opportunities, and therefore: ‘Our main concern must be to facilitate learning
through our understanding of real work in the manager’s world, rather than
attempting to impose separate management development processes.’ He suggests
that formal management development processes do not always function as effec-
tively as we would like because: ‘We have put too much emphasis on planning ahead,
and not enough on enabling managers to use, understand and then build on their
past experiences.’
MANAGEMENT DEVELOPMENT ACTIVITIES
The three essential management development activities are the:
● analysis of present and future management needs;
● assessment of existing and potential skills and effectiveness of managers against
those needs;
● production of strategies and plans to meet those needs.
594 ❚ Human resource development
Management development also involves management succession planning and
career management activities as described in Chapter 26.
Analysis of needs
The analysis of the future needs for managers is carried out through human resource
planning processes (see Chapter 25).
In today’s changeable, if not chaotic, conditions it may not be feasible to make
precise forecasts of the number of managers required. But what can and should be
done is to assess the skills and competences managers will need to meet future
demands and challenges arising from competitive pressures, new product-market
strategies and the introduction of new technology.
Assessment of skills and competences
The assessment of skills and competences against these needs can be carried out by
performance management processes as described in Part VII. It will be important,
however, to include in these processes a means of identifying specific development
needs and the agreement of development plans to meet not only current needs but
anticipated future requirements.
These aspects of management development are discussed in the remaining sections
of this chapter.
Management development strategy
The management development strategy will be concerned overall with what the
organization intends to do about providing for its future management needs in the
light of its business plans. The strategy will be concerned with the roles of the parties
involved and with the approaches the organization proposes to use to develop its
managers.
The prime aim of these benchmark statements is to identify the key facets that
make up management development activities. They provide personnel and line
managers with a means of conducting their own evaluation and analysis of the state
of management development within their organization. Each facet or ‘dimension’ in
the statements brings together such aspects as the links between the management
development plan, the assessment of skills and identification of skill gaps, and the
delivery of appropriate and effective training and development.
The facets are broken down into four aspects of performance:
● commitment to management development;
● reviewing the current position of management development;
Management development ❚ 595
● making progress in management development;
● excellence in management development.
The underpinning assumption in the framework is the importance of bringing
together the elements of a management development strategy into a more integrated
whole. The various components do not have separate existences of their own.
APPROACHES TO MANAGEMENT DEVELOPMENT
Management development should be regarded as a range of related activities rather
than an all-embracing programme. The use of the word ‘programme’ to describe the
process smacks too much of a mechanistic approach. It is important to start from an
understanding of how managers learn, as considered below.
This does not imply that some systemization is not necessary; first, because many
managers have to operate in more or less routine situations and have to be developed
accordingly, and secondly, because organizations will not continue to thrive if they
simply react to events. There must be an understanding of the approaches that can
be used both to develop managers and also to assess existing managerial resources
and how they meet the needs of the enterprise. And plans must be made for
the development of those resources by selecting the best of the methods available. But
this should not be seen as a ‘programme’ consisting of a comprehensive, highly
integrated and rigidly applied range of management training and development tech-
niques.
The management development activities required depend on the organization: its
technology, its environment and its philosophy. A traditional bureaucratic/mecha-
nistic type of organization may be inclined to adopt the programmed routine
approach, complete with a wide range of courses, inventories, replacement charts,
career plans and results-orientated review systems. An innovative and organic type
of organization may rightly dispense with all these mechanisms. Its approach would
be to provide its mangers with the opportunities, challenges and guidance they
require, seizing the chance to give people extra responsibilities, and ensuring that
they receive the coaching and encouragement they need. There may be no replace-
ment charts, inventories or formal appraisal schemes, but people know how they
stand, where they can go and how to get there.
As discussed later in this chapter, the role of formal training is much more limited
than in the earlier approaches to management development, where it tended to
predominate. As Hirsh and Carter (2002) emphasize:
596 ❚ Human resource development
Management training still needs to provide a coherent view of what managers need to
learn, but delivery needs to be more flexible and fit into the busy working lives of
managers… The development of interpersonal and leadership skills is a high priority and
not easily achieved through conventional formal training.
How managers learn
It has often been said that managers learn to manage by managing – in other words,
‘experience is the best teacher’. This is largely true, but some people learn much
better than others. After all, a manager with 10 years’ experience may have had no
more than one year’s experience repeated 10 times.
Differences in the ability to learn arise because some managers are naturally
more capable or more highly motivated than others, while some will have had the
benefit of the guidance and help of an effective boss who is fully aware of his or her
responsibilities for developing managers. The saying quoted above could be
expanded to read: ‘Managers learn to manage by managing under the guidance
of a good manager.’ The operative word in this statement is ‘good’. Some managers
are better at developing people than others, and one of the aims of management
development is to get all managers to recognize that developing their staff is an
important part of their job. And for senior managers to say that people do not
learn because they are not that way inclined, and to leave it at that, is to neglect one
of their key responsibilities – to improve the performance of the organization by
doing whatever is practical to improve the effectiveness and potentials of the
managers.
To argue that managers learn best ‘on the job’ should not lead to the conclusion that
managers are best left entirely to their own devices or that management development
should be a haphazard process. The organization should try to evolve a philosophy of
management development which ensures that consistent and deliberate interven-
tions are made to improve managerial learning. Revans (1989) wants to take manage-
ment development back into the reality of management and out of the classroom, but
even he believes that deliberate attempts to foster the learning process through
‘action learning’ (see Chapter 38) are necessary.
The three basic approaches to management development are:
1. learning through work;
2. formal training; and
3. feedback, facilitation and support.
These can be achieved through both formal and informal means, as described
below.
Management development ❚ 597
Formal approaches to management development
The formal approaches to management development include:
● development on the job through coaching, counselling, monitoring and feedback
by managers on a continuous basis associated with the use of performance
management processes to identify and satisfy development needs, and with
mentoring;
● development through work experience, which includes job rotation, job enlarge-
ment, taking part in project teams or task groups, ‘action learning’, and second-
ment outside the organization;
● formal training by means of internal or external courses – although management
training programmes are more likely to be delivered in a series of modules over a
number of months rather than a single, long, residential course;
● structured self-development by following self-managed learning programmes
agreed as a personal development plan or learning contract with the manager or
a management development adviser – these may include guidance reading or the
deliberate extension of knowledge or acquisition of new skills on the job;
● e-learning as part of a blended learning programme.
The formal approaches to management development are based on the identification
of development needs through performance management or a development centre.
The approach may be structured around a list of generic or core competences which
have been defined as being appropriate for managers in the organization.
Informal approaches to management development
Informal approaches to management development make use of the learning experi-
ences that managers meet during the course of their everyday work. Managers are
learning every time they are confronted with an unusual problem, an unfamiliar task
or a move to a different job. They then have to evolve new ways of dealing with the
situation. They will learn if they analyse what they did to determine how and why it
contributed to its success or failure. This retrospective or reflective learning will be
effective if managers can apply it successfully in the future.
This is potentially the most powerful form of learning. The question is: can any-
thing be done to help managers make the best use of their experience? This type of
‘experiential’ learning comes naturally to some managers. They seem to absorb,
unconsciously and by some process of osmosis, the lessons from their experience,
although in fact they they have probably developed a capacity for almost instanta-
neous analysis, which they store in their mental databank and which they can retrieve
whenever necessary.
598 ❚ Human resource development
Ordinary mortals, however, either find it difficult to do this sort of analysis or do
not recognize the need. This is where semi-formal approaches can be used to
encourage and help managers to learn more effectively. These approaches include:
● emphasizing self-assessment and the identification of development needs by
getting managers to assess their own performance against agreed objectives and
analyse the factors that contributed to effective or less effective performance – this
can be provided through performance management;
● getting managers to produce their own personal development plans or self-
managed learning programmes;
● encouraging managers to discuss their own problems and opportunities with
their bosses, colleagues or mentors in order to establish for themselves what they
need to learn or be able to do.
An integrated approach to management development
An integrated approach to management development will make judicious use of both
the formal and informal methods as described above. There are five governing prin-
ciples:
● The reality of management – the approach to management development should
avoid making simplistic assumptions on what managers need to know or do,
based on the classical analysis of management as the processes of planning,
organizing, directing and controlling. In reality managerial work is relatively
disorganized and fragmented, and this is why many practising managers
reject the facile solutions suggested by some formal management training
programmes. As Kanter (1989) has said: ‘Managerial work is undergoing such
enormous and rapid change that many managers are reinventing their profession
as they go.’
● Relevance – it is too easy to assume that all managers need to know about
such nostrums as strategic planning, economic value added, balance sheet
analysis, etc. These can be useful but they may not be what managers really
need. Management development processes must be related to the needs of partic-
ular managers in specific jobs and these processes may or may not include
techniques such as those listed above. Those needs should include not only what
managers should know now but also what they should know and be able to do in
the future, if they have the potential. Thus, management development may
include ‘broadening programmes’ aimed at giving managers an understanding of
the wider, strategic issues which will be relevant at higher levels in the organiza-
tion.
Management development ❚ 599
● Self-development – managers need to be encouraged to develop themselves and
helped to do so. Performance management will aim to provide this guidance.
● Experiential learning – if learning can be described as a modification of behaviour
through experience then the principal method by which managers can be
equipped is by providing them with the right variety of experience, in good time
in the course of their careers, and by helping them to learn from that experience –
coaching and action learning are methods of achieving this.
● Formal training – courses can supplement but can never replace experience and
they must be carefully timed and selected or designed to meet particular needs. A
‘sheep dip’ approach which exposes all managers to the same training course may
be desirable in some circumstances, but the focus should generally be on identi-
fying and meeting individual learning needs.
Competency-based management development
Competency-based management development uses competency frameworks (see
Chapter 11) as a means of identifying and expressing development needs and
pointing the way to self-managed learning programmes or the provision of learning
opportunities by the organization.
Competency-based management development may concentrate on a limited
number of core or generic competences which the organization has decided will be an
essential part of the equipment of their managers if they are going to take the
organization forward in line with its strategic plans. For example:
● strategic capability to understand the changing business environment, opportuni-
ties for product-market development, competitive challenges and the strengths
and weaknesses of their own organization in order to identify optimum strategic
responses;
● change management capability to identify change needs, plan change programmes
and persuade others to participate willingly in the implementation of change;
● team management capability to get diverse groups of people from different disci-
plines to work well together.
● relationship management to network effectively with others to share information
and pool resources to achieve common objectives;
● international management to be capable of managing across international frontiers,
working well with people of other nationalities.
Development centres
The aim of development centres is to help participants build up an awareness of the
600 ❚ Human resource development
competences their job requires and to construct their own personal development
plans to improve their performance in the present job and to enhance their careers.
Like assessment centres (see Chapter 27), development centres are built around
definitions of competency requirements. Unlike assessment centres, however, devel-
opment centres look ahead at the competencies needed in the future. The other signif-
icant difference between a development centre and an assessment centre is that in the
latter case the organization ‘owns’ the results for selection or promotion purposes,
while in the former case the results are owned by the individual as the basis for self-
managed learning.
Development centres are not an event, nor a physical location. The activities of the
centre offer participants the opportunity to examine and understand the competences
they require now and in the future. Because ‘behaviour predicts behaviour’ the activ-
ities of the centre need to offer opportunities for competences to be observed in prac-
tice. Simulations of various kinds are therefore important features – these are a
combination of case studies and role playing designed to obtain the maximum
amount of realism. Participants are put into the position of practising behaviour in
conditions very similar to those they will meet in the course of their everyday work.
An important part of the centre’s activities will be feedback reviews, counselling
and coaching sessions conducted by the directing staff, which will consist of full-time
tutors and line managers who have been given special training in the techniques
required.
The stages of a typical development centre as described by Hall and Norris (1992)
are:
Prior to the centre delegates assess themselves against defined competencies.
Day 1
● Delegates test their pre-centre work with other delegates
● Individual task
● Structured self-insight
● Business simulation
Day 2
● Team roles questionnaire
● Personal profiles questionnaire
● Further counselling sessions and self-assessment procedures
Management development ❚ 601
Day 3
● Numerical reasoning tests
● Feedback on questionnaire
● Counselling on personal development plans
● Review of key points and findings
EMOTIONAL INTELLIGENCE AND LEADERSHIP
QUALITIES
Management development should be concerned with enhancing leadership as well
as extending and improving more general management skills. According to Goleman
(1995), this process should take account of the concept of emotional intelligence as
discussed in Chapter 10. Emotional intelligence has been defined by Goleman (1995)
as being about:
● knowing what you are feeling and being able to handle those feelings without
having them swamp you;
● being able to motivate yourself to get jobs done, be creative and perform at your
peak;
● sensing what others are feeling and handling relationships effectively.
The possession of high levels of emotional intelligence is a necessary attribute for
success as a leader.
Goleman has defined four components of emotional intelligence:
1. Self-management – the ability to control or redirect disruptive impulses and moods
and regulate your own behaviour coupled with a propensity to pursue goals with
energy and persistence. The six competencies associated with this component are
self-control, trustworthiness and integrity, initiative and adaptability, comfort
with ambiguity, openness to change and a strong desire to achieve.
2. Self-awareness – the ability to recognize and understand your moods, emotions
and drives as well as their effect on others. This is linked to three competencies:
self-confidence, realistic self-assessment and emotional self-awareness.
3. Social awareness – the ability to understand the emotional make-up of other
people, and skill in treating people according to their emotional reactions. This is
linked to six competencies: empathy, expertise in building and retaining talent,
organizational awareness, cross-cultural sensitivity, valuing diversity, and service
to clients and customers.
602 ❚ Human resource development
4. Social skills – proficiency in managing relationships and building networks to get
the desired result from others and reach personal goals, and the ability to find
common ground and build rapport. The five competencies associated with this
component are leadership, effectiveness in leading change, conflict management,
influence/communication, and expertise in building and leading teams.
The steps required to develop emotional intelligence suggested by Goleman (1999)
are:
● assess the requirements of jobs in terms of emotional skills;
● assess individuals to identify their level of emotional intelligence – 360-degree
feedback can be a powerful source of data;
● gauge readiness – ensure that people are prepared to improve their level of
emotional intelligence;
● motivate people to believe that the learning experience will benefit them;
● make change self-directed – encourage people to prepare a learning plan which
fits their interests, resources and goals;
● focus on clear manageable goals – the focus must be on immediate, manageable
steps, bearing in mind that cultivating a new skill is gradual, with stops and
starts; the old ways will reassert themselves from time to time;
● prevent relapse – show people how they can learn lessons from the inevitable
relapses;
● give performance feedback;
● encourage practice, remembering that emotional competence cannot be improved
overnight;
● provide models of desired behaviours;
● encourage and reinforce – create a climate that rewards self-improvement;
● evaluate – establish sound outcome measures and then assess performance
against them.
RESPONSIBILITY FOR MANAGEMENT DEVELOPMENT
Management development is not a separate activity to be handed over to a specialist
and forgotten or ignored. The success of a management development programme
depends upon the degree to which all levels of management are committed to it. The
development of subordinates must be recognized as a natural and essential part of
any manager’s job. But the lead must come from the top.
The traditional view is that the organization need not concern itself with manage-
ment development. The natural process of selection and the pressure of competition
Management development ❚ 603
will ensure the survival of the fittest. Managers, in fact, are born not made. Cream
rises to the top (but then so does scum).
The reaction to this was summed up in Humble’s (1963) phrase, ‘programmitis and
crown prince’. Management development was seen in its infancy as a mechanical
process using management inventories, multicoloured replacement charts, ‘Cook’s
tours’ for newly recruited graduates, detailed job rotation programmes, elaborate
points schemes to appraise personal characteristics, and endless series of formal
courses.
The true role of the organization in management development lies somewhere
between these two extremes. On the one hand, it is not enough, in conditions of rapid
growth (when they exist) and change, to leave everything to chance – to trial and
error. On the other hand, elaborate management development programmes cannot
successfully be imposed on the organization. As Peter Drucker wisely said many
years ago (1955): ‘Development is always self-development. Nothing could be more
absurd than for the enterprise to assume responsibility for the development of a man.
[sic]. The responsibility rests with the individual, his abilities, his efforts’.
But he went on to say:
Every manager in a business has the opportunity to encourage individual self-
development or to stifle it, to direct it to or to misdirect it. He [sic] should be specifically
assigned the responsibility for helping all men working with him to focus, direct and
apply their self-development efforts productively. And every company can provide
systematic development challenges to its managers.
Executive ability is eventually something that individuals must develop for them-
selves while carrying out their normal duties. But they will do this much better if they
are given encouragement, guidance and opportunities by their company and
managers. In McGregor’s (1960) phrase: managers are grown – they are neither born
nor made. The role of the company is to provide conditions favourable to faster
growth. And these conditions are very much part of the environment and organiza-
tional climate of the company and the management style of the chief executive. The
latter has the ultimate responsibility for management development. As McGregor
wrote:
The job environment of the individual is the most important variable affecting his [sic]
development. Unless that environment is conducive to his growth, none of the other
things we do to him or for him will be effective. This is why the ‘agricultural’ approach
to management development is preferable to the ‘manufacturing’ approach. The latter
leads, among other things, to the unrealistic expectation that we can create and develop
managers in the classroom.
604 ❚ Human resource development
It is remarkable that today some people are still reciting these well-established princi-
ples as if they had just discovered them.
Personal development plans
Managers must therefore take the main responsibility for their own development.
The organization can help and the manager’s boss must accept some responsibility
for encouraging self-development and providing guidance as necessary. But individ-
uals should be expected to draw up their own personal development plans (see also
Chapter 39), the content of which would be based on answers to the following
questions:
● What knowledge and/or skills do you intend to gain? and/or
● What levels of competence are you planning to achieve?
● What are your learning objectives? These should be set out in the form of defini-
tions of the areas in which your performance will improve and/or what new
things you will be able to do after the learning programme.
● How are you doing to achieve your objectives? What tasks, projects, exercises or
reading will you do? What educational or training courses would you like to
attend? The development plan should be broken down into defined phases and
specific learning events should be itemized. The duration of each phase and the
total length of the programme should be set out together with the costs, if any.
● What resources will you need in the form of computer-based training material,
books, videos, individual coaching, mentoring etc?
● What evidence will you show to demonstrate your learning? What criteria will be
used to ensure that this evidence is satisfactory?
Role of the human resource development specialist
Management development is not a separate activity to be handed over to a specialist
and forgotten or ignored. The success of management development depends upon
the degree to which it is recognized as an important aspect of the business strategy –
a key organizational process aimed at delivering results. All levels of management
must therefore be committed to it. The development of their staff must be recognized
as a natural and essential part of any manager’s job and one of the key criteria upon
which their performance as managers will be judged. But the lead must come from
the top.
However, human resource development specialists still have a number of
important roles as facilitators of the learning and development process. They:
Management development ❚ 605
● interpret the needs of the business and advise on how management development
strategies can play their part in meeting these needs;
● act as advocates of the significance of management development as a business-led
activity;
● make proposals on formal and informal approaches to management develop-
ment;
● develop in conjunction with line management competency frameworks which
can be used as the basis for management development;
● provide guidance to managers on how to carry out their developmental activities;
● provide help and encouragement to managers in preparing and pursuing their
personal development plans – including advice on acquiring an NVQ, profes-
sional or academic qualifications;
● provide the learning material, including e-learning, managers need to achieve
their learning objectives;
● act as tutors or mentors to individual managers or groups of managers as
required;
● advise on the use and choice of external management education programmes;
● facilitate action learning projects;
● plan and conduct development centre;
● plan and conduct other formal learning events with the help of external providers
as required.
606 ❚ Human resource development
Formulating and implementing
learning and development
strategies
This chapter deals with the formulation and implementation of learning and devel-
opment strategies, the purpose of which is to provide a road map for the future and a
basis upon which learning and development activities can be planned, The chapter
deals with making the business case, creating a learning climate, identifying learning
needs, planning and implementing learning and development activities, and evalu-
ating the learning that has taken place.
MAKING THE BUSINESS CASE
The business case for learning and development should demonstrate how learning,
training and development programmes will meet business needs. Kearns and Miller
(1997) go as far as to claim that: ‘If a business objective cannot be cited as a basis for
designing training and development, then no training and development should be
offered.’
The areas of the business strategy that depend on talented people should be
analysed. The organization’s strategic plans and their impact on knowledge and skill
41
requirements should also be noted. For example, these might include the develop-
ment of a high performance culture, productivity improvements, the innovation and
launch of new products or services, achieving better levels of service delivery to
customers, or the extended use of IT or other forms of technology. Any proposed
learning and training interventions should specify how they would contribute to the
achievement of these strategic goals.
A cost/benefit analysis is required that compares the benefits, expressed in quanti-
fied terms as far as possible, which will result from the learning activity. The business
case has to convince management that there will be an acceptable return on the
investment (ROI) in learning and training programmes. It can be difficult to produce
realistic figures, although the attempt is worth making with the help of finance
specialists. The case for investing in learning and development can refer to any of the
following potential benefits:
● improve individual, team and corporate performance in terms of output, quality,
speed and overall productivity;
● attract high-quality employees by offering them learning and development
opportunities, increasing their levels of competence and enhancing their skills,
thus enabling them to obtain more job satisfaction, to gain higher rewards and to
progress within the organization;
● provide additional non-financial rewards (growth and career opportunities) as
part of a total reward policy (see Chapter 42);
● improve operational flexibility by extending the range of skills possessed by
employees (multiskilling);
● increase the commitment of employees by encouraging them to identify with the
mission and objectives of the organization;
● help to manage change by increasing understanding of the reasons for change
and providing people with the knowledge and skills they need to adjust to new
situations;
● provide line managers with the skills required to manage and develop their
people;
● help to develop a positive culture in the organization: one, for example, which is
oriented towards performance improvement;
● provide higher levels of service to customers;
● minimize learning costs (reduce the length of learning curves).
608 ❚ Human resource development
DEVELOPING A LEARNING CULTURE
A learning culture is one that promotes learning because it is recognized by top
management, line managers and employees generally as an essential organizational
process to which they are committed and in which they engage continuously.
Reynolds (2004) describes a learning culture as a ‘growth medium’ that will
‘encourage employees to commit to a range of positive discretionary behaviours,
including learning’ and which has the following characteristics: empowerment not
supervision, self-managed learning not instruction, long-term capacity building not
short-term fixes. It will encourage discretionary learning, which Sloman (2003a)
believes takes place when individuals actively seek to acquire the knowledge and
skills that promote the organization’s objectives.
It is suggested by Reynolds (2004) that to create a learning culture it is necessary to
develop organizational practices that raise commitment amongst employees and
‘give employees a sense of purpose in the workplace, grant employees opportunities
to act upon their commitment, and offer practical support to learning’. He proposes
the following steps:
1. Develop and share the vision – belief in a desired and emerging future.
2. Empower employees – provide ‘supported autonomy’; freedom for employees to
manage their work within certain boundaries (policies and expected behaviours)
but with support available as required.
3. Adopt a facilitative style of management in which responsibility for decision-
making is ceded as far as possible to employees.
4. Provide employees with a supportive learning environment where learning
capabilities can be discovered and applied, eg peer networks, supportive policies
and systems, protected time for learning.
5. Use coaching techniques to draw out the talents of others by encouraging
employees to identify options and seek their own solutions to problems.
6. Guide employees through their work challenges and provide them with time,
resources and, crucially, feedback.
7. Recognize the importance of managers acting as role models: ‘The new way of
thinking and behaving may be so different that you must see what it looks like
before you can imagine yourself doing it. You must see the new behaviour and
attitudes in others with whom you can identify’ (Schein, 1990).
8. Encourage networks – communities of practice.
9. Align systems to vision – get rid of bureaucratic systems that produce problems
rather than facilitate work.
Formulating and implementing learning and development strategies ❚ 609
IDENTIFYING LEARNING NEEDS
All learning activities need to be based on an understanding of what needs to be done
and why. The purpose of the activities must be defined and this is only possible if the
learning needs of the organization and the groups and individuals within it have
been identified and analysed.
The basis of learning needs analysis
Learning needs analysis is sometimes assumed to be concerned only with defining
the gap between what is happening and what should happen, ie the difference
between what people know and can do and what they should know and be able to do.
This gap is what has to be filled by training.
But this ‘deficiency’ model of training – only putting things right that have gone
wrong – is limited. Learning is much more positive than that. It is more concerned
with identifying and satisfying development needs – fitting people to take on extra
responsibilities, increasing all-round competence, equipping people to deal with new
work demands, multiskilling, and preparing people to take on higher levels of
responsibility in the future.
Areas for learning needs analysis
Learning needs should be analysed, first, for the organization as a whole – corporate
needs; second, for departments, teams, functions or occupations within the organiza-
tion – group needs; and third, for individual employees – individual needs. These
three areas are interconnected, as shown in Figure 41.1. The analysis of corporate
needs will lead to the identification of learning needs in different departments or
occupations, while these in turn will indicate what individual employees need to
learn. The process operates in reverse. As the needs of individual employees are
analysed separately, common needs emerge that can be dealt with on a group basis.
The sum of group and individual needs will help to define corporate needs, although
there may be some superordinate learning requirements that can be related only to
the company as a whole to meet its business development needs – the whole learning
plan may be greater than the sum of its parts.
These areas of analysis are discussed below.
Analysis of business and human resource plans
Business and HR plans should indicate in general terms the types of skills and
competencies that may be required in the future and the numbers of people with
610 ❚ Human resource development
those skills and competencies who will be needed. These broad indicators have to be
translated into more specific plans that cover, for example, the outputs from training
programmes of people with particular skills or a combination of skills (multiskilling).
Surveys
Special surveys may be carried out that analyse the information from a number of
sources, eg performance reviews, to identify corporate and group learning and
training needs. This information can be usefully supplemented by interviewing
people to establish their views about what they need to learn. But they often find it
difficult to articulate learning needs and it is best to lead with a discussion of the
work they do and identify any areas where they believe that their performance and
potential could be improved by a learning or training programme.
An analysis should also be made of any areas where future changes in work
processes, methods or job responsibilities are planned, and of any common gaps in
skills or knowledge or weaknesses in performance that indicate a learning need.
Further information should be derived from the evaluation of training, as described
at the end of this chapter.
Performance and development reviews
Performance management processes, as described in Part VII of this book, should be
a prime source of information about individual learning and development needs. The
performance management approach to learning concentrates on the preparation of
Formulating and implementing learning and development strategies ❚ 611
Corporate Group Individual
Analysis of
business
plans
Analysis of
human
resource
plans
Surveys
Performance
and
development
reviews
Role
analysis
Learning
specification
Figure 41.1 Learning needs analysis – areas and methods
performance improvement programmes, personal development plans and learning
contracts that lead to jointly determined action plans. The emphasis is on identifying
learning needs for continuous development or to produce specific improvements in
performance.
Role analysis
Role analysis is the basis for preparing role profiles that provide a framework for
analysing and identifying learning needs. Role profiles set out the key result areas of
the role but, importantly, also define the competencies required to perform the role. A
good performance management process will ensure that role profiles are updated
regularly and the performance review will be built round an analysis of the results
achieved by reference to the key result areas and agreed objectives. The competency
framework for the role is used to assess the level of competency displayed in
achieving, or as the case may be, not achieving those results. An assessment can then
be made of any learning required to develop levels of competency. Ideally, this should
be a self-assessment by individuals, who should be given every encouragement to
identify learning needs themselves. But these can be discussed with the individuals’
manager and agreement reached on how the learning needs should be met, by the
individuals through self-managed learning, and/or with the help and support of
their managers. The output of role analysis could be a learning specification, as illus-
trated in Figure 41.2.
PLANNING AND IMPLEMENTING LEARNING AND
DEVELOPMENT PROGRAMMES
Every learning and development programme needs to be designed individually,
and the design will continually evolve as new learning needs emerge, or when feed-
back indicates that changes are required. It is essential to consider carefully the
objectives of the programme and to express these in the form of what behaviour
is expected from those involved in the workplace (terminal behaviour). When
planning a learning event, the process used should match the desired objectives for
the event.
The basis of learning and development programmes
The planning and implementation of learning and development programmes is
based on an understanding of learning needs. A training survey conducted in 2005
612 ❚ Human resource development
(CIPD, 2005e) produced the data set out below in response to the question, ‘Which
skills does your organization need to develop in order to fulfil requirements in three
years’ time?’ The respondents listed in order:
1. Management and leadership.
2. Communication.
3. Business skills.
4. Customer service.
5. Advanced technical skills.
6. Broader skill sets.
7. Coaching and mentoring.
8. Innovation.
9. IT skills.
10. Ability to adapt easily to change.
Formulating and implementing learning and development strategies ❚ 613
LEARNING SPECIFICATION
Role title: Product Manager Department: Marketing
What the role holder must understand
Learning outcomes Learning methods
● The product market ● Coaching: Marketing Manager and Advertising
Manager
● The product specification ● Coaching: Operations Manager
● Market research availability ● Coaching: Market Research Manager
● Interpretation of marketing data ● Coaching: Market Research Manager
● Customer service requirements ● Customer Service Manager
● Techniques of product management ● Institute of Marketing courses
What the role holder must be able to do
Learning outcomes Learning methods
● Prepare product budget ● Coaching: Budget Accountant
● Prepare marketing plans ● Coaching: Mentor
● Conduct market reviews ● Coaching: Market Research Department
● Prepare marketing campaigns ● Read: Product Manager’s Manual
● Specify requirements for advertisers and ● Read: Product Manager’s Manual
promotional material
● Liaise with advertising agents and creative ● Attachment to agency
suppliers
● Analyse results of advertising campaigns ● Coaching: Mentor, read analyses
● Prepare marketing reports ● Read: previous reports, observe:
marketing review meetings
Figure 41.2 A learning specification
Account needs to be taken of the lessons that can be learnt from learning theory, espe-
cially those concerned with cognitive, experiential and social learning. These high-
light the importance of providing people with the opportunity to learn for
themselves, and emphasizes the importance of learning from experience and learning
from other people. The concepts of self-directed learning and personal development
planning are particularly important, but encouraging these processes needs to be
reinforced by the provision of guidance and advice to learners, mainly from their line
managers but also from learning specialists and through the provision by the organi-
zation of learning resource centres and e-learning programmes.
Responsibility for the implementation of learning
While individuals should be expected to take a considerable degree of responsibility
for managing their own learning, they need the help and support of their line
managers and the organization.
Line managers have a key role in planning and facilitating learning by conducting
performance and development reviews, agreeing learning contracts and personal
development plans with their staff, and helping staff to implement those plans
through the provision of learning opportunities and coaching. But they have to be
encouraged to do this. They should understand that the promotion of learning is
regarded as an important aspect of their responsibilities and that their performance in
carrying it out will be assessed. They also need guidance on how they should carry
out their developmental role.
Responsibility for learning and development is being placed increasingly on
managers and employees rather than training professionals. The latter are becoming
learning facilitators rather than training providers or instructors. The direct role of
training is becoming less important. As Stewart and Tansley (2002) point out, training
specialists are focusing on learning processes, rather than the content of training
courses. Carter et al (2003) argue that ‘The shifting organizational forms of training,
coupled with multiple delivery methods, are not leading to a single new role for the
trainer, but rather an array of different role demands.’ These roles include facilitator
and change agent.
As facilitators, learning and development specialists analyse learning needs and
make proposals on how these can best be satisfied. They provide facilities such as
learning resource centres and e-learning programmes, and plan and implement
training interventions, often outsourcing training to external providers. Importantly,
they provide guidance to line managers and help them to develop their skills in
assessing development needs, personal development planning and coaching.
Additionally, they are there to give advice and help to individuals on their learning
plans.
614 ❚ Human resource development
Learning and development activities
A balanced learning approach is required, making use of the various forms of
learning and development referred to in Chapter 38. The aim should be to produce a
coherent strategy that contains the plans for creating and maintaining a learning
climate and developing and implementing complementary and mutually supportive
learning activities such as coaching and mentoring. Details should be provided for
each activity on its objectives, the methods to be used, its timing as part of a
programme, how it is linked to other learning activities, who is responsible (empha-
sizing the role of individuals and their managers), and the business case for using it in
terms of a cost/benefit assessment.
The extent to which organizations use different approaches as revealed by a survey
conducted in 2004 (IRS, 2004g) is shown in Table 41.1.
EVALUATION OF LEARNING
It is important to evaluate learning in order to assess its effectiveness in producing the
outcomes specified when the activity was planned and to indicate where improve-
ments or changes are required to make the training even more effective. As Tamkin
et al (2002) suggest:
Formulating and implementing learning and development strategies ❚ 615
Activity No of organizations
using ‘regularly’ or
‘sometimes’
On-the-job induction 72
On-the-job skills updating 71
External conferences and workshops 70
Formal classroom training 67
Coaching 64
Mentoring 55
Off-the-job induction 49
Off-the-job skills updating 40
e-learning 35
Non-vocational training 22
Action learning sets 16
N = 79
Table 41.1 Use of learning activities (Source: IRS, 2004g)
Learning can be modelled as a chain of impact from the planning of learning to meet
organizational or individual learning needs to the learning that takes place in a learning
event, from learning to changed behaviour, and from changed behaviour to impact on
others and the organization as a whole.
It is at the planning stage that the basis upon which each category of learning event is
to be evaluated should be determined. At the same time, it is necessary to consider
how the information required for evaluation should be obtained and analysed.
Approaches to the evaluation of learning have traditionally concentrated on the
evaluation of training events as described below. But the trend is to concentrate more
on the validation of the total learning process.
Training evaluation defined
The process of evaluating training has been defined by Hamblin (1974) as: ‘Any
attempt to obtain information (feedback) on the effects of a training programme, and
to assess the value of the training in the light of that information.’ Evaluation leads to
control, which means deciding whether or not the training was worthwhile (prefer-
ably in cost/benefit terms) and what improvements are required to make it even
more cost-effective.
Evaluation is an integral feature of learning activities. In its crudest form, it is the
comparison of objectives (criterion behaviour) with outcomes (terminal behaviour) to
answer the question of how far the event has achieved its purpose. The setting of
objectives and the establishment of methods of measuring results are, or should be,
an essential part of the planning stage of any learning and development programme.
Levels of evaluation
Four levels of training evaluation have been suggested by Kirkpatrick (1994).
Level 1. Reaction
At this level, evaluation measures how those who participated in the training have
reacted to it. In a sense, it is a measure of immediate customer satisfaction.
Kirkpatrick suggests the following guidelines for evaluating reactions:
● determine what you want to find out;
● design a form that will quantify reactions;
● encourage written comments and suggestions;
● get 100 per cent immediate response;
616 ❚ Human resource development
● get honest responses;
● develop acceptable standards;
● measure reactions against standards, and take appropriate action;
● communicate reactions as appropriate.
Research by Warr et al (1999) has shown that there is relatively little correlation
between learner reactions and measures of training, or subsequent measures of
changed behaviour. But as Tamkin et al (2002) point out, despite this, organizations
are still keen to get reactions to training, and used with caution this can produce
useful information on the extent to which learning objectives were perceived to be
met and why.
Level 2. Evaluating learning
This level obtains information on the extent to which learning objectives have been
attained. It will aim to find how much knowledge was acquired, what skills were
developed or improved, and the extent to which attitudes have changed in the
desired direction. So far as possible, the evaluation of learning should involve the use
of tests before and after the programme – paper and pencil, oral or performance tests.
Level 3. Evaluating behaviour
This level evaluates the extent to which behaviour has changed as required when
people attending the programme have returned to their jobs. The question to be
answered is the extent to which knowledge, skills and attitudes have been transferred
from the classroom to the workplace. Ideally, the evaluation should take place both
before and after the training. Time should be allowed for the change in behaviour to
take place. The evaluation needs to assess the extent to which specific learning objec-
tives relating to changes in behaviour and the application of knowledge and skills
have been achieved.
Level 4. Evaluating results
This is the ultimate level of evaluation and provides the basis for assessing the bene-
fits of the training against its costs. The objective is to determine the added value of
learning and development programmes – how they contribute to raising organiza-
tional performance significantly above its previous level. The evaluation has to be
based on ‘before and after’ measures and has to determine the extent to which the
fundamental objectives of the training have been achieved in areas such as increasing
sales, raising productivity, reducing accidents or increasing customer satisfaction.
Formulating and implementing learning and development strategies ❚ 617
Evaluating results is obviously easier when they can be quantified. However, it is not
always easy to prove the contribution to improved results made by training as
distinct from other factors and, as Kirkpatrick says: ‘Be satisfied with evidence,
because proof is usually impossible to get.’ Perhaps the most powerful method of
demonstrating that learning programmes pay is to measure the return on investment,
as discussed below.
Return on investment as a method of evaluation
Return on investment (ROI) is advocated by some commentators as a means of
assessing the overall impact of training on organizational performance. It is calcu-
lated as:
Benefits from training (£) – costs of training (£) × 100
Costs of training (£)
Kearns and Miller (1997) believe that only this sort of measure is useful in evaluating
the overall impact of training. They argue that particular hard measures should be
used to evaluate specific training; for example, if development aims to bring about
greater awareness of customers then it should still be measured by the eventual effect
on customer spend, customer satisfaction and number of customers.
The pressure to produce financial justifications for any organizational activity,
especially in areas such as learning and development, has increased the interest in
ROI. The problem is that while it is easy to record the costs it is much harder to
produce convincing financial assessments of the benefits. Kearns (2005a) provides a
response to this concern:
All business is about the art of speculation and the risk of the unknown. The trick here is
not to try and work to a higher standard of credibility than anyone else in the organiza-
tion. If accountants are prepared to guess about amortization costs or marketing direc-
tors to guess about market share why should a trainer not be prepared to have a guess at
the potential benefits of training?
He recommends the use of ‘a rule of thumb’ when using ROI to the effect that any
training should improve the performance of trainees by at least 1 per cent. Thus if the
return on sales training is being measured, the benefits could be calculated as 1 per
cent of profit on sales.
618 ❚ Human resource development
Use of evaluation tools
Research by The Industrial Society (2000) has shown that the Kirkpatrick model was
used by 35 per cent of the 487 participants. Research by Twitchell et al (2000) found
that many US organizations use levels 1 and 2 evaluations for at least some
programmes, fewer than half even try level 3 and only a small percentage use level 4
evaluations.
The number of respondents to the IRS 2004 training survey using different types of
evaluation is shown in Table 41.2.
Application of evaluation
As Reid et al (2004) comment: ‘The more care that has been taken in the assessment of
needs and the more precise the objectives, the greater will be the possibility of effec-
tive evaluation.’ This is the basis for conducting evaluation at various levels.
Like the similar levels of evaluation suggested by Hamblin in 1976 (reactions,
learning, job behaviour, impact on unit and organizational performance) the levels
defined by Kirkpatrick are links in the chain. Training produces reactions, which lead
Formulating and implementing learning and development strategies ❚ 619
Activity No of organizations
using ‘regularly’ or
‘sometimes’
Immediate post-course questionnaire 74
Monitoring appraisal results 50
Observation of participants at work 49
Interviewing participants 48
Employee attitude surveys 44
Monitoring qualifications gained 42
Follow-up questionnaires 41
Monitoring test results 35
Survey line managers 34
Assessment of participant’s action plans 31
Evaluation framework/model 28
Customer surveys 28
Analysis of output/quality data 25
N = 79
Table 41.2 Use of evaluation tools (Source: IRS, 2004f)
to learning, which leads to changes in job behaviour, which lead to results at unit and
organizational level. Trainees can react favourably to a course – they can enjoy the
experience – but learn little or nothing. They can learn something, but cannot, or will
not, or are not allowed to apply it. They apply it but it does no good within their own
areas. It does some good in their function, but does not improve organizational effec-
tiveness.
Evaluation can take place at any level. In the Kirkpatrick scheme it is easier to start
at level 1 and progress up with increasing difficulty to level 4. It could be argued that
the only feedback from evaluation that matters is the result in terms of improved unit
or organizational performance that training brings. But if this is hard to measure,
training could still be justified in terms of any actual changes in behaviour that the
programme was designed to produce. This is based on the assumption that the
analysis of learning needs indicated that this behaviour is more than likely to deliver
the desired results. Similarly, at the learning level, if a proper analysis of knowledge,
skills and attitude requirements and their impact on behaviour has been conducted, it
is reasonable to assume that if the knowledge, etc has been acquired, behaviour is
likely to change appropriately. Finally, if all else fails, reactions are important in that
they provide immediate feedback on the quality of training given (including the
performance of the trainer), which can point the way to corrective action.
620 ❚ Human resource development
Rewarding people
This part is concerned with the process of rewarding people in organizations. It starts in
Chapter 42 with a general review of reward management, which includes descriptions of its
application for directors and executives, sales staff and manual workers. This is followed in
Chapter 43 with an examination of the concept of strategic reward. The rest of Part IX deals
with the following aspects of reward management:
Chapter 44 – Job evaluation
Chapter 45 – Market rate analysis
Chapter 46 – Grade and pay structures
Chapter 46 – Contingent pay
Chapter 47 – Employee benefits, pensions and allowances
Chapter 48 – Managing reward systems
Part IX
Reward management
This chapter provides an overview of reward management. The concept of reward
management, its strategic and detailed aims and its philosophy are discussed
initially. Reference is also made to the economic factors that affect levels of pay.
This is followed by descriptions of the elements of a reward management system and
the concept of total reward. The chapter ends with descriptions of particular applica-
tions of reward management for directors and executives, sales staff and manual
workers.
REWARD MANAGEMENT DEFINED
Reward management is concerned with the formulation and implementation
of strategies and policies, the purposes of which are to reward people fairly, equit-
ably and consistently in accordance with their value to the organization and thus
help the organization to achieve its strategic goals. It deals with the design, imple-
mentation and maintenance of reward systems (reward processes, practices
and procedures) that aim to meet the needs of both the organization and its
stakeholders.
42
THE AIMS OF REWARD MANAGEMENT
The aims of reward management are to:
● reward people according to what the organization values and wants to pay for;
● reward people for the value they create;
● reward the right things to convey the right message about what is important in
terms of behaviours and outcomes;
● develop a performance culture;
● motivate people and obtain their commitment and engagement;
● help to attract and retain the high quality people the organization needs;
● create total reward processes that recognize the importance of both financial and
non-financial rewards;
● develop a positive employment relationship and psychological contract;
● align reward practices with both business goals and employee values; as Brown
(2001) emphasizes, the ‘alignment of your reward practices with employee values
and needs is every bit as important as alignment with business goals, and critical
to the realization of the latter’;
● operate fairly – people feel that they are treated justly in accordance with what is
due to them because of their value to the organization: the ‘felt-fair’ principle of
Jaques (1961);
● apply equitably – people are rewarded appropriately in relation to others within
the organization, relativities between jobs are measured as objectively as possible
and equal pay is provided for work of equal value;
● function consistently – decisions on pay do not vary arbitrarily and without due
cause between different people or at different times;
● operate transparently – people understand how reward processes operate and
how they are affected by them.
THE PHILOSOPHY OF REWARD MANAGEMENT
Reward management is based on a well-articulated philosophy – a set of beliefs and
guiding principles that are consistent with the values of the organization and help to
enact them. These include beliefs in the need to achieve fairness, equity, consistency
and transparency in operating the reward system. The philosophy recognizes that if
HRM is about investing in human capital from which a reasonable return is required,
then it is proper to reward people differentially according to their contribution (ie the
return on investment they generate).
624 ❚ Rewarding people
The philosophy of reward management recognizes that it must be strategic in the
sense that it addresses longer-term issues relating to how people should be valued for
what they do and what they achieve. Reward strategies and the processes that are
required to implement them have to flow from the business strategy.
Reward management adopts a ‘total reward’ approach, which emphasizes the
importance of considering all aspects of reward as a coherent whole that is integrated
with other HR initiatives designed to achieve the motivation, commitment, engage-
ment and development of employees. This requires the integration of reward strate-
gies with other HRM strategies, especially those concerning human resource
development. Reward management is an integral part of an HRM approach to
managing people.
The philosophy will be affected by the business and HR strategies of the organiza-
tion, the significance attached to reward matters by top management, and the internal
and external environment of the organization. The external environment includes the
levels of pay in the labour market (market rates) and it is helpful to be aware of the
economic theories that explain how these levels are determined, as summarized in
Table 42.1.
THE ELEMENTS OF REWARD MANAGEMENT
The elements of reward management are described below.
Reward system
A reward system consists of:
● Policies that provide guidelines on approaches to managing rewards.
● Practices that provide financial and non-financial rewards.
● Processes concerned with evaluating the relative size of jobs (job evaluation) and
assessing individual performance (performance management).
● Procedures operated in order to maintain the system and to ensure that it operates
efficiently and flexibly and provides value for money.
Reward strategy
Reward strategy sets out what the organization intends to do in the longer term to
develop and implement reward policies, practices and processes that will further the
achievement of its business goals.
Reward management ❚ 625
626 ❚ Rewarding people
Name of theory Summary of theory Practical significance
The law of supply Other things being equal, if there is a Emphasizes the importance of
and demand surplus of labour and supply exceeds labour market factors in
the demand, pay levels go down; if affecting market rates.
there is a scarcity of labour and demand
exceeds the supply, pay goes up.
Efficiency wage Firms will pay more than the market Organizations use efficiency
theory rate because they believe that high wages theory (although they
levels of pay will contribute to increases will not call it that) when they
in productivity by motivating superior formulate pay policies which
performance, attracting better candidates, place them as market leaders
reducing labour turnover and persuading or at least above the average.
workers that they are being treated
fairly. This theory is also known as ‘the
economy of high wages‘.
Human capital A worker has a set of skills developed Employees and employers
theory by education and training which each derive benefits from
generates a stock of productive investment in creating human
capital. capital. The level of pay should
supply both parties with a
reasonable return on that
investment.
Agency theory The owners of a firm (the principals) are A system of incentives to
separate from the employees (the agents). motivate and reward
This difference can create ‘agency costs’ acceptable behaviour. This
because the agents may not be so process of ‘incentive alignment’
productive as the principals. The latter consists of paying for
therefore have to devise ways of measurable results that are
motivating and controlling the efforts deemed to be in the best
of the former. interests of the owners.
The effort bargain Workers aim to strike a bargain about the Management has to assess
relationship between what they regard as what level and type of
as reasonable contribution and what inducements it has to offer in
their employer is prepared to offer to return for the contribution it
elicit that contribution. requires from its workforce.
Table 42.1 Economic theories explaining pay levels
Reward policies
Reward policies address the following broad issues:
● the level of rewards, taking into account ‘market stance’, ie how internal rates of
pay should compare with market rates, for example aligned to the median or the
upper quartile rate;
● achieving equal pay;
● the relative importance attached to external competitiveness and internal equity;
● the approach to total reward;
● the scope for the use of contingent rewards related to performance, competence,
contribution or skill;
● the role of line managers;
● transparency – the publication of information on reward structures and processes
to employees.
Total reward
Total reward is the combination of financial and non-financial rewards available to
employees.
Total remuneration
Total remuneration is the value of all cash payments (total earnings) and benefits
received by employees.
Base or basic pay
The base rate is the amount of pay (the fixed salary or wage) that constitutes the rate
for the job. It may be varied according to the grade of the job or, for manual workers,
the level of skill required.
Base pay will be influenced by internal and external relativities. The internal rela-
tivities may be measured by some form of job evaluation. External relativities are
assessed by tracking market rates. Alternatively, levels of pay may be agreed through
collective bargaining with trade unions or by reaching individual agreements.
Base pay may be expressed as an annual, weekly or hourly rate. For manual
workers this may be called a ‘time rate’ system of payment. Allowances for overtime,
shift working, unsocial hours or increased cost of living in London or elsewhere may
be added to base pay. The base rate may be adjusted to reflect increases in the cost of
living or market rates by the organization, unilaterally or by agreement with a trade
union.
Reward management ❚ 627
Job evaluation
Job evaluation is a systematic process for defining the relative worth or size of jobs
within an organization in order to establish internal relativities and provide the basis
for designing an equitable grade structure, grading jobs in the structure and
managing relativities. It does not determine the level of pay directly. Job evaluation
can be analytical or non-analytical. It is based on the analysis of jobs or roles, which
leads to the production of job descriptions or role profiles. Job evaluation is described
in Chapter 44.
Market rate analysis
Market rate analysis is the process of identifying the rates of pay in the labour market
for comparable jobs to inform decisions on levels of pay within the organization. A
policy decision may be made on how internal rates of pay should compare with
external rates – an organization’s market stance. Market rate analysis is described in
Chapter 45.
Grade and pay structures
Jobs may be placed in a graded structure according to their relative size. Pay levels in
the structure are influenced by market rates. The pay structure may consist of pay
ranges attached to grades, which provide scope for pay progression based on perfor-
mance, competence, contribution or service. Alternatively, a ‘spot rate’ structure may
be used for all or some jobs in which no provision is made for pay progression in a
job. The various types of grade and pay structures are described in Chapter 46.
Contingent pay
Additional financial rewards may be provided that are related to performance,
competence, contribution, skill or experience. These are referred to as ‘contingent
pay’. Contingent payments may be added to base pay, ie ‘consolidated’. If such
payments are not consolidated (ie paid as cash bonuses) they are described as ‘vari-
able pay’. Contingent pay schemes are described in Chapter 47.
Employee benefits
Employee benefits include pensions, sick pay, insurance cover, company cars and a
number of other ‘perks’ as described in Chapter 48. They comprise elements of remu-
neration additional to the various forms of cash pay and also include provisions for
employees that are not strictly remuneration, such as annual holidays.
628 ❚ Rewarding people
Performance management
Performance management processes (see Part VII) define individual performance
and contribution expectations, assess performance against those expectations,
provide for regular constructive feedback and result in agreed plans for performance
improvement, learning and personal development. They are a means of providing
non-financial motivation and may also inform contingent pay decisions.
Non-financial rewards
These are rewards that do not involve any direct payments and often arise from the
work itself, for example, achievement, autonomy, recognition, scope to use and
develop skills, training, career development opportunities and high quality leader-
ship.
The inter-relationships of these elements are shown in Figure 42.1.
TOTAL REWARD
The concept of total reward has emerged quite recently and is exerting considerable
influence on reward management. This section of the chapter begins by defining
what it means. The importance of the concept is then explained, and the section
continues with an analysis of the components of total reward. It concludes with a
description of how a total reward approach to reward management can be devel-
oped.
Total reward defined
As defined by Manus and Graham (2003), total reward ‘includes all types of rewards
– indirect as well as direct, and intrinsic as well as extrinsic’. Each aspect of re-
ward, namely base pay, contingent pay, employee benefits and non-financial rewards,
which include intrinsic rewards from the work itself, are linked together and treated
as an integrated and coherent whole. Total reward combines the impact of the two
major categories of reward as defined below and illustrated in Figure 42.2: 1) transac-
tional rewards – tangible rewards arising from transactions between the employer and
employees concerning pay and benefits; and 2) relational rewards – intangible rewards
concerned with learning and development and the work experience.
A total reward approach is holistic: reliance is not placed on one or two reward
mechanisms operating in isolation, and account is taken of every way in which
people can be rewarded and obtain satisfaction through their work. The aim is to
Reward management ❚ 629
maximize the combined impact of a wide range of reward initiatives on motivation,
commitment and job engagement. As O’Neal (1998) has explained: ‘Total reward
embraces everything that employees value in the employment relationship.’
630 ❚ Rewarding people
Job evaluation
Grade and pay
structure
Market rate
analysis
Contingent pay
Business and
HR strategy
Reward
strategy
Total
remuneration
Total reward
Employee
benefits
Allowances
Performance
management
Non-financial
rewards
Figure 42.1 Reward management: elements and interrelationships
An equally wide definition of total reward is offered by WorldatWork (2000) who
state that total rewards are ‘all of the employer’s available tools that may be used to
attract, retain, motivate and satisfy employees’. Thompson (2002) suggests that:
Definitions of total reward typically encompass not only traditional, quantifiable
elements like salary, variable pay and benefits, but also more intangible non-cash
elements such as scope to achieve and exercise responsibility, career opportunities,
learning and development, the intrinsic motivation provided by the work itself and the
quality of working life provided by the organization.
The conceptual basis of total rewards is that of configuration or ‘bundling’, so that
different reward processes are interrelated, complementary and mutually reinforcing.
Total reward strategies are vertically integrated with business strategies, but they are
also horizontally integrated with other HR strategies to achieve internal consistency.
Reward management ❚ 631
Transactional
rewards
Base pay
Contingency pay
Employee benefits
Learning and development
The work experience
Relational
rewards
Total reward
Total
remuneration
Non-financial/
intrinsic
rewards
Figure 42.2 The components of total reward
The significance of total reward
Essentially, the notion of total reward says that there is more to rewarding people
than throwing money at them.
For O’Neal (1998), a total reward strategy is critical to addressing the issues created
by recruitment and retention as well as providing a means of influencing behaviour:
It can help create a work experience that meets the needs of employees and encourages
them to contribute extra effort, by developing a deal that addresses a broad range of
issues and by spending reward dollars where they will be most effective in addressing
workers’ shifting values.
Perhaps the most powerful argument for a total rewards approach was made by
Pfeffer (1998):
Creating a fun, challenging, and empowered work environment in which individuals are
able to use their abilities to do meaningful jobs for which they are shown appreciation is
likely to be a more certain way to enhance motivation and performance – even though
creating such an environment may be more difficult and take more time than simply
turning the reward lever.
The benefits of a total reward approach are:
● Greater impact – the combined effect of the different types of rewards will make
a deeper and longer-lasting impact on the motivation and commitment of
people.
● Enhancing the employment relationship – the employment relationship created by a
total reward approach makes the maximum use of relational as well as transac-
tional rewards and will therefore appeal more to individuals.
● Flexibility to meet individual needs – as pointed out by Bloom and Milkovitch (1998):
‘Relational rewards may bind individuals more strongly to the organization
because they can answer those special individual needs.’
● Talent management – relational rewards help to deliver a positive psychological
contract and this can serve as a differentiator in the recruitment market that is
much more difficult to replicate than individual pay practices. The organization
can become an ‘employer of choice’ and ‘a great place to work’, thus attracting
and retaining the talented people it needs.
632 ❚ Rewarding people
MODEL OF TOTAL REWARD
A model of total reward is shown in Figure 42.3.
The upper two quadrants – pay and benefits – represent transactional rewards. These
are financial in nature and are essential to recruit and retain staff but can be easily
copied by competitors. By contrast, the relational (non-financial) rewards produced
Reward management ❚ 633
Transactional
(tangible)
Communal
Individual
Relational
(intangible)
Figure 42.3 Model of total reward
Pay Benefits
● base pay ● pensions
● contingent pay ● holidays
● cash bonuses ● health care
● long-term incentives ● other perks
● shares ● flexibility
● profit sharing
Learning and development Work environment
● workplace learning and ● core values of the organization
development ● leadership
● training ● employee voice
● performance management ● recognition
● career development ● achievement
● job design and role development
(responsibility, autonomy,
meaningful work, the scope to
use and develop skills)
● quality of working life
● work/life balance
● talent management
by the lower two quadrants are essential to enhancing the value of the upper two
quadrants. The real power, as Thompson (2002) states, comes when organizations
combine relational and transactional rewards.
REWARD MANAGEMENT FOR DIRECTORS AND
EXECUTIVES
Principles of corporate governance relating to remuneration of
directors
The key principles of corporate governance as it affects the remuneration of directors,
which emerged from various reviews, namely the Cadbury, Greenbury and Hampel
Reports, are as follows:
● Remuneration committees should consist exclusively of non-executive directors.
Their purpose is to provide an independent basis for setting the salary levels and
the rules covering incentives, share options, benefit entitlements and contract
provisions for executive directors. Such committees are accountable to share-
holders for the decisions they take and the non-executive directors who sit on
them should have no personal financial interests at stake. They should be consti-
tuted as sub-committees of company boards and boards should elect both the
chairman and the members.
● Remuneration committees must provide a remuneration package sufficient to
attract, retain and motivate directors but should avoid paying more than is neces-
sary. They should be sensitive to wider issues, eg pay and employment conditions
elsewhere in the company.
● Remuneration committees should take a robust line on the payment of compen-
sation where performance has been unsatisfactory.
● Performance-related elements should be designed to align the interests of direc-
tors and shareholders.
● Any new longer-term incentive arrangement should, preferably, replace existing
executive share option plans, or at least form part of an integrated approach,
which should be approved by shareholders.
● The pension consequences and associated costs to the company of increases in
base salary should be considered.
● Notice or service contract periods should be set at, or reduced to, a year or less.
However, in some cases periods of up to two years may be acceptable.
634 ❚ Rewarding people
Elements of directors’ and senior executives’ pay
The main elements of directors’ and senior executives’ pay are basic pay, bonus or
incentive schemes, share option and share ownership schemes.
Basic pay
Decisions on the base salary of directors and senior executives are usually founded on
largely subjective views about the market worth of the individuals concerned.
Remuneration on joining the company is commonly settled by negotiation, often
subject to the approval of a remuneration committee. Reviews of base salaries are
then undertaken by reference to market movements and success as measured by
company performance. Decisions on base salary are important not only in themselves
but also because the level may influence decisions on the pay of both senior and
middle managers. Bonuses are expressed as a percentage of base salary, share options
may be allocated as a declared multiple of basic pay and, commonly, pension will be
a proportion of final salary.
Bonus schemes
Virtually all major employers in the UK (90 per cent according to recent surveys by
organizations such as Monks and Hay) provide annual incentive (bonus) schemes for
senior executives. Bonus schemes provide directors and executives with cash sums
based on the measures of company and, frequently, individual performance.
Typically, bonus payments are linked to achievement of profit and/or other finan-
cial targets and they are sometimes ‘capped’, ie a restriction is placed on the
maximum amount payable. There may also be elements related to achieving specific
goals and to individual performance.
Share option schemes
Many companies have share option schemes that give directors and executives the
right to buy a block of shares on some future date at the share price ruling when the
option was granted. They are a form of long-term incentive on the assumption that
executives will be motivated to perform more effectively if they can anticipate a
substantial capital gain when they sell their shares at a price above that prevailing
when they took up the option.
Executive restricted share schemes
Under such schemes free shares are provisionally awarded to participants. These
Reward management ❚ 635
shares do not belong to the executive until they are released or vested; hence they are
‘restricted’. The number of shares actually released to the executive at the end of a
defined period (usually three or, less commonly, five years) will depend on perfor-
mance over that period against specific targets. Thereafter there may be a further
retention period when the shares must be held, although no further performance
conditions apply.
REWARD MANAGEMENT FOR SALES STAFF
There are no hard-and-fast rules governing how sales representatives should be paid.
It depends on the type of company, the products or services it offers its customers and
the nature of the sales process – how sales are organized and made. The different
methods are described in Table 42.2.
PAYING MANUAL WORKERS
The pay of manual workers takes the form of time rates, also known as day rates, day
work, flat rates or hourly rates. Incentive payments by means of payment-by-results
schemes may be made on top of a base rate.
Time rates
These provide workers with a predetermined rate for the actual hours they work.
Time rates on their own are most commonly used when it is thought that it
is impossible or undesirable to use a payment-by-results system, for example in
maintenance work. From the viewpoint of employees, the advantage of time rates is
that their earnings are predictable and steady and they do not have to engage in
endless arguments with rate-fixers and supervisors about piece rate or time
allowances. The argument against them is that they do not provide a direct incentive
relating the reward to the effort or the results. Two ways of modifying the basic
time rate approach are to adopt high day rates, as described below, or measured day
work.
Time rates may take the form of what are often called high day rates. These are
higher than the minimum time rate and may contain a consolidated bonus rate
element. The underlying assumption is that higher base rates will encourage greater
effort without the problems created when operating an incentive scheme. High day
rates are usually above the local market rates, to attract and retain workers.
636 ❚ Rewarding people
Reward management ❚ 637
Method Features Advantages Disadvantages When
appropriate
Salary only Straight salary, no Encourage No direct When
commission or customer service motivation representing the
bonus rather than high through money; company is more
pressure selling; may attract important than
deal with the under-achieving direct selling;
problem of staff people who are staff have little
who are working subsidized by influence on
in a new or high achievers; sales volume (they
unproductive increases fixed may simply be
sales territory; costs of sales ‘order takers’);
protects income because pay customer service
when sales costs are not is all-important
fluctuate for flexed with
reasons beyond sales results
the individual’s
control
Salary plus Basic salary plus Direct financial Relating pay to When it is
commission cash commission motivation is the volume or believed that the
calculated as a provided related value of sales is way to get more
percentage of to what sales too crude an sales is to link
sales volume or staff are there, approach and extra money to
value to do may result in results but a base
ie generate sales; staff going for salary is still
but they are not volume by needed to attract
entirely concentrating the many people
dependent on on the easier to who want to be
commission – sell products not assured of a
they are those generating reasonable basic
cushioned by high margins; salary which will
their base salary may encourage not fluctuate but
high-pressure who still aspire
selling as in to increase that
some financial salary by their
services firms in own efforts
the 1980s and
1990s
Salary plus Basic salary plus Provide financial Do not have a When: flexibility
bonus cash bonus motivation but clear line of in providing
based on targets or sight between rewards is
Table 42.2 Summary of payment and incentive arrangements for sales staff
continued overleaf
638 ❚ Rewarding people
Method Features Advantages Disadvantages When
appropriate
achieving and objectives can effort and reward; important; it is
exceeding sales be flexed to may be complex felt that sales
targets or quotas ensure that to administer; staff need to be
and meeting particular sales sales motivated to
other selling goals are representative focus on aspects
objectives achieved, eg may find them of their work
high margin hard to other than simply
sales, customer understand and maximizing
service resent the use of sales volume
subjective
judgements on
performance
other than
sales
Commission Only Provide a direct Lead to high- When: sales
only commission financial pressure selling; performance
based on a incentive; attract may attract the depends mainly
percentage of high performing wrong sort of on selling ability
sales volume or sales staff; ensure people who are and can be
value is paid, that selling costs interested only measured by
there is no basic vary directly with in making sales immediate sales
salary sales; little direct and not results; staff are
supervision customer service; not involved in
required focus attention non-selling
on high volume activities;
rather than continuing
profitability relationships
with
customers are
relatively
unimportant
Additional Incentives, Utilize May be When it is
non-cash prizes, cars, powerful difficult to believed that
rewards recognition, non-financial administer; other methods of
opportunities motivators do not payment need to
to grow provide a be enhanced by
direct providing
incentive additional
motivators
Table 42.2 continued
Payment-by-result schemes
Payment-by-result (PBR) schemes provide incentives to workers by relating their pay
or, more usually, part of their pay to the number of items they produce or the time
taken to do a certain amount of work. The main types of PBR or incentive schemes for
individuals are piece work, work measured schemes, measured day work and perfor-
mance-related pay. Team bonus schemes are an alternative to individual PBR and
plant-wide schemes can produce bonuses that are paid instead of individual or team
bonuses, or in addition to them. Each of these methods is described in Table 42.3
together with an assessment of their advantages and disadvantages for employers
and employees, and when they are appropriate.
Reward management ❚ 639
Table 42.3 Comparison of shopfloor payment-by-result schemes
Select Main For employers For employees When
features Advantages Disadvantages Advantages Disadvantages appropriate
Piece Bonus directly Direct Lose control Predict and More difficult Fairly
work related to motivation; over output; control to predict and limited
output. simple, easy quality earnings in control application
and to operate. problems. the short- earnings in the to work
term; regulate longer-term; involving
pace of work work may be unit
themselves. stressful and production
produce RSI. controlled
by the
person eg
agriculture,
garment
manufac-
ture.
Work- Work Provides what Schemes are Appear to Ratings are For short-
measured measurement appears to be a expensive, provide a still prone to cycle
schemes used to ‘scientific’ time- more subjective repetitive
determine method of consuming objective judgement work where
standard relating and difficult method of and earnings changes in
output levels reward to to run and relating pay can fluctuate the work
over a period performance; can too easily to because of mix or
or standard can produce degenerate performance; changes in design
times for significant and cause employees work changes
job/tasks; increases in wage drift can be requirements are
bonus based productivity, because of involved in outside the infrequent,
by reference to at least in loose rates. the rating control of down time
performance the short-term. process to employees. is restricted,
ratings ensure and
compared fairness. manage-
continued
640 ❚ Rewarding people
Select Main For employers For employees When
features Advantages Disadvantages Advantages Disadvantages appropriate
with actual ment and
performance supervision
or time are capable
saved. of
managing
and
maintaining
the scheme.
Measured Pay fixed at a Employees are Performance High No Everyone
day work high rate on under an targets can predictable opportunities must be
the obligation to become easily earnings are for individuals totally
understanding work at the attained norms provided. to be committed
that a high specified level and may be rewarded to making it
level of of difficult to in line with work; high
performance performance. change. their own standards of
against work- efforts. work
measured measure-
standards will ment are
be essential;
maintained. good
control
systems
to
identify
shortfalls on
targets.
Perfor- Payments on Reward Measuring Opportunity Assessment As part of a
mance top of base individual performance to be informing reward
related rates are made contribution can be rewarded for performance harmoniza-
pay related to without difficult; no own efforts pay decisions tion (shop
individual resource to direct without may be biased, floor and
assessments work incentive having to inconsistent staff)
of measurement; provided. submit to a or programme;
performance. relevant in high pressured unsupported as an
technology PBR system. by evidence. alternative
manufacturing. to work
measured
schemes or
an en-
hancement
of a high
day rate
system.
Table 42.3 continued
continued
Reward management ❚ 641
Select Main For employers For employees When
features Advantages Disadvantages Advantages Disadvantages appropriate
Group or Groups or Encourage Direct Bonuses can Depend on When team
team teams are team incentive may be related effective work working is
basis paid bonuses cooperation be limited; clearly to the measurement, important
on the basis and effort; depends on joint efforts which is not and team
of their not too good work of the group; always efforts
performance individualized. measurement fluctuations available; can be
as indicated or the in earnings individual accurately
by work availability minimized. effort and measured
measurement of clear group contribution and
ratings or the output or not assessed;
achievement productivity recognized. as
of targets. targets. an
alternative
to
individual
PBR if this
is not
effective.
Table 42.3 continued
Strategic reward
Strategic reward management is about the development and implementation of
reward strategies and the philosophies and guiding principles that underpin them. It
provides answers to two basic questions: 1) where do we want our reward practices
to be in a few years’ time? and 2) how do we intend to get there? It therefore deals
with both ends and means. As an end it describes a vision of what reward processes
will look like in a few years’ time. As a means, it shows how it is expected that the
vision will be realized.
The chapter starts with a definition of reward strategy and an explanation of why it
is necessary. Consideration is then given to the structure and content of reward strate-
gies. The guiding principles for inclusion in a reward strategy are discussed next and
this is followed by a description of the development process and a note of the criteria
for effectiveness. Examples of reward strategy are then given and implementation
issues are assessed. The chapter ends with an examination of the important issue of
line management capability.
REWARD STRATEGY DEFINED
Reward strategy is a declaration of intent that defines what the organization wants to
do in the longer term to develop and implement reward policies, practices and
43
processes that will further the achievement of its business goals and meet the needs of
its stakeholders.
Reward strategy provides a sense of purpose and direction and a framework for
developing reward policies, practices and process. It is based on an understanding of
the needs of the organization and its employees and how they can best be satisfied. It
is also concerned with developing the values of the organization on how people
should be rewarded and formulating guiding principles that will ensure that these
values are enacted.
Reward strategy is underpinned by a reward philosophy that expresses what the
organization believes should be the basis upon which people are valued and
rewarded. Reward philosophies are often articulated as guiding principles.
WHY HAVE A REWARD STRATEGY?
In the words of Brown (2001): ‘Reward strategy is ultimately a way of thinking that
you can apply to any reward issue arising in your organization, to see how you can
create value from it.’ There are four arguments for developing reward strategies:
1. You must have some idea where you are going, or how do you know how to get
there, and how do you know that you have arrived (if you ever do)?
2. Pay costs in most organizations are by far the largest item of expense – they can
be 60 per cent and often much more in labour-intensive organizations – so
doesn’t it make sense to think about how they should be managed and invested
in the longer term?
3. There can be a positive relationship between rewards, in the broadest sense, and
performance, so shouldn’t we think about how we can strengthen that link?
4. As Cox and Purcell (1998) write: ‘The real benefit in reward strategies lies in
complex linkages with other human resource management policies and prac-
tices.’ Isn’t this a good reason for developing a reward strategic framework
which indicates how reward processes will be associated with HR processes so
that they are coherent and mutually supportive?
THE STRUCTURE OF REWARD STRATEGY
Reward strategy should be based on a detailed analysis of the present arrangements
for reward, which would include a statement of their strengths and weaknesses. This,
as suggested by the CIPD (2004e), could take the form of a ‘gap analysis’, which
644 ❚ Rewarding people
compares what is believed should be happening with what is happening and
indicates which ‘gaps’ need to be filled. A format for the analysis is shown in Figure
43.1.
A diagnosis should be made of the reasons for any gaps or problems so that deci-
sions can be made on what needs to be done to overcome them. It can then be struc-
tured under the headings set out below:
1. A statement of intentions – the reward initiatives that it is proposed should be
taken.
2. A rationale – the reasons why the proposals are being made. The rationale should
make out the business case for the proposals, indicate how they will meet busi-
ness needs and set out the costs and the benefits. It should also refer to any
people issues that need to be addressed and how the strategy will deal with
them.
3. A plan – how, when and by whom the reward initiatives will be implemented.
The plan should indicate what steps will need to be taken and should take
account of resource constraints and the need for communications, involvement
and training. The priorities attached to each element of the strategy should be
indicated and a timetable for implementation should be drawn up. The plan
should state who will be responsible for the development and implementation of
the strategy.
4. A definition of guiding principles – the values that it is believed should be adopted
in formulating and implementing the strategy.
THE CONTENT OF REWARD STRATEGY
Reward strategy may be a broad-brush affair simply indicating the general direction
in which it is thought reward management should go. Additionally or alternatively,
reward strategy may set out a list of specific intentions dealing with particular
aspects of reward management.
Broad-brush reward strategy
A broad-brush reward strategy may commit the organization to the pursuit of a total
rewards policy. The basic aim might be to achieve an appropriate balance between
financial and non-financial rewards. A further aim could be to use other approaches
to the development of the employment relationship and the work environment,
which will enhance commitment and engagement and provide more opportunities
for the contribution of people to be valued and recognized.
Strategic reward ❚ 645
646 ❚ Rewarding people
What should be happening What is happening What needs to be done
1. A total reward approach is adopted
which emphasises the significance of
both financial and non-financial
rewards.
2. Reward policies and practices are
developed within the framework of a
well-articulated strategy which is
designed to support the achievement
of business objectives and meet the
needs of stakeholders.
3. A job evaluation scheme is used which
properly reflects the values of the
organisation, is up-to-date with regard
to the jobs it covers and is non-
discriminatory.
4. Equal pay issues are given serious
attention. This includes the conduct
of equal pay reviews which lead to
action.
5. Market rates are tracked carefully so
that a competitive pay structure exists
which contributes to the attraction and
retention of high quality people.
6. Grade and pay structures are based
on job evaluation and market rate
analysis, appropriate to the
characteristics and needs of the
organization and its employees,
facilitate the management of
relativities, provide scope for rewarding
contribution, clarify reward and career
opportunities, constructed logically,
operate transparently and are easy to
manage and maintain.
7. Contingent pay schemes reward
contribution fairly and consistently,
support the motivation of staff and the
development of a performance culture,
deliver the right messages about the
values of the organization, contain a
clear ‘line of sight’ between
contribution and reward and are cost-
effective.
8. Performance management processes
contribute to performance
improvement, people development and
the management of expectations,
operate effectively throughout the
organization and are supported by line
managers and staff.
Figure 43.1 A reward gap analysis continued
Strategic reward ❚ 647
Figure 43.1 continued
What should be happening What is happening What needs to be done
9. Employee benefits and pension
schemes meet the needs of
stakeholders and are cost-effective.
10. A flexible benefits approach is
adopted.
11. Reward management procedures exist
which ensure that reward processes
are managed effectively and that costs
are controlled.
12. Appropriate use is made of computers
(software and spreadsheets) to
assist in the process of reward
management.
13. Reward management aims and
arrangements are transparent and
communicated well to staff.
14. Surveys are used to assess the
opinions of staff about reward and
action is taken on the outcomes.
15. An appropriate amount of
responsibility for reward is devolved to
line managers.
16. Line managers are capable of carrying
out their devolved responsibilities well.
17. Steps are taken to train line managers
and provide them with support and
guidance as required.
18. HR has the knowledge and skills to
provide the required reward
management advice and services and
to guide and support line managers.
19. Overall, reward management
developments are conscious of the
need to achieve affordability and to
demonstrate that they are cost
effective.
20. Steps are taken to evaluate the
effectiveness of reward management
processes and to ensure that they
reflect changing needs.
Examples of other broad strategic aims include:
● introducing a more integrated approach to reward management – encouraging
continuous personal development and spelling out career opportunities;
● developing a more flexible approach to reward that includes the reduction of
artificial barriers as a result of over-emphasis on grading and promotion;
● generally rewarding people according to their contribution;
● supporting the development of a performance culture and building levels of
competence; and
● clarifying what behaviours will be rewarded and why.
Specific reward initiatives
The selection of reward initiatives and the priorities attached to them will be based
on an analysis of the present circumstances of the organization and an assessment
of the needs of the business and its employees. The following are examples of
possible specific reward initiatives, one or more of which might feature in a reward
strategy:
● the replacement of present methods of contingent pay with a pay for contribution
scheme;
● the introduction of a new grade and pay structure, eg a broad-graded or career
family structure;
● the replacement of an existing decayed job evaluation scheme with a computer-
ized scheme that more clearly reflects organizational values;
● the improvement of performance management processes so that they provide
better support for the development of a performance culture and more clearly
identify development needs;
● the introduction of a formal recognition scheme;
● the development of a flexible benefits system;
● the conduct of equal pay reviews with the objective of ensuring that work of
equal value is paid equally;
● communication programmes designed to inform everyone of the reward policies
and practices of the organization;
● training, coaching and guidance programmes designed to increase line manage-
ment capability (see also the last section of this chapter).
648 ❚ Rewarding people
GUIDING PRINCIPLES
Guiding principles define the approach an organization takes to dealing with reward.
They are the basis for reward policies and provide guidelines for the actions
contained in the reward strategy. They express the reward philosophy of the organi-
zation – its values and beliefs about how people should be rewarded.
Members of the organization should be involved in the definition of guiding prin-
ciples that can then be communicated to everyone to increase understanding of what
underpins reward policies and practices. However, employees will suspend their
judgement of the principles until they experience how they are applied. What matters
to them are not the philosophies themselves but the pay practices emanating from
them and the messages about the employment ‘deal’ that they get as a consequence.
It is the reality that is important, not the rhetoric.
Reward guiding principles may refer to concerns such as:
● developing reward policies and practices that support the achievement of busi-
ness goals;
● providing rewards that attract, retain and motivate staff and help to develop a
high performance culture;
● maintaining competitive rates of pay;
● rewarding people according to their contribution;
● recognizing the value of all staff who are making an effective contribution, not
just the exceptional performers;
● allowing a reasonable degree of flexibility in the operation of reward processes
and in the choice of benefits by employees;
● devolving more responsibility for reward decisions to line managers.
An example of a statement of reward philosophy and guiding principles is given in
Figure 43.2.
DEVELOPING REWARD STRATEGY
The formulation of reward strategy can be described as a process for developing and
defining a sense of direction. The main phases are:
1. The diagnosis phase, when reward goals are agreed, current policies and practices
assessed against them, options for improvement considered and any changes
agreed.
Strategic reward ❚ 649
2. The detailed design phase, when improvements and changes are detailed and any
changes tested (pilot testing is important).
3. The final testing and preparation phase.
4. The implementation phase, followed by ongoing review and modification.
A logical step-by-step model for doing this is illustrated in Figure 43.3. This incorpo-
rates ample provision for consultation, involvement and communication with stake-
holders, who include senior managers as the ultimate decision makers as well as
employees and line managers.
In practice, however, the formulation of reward strategy is seldom as logical and
linear a process as this. As explained in Chapter 7, strategies evolve. Reward strate-
gists have to respond to changes in organizational requirements, which are
happening all the time. They need to track emerging trends in reward management
and may modify their views accordingly, as long as they do not leap too hastily on the
latest bandwagon.
650 ❚ Rewarding people
Reward philosophy Principles
● We will provide an innovative reward package ● Innovative and differentiated policies and
that is valued by our staff and communicated benefits.
brilliantly to reinforce the benefits of working
for B&Q plc.
● Reward investment will be linked to company ● Basic salaries will be competitive.
performance so that staff share in the success ● Total compensation will be upper quartile.
they create and, by going the extra mile, ● We share the success of B&Q with all
receive above average reward compared to employees.
local competitors. ● Increase variable pay as a percentage of
overall to drive company performance.
● Pay for performance.
● Performance objectives must have line of
sight for individuals/team.
● All parts of the total reward investment will ● Non-cash recognition is a powerful driver of
add value to the business and reinforce our business performance.
core purpose, goals and values. ● Pay can grow without promotion.
● Rewards are flexible around individual
aspirations.
● We will not discriminate on anything other
than performance.
Figure 43.2 Reward philosophy and guiding principles at B&Q
It may be helpful to set out reward strategies on paper for the record and as a basis
for planning and communication. But this should be regarded as no more than a
piece of paper that can be torn up when needs change – as they will – not a tablet of
stone.
COMPONENTS OF AN EFFECTIVE REWARD STRATEGY
Brown (2001) has suggested that effective reward strategies have three components:
Strategic reward ❚ 651
Analyse business
strategy and
business needs
Develop HR strategy
Analyse present
HR and reward
policies and
practices
Assess needs of
stakeholders – line
managers and
other employees
Consult and
involve senior
management
Consult, involve
and communicate
with employees
Brief and train
Final
communications
Develop and justify
reward strategy and
define guiding
principles
Prepare and
test plan
Implement plan
Review and modify
as required
Figure 43.3 A model of the reward strategy development process
1. They have to have clearly defined goals and a well-defined link to business
objectives.
2. There have to be well-designed pay and reward programmes, tailored to the
needs of the organization and its people, and consistent and integrated with one
another.
3. Perhaps most important and most neglected, there needs to be effective and
supportive HR and reward processes in place.
REWARD STRATEGY PRIORITIES
The CIPD (2005d) survey into reward policy and practice covering 477 organizations
with 1.5 million employees established that 45 per cent of employers had a formal
reward strategy that was aligned to the business and human resource strategies of the
organization. The top priority, as shown in Figure 43.4, is supporting the goals of the
organization, followed by rewarding, recruiting and retaining high performers.
652 ❚ Rewarding people
0% 50% 100%
Figure 43.4 Reward strategy priorities (Source: CIPD 2005d)
Support business goals 79%
Reward high performers 64%
Recruit and retain high performers 62%
Link pay to the market 53%
Maintain market competitiveness 51%
Manage pay costs 50%
Ensure internal equity 41%
EXAMPLES OF REWARD STRATEGIES
The source of the following examples of reward strategies is e-reward (2004a).
AEGON UK
A good example of the development of a reward strategy is provided by AEGON UK,
the insurance group with 4,000 employees. Like many companies, AEGON UK’s pay
systems and supporting processes such as job evaluation and performance appraisal
used to stand alone, apart from other HR processes. The company has adopted a
more holistic approach to the development of its new reward system – which it calls
the Human Resources Integrated Approach – so that from every angle staff can look at
the elements of reward, pay management, performance management and career
development and observe that they are consistent and linked. The stated objective of
this programme is ‘to develop a set of HR processes which are integrated with each
other and with the business objectives’. In other words, AEGON UK aims to ensure
that the processes of recruiting, retaining and motivating people, as well as
measuring their performance, are in line with what the business is trying to achieve.
The Human Resources Integrated Approach is underpinned by a competency framework.
The established competencies form the basis of the revised HR processes:
● Recruitment: competency based with multi-assessment processes as the basic
approach.
● Reward: market driven with overall performance dictating rate of progress of
salaries within broad bands rather then existing grades.
● Performance management: not linked to pay, concentrated on personal develop-
ment, objective setting and competency development.
● Training and development: targeted on key competencies and emphasizing self-
development.
Norwich Union Insurance
Progression, Performance and Pay is the name given to Norwich Union Insurance’s new
total reward strategy. It comprises four main elements:
1. Reward – salary and benefits, variable pay, all-employee share option plan and
incentive awards.
2. Career framework – meaningful job content and career opportunities.
3. Performance – challenging work; recognition and brand supporting behaviours.
4. Development – learning opportunities and personal development.
Strategic reward ❚ 653
As stated in the Norwich Union Insurance’s documentation and illustrated in Figure
43.5:
These initiatives… support our commitment to the one team culture reflected in our
balanced scorecard. The Progression, Performance & Pay framework is underpinned by
the brand values: Progressive, Shared benefit and Integrity. These should be reflected in
the way we agree objectives and use the skills, knowledge and behaviours model.
Progression, Performance & Pay moves us towards ‘total reward’ where financial reward
is just one element of the reward package. Other elements are benefits, recognition of
performance, career opportunities and personal development. In our model these are
expressed through reward, performance, career framework and development. This gives
us the tools to help build NUI as a great place to work, which attracts and retains quality
staff.
The framework was accompanied by a commitment from senior management:
● to recognize our best people through career opportunities and reward packages;
● to develop all staff to their full potential;
654 ❚ Rewarding people
development
progression,
performance
& pay
career
framework
reward performance
● pay
● benefits
● learning opportunities
● personal development
● meaningful job content
● career opportunities
● challenging work
● recognition
● brand supporting
behaviour
Figure 43.5 The Norwich Union Insurance Progression, Performance & Pay
framework
● to widen career opportunities for all;
● to provide managers with the means to recognize and reward performance
locally.
Integrated reward at Kwik-Fit
B&Q
Will Astill, Reward Manager of B&Q, a retail chain with 25,000 employees, which
completed a strategic reward review in 2003, explained to e-reward that:
An overriding theme running through our review was on the desirability of adopting a
strategic approach. It wasn’t a case of ‘let’s follow the best practice’, nor were we lured
into adopting the latest fads and fashions. Applying a bespoke system – taking what
someone has done before and adapting it to your organization – will not push you ahead
of rivals. Our emphasis throughout the two-year process was on what’s right for the busi-
ness.
Strategic reward ❚ 655
‘make the work worth it’
Organization design
Reward Performance management
Strategy,
vision and
values
What should I be doing?
How should I be doing it?
● roles and accountabilities
● communications and clarification
What’s in it for me?
● base pay
● incentive pay
● benefits
● flexibility
● recognition
How am I doing?
How can I grow?
● learning and
development
● performance culture
● coaching
Figure 43.6 Integrated reward model – Kwik-fit
Other examples
Other examples are given in Table 43.1 of the ways in which organizations have
responded to the needs established by their business strategy and the business and
reward issues they are facing. In each case the organizations started with broad-brush
statements about their intentions and proceeded from there to prepare action plans
and implementation programmes for specific innovations that had been fully justi-
fied by a cost/benefit analysis.
IMPLEMENTING REWARD STRATEGY
Formulation is easy, implementation is hard. In the UK more attention is now being
given to how organizations can make things happen. It is recognized that a pragmatic
656 ❚ Rewarding people
Organization Business strategy Business/reward Reward strategy
issues
Food distribution Increase efficiency Poor team work Broad-banding
Innovate Inflexible Team pay
Cost reduction Narrow focus Gain-sharing
Engineering Maintain market share Skill-based pay not Link operating plan
manufacturing Increase competitive working and performance
edge PRP only for managers management
Develop more Performance Replace skill-based
sophisticated planning appraisal ineffective pay
processes Introduce PRP for all
International bank International growth Transactional rather Replace incremental
Enhance customer than relational approach scales
service Incremental scales Introduce
Maintain market Pay for jobs not people contribution-related
leadership pay
Revise performance
management
Care provider, Growth by improving Flexibility Competence-related
voluntary sector service delivery Cost of people pay
Develop new projects Competence of people Broad-banding
Win more contracts
Table 43.1 Examples of reward strategies and their derivation
approach is required – what’s good is what works. It is also appreciated that imple-
mentation presents a massive change management challenge. The practical advice on
managing changes in reward systems given by Paul Craven, Compensation Director,
R&D, GlaxoSmithKline was: ‘Don’t expect people to change overnight and don’t try
to force change. It is better to reinforce desirable behaviour than to attempt to enforce
a particular way of doing things.’ The advice given by Nicki Denby, Performance and
Reward Director, Diageo was to:
● keep it simple, but simple isn’t easy;
● ensure that the HR department is not developing policies and practices on its
own, which are then tagged as just another HR initiative rather than something
which is owned by the organization as a whole;
● not only explain the planned changes, the rationale behind them, and how they
affect the workforce, but also communicate details of who was involved in the
development process so that unnecessary fears are allayed.
Will Astill of B&Q had three pieces of advice on implementation:
1. the value of in-depth employee consultation should never be undervalued;
2. no initiative should be implemented without looking at the return on invest-
ment; and
3. evaluate the effectiveness of programmes and take action as required.
REWARD STRATEGY AND LINE MANAGEMENT
CAPABILITY
The trend is to devolve more responsibility for managing reward to line managers.
Some will have the ability to respond to the challenge and opportunity; others will be
incapable of carrying out this responsibility without close guidance from HR; some
may never be able to cope. Managers may not always do what HR expects them to do
and if compelled to, they may be half-hearted about it. This puts a tremendous onus
on HR and reward specialists to develop line management capability, to initiate
processes that can readily be implemented by line managers, to promote under-
standing by communicating what is happening, why it is happening and how it will
affect everyone, to provide guidance and help where required and to provide formal
training as necessary.
Strategic reward ❚ 657
Job evaluation
Job evaluation is of fundamental importance in reward management. It provides the
basis for achieving equitable pay and is essential as a means of dealing with equal
pay for work of equal value issues. In the 1980s and 1990s job evaluation fell into
disrepute because it was alleged to be bureaucratic, time-consuming and irrelevant in
a market economy where market rates dictate internal rates of pay and relativities.
However, as the e-reward 2003 survey of job evaluation showed, job evaluation is still
practised widely and, indeed, its use is extending, not least because of the pressures
to achieve equal pay.
In this chapter:
● job evaluation is defined;
● the different types of job evaluation schemes are described;
● information on the incidence of job evaluation is provided;
● the use of computers in job evaluation is discussed;
● the arguments for and against job evaluation are summarized;
● consideration is given to criteria for choice;
● the process of developing a point-factor scheme is described;
● conclusions are reached about using job evaluation effectively.
44
JOB EVALUATION DEFINED
Job evaluation is a systematic process for defining the relative worth or size of jobs
within an organization in order to establish internal relativities. It provides the basis
for designing an equitable grade and pay structure, grading jobs in the structure and
managing job and pay relativities.
Aims
Job evaluation aims to:
● establish the relative value or size of jobs (internal relativities) based on fair,
sound and consistent judgements;
● produce the information required to design and maintain equitable and defen-
sible grade and pay structures;
● provide as objective as possible a basis for grading jobs within a grade structure,
thus enabling consistent decisions to be made about job grading;
● enable sound market comparisons with jobs or roles of equivalent complexity and
size;
● be transparent – the basis upon which grades are defined and jobs graded should
be clear;
● ensure that the organization meets equal pay for work of equal value obligations.
The last aim is important. In its Good Practice Guide on Job Evaluation Schemes Free of Sex
Bias the Equal Opportunities Commission (2003) states that: ‘Non-discriminatory job
evaluation should lead to a payment system which is transparent and within which
work of equal value receives equal pay regardless of sex.’
Approaches
Job evaluation can be analytical or non-analytical. Jobs can also be valued by
reference to their market rates – ‘market pricing’. These approaches are described
below.
ANALYTICAL JOB EVALUATION
Defined
Analytical job evaluation is the process of making decisions about the value or size of
jobs, which are based on an analysis of the level at which various defined factors or
660 ❚ Rewarding people
elements are present in a job in order to establish relative job value. The set of factors
used in a scheme is called the factor plan, which defines each of the factors used
(which should be present in all the jobs to be evaluated) and the levels within each
factor. Analytical job evaluation is the most common approach to job evaluation (it
was used by 89 per cent of the organizations with job evaluation responding to the e-
reward 2003 survey). The two main types of analytical job evaluation schemes are
point-factor schemes and analytical matching, as described later.
Main features
The main features of analytical job evaluation as explained below are that it is system-
atic, judgemental, concerned with the person not the job and deals only with internal
relativities.
Systematic
Analytical job evaluation is systematic in that the relative value or ‘size’ of jobs is
determined on the basis of factual evidence on the characteristics of the jobs that have
been analysed within a structured framework of criteria or factors.
Judgemental
Human judgement has to be exercised at a number of points in the job evaluation
process. Although job evaluations are based on factual evidence, this has to be inter-
preted. The information provided about jobs through job analysis can sometimes fail
to provide a clear indication of the levels at which demands are present in a job. The
definitions in the factor plan may not precisely indicate the level of demand that
should be recorded. Judgement is required in making decisions on the level and
therefore, in a point-factor or factor comparison scheme, the score. The aim is to maxi-
mize objectivity but it is difficult to eliminate a degree of subjectivity. As the Equal
Opportunities Commission (EOC) states in its Good Practice Guide on Job Evaluation
Schemes Free of Sex Bias 2003: ‘It is recognized that to a certain extent any assessment
of a job’s total demands relative to another will always be subjective.’
A fundamental aim of any process of job evaluation is to provide frameworks or
approaches that ensure, as far as possible, that consistent judgements are made based
on objectively assessed information. To refer to an evaluation as ‘judgemental’ does
not necessarily mean that it is inaccurate or unsound. Correct judgements are
achieved when they are made within a defined framework and are based on clear
evidence and sound reasoning. This is what a job evaluation scheme can do if the
scheme is properly designed and properly applied.
Job evaluation ❚ 661
Concerned with the job not the person
This is the iron law of job evaluation. It means that when evaluating a job the only
concern is the content of that job in terms of the demands made on the job holder.
The performance of the individual in the job must not be taken into account. But
it should be noted that while performance is excluded, in today’s more flexible organi-
zations the tendency is for some people, especially knowledge workers, to have flex-
ible roles. Individuals may have the scope to enlarge or enrich their roles and this
needs to be taken into account when evaluating what they do. Roles cannot neces-
sarily be separated from the people who carry them out. It is people who create value,
not jobs.
Concerned with internal relativities
When used within an organization, job evaluation in the true sense as defined above
(ie not market pricing as described later) can only assess the relative size of jobs in
that organization. It is not concerned with external relativities, that is, the relationship
between the rates of pay of jobs in the organization and the rates of pay of compa-
rable jobs elsewhere (market rates).
Types of analytical schemes
Point-factor evaluation
Point-factor schemes are the most commonly used type of analytical job evaluation.
The methodology is to break down jobs into factors or key elements representing the
demands made by the job on job holders, the competencies required and, in some
cases, the impact the job makes. It is assumed that each of the factors will contri-
bute to job size (ie the value of the job) and is an aspect of all the jobs to be evaluated
but to different degrees. Using numerical scales, points are allocated to a job under
each factor heading according to the extent to which it is present in the job. The sepa-
rate factor scores are then added together to give a total score, which represents job
size.
Analytical matching
Like point-factor job evaluation, analytical matching is based on the analysis of a
number of defined factors. Grade or level profiles are produced which define the
characteristics of jobs in each grade in a grade structure in terms of those factors. Role
profiles are produced for the jobs to be evaluated set out on the basis of analysis
under the same factor headings as the grade profiles. The role profiles are then
662 ❚ Rewarding people
‘matched’ with the range of grade or level profiles to establish the best fit and thus
grade the job.
Alternatively or additionally, role profiles for jobs to be evaluated can be matched
analytically with generic role profiles for jobs that have already been graded.
Analytical matching may be used to grade jobs following the initial evaluation of a
sufficiently large and representative sample of ‘benchmark’ jobs, ie jobs that can be
used as a basis for comparison with other jobs. This can happen in large organizations
when it is believed that it is not necessary to go through the whole process of point-
factor evaluation for every job. This especially applies where ‘generic’ roles are
concerned, ie roles that are performed by a number of job holders, which are essen-
tially similar although there may be minor differences. When this follows a large job
evaluation exercise as in the NHS Agenda for Change programme, the factors used in
the grade and role profiles will be the same as those used in the point-factor job
evaluation scheme.
Factor comparison
The original and now little used factor comparison method compared jobs factor by
factor using a scale of money values to provide a direct indication of the rate for the
job. The main form of factor comparison now in use is graduated factor comparison,
which involves comparing jobs factor by factor with a graduated scale. The scale may
have only three value levels – for example lower, equal, higher – and factor scores are
not necessarily used.
It is a method often used by the independent experts engaged by Employment
Tribunals to advise on an equal pay claim. Their job is simply to compare one job with
one or two others, not to review internal relativities over the whole spectrum of jobs
in order to produce a rank order. Independent experts may score their judgements of
comparative levels, in which case graduated factor comparison resembles the point-
factor method, except that the number of levels and range of scores are limited, and
the factors may not be weighted.
Proprietary brands
There are a number of job evaluation schemes offered by management consultants.
By far the most popular is the Hay Guide Chart Profile Method, which is a factor
comparison scheme. It uses three broad factors (know-how, problem solving and
accountability) each of which is further divided into sub-factors, although these
cannot be scored individually. Definitions of each level have been produced for each
sub-factor to guide evaluators and ensure consistency of application.
Job evaluation ❚ 663
NON-ANALYTICAL JOB EVALUATION
Non-analytical job evaluation compares whole jobs to place them in a grade or a rank
order – they are not analysed by reference to their elements or factors. Non-analytical
schemes do not meet the requirements of equal value law. The main non-analytical
schemes are described below.
Job classification
This is the most common non-analytical approach. Jobs as defined in job descriptions
are slotted into grades in a hierarchy by comparing the whole job with a grade
definition and selecting the grade that provides the best fit. It is based on an initial
definition of the number and characteristics of the grades into which jobs will
be placed. The grade definitions may therefore refer to such job characteristics
as skill, decision making and responsibility. Job descriptions may be used that in-
clude information on the presence of those characteristics but the characteristics
are not assessed separately when comparing the description with the grade
definition.
Job ranking
Whole-job ranking is the most primitive form of job evaluation. The process involves
comparing jobs with one another and arranging them in order of their perceived
size or value to the organization. In a sense, all evaluation schemes are ranking
exercises because they place jobs in a hierarchy. The difference between simple
ranking and analytical methods such as point-factor rating is that job ranking
does not attempt to quantify judgements. Instead, whole jobs are compared – they
are not broken down into factors or elements although, explicitly or implicitly,
the comparison may be based on some generalized concept such as the level of
responsibility.
Paired comparison ranking
Paired comparison ranking is a statistical technique that is used to provide a more
sophisticated method of whole-job ranking. It is based on the assumption that it is
always easier to compare one job with another than to consider a number of jobs and
attempt to build up a rank order by multiple comparisons.
The technique requires the comparison of each job as a whole separately with every
other job. If a job is considered to be of a higher value than the one with which it is
being compared it receives two points; if it is thought to be equally important, it
664 ❚ Rewarding people
receives one point; if it is regarded as less important, no points are awarded. The
scores are added for each job and a rank order is obtained.
A simplified example of a paired comparison ranking is shown in Figure 44.1.
The advantage of paired comparison ranking over normal ranking is that it is easier
to compare one job with another rather than having to make multi-comparisons. But
it cannot overcome the fundamental objections to any form of whole-job ranking –
that no defined standards for judging relative worth are provided and it is not an
acceptable method of assessing equal value. There is also a limit to the number of jobs
that can be compared using this method – to evaluate 50 jobs requires 1,225 compar-
isons.
Paired comparisons can also be used analytically to compare jobs on a factor by
factor basis.
Internal benchmarking
Internal benchmarking is what people often do intuitively when they are deciding on
the value of jobs, although it has never been dignified in the job evaluation texts as a
formal method of job evaluation. It simply means comparing the job under review
with any internal job that is believed to be properly graded and paid, and placing the
job under consideration into the same grade as that job. The comparison is often
made on a whole-job basis without analysing the jobs factor by factor.
Market pricing
Market pricing is the process of assessing rates of pay by reference to the market rates
for comparable jobs and is essentially external benchmarking. Strictly speaking,
market pricing is not a process of job evaluation in the sense that those described
Job evaluation ❚ 665
Job a b c d e f Total Ranking
reference score
A – 0 1 0 1 0 2 5=
B 2 – 2 2 2 0 8 2
C 1 0 – 1 1 0 3 4
D 2 0 1 – 2 0 5 3
E 1 0 1 0 – 0 2 5=
F 2 2 2 2 2 – 10 1
Figure 44.1 A paired comparison
above are – they only deal with internal relativities and are not directly concerned
with market values, although in conjunction with a formal job evaluation scheme,
establishing market rates is a necessary part of a programme for developing a pay
structure.
However, the term ‘market pricing’ in its extreme form is used to denote a process
of directly pricing jobs on the basis of external relativities with no regard to internal
relativities. This approach was widely publicized in the US in the mid-1990s as a
reaction to what was regarded as too much emphasis on internal relativities (’a job
is worth what the market says it is worth’) accompanied by over-bureaucratic
job evaluation. It sat alongside attempts at developing broad-banded pay structures
(ie structures with a limited number of grades or bands). The approach has board
level appeal because of the focus on competitiveness in relation to the marketplace for
talent.
The acceptability of market pricing is heavily dependent on the quality and detail
of market matching as well as the availability of robust market data. It can therefore
vary from analysis of data by job titles to detailed matched analysis collected through
bespoke surveys focused on real market equivalence. Market pricing can produce an
indication of internal relativities even if these are market driven. But it can lead to pay
discrimination against women where the market has traditionally been discrimina-
tory. It does not satisfy UK equal pay legislation.
Market pricing can be done formally by the analysis of published pay surveys,
participating in ‘pay clubs’, conducting special surveys, obtaining the advice of
recruitment consultants and agencies and, more doubtfully, by studying advertise-
ments. In its crudest form, market pricing simply means fixing the rate for a job at the
level necessary to recruit or retain someone. To avoid a successful equal pay claim,
any difference in pay between men and women carrying out work of equal value
based on market rate considerations has to be ‘objectively justified’.
THE INCIDENCE OF JOB EVALUATION
Despite considerable criticism in the 1990s, job evaluation has not diminished in use
in the UK or in many other countries. A survey of job evaluation practice in the UK
(e-reward, 2003) found that 44 per cent of the 236 organizations contributing to the
research had a formal job evaluation scheme, and 45 per cent of those who did not
have such a scheme intended to introduce one. Analytical schemes were used by 89
per cent of the respondents, of which 70 per cent used point-factor rating. The most
popular non-analytical approach was job classification. Schemes developed in-house
(’home grown’ schemes) were used by 37 per cent of the respondents.
666 ❚ Rewarding people
A ‘proprietary brand’, ie one provided by consultants, was used by 37 per cent of
respondents and 26 per cent used a hybrid or tailored version of a proprietary brand.
The Hay Guide Chart Profile method dominated the market (83 per cent of the
proprietary brand schemes). Organizations opting for a proprietary brand did so
because of its credibility and, especially with Hay, its link to a market rate database.
Organizations opting for a home grown approach did so because they believed this
would ensure that it could be shaped to meet the strategic needs of the organization
and fit its technology, structure, work processes and business objectives. A minority
of respondents mentioned the scope for aligning the scheme with their competency
framework.
COMPUTER-ASSISTED JOB EVALUATION
Computers can be used to help directly with the job evaluation process.
Types of schemes
There are two types of computer-assisted systems.
First, there are job analysis-based schemes such as that offered by Link Consultants in
which the job analysis data is either entered direct into the computer or transferred to
it from a paper questionnaire. The computer software applies predetermined rules
based on an algorithm that reflects the organization’s evaluation standards to convert
the data into scores for each factor and produce a total score. The algorithm replicates
panel judgements both on job factor levels and overall job score.
Secondly, there are interactive schemes using software such as that supplied by Pilat
UK (Gauge) in which the job holder and his or her manager sit in front of a PC and are
presented with a series of logically interrelated questions forming a question tree; the
answers to these questions lead to a score for each of the built-in factors in turn and a
total score.
Advantages of computer-assisted job evaluation
Computer-assisted job evaluation systems can:
● provide for greater consistency – the same input information will always give the
same output result because the judgemental framework on which the scheme is
based (the algorithm) can be applied consistently to the input data;
● offer extensive database capabilities for sorting, analysing and reporting on the
input information and system outputs;
● speed up the job evaluation process once the initial design is complete.
Job evaluation ❚ 667
Disadvantages of computer-assisted job evaluation
Computer-assisted job evaluation systems can lack transparency – the evaluation in
conventional computer-assisted schemes is made in a ‘black box’ and it can be diffi-
cult to trace the connection between the analysis and the evaluation and therefore to
justify the score. This is not such a problem with interactive schemes in which job
holders participate in evaluations and the link between the answer to a question and
the score can be traced in the ‘question trees’.
Computer-assisted job evaluation systems can also appear to by-pass the evalua-
tion process through joint management/employee panels, which is typical in conven-
tional schemes; however, this problem can be reduced if panels are used to validate
the computer-generated scores.
CRITERIA FOR CHOICE
The main criteria for selecting a job evaluation scheme are that it should be:
● Analytical – it should be based on the analysis and evaluation of the degree to
which various defined elements or factors are present in a job.
● Thorough in analysis and capable of impartial application – the scheme should have
been carefully constructed to ensure that its analytical framework is sound and
appropriate in terms of all the jobs it has to cater for. It should also have been
tested and trialled to check that it can be applied impartially to those jobs.
● Appropriate – it should cater for the particular demands made on all the jobs to be
covered by the scheme.
● Comprehensive – the scheme should be applicable to all the jobs in the organization
covering all categories of staff, and the factors should be common to all those jobs.
There should therefore be a single scheme that can be used to assess relativities
across different occupations or job families and to enable benchmarking to take
place as required.
● Transparent – the processes used in the scheme from the initial role analysis
through to the grading decision should be clear to all concerned.
● Non-discriminatory – the scheme must meet equal pay for work of equal value
requirements.
A summary of the various approaches to job evaluation and their advantages and
disadvantages is given in Table 44.1.
668 ❚ Rewarding people
Job evaluation ❚ 669
Table 44.1 Comparison of approaches to job evaluation
Scheme Characteristics Advantages Disadvantages
Point-factor An analytical approach As long as it is based on Can be complex and give
rating in which separate factors proper job analysis, a spurious impression
are scored and added point-factor schemes of scientific accuracy –
together to produce a provide evaluators with judgement is still needed
total score for the job defined yardsticks that in scoring jobs. Not easy
which can be used for help to increase the to amend the scheme as
comparison and grading objectivity and consistency circumstances, priorities
purposes. of judgements and reduce or values change.
the over-simplified
judgement made in non-
analytical job evaluation.
They provide a defence
against equal value claims
as long as they are not in
themselves discriminatory.
Analytical Grade profiles are If the matching process The matching process
matching produced which define is truly analytical and could be more
the characteristics of jobs carried out with great superficial and therefore
in each grade in a grade care, this approach suspect than evaluation
structure in terms of a saves time by enabling through a point-factor
selection of defined the evaluation of a large scheme. In the latter
factors. Role profiles are number of jobs, approach there are
produced for the jobs to especially generic ones, factor level definitions
be evaluated set out on to be conducted quickly to guide judgements
the basis of analysis under and in a way which and the resulting scores
the same factor headings should satisfy equal provide a basis for
as the grade profiles. value requirements. ranking and grade
Role profiles are ‘matched’ design which is not the
with the range of grade case with analytical
profiles to establish the matching. Although
best fit and thus grade the matching on this basis
job. may be claimed to be
analytical, it might be
difficult to prove this in
an equal value case.
Job Non-analytical – grades Simple to operate; Can be difficult to fit
classification are defined in a structure standards of judgement complex jobs into a grade
in terms of the level of when making without using over-
responsibilities involved comparisons are elaborate grade
in a hierarchy. Jobs are provided in the shape of definitions; the
allocated to grades by the grade definitions. definitions tend to be so
continued
670 ❚ Rewarding people
Scheme Characteristics Advantages Disadvantages
matching the job generalized that they are
description with the not much help in
grade description evaluating borderline
(job slotting). cases or making
comparisons between
individual jobs; does
not provide a defence
in an equal value case.
Ranking Non-analytical – whole Easy to apply and No defined standards of
job comparisons are made understand. judgement; differences
to place them in rank between jobs not
order. measured; does not
provide a defence
in an equal
value case.
Internal Jobs or roles are Simple to operate; Relies on a considerable
benchmarking compared with facilitates direct amount of judgement and
benchmark jobs that comparisons, especially may simply perpetuate
have been allocated into when the jobs have been existing relativities;
grades on the basis of analysed in terms of a dependent on accurate
ranking or job classification set of common criteria. job/role analysis; may
and placed in whatever not provide a defence in
grade provides an equal value case.
the closest match of jobs.
The job descriptions may
be analytical in the
sense that they cover
a number of standard
and defined
elements.
Market Rates of pay are aligned In line with the belief Relies on accurate
pricing to market rates – internal that ‘a job is worth what market rate information
relativities are therefore the market says it is which is not always
determined by relativities worth’. Ensures that pay available; relativities
in the market place. Not is competitive. in the market may not
strictly a job evaluation properly reflect internal
scheme. relativities; pay
discrimination
may be
perpetuated.
Table 44.1 continued
Making the choice
The choice has to be made by reference to the criteria referred to earlier and to the
advantages and disadvantages of the alternative approaches listed above. But the
overwhelming preference for analytical schemes shown by the e-reward survey
suggests that the choice is fairly obvious. The advantages of using a recognized
analytical approach that satisfies equal value requirements appear to be over-
whelming. Point-factor schemes were used by 70 per cent of those respondents and
others used analytical matching, often in conjunction with the points scheme.
There is much to be said for adopting point-factor methodology as the main
scheme, but using analytical matching in a supporting role to deal with large
numbers of generic roles not covered in the original benchmarking exercise.
Analytical matching can be used to allocate generic roles to grades as part of the
normal job evaluation operating procedure to avoid having to resort to job evaluation
in every case. The tendency in many organizations is to assign to job evaluation a
supporting role of this nature rather than allowing it to dominate all grading deci-
sions and thus involve the expenditure of much time and energy.
THE CASE FOR AND AGAINST JOB EVALUATION
The case for
The case for properly devised and applied job evaluation, especially analytical job
evaluation, is that:
● it can make the criteria against which jobs are valued explicit and provide a basis
for structuring the judgement process;
● an equitable and defensible pay structure cannot be achieved unless a structured
and systematic process is used to assess job values and relativities;
● a logical framework is required within which consistent decisions can be made on
job grades and rates of pay;
● the factor plan and the process of job evaluation can be aligned to the organiza-
tion’s value system and competency framework and therefore reinforce them as
part of an integrated approach to people management;
● analytical schemes provide the best basis for achieving equal pay for work of
equal value and are the only acceptable defence in an equal pay case;
● a formal process of job evaluation is more likely to be accepted as fair and equi-
table than informal or ad hoc approaches – and the degree of acceptability will be
considerably enhanced if the whole process is transparent.
Job evaluation ❚ 671
The case against
The case against job evaluation has been presented vociferously. Critics emphasize
that it can be bureaucratic, inflexible, time-consuming and inappropriate in today’s
organizations. Opponents such as Nielsen (2002) take exception to the fact that job
evaluation is not concerned with external relativities, which, they claim, are what
really matter. Schemes can decay over time through use or misuse. People learn how
to manipulate them to achieve a higher grade and this leads to the phenomenon
known as grade drift – upgradings that are not justified by a sufficiently significant
increase in responsibility. Job evaluators can fall into the trap of making a priori judge-
ments. They may judge the validity of a job evaluation exercise according to the
extent to which it corresponds with their preconceptions about relative worth. The
so-called ‘felt-fair’ test is used to assess the acceptability of job evaluations, but a rank
order is felt to be fair if it reproduces their notion of what it ought to be.
These criticisms mainly focus on the way in which job evaluation is operated
rather than the concept of job evaluation itself. Like any other management tech-
nique, job evaluation schemes can be misconceived and misused. And the grade and
pay structures developed through job evaluation seldom last for more than a few
years and need to be replaced or adjusted to remedy decay or reflect new ways of
working.
Those who criticize job evaluation because it is only concerned with internal
relativities fail to understand that job evaluation exists to grade jobs, not to price
them. Of course, when developing the pay structures superimposed on grade struc-
tures it is necessary to take account of external relativities and this will mean recon-
ciling the different messages provided by job evaluation and market rate surveys. If
the latter indicate that attracting and retaining good quality staff is only feasible if
rates of pay are higher than those indicated by the grading of the job, then it may be
necessary to pay market supplements, but to avoid claims that equal pay is not being
provided, these must be objectively justified on the basis of evidence on competitive
rates.
DESIGNING A POINT-FACTOR JOB EVALUATION
SCHEME
The process of designing a job evaluation scheme is demanding and time-consuming,
as is stressed by Armstrong et al (2003). This section considers the design and process
criteria and the design and implementation programme.
672 ❚ Rewarding people
Design and process criteria
It is necessary to distinguish between the design of a scheme and the process of oper-
ating it. Equal pay considerations have to be taken into account in both design and
process.
Design principles
The design principles are that:
● the scheme should be based on a thorough analysis of the jobs to be covered and
the types of demands made on those jobs to determine what factors are appro-
priate;
● the scheme should facilitate impartial judgements of relative job size;
● the factors used in the scheme should cover the whole range of jobs to be evalu-
ated at all levels without favouring any particular type of job or occupation and
without discriminating on the grounds of sex, race, disability or for any other
reason – the scheme should fairly measure features of female-dominated jobs as
well as male-dominated jobs;
● through the use of common factors and methods of analysis and evaluation, the
scheme should enable benchmarking to take place of the relativities between jobs
in different functions or job families;
● the factors should be clearly defined and differentiated – there should be no
double counting;
● the levels should be defined and graduated carefully;
● sex bias must be avoided in the choice of factors, the wording of factor and level
definitions and the factor weightings – checks should be carried out to identify
any bias.
Process principles
The process principles are that:
● the scheme should be transparent, everyone concerned should know how it
works – the basis upon which the evaluations are produced;
● appropriate proportions of women, those from ethnic minorities and people with
disabilities should be involved in the process of developing and applying job
evaluation;
● the quality of role analysis should be monitored to ensure that analyses produce
accurate and relevant information that will inform the job evaluation process and
will not be biased;
Job evaluation ❚ 673
● consistency checks should be built into operating procedures;
● the outcomes of evaluations should be examined to ensure that sex or any other
form of bias has not occurred;
● particular care is necessary to ensure that the outcomes of job evaluation do not
simply replicate the existing hierarchy – it is to be expected that a job evaluation
exercise will challenge present relativities;
● all those involved in role analysis and job evaluation should be thoroughly
trained in the operation of the scheme and in how to avoid bias;
● special care should be taken in developing a grade structure following a job eval-
uation exercise to ensure that grade boundaries are placed appropriately and that
the allocation of jobs to grades is not in itself discriminatory;
● there should be scope for the review of evaluations and for appeals against grad-
ings;
● the scheme should be monitored to ensure that it is being operated properly and
that it is still fit for its purpose.
The design and implementation programme
The design and implementation of a point-factor job evaluation scheme can be a
demanding and time-consuming affair. In a large organization it can take two years
or more to complete a project. Even in a small organization it can take several months.
Many organizations seek outside help from management consultants or ACAS in
conducting the programme. An example of a programme is given in Figure 44.2.
Activities 1 to 6 form the initial design phase and activities 7 to 12 form the appli-
cation of the design and implementation phases. Full descriptions of these phases
follow.
The scheme design programme
Figure 44.3 shows the steps required to design a point-factor job evaluation scheme.
Step 1. Decide to develop scheme
The decision to develop a new point-factor job evaluation scheme follows an analysis
of the existing arrangements, if any, for job evaluation, and a diagnosis of any prob-
lems.
Step 2. Prepare detailed project programme
The detailed project programme could be set out in a bar chart, as illustrated in Figure
44.2.
674 ❚ Rewarding people
Step 3. Select, brief and train design team
The composition of the design team should have been determined broadly at Step 1.
Members are usually nominated by management and the staff or union(s) (if they
exist). It is very desirable to have a representative number of women and men and the
major ethnic groups employed in the organization. It is also necessary to appoint a
facilitator.
Job evaluation ❚ 675
Activity Month
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
1 Prepare initial factor plan
2 Test initial factor plan
3 Prepare final factor plan
4 Test final factor plan
5 Computerize
6 Test computerised version
7 Evaluate benchmark jobs
8 Conduct market rate survey
9 Design grade and pay structure
10 Evaluate remaining jobs
11 Define operating procedures
12 Implement
Figure 44.2 A typical job evaluation programme
676 ❚ Rewarding people
Figure 44.3 Design sequence
Communicate
as required
throughout
project
1 Decide to develop
scheme
4 Formulate
communication
strategy
3 Select, brief and
train design team
2 Prepare project
programme
5 Identify and define
factors
6 Define factor levels
to produce basic
unscored and
unweighted factor
plan
7 Select and analyse
test jobs
8 Test basic factor
plan
Amend initial factor
plan as necessary
10 Decide on
weighting
9 Develop scoring
model
11 Produce full factor
plan
12 Test the full factor
plan
Amend full factor plan
as necessary
13 Computerise as
required
14 Test computerised
system
Amend computerised
system as required
15 Apply scheme to
benchmark jobs
Step 4. Formulate communication strategy
It is essential to have a communication strategy. The introduction of a new job evalu-
ation will always create expectations. Some people think that they will inevitably
benefit from pay increases, others believe that they are sure to lose money. It has to be
explained carefully, and repeatedly, that no one should expect to get more and that no
one will lose. The strategy should include a preliminary communication setting out
what is proposed and why, and how people will be affected. Progress reports should
be made at milestones throughout the programme, for example when the factor plan
has been devised. A final communication should describe the new grade and pay
structure and spell out exactly what is to happen to people when the structure is
introduced.
Step 5. Identify and define factors
Job evaluation factors are the characteristics or key elements of jobs that are used to
analyse and evaluate jobs in an analytical job evaluation scheme. The factors must be
capable of identifying relevant and important differences between jobs that will
support the creation of a rank order of jobs to be covered by the scheme. They should
apply equally well to different types of work, including specialists and generalists,
lower-level and higher-level jobs, and not be biased in favour of one sex or group.
Although many of the job evaluation factors used across organizations capture
similar job elements (this is an area where there are some enduring truths), the task of
identifying and agreeing factors can be challenging.
The e-reward survey (2003) established that the eight most frequently used factors
by the respondents with analytical schemes were:
1. Knowledge and skill.
2. Communications and contacts.
3. Judgement and decision-making.
4. Impact.
5. People management.
6. Freedom to act.
7. Working environment.
8. Responsibility for financial resources.
Step 6. Define factor levels to produce the basic factor plan
The factor plan is the key job evaluation document. It guides evaluators on making
decisions about the levels of demand. The basic factor plan defines the levels within
Job evaluation ❚ 677
each of the selected factors. A decision has to be made on the number of levels (often
five, six or seven), which has to reflect the range of responsibilities and demands in
the jobs covered by the scheme.
Step 7. Select and analyse test jobs
A small representative sample of jobs should be identified to test the scheme. A
typical proportion would be about 10 per cent of the jobs to be covered. These are
then analysed in terms of the factors.
Step 8. Test basic factor plan
The factors forming the basic factor plan are tested by the design team on a represen-
tative sample of jobs. The aim of this initial test is to check on the extent to which the
factors are appropriate, cover all aspects of the jobs to be evaluated, are non-discrim-
inatory, avoid double counting and are not compressed unduly. A check is also made
on level definitions to ensure that they are worded clearly, graduated properly and
cover the whole range of demands applicable to the jobs to be evaluated so that they
enable consistent evaluations to be made.
Step 9. Develop scoring model
The aim is to design a point-factor scheme that will operate fairly and consistently to
produce a rank order of jobs, based on the total points score for each job. Each level in
the factor plan has to be allocated a points value so that there is a scoring progression
from the lowest to the highest level.
Step 10. Decide on the factor weighting
Weighting is the process of attaching more importance to some factors than others
through the scoring system (explicit weighting) or as a result of variations in the
number of levels or the choice of factors (implicit weighting).
Step 11. Prepare full factor plan
The outcome of stages 9 and 10 is the full scored and weighted factor plan, which is
tested in Step 12.
Step 12. Test the full factor plan
The full factor plan incorporating a scoring scheme and either explicit or implicit
678 ❚ Rewarding people
weighting is tested on the same jobs used in the initial test of the draft factors. Further
jobs may be added to extend the range of the test.
Step 13. Computerize
The steps set out above will produce a paper-based scheme and this is still the most
popular approach. The e-reward survey (2003) found that only 28 per cent of respon-
dents with job evaluation schemes used computers to aid evaluation. But full
computerization can offer many advantages, including greater consistency, speed
and the elimination of much of the paperwork. There is also the possibility of using
computers to help manage and support the process without using computers as a
substitute for grading design teams.
Computer-assisted schemes use the software provided by suppliers, but the
system itself is derived from the paper-based scheme devised by the methods set
out above. No job evaluation design team is required to conduct evaluations, but
it is necessary to set up a review panel that can validate and agree the outcomes
of the computerized process. No one likes to feel that a decision about their grade
has been made by a computer on its own, and hard lessons have been learnt by
organizations that have ended up with fully automated but discriminatory
systems.
Step 14. Test the computerized scheme
The computerized scheme is tested to ensure that it delivers an acceptable rank order.
Step 15. Apply and implement
When the final design of the paper or computerized scheme has been tested as satis-
factory the application and implementation programme can begin.
CONCLUSIONS
It could be claimed that every time a decision is made on what a job should be paid
requires a form of job evaluation. Job evaluation is therefore unavoidable, but it
should not be an intuitive, subjective and potentially biased process. The issue is how
best to carry it out analytically, fairly, systematically, consistently, transparently and,
so far as possible, objectively, without being bureaucratic, inflexible or resource-inten-
sive. There are five ways of dealing with this issue:
Job evaluation ❚ 679
1. Use a tested and relevant analytical job evaluation scheme to inform and support
the processes of designing grade structures, grading jobs, managing relativities
and ensuring that work of equal value is paid equally.
2. Ensure that job evaluation is introduced and managed properly.
3. Consider using computers to speed up processing and decision-making while at
the same time generating more consistent evaluations and reducing bureaucracy.
4. Recognize that thorough training and continuing guidance for evaluators is
essential, as is communication about the scheme, its operation and objectives to
all concerned.
5. Review the operation of the scheme regularly to ensure that it is not decaying
and continues to be appropriate and trusted.
680 ❚ Rewarding people
Market rate analysis
PURPOSE
To ensure that pay levels are competitive, it is necessary to track market rates for the
jobs within the organization, especially those that are particularly vulnerable to
market pressures because of scarcity factors. This is sometimes called benchmarking.
Job evaluation schemes can be used to determine internal relativities, but, in them-
selves, they cannot price jobs. To a large extent, pay levels are subject to market forces
which have to be taken into account in fixing the rates for particular jobs. Some
specialized jobs may not be subject to the same external pressures as others, but it is
still necessary to know what effect market rates are likely to have on the pay structure
as a whole before deciding on internal pay differentials which properly reflect levels
of skill and responsibility. It has also to be accepted that market pressures and negoti-
ations affect differentials within the firm.
THE CONCEPT OF THE MARKET RATE
The concept of the market rate, even in the local labour market, is an imprecise one.
There is no such thing as the market rate, unless this is represented by a universally
applied national pay scale, and such cases are now rare. There is always a range of
45
rates paid by different employers, even for identical jobs, because of different pay
policies on how they want their rates to compare with the market rates. This is partic-
ularly so in managerial jobs and other occupations where duties can vary consider-
ably, even if the job title is the same, and where actual pay is likely to be strongly
influenced by the quality and value to the business of individuals. It is therefore
possible to use pay surveys only to provide a broad indication of market rates.
Judgement has to be used in interpreting the results of special enquiries or the data
from published surveys. And there is often plenty of scope for selecting evidence
which supports whatever case is being advanced.
THE INFORMATION REQUIRED
When making market comparisons, the aim should be to:
● obtain accurate and representative data covering base pay, bonuses and benefits;
● compare like with like in terms of the type and size of the job and the type of
organization – this is the process of ‘job matching’;
● obtain up-to-date information;
● interpret data in the light of the organization’s circumstances and needs;
● present data in a way that indicates the action required.
JOB MATCHING
The aim in conducting a pay survey is to compare like with like – the process of
job matching. The various methods of job matching in ascending order of accuracy
are:
● job title – often very misleading;
● brief (two or three lines) description of job and level of responsibility – this provides
better guidance for matching jobs but still leaves much scope for inaccuracy;
● capsule job descriptions which define the job and its duties in two or three hundred
words, some indication being given of the size of the job in such terms as
resources controlled – these can provide a better basis for job matching but may
still not produce the ideal degree of accuracy;
● full job descriptions which provide more details about the job but demand a consid-
erable amount of effort in making the comparisons;
682 ❚ Rewarding people
● job evaluation can be used in support of a job description to obtain reasonably
accurate information on comparative job sizes, but it is very time consuming
unless it is done through the UK surveys run on this basis by firms such as Hay
and Wyatt.
PRESENTATION OF DATA
Data can be presented in two ways:
1. Measures of central tendency:
– arithmetic mean (average);
– median – the middle item in a distribution of individual items, this is the most
commonly used measure because it avoids the distortions to which arithmetic
averages are prone.
2. Measures of dispersion:
– upper quartile – the value above which 25 per cent of the individual values
fall;
– lower quartile – the value below which 25 per cent of the individual values
fall;
– interquartile range – the difference between the upper and lower quartiles.
SOURCES OF INFORMATION
The following are the sources of information available on market rates:
● published surveys;
● special surveys;
● club surveys;
● advertisements.
These are described below and a comparison between them and other sources is
made in Table 45.1.
Published surveys
There is a wide range of published surveys which either collect general information
about managerial salaries or cover the pay for specialist professional, technical or
Market rate analysis ❚ 683
office jobs. The general surveys which are available ‘over the counter’ include those
published by Reward, Monks Publications and Remuneration Economics. Incomes
Data Services publishes a Directory of Salary Surveys which is a consumer’s guide to
all the major surveys.
When using a published survey it is necessary to check on:
● the information provided;
● the size and composition of the participants;
● the quality of the job matching information;
● the extent to which it covers the jobs for which information is required;
● the degree to which it is up to date;
● how well data are presented.
Published surveys are a quick and not too expensive way of getting information. But
there may be problems in job matching and the information may be somewhat out of
date.
Special surveys
Special surveys can be ‘do it yourself’ affairs or they can be conducted for you by
management consultants. The latter method costs more but it saves a lot of time and
trouble and some organizations may be more willing to respond to an enquiry from a
reputable consultant.
Special surveys can be conducted as follows:
1. Decide what information is wanted.
2. Identify the ‘benchmark’ jobs for which comparative pay data are required. This
could have been done as part of a job evaluation exercise.
3. Produce capsule job descriptions for those jobs.
4. Identify the organizations that are likely to have similar jobs.
5. Contact those organizations and invite them to participate. It is usual to say that
the survey findings will be distributed to participants (this is the quid pro quo)
and that individual organizations will not be identified.
6. Provide participants with a form to complete together with notes for guidance
and capsule job descriptions.
7. Analyse the returned forms and distribute a summary of the results to partici-
pants.
Special surveys can justify the time and trouble, or expense, by producing usefully
comparable data. It may, however, be difficult to get a suitable number of participants
684 ❚ Rewarding people
to take part, either because organizations cannot be bothered or because they are
already members of a survey club or take part in a published survey.
Club surveys
Club surveys are conducted by a number of organizations who agree to exchange
information on pay in accordance with a standard format and on a regular basis.
They have all the advantages of special surveys plus the additional benefits of saving
a considerable amount of time and providing regular information. It is well worth
joining one if you can. If a suitable club does not exist, you could always try to start
one, but this takes considerable effort.
Advertisements
Many organizations rely on the salary levels published in recruitment advertise-
ments. But these can be very misleading as you will not necessarily achieve a good
match and the quoted salary may not be the same as what is finally paid. However,
although it is highly suspect, data from advertisements can be used to supplement
other more reliable sources.
Other market intelligence
Other market intelligence can be obtained from the publications of Incomes Data
Services and Industrial Relations Services. This may include useful information on
trends in the ‘going rate’ for general, across-the-board pay increases which can be
used when deciding on what sort of uplift, if any, is required to pay scales.
Using survey data
The use of market survey data as a guide on pay levels is a process based on judge-
ment and compromise. Different sources may produce different indications of market
rate levels. As a result you may have to produce what might be described as a
‘derived’ market rate based on an assessment of the relative reliability of the data.
This would strike a reasonable balance between the competing merits of the different
sources used. This is something of an intuitive process.
Once all the data available have been collected and presented in the most accessible
manner possible (ie job by job for all the areas the structure is to cover), reference
points can be determined for each pay range in a graded structure as described in
Chapter 46. This process will take account of the place in the market the business
wishes to occupy, ie its market ‘stance’ or ‘posture’.
Market rate analysis ❚ 685
686 ❚ Rewarding people
Table 45.1 Summary of sources of market data
Source Brief description Advantages Disadvantages
General national Available for purchase Wide coverage, readily Risk of imprecise job
published surveys – provide an overall available, continuity matching, insufficiently
picture of pay levels for allows trend analyses specific, quickly out of
different occupations in over time, expert date.
national and regional providers.
labour markets.
Local published Available for purchase Focus on local labour Risk of imprecise job
surveys – provide an overall market especially for matching, insufficiently
picture of pay levels for administrative staff and specific, quickly out of
different occupations in manual workers. date, providers may not
the local labour market. have expertise in pay
surveys.
Sector surveys Available for purchase Focus on a sector Risk of imprecise job
– provide data on a where pay levels may matching, insufficiently
sector such as charities. differ from national specific, quickly out of
rates, deal with date.
particular categories in
depth.
Industrial surveys Surveys, often Focus on an industry, Job matching may still
conducted by employer deal with particular not be entirely precise,
and trade associations categories in depth, quickly out of date.
on jobs specific to an quality of job matching
industry. may be better than
general or sector
surveys.
Special surveys Surveys specially Focused, reasonably Takes time and trouble,
conducted by an good job matching, may be difficult to get
organization. control of participants, participation, sample
control of analysis size may therefore be
methodology. inadequate.
Pay clubs Groups of employers Focused, precise job Sample size may be too
who regularly matching, control of small, involve a
exchange data on pay participants, control of considerable amount of
levels. analysis methodology, administration, may be
regular data, trends difficult to maintain
data, more information enthusiasm of
may be available on participants.
benefits and pay
policies.
continued
Market rate analysis ❚ 687
Table 45.1 continued
Source Brief description Advantages Disadvantages
Published data Data on settlements Readily accessible. Mainly about
in journals and pay levels available settlements and trends
from IDS or IRS, and little specific well
on national trends in matched information
earnings from the New on pay levels for
Earnings Survey. individual jobs.
Job Pay data obtained from Readily accessible, Job matching very
advertisements job advertisements. highly visible (to imprecise, pay
employees as well as information may be
employers), up to date. misleading.
Management Pay data obtained from Based on well- Only obtainable from
consultants’ the databases researched and specific consultants.
databases maintained by matched data.
management
consultants.
Analysis of Pay data derived from Immediate data. Data random and can
recruitment data analysis of pay levels be misleading because
required to recruit staff. of small sample.
Other market Pay data obtained Provide good Imprecise, not
intelligence from informal background. regularly available.
contacts or networks.
Grade and pay structures
Grade and pay structures are an important part of reward systems. If properly
designed and maintained they provide a logically designed framework within which
an organization’s pay policies can be implemented. They enable the organization to
determine where jobs should be placed in a hierarchy, define pay levels and the scope
for pay progression, and provide the basis upon which relativities can be managed,
equal pay achieved and the processes of monitoring and controlling the implementa-
tion of pay practices can take place. A grade structure can also serve as a medium
through which the organization communicates the career and pay opportunities
available to employees.
GRADE STRUCTURE DEFINED
A grade structure consists of a sequence or hierarchy of grades, bands or levels into
which groups of jobs that are broadly comparable in size are placed. There may be a
single structure that contains grades or bands and which is defined by their number
and width (width is the scope the grade or band provides for pay progression).
Alternatively the structure may be divided into a number of job or career families
consisting of groups of jobs where the essential nature and purpose of the work are
similar but the work is carried out at different levels.
46
PAY STRUCTURE DEFINED
A pay structure defines the different levels of pay for jobs or groups of jobs by refer-
ence to their relative internal value as determined by job evaluation, to external rela-
tivities as established by market rate surveys and, sometimes, to negotiated rates for
jobs. It provides scope for pay progression in accordance with performance, compe-
tence, contribution or service.
There may be a single pay structure covering the whole organization or there may
be one structure for staff and another for manual workers, but this is becoming less
common. There has in recent years been a trend towards ‘harmonizing’ terms and
conditions between different groups of staff as part of a move towards single status.
This has been particularly evident in many public sector organizations in the UK,
supported by national agreements on ‘single status’. Executive directors are some-
times treated separately where reward policy for them is decided by a remuneration
committee of non-executive directors.
A grade structure becomes a pay structure when pay ranges, brackets or scales are
attached to each grade, band or level. In some broad-banded structures, as described
below, reference points and pay zones may be placed within the bands and these
define the range of pay for jobs allocated to each band.
GUIDING PRINCIPLES FOR GRADE AND PAY
STRUCTURES
Grade and pay structures should:
● be appropriate to the culture, characteristics and needs of the organization and its
employees;
● facilitate the management of relativities and the achievement of equity, fairness,
consistency and transparency in managing gradings and pay;
● be capable of adapting to pressures arising from market rate changes and skill
shortages;
● facilitate operational flexibility and continuous development;
● provide scope as required for rewarding performance, contribution and increases
in skill and competence;
● clarify reward, lateral development and career opportunities;
● be constructed logically and clearly so that the basis upon which they operate can
readily be communicated to employees;
● enable the organization to exercise control over the implementation of pay
policies and budgets.
690 ❚ Rewarding people
TYPES OF GRADE AND PAY STRUCTURE
The types of pay structures as described below are narrow-graded, broad-graded,
broad-banded, job family, career family and pay spine. Some organizations use spot
rates for all or some of their employees and although this approach does not consti-
tute a pay structure, it is described below as a feature of some pay systems. Spot rate
systems can be expanded by developing individual job grades.
Narrow-graded structure
A narrow-graded structure, as illustrated in Figure 46.1, consists of a sequence of job
grades into which jobs of broadly equivalent value are placed. There may be 10 or
more grades and long-established structures, especially in the public sector, may have
as many as 18 grades. Grades may be defined by a bracket of job evaluation points so
that any job for which the job evaluation score falls within the points bracket for a
grade would be allocated to that grade. Alternatively, grades may be defined by
grade definitions or profiles, which provide the information required to match jobs
set out under job demand factor headings (analytical matching). This information can
be supplemented by reference to benchmark jobs that have been already graded as
part of the structure design exercise.
‘Mid-point management’ techniques are often used to analyse and control pay poli-
cies by comparing actual pay with the reference point that is regarded as the policy
pay level. ‘Compa-ratios’ can be used to measure the relationship between actual and
policy rates of pay as a percentage. If the two coincide, the compa-ratio is 100 per
cent. Compa-ratio analysis can be used to establish how pay practice (actual pay)
compares with pay policy (the rate for a person who is fully qualified and competent
in his or her job).
The problem with narrow-graded structures is that they encourage ‘grade drift’, ie
unjustified upgradings. This takes place because it is difficult to differentiate between
successive grades even with the help of job evaluation.
Broad-graded structures
Broad-graded structures, as illustrated in Figure 46.2, have six to nine grades rather
than the 10 or more grades contained in narrow-graded structures. They may include
‘reference points’ or ‘market anchors’, which indicate the rate of pay for a fully
competent performer in the grade and are aligned to market rates in accordance with
‘market stance’ policy. The grades and pay ranges are defined and managed in the
same way as narrow-graded structures except that the increased width of the grades
Grade and pay structures ❚ 691
means that organizations sometimes introduce mechanisms to control progression in
the grade so that staff do not inevitably reach its upper pay limit. The mechanisms
available consist of:
● Reference point control – scope is provided for progression according to compe-
tence by increments to the reference point. Thereafter, individuals may earn cash
bonuses for high achievement that may be consolidated up to the maximum pay
for the grade if high achievement levels are sustained.
● Threshold control – a point is defined in the pay range beyond which pay cannot
increase unless individuals achieve a defined level of competence and achieve-
ment.
● Segment or zone control – an extension of threshold control, which involves
dividing the grade into a number (often three) of segments or zones.
Broad-graded structures are used to overcome or at least alleviate the grade drift
problem endemic in multi-graded structures. If the grades are defined, it is easier to
differentiate them, and matching (comparing role profiles with grade definitions or
profiles to find the best fit) becomes more accurate. But it may be difficult to control
progression and this would increase the costs of operating them, although these costs
could be offset by better control of grade drift.
692 ❚ Rewarding people
£
Figure 46.1 A narrow, multi-graded structure
Broad-banded structures
Broad-banded structures compress multi-graded structures into four or five ‘bands’,
as illustrated in Figure 46.3. The process of developing broad-banded structures is
called ‘broad-banding’. In its original version, a broad-banded structure contained no
more than five bands, each with, typically, a span of 70 to 100 per cent. Bands were
unstructured and pay was managed much more flexibly than in a conventional
graded structure (no limits may be defined for progression, which depended on
competence and the assumption of wider role responsibilities) and much more atten-
tion was paid to market rates that governed what were in effect the spot rates for jobs
within bands. Analytical job evaluation was often felt to be unnecessary because of
the ease with which jobs could be allocated to one of a small number of bands. The
difference between broad bands and broad grades is that the latter still generally
adopt a fairly conventional approach to pay management by the use of analytical job
evaluation, mid-point management, compa-ratio analysis and pay matrix techniques.
However, structure often crept in. It started with reference points aligned to market
rates around which similar roles could be clustered. These were then extended into
zones for individual jobs or groups of jobs, which placed limits on pay progression, as
illustrated in Figure 46.4. Job evaluation was increasingly used to define the bound-
aries of the band and to size jobs as a basis for deciding where reference points should
be placed in conjunction with market pricing. The original concept of broad-banding
was therefore eroded as more structure was introduced and job evaluation became
more prominent to define the structure and meet equal pay requirements. Zones
within broad bands began to look rather like conventional grades.
Grade and pay structures ❚ 693
£
Figure 46.2 A broad-graded structure
694 ❚ Rewarding people
£
Figure 46.3 Narrow and broad-banded structures
£
Figure 46.4 A broad-banded structure with zones
Band B
Zone B1
x
Zone B2
x
Zone B3
x
Band A
Zone A1
x
Zone A2
x
Zone A3
x
(x = reference point)
Job family structures
Job families consist of jobs in a function or occupation such as marketing, operations,
finance, IT, HR, administration or support services, which are related through the
activities carried out and the basic knowledge and skills required, but in which the
levels of responsibility, knowledge, skill or competence levels required differ. In a job
family structure, as shown in Figure 46.5, different job families are identified and the
successive levels in each family are defined by reference to the key activities carried
out and the knowledge and skills or competences required to perform them effec-
tively. They therefore define career paths – what people have to know and be able to
do to advance their career within a family and to develop career opportunities in
other families. Typically, job families have between six and eight levels as in broad-
graded structures. Some families may have more levels than others.
In contrast to career family structures (see below) each family in a job family struc-
ture may in effect have its own pay structure that takes account of different levels of
market rates between families (this is sometimes called ‘market grouping’). The level
or grade structures may also differ between families to reflect any special family role
characteristics. Because the size of jobs and rates of pay can vary between the same
levels in different job families, there may be no read-across between them unless use
is made of analytical job evaluation.
Grade and pay structures ❚ 695
£
Figure 46.5 A job family structure
Career family structures
Career family structures, as shown in Figure 46.6, resemble job family structures in
that there are a number of different ‘families’. The difference is that in a career family,
jobs in the corresponding levels across each of the career families are within the same
size range and, if an analytical job evaluation scheme is used, this is defined by the
same range of scores. Similarly, the pay ranges in corresponding levels across the
career families are the same. In effect, a career structure is a single graded structure in
which each grade has been divided into families.
Career family structures focus on career mapping and career development as part
of an integrated approach to human resource management. This is as important a
feature of career families as the pay structure element, possibly even more so.
Pay spines
Pay spines are found in the public sector or in agencies and charities that have
adopted a public sector approach to reward management. As illustrated in Figure
46.7, they consist of a series of incremental ‘pay points’ extending from the lowest to
the highest paid jobs covered by the structure. Typically, pay spine increments are
between 2.5 and 3 per cent. They may be standardized from the top to the bottom of
the spine, or the increments may vary at different levels, sometimes widening
towards the top. Job grades are aligned to the pay spine and the pay ranges for the
grades are defined by the relevant scale of pay points. The width of grades can vary
and job families may have different pay spines. Progression through a grade is based
696 ❚ Rewarding people
Career families
Operations Administration Finance IT
Level 1 Level 1 Level 1 Level 1
Level 2 Level 2 Level 2 Level 2
Level 3 Level 3 Level 3 Level 3
Level 4 Level 4 Level 4 Level 4
Level 5 Level 5 Level 5 Level 5
Level 6 Level 6 Level 6 Level 6
evaluation points £ job
Figure 46.6 A career family structure
on service, although an increasing number of organizations provide scope for acceler-
ating increments or providing additional increments above the top of the scale for the
grade to reward merit.
Spot rates
Some organizations do not have a graded structure at all for any jobs or for certain
jobs such as directors. Instead they use ‘spot rates’. They may also be called the ‘rate
for the job’, more typically for manual jobs where there is a defined skilled or semi-
skilled market rate that may be negotiated with a trade union. Spot rates are quite
often used in retail firms for customer service staff.
Spot rates are sometimes attached to a person rather than a job. Unless they are
negotiated, rates of pay and therefore relativities are governed by market rates and
managerial judgement. Spot rates are not located within grades and there is no
defined scope for progression while on the spot rate. There may, however, be scope
for moving on to higher spot rates as skill, competence or contribution increases. Job
holders may be eligible for incentive bonuses on top of the spot rate.
Spot rates may be used where there is a very simple hierarchy of jobs, as in some
manufacturing and retailing companies. They may be adopted by organizations that
want the maximum amount of scope to pay what they like. They often exist in small
Grade and pay structures ❚ 697
£
Figure 46.7 A pay spine
or start-up organizations that do not want to be constrained by a formal grade struc-
ture and prefer to retain the maximum amount of flexibility. But they can result in
serious inequities that may be difficult to justify.
Individual job grades
Individual job grades are, in effect, spot rates to which a defined pay range of, say, 20
per cent on either side of the rate has been attached to provide scope for pay progres-
sion based on performance, competence or contribution. Again, the mid-point of the
range is fixed by reference to job evaluation and market rate comparisons.
Individual grades are attached to jobs not people, but there may be more flexibility
for movement between grades than in a conventional grade structure. This can arise
when people have expanded their role and it is considered that this growth in the
level of responsibility needs to be recognized without having to upgrade the job.
Individual job grades may be restricted to certain jobs, for example more senior
managers where flexibility in fixing and increasing rates of pay is felt to be desirable.
They provide for greater flexibility than more conventional structures but can be
difficult to manage and justify and can result in pay inequities. The ‘zones’ that are
often established in broad-banded structures have some of the characteristics of indi-
vidual job grades.
Summary
A summary of the features of the different pay structures, their advantages and disad-
vantages and when they may be appropriate is given in Table 46.1.
Incidence of different types of structure
Figure 46.8 shows the incidence of different types of structure as established by the
e-reward survey (2004c). Broad-graded structures are now the most popular. They are
replacing narrow-graded structures rather than broad-banding, which is relatively
little used. There are a fair number of job family structures but few career family
structures.
DESIGNING GRADE AND PAY STRUCTURES
Design options
There is a choice of structure, as shown in Table 46.1, and whichever structure is
selected, there will be a number of design options. The first decision to make is where
698 ❚ Rewarding people
Grade and pay structures ❚ 699
Table 46.1 Summary analysis of different grade and pay structures
Type of Features Advantages Disadvantages When appropriate
structure
Narrow- A sequence of job Clearly indicate Create hierarchical In a large bureau-
graded grades –10 or more pay relativities rigidity cratic organization
Narrow pay ranges Facilitate control Prone to grade drift with well defined
eg 20 per cent – Easy to understand Inappropriate in a hierarchies
40 per cent de-layered When close and
Progression organization rigid control is
usually linked to required
performance When some but not
too much scope for
pay progression
related to
performance or
contribution is
wanted
Broad- A sequence of As for narrow Too much scope Desirable to define
graded between 6 and 9 graded structures for pay progression and differentiate
grades but in addition: Control grades more
Fairly broad pay the broader grades mechanisms can accurately as an aid
ranges eg 40 to can be defined be provided but to better precision
50% more clearly they can be when grading jobs
Progression linked better control can difficult to manage Grade drift
to contribution and be exercised over May be costly problems exist
may be controlled grade drift More scope wanted
by thresholds or to reward
zones contribution
Broad- A series of, often 5 More flexible Create unrealistic In de-layered,
banded or 6 ‘broad’ bands Reward lateral expectations of process-based,
Wide pay bands – development and scope for pay rises flexible
typically between growth in Seem to restrict organizations
50 and 80% competence scope for Where more
Progression linked Fit new style promotion flexibility in pay
to contribution and organizations Difficult to determination is
competence understand wanted
Equal pay Where the focus is
problems on continuous
improvement
and
lateral
development
continued
to place grade boundaries which, as described below, is usually informed by a job
evaluation exercise. Decisions on grade boundaries will be influenced by considera-
tions affecting the number and width of grades. Further options exist on the pay
structure concerning the differentials between grades, the degree to which there
should be overlap between grades, if any, and the method of pay progression within
grades. In broad-banded structures there is also choice on the infrastructure (the use
of reference points or zones), and in career or job family structures there are options
concerning the number of families, the composition of families and the basis upon
which levels should be defined.
700 ❚ Rewarding people
Table 46.1 continued
Type of Features Advantages Disadvantages When appropriate
structure
Job Separate grade and Can appear to be Facilitate pay When there are
family pay structures for divisive differentiation distinct market
job families May inhibit lateral between market groups which
containing career groups. need to be
similar jobs development Define career rewarded
Progression linked May be difficult to paths against differentially
to competence maintain internal clear criteria Where there are
and/or equity between job distinct groups of
contribution families unless jobs in families
underpinned by job
evaluation
Pay A series of Easy to manage No scope for In a public sector
spine incremental pay Pay progression differentiating or voluntary
points covering all not based on rewards according organization where
jobs managerial to performance this is the
Grades may be judgement May be costly as traditional
superimposed staff drift up the approach and it
Progression spine therefore fits the
linked to service culture
Where it is believed
to be impossible
to measure
differential levels
of performance
fairly and
consistently
Deciding on grade boundaries
An analytical job evaluation exercise will produce a rank order of jobs according to
their job evaluation scores. A decision then has to be made on where the boundaries
that will define grades should be placed in the rank order. So far as possible, bound-
aries should divide groups or clusters of jobs which are significantly different in size
so that all the jobs placed in a grade are clearly smaller than the jobs in the next higher
grade and larger than the jobs placed in the next lower grade.
Fixing grade boundaries is one of the most critical aspects of grade structure design
following an analytical job evaluation exercise. It requires judgement – the process is
not scientific and it is rare to find a situation when there is one right and obvious
answer. In theory, grade boundaries could be determined by deciding on the number
of grades in advance and then dividing the rank order into equal parts. But this
would mean drawing grade boundary lines arbitrarily and the result could be the
separation of groups of jobs that should properly be placed in the same grade.
The best approach is to analyse the rank order to identify any significant gaps in
the points scores between adjacent jobs. These natural breaks in points scores will
then constitute the boundaries between clusters of jobs that can be allocated to adja-
cent grades. A distinct gap between the highest rated job in one grade and the lowest
rated job in the grade above will help to justify the allocation of jobs between grades.
It will therefore reduce boundary problems leading to dissatisfaction with gradings
Grade and pay structures ❚ 701
broad-graded 24%
narrow-graded 18%
pay spine 13%
job family 11%
individual job ranges 10%
spot rates 10%
broad-banded 8%
career family 6%
n = 166
Figure 46.8 Type of grade and pay structure
when the distinction is less well defined. Provisionally, it may be decided in advance
when designing a conventional graded structure that a certain number of grades is
required, but the gap analysis will confirm the number of grades that is appropriate,
taking into account the natural divisions between jobs in the rank order. However, the
existence of a number of natural breaks cannot be guaranteed, which means that
judgement has to be exercised as to where boundaries should be drawn when the
scores between adjacent jobs are close.
In cases where there are no obvious natural breaks, the guidelines that should be
considered when deciding on boundaries are as follows:
● Jobs with common features as indicated by the job evaluation factors are grouped
together so that a distinction can be made between the characteristics of the jobs
in different grades – it should be possible to demonstrate that the jobs grouped
into one grade resemble each other more than they resemble jobs placed in adja-
cent grades.
● The grade hierarchy should take account of the organizational hierarchy, ie jobs in
which the job holder reports to a higher level job holder should be placed in a
lower grade, although this principle should not be followed slavishly when an
organization is over-hierarchical with, perhaps, a series of one-over-one reporting
relationships.
● The boundaries should not be placed between jobs mainly carried out by men and
jobs mainly carried out by women.
● The boundaries should ideally not be placed immediately above jobs in which
large numbers of people are employed.
● The grade width in terms of job evaluation points should represent a significant
step in demand as indicated by the job evaluation scheme.
Number of grades, levels or bands
The considerations to be taken into account when deciding on the number of grades
levels or bands are:
● The range and types of roles to be covered by the structure.
● The range of pay and job evaluation points scores to be accommodated.
● The number of levels in the organizational hierarchy (this will be an important
factor in a broad-banded structure).
● Decisions on where grade boundaries should be placed following a job evaluation
exercise, which has produced a ranked order of jobs – this might identify the exis-
tence of clearly defined clusters of jobs at the various levels in the hierarchy
between which there are significant differences in job size.
702 ❚ Rewarding people
● The fact that within a given range of pay and responsibility, the greater the
number of grades the smaller their width and vice versa – this is associated with
views on what is regarded as the desirable width of a range, taking into account
the scope for progression, the size of increments in a pay spine and equal pay
issues.
● The problem of ‘grade drift’ (unjustified upgradings in response to pressure, lack
of promotion opportunities or because job evaluation has been applied laxly),
which can be increased if there are too many narrow grades.
Width of grades
The factors affecting decisions on the width of grades or bands are:
● Views on the scope that should be allowed for performance, contribution or
career progression within grade.
● Equal pay considerations – wide grades, especially extended incremental scales,
are a major cause of pay gaps between men and women simply because women,
who are more likely to have career breaks than men, may not have the same
opportunity as men to progress to the upper regions of the range; male jobs may
therefore cluster towards the top of the range while women’s may cluster towards
the bottom.
● V on the number of grades – the greater the number the smaller the width.
● Decisions on the value of increments in a pay spine – if it is believed, as in local
government and as a result of an ACAS equal pay case that the number of incre-
ments should be restricted, for equal pay or other reasons, but that the number of
grades should also be limited, then it is necessary to increase the value of the
increments.
● In a broad-banded structure, the range of market rates and job evaluation scores
covering the jobs allocated to the band.
Differentials between pay ranges
Differentials between pay ranges should provide scope to recognize increases in job
size between successive grades. If differentials are too close – less than 10 per cent –
many jobs become borderline cases, which can result in a proliferation of appeals and
arguments about grading. Large differentials below senior management level of more
than 25 per cent can create problems for marginal or borderline cases because of the
amount at stake. Experience has shown that in most organizations with conventional
grade structures, a differential of between 16 and 20 per cent is appropriate except,
perhaps, at the highest levels.
Grade and pay structures ❚ 703
Pay range overlap
There is a choice on whether or not pay ranges should overlap and if so, by how
much. The amount of overlap, if any, is a function of range width and differentials.
Large overlaps of more than 10 per cent can create equal pay problems where, as is
quite common, men are clustered at the top of their grades and women are more
likely to be found at the lower end.
Pay progression
There is a choice of methods of pay progression between the fixed service-
related increments common in the public sector, and the other forms of contingent
pay, namely performance, competence or contribution-related, as described in
Chapter 47.
The grade and pay structure design process
An analytical job evaluation scheme is usually the basis for designing a graded struc-
ture and it can be used in the initial stages of designing a broad-banded or career/job
family structure. In the case of graded structures, decisions on the number and width
of grades are generally based on an analysis of the rank order of scores produced by
job evaluation.
This approach is used less often in the design of broad-banded or career/job family
structures, where the most common method is to make a provisional advance deci-
sion on the number of bands or career family levels, and then position roles in bands
(often by reference to market rates) or allocate roles into levels by an ‘analytical
matching’ process, as described in Chapter 44. Job evaluation may only be used at a
later stage to validate the positioning of roles in bands or the allocation of jobs to
family levels, check on relativities and, sometimes, define the bands or levels in job
evaluation score terms. The initial decision on the number of bands or levels and their
definition may, however, be changed in the light of the outcome of the allocation,
matching and evaluation processes.
More rarely, the grade and pay structure design is conducted by means of a non-
analytical job classification exercise (see Chapter 44), which defines a number of
single grades. Jobs are then slotted into the grades by reference to the grade defini-
tions. The basic sequence of steps for designing a grade and pay structure is illus-
trated in Figure 46.9. Note the emphasis on communication and involvement at all
stages.
704 ❚ Rewarding people
Grade and pay structures ❚ 705
Figure 46.9 Flow chart: design of a new grade and pay structure
Communicate
and involve
throughout
programme
Analyse present
arrangements
Define objectives
and guiding
principles
Set up steering
group and task
force
Decide on
methodology and
programme
Select and
develop job
evaluation scheme
Choose scheme
and define its key
features
Career or job
family structure
Broad-banded
structure
Graded structure
Define families
and levels
Define bands and
their infrastructure
Evaluate
benchmark jobs
Match benchmark
roles to levels
Allocate benchmark
roles to bands
Design grade
structure
Design pay
structure
Design pay
structure
Design pay
structure
Conduct
analysis of
market rates
Validate allocation
through job
evaluation
Validate as
required through
JE
Match remaining
roles to levels
Allocate remaining
roles to levels
Match remaining
roles to levels
Implement Implement Implement
Contingent pay
This chapter starts with a definition of contingent pay and details of its incidence. It
then deals with individual contingent pay under the following headings:
● contingent pay as a motivator;
● arguments for and against contingent pay;
● alternatives to contingent pay;
● criteria for success;
● performance-related pay;
● competence-related pay;
● contribution-related pay;
● skill-based pay;
● service-related pay;
● choice of scheme;
● readiness for contribution pay;
● developing and implementing contingent pay.
The chapter concludes with a description of team pay schemes and schemes that pay
for organizational performance. Incentives for sales staff and manual workers are
covered in Chapter 42.
47
CONTINGENT PAY DEFINED
Contingent pay provides an answer to the two fundamental reward management
questions: what do we value, and what are we prepared to pay for? Individual
contingent pay relates financial rewards to the performance, competence, contribu-
tion or skill of individual employees. However, pay related to service is also in a sense
contingent pay and is therefore considered separately towards the end of the chapter.
Contingent pay may also be provided for teams and for organizational performance.
THE INCIDENCE OF CONTINGENT PAY
The e-reward survey of contingent pay (2004b) established that 189 schemes were
used by the 100 respondents in the proportions shown in Figure 47.1.
Performance-related pay remains the most common approach and a large proportion
of organizations relate pay to organizational performance. Contribution-related pay
(a combination of performance and competence pay) is used to a surprisingly high
extent considering that as a defined concept it did not really exist until the end of the
1990s, when it was introduced by Brown and Armstrong (1999). Service-related pay
708 ❚ Rewarding people
Performance related pay 65%
Pay related to organizational performance 40%
Contribution related 33%
Service related
15%
Team pay
11%
Competence
Related 8%
0% 50% 100%
Figure 47.1 Incidence of contingent pay schemes
persists in the public and voluntary sectors, but neither team pay nor competence-
related pay is much used.
THE NATURE OF INDIVIDUAL CONTINGENT PAY
Contingent pay may be consolidated in base pay or provided in the form of cash
lump sum bonuses. The latter arrangement is called ‘variable pay’. This is sometimes
referred to as ‘pay at risk’, which has to be re-earned, as distinct from consolidated
pay, which is usually regarded as continuing as long as the person remains in the job
and performs it satisfactorily.
Contingent pay schemes are based on processes for measuring or assessing perfor-
mance, competence, contribution or skill. These may be expressed as ratings, which
are converted by means of a formula to a payment. Alternatively, there may be no
formal ratings and pay decisions are based on broad assessments rather than a
formula.
INDIVIDUAL CONTINGENT PAY AS A MOTIVATOR
Many people see contingent pay as the best way to motivate people. But it is
simplistic to assume that it is only the extrinsic motivators in the form of pay that
create long-term motivation. The total reward concept, as explained in Chapter 42,
emphasizes the importance of non-financial rewards as an integral part of a complete
package. The intrinsic motivators, which can arise from the work itself and the
working environment, may have a deeper and longer-lasting effect.
Incentives and rewards
When considering contingent pay as a motivator a distinction should be made
between financial incentives and rewards.
Financial incentives are designed to provide direct motivation. They tell people how
much money they will get in the future if they perform well – ‘Do this and you will
get that’. A shop floor payment-by-result scheme and a sales representative’s
commission system are examples of financial incentives.
Financial rewards act as indirect motivators because they provide a tangible means
of recognizing achievements, as long as people expect that what they do in the future
will produce something worthwhile, as expectancy theory suggests. Rewards can be
retrospective – ‘You have achieved this, therefore we will pay you that.’ But rewards
Contingent pay ❚ 709
can also be prospective: ‘We will pay you more now because we believe you have
reached a level of competence that will produce high levels of performance in the
future.’
ARGUMENTS FOR AND AGAINST INDIVIDUAL
CONTINGENT PAY
Arguments for
The most powerful argument for individual contingent pay is that those who
contribute more should be paid more. It is right and proper to recognize achievement
with a financial and therefore tangible reward. This is preferable to paying people
just for ‘being there’, as happens in a service-related system.
The e-reward survey of contingent pay (2004b) found that, in order of importance,
the following were the main reasons given by the respondents for using contingent
pay:
1. To recognize and reward better performance.
2. To attract and retain high quality people.
3. To improve organizational performance.
4. To focus attention on key results and values.
5. To deliver a message about the importance of performance.
6. To motivate people.
7. To influence behaviour.
8. To support cultural change.
Arguments against
The main arguments against individual contingent pay are that:
● the extent to which contingent pay schemes motivate is questionable – the
amounts available for distribution are usually so small that they cannot act as an
incentive;
● the requirements for success as set out below are exacting and difficult to achieve;
● money by itself will not result in sustained motivation – as Kohn (1993) points
out, money rarely acts in a crude, behaviourist, Pavlov’s dog manner;
● people react in widely different ways to any form of motivation – it cannot be
assumed that money will motivate all people equally, yet that is the premise on
which contribution pay schemes are based;
710 ❚ Rewarding people
● financial rewards may possibly motivate those who receive them, but they can
demotivate those who don’t, and the numbers who are demotivated could be
much higher than those who are motivated;
● contingent pay schemes can create more dissatisfaction than satisfaction if they
are perceived to be unfair, inadequate or badly managed, and, as explained
below, they can be difficult to manage well;
● contingent pay schemes depend on the existence of accurate and reliable methods
of measuring performance, competence, contribution or skill, which might not
exist;
● contingent pay decisions depend on the judgement of managers which, in the
absence of reliable criteria, could be partial, prejudiced, inconsistent or ill-
informed;
● the concept of contingent pay is based on the assumption that performance is
completely under the control of individuals when in fact, it is affected by the
system in which they work;
● contingent pay, especially performance-related pay schemes, can militate against
quality and teamwork.
Another powerful argument against contingent pay is that it has proved difficult to
manage. Organizations, including the Civil Service, rushed into performance-related
pay in the 1980s without really understanding how to make it work. Inevitably
problems of implementation arose. Studies such as those conducted by Bowey (1982),
Kessler and Purcell (1992), Marsden and Richardson (1994) and Thompson (1992)
have all revealed these difficulties. Failures are usually rooted in implementation
and operating processes, especially those concerned with performance management,
the need for effective communication and involvement, and line management
capability.
The last factor is crucial. The success of contingent pay rests largely in the hands
of line managers. They have to believe in it as something that will help them as well
as the organization. They must also be good at practising the crucial skills of agreeing
targets, measuring performance fairly and consistently, and providing feedback to
their staff on the outcome of performance management and its impact on pay. Line
managers can make or break contingent pay schemes.
Wright (1991) summed it all up: ‘Even the most ardent supporters of per-
formance-related pay recognize that it is difficult to manage well’, and Oliver
(1996) made the point that ‘performance pay is beautiful in theory but difficult in
practice’.
Contingent pay ❚ 711
Conclusions
A comprehensive study by Brown and Armstrong (1999) into the effectiveness of
contingent pay as revealed by a number of research projects produced two overall
conclusions: 1) contingent pay cannot be endorsed or rejected universally as a prin-
ciple; and 2) no type of contingent pay is universally successful or unsuccessful. They
concluded their analysis of the research findings by stating that ‘the research does
show that the effectiveness of pay-for-performance schemes is highly context and
situation-specific; and it has highlighted the practical problems which many compa-
nies have experienced with these schemes’.
ALTERNATIVES TO INDIVIDUAL CONTINGENT PAY
The arguments against contribution pay set out above convince many people that it is
unsatisfactory, but what is the alternative? One answer is to rely more on non-finan-
cial motivators. But it is still necessary to consider what should be done about pay.
The reaction in the 1990s to the adverse criticisms of PRP was to develop the concept
of competence-related pay that fitted in well with the emphasis on competencies (the
competency industry). This approach, as described later, in theory overcame some of
the cruder features of PRP but still created a number of practical difficulties and has
never really taken off. In the late 1990s the idea of contribution-related pay emerged,
as advocated by Brown and Armstrong (1999). This combines the output-driven focus
of PRP with the input (competence) oriented focus of competence-related pay and
has proved to be much more appealing than either performance or competence-
related pay.
However, many people still have reservations about this approach from the view-
point of achieving the fair and consistent measurement of contribution. So what are
the alternatives for them? Team pay is often advocated because it removes the indi-
vidualistic aspect of PRP and accords with the belief in the importance of teamwork,
but although team pay is attractive, it is often difficult to apply and it still relies on
performance measurement.
The traditional alternative is service-related pay, as described later in this chapter.
This certainly treats everyone equally (and therefore appeals to trade unions) but
pays people simply for being there, and this could be regarded as inequitable in that
rewards take no account of relative levels of contribution.
The other common alternative is a spot rate system as described in Chapter 46.
Most people, however, want and expect a range of base pay progression, however
that is determined, and spot rates are not much used in larger organizations except
for senior managers, shop floor and sales staff.
712 ❚ Rewarding people
CRITERIA FOR SUCCESS
The following are the success criteria for individual contingent pay:
● Individuals should have a clear line of sight between what they do and what they
will get for doing it. A line of sight model adapted from Lawler (1988) is shown in
Figure 47.2. The concept expresses the essence of expectancy theory: that motiva-
tion only takes place when people expect that their effort and contribution will be
rewarded. The reward should be clearly and closely linked to accomplishment or
effort – people know what they will get if they achieve defined and agreed targets
or standards and can track their performance against them.
● The rewards are worth having.
● Fair and consistent means are available for measuring or assessing performance,
competence, contribution or skill.
● People must be able to influence their performance by changing their behaviour
and developing their competences and skills.
● The reward should follow as closely as possible the accomplishment that gener-
ated it.
These are ideal requirements and few schemes meet them in full. That is why indi-
vidual contingent pay arrangements as described below can often promise more than
they deliver.
PERFORMANCE-RELATED PAY
Methods of operating PRP vary considerably but its typical main features are summa-
rized in Figure 47.3 and described below.
Contingent pay ❚ 713
Effort Performance Results Measures Pay out
Figure 47.2 Line of sight model
Agreed
outcomes
(targets)
Performance
measures
Performance Rating Formula
Performance
pay
Figure 47.3 Performance-related pay
Basis of scheme
Pay increases are related to the achievement of agreed results defined as targets or
outcomes. Scope is provided for consolidated pay progression within pay brackets
attached to grades or levels in a graded or career family structure, or zones in a broad-
banded structure. Such increases are permanent – they are seldom if ever withdrawn.
Alternatively or additionally, high levels of performance or special achievements may
be rewarded by cash bonuses, which are not consolidated and have to be re-earned.
Individuals may be eligible for such bonuses when they have reached the top of the
pay bracket for their grade, or when they are assessed as being fully competent,
having completely progressed along their learning curve. The rate of pay for
someone who reaches the required level of competence can be aligned to market rates
according to the organization’s pay policy.
Pay progression
The rate and limits of progression through the pay brackets are typically but not
inevitably determined by performance ratings, which are often made at the time of
the performance management review but may be made separately in a special pay
review. Some organizations do not base PRP increases on formal ratings and instead
rely on a general assessment of how much the pay of individuals should increase by
reference to performance, potential, the pay levels of their peers and their ‘market
worth’ (the rate of pay it is believed they could earn elsewhere).
Conclusions on PRP
PRP has all the advantages and disadvantages listed for contingent pay. Many people
feel the latter outweigh the former. It has attracted a lot of adverse comment,
primarily because of the difficulties organizations have met in managing it. Contri-
bution-related pay schemes are becoming much more popular.
COMPETENCE-RELATED PAY
The main features of competence-related pay schemes are illustrated in Figure 47.4
and described below.
714 ❚ Rewarding people
Agreed
competence
requirements
Competence
level
definitions
Evidence of
competence
level achieved
Rating or
assessment
Methodology
Competence
pay
Figure 47.4 Competence-related pay
Basis of scheme
People receive financial rewards in the shape of increases to their base pay by refer-
ence to the level of competence they demonstrate in carrying out their roles. It is a
method of paying people for the ability to perform now and in the future.
As in the case of PRP, scope is provided for consolidated pay progression within
pay brackets attached to grades or levels in a narrow-graded or career family struc-
ture, or zones in a broad-banded structure (competence pay is often regarded as a
feature of such structures).
Pay progression
The rate and limits of progression through the pay brackets can be based on ratings of
competence using a PRP-type matrix, but they may be governed by more general
assessments of competence development.
Conclusions on competence-related pay
Competence-related pay is attractive in theory because it can be part of an integrated
competency-based approach to HRM. However, the idea of competence-related pay
raises two questions. The fundamental question is, ‘What are we paying for?’ Are we
paying for competencies, ie how people behave, or competences, ie what people have
to know and be able to do to perform well? If we are rewarding good behaviour
(competencies) then a number of difficulties arise. It has been suggested by Sparrow
(1996) that these include the performance criteria on which competencies are based,
the complex nature of what is being measured, the relevance of the results to the orga-
nization, and the problem of measurement. He concluded that ‘we should avoid
over-egging our ability to test, measure and reward competencies’.
Other fundamental objections to the behavioural approach have been raised by
Lawler (1993). He expresses concern about schemes that pay for an individual’s
personality trails and emphasizes that such plans work best ‘when they are tied to the
ability of an individual to perform a particular task and when there are valid
measures available of how well an individual can perform a task’. He also points out
that, ‘generic competencies are not only hard to measure, they are not necessarily
related to successful task performance in a particular work assignment or work role’.
This raises the second question: ‘Are we paying for the possession of competence
or the use of competence?’ Clearly it must be the latter. But we can only assess the
effective use of competence by reference to performance. The focus is therefore on
results and if that is the case, competence-related pay begins to look suspiciously like
performance-related pay. It can be said that the difference between the two in these
Contingent pay ❚ 715
circumstances is all ‘smoke and mirrors’. Competence-related pay could be regarded
as no more than a more acceptable name for PRP.
Competence-related pay sounds like a good idea but it has not been taken up to a
great extent because of the problems mentioned above.
CONTRIBUTION-RELATED PAY
Contribution-related pay, as modelled in Figures 47.5 and 47.6, is a process for
making pay decisions that are based on assessments of both the outcomes of the work
carried out by individuals and the inputs in terms of levels of competence and
competency that have influenced these outcomes. In other words, it pays not only for
what they do but how they do it. Contribution-related pay focuses on what people in
organizations are there to do, that is, to contribute by their skill and efforts to the
achievement of the purpose of their organization or team.
716 ❚ Rewarding people
Outcomes
The results that
have been
achieved
Inputs
How the results
have been
obtained
Contribution
The part played in
achieving a team
or corporate goal
Figure 47.5 Contribution pay model (1)
Paying for past performance Paying for future success
Paying for contribution
Results Competence
+
=
Figure 47.6 Contribution pay model (2)
The case for contribution-related pay was made by Brown and Armstrong (1999) as
follows:
Contribution captures the full scope of what people do, the level of skill and compe-
tence they apply and the results they achieve, which all contribute to the organization
achieving its long-term goals. Contribution pay works by applying the mixed model of
performance management: assessing inputs and outputs and coming to a conclusion on
the level of pay for people in their roles and their work; both to the organization and in
the market; considering both past performance and their future potential.
Main features
Contribution-related pay rewards people for both their performance (outcomes) and
their competence (inputs). Pay awards can be made as consolidated pay increases,
but in some schemes there is also scope for cash bonuses. The features of contribu-
tion-related pay are illustrated in Figure 47.7.
A pay for contribution scheme incorporating competence and contribution pay in the
form of consolidated increases and cash bonuses developed for the Shaw Trust is
modelled in Figure 47.8.
Contingent pay ❚ 717
Agreed
outcomes
(targets)
Performance
measures
Performance
(results
achieved)
Rating or
assessment
Methodology
Contribution
pay
Agreed
competence
requirements
Competence
level
definitions
Evidence of
competence
level
achieved
Figure 47.7 Contribution-related pay
SKILL-BASED PAY
Defined
Skill-based pay provides employees with a direct link between their pay progression
and the skills they have acquired and can use effectively. It focuses on what skills the
business wants to pay for and what employees must do to demonstrate them. It is
therefore a people-based rather than a job-based approach to pay. Rewards are related
to the employee’s ability to apply a wider range or a higher level of skills to different
jobs or tasks. It is not linked simply to the scope of a defined job or a prescribed set of
tasks.
A skill may be defined broadly as a learnt ability that improves with practice over
time. For skill-based pay purposes the skills must be relevant to the work. Skill-based
pay is also known as ‘knowledge-based pay’, but the terms are used interchangeably,
knowledge being regarded loosely as the understanding of how to do a job or certain
tasks.
718 ❚ Rewarding people
£
90% Recruitment
Consolidated increases related
to competence
Highly competent: aligned to
market rate
Bonuses for exceptional contribution –
may be consolidated if exceptional
contribution sustained
95%
97.5%
100% Reference point
A
B
110% C
}
}
Figure 47.8 Contribution-related pay model (Shaw Trust)
Application
Skill-based pay was originally applied mainly to operatives in manufacturing firms,
but it has been extended to technicians and workers in retailing, distribution, catering
and other service industries. The broad equivalent of skill-based pay for managerial,
professional and administrative staff and knowledge workers is competence-related
pay, which refers to expected behaviour as well as, often, to knowledge and skill
requirements. There is clearly a strong family resemblance between skill- and compe-
tence-related pay – each is concerned with rewarding the person as well as the job.
But they can be distinguished both by the way in which they are applied, as described
below, and by the criteria used.
Main features
Skill-based pay works as follows:
● Skill blocks or modules are defined. These incorporate individual skills or clusters
of skills that workers need to use and which will be rewarded by extra pay when
they have been acquired and the employee has demonstrated the ability to use
them effectively.
● The skill blocks are arranged in a hierarchy, with natural break points between
clearly definable different levels of skills.
● The successful completion of a skill module or skill block will result in an incre-
ment in pay. This will define how the pay of individuals can progress as they gain
extra skills.
● Methods of verifying that employees have acquired and can use the skills at
defined levels are established.
● Arrangements for ‘cross-training’ are made. These will include learning modules
and training programmes for each skill block.
Conclusions
Skill-based pay systems are expensive to introduce and maintain. They require a
considerable investment in skill analysis, training and testing. Although in theory a
skill-based scheme will pay only for necessary skills, in practice individuals will not
be using them all at the same time and some may be used infrequently, if at all.
Inevitably, therefore, payroll costs will rise. If this increase is added to the cost of
training and certification, the total of additional costs may be considerable. The advo-
cates of skill-based pay claim that their schemes are self-financing because of the
resulting increases in productivity and operational efficiency. But there is little
Contingent pay ❚ 719
evidence that such is the case. For this reason, skill-based schemes have never been
very popular in the UK and some companies have discontinued them.
SERVICE-RELATED PAY
Defined
Service-related pay provides fixed increments that are usually paid annually to
people on the basis of continued service either in a job or a grade in a pay spine struc-
ture. Increments may be withheld for unacceptable performance (although this is
rare) and some structures have a ‘merit bar’, which limits increments unless a defined
level of ‘merit’ has been achieved. This is the traditional form of contingent pay and is
still common in the public and voluntary sectors and in education and the health
service, although it has largely been abandoned in the private sector.
Arguments for
Service-related pay is supported by many unions because they perceive it as being
fair – everyone is treated equally. It is felt that linking pay to time in the job rather
than performance or competence avoids the partial and ill-informed judgements
about people that managers are prone to make. Some people believe that the prin-
ciple of rewarding people for loyalty through continued service is a good one.
Arguments against
The arguments against service-related pay are that:
● it is inequitable in the sense that an equal allocation of pay increases according to
service does not recognize the fact that some people will be contributing more
than others and should be rewarded accordingly;
● it does not encourage good performance; indeed, it rewards poor performance
equally;
● it is based on the assumption that performance improves with experience, but
this is not automatically the case – it has been said that a person with five years’
experience may in practice only have had one year’s experience repeated five
times;
● it can be expensive – everyone may drift to the top of the scale, especially in times
of low staff turnover, but the cost of their pay is not justified by the added value
they provide.
720 ❚ Rewarding people
The arguments against service-related pay have convinced most managements,
although some are concerned about managing any other form of contingent-pay
schemes (incremental pay scales do not need to be managed at all). They may also
have to face strong resistance from their unions and can be unsure of what exit
strategy they should adopt if they want to change. They may therefore stick with the
status quo.
CHOICE OF APPROACH
The first choice is whether or not to have contingent pay related to performance,
competence, contribution or skill. Public or voluntary sector organizations with fixed
incremental systems (pay spines), where progression is solely based on service, may
want to retain them because they do not depend on possibly biased judgements by
managers and they are perceived as being fair – everyone gets the same – and easily
managed. However, the fairness of such systems can be questioned. Is it fair for a
poor performer to be paid more than a good performer simply for being there?
The alternatives to fixed increments are either spot rates or some form of contin-
gent pay. Spot rate systems in their purest form are generally only used for senior
managers, shop floor or retail workers, and in smaller organizations and new busi-
nesses where the need for formal practices has not yet been recognized.
If it is decided that a more formal type of contingent pay for individuals should be
adopted, the choice is between the various types of performance pay, competence-
related or contribution-related pay and skill-based pay, as summarized in Table 47.1.
The alternative to individual contingent pay is team pay, as described later. Pay
related to organizational performance is another alternative, although some organi-
zations have such schemes in addition to individual contingent pay.
READINESS FOR INDIVIDUAL CONTINGENT PAY
The 10 questions to be answered when assessing readiness for individual contingent
pay are:
1. Is it believed that contingent pay will benefit the organization in the sense of
enhancing its ability to achieve its strategic goals?
2. Are there valid and reliable means of measuring performance?
3. Is there a competency framework and are there methods of assessing levels of
competency objectively (or could such a framework be readily developed)?
Contingent pay ❚ 721
722 ❚ Rewarding people
Type of Main features Advantages Disadvantages When
scheme appropriate
Performance- Increases to May motivate May not motivate For people who
related pay basic pay or (but this is Relies on are likely to be
bonuses are uncertain) judgements of motivated by
related to Links reards to performance money
assessment of objectives which may be In organizations
performance Meets the need to subjective with a
be rewarded for Prejudicial to performance-
achievement teamwork orientated
Delivers message Focuses on culture
that good outputs, not When
performance is quality performance
important and Relies on good can be
will be rewarded performance measured
management objectively
processes
Difficult to
manage well
Competence- Pay increases Focus attention Assessment of As part of an
related pay are related to the on need to competence integrated
level of achieve higher levels may be approach to
competence levels of difficult HRM where
competence Ignores outputs – competencies
Encourages danger of paying are used across a
competence for competences number of
development that will not be activities
Can be integrated used Where
with other Relies on well- competence is a
applications of trained and key factor where
competency- committed line it may be
based HR managers inappropriate
management or hard to
measure
outputs
Where well-
established
competency
frameworks
exist
Table 47.1 Comparison of individual contingent pay schemes
continued
4. Are there effective performance management processes that line managers
believe in and carry out conscientiously?
5. Are line managers willing to assess performance or contribution and capable of
doing so?
6. Are line managers capable of making and communicating contingent pay deci-
sions?
7. Is the HR function capable of providing advice and guidance to line managers
on managing contingent pay?
8. Can procedures be developed to ensure fairness and consistency in assessments
and pay decisions?
9. Are employees and trade unions willing to accept the scheme?
10. Do employees trust management to deliver the deal?
Contingent pay ❚ 723
Type of Main features Advantages Disadvantages When
scheme appropriate
Contribution- Increases in pay Rewards people As for both PRP When it is
related pay or bonuses are not only for what and competence- believed that a
related both to they do but how related pay – it well-rounded
inputs they do it may be hard to approach
(competence) measure covering both
and outputs contribution and inputs and
(performance) it is difficult to outputs is
manage well appropriate
Skill-based Increments Encourages and Can be expensive On the shop
pay related to the rewards the when people are floor or in retail
acquisition of acquisition of paid for skills organizations
skills skills they don’t use
Service- Increments No scope for Fails to reward Where this is the
related pay related to service bias, easy to those who traditional
in grade manage contribute more approach and
trade unions
oppose
alternatives
Table 47.1 continued
DEVELOPING AND IMPLEMENTING INDIVIDUAL
CONTINGENT PAY
The 10 steps required to develop and implement individual contingent pay are:
1. Analyse culture, strategy and existing processes, including the grade and pay
structure, performance management and methods of progressing pay or
awarding cash bonuses.
2. Decide which form of contingent pay is most appropriate.
3. Set out aims that demonstrate how contribution pay will help to achieve the
organization’s strategic goals.
4. Communicate aims to line managers’ staff and involve them in the development
of the scheme.
5. Determine how the scheme will operate.
6. Develop or improve performance management processes covering the selection
of performance measures, decisions on competence requirements, methods of
agreeing objectives and the procedure for conducting joint reviews.
7. Communicate intentions to line managers and staff.
8. Pilot test the scheme and amend as necessary.
9. Provide training to all concerned.
10. Launch the scheme and evaluate its effectiveness after the first review.
TEAM-BASED PAY
Team-based pay provides rewards to teams or groups of employees carrying out
similar and related work that is linked to the performance of the team. Performance
may be measured in terms of outputs and/or the achievement of service delivery
standards. The quality of the output and the opinion of customers about service
levels are also often taken into account.
As described by Armstrong and Ryden (1996), team pay is usually paid in the form
of a bonus that is shared amongst team members in proportion to their base rate of
pay (much less frequently, it is shared equally). Individual team members may be
eligible for competence-related or skill-based pay but not for performance-related
pay.
Advantages of team pay
Team pay can:
● encourage effective teamworking and co-operative behaviour;
724 ❚ Rewarding people
● clarify team goals and priorities;
● enhance flexible working within teams;
● encourage multiskilling;
● provide an incentive for the team collectively to improve performance;
● encourage less effective team members to improve to meet team standards.
Disadvantages of team pay
The disadvantages of team pay are that:
● it only works in cohesive and mature teams;
● individuals may resent the fact that their own efforts are not rewarded specifi-
cally;
● peer pressure, which compels individuals to conform to group norms, could be
undesirable.
Conditions suitable for team pay
Team pay is more likely to be appropriate when:
● teams can be readily identified and defined;
● teams are well established;
● the work carried out by team members is interrelated – team performance
depends on the collective efforts of team members;
● targets and standards of performance can be determined and agreed readily with
team members;
● acceptable measurements of team performance compared with targets and stan-
dards are available;
● generally, the formula for team pay meets the criteria for performance pay.
ORGANIZATION-WIDE SCHEMES
Organization-wide bonus schemes pay sums of money to employees that are related
to company or plant-wide performance. They are designed to share the company’s
prosperity with its employees and thus to increase their commitment to its objectives
and values. Because they do not relate reward directly to individual effort, they are
not effective as direct motivators, although gain-sharing schemes can focus directly
on what needs to be done to improve performance and so get employees involved in
productivity improvement or cost-reduction plans. The two main types of schemes
are gain sharing and profit sharing.
Contingent pay ❚ 725
Gain sharing
Gain sharing is a formula-based company or factory-wide bonus plan that provides
for employees to share in the financial gains resulting from increases in added value
or another measure of productivity. The link between their efforts and the payout can
usefully be made explicit by involving them in analysing results and identifying
areas for improvement.
Profit sharing
Profit sharing is the payment to eligible employees of sums in the form of cash or
shares related to the profits of the business. The amount shared may be determined
by a published or unpublished formula or entirely at the discretion of management.
Profit sharing differs from gain sharing in that the former is based on more than
improved productivity. A number of factors outside the individual employee’s
control contribute to profit. Gain sharing aims to relate its payouts much more specif-
ically to productivity and performance improvements within the control of
employees. It is not possible to use profit-sharing schemes as direct incentives as for
most employees the link between individual effort and the reward is so remote. But
they can increase identification with the company and many managements operate
profit-sharing schemes because they believe that they should share the company’s
success with its employees.
Share ownership schemes
There are two main forms of share ownership plans: Share Incentive Plans (SIPS) and
Save-As-You-Earn (SAYE) schemes. These can be Inland Revenue-approved and if so,
produce tax advantages as well as linking financial rewards in the longer term to the
prosperity of the company.
Share incentive plans
Share incentive plans must be Inland Revenue-approved. They provide employees
with a tax-efficient way of purchasing shares in their organization to which the
employer can add ‘free’, ‘partnership’ or ‘matching’ shares and which can also be
issued as shares. There is a limit to the amount of free shares that can be provided to
employees (£3,000 a year in 2004). Employees can use up to £1,500 a year (in 2004) out
of pre-tax and pre-National Insurance Contributions pay to buy partnership shares,
and employers can give matching shares at a ratio of up to two matching shares for
each partnership share.
726 ❚ Rewarding people
Save-As-You-Earn schemes
SAYE schemes must be Inland Revenue-approved. They provide employees with the
option to buy shares in the company in three, five or seven years’ time at today’s
price, or a discount of up to 20 per cent of that price. Purchases are made from a
savings account to which the employee pays an agreed sum each month. The
monthly savings must be between £5 and £250. Income tax is not chargeable when the
option is granted.
Contingent pay ❚ 727
Employee benefits, pensions and
allowances
EMPLOYEE BENEFITS
Definition
Employee benefits are elements of remuneration given in addition to the various
forms of cash pay. They also include items that are not strictly remuneration, such as
annual holidays.
Objectives
The objectives of the employee benefits policies and practices of an organization are
to:
● provide an attractive and competitive total remuneration package which both
attracts and retains high-quality employees;
● provide for the personal needs of employees;
● increase the commitment of employees to the organization;
● provide for some people a tax-efficient method of remuneration.
Note that these objectives do not include ‘to motivate employees’. This is because the
48
normal benefits provided by a business seldom make a direct and immediate impact
on performance. They can, however, create more favourable attitudes towards the
business which can improve commitment and organizational performance in the
longer term.
Main types of employee benefits
Benefits can be divided into the following categories:
● Pension schemes: these are generally regarded as the most important employee
benefit.
● Personal security: these are benefits which enhance the individual’s personal and
family security with regard to illness, health, accident or life insurance.
● Financial assistance: loans, house purchase schemes, relocation assistance and
discounts on company goods or services.
● Personal needs: entitlements which recognize the interface between work and
domestic needs or responsibilities, eg holidays and other forms of leave, child
care, career breaks, retirement counselling, financial counselling and personal
counselling in times of crisis, fitness and recreational facilities.
● Company cars and petrol: still a much appreciated benefit in spite of the fact that
cars are now more heavily taxed.
● Other benefits: which improve the standard of living of employees such as subsi-
dized meals, clothing allowances, refund of telephone costs, mobile phones (as a
‘perk’ rather than a necessity) and credit card facilities.
● Intangible benefits: characteristics of the organization which contribute to the
quality of working life and make it an attractive and worthwhile place in which to
be employed.
Taxation
It should be remembered that most benefits are taxable as ‘benefits in kind’, the
notable exceptions being approved pension schemes, meals where these are generally
available to employees, car parking spaces, professional subscriptions and accommo-
dation where this is used solely for performing the duties of the job.
Flexible benefits
Flexible benefit schemes (sometimes called cafeteria schemes) allow employees to
decide, within certain limits, on the make-up of their benefits package. Schemes can
allow for a choice within benefits or a choice between benefits. Employees are
730 ❚ Rewarding people
allocated an individual allowance to spend on benefits. This allowance can be used to
switch between benefits, to choose new ones or to alter the rate of cover within
existing benefits. Some core benefits such as sick pay may lie outside the scheme and
cannot be ‘flexed’. Employees can shift the balance of their total reward package
between pay and benefits, either adding to their benefits allowance by sacrificing
salary or taking any unspent benefit allowance as cash.
Flexible benefit schemes provide employees with a degree of choice on what bene-
fits they want, according to their needs. A flexible benefit policy can save employers
money on benefits that are neither wanted nor needed.
Total remuneration
The concept of total remuneration is based on the principle of treating all aspects
of pay and benefits provision as a whole. The cost to the business and the value
to the individual of each element can be assessed with the object of adjusting
the package according to organizational and individual needs. Consideration
can also be given to the overall competitiveness of the total package in the market
place.
OCCUPATIONAL PENSION SCHEMES
The reasons for having a worthwhile pension scheme are that it:
● demonstrates that the organization is a good employer;
● attracts and retains high-quality people by helping to maintain competitive levels
of total remuneration;
● indicates that the organization is concerned about the long-term interests of its
employees.
Definition
An occupational pension scheme is an arrangement under which an employer
provides pensions for employees when they retire, income for the families of
members who die, and deferred benefits to members who leave. A ‘group scheme’ is
the typical scheme which provides for a number of employees.
Operation
Occupational pension schemes are administered by trusts which are supposed to be
Employee benefits, pensions and allowances ❚ 731
outside the employer’s control. The trustees are responsible for the pension fund
from which pension benefits are paid.
The pension fund is fed by contributions from employers and usually (but not
always) employees. The size of the fund and its capacity to meet future commitments
depend both on the size of contributions and on the income the trustees can generate.
They do this by investing fund money with the help of advisers in stocks, shares and
other securities, or through an insurance company. In the latter case, insurance
companies offer either a managed fund – a pool of money managed by the insurance
company for a number of clients – or a segregated fund which is managed for a single
client.
Contributions
In a contributory scheme employees as well as employers make contributions to the
pension fund. Pensionable earnings are total earnings from which may be excluded
such payments as overtime or special bonuses. A sum equal to the State flat rate
pension may also be excluded.
The level of contributions varies considerably, although in a typical contributory
scheme, employees would be likely to contribute about 5 per cent of their earnings
and employers would contribute approximately twice that amount.
Approved scheme
Members of an occupational scheme that has been approved by the Inland Revenue
(an approved scheme) obtain full tax relief on their contributions. The company also
recovers tax on its contributions and the income tax deductible from gains realized on
UK investments. This makes a pension fund the most tax-efficient form of saving
available in the UK.
Employers can establish unapproved pension schemes which provide benefits in
excess of approved schemes but at the expense of the generous tax allowances for the
latter type of scheme.
Retiring age and sex discrimination
Traditionally, the retiring age was 65 for men and 60 for women. However, under the
Sex Discrimination Act (1986), it is unlawful for employers to require female
employees to retire at an earlier age than male employees. In its judgement on the
Barber v Guardian Royal Exchange case on 17 May 1990 the European Court ruled that
pension was ‘pay’ under Article 119 of the Treaty of Rome (which provided for equal
pay) and that it was unlawful to discriminate between men and women with regard
732 ❚ Rewarding people
to pension rights. It has since been agreed that pensions would not be considered as
pay prior to 17 May 1990.
Benefits statements
Every member of an occupational scheme is entitled to an annual statement setting
out his or her prospective benefits.
Types of occupational pension schemes
A defined benefit or final salary group pension scheme offers a guaranteed pension,
part of which may be surrendered for a tax-free cash sum. In its final pay or salary
form, the pension is a fraction of final pensionable earnings for each year of service
(typically 1/60th). To achieve the maximum two-thirds pension in a 1/60th scheme
would therefore take 40 years’ service. Defined benefit schemes provide employers
with a predictable level of pension. But for employers, they can be costly and unpre-
dictable because they have to contribute whatever is necessary to buy the promised
benefits.
In a defined contribution or money purchase scheme employers fix the contributions
they want to pay for employees by undertaking to pay a defined percentage of earn-
ings irrespective of the benefits available on retirement. The retirement pension is
therefore whatever annual payment can be purchased with the money accumulated
in the fund for a member.
A defined contribution scheme offers the employee unpredictable benefits because
these depend on the total value of the contributions invested, the investment returns
achieved and the rate at which the accumulated fund can be converted into pension
on retirement. For the employer, however, it offers certainty of costs.
Stakeholder pensions
All employers with five or more people on their payroll are obliged to provide access
to a stakeholder pension for employees who have no access to a company pension.
Stakeholder pensions will be money-purchase schemes and, initially, employers do
not have to make a contribution and employees are not required to take them out
(although these conditions may be changed). Employers can designate a stakeholder
scheme from a provider but in choosing one are required to consult with the
employees concerned.
Employee benefits, pensions and allowances ❚ 733
Developments in pension provision
As the CIPD (2003b) comments:
The last decade has seen a significant change in the nature of occupational schemes
offered to new employees. There has been a shift away from defined benefit schemes
for new employees in favour of defined contribution schemes. There has also been a
significant growth in mixed and hybrid types of pension plan, and a reduction in the
proportion of the total workforce who are members of occupational schemes of any
type.
The move away from defined benefit (final salary) schemes has largely been because
of the increasing and unpredictable costs of such schemes. But as the CIPD states, ‘An
important driver of these changes has been demographic, with a declining birth rate
and fall in the average retirement age, combining with the significant increase in life
expectancy to push up scheme costs. Greater labour market flexibility may also be a
contributory factor.’ Some organizations such as the civil service are introducing
money purchase schemes to help to recruit and retain younger employees in
specialist fields.
The contribution of HR
As suggested by the CIPD, HR can contribute to the development of pensions policy
by:
● defining and communicating clear pension goals aligned to the needs of the orga-
nization and its staff;
● advising on the design and implementation of appropriate schemes to achieve
these goals – flexibility and choice on provision are important components of
these designs to meet the needs of a more diverse workforce;
● educating managers and employees so that they can take on personal responsi-
bility and make informed choices on the way they want to work and move into
retirement, with the appropriate pension provision to achieve this.
ALLOWANCES AND OTHER PAYMENTS TO EMPLOYEES
The main areas in which allowances and other special payments may be made to
employees are:
734 ❚ Rewarding people
● Location allowances – London and large town allowances may be paid because of
housing and other cost-of-living differentials. Allowances are paid as an addition
to basic pay although many employers in effect consolidate them by paying the
local market rate which takes into account explicit or implicit location allowances
and costs.
● Subsistence allowances – the value of subsistence allowances for accommodation
and meals varies greatly between organizations. Some have set rates depending
on location or the grade of employee. Others allow ‘reasonable’ rates without any
set scale but usually, and desirably, with guidelines on acceptable hotel and meal
costs.
● Overtime payments – most manual workers are eligible for paid overtime as well as
many staff employees up to management level. Higher-paid staff may receive
time off in lieu if they work longer hours. Typically organizations that make over-
time payments give time and a half as an overtime premium from Monday to
Saturday, with double time paid on Sundays and statutory holidays. Some firms
also pay double time from around noon on Saturday. Work on major statutory
holidays such as Christmas Day and Good Friday often attracts higher overtime
premiums.
● Shift payments are made at rates which usually vary according to the shift arrange-
ment. A premium of, say, one-third of basic pay may be given to people working
nights while those on an early or late day shift may receive less, a premium, say,
of one-fifth of basic pay.
● Stand-by and call-out allowances may be made to those who have to be available to
come in to work when required. The allowance may be made as a standard
payment added to basic pay. Alternatively, special payments may be made for
unforeseen call-outs.
Employee benefits, pensions and allowances ❚ 735
Managing reward systems
Managing reward systems is a complex and demanding business. This chapter deals
with the subject in seven parts:
1. Preparation and use of forecasts and budgets.
2. Evaluating the reward system.
3. Pay reviews.
4. Control.
5. Reward procedures.
6. Responsibility for reward management.
7. Communicating to employees.
REWARD BUDGETS AND FORECASTS
Reward budgets and forecasts are concerned with overall payroll costs and the costs
of general and individual pay increases.
Payroll budgets
A payroll budget is a statement of the planned allocation and use of human resources
required to meet the objectives of the organization. It is usually a major part of the
49
master budget. The budget is based on forecast levels of activity which determine the
number of people required. The annual payroll budget is a product of the number of
people to be employed and the rates at which they will be paid during the budget
year. It will incorporate the cost of benefits (eg pensions contributions) and the
employer’s National Insurance contributions. The budget will be adjusted to take
account of forecasts covering increases or decreases to employee numbers, the likely
costs of general and individual pay reviews, changes to the pay structure and
increases to the cost of employee benefits.
Managers in charge of budget centres will have their own payroll budget which
they have to account for. This budget will incorporate forecasts of pay increases as
well as the manager’s assessment of the numbers of employees needed in different
categories. Managers will be required to ensure that individual pay increases are
made within that budget, which may, however, be flexed upwards or downwards
if activity levels or the assumptions on which forecast pay increases were based
change.
Review budgets
A general review budget simply incorporates the forecast costs of any across-the-
board pay increases that may be granted or negotiated during the budget year.
Individual performance review budgets may be expressed as the percentage increase
to the payroll that can be allowed for performance, skill-based or competence-related
increases. The size of the budget will be affected by the following considerations:
● the amount the organization believes it can afford to pay on the basis of budgeted
revenue, profit, and payroll costs;
● the organization’s policies on pay progression – the size and range of increases;
● any allowances that may need to be made for increasing individual rates of pay to
remove anomalies, for example after a job evaluation exercise.
The basic budget would be set for the organization as a whole but, within that figure,
departmental budgets could be flexed to reflect different needs and circumstances.
Pay modelling techniques which cost alternative pay review proposals on distribu-
tions of awards can be used to prepare individual review budgets. Increasingly,
organizations are replacing individual review budgets with a total payroll budgeting
approach. This means that departmental heads have to fund individual increases
from their payroll budget. In effect, they are expected to add value from performance
pay or at least ensure that it is self-financing.
738 ❚ Rewarding people
EVALUATING THE REWARD SYSTEM
The reward system should be audited regularly to assess its effectiveness, the extent
to which it is adding value and its relevance to the present and future needs of
the organization. This audit should include an assessment of opinions about the
reward system by its key users and those who are affected by it. This leads to a diag-
nosis of strengths and weaknesses and an assessment of what needs to be done and
why.
The operation of the reward system should be monitored continually by the
HR department through such audits and by the use of compa-ratios and attrition
analysis as discussed below. In particular it is necessary to analyse data on upgrad-
ings, the effectiveness with which performance management processes are func-
tioning and the amount paid out on pay-for-performance schemes and the impact
they are making on results.
Internal relativities should also be monitored by carrying out periodic studies of
the differentials that exist vertically within departments or between categories of
employees. The studies should examine the differentials built into the pay structure
and also analyse the differences between the average rates of pay at different levels. If
it is revealed that because of changes in roles or the impact of pay reviews differen-
tials no longer properly reflect increases in job values and/or are no longer ‘felt fair’,
then further investigations to establish the reasons for this situation can be conducted
and, if necessary, corrective action taken.
External relativities should be monitored by tracking movements in market rates
by studying published data and conducting pay surveys as described in Chapter 42.
No reward innovations should take place unless a cost–benefit analysis has forecast
that they will add value. The audit and monitoring processes should establish the
extent to which the predicted benefits have been obtained and check on the costs
against the forecast.
Compa-ratio analysis
A compa-ratio (short for comparative ratio) measures the relationship in a
graded pay structure between actual and policy rates of pay as a percentage. The
policy value used is the midpoint or reference point in a pay range which repre-
sents the ‘target rate’ for a fully competent individual in any job in the grade. This
point is aligned to market rates in accordance with the organization’s market stance
policy.
Compa-ratios are used to define where an individual is placed in a pay range. The
analysis of compa-ratios indicates what action might have to be taken to slow down
Managing reward systems ❚ 739
or accelerate increases if compa-ratios are too high or too low compared with the
policy level. This process is sometimes called ‘midpoint management’.
Compa-ratios are calculated as follows:
actual rate of pay
× 100
mid or reference point of range
A compa-ratio of 100 per cent means that actual and policy pay are the same. Compa-
ratios which are higher or lower than 100 per cent mean that, respectively, pay is
above or below the policy target rate. For example, if the target (policy) rate in a range
were £20,000 and the average pay of all the individuals in the grade were £18,000, the
compa-ratio would be 90 per cent.
Compa-ratios establish differences between policy and practice and the reasons for
such differences need to be established.
Analysing attrition
Attrition or slippage takes place when employees enter jobs at lower rates of pay than
the previous incumbents. If this happens payroll costs will go down given an even
flow of starters and leavers and a consistent approach to the determination of rates of
pay. In theory attrition can help to finance pay increases within a range. It has been
claimed that fixed incremental systems can be entirely self-financing because of attri-
tion, but the conditions under which this can be attained are so exceptional that it
probably never happens.
Attrition can be calculated by the formula: total percentage increase to payroll
arising from general or individual pay increases minus total percentage increase in
average rates of pay. If it can be proved that attrition is going to take place, the
amount involved can be taken into account as a means of at least partly financing
individual pay increases. Attrition in a pay system with regular progression through
ranges and a fairly even flow of starters and leavers is typically between 2 and 3 per
cent but this should not be regarded as a norm.
CONDUCTING PAY REVIEWS
Pay reviews are general or ‘across-the-board’ reviews in response to movements in
the cost of living or market rates or following pay negotiations with trade unions, or
individual reviews that determine the pay progression of individuals in relation to
their performance or contribution, or individual reviews. They are one of the most
740 ❚ Rewarding people
visible aspects of reward management (the other is job grading) and are an important
means of implementing the organization’s reward policies and demonstrating to
employees how these policies operate.
Employees expect that general reviews will maintain the purchasing power of their
pay by compensating for increases in the cost of living. They will want their levels of
pay to be competitive with what they could earn outside. And they will want to be
rewarded fairly and equitably for the contribution they make.
General reviews
General reviews take place when employees are given an increase in response to
general market rate movements, increases in the cost of living, or union negotiations.
General reviews are often combined with individual reviews, but employees are
usually informed of the general and individual components of any increase they
receive. Alternatively the general review may be conducted separately to enable
better control to be achieved over costs and to focus employees’ attention on the
performance-related aspect of their remuneration.
Some organizations have completely abandoned the use of across-the-board
reviews. They argue that the decision on what people should be paid should be an
individual matter, taking into account the personal contribution people are making
and their ‘market worth’ – how they as individuals are valued in the marketplace.
This enables the organization to adopt a more flexible approach to allocating pay
increases in accordance with the perceived value of individuals to the organization.
The steps required to conduct a general review are:
1. Decide on the budget.
2. Analyse data on pay settlements made by comparable organizations and rates of
inflation.
3. Conduct negotiations with trade unions as required.
4. Calculate costs.
5. Adjust the pay structure – by either increasing the pay brackets of each grade by
the percentage general increase or by increasing pay reference points by the
overall percentage and applying different increases to the upper or lower limits
of the bracket, thus altering the shape of the structure.
6. Inform employees.
Individual reviews
Individual pay reviews determine contingent pay increases or bonuses. The e-reward
2004 survey of contribution pay found that the average size of the contingent pay
Managing reward systems ❚ 741
awards made by respondents to the CIPD 2003 performance management survey
(Armstrong and Baron, 2004) was 3.3 per cent. Individual awards may be based on
ratings, an overall assessment that does not depend on ratings, or ranking, as
discussed below.
Individual pay reviews based on ratings
Managers propose increases on the basis of their performance management ratings
within a given pay review budget and in accordance with pay review guidelines.
Forty-two per cent of the respondents to the CIPD 2003/4 performance management
survey used ratings to inform contingent pay decisions. Approaches to rating were
discussed in Chapter 33.
There may be a direct link between the rating and the pay increase, for example:
Rating % Increase
A 6
B 4
C 3
D 2
E 0
Alternatively, a pay matrix may be used which relates pay increases to both the rating
and position in the pay range. Many people argue that linking performance manage-
ment too explicitly to pay prejudices the essential developmental nature of perfor-
mance management. However, realistically it is accepted that decisions on
performance-related or contribution-related increases have to be based on some form
of assessment. One solution is to ‘decouple’ performance management and the pay
review by holding them several months apart, and 45 per cent of the respondents to
the CIPD 2003/4 survey (Armstrong and Baron, 2004) separated performance
management reviews from pay reviews (43 per cent of the respondents to the
e-reward 2004 survey separated the review). There is still a read-across but it is not so
immediate. Some try to do without formulaic approaches (ratings and pay matrices)
altogether, although it is impossible to dissociate contingent pay completely from
some form of assessment.
Doing without ratings
Twenty-seven per cent of the respondents to the 2004 e-reward survey of contingent
pay did without ratings. The percentage of respondents to the 2003/4 CIPD perfor-
mance management survey who did not use ratings was 52 per cent (this figure is too
742 ❚ Rewarding people
high to be fully reliable and may have been inflated by those who treat service-related
increments, which do not depend on ratings, as contingent pay). One respondent to
the e-reward survey explained that in the absence of ratings, the approach they used
was ‘informed subjectivity’, which meant considering ongoing performance in the
form of overall contribution.
Some companies adopt what might be called an holistic approach. Managers
propose where people should be placed in the pay range for their grade, taking into
account their contribution and pay relative to others in similar jobs, their potential,
and the relationship of their current pay to market rates. The decision may be
expressed in the form of a statement that an individual is now worth £21,000 rather
than £20,000. The increase is 5 per cent, but what counts is the overall view about the
value of a person to the organization, not the percentage increase to that person’s pay.
Ranking
Ranking is carried out by managers who place staff in a rank order according to an
overall assessment of relative contribution or merit and then distribute performance
ratings through the rank order. The top 10 per cent could get an A rating, the next 15
per cent a B rating, and so on. The ratings determine the size of the reward. But
ranking depends on what could be invidious comparisons and only works when
there are a number of people in similar jobs to be ranked.
Guidelines to managers on conducting individual pay reviews
Whichever approach is adopted, guidelines have to be issued to managers on how
they should conduct reviews. These guidelines will stipulate that they must keep
within their budgets and may indicate the maximum and minimum increases that
can be awarded, with an indication of how awards could be distributed. For example,
when the budget is 4 per cent overall, it might be suggested that a 3 per cent increase
should be given to the majority of their staff and the others given higher or lower
increases as long as the total percentage increase does not exceed the budget.
Managers in some companies are instructed that they must follow a forced pattern of
distribution but, only 8 per cent of the respondents to the 2003/4 CIPD survey used
this method.
To help them to explore alternatives, managers may be provided with a spread-
sheet facility in which the spreadsheets contain details of the existing rates of staff
and which can be used to model alternative distributions on a ‘what if’ basis.
Managers may also be encouraged to ‘fine tune’ their pay recommendations to ensure
that individuals are on the right track within their grade according to their level of
performance, competence and time in the job compared with their peers. To do this,
Managing reward systems ❚ 743
they need guidelines on typical rates of progression in relation to performance, skill
or competence, and specific guidance on what they can and should do. They also
need information on the positions of their staff in the pay structure relative to the
policy guidelines.
Conducting individual pay reviews
The steps required to conduct an individual pay review are:
1. Agree budget.
2. Prepare and issue guidelines on the size, range and distribution of awards and on
methods of conducting the review.
3. Provide advice and support.
4. Review proposals against budget and guidelines and agree modifications to
them if necessary.
5. Summarize and cost proposals and obtain approval.
6. Update payroll.
7. Inform employees.
It is essential to provide advice, guidance and training to line managers as required.
Some managers will be confident and capable from the start; others will have a lot to
learn.
CONTROL
Control over the implementation of pay policies generally and payroll costs in partic-
ular will be easier if it is based on:
● a clearly defined and understood pay structure;
● specific pay review guidelines and budgets;
● defined procedures for grading jobs and fixing rates of pay;
● clear statements of the degree of authority managers have at each level to decide
on rates of pay and increases;
● an HR function which is capable of monitoring the implementation of pay poli-
cies and providing the information and guidance managers require and has the
authority and resources (including computer software) to do so;
● a systematic process for monitoring the implementation of pay policies and costs
against budgets.
744 ❚ Rewarding people
REWARD PROCEDURES
Reward management procedures are required to achieve and monitor the implemen-
tation of reward management policies. They deal with methods of fixing pay on
appointment or promotion and dealing with anomalies. They will also refer to
methods of appealing against grading or pay decisions, usually through the
organization’s normal appeals procedure.
Procedures for grading jobs
The procedures for grading new jobs or re-grading existing ones should lay down
that grading or re-grading can only take place after a proper job evaluation study. It is
necessary to take action to control grade drift (unjustified upgradings) by insisting
that this procedure is followed. Pressures to upgrade because of market forces or
difficulties in recruitment or retention should be resisted. These problems should
be addressed by such methods as market premiums or creating special market
groups of jobs.
Fixing rates of pay on appointment
Line managers should have a major say in pay offers and some freedom to
negotiate when necessary, but they should be required to take account of relevant pay
policy guidelines which should set out the circumstances in which pay offers above
the minimum of the range can be made. It is customary to allow a reasonable
degree of freedom to make offers up to a certain point, eg the 90 per cent level in an
80 to 120 per cent pay range. Pay policies frequently allow offers to be made up
to the midpoint or reference point depending on the extent to which the recruit
has the necessary experience, skills and competences. Offers above the mid-
point should be exceptional because they would leave relatively little room for
expansion. Such offers will sometimes be made because of market pressures, but
they need to be very carefully considered because of the inevitably of grade
drift unless the individual is promoted fairly soon. If the current rates are too low to
attract good candidates, it may be necessary to reconsider the scales or to agree on
special market rate premiums. To keep the latter under control, it is advisable to
require that they should only be awarded if they are authorized by the personnel
department or a more senior manager. Many organizations require that all offers
should be vetted and approved by a member of the personnel function and/or a
higher authority.
Managing reward systems ❚ 745
Promotion increases
Promotion increases should be meaningful, say 10 per cent or more. They should not
normally take the promoted employee above the midpoint or reference point in the
pay range for his or her new job so that there is adequate scope for performance-
related increases. One good reason for having reasonably wide differentials is to
provide space for promotions.
Dealing with anomalies
Within any pay structure, however carefully monitored and maintained, anomalies
will occur and they need to be addressed during a pay review. Correction of anom-
alies will require higher level increases for those who are under-paid relative to their
performance and time in the job, and lower levels of increase for those who are corre-
spondingly over-paid. It is worth noting that over-payment anomalies cannot be
corrected in fixed incremental structures, and this is a major disadvantage of such
systems. The cost of anomaly correction should not be huge in normal circumstances
if at every review managers are encouraged to ‘fine tune’ their pay recommendations
as suggested earlier.
In a severely anomalous situation, which may be found at the implementation
stage of a new structure or at a major review, a longer-term correction programme
may be necessary either to mitigate the demotivating effects of reducing relative rates
of pay or to spread costs over a number of years.
As well as individual anomaly correction there may be a need to correct a historical
tendency to over-pay or under-pay whole departments, divisions or functions by
applying higher or lower levels of increases over a period of time. This would involve
adjustments to pay review budgets and guidelines and, obviously, it would have to
be handled with great care.
RESPONSIBILITY FOR REWARD
The trend is to devolve more responsibility for pay decisions to line managers,
especially those concerned with individual pay reviews. But there are obvious
dangers. These include inconsistency between managers’ decisions, favouritism,
prejudice (gender or racial) and illogical distributions of rewards. Research has
shown that many managers tend not to differentiate between the performance
of individual members of their staff. Ratings can be compressed, with most
people clustered around the midpoint and very few staff rated as good or poor
performers.
746 ❚ Rewarding people
Devolving more authority to line managers may in principle be highly desirable
but managers must be briefed thoroughly on their responsibilities, the organization’s
pay policies (including methods of progressing pay), the principles to be followed in
conducting review and how they should interpret and apply pay review guidelines.
The need to achieve equity and a reasonable degree of consistency across the
organization should be emphasized. Managers should be given whatever training,
guidance and help they need to ensure that they are capable of exercising their discre-
tionary powers wisely. This training should cover:
● how information on market rates supplied by the personnel department should
be interpreted and used;
● how data provided by the personnel department on the levels of pay and pay
progression histories of individual members of staff and the distribution of pay
by occupation throughout the department should be used as the basis for plan-
ning pay;
● methods of assessing performance and contribution levels;
● how to interpret any generic competence profiles to assess individual develop-
ment needs and agree career pathways;
● how to assess competence requirements for specific roles (as they exist now or as
they may develop), and how to counsel employees on the preparation of personal
development plans;
● methods of reviewing progress in achieving these plans and in career develop-
ment, and how to interpret information from these reviews when making pay
decisions;
● generally, how to distribute rewards within budgets, fairly, equitably and consis-
tently by reference to assessments of contribution, competence, progress or
growth.
● the guidance available from the personnel function on how to manage pay – it
should be emphasized that guidance must always be sought if line managers
have any doubts as to how they should exercise their discretion.
Full devolution implies that the decisions of managers on pay increases are not
reviewed and questioned as long as they keep within their budgets. However, it is
usual for senior managers, personnel or pay specialists to monitor pay proposals to
spot inconsistencies or what appear to be illogical recommendations, especially when
the scheme is initiated or with newly appointed managers. The use of computerized
personnel information systems makes it easier for managers to communicate their
proposals and for the personnel department to monitor them. If the personnel depart-
ment is involved, it should aim to provide support and guidance, not to act as a police
Managing reward systems ❚ 747
force. Monitoring can be relaxed as managers prove that they are capable of making
good pay decisions.
COMMUNICATING TO EMPLOYEES
Employee reward systems communicate messages to employees about the beliefs
of the organization on what is felt to be important when valuing people in their
roles. They deliver two messages: this is how we value your contribution; this is
what we are paying for. It is therefore important to communicate to employees
collectively about the reward policies and practices of the organization and individu-
ally about how those policies affect them – now and in the future. Transparency is
essential.
What to communicate to employees generally
Employees generally should understand:
● the reward policies of the organization in setting pay levels, providing benefits and
progressing pay;
● the pay structure – grades and pay ranges and how the structure is managed;
● the benefits structure – the range of benefits provided, with details of the pension
scheme and other major benefits;
● methods of grading and regrading jobs – the job evaluation scheme and how it
operates;
● pay progression – how pay progresses within the pay structure and how pay deci-
sions affecting employees collectively and individually are made;
● pay-for-performance schemes – how individual, team and organization-wide
schemes work and how employees can benefit from them;
● pay for skill or competence – how any skill-based or competence-based schemes
work, the aims of the organization in using such schemes, and how employees
can benefit from them;
● performance management – how performance management processes operate and
the parts played by managers and employees;
● reward developments and initiatives – details of any changes to the reward system,
the reasons for such changes, and how employees will be affected by them – the
importance of doing this thoroughly cannot be over-emphasized.
748 ❚ Rewarding people
What to communicate to individual employees
Individual employees should know and understand:
● their job grade and how it has been determined;
● the basis upon which their present rate of pay has been determined;
● the pay opportunities available to them – the scope in their grade for pay progres-
sion, the basis upon which their pay will be linked to their performance and the
acquisition and effective use of skills and competences as their career develops,
and what actions and behaviour are expected of them if their pay is to progress;
● performance management – how their performance will be reviewed and the part
they play in agreeing objectives and formulating personal development and
performance improvement plans;
● the value of the employee benefits they receive – the level of total remuneration
provided for individuals by the organization, including the values of such bene-
fits as pension and sick pay schemes;
● appeals and grievances – how they can appeal against grading and pay decisions or
take up a grievance on any aspect of their remuneration.
Managing reward systems ❚ 749
Employee relations
EMPLOYEE RELATIONS DEFINED
Employee relations consist of all those areas of human resource management that
involve relationships with employees – directly and/or through collective agreements
where trade unions are recognized. Employee relations are concerned with generally
managing the employment relationship as considered in Chapter 15.
These relationships deal with the agreement of terms and conditions of employment
and with issues arising from employment. They will not necessarily be subject to
collective agreements or joint regulation. Employee relations, therefore, cover a
broader spectrum of the employment relationship than industrial relations, which are
usually regarded as being essentially about dealings between managements and trade
unions. This wider definition recognizes the move away from collectivism towards
individualism in the ways in which employers relate to their employees. The move in
this direction has been prompted by a growing insistence on management’s preroga-
tive supported by the philosophy of HRM, the requirement to meet competition with
slimmer and more efficient organizations, a massive restructuring of industry in the
1980s, the 1980s concept of the market economy and free enterprise and by trade
union legislation.
Employee relations practices include formal processes, procedures and channels of
communication. It is important to remember, however, that employee relations are
Part X
mainly conducted on a day-to-day informal basis by line managers and team leaders;
without the framework of employment and employee relations policies but acting
mainly on their own initiative.
PLAN
This part covers the broad subject of employee relations under the following headings:
● the framework of employee relations – the conceptual framework to industrial
relations. The HRM approach to employee relations developments in industrial
relations and the parties involved (Chapter 50);
● employee relations processes, including collective bargaining (Chapter 51);
● negotiating and bargaining skills (Chapter 52);
● processes for employee involvement and participation (employee voice) and
communications (Chapters 53 and 54).
752 ❚ Employee relations
The framework of employee
relations
The purpose of this chapter is to provide a review of the complex subject of employee
relations. It starts with a summary of the elements of employee relations and then
deals with the following industrial and employee relations concepts:
● the systems theory of industrial relations, which sees the subject as a system of
regulations and rules;
● the types of regulations and rules contained in the system;
● the nature of collective bargaining and bargaining power;
● the unitarist and pluralist views about the basis of the relationship between
management and trade unions in particular or employees in general;
● the reconciliation of interests;
● individualism and collectivism as approaches to employee relations;
● the voluntarist approach to industrial relations and its decline;
● human resource management (HRM) as a new paradigm for employee relations;
● the role of the employee relations function.
The chapter continues with a summary of developments in industrial relations
and a review of the current industrial relations scene. The chapter concludes with a
50
description of the various parties to industrial relations and the institutions, agencies
and officers involved.
THE ELEMENTS OF EMPLOYEE RELATIONS
The elements of employee relations consist of:
● The formal and informal employment policies and practices of the organization.
● The development, negotiation and application of formal systems, rules and
procedures for collective bargaining, handling disputes and regulating employ-
ment. These serve to determine the reward for effort and other conditions of
employment, to protect the interests of both employees and their employers, and
to regulate the ways in which employers treat their employees and how the latter
are expected to behave at work.
● Policies and practices for employee voice and communications.
● The informal as well as the formal processes that take place in the shape of contin-
uous interactions between managers and team leaders or supervisors on the one
hand and employee representatives and individuals on the other. These may
happen within the framework of formal agreements but are often governed by
custom and practice and the climate of relationships that has been built up over
the years.
● The philosophies and policies of the major players in the industrial relations
scene: the government of the day, management and the trade unions.
● A number of parties each with different roles. These consist of the state, manage-
ment, employers’ organizations, the trade unions, individual managers and
supervisors, HR managers, employee representatives or shop stewards and
employees.
● The legal framework.
● A number of institutions such as the Advisory, Conciliation and Arbitration
Service (ACAS) and the employment tribunals.
● The bargaining structures, recognition and procedural agreements and practices
which have evolved to enable the formal system to operate.
INDUSTRIAL RELATIONS AS A SYSTEM OF RULES
Industrial relations can be regarded as a system or web of rules regulating employ-
ment and the ways in which people behave at work. The systems theory of industrial
754 ❚ Employee relations
relations, as propounded by Dunlop (1958), states that the role of the system is to
produce the regulations and procedural rules that govern how much is distributed in
the bargaining process and how the parties involved, or the ‘actors’ in the industrial
relations scene, relate to one another. According to Dunlop, the output of the system
takes the form of:
The regulations and policies of the management hierarchy; the laws of any worker hier-
archy; the regulations, degrees, decisions, awards or orders of governmental agencies;
the rules and decisions of specialized agencies created by the management and worker
hierarchies; collective bargaining arrangements and the customs and traditions of the
work place.
The system is expressed in many more or less formal or informal guises: in legislation
and statutory orders, in trade union regulations, in collective agreements and arbitra-
tion awards, in social conventions, in managerial decisions, and in accepted ‘custom
and practice’. The ‘rules’ may be defined and coherent, or ill-defined and incoherent.
Within a plant the rules may mainly be concerned with doing no more than defining
the status quo which both parties recognize as the norm from which deviations may be
made only by agreement. In this sense, therefore, an industrial relations system is a
normative system where a norm can be seen as a rule, a standard, or a pattern for
action which is generally accepted or agreed as the basis upon which the parties
concerned should operate.
Systems theory, however, does not sufficiently take into account the distribution of
power between management and trade unions, nor the impact of the state. Neither
does it adequately explain the role of the individual in industrial relations.
TYPES OF REGULATIONS AND RULES
Job regulation aims to provide a framework of minimum rights and rules. Internal
regulation is concerned with procedures for dealing with grievances, redundancies or
disciplinary problems and rules concerning the operation of the pay system and the
rights of shop stewards. External regulation is carried out by means of employment
legislation, the rules of trade unions and employers’ associations, and the regulative
content of procedural or substantive rules and agreements.
Procedural rules are intended to regulate conflict between the parties to collective
bargaining, and when their importance is emphasized, a premium is being placed on
industrial peace. Substantive rules settle the rights and obligations attached to jobs. It
is interesting to note that in the UK, the parties to collective agreements have tended
to concentrate more on procedural than on substantive rules. In the USA, where there
The framework of employee relations ❚ 755
is greater emphasis on fixed-term agreements, the tendency has been to rely more on
substantive rules.
COLLECTIVE BARGAINING
The industrial relations system is regulated by the process of collective bargaining,
defined by Flanders (1970) as a social process that ‘continually turns disagreements
into agreements in an orderly fashion’. Collective bargaining aims to establish by
negotiation and discussion agreed rules and decisions on matters of mutual concern
to employers and unions as well as methods of regulating the conditions governing
employment.
It therefore provides a framework, often in the form of a collective agreement,
within which the views of management and unions about disputed matters that
could lead to industrial disorder can be considered with the aim of eliminating the
causes of the disorder. Collective bargaining is a joint regulating process, dealing with
the regulation of management in its relationships with work people as well as the
regulation of conditions of employment. It has a political as well as an economic basis
– both sides are interested in the distribution of power between them as well as the
distribution of income.
Collective bargaining can be regarded as an exchange relationship in which
wage–work bargains take place between employers and employees through the
agency of a trade union. Traditionally, the role of trade unions as bargaining agents
has been perceived as being to offset the inequalities of individual bargaining power
between employers and employees in the labour market.
Collective bargaining can also be seen as a political relationship in which trade
unions, as Chamberlain and Kuhn (1965) noted, share industrial sovereignty or
power over those who are governed, the employees. The sovereignty is held jointly
by management and union in the collective bargaining process.
Above all, collective bargaining is a power relationship that takes the form of a
measure of power sharing between management and trade unions (although recently
the balance of power has shifted markedly in the direction of management).
Bargaining power
The extent to which industrial sovereignty is shared by management with its trade
unions (if at all) depends upon the relative bargaining powers of the two parties.
Bargaining power can be defined as the ability to induce the other side to make a
decision that it would otherwise not make. As Fox and Flanders (1969) commented:
756 ❚ Employee relations
‘Power is the crucial variable which determines the outcome of collective bargaining.’
It has been suggested by Hawkins (1979) that a crucial test of bargaining power is
‘whether the cost to one side in accepting a proposal from the other is higher than the
cost of not accepting it’. Singh (1989) has pointed out that bargaining power is not
static but varies over time. He also notes that:
Bargaining power is inherent in any situation where differences have to be reconciled. It
is, however, not an end in itself and negotiations must not rely solely on bargaining
power. One side may have enormous bargaining power, but to use it to the point where
the other side feels that it is impossible to deal with such a party is to defeat the purpose
of negotiations.
Atkinson (1989) asserts that:
● what creates bargaining power can be appraised in terms of subjective assess-
ments by individuals involved in the bargaining process;
● each side can guess the bargaining preferences and bargaining power of the other
side;
● there are normally a number of elements creating bargaining power.
Forms of collective bargaining
Collective bargaining takes two basic forms, as identified by Chamberlain and Kuhn
(1965):
● conjunctive bargaining, which ‘arises from the absolute requirement that some
agreement – any agreement – may be reached so that the operations on which
both are dependent may continue’, and results in a ‘working relationship in
which each party agrees, explicitly or implicitly, to provide certain requisite
services, to recognize certain seats of authority, and to accept certain responsibili-
ties in respect of each other’;
● cooperative bargaining, in which it is recognized that each party is dependent on the
other and can achieve its objectives more effectively if it wins the support of the
other.
A similar distinction was made by Walton and McKersie (1965), who referred to
distributive bargaining as the ‘complex system of activities instrumental to the attain-
ment of one party’s goals when they are in basic conflict with those of the other
party’ and to integrative bargaining as the ‘system of activities which are not in funda-
mental conflict with those of the other party and which therefore can be integrated to
The framework of employee relations ❚ 757
some degree’. Such objectives are said to define ‘an area of common concern, a
purpose’.
THE UNITARY AND PLURALIST VIEWS
There are two basic views expressed about the basis of the relationship between
management and trade unions in particular or employees in general: the unitary and
the pluralist perspectives.
The unitary view is typically held by managements who see their function as that
of directing and controlling the workforce to achieve economic and growth
objectives. To this end, management believes that it is the rule-making authority.
Management tends to view the enterprise as a unitary system with one source
of authority – itself – and one focus of loyalty – the organization. It extols the virtue
of teamwork, where everyone strives jointly to a common objective, everyone
pulls their weight to the best of their ability, and everyone accepts their place and
function gladly, following the leadership of the appointed manager or supervisor.
These are admirable sentiments, but they sometimes lead to what McClelland (1963)
referred to as an orgy of ‘avuncular pontification’ on the part of the leaders of
industry. This unitary view, which is essentially autocratic and authoritarian, has
sometimes been expressed in agreements as ‘management’s right to manage’. The
philosophy of HRM with its emphasis on commitment and mutuality is based on the
unitary perspective.
In contrast, the pluralist view, as described by Fox (1966), is that an industrial
organization is a plural society, containing many related but separate interests and
objectives which must be maintained in some kind of equilibrium. In place of a corpo-
rate unity reflected in a single focus of authority and loyalty, management has to
accept the existence of rival sources of leadership and attachment. It has to face the
fact that in Drucker’s (1951) phrase, a business enterprise has a triple personality: it is
at once an economic, a political and a social institution. In the first, it produces and
distributes incomes. In the second, it embodies a system of government in which
managers collectively exercise authority over the managed, but are also themselves
involved in an intricate pattern of political relationships. Its third personality is
revealed in the plant community, which evolves from below out of face-to-face rela-
tions based on shared interests, sentiments, beliefs and values among various groups
of employees.
Pluralism conventionally regards the workforce as being represented by ‘an oppo-
sition that does not seek to govern’ (Clegg, 1976). Pluralism, as described by Cave
(1994), involves ‘a balance of power between two organized interests and a sufficient
758 ❚ Employee relations
degree of trust within the relationship (usually) for each side to respect the
other’s legitimate and, on occasions, separate interests, and for both sides to refrain
from pushing their interest separately to the point where it became impossible to
keep the show on the road’. It has been noted by Guest (1995) that: ‘The tradition
of bargaining at plant or even organization level has reinforced a pluralistic
concept.’
THE RECONCILIATION OF INTERESTS
The implication of the pluralistic approach to employee relations is that there has to
be some process for reconciling different interests. This can be achieved through
formal agreements where there are recognized trade unions or staff associations. The
absence of these may indicate that management adopts a unitarist philosophy. But it
is to be hoped that in these circumstances management’s efforts to increase mutuality
and gain commitment adopt a stakeholder or partnership approach which at least
involves consultation with employees on how the joint interests of the organization
and its members can best be satisfied.
The process of reconciling interests has been modelled by Gennard and Judge
(1997), as shown in Figure 50.1.
INDIVIDUALISM AND COLLECTIVISM
Purcell (1987) argues that the distinction between pluralist and unitary frames of
management has ‘provided a powerful impetus to the debate about management
style, but the mutually exclusive nature of these categories has limited further devel-
opment’. Moreover, wide variations can be found within both the unitary and the
pluralist approach. He therefore suggests an alternative distinction between ‘individ-
ualism’ – policies focusing on individual employees – and ‘collectivism’ – the extent
to which groups of workers have an independent voice and participate in decision
making with managers. He believes that companies can and do operate on both these
dimensions of management style.
VOLUNTARISM AND ITS DECLINE
The essence of the systems theory of industrial relations is that the rules are jointly
agreed by the representatives of the parties to employment relations; an arrangement
The framework of employee relations ❚ 759
which, it is believed, makes for readier acceptance than if they were imposed by a
third party such as the State. This concept of voluntarism was defined by Kahn-
Freund (1972) as ‘the policy of the law to allow the two sides by agreement and prac-
tice to develop their own norms and their own sanctions and to abstain from legal
compulsion in their collective relationship’. It was, in essence, voluntarism that came
under attack by government legislation from 1974 onwards, including the principle
of ‘immunities’ for industrial action and the closed shop.
760 ❚ Employee relations
Figure 50.1 Employee relations: reconciliation of interests
Employees
‘highest wages
and conditions’
survival of the
enterprise
Employers
profit/surplus
high quality service
survival of the
enterprise
reflect relative bargaining powers
reconciliation of
different interests
processes
agreements
different
interests
common
interest
THE HRM APPROACH TO EMPLOYEE RELATIONS
The HRM model
The philosophy of HRM has been translated into the following prescriptions, which
constitute the HRM model for employee relations:
● a drive for commitment – winning the ‘hearts and minds’ of employees to get
them to identify with the organization, to exert themselves more on its behalf and
to remain in it, thus ensuring a return on their training and development;
● an emphasis on mutuality – getting the message across that ‘we are all in this
together’ and that the interests of management and employees coincide;
● the organization of complementary forms of communication, such as team
briefing, alongside traditional collective bargaining – ie approaching employees
directly as individuals or in groups rather than through their representatives;
● a shift from collective bargaining to individual contracts;
● the use of employee involvement techniques such as quality circles or improve-
ment groups;
● continuous pressure on quality – total quality management;
● increased flexibility in working arrangements, including multi-skilling, to
provide for the more effective use of human resources, sometimes accompanied
by an agreement to provide secure employment for the ‘core’ workers;
● emphasis on teamwork;
● harmonization of terms and conditions for all employees.
The key contrasting dimensions of traditional industrial relations and HRM have
been presented by Guest (1995) as follows:
The framework of employee relations ❚ 761
Dimension Industrial Relations HRM
Psychological contract Compliance Commitment
Behaviour references Norms, custom and Values/mission
practice
Relationships Low trust, pluralist, High trust, unitarist,
collective individual
Organization design Formal roles, Flexible roles,
hierarchy, flat structure,
division of labour, teamwork/autonomy,
managerial control self control
Table 50.1 Contrasting dimensions of industrial relations and HRM
Guest notes that this model aims to support the achievement of the three main
sources of competitive advantage identified by Porter (1980), namely, innovation,
quality and cost leadership. Innovation and quality strategies require employee
commitment while cost leadership strategies are believed by many managements to
be achievable only without a union. ‘The logic of a market-driven HRM strategy is
that where high organisational commitment is sought, unions are irrelevant. Where
cost advantage is the goal, unions and industrial relations systems appear to carry
higher costs.’
An HRM approach is still possible if trade unions are recognized by the organiza-
tion. In this case, the strategy might be to marginalize or at least side-step them by
dealing direct with employees through involvement and communications processes.
THE CONTEXT OF INDUSTRIAL RELATIONS
Industrial relations are conducted within the external context of the national political
environment, the international context and the internal context of the organization.
The political context
The political context is formed by the government of the day. Conservative adminis-
trations from 1979 to 1997 set out to curb the power of the trade unions
through legislation and succeeded to a degree. Labour administrations have not
made any major changes to existing legislation except in the area of trade union
recognition.
The European context
Employee relations in the UK are affected by European Union regulations and initia-
tives. A number of Articles in the original treaty of Rome referred to the promotion of
improvements in working conditions and the need to develop dialogue between the
two sides of industry. It seems likely that the conduct of employee relations in Britain
will be increasingly affected by EU directives, such as those concerning works coun-
cils and working hours.
The organizational context
The need to ‘take cost out of the business’ has meant that employers have focused on
the cost of labour – usually the highest and most easily reduced cost. Hence ‘the lean
organization’ movement and large-scale redundancies, especially in manufacturing.
762 ❚ Employee relations
There has been pressure for greater flexibility and increased management control of
operations, which has had a direct impact on employee relations policies and union
agreements.
The widespread introduction of new technology and information technology has
aimed to increase productivity by achieving higher levels of efficiency and reducing
labour costs. Organizations are relying more on a core of key full-time employees,
leaving the peripheral work to be undertaken by subcontractors and the increasing
numbers of part-timers – women and men. This has reduced the number of
employees who wish to join unions or remain trade union members.
DEVELOPMENTS IN INDUSTRIAL RELATIONS
Developments in the practice of industrial relations since the 1950s can be divided
into the following phases:
1. The traditional system existing prior to the 1970s.
2. The Donovan analysis of 1968.
3. The interventionist and employment protection measures of the 1970s.
4. The 1980s programme for curbing what were perceived by the Conservative
Government to be the excesses of rampant trade unionism.
The traditional system – to 1971
Relations prior to 1971 and indeed for most of the 1970s could be described as a
system of collective representation designed to contain conflict. Voluntary collective
bargaining between employees and employers’ associations was the central feature of
the system, and this process of joint regulation was largely concerned with pay and
basic conditions of employment, especially hours of work in industry, and legal
abstention on the part of the state and the judiciary. During this period and, in fact,
for most of the twentieth century, the British system of industrial relations was char-
acterized by a tradition of voluntarism.
The Donovan analysis
The high incidence of disputes and strikes, the perceived power of the trade unions
and some well-publicized examples of shop steward militancy (although the majority
were quite amenable) contributed to the pressure for the reform of industrial relations
which led to the setting up of the Donovan Commission. This concluded in 1968 that
the formal system of industry-wide bargaining was breaking down. Its key findings
The framework of employee relations ❚ 763
were that at plant level, bargaining was highly fragmented and ill-organized, based
on informality and custom and practice. The Commission’s prescription was for a
continuation of voluntarism, reinforced by organized collective bargaining arrange-
ments locally, thus relieving trade unions and employers’ associations of the ‘policing
role’, which they so often failed to carry out. This solution involved the creation of
new, orderly and systematic frameworks for collective bargaining at plant level by
means of formal negotiation and procedural agreements.
Since Donovan, comprehensive policies, structures and procedures to deal with
pay and conditions, shop steward facilities, discipline, health and safety, etc have
been developed at plant level to a substantial extent. The support provided by
Donovan to the voluntary system of industrial relations was, however, underpinned
by a powerful minority note of reservation penned by Andrew Shonfield in the 1968
report of the Royal Commission. He advocated a more interventionist approach,
which began to feature in government policies in the 1970s.
Interventionism in the 1970s
The received wisdom in the 1960s, as reflected in the majority Donovan report, was
that industrial relations could not be controlled by legislation. But the Industrial
Relations Act introduced by the Conservative Government in 1971 ignored this belief
and drew heavily on Shonfield’s minority report. It introduced a strongly interven-
tionist legal framework to replace the voluntary regulation of industrial relations
systems. Trade unions lost their general immunity from legal action and had to
register under the Act if they wanted any rights at all. Collective agreements were to
become legally binding contracts and a number of ‘unfair industrial practices’ were
proscribed. Individual workers were given the right to belong or not belong to a trade
union but no attempt was made to outlaw the closed shop. But the Act failed to make
any impact, being ignored or side-stepped by both trade unions and employers,
although it did introduce the important general right of employees ‘not to be unfairly
dismissed’.
The Labour Government of 1974 promptly repealed the 1971 Industrial Relations
Act and entered into a ‘social contract’ with the trade unions which incorporated an
agreement that the Trades Union Congress (TUC) would support the introduction of
a number of positive union rights. These included a statutory recognition procedure
and in effect meant that the unions expressed their commitment to legal enforcement
as a means of restricting management’s prerogatives.
Statutory rights were also provided for minimum notice periods, statements of
terms and conditions, redundancy payments and unfair dismissal.
764 ❚ Employee relations
The 1980s – curbing the trade unions
The strike-ridden ‘winter of discontent’ in 1978 and the return of a Conservative
Government in 1979 paved the way for the ensuing step-by-step legislation which
continued throughout the 1980s and into the early 1990s.
The ethos of the Conservative Governments in the 1980s was summed up by
Phelps Brown (1990) as follows:
People are no longer seen as dependent on society and bound by reciprocal relationship
to it; indeed the very notion of society is rejected. Individuals are expected to shift for
themselves and those who get into difficulties are thought to have only themselves to
blame. Self-reliance, acquisitive individualism, the curtailment of public expenditure,
the play of market forces instead of the restraints and directives of public policy, the
prerogatives of management instead of the power of the unions, centralisation of power
instead of pluralism.
The legislation on trade unions followed this ethos and was guided by an ideo-
logical analysis expressed in the 1981 Green Paper on Trade Union Immunities
as follows: ‘Industrial relations cannot operate fairly and efficiently or to the benefit
of the nation as a whole if either employers or employees collectively are given
predominant power – that is, the capacity effectively to dictate the behaviour of
others.’
The government described industrial relations as ‘the fundamental cause of weak-
ness in the British economy’, with strikes and restrictive practices inhibiting the
country’s ability to compete in international markets. The balance of bargaining
power was perceived to have moved decisively in favour of trade unions which were
described as ‘irresponsible, undemocratic and intimidatory’, while the closed shop
was described as being destructive of the rights of the individual worker.
Developments since 1990
Kessler and Bayliss (1992) commented that ‘the needs of employers have increasingly
been towards enterprise orientated rather than occupationally orientated trade
unions’. They also noted that: ‘It is clear that the significance of industrial relations in
many firms has diminished. It is part of a management controlled operation – a
branch of human resource management. It is no longer a high profile problem-ridden
part of personnel management as it so often was in the 1970s.’
Guest (1995) noted that the industrial relations system may continue as a largely
symbolic ‘empty shell’, insufficiently important for management to confront and
eliminate, but retaining the outward appearance of health to the casual observer:
The framework of employee relations ❚ 765
‘Management sets the agenda, which is market-driven, while industrial relations
issues are relatively low on the list of concerns.’
Conclusions of the Workplace Employee Relations Survey (WERS)
2004
The results showed some significant changes (from the 1988 survey). Most striking of
all, perhaps, was the continuing decline of collective labour organization. Employees
were less likely to be union members than they were in 1998; workplaces were less
likely to recognize unions for bargaining over pay and conditions; collective
bargaining was less prevalent. Even so, the rate of decline seemed to have slowed
down from that seen in earlier periods and the joint regulation of terms and condi-
tions remains a reality for many employees in Britain: one-half of employees were
employed in workplaces with a recognized trade union; one-third were union
members; and 40 per cent had their pay set through collective bargaining.
THE PARTIES TO INDUSTRIAL RELATIONS
The parties to industrial relations are:
● the trade unions;
● shop stewards or employee representatives;
● the Trades Union Congress (the TUC);
● management;
● employer’s organizations;
● the Confederation of British Industry;
● various institutions, agencies and officers.
The role of each of these parties is summarized below
The trade unions
Traditionally the fundamental purpose of trade unions is to promote and protect the
interests of their members. They are there to redress the balance of power between
employers and employees. The basis of the employment relationship is the contract
of employment. But this is not a contract between equals. Employers are almost
always in a stronger position to dictate the terms of the contract than individual
employees. Trade unions, as indicated by Freeman and Medoff (1984), provide
workers with a ‘collective voice’ to make their wishes known to management and
766 ❚ Employee relations
thus bring actual and desired conditions closer together. This applies not only to
terms of employment such as pay, working hours and holidays, but also to the way
in which individuals are treated in such aspects of employment as the redress of
grievances, discipline and redundancy. Trade unions also exist to let manage-
ment know that there will be, from time to time, an alternative view on key issues
affecting employees. More broadly, unions may see their role as that of participat-
ing with management on decision making on matters affecting their members’
interests.
Within this overall role, trade unions have had two specific roles, namely to secure,
through collective bargaining, improved terms and conditions for their members,
and to provide protection, support and advice to their members as individual
employees.
An additional role, that of providing legal, financial and other services to their
members, has come into prominence more recently.
Trade union structure
Trade unions are run by full-time central and, usually, district officials. There may
be local committees of members. National officials may conduct industry-wide
or major employer pay negotiations while local officials may not be involved in
plant negotiations unless there is a ‘failure to agree’ and the second stage of a negoti-
ating procedure is invoked. Major employers who want to introduce significant
changes in agreements or working arrangements may deal direct with national
officials.
The trade union movement is now dominated by the large general unions and the
merged craft and public service unions.
Shop stewards
Shop stewards or employee representatives may initially be responsible for plant
negotiations, probably with the advice of full-time officials. They will certainly be
involved in settling disputes and resolving collective grievances and in representing
individual employees with grievances or over disciplinary matters. They may be
members of joint consultative committees, which could be wholly or partly com-
posed of trade union representatives.
At one time, shop stewards were the ogres of the industrial relations scene.
Undoubtedly there were cases of militant shop stewards, but where there are
recognized trade unions, managements have generally recognized the value of shop
stewards as points of contact and channels of communication.
The framework of employee relations ❚ 767
The Trades Union Congress (TUC)
The TUC acts as the collective voice of the unions. Its roles are to:
● represent the British trade union movement in the UK and internationally;
● conduct research and develop policies on trade union, industrial, economic and
social matters and to campaign actively for them;
● regulate relationships between unions;
● help unions in dispute;
● provide various services (eg research) to affiliated unions.
But the TUC has effectively been marginalized by successive Conservative govern-
ments and is but a shadow of its former self, especially since its interventionary role
concerning union disputes over membership (the Bridlington rules) has now effec-
tively been abolished by legislation.
International union organizations
The two main international union organizations are the European Trade Union
Confederation and the International Trade Union Confederation. At present neither
of these makes much impact on the UK, but this could change.
Staff associations
Staff associations may sometimes have negotiating and/or representational rights
but they seldom have anything like the real power possessed by a well-organized and
supported trade union. They are often suspected by employees as being no more than
management’s poodle. Managements have sometimes encouraged the development
of staff associations as an alternative to trade unions but this strategy has not always
worked. In fact, in some organizations the existence of an unsatisfactory staff associa-
tion has provided an opportunity for a trade union to gain membership and recogni-
tion. Staff associations have their uses as channels of communication, and
representatives can play a role in consultative processes and in representing
colleagues who want to take up grievances or who are being subjected to disciplinary
proceedings.
The role of management
The balance of power has undoubtedly shifted to managements who now have more
choice over how they conduct relationships with their employees. But the evidence is
768 ❚ Employee relations
that there has been no concerted drive by managements to de-recognize unions. As
Kessler and Bayliss (1992) point out: ‘If managers in large establishments and compa-
nies wanted to make changes they looked at ways of doing so within the existing
arrangements and if they could produce the goods they used them. Because
managers found that the unions did not stand in their way they saw no reason for
getting rid of them.’ They argued that management’s industrial relations objectives
are now generally to:
● control the work process;
● secure cost-effectiveness;
● reassert managerial authority;
● move towards a more unitary and individualistic approach.
As Storey (1992a) found in most of the cases he studied, there was a tendency for
managements to adopt HRM approaches to employee relations while still coexisting
with the unions. But they gave increasing weight to systems of employee involve-
ment, in particular communication, which bypass trade unions.
Employers’ organizations
Traditionally, employers’ organizations have bargained collectively for their mem-
bers with trade unions and have in general aimed to protect the interests of those
members in their dealings with unions. Multi-employers or industry-wide bargain-
ing, it was believed, allowed companies to compete in product markets without
undercutting their competitors’ employment costs and prevented the trade unions
‘picking off’ individual employers in a dispute.
The trend towards decentralizing bargaining to plant level has reduced the extent
to which employers’ organizations fulfil this traditional role, although some indus-
tries such as building and electrical contracting with large numbers of small compa-
nies in competitive markets have retained their central bargaining function, setting a
floor of terms and conditions for the industry.
The Confederation of British Industry (CBI)
The CBI is a management organization which is only indirectly concerned with
industrial relations. It provides a means for its members to influence economic policy
and it provides advice and services to them, supported by research.
The framework of employee relations ❚ 769
Institutions, agencies and officers
There are a number of bodies and people with a role in employee relations, as
described below.
The Advisory Conciliation and Arbitration Service (ACAS)
ACAS was created by the government but functions independently. It has three main
statutory duties:
● to resolve disputes;
● to provide conciliatory services for individuals in, for example, unfair dismissal
cases;
● to give advice, help and information on industrial relations and employment
issues.
ACAS helps to resolve disputes in three ways: collective conciliation, arbitration and
mediation.
During the 1980s and early 1990s the use of ACAS’s collective conciliation and
arbitration services declined considerably. But the individual conciliation case load
has been very heavy and the ACAS advisory work has flourished. These are aimed
at encouraging non-adversarial approaches to preventing and resolving problems at
work by facilitating joint working groups of employers, employees and their
representatives.
The Central Arbitration Committee (CAC)
The CAC is an independent arbitration body that deals with disputes. It arbitrates at
the request of one party but with the agreement of the other. It does not handle many
arbitrations but it deals more frequently with claims by trade unions for disclosure of
information for collective bargaining purposes.
Employment tribunals
Employment tribunals are independent judicial bodies that deal with disputes on
employment matters such as unfair dismissal, equal pay, sex and race discrimination
and employment protection provisions. They have a legally qualified chair and two
other members, one an employer, the other a trade unionist.
770 ❚ Employee relations
The Employment Appeal Tribunal (EAT)
The EAT hears appeals from the decisions of industrial tribunals on questions of law
only.
ROLE OF THE HR FUNCTION IN
EMPLOYEE RELATIONS
The HR function provides guidance and training and will develop and help to intro-
duce and maintain formal processes; but it does not do line managers’ jobs for them.
However, in their role as industrial relations specialists, HR practitioners may deal
directly with trade unions and their representatives. They are also likely to have a
measure of responsibility for maintaining participation and involvement processes
and for managing employee communications. They can and should play a major part
in developing employee relations strategies and policies that aim to:
● achieve satisfactory employment relationships, taking particular account of the
importance of psychological contracts;
● build stable and cooperative relationships with employees which recognize that
they are stakeholders in the organization and minimize conflict;
● achieve commitment through employee involvement and communications
processes;
● develop mutuality – a common interest in achieving the organization’s goals
through the development of organizational cultures based on shared values
between management and employees;
● clarify industrial relations processes with trade unions and build harmonious
relationships with them on a partnership basis.
In these capacities HR practitioners can make a major contribution to the creation and
maintenance of a good employee relations climate.
The framework of employee relations ❚ 771
Employee relations processes
Employee relations processes consist of the approaches and methods adopted by
employers to deal with employees either collectively through their trade unions or
individually. They will be based on the organization’s articulated or implied
employee relations policies and strategies as examined in the first two sections of this
chapter. The way in which they are developed and how they function will be influ-
enced by, and will influence, the employee relations climate, the concept of which is
examined in the third section of the chapter.
Industrial relations processes, ie those aspects of employee relations that are
concerned with the dealings between employers and trade unions, consist of:
● approaches to recognizing or de-recognizing trade unions;
● formal methods of collective bargaining;
● partnership as an approach to employee relations;
● the informal day-to-day contacts on employment issues that take place in the
workplace between management and trade union representatives or officials;
● features of the industrial relations scene such as union membership in the work-
place, the check-off and strikes.
These processes are considered later in this chapter. Negotiating techniques and skills
as an aspect of collective bargaining are dealt with separately in the next chapter. In
51
addition there are the employee relations processes of involvement, participation and
communication which are discussed in Chapter 53.
The outcomes of these processes are various forms of procedural and substantive
agreements and employment procedures, including harmonization of terms and
conditions, and the approaches used by organizations to manage with and without
trade unions. These are described in the last three sections of this chapter.
EMPLOYEE RELATIONS POLICIES
Approaches to employee relations
Four approaches to employee relations policies have been identified by Industrial
Relations Services (1994):
● Adversarial: the organization decides what it wants to do, and employees are
expected to fit in. Employees only exercise power by refusing to cooperate.
● Traditional: a good day-to-day working relationship but management proposes
and the workforce reacts through its elected representatives.
● Partnership: the organization involves employees in the drawing up and execution
of organization policies, but retains the right to manage.
● Power sharing: employees are involved in both day-to-day and strategic decision
making.
Adversarial approaches are much less common than in the 1960s and 1970s. The
traditional approach is still the most typical but more interest is being expressed in
partnership, as discussed later in this chapter. Power sharing is rare.
Nature and purpose of employee relations policies
Against the background of a preference for one of the four approaches listed above,
employee relations policies express the philosophy of the organization on what sort
of relationships between management and employees and their unions are wanted,
and how they should be handled. A partnership policy will aim to develop and main-
tain a positive, productive, cooperative and trusting climate of employee relations.
When they are articulated, policies provide guidelines for action on employee
relations issues and can help to ensure that these issues are dealt with consistently.
They provide the basis for defining management’s intentions (its employee relations
strategy) on key matters such as union recognition and collective bargaining.
774 ❚ Employee relations
Policy areas
The areas covered by employee relations policies are:
● trade union recognition – whether trade unions should be recognized or de-
recognized, which union or unions the organization would prefer to deal with,
and whether or not it is desirable to recognize only one union for collective
bargaining and/or employee representational purposes;
● collective bargaining – the extent to which it should be centralized or decentralized
and the scope of areas to be covered by collective bargaining;
● employee relations procedures – the nature and scope of procedures for redundancy,
grievance handling and discipline;
● participation and involvement – the extent to which the organization is prepared to
give employees a voice on matters that concern them;
● partnership – the extent to which a partnership approach is thought to be
desirable;
● the employment relationship – the extent to which terms and conditions of employ-
ment should be governed by collective agreements or based on individual
contracts of employment (ie collectivism versus individualism);
● harmonization of terms and conditions of employment for staff and manual
workers;
● working arrangements – the degree to which management has the prerogative to
determine working arrangements without reference to trade unions or employees
(this includes job-based or functional flexibility).
When formulating policies in these areas, organizations may be consciously or
unconsciously deciding on the extent to which they want to adopt the HRM approach
to employee relations. This emphasizes commitment, mutuality and forms of
involvement and participation that mean that management approaches and commu-
nicates with employees directly rather than through their representatives.
Policy choices
There is, of course, no such thing as a model employee relations policy. Every
organization develops its own policies. In a mature business these will be in accor-
dance with established custom and practice, its core values and management style
and the actual or perceived balance of power between management and unions. In
younger organizations, or those being established on a green field site, the policies
will depend on the assumptions and beliefs of management and, where relevant, the
existing philosophy and policies of the parent organization. In both these cases
Employee relations processes ❚ 775
policies will be affected by the type of people employed by the organization, its busi-
ness strategies, technology, the industry or sector in which it operates, and its struc-
ture (for example, the extent to which it is centralized or decentralized).
The following four policy options for organizations on industrial relations and
HRM have been described by Guest (1995):
● The new realism – a high emphasis on HRM and industrial relations. The aim is to inte-
grate HRM and industrial relations. This is the policy of such organizations as
Rover, Nissan and Toshiba. A review of new collaborative arrangements in the
shape of single-table bargaining (IRS, 1993) found that they were almost always
the result of employer initiatives, but that both employers and unions seem satis-
fied with them. They have facilitated greater flexibility, more multi-skilling, the
removal of demarcations and improvements in quality. They can also extend
consultation processes and accelerate moves towards single status.
● Traditional collectivism – priority to industrial relations without HRM. This involves
retaining the traditional pluralist industrial relations arrangements within an
eventually unchanged industrial relations system. Management may take the
view in these circumstances that it is easier to continue to operate with a union,
since it provides a useful, well-established channel for communication and for the
handling of grievance, discipline and safety issues.
● Individualized HRM – high priority to HRM with no industrial relations. According to
Guest, this approach is not very common, excepting North American-owned
firms. It is, he believes, ‘essentially piecemeal and opportunistic’.
● The black hole – no industrial relations. This option is becoming more prevalent in
organizations in which HRM is not a policy priority for managements but where
they do not see that there is a compelling reason to operate within a traditional
industrial relations system. When such organizations are facing a decision on
whether or not to recognize a union, they are increasingly deciding not to do so.
And, as shown by Millward (1994), non-union firms are not replacing the unions
with an HRM strategy. Marginson et al (1993) similarly found no support for a
non-union HRM strategy.
Policy formulation
Employee relations policies usually evolve in the light of the circumstances of the
firm, traditional practices, management’s values and style and the power of trade
unions to exert influence. They will change as new situations emerge and these
may include competitive pressure, new management, a takeover, different views
amongst employees about the value of trade unions, or new trade union policies.
Sometimes these changes will be deliberate. Management may decide that it no
776 ❚ Employee relations
longer has any use for trade unions and will therefore de-recognize them. On other
occasions the changes will simply emerge from the situation in which management
finds itself.
The evolutionary and emergent nature of employee relations policies is the most
typical case. But there is much to be said for managements occasionally to sit back
and think through their policies in order to establish the extent to which they are still
appropriate. This review should be based on an analysis of current policies and their
relevance to the changing environment of the organization. The analysis could be
extended to discussions with union representatives within the firm and local or even
national officials to obtain their views. Employees could also be consulted so that
their views could be obtained and acted upon, thus making it more likely that they
will accept and be committed to policy changes. If there is a staff association, its role
as a representative body should be reconsidered. Alternatively, the case for setting up
a staff association should be reviewed. The outcome of attitude surveys designed to
elicit the opinions of employees on matters of general concern to them can provide
additional information on which to base policy decisions.
The result of such a review might, for example, be a decision not to make a frontal
assault on the union, but simply to diminish its power by restricting the scope of
collective bargaining and bypassing it and its shop stewards through more direct
approaches to individual employees. As recent surveys have shown, this, rather than
outright de-recognition, has been the typical policy of unionized firms. And it is prob-
able in most of these cases that the policy evolved over time, rather than being formu-
lated after a systematic review.
Alternatively, processes of consultation with trade unions and employees may lead
to the development of a more positive policy of partnership with the trade union
which recognizes the mutual advantages of working together.
Expressing policy
Most organizations seem reluctant to commit their employee relations policies to
writing. And this is understandable in the light of their fluid nature and, in some
cases, the reluctance of managements to admit publicly that they are anti-union.
Policies that are deeply embedded as part of the managerial philosophy and values
of the organization do not need to be formalized. They will be fully understood by
management and will therefore be acted upon consistently, especially when they are
in effect broad expressions of the views of management rather than specific action
guidelines.
The argument for having written policies is that everyone – line managers, team
leaders and employees generally – will be clear about where they stand and how they
Employee relations processes ❚ 777
are expected to act. Firms may also want to publish their employee relations policies
to support a ‘mutual commitment’ strategy. But this presupposes the involvement of
employees in formulating the policies.
EMPLOYEE RELATIONS STRATEGIES
Nature and purpose
Employee relations strategies set out how objectives such as those mentioned above
are to be achieved. They define the intentions of the organization about what needs to
be done and what needs to be changed in the ways in which the organization
manages its relationships with employees and their trade unions. Like all other
aspects of personnel or HR strategy, employee relations strategies will flow from the
business strategy but will also aim to support it. For example, if the business strategy
is to concentrate on achieving competitive edge through innovation and the delivery
of quality to its customers, the employee relations strategy may emphasize processes
of involvement and participation, including the implementation of programmes for
continuous improvement and total quality management. If, however, the strategy for
competitive advantage, or even survival, is cost reduction, the employee relations
strategy may concentrate on how this can be achieved by maximizing cooperation
with the unions and employees and by minimizing detrimental effects on those
employees and disruption to the organization.
Employee relations strategies should be distinguished from employee relations
policies. Strategies are dynamic. They provide a sense of direction, and give an
answer to the question ‘how are we going to get from here to there?’ Employee rela-
tions policies are more about the here and now. They express ‘the way things are done
around here’ as far as dealing with unions and employees is concerned. Of course
they will evolve but this may not be a result of a strategic choice. It is when a delib-
erate decision is made to change policies that a strategy for achieving this change has
to be formulated. Thus if the policy is to increase commitment, the strategy could
consider how this might be achieved by involvement and participation processes.
Strategic directions
The intentions expressed by employee relations strategies may direct the organiza-
tion towards any of the following:
● changing forms of recognition, including single union recognition, or de-
recognition;
● changes in the form and content of procedural agreements;
778 ❚ Employee relations
● new bargaining structures, including decentralization or single-table bargaining;
● the achievement of increased levels of commitment through involvement or
participation;
● deliberately bypassing trade union representatives to communicate directly with
employees;
● increasing the extent to which management controls operations in such areas as
flexibility;
● generally improving the employee relations climate in order to produce more
harmonious and cooperative relationships;
● developing a ‘partnership’ with trade unions, recognizing that employees are
stakeholders and that it is to the advantage of both parties to work together (this
could be described as a unitarist strategy aiming at increasing mutual commit-
ment).
Formulating strategies
Like other business and HR strategies, those concerned with employee relations can,
in Mintzberg’s (1987) words, ‘emerge in response to an evolving situation’. But it is
still useful to spend time deliberately formulating strategies and the aim should be to
create a shared agenda which will communicate a common perspective on what
needs to be done. This can be expressed in writing but it can also be clarified through
involvement and communication processes.
EMPLOYEE RELATIONS CLIMATE
The employee relations climate of an organization represents the perceptions of
management, employees and their representatives about the ways in which
employee relations are conducted and how the various parties (managers, employees
and trade unions) behave when dealing with one another. An employee relations
climate can be good, bad or indifferent according to perceptions about the extent to
which:
● management and employees trust one another;
● management treats employees fairly and with consideration;
● management is open about its actions and intentions – employee relations poli-
cies and procedures are transparent;
● harmonious relationships are generally maintained on a day-to-day basis, which
results in willing cooperation rather than grudging submission;
Employee relations processes ❚ 779
● conflict, when it does arise, is resolved without resort to industrial action and
resolution is achieved by integrative processes which result in a ‘win–win’ solu-
tion;
● employees are generally committed to the interests of the organization and,
equally, management treats them as stakeholders whose interests should be
protected as far as possible.
Improving the climate
Improvements to the climate can be attained by developing fair employee relations
policies and procedures and implementing them consistently. Line managers and
team leaders who are largely responsible for the day-to-day conduct of employee
relations need to be educated and trained on the approaches they should adopt.
Transparency should be achieved by communicating policies to employees, and
commitment increased by involvement and participation processes. Problems that
need to be resolved can be identified by simply talking to employees, their represen-
tatives and their trade union officials. Importantly, as discussed below, the organiza-
tion can address its obligations to the employees as stakeholders and take steps to
build trust.
An ethical approach
Businesses aim to achieve prosperity, growth and survival. Ideally, success should
benefit all the stakeholders in the organization – owners, management, employees,
customers and suppliers. But the single-minded pursuit of business objectives can act
to the detriment of employees’ well-being and security. There may be a tension
between accomplishing business purposes and the social and ethical obligations of an
organization to its employees. But the chances of attaining a good climate of
employee relations are slight if no attempt is made to recognize and act on an organi-
zation’s duties to its members.
An ethical approach will be based on high-commitment and high-involvement
policies. The commitment will be mutual and the arrangements for involvement will
be genuine, ie management will be prepared not only to listen but to act on the views
expressed by employees or at least, if it cannot take action, the reasons why will be
explained. It will also be transparent and, although the concept of a ‘job for life’ may
no longer be valid in many organizations, at least an attempt will be made to
maintain ‘full employment’ policies.
780 ❚ Employee relations
Building trust
The Institute of Personnel and Development’s (IPD) statement People Make the
Difference (1994) makes the point that much has been done in recent years to introduce
a sense of reality into employee relations. But, according to the IPD, ‘Managers
should not kid themselves that acquiescence is the same thing as enthusiastic
involvement. The pace of life and changing work patterns in the future will put a
strain on the best of relationships between employees and managers.’
The IPD suggests that employee relations policies aimed at building trust should
be based on the principles that employees cannot just be treated as a factor of produc-
tion and that organizations must translate their values concerning employee relations
into specific and practical action. In too many organizations, inconsistency between
what is said and what is done undermines trust, generates employee cynicism and
provides evidence of contradictions in management thinking.
UNION RECOGNITION AND DE-RECOGNITION
Recognition
An employer fully recognizes a union for the purposes of collective bargaining when
pay and conditions of employment are jointly agreed between management and
trade unions. Partial recognition takes place when employers restrict trade unions to
representing their members on issues arising from employment. An independent
trade union can apply to the CAC for recognition, which will agree where either a
majority of the workers already belong to the union, or when the union wins majority
support for recognition by at least 40 per cent of those entitled to vote in a secret
ballot.
Single union recognition
The existence of a number of unions within one organization was frequently criti-
cized in the 1980s because of the supposed increase in the complexity of bargaining
arrangements and the danger of inter-union demarcation disputes (who does what).
The answer to this problem was thought to be single union representation through
single union deals. These had a number of characteristics that were considered to be
advantageous to management.
Single-union deals have the following typical features:
● a single union representing all employees, with constraints put on the role of
union full-time officials;
Employee relations processes ❚ 781
● flexible working practices – agreement to the flexible use of labour across tradi-
tional demarcation lines;
● single status for all employees – the harmonization of terms and conditions
between manual and non-manual employees;
● an expressed commitment by the organization to involvement and the disclosure
of information in the form of an open communications system and, often, a works
council;
● the resolution of disputes by means of devices such as pendulum arbitration, a
commitment to continuity of production and a ‘no-strike’ provision.
Single-union deals have generally been concluded on green field sites, often by
Japanese firms such as Nissan, Sanyo, Matshushsita and Toyota. A ‘beauty contest’
may be held by the employer to select a union from a number of contenders. Thus,
the initiative is taken by the employer, who can lay down radical terms for the
agreement.
Factors influencing recognition or de-recognition
Employers are in a strong position now to choose whether they recognize a union or
not, which union they want to recognize and the terms on which they would grant
recognition, for example a single union and a no-strike agreement.
When setting up on green field sites employers may refuse to recognize unions.
Alternatively they hold ‘beauty contests’, as mentioned above, to select the union
they prefer to work with, which will be prepared to reach an agreement in line with
what management wants.
An organization deciding whether or not to recognize a union will take some or all
of the following factors into account:
● the perceived value or lack of value of having a process for regulating collective
bargaining;
● if there is an existing union, the extent to which management has freedom to
manage; for example, to change working arrangements and introduce flexible
working or multi-skilling;
● the history of relationships with the union;
● the proportion of employees who are union members and the degree to which
they believe they need the protection their union provides; a decision on de-
recognition has to weigh the extent to which its perceived advantages outweigh
the disadvantages of upsetting the status quo;
● any preferences as to a particular union, because of its reputation or the extent to
which it is believed a satisfactory relationship can be maintained.
782 ❚ Employee relations
In considering recognition arrangements employers may also consider entering into a
‘single union deal’ as described above.
COLLECTIVE BARGAINING ARRANGEMENTS
Collective bargaining arrangements are those set up by agreements between manage-
ments, employers’ associations, or joint employer negotiating bodies and trade
unions to determine specified terms and conditions of employment for groups of
employees. Collective bargaining processes are usually governed by procedural
agreements and result in substantive agreements and agreed employee relations
procedures.
The considerations to be taken into account in developing and managing collective
bargaining arrangements are:
● collective agreements;
● the level at which bargaining should take place;
● single-table bargaining where a number of unions are recognized in one work-
place;
● dispute resolution.
Collective agreements
Collective agreements can be classified as procedural agreements or substantive
agreements. The former provide the framework for collective bargaining, and the
latter are the outcome of collective bargaining. Two forms of collective procedural
agreements have become prominent: partnership agreements and new-style agree-
ments.
Procedural agreements
Procedural agreements set out the respective responsibilities and duties of managers
and unions, the steps through which the parties make joint decisions, and the proce-
dure to be followed if the parties fail to agree. Their purpose is to regulate the behav-
iour of the parties to the agreement, but they are not legally enforceable, and the
degree to which they are followed depends on the goodwill of both parties or the
balance of power between them. Procedural agreements are seldom broken and, if so,
never lightly. The basic presumption of collective bargaining is that both parties will
honour agreements that have been made freely between them. An attempt to make
collective agreements legally enforceable in the 1971 Industrial Relations Act failed
because employers generally did not seek to enforce its provisions.
Employee relations processes ❚ 783
A typical procedural or procedure agreement contains the following sections:
● a preamble defining the objectives of the agreement;
● a statement that the union is recognized as a representative body with negotiating
rights;
● a statement of general principles, which may include a commitment to use the
procedure (a no-strike clause) and/or a status quo clause which restricts the
ability of management to introduce changes outside negotiated or customary
practice;
● a statement of the facilities granted to unions, including the rights of shop stew-
ards and the right to hold meetings;
● provision for joint negotiating committees (in some agreements);
● the negotiating or disputes procedure;
● provision for terminating the agreement.
The scope and content of such agreements can, however, vary widely. Some organi-
zations have limited recognition to the provision of representational rights only,
others have taken an entirely different line in concluding single-union deals which,
when they first emerged in the 1980s, were sometimes dubbed ‘new style agree-
ments’, or referred to as the ‘new realism’.
An agreement may incorporate or have attached to it employee relations proce-
dures such as those concerned with grievances, discipline and redundancy. In addi-
tion, agreements are sometimes reached on health and safety procedures.
Substantive agreements
Substantive agreements set out agreed terms and conditions of employment,
covering pay and working hours and other aspects such as holidays, overtime
regulations, flexibility arrangements and allowances. Again, they are not legally
enforceable. A substantive agreement may detail the operational rules for a
payment-by-results scheme which could include arrangements for timing or re-
timing and for payments during waiting time or on new, untimed, work.
Partnership agreements
A partnership agreement is one in which both parties (management and the trade
union) agree to work together to their mutual advantage and to achieve a climate of
more cooperative and therefore less adversarial industrial relations.
The rationale for partnership is that it is a way of getting away from confronta-
tional industrial relations to the mutual benefit of both management and employees.
784 ❚ Employee relations
Partnership deals can at least attempt to balance the needs of employees for job secu-
rity with the aims of management to maximize flexibility.
Common features
The common features of partnership as defined by Reilly (2001) are:
● Mutuality – both sides recognize that there are areas of commonality, of shared
interest.
● Plurality – it is recognized that there are areas of difference as well as areas of
common interest.
● Trust and respect – for the intentions of the other side and for legitimate differences
in interests.
● Agreement without coercion – there is an intention to solve problems through
consensus, recognizing business and employee needs.
● Involvement and voice – opportunities are provided for employees to shape their
work environment and have their opinions heard.
● Individualist and collectivist dimension – this is achieved through direct and indirect
(ie representative) forms of employee involvement.
Problems
The concept of partnership captured attention when it first emerged, but it has not
become a major feature of the industrial relations scene. The TUC estimates that there
are only about 60 genuine partnership deals in existence. Reilly (2001) notes that the
concept can come under pressure for a number of reasons. Three of the key factors
are:
1. misunderstanding of what partnership is all about;
2. lack of trust, lack of support and increased evocation over the benefits of part-
nership; and
3. disagreements that are not resolved and infect relationships.
Senior management may not really believe in partnership and make unilateral deci-
sions without consultation; support may come from full-time trade union officials
but is not backed by shop stewards; and employees may reject the partnership notion,
seeing their representatives as management ‘poodles’ unable to look after their inter-
ests properly. Partnership may mean that employees and their representatives can be
well informed, consulted and have a voice, but in the end management decides.
Employee relations processes ❚ 785
New-style agreements
The so-called ‘new style agreements’ emerged in the 1990s to achieve improvements
in the conclusion and operation of negotiating and bargaining arrangements. As
described by Farnham (2000), a major feature of these agreements was that their
negotiating and disputes procedures were based on the mutually accepted ‘rights’ of
the parties expressed in the recognition agreement. The intention was to resolve any
differences of interests on substantive issues between the parties by regulations, with
pendulum arbitration providing a resolution of those issues where differences exist.
As originally conceived, new style agreements typically included provision for
single-union recognition, single status, labour flexibility, a works council, and a no-
strike clause to the effect that issues should be resolved without recourse to industrial
action. Some or all of these provisions may still be made in agreements, but are not
usually packaged as ‘new style’ agreements.
Bargaining levels
There has been a pronounced trend away from multi-employer bargaining, especially
in the private sector. This has arisen because of decentralization and a reluctance on
the part of central management to get involved.
Single-table bargaining
Single-table bargaining brings together all the unions in an organization as a single
bargaining unit. The reasons organizations advance for wanting a ‘single-table deal’
are:
● a concern that existing multi-unit bargaining arrangements not only are ineffi-
cient in terms of time and management resources but are also a potential source of
conflict;
● the desire to achieve major changes in working practices, which it is believed can
be achieved only through single-table bargaining;
● a belief in the necessity of introducing harmonized or single-status conditions.
Marginson and Sisson (1990), however, identified a number of critical issues which
need to be resolved if single-table bargaining is to be introduced successfully. These
comprise:
● the commitment of management to the concept;
● the need to maintain levels of negotiation which are specific to particular groups
below the single-bargaining table;
786 ❚ Employee relations
● the need to allay the fears of managers that they will not be able to react flexibly to
changes in the demand for specific groups of workers;
● the willingness of management to discuss a wider range of issues with union
representatives – this is because single-table bargaining adds to existing
arrangements a top tier in which matters affecting all employees, such as training,
development, working time and fringe benefits can be discussed;
● the need to persuade representatives from the various unions to forget their
previous rivalries, sink their differences and work together (not always easy);
● the need to allay the fears of trade unions that they may lose representation rights
and members, and of shop stewards that they will lose the ability to represent
members effectively.
These are formidable requirements to satisfy, and however desirable single-table
bargaining may be, it will never be easy to introduce or to operate.
Third-party dispute resolution
The aim of collective bargaining is, of course, to reach agreement, preferably to the
satisfaction of both parties. Negotiating procedures, as described in the next section
of this chapter, provide for various stages of ‘failure to agree’ and often include a
clause providing for some form of third-party dispute resolution in the event of the
procedure being exhausted. The processes of dispute resolution as identified by IRS
(2004d) are conciliation, arbitration and mediation.
Conciliation
An attempt through informal discussions to help parties in a dispute to reach their
own agreement. The third party does not recommend or decide on a settlement. One
advantage of this process is that it helps the parties to retain ownership of the resolu-
tion of the problem, which can, in turn, engender greater commitment to its imple-
mentation. Conciliation is the most frequently used form of third-party involvement.
Arbitration
The parties put the issue to an independent third party for determination. The parties
agree in advance to accept the arbitrator’s decision as a means of finally resolving the
matter. There is sometimes a reluctance to use this method as it removes control over
the final outcome from employers, employees or trade unions.
Employee relations processes ❚ 787
Mediation
Formal but non-binding recommendations or proposals are put forward for further
consideration by the parties. The use of dispute mediation is rare, partly because it is
seen as a halfway house. There is sometimes a feeling that if conciliation cannot
succeed, it may be best simply to go all the way to arbitration.
INFORMAL EMPLOYEE RELATIONS PROCESSES
The formal processes of union recognition, collective bargaining and dispute resolu-
tion described earlier in this chapter provide the framework for industrial relations in
so far as this is concerned with agreeing terms and conditions of employment and
working arrangements and settling disputes. But within or outside that framework,
informal employee relations processes are taking place continuously.
Informal employee relationships take place whenever a line manager or team
leader is handling an issue in contact with a shop steward, an employee representa-
tive, an individual employee or a group of employees. The issue may concern
methods of work, allocation of work and overtime, working conditions, health and
safety, achieving output and quality targets and standards, discipline or pay (espe-
cially if a payment-by-results scheme is in operation, which can generate continuous
arguments about times, standards, re-timings, payments for waiting time or when
carrying out new tasks, and fluctuations or reductions in earnings because of alleged
managerial inefficiency).
Line managers and supervisors handle day-to-day grievances arising from any of
these issues and are expected to resolve them to the satisfaction of all parties without
involving a formal grievance procedure. The thrust for devolving responsibility to
line managers for personnel matters has increased the onus on them to handle
employee relations effectively. A good team leader will establish a working relation-
ship with the shop steward representing his or her staff which will enable issues
arising on the shop-floor or with individual employees to be settled amicably before
they become a problem.
Creating and maintaining a good employee relations climate in an organization
may be the ultimate responsibility of top management, advised by personnel special-
ists. But the climate will be strongly influenced by the behaviour of line managers
and team leaders. The HR function can help to improve the effectiveness of this
behaviour by identifying and defining the competences required, advising on the
selection of supervisors, ensuring that they are properly trained, encouraging the
development of performance management processes that provide for the assess-
ment of the level of competence achieved by line managers and team leaders in
788 ❚ Employee relations
handling employee relations, or by providing unobtrusive help and guidance as
required.
OTHER FEATURES OF THE INDUSTRIAL
RELATIONS SCENE
There are four features of the industrial relations scene which are important, besides
the formal and informal processes discussed above. These features are harmoniza-
tion, union membership arrangements within the organization, the ‘check-off’
system, and strikes and other forms of industrial action (which should more realisti-
cally be called industrial inaction if it involves a ‘go slow’ or ‘work to rule’).
Harmonization
Harmonization is the process of introducing the same conditions of employment for
all employees. It is distinguished by Roberts (1990) from single status and staff status
as follows:
● Single status is the removal of differences in basic conditions of employment to
give all employees equal status. Some organizations take this further by putting
all employees into the same pay and grading structure.
● Staff status is a process whereby manual and craft employees gradually receive
staff terms and conditions of employment, usually upon reaching some quali-
fying standard, for example length of service.
● Harmonization means the reduction of differences in the pay structure and other
employment conditions between categories of employee, usually manual and
staff employees. The essence of harmonization is the adoption of a common
approach and criteria to pay and conditions for all employees. It differs from staff
status in that, in the process of harmonization, some staff employees may have to
accept some of the conditions of employment of manual workers.
According to Duncan (1989), the pressure towards harmonization has arisen for the
following reasons:
● New technology – status differentials can obstruct efficient labour utilization, and
concessions on harmonization are invariably given in exchange for an agreement
on flexibility. Moreover, technology, by de-skilling many white-collar jobs and
enhancing the skills of former blue-collar workers, has made differential treat-
ment harder to defend.
Employee relations processes ❚ 789
● Legislation – equal pay, the banning of sex and racial discrimination, and employ-
ment protection legislation have extended to manual workers rights that were
previously the preserve of staff. The concept of equal value has been a major chal-
lenge to differentiation between staff and manual workers.
● Improving productivity by the more flexible use of labour.
● Simplifying personnel administration and thereby reducing costs.
● Changing employee attitudes and so improving commitment, motivation and
morale.
In Roberts’ view, questions of morality are probably of least importance.
Union membership within organizations
The closed shop, which enforced union membership within organizations, has been
made illegal. But many managers prefer that all their employees should be in the
union because on the whole it makes their life easier to have one channel of represen-
tation to deal with industrial relations issues and also because it prevents conflict
between members and non-members of the union.
The ‘check-off’ system
The ‘check-off’ is a system that involves management in deducting the subscriptions
of trade union members on behalf of the union. It is popular with unions because it
helps to maintain membership and provides a reasonably well guaranteed source of
income. Managements have generally been willing to cooperate as a gesture of good
faith to their trade union. They may support a check-off system because it enables
them to find out how many employees are union members. Employers also know
that they can exert pressure in the face of industrial action by threatening to end the
check-off. However, the Trade Union and Employment Rights Act 1993 provides that
if an employer is lawfully to make check-off deductions from a worker’s pay, there
must be prior written consent from the worker and renewed consent at least every
three years. This three-year renewal provision can inhibit the maintenance of the
system.
Strikes
Strikes are the most politically charged of all the features of industrial relations. The
Conservative Government in the 1980s believed that ‘strikes are too often a weapon
of first rather than last resort’. However, those involved in negotiation – as well as
trade unions – have recognized that a strike is a legitimate last resort if all else fails. It
790 ❚ Employee relations
is a factor in the balance of power between the parties in a negotiation and has to be
taken into account by both parties.
Unlike other Western European countries, there is no legal right in Britain for
workers or their unions to take strike action. What has been built up through
common law is a system of legal liability that suspends union liability for civil
wrongs or ‘torts’ as long as industrial action falls within the legal definition of a trade
dispute and takes place ‘in contemplation of furtherance of a trade dispute’.
The Conservative Government’s 1980s and 1990s legislation has limited this legal
immunity to situations where a properly conducted ballot has been conducted by the
union authorizing or endorsing the action and where the action is between an
employer and their direct employees, with all secondary or sympathy action being
unlawful. Immunity is also removed if industrial action is taken to impose or enforce
a closed shop or where the action is unofficial and is not repudiated in writing by the
union. The impact of this law is to deter the calling of strikes without careful consid-
eration of where the line of legal immunity is now drawn and of the likely result of a
secret ballot. But the secret ballot can in effect legitimize strike action.
The number of strikes and the proportion of days lost through strike action have
diminished significantly in the UK since the 1970s. This reduction has been caused
more by economic pressures than by the legislation. Unions have had to choose
between taking strike action, which could lead to closure, or survival on the terms
dictated by employers with fewer jobs. In addition, unions in manufacturing found
that their members who remained in jobs did well out of local productivity
bargaining and threatened strike action.
MANAGING WITH TRADE UNIONS
Ideally, managements and trade unions learn to live together, often on a give and take
basis, the presumption being that neither would benefit from a climate of hostility or
by generating constant confrontation. It would be assumed in this ideal situation that
mutual advantage would come from acting in accordance with the spirit as well as
the letter of agreed joint regulatory procedures. However, both parties would prob-
ably adopt a realistic pluralist viewpoint, recognizing the inevitability of differences
of opinion, even disputes, but believing that with goodwill on both sides they could
be settled without recourse to industrial action.
Of course, the reality in the 1960s and 1970s was often different. In certain busi-
nesses, for example in the motor and shipbuilding industries, hostility and confronta-
tion were rife. And newspaper proprietors tended to let their unions walk all over
them in the interests of peace and profit.
Employee relations processes ❚ 791
Times have changed. As noted earlier, trade union power has diminished and
managements have tended to seize the initiative. They may be content to live with
trade unions but they give industrial relations lower priority. They may feel that it is
easier to continue to operate with a union because it provides a useful, well-
established channel for communication and for the handling of grievance, discipline
and safety issues. In the absence of a union, management would need to develop its
own alternatives, which would be costly and difficult to operate effectively. The trade
union and the shop stewards remain a useful lubricant. Alternatively, as Smith and
Morton (1993) suggest, the management perspective may be that it is safer to margin-
alize the unions than formally to de-recognize them and risk provoking a confronta-
tion: ‘Better to let them wither on the vine than receive a reviving fertilizer’. However,
the alternative view was advanced by Purcell (1979) who argued that management
will have greater success in achieving its objectives by working with trade unions, in
particular by encouraging union membership and participation in union affairs.
Four types of industrial relations management have been identified by Purcell and
Sisson (1983):
● Traditionalists have unitary beliefs and are anti-union with forceful management.
● Sophisticated paternalists are essentially unitary but they do not take it for granted
that their employees accept the organization’s objectives or automatically legit-
imize management decision making. They spend considerable time and resources
in ensuring that their employees adopt the right approach.
● Sophisticated moderns are either constitutionalists, where the limits of collective
bargaining are codified in an agreement but management is free to take decisions
on matters that are not the subject of such an agreement, or consultors, who
accept collective bargaining but do not want to codify everything in a collective
agreement, and instead aim to minimize the amount of joint regulation and
emphasize joint consultation with ‘problems’ having to be solved rather than
‘disputes’ settled.
● Standard moderns are pragmatic or opportunist. Trade unions are recognized, but
industrial relations are seen as primarily fire-fighting and are assumed to be non-
problematic unless events prove otherwise. This is by far the most typical
approach.
MANAGING WITHOUT TRADE UNIONS
Most organizations do, in fact, manage without trade unions; they constitute what
Guest (2001) refers to as the ‘black hole’. Millward et al (1992) established from the
792 ❚ Employee relations
third Workplace Industrial Relations Survey (2004) that the characteristics of union-free
employee relations were as follows:
● Employee relations were generally seen by managers as better in the non-union
sector than in the union sector.
● Strikes were almost unheard of.
● Labour turnover was high but absenteeism was no worse.
● Pay levels were generally set unilaterally by management.
● The dispersion of pay was higher, it was more market related and there was more
performance-related pay. There was also a greater incidence of low pay.
● In general, no alternative methods of employee representation existed as a substi-
tute for trade union representation.
● Employee relations were generally conducted with a much higher degree of infor-
mality than in the union sector. In a quarter of non-union workplaces there were
no grievance procedures and about a fifth had no formal disciplinary procedures.
● Managers generally felt unconstrained in the way in which they organized work.
● There was more flexibility in the use of labour than in the union sector, which
included the greater use of freelance and temporary workers.
● Employees in the non-union sector are two and a half times as likely to be
dismissed as those in unionized firms and the incidence of compulsory redun-
dancies is higher.
The survey concluded that many of the differences between unionized and non-
unionized workplaces could be explained by the generally smaller size of the non-
union firms and the fact that many such workplaces were independent, rather than
being part of a larger enterprise.
Another characteristic not mentioned by the survey is the use by non-unionized
firms of personal contracts as an alternative to collective bargaining. In theory,
employees are free to negotiate such contracts, but as an Anglia Polytechnic
University (1995) study found, little bargaining activity takes place in the 500 work-
places they surveyed. The conclusion was that the personal contract ‘reflects inherent
inequality of bargaining power’ and this suggests that there is a continuing role for
trade unions.
This does not paint a very satisfactory picture of employee relations from the
workers’ point of view, but it is probably typical of smaller, independent firms. Some
of the latter may be what Marchington (1995b) describes as the traditional sweatshop
employer. The pressure on the firm could be to control costs and increase flexibility
and responsiveness to customer demands. These are objectives which management
may feel could only be achieved without union interference.
Employee relations processes ❚ 793
Some larger organizations, for example IBM and Marks & Spencer, manage
without unions by, in effect, adopting a ‘union substitution’ policy. This offers a
complete employment package, which can be seen by employees as an attractive
alternative to trade union membership. The package is likely to include highly
competitive pay with harmonized employment conditions, recruitment tests
designed to select people who match organizational norms, a focus on employee
communications and information sharing, induction programmes that aim to get
employees to accept the organization’s ethos, an emphasis on training and career
development and a commitment to providing secure and satisfying work. Such busi-
nesses may broadly adhere to the HRM model (although they would not describe it
as such, and this is the approach they used before HRM was invented).
HRM techniques for increasing commitment through involvement and communi-
cation processes provide a route that some organizations without unions follow in
order to maintain a satisfactory employee relations climate. But it is not easy. Unless
HRM fits the core values of the organization and is in accord with its management
style, and unless a coherent and integrated approach is adopted to introducing HRM
processes, it is unlikely to succeed.
794 ❚ Employee relations
Negotiating and bargaining
Collective bargaining requires the exercise of negotiating skills. Bargaining skills are
also necessary during the process of negotiating collective substantive agreements on
terms and conditions of employment. Negotiating skills are required in many other
aspects of HRM, including, for example, agreeing individual contracts of employ-
ment and outsourcing contracts, but this chapter concentrates on those used in collec-
tive bargaining. This chapter covers the nature and process of negotiation and
bargaining, bargaining conventions, the stages of negotiation and, in summary, the
skills required.
THE NATURE OF NEGOTIATING AND BARGAINING
To negotiate is to converse with a view to finding terms of agreement. To bargain is to
go through the steps required to come to terms on a transaction. Collective bargaining
is essentially a process of negotiation – of conferring and, it is hoped, reaching agree-
ment without resorting to force (although hard words may be exchanged on the way).
Within this negotiating process bargaining takes place. This means coming to terms
on a settlement, which in a pay negotiation may be somewhere between the union’s
opening demand of, say, 4 per cent increase and the employer’s first response of, say,
2 per cent. The point at which a settlement is achieved between these figures will
52
depend on the relative bargaining power of the two parties, the realism of the offer or
response, the level of bargaining skills the parties can deploy and the sheer determi-
nation of either party to press its point or not to concede (this may be a function of
bargaining power).
NEGOTIATING
Negotiating take place when two parties meet to reach an agreement. This can be a
convergent process (in commercial terms this is sometimes referred to as a ‘willing
buyer – willing seller’ situation) where both parties are equally keen to reach a
win–win agreement. Clearly, if this can be achieved rather than a win–lose outcome,
the future relationships between the parties are more likely to be harmonious.
Certainly, the primary aim of any negotiator should be to proceed on this basis.
But some negotiations can be described as ‘divergent’ in which one or both of the
parties aim to win as much as they can from the other while giving away as little as
possible. In these circumstances, negotiating can be a war game. It is a battle in the
sense that the bargainers are pitting their wits against each other while also bringing
in the heavy artillery in the shape of sanctions or threatened sanctions. As with other
battles, the negotiation process can produce a pyrrhic victory in which both sides,
including the apparent winner, retire to mourn their losses and lick their wounds. It is
a game in the sense that both sides are trying to win, but there are various conven-
tions or rules that the parties tacitly adopt or recognize, although they may break
them in the heat of the battle.
Negotiations can normally be broken down into four stages:
1. preparing for negotiation: setting objectives, defining strategy and assembling
data;
2. opening;
3. bargaining;
4. closing.
Before analysing these stages in detail it may be helpful to consider the process of
bargaining and list the typical conventions that operate when bargaining takes place.
The process of bargaining
The process of bargaining consists of three distinct, though related, functions. First,
bargainers state their bargaining position to their opposite numbers. Second, they
probe weaknesses in the bargaining position of their opposite numbers and try to
796 ❚ Employee relations
convince them that they must move, by stages if this is inevitable, from their present
position to a position closer to what the bargainer wants. Third, they adjust or
confirm their original estimate of their own bargaining position in the light of infor-
mation gleaned and reactions from their opposite numbers, in order that, if the time
comes to put an estimate of bargaining position to the test, the ground chosen will be
as favourable as possible.
The essence of the bargaining process was described by Peters (1968):
In skilful hands the bargaining position performs a double function. It conceals and it
reveals. The bargaining position is used to indicate – to unfold gradually, step by step –
the maximum expectation of the negotiator, while at the same time concealing, for as
long as necessary, his minimum expectation. By indirect means, such as the manner and
timing of the changes in your bargaining position, you, as a negotiator, try to convince
the other side that your maximum expectation is really your minimum breaking-off
point. Since you have taken an appropriate bargaining position at the start of negotia-
tions, each change in your position should give ever-clearer indications of your
maximum expectation. Also, each change should be designed to encourage or pressure
the other side to reciprocate with as much information as you give them.
Bargaining conventions
There are certain conventions in collective bargaining which most experienced and
responsible negotiators understand and accept, although they are never stated and,
indeed, may be broken in the heat of the moment, or by a tyro in the bargaining game.
These conventions help to create an atmosphere of trust and understanding which is
essential to the maintenance of the type of stable bargaining relationship that benefits
both sides. Some of the most generally accepted conventions are listed below:
● Whatever happens during the bargaining, both parties are using the bargaining
process in the hope of coming to a settlement.
● While it is preferable to conduct negotiations in a civilized and friendly manner,
attacks, hard words, threats, and (controlled) losses of temper are sometimes used
by negotiators to underline determination to get their way and to shake their
opponent’s confidence and self-possession – but these should be treated by both
sides as legitimate tactics and should not be allowed to shake the basic belief in
each other’s integrity or desire to settle without taking drastic action.
● Off-the-record discussions are mutually beneficial as a means of probing attitudes
and intentions and smoothing the way to a settlement, but they should not be
referred to specifically in formal bargaining sessions unless both sides agree in
advance.
Negotiating and bargaining ❚ 797
● Each side should normally be prepared to move from its original position.
● It is normal, although not inevitable, for the negotiation to proceed by alternate
offers and counter-offers from each side which lead steadily towards a settlement.
● Concessions, once made, cannot be withdrawn.
● Firm offers must not be withdrawn, although it is legitimate to make and with-
draw conditional offers.
● Third parties should not be brought in until both parties are agreed that no
further progress would be made without them.
● The final agreement should mean exactly what it says – there should be no
trickery, and the terms agreed should be implemented without amendment.
● So far as possible, the final settlement should be framed in such a way as to
reduce the extent to which the other party obviously loses face or credibility.
Preparing for negotiation
Negotiations take place in an atmosphere of uncertainty. Neither side knows how
strong the other side’s bargaining position is or what it really wants and will be
prepared to accept. They do not know how much the other party will be prepared to
concede or the strength of its convictions.
In a typical pay negotiation unions or representative bodies making the claim will
define three things:
● the target they would like to achieve;
● the minimum they will accept;
● the opening claim which they believe will be most likely to help achieve the
target.
Employers define three related things:
● the target settlement they would like to achieve;
● the maximum they would be prepared to concede;
● the opening offer they will make which would provide them with sufficient room
to manoeuvre in reaching their target.
The difference between the union’s claim and the employer’s offer is the negotiating
range. If your maximum exceeds their minimum, this will indicate the settlement
range. This is illustrated in Figure 52.1. In this example the chance of settlement
without too much trouble is fairly high. It is when your maximum is less than their
minimum, as in Figure 52.2, that the trouble starts. Over a period of time a negotia-
tion where a settlement range exists proceeds in the way demonstrated in Figure 52.3.
798 ❚ Employee relations
Objectives
The objectives in the form of a target settlement and initial and minimum/maximum
offers and agreements will be conditioned by:
● the perceptions of both parties about the relative strengths of their cases;
● the relative power of the two parties;
● the amount of room for negotiation the parties want to allow;
● the employer’s ability to pay;
● the going rate elsewhere;
● the rate of inflation – although employers are reluctant to concede that it is their
job to protect their employees from inflation, the cost of living is often one of the
chief arguments advanced by a union for an increase.
Strategy
Negotiating strategy should clearly be designed to achieve the target settlement, with
the maximum the negotiator is prepared to concede being the fall-back position. Two
decisions are required:
Negotiating and bargaining ❚ 799
3.5 Maximum
3 Target
2.5 Offer
Claim 5
Target 4
Minimum 3
Settlement
range
Negotiating
range
Union Employer
% %
Figure 52.1 Negotiating range within a settlement range
1. The stages to follow in moving from, in the union’s case, the opening claim to the
final agreement, and in the employer’s case from the initial to the closing offer.
This is dependent on the amount of room for negotiating that has been allowed.
2. The negotiating package the employer wants to use in reply to whatever package
the union has put forward. The employer’s aim should be to provide scope for
trading concessions during the course of negotiations. From their viewpoint,
there is also much to be said for having in reserve various conditions which they
can ask the unions to accept in return for any concessions they may be prepared
to make. Employers might, for example, ask for an extended period before the
next settlement in return for an increase in their offer.
Preparation steps
Negotiators must prepare carefully for negotiations so that they do not, in Aneurin
Bevan’s phrase, ‘go naked to the conference table’. The following steps should be
taken:
● List the arguments to be used in supporting your case.
800 ❚ Employee relations
3 Maximum
2.5 Target
2 Offer
Claim 7
Target 5
Minimum 4
Negotiating
gap
Negotiating
range
Union Employer
% %
Figure 52.2 Negotiating range with a negotiating gap
● List the likely arguments or counter-arguments that the other party is likely to
use.
● List the counter-arguments to the arguments of the other side.
● Obtain the data you need to support your case.
● Select the negotiating team – this should never have fewer than two members,
and for major negotiations should have three or more: one to take the lead and do
most of the talking, one to take notes and feed the negotiator with any supporting
information required, and the others to observe opposite numbers and play a
specific part in negotiations in accordance with their brief.
● Brief the members of the negotiating team on their roles and the negotiating
strategy and tactics that are to be adopted – if appropriate, prepared statements or
arguments should be issued at this stage to be used as required by the strategic
plan.
Negotiating and bargaining ❚ 801
%
6
Claim 5
Employer’s 4
maximum
Union’s
minimum
3
Offer 2
Settlement
Opening Bargaining Closing
Figure 52.3 Stages of a negotiation
● Rehearse the members of the team in their roles; they can be asked to repeat their
points to other members and deal with responses from them; or someone can act
as devil’s advocate and force the leader or other members of the team to handle
awkward points or negotiating ploys.
At this stage it may be possible to meet one or more members of the other side infor-
mally to sound out their position, while they sound out yours. This ‘early warning’
system can be used to condition either side to modify their likely initial demands or
responses by convincing them either of the strength of your own position or their
determination to persist with the claim or to resist.
Opening
Opening tactics can be as follows:
● Open realistically and move moderately.
● Challenge the other side’s position as it stands; do not destroy their ability to
move.
● Explore attitudes, ask questions, observe behaviour and, above all, listen in order
to assess the other side’s strengths and weaknesses, their tactics and the extent to
which they may be bluffing.
● Make no concessions of any kind at this stage.
● Be non-committal about proposals and explanations (do not talk too much).
Bargaining
After the opening moves, the main bargaining phase takes place in which the gap is
narrowed between the initial positions and the parties attempt to persuade each other
that their case is strong enough to force the other side to close at a less advantageous
point than they had planned. The following tactics can be employed:
● Always make conditional proposals: ‘If you will do this, then I will consider
doing that’ – the words to remember are: if… then…
● Never make one-sided concessions: always trade off against a concession from
the other party: ‘If I concede x, then I expect you to concede y’.
● Negotiate on the whole package: negotiations should not allow the other side to
pick off item by item.
● Keep the issues open to extract the maximum benefit from potential trade-offs.
802 ❚ Employee relations
Closing
When and how negotiators should close is a matter of judgement, and depends on an
assessment of the strength of the other side’s case and their determination to see it
through. There are various closing techniques:
● making a concession from the package, preferably a minor one which is traded off
against an agreement to settle – the concession can be offered more positively
than in the bargaining stage: ‘If you will agree to settle at x, then I will concede y’;
● doing a deal: splitting the difference, or bringing in something new, such as
extending the settlement time scale, agreeing to back-payments, phasing
increases, or making a joint declaration of intent to do something in the future (eg
introducing a productivity plan);
● summarizing what has happened to date, emphasizing the concessions that have
been made and the extent to which movement has been made and stating that the
final position has been reached;
● applying pressure through a threat of the dire consequences which will follow if a
‘final’ claim is not agreed or a ‘final’ offer is not accepted;
● giving the other side a choice between two courses of action.
Employers should not make a final offer unless they mean it. If it is not really their
final offer and the union calls their bluff they may have to make further concessions
and their credibility will be undermined. Each party will, of course, attempt to force
the other side into revealing the extent to which they have reached their final posi-
tion. But negotiators should not allow themselves to be pressurized. If negotiators
want to avoid committing themselves and thus devaluing the word ‘final’, they
should state as positively as they can that this is as far as they are prepared to go. But
bargaining conventions accept that further moves may still be made on a quid pro quo
basis from this ‘final position’.
NEGOTIATING AND BARGAINING SKILLS
Negotiating skills
The main negotiating skills are:
● analytical ability – the capacity to assess the key factors which will affect the nego-
tiating stance and tactics of both sides, and to use this assessment to ensure that
all the facts and argument that can be used to support the negotiator’s case or
prejudice the other party’s case are marshalled;
Negotiating and bargaining ❚ 803
● empathy – the ability to put oneself in the other party’s shoes to understand not
only what they are hoping to achieve but also why they have these expectations
and the extent to which they are determined to fulfil them;
● planning ability – to develop and implement negotiating strategies and tactics but
to be prepared to be flexible about the tactics in the light of developments during
negotiations;
● interactive skills – the capacity to relate well with other people, to be persuasive
without being domineering, to make a point without using it as an opportunity to
make the other side lose face, to show respect to the other side’s arguments and
points if they are valid while questioning them if they are dubious, to respond
quickly to changing moods and reactions so that the opportunity can be seized to
make progress towards consensus (and the achievement of consensus is the
ultimate aim);
● communicating skills – the ability to convey information and arguments clearly,
positively and logically while also being prepared to listen to the other side and to
respond appropriately.
Bargaining skills
The basic bargaining skills are:
● the ability to sense the extent to which the other side wants or indeed expects to
achieve its claims or sustain its offer;
● the reciprocal ability not to give real wants away (bargaining, as was mentioned
earlier, is about concealing as well as revealing) – in the market place it is always
easier for sellers to drive a hard bargain with buyers who have revealed somehow
that they covet the article;
● flexible realism – the capacity to make realistic moves during the bargaining
process to reduce the claim or increase the offer which will demonstrate that the
bargainer is seeking a reasonable settlement and is prepared to respond appropri-
ately to movements made by the other side;
● respect – the ability to demonstrate to the other party that the negotiator respects
their views and takes them seriously even if he or she disagrees with them;
● sensitivity – the ability to sense changes in moods and directions or weaknesses in
arguments and respond quickly to press home a point.
Acquiring the skills
Negotiating and bargaining skills are developed through experience. To a certain
extent they can be taught in the classroom through role plays and simulations but
804 ❚ Employee relations
these can never replace the reality of sitting down with the other side and discussing
claims and counter-offers, making points, handling confrontation and working out
and applying the tactics required to reach a satisfactory settlement. It is useful to be
aware of the need to apply the skills listed above but they only become meaningful
during actual negotiation.
The best way to learn is by being a subsidiary member of a team with the scope to
observe and comment on the tactics, approaches and skills used by both sides and,
increasingly, to make planned contributions. A good team leader will nurse the tyro
negotiator and will review the nature of each negotiating session to assess what went
right or wrong, and why. This is how the writer learnt his negotiating skills and it
served him in good stead when faced with the task of leading negotiating teams at
plant, local and national level in the stimulating, exciting but sometimes frustrating
process of negotiation.
Negotiating and bargaining ❚ 805
Employee voice
The phrase ‘employee voice’ refers to the say employees have in matters of concern
to them in their organization. Employee voice processes answer the question posed
by Beardwell (1998): ‘What is the most important expression of employee pers-
pectives within any organization?’ In this chapter the notion of employee voice is
first defined, and reference is made to the more traditional but closely associated
concepts of participation and involvement. The rest of the chapter is devoted to
describing the various employee voice processes that can be developed in organiza-
tions.
THE CONCEPT OF EMPLOYEE VOICE
As defined by Boxall and Purcell (2003), ‘Employee voice is the term increasingly
used to cover a whole variety of processes and structures which enable, and some-
times empower employees, directly and indirectly, to contribute to decision-making
in the firm.’ Employee voice can be seen as ‘the ability of employees to influence
the actions of the employer’ (Millward et al 2000). The concept covers the provision of
opportunities for employees to register discontent and modify the power of manage-
ment. It embraces involvement, and more significantly, participation.
53
INVOLVEMENT AND PARTICIPATION
Involvement means that management allows employees to discuss with it issues that
affect them but that management retains the right to manage. It is primarily a
management-driven concept. Participation is about employees playing a greater part
in the decision making process. It is therefore much closer to the concept of employee
voice systems, that is, arrangements for ensuring that employees are given the oppor-
tunity to influence management decisions and to contribute to the improvement of
organizational performance.
PURPOSES OF EMPLOYEE VOICE
The purposes of employee voice have been defined by Marchington et al (2001) as
follows:
● Articulation of individual dissatisfaction – to rectify a problem with management or
prevent deterioration of relations.
● Expression of collective organization – to provide a countervailing source of power to
management.
● Contribution to management decision making – to seek improvements in work orga-
nization, quality and productivity.
● Demonstration of mutuality and cooperative relations – to achieve long term viability
for the organization and its employees.
THE FRAMEWORK FOR EMPLOYEE VOICE
The framework for employee voice has been modelled by Marchington et al (2001) as
shown in Figure 53.1. This framework identifies two dimensions of voice: first, indi-
vidual employees, and second, collective; that is, union and other representation. The
shared agenda of involvement and partnership is a form of upward problem solving.
This is on the same axis as the contested agenda of grievances and collective
bargaining. These are not absolutes. Organizations will have tendencies toward
shared or contested agendas, just as there will be varying degrees of direct and indi-
rect involvement, although they are unlikely to have partnership and traditional
collective bargaining at the same time. As Kochan et al (1986) point out, one of the
strongest factors affecting the choice of approach to employee voice is the attitude of
management towards unions.
808 ❚ Employee relations
EXPRESSION OF EMPLOYEE VOICE
The degree to which employees have a voice will vary considerably. At one end of the
scale there is unilateral management, where employees have no voice at all. At the
other end, employees might have complete self-management and control as in a
cooperative, although this is rare. In between, the steps in the degree to which
employees have voice, as defined by Boxall and Purcell (2003), are:
● little voice – information provided;
● downward – right to be told;
● some – opportunity to make suggestions;
● two way – consulted during decision making;
● two way plus – consulted at all stages of decision making and implementation;
● a lot – the right to delay a decision;
● power to affect outcome – the right to veto a decision;
● substantial – equality or co-determination in decision making.
Employee voice ❚ 809
Employee Partnership
involvement agreements
Grievance Traditional
procedures collective
bargaining
Direct
involvement
Shared agenda
Contested agenda
Indirect
involvement
Figure 53.1 A framework for employee voice
(Source: M. Marchington, A. Wilkinson, P Ackers and A. Dandon, Management Choice and
Employee Voice, CIPD, 2001)
FACTORS AFFECTING CHOICE
Research carried out by Marchington et al (1992) identified a number of factors that
influenced employers to implement employee involvement or voice initiatives:
● information and education – a desire to ‘educate’ employees more fully about
aspects of the business and to convince them of the ‘logic’ of management’s
actions;
● secure enhanced employee contributions – seeking employee ideas and using them to
improve performance;
● handling conflict at work and promoting stability – providing a safety valve for the
expression of employees’ views;
● a mechanism for channelling employee anxieties and misgivings without their resorting
to the disputes procedure and industrial action.
FORMS OF EMPLOYEE VOICE
As defined by Marchington et al (2001), the main methods of employee voice fall into
two categories: representative participation and upward problem solving.
Representative participation
● Joint consultation – a formal mechanism which provides the means for manage-
ment to consult employee representatives on matters of mutual interest
(discussed in more detail below).
● Partnership schemes – these emphasize mutual gains and tackling issues in a spirit
of cooperation rather than through traditional adversarial relationships.
● European Works Councils – these may be set up across European sites as required
by EU legislation.
● Collective representation – the role of trade unions or other forms of staff association
in collective bargaining and representing the interests of individual employees
and groups of employees. This includes the operation of grievance procedures.
Upward problem solving
● Electronic media – the intranet.
● Two way communication – meetings between managers and their staff, or briefing
groups.
810 ❚ Employee relations
● Attitude surveys – seeking the opinions of staff through questionnaires (discussed
in more detail below).
● Suggestion schemes – the encouragement of employees to make suggestions, often
accompanied by rewards for accepted ideas (discussed in more detail below).
● Project teams – getting groups of employees together with line managers to
develop new ideas, processes, services or products or to solve problems (quality
circles and improvement groups come into this category, although the former
have generally failed to survive as a specific method of involvement).
JOINT CONSULTATION
Joint consultation enables managers and employee representatives to meet on a
regular basis in order to exchange views, to make good use of members’ knowledge
and expertise, and to deal with matters of common interest that are not the subject of
collective bargaining.
For joint consultation to work well it is first necessary to define, discuss and agree
its objectives. These should be related to tangible and significant aspects of the job,
the process of management, or the formulation of policies that affect the interests of
employees. They should not deal only with peripheral matters such as welfare,
social amenities or the quality of the sausages in the staff restaurant. Consultation
should take place before decisions are made. Management must believe in and must
be seen to believe in involving employees. Actions speak better than words, and
management should demonstrate that it will put into effect the joint decisions
made during discussions. The unions must also believe in participation as a
genuine means of giving them voice and advancing the interests of their members,
and not simply as a way of getting more power. They should show by their actions
that they are prepared to support unpopular decisions to which they have been a
party.
Joint consultation machinery should be in line with any existing systems of negoti-
ation and representation. It should not be supported by management as a possible
way of reducing the powers of the union. If this naive approach is taken, it will fail –
it always does. Joint consultation should be regarded as a process of integrative
bargaining complementary to the distributive bargaining that takes place in joint
negotiating committees.
Consultative committees should always relate to a defined working unit, should
never meet unless there is something specific to discuss, and should always conclude
their meetings with agreed points which are implemented quickly.
Employee and management representatives should be properly briefed and
Employee voice ❚ 811
trained, and have all the information they require. Managers and team leaders should
be kept in the picture, and as appropriate, involved in the consultation process. It is
clearly highly undesirable for them to feel that they have been left out.
ATTITUDE SURVEYS
Attitude surveys are a valuable way of involving employees by seeking their views
on matters that concern them. Attitude surveys can provide information on the pref-
erences of employees, give warning on potential problem areas, diagnose the cause of
particular problems, and compare levels of job satisfaction, commitment and morale
in different parts of the organization.
Methods of conducting attitude surveys
There are three methods of conducting attitude surveys:
● By the use of structured questionnaires. These can be issued to all or a sample of
employees. The questionnaires may be standardized ones, such as the Brayfield
and Rothe Index of Job Satisfaction, or they may be developed specially for the
organization. The advantage of using standardized questionnaires is that they
have been thoroughly tested, and in many cases norms are available against
which results can be compared. Additional questions specially relevant to the
company can be added to the standard list. A tailor-made questionnaire can be
used to highlight particular issues, but it may be advisable to obtain professional
help from an experienced psychologist, who can carry out the skilled work of
drafting and pilot testing the questionnaire and interpreting the results.
Questionnaires have the advantage of being relatively cheap to administer and
analyse, especially when there are large numbers involved. Many organizations
use electronic means (the intranet) to seek the views of employees generally or on
particular issues. An example of an attitude survey dealing with views on pay is
given in the Appendix.
● By the use of interviews. These may be ‘open ended’ or depth interviews in which
the discussion is allowed to range quite freely. Alternatively they may be semi-
structured in that there is a checklist of points to be covered, although the aim of
the interviewer should be to allow discussion to flow around the points so that
the frank and open views of the individual are obtained. Alternatively, and more
rarely, interviews can be highly structured so that they become no more than the
spoken application of a questionnaire. Individual interviews are to be preferred
812 ❚ Employee relations
because they are more likely to be revealing, but they are expensive and time-
consuming and not so easy to analyse. Discussions through ‘focus groups’
(groups of employees convened to focus their attention on particular issues) are a
quicker way of reaching a large number of people, but the results are not so easy
to quantify, and some people may have difficulty in expressing their views in
public.
● By a combination of questionnaire and interview. This is the ideal approach because it
combines the quantitative data from the questionnaire with the qualitative data
from the interviews. It is always advisable to accompany questionnaires with
some depth interviews, even if time permits only a limited sample. An alternative
approach is to administer the questionnaire to a group of people and then discuss
the reactions to each question with the group. This ensures that a quantified
analysis is possible but enables the group, or at least some members of it, to
express their feelings more fully.
● By the use of focus groups. A focus group is a representative sample of employees
whose attitudes and opinions are sought on issues concerning the organization
and their work. The essential features of a focus group are that it is structured,
informed, constructive and confidential.
Assessing results
It is an interesting fact that when people are asked directly if they are satisfied with
their job, most of them (70 to 90 per cent) will say they are. This is regardless of the
work being done, and often in spite of strongly held grievances. The probable reason
for this phenomenon is that while most people are willing to admit to having griev-
ances – in fact, if invited to complain, they will complain – they may be reluctant to
admit, even to themselves, to being dissatisfied with a job that they have no imme-
diate intention of leaving. Many employees have become reconciled to their work,
even if they do not like some aspects of it, and have no real desire to do anything else.
So they are, in a sense, satisfied enough to continue, even if they have complaints.
Finally, many people are satisfied with their job overall, although they grumbled
about many aspects of it.
Overall measures of satisfaction do not, therefore, always reveal anything inter-
esting. It is more important to look at particular aspects of satisfaction or dissatisfac-
tion, to decide whether or not anything needs to be done. In these circumstances, the
questionnaire will indicate only a line to be followed up. It will not provide the
answers. Hence the advantage of individual meetings or focus group discussions to
explore in depth any issue raised.
Employee voice ❚ 813
SUGGESTION SCHEMES
Suggestion schemes can provide a valuable means for employees to participate in
improving the efficiency of the company. Properly organized, they can help to reduce
the feelings of frustration endemic in all concerns where people think they have good
ideas but cannot get them considered because there are no recognized channels of
communication. Normally only those ideas outside the usual scope of employees’
duties are considered, and this should be made clear, as well as the categories of those
eligible for the scheme – senior managers are often excluded.
The basis of a successful suggestion scheme should be an established procedure for
submitting and evaluating ideas, with tangible recognition for those that have merit,
and an effective system for explaining to employees without discouraging them that
their ideas cannot be accepted.
The most common arrangement is to use suggestion boxes, with possibly a
special form for entering a suggestion. Alternatively, or additionally, employees
can be given the name of an individual or a committee to whom suggestions
should be submitted. Managers and team leaders must be stimulated to encourage
their staff to submit suggestions, and publicity in the shape of posters, leaflets and
articles in the company magazine should be used to promote the scheme. The
publicity should give prominence to the successful suggestions and how they are
being implemented.
One person should be made responsible for administering the scheme. He or she
should have the authority to reject facetious suggestions, but should be given clear
guidance on the routing of suggestions by subject matter to departments or individ-
uals for their comments. The administrator deals with all communications, and if
necessary may go back to the individual who submitted the suggestion to get more
details of, for example, the savings in cost or improvements in output that should
result from the idea.
It is desirable to have a suggestion committee consisting of management and
employee representatives, to review suggestions in the light of the comments of any
specialist functions or executives who have evaluated them. This committee should
be given the final power to accept or reject suggestions, and be able if necessary to call
for additional information or opinion before making its decision. The committee
could also decide on the size of any award within established guidelines, such as a
proportion of savings during the first year. There should be a standard procedure for
recording the decisions of the committee and informing those who made suggestions
of the outcome – with reasons for rejection if appropriate.
814 ❚ Employee relations
PLANNING FOR VOICE
The forms of voice appropriate for an organization depend upon the values and atti-
tudes of management, and if they exist trade unions, and the current climate of
employee relations. Planning should be based on a review of the existing forms of
voice, which includes discussions with stakeholders (line managers, employees and
trade union representatives) on the effectiveness of existing arrangements and any
improvements required. In the light of these discussions, new or revised approaches
can be developed, but it is necessary to brief and train those involved in the part they
should play.
Employee voice ❚ 815
Communications
Organizations function by means of the collective action of people, yet each indi-
vidual is capable of taking independent action which may not be in line with policy
or instructions, or may not be reported properly to other people who ought to know
about it. Good communications are required to achieve coordinated results.
Organizations are subject to the influence of continuous change which affects the
work employees do, their well-being and their security. Change can be managed only
by ensuring that the reasons for and the implications of change are communicated to
those affected in terms which they can understand and accept.
Individuals are motivated by the extrinsic reward system and the intrinsic rewards
coming from the work itself. But the degree to which they are motivated depends
upon the amount of responsibility and scope for achievement provided by their job,
and upon their expectations that the rewards they will get will be the ones they want,
and will follow from the efforts they make. Feelings about work and the associated
rewards depend very much on the effectiveness of communications from their
managers or team leaders and within the company.
Above all, good two-way communications are required so that management can
keep employees informed of the policies and plans affecting them, and employees
can react promptly with their views about management’s proposals and actions.
Change cannot be managed properly without an understanding of the feelings of
those affected by it, and an efficient system of communications is needed to under-
stand and influence these feelings.
54
But the extent to which good communications create satisfactory relationships
rather than simply reducing unsatisfactory ones, can be exaggerated. A feature of
management practices is the way in which different management theories become
fashionable or influential for a while and then decline in favour. Among these has
been the ‘good communications’ theory of management. This approach to dealing
with management problems is based upon the following assumptions:
● The needs and aims of both employees and management are, in the long run, the
same in any organization. Managers’ and employees’ ideas and objectives can all
be fitted together to form a single conceptual framework.
● Any differences in opinion between management and employees are due to
misunderstandings which have arisen because communications are not good
enough.
● The solution to industrial strife is to improve communications.
This theory is attractive and has some validity. Its weakness is that the assumptions
are too sweeping, particularly the belief that the ultimate objectives of management
and workers are necessarily identical. The good communications theory, like pater-
nalism, seems to imply that a company can develop loyalty by keeping people
informed and treating them well. But people working in organizations have other
and, to them, more important loyalties elsewhere – and why not?
The existence of different loyalties and points of view in an organization does not
mean that communication is unimportant. If anything the need for a good communi-
cations system becomes even greater when differences and conflict exist. But it can
only alleviate those differences and pave the way to better cooperation. It cannot
solve them.
It is therefore necessary to bear in mind that the group with which we identify – the
reference group – influences our attitudes and feelings. ‘Management’ and the ‘the
union’ as well as our family, our ethnic background, our political party and our reli-
gious beliefs (if any) constitute a reference group and colour our reactions to informa-
tion. What each group ‘hears’ depends on its own interests. Shared experiences and
common frames of reference have much more influence than exhortations from
management. Employees may feel they have nothing to do with them because it
conflicts with what they already believe.
However, although there may be limitations on the extent to which communication
strategies can enhance mutuality and commitment, there is no doubt that it is essen-
tial for managements to keep people informed on matters that affect them and to
provide channels for them to express their views. This is particularly necessary when
new employment initiatives are taking place and effective change management is
818 ❚ Employee relations
very much about communicating management’s intentions to people and making
sure that they understand how they will be affected.
COMMUNICATION AREAS AND OBJECTIVES
The main communication areas and their associated objectives are set out in Table
54.1.
Employee relations are mainly affected by managerial and internal communica-
tions, although external communications are an additional channel of information.
The strategy for managerial communications is concerned with planning and control
procedures, management information systems and techniques of delegating and
giving instructions. These matters are outside the scope of this book, except in so far
as the procedures and skills can be developed by training programmes.
COMMUNICATIONS STRATEGY
The strategy for internal communications should be based on analyses of:
● what management wants to say;
● what employees want to hear;
● the problems being met in conveying or receiving information.
These analyses can be used to indicate the systems of communication that need to be
developed and the education and training programmes required to make them work.
They should also provide guidance on how communications should be managed and
timed. Bad management and poor timing are frequently the fundamental causes of
ineffective communication.
What management wants to say
What management wants to say depends upon an assessment of what employees
need to know, which, in turn, is affected by what they want to hear.
Management usually aims to achieve three things: first, to get employees to under-
stand and accept what management proposes to do in areas that affect them; second,
to obtain the commitment of employees to the objectives, plans and values of the
organization; and, third, to help employees to appreciate more clearly the contribu-
tion they can make to organizational success and how it will benefit them.
Communications ❚ 819
820 ❚ Employee relations
Communication Area Objectives
1. the communication downwards to ensure that managers and
and sideways of corporate or supervisors receive clear, accurate
functional objectives, policies and prompt information on what
plans and budgets to those who they are expected to achieve to
have to implement them further the company’s objectives
2. the communication downwards to ensure that the instructions are
of direct instructions from a clear and precise and provide the
manager to a subordinate on necessary motivation to get people
what the latter has to do into action
3. the communication upwards and to ensure that managers and
sideways of proposals, supervisors have adequate scope to
suggestions and comments on influence corporate and functional
corporate or functional objectives, decisions on matters about which
policies and budgets from those they have specific expertise and
who have to implement them knowledge
4. the communication upwards and to enable management to monitor and
sideways of management control performance in order that, as
information on performance and necessary, opportunities can be exploited
results or swift corrective action taken
5. the communication downwards to ensure that (i) employees are kept
of information on company plans, informed of matters that affect them,
policies or performance especially changes to working conditions,
and factors influencing their prosperity
and security; (ii) employees are encouraged
to identify themselves more completely
with the company
6. the communication upwards of to ensure that employees are given
the comments and reactions of an opportunity to voice their suggestions
employees to what is proposed will and fears and that the company is in a
happen or what is actually happening position to amend its plans in the light
in matters that affect them of these comments
7. the receipt and analysis of to ensure that the company is fully
information from outside which aware of all the information on
affects the company’s interests legislation and on marketing,
commercial, financial and technological
matters that affect its interests
8. the presentation of information to exert influence in the interests of
about the company and its the company, to present a good
products to the government, image of the company, and to
customers and the public at large persuade customers to buy its
products or services
Table 54.1 Communication areas and objectives
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Communications from management should be about values, plans, intentions and
proposals (with the opportunity for discussion with and feedback from employees)
as well as about achievements and results. Exhortations should not be used: no one
listens to them. It is better to concentrate on specific requirements rather than
resorting to general appeals for abstract things such as improved quality or produc-
tivity. The requirements should be phrased in a way which emphasizes how all
concerned will actually work together and the mutual benefits that should result.
What employees want to hear
Clearly, employees want to hear about and to comment upon the matters that affect
their interests. These will include changes in working methods and conditions,
changes in the arrangements for overtime and shift working, company plans which
may affect pay or security, and changes in terms and conditions of employment. It is
management’s job to understand what employees want to hear and plan its
communications strategy accordingly. Understanding can be obtained by conducting
‘focus groups’ discussions which bring together groups of employees to focus on
particular issues that concern them, by means of attitude surveys, by asking
employee representatives, by informally listening to what employees say, and by
analysing grievances to see if improved communications could modify them.
Analysing communication problems
Specific examples of employee relations problems where communication failures
have been the cause or a contributory factor should be analysed to determine exactly
what went wrong and what needs to be done to put it right. The problems may be any
of those listed earlier in this chapter, including lack of appropriate channels of
communication, lack of appreciation of the need to communicate, and lack of skill in
overcoming the many formidable barriers to communication. Problems with chan-
nels of communication can be dealt with by introducing new or improved communi-
cations systems. Lack of skill is a matter for education and training.
COMMUNICATION SYSTEMS
Communication systems can be divided into those using an intranet, those using the
written word such as magazines, newsletters, bulletins and notice-boards, and those
using oral methods such as meetings, briefing groups and public address systems.
The aim should be to make judicious use of a number of channels to make sure that
the message gets across.
Communications ❚ 821
Communications through an intranet system
Organizations are increasingly relying on an internal e-mail system (the intranet) to
communicate information, especially in workplaces where all or most of the
employees have direct or indirect access to a computer. The advantage of intranet
communications is that they can be transmitted swiftly to a wide audience. They can
also be used for two-way communications – employees can be invited to respond to
questions or surveys.
Magazines
Glossy magazines or house journals are an obvious way to keep employees informed
about the company and are often used for public relations purposes as well. They can
extol and explain the achievements of the company and may thus help to increase
identification and even loyalty. If employees are encouraged to contribute (although
this is difficult), the magazine can become more human. The biggest danger of this
sort of magazine is that it becomes a public relations exercise which is seen by
employees as having little relevance to their everyday affairs.
Newsletters
Newsletters aim to appear more frequently and to angle their contents more to the
immediate concerns of employees than the glossier form of house magazine. To be
effective, they should include articles specifically aimed at explaining what manage-
ment is planning to do and how this affects everyone. They can also include more
chatty ‘human interest’ material about the doings of employees to capture the
attention of readers. Correspondence columns can provide an avenue for the
expression of employees’ views and replies from management, but no attempt
should be made to censor letters (except those that are purely abusive) or to pull
punches in reply. Anonymous letters should be published if the writer gives his name
to the editor.
The key factor in the success of a newsletter or any form of house magazine is the
editor, who should be someone who knows the company and its employees and can
be trusted by everyone to be frank and fair. Professional expertise is obviously desir-
able but it is not the first consideration, as long as the editor can write reasonably well
and has access to expert help in putting the paper together. It is often a good idea to
have an editorial board consisting of management and employee representatives to
advise and assist the editor.
Organizations often publish a newsletter in addition to a house magazine, treating
the latter mainly as a public relations exercise and relying on the newsletter as the
prime means of communicating with employees.
822 ❚ Employee relations
Bulletins
Bulletins can be used to give immediate information to employees which cannot wait
for the next issue of a newsletter; or they can be a substitute for a formal publication
if the company does not feel that the expense is justified. Bulletins are useful only if
they are distributed quickly and are seen by all interested employees. They can
simply be posted on notice-boards or, more effectively, given to individual employees
and used as a starting point for a briefing session if they contain information of suffi-
cient interest to merit a face-to-face discussion.
Notice-boards
Notice-boards are an obvious but frequently misused medium for communications.
The biggest danger is allowing boards to be cluttered up with uninteresting or out-of-
date material. It is essential to control what goes on to the boards and to appoint
responsible people to service them by removing out-of-date or unauthorized notices.
A more impressive show can be made of notices and other material if an informa-
tion centre is set up in the restaurant or some other suitable place where the informa-
tion can be displayed in a more attractive and compelling manner than on a typical
notice-board.
Employee involvement
Employee involvement through such means as consultative committees provides a
channel for two-way communication. Sometimes, however, they are not particularly
effective, either because their thunder has been stolen by union negotiation commit-
tees, or because their proceedings are over-formalized and restricted and fail to
address the real issues. It is essential to disseminate the information revealed at
committees around the offices and works, but it is impossible to rely on committee
members to do this. Minutes can be posted on notice-boards, but they are seldom
read, usually because they contain too much redundant material.
DVDs
Specially made DVDs can be a cost-effective method of getting across personal
messages (eg from the chief executive) or information about how the company is
doing. They can, however, be regarded by employees as too impersonal and/or too
slick to have any real meaning.
Communications ❚ 823
Team briefing
The concept of team briefing (previously called briefing groups), as originally devel-
oped by the Industrial Society, is a device to overcome the restricted nature of joint
consultative committees by involving everyone in an organization, level by level, in
face-to-face meetings to present, receive and discuss information. Team briefing aims
to overcome the gaps and inadequacies of casual briefings by injecting some order
into the system.
Team briefing should operate as follows:
1. Organization
– cover all levels in an organization;
– fewest possible steps between the top and bottom;
– between 4 and 18 in each group;
– run by the immediate leader of each group at each level (who must be
properly trained and briefed).
2. Subjects
– policies – explanations of new or changed policies;
– plans – as they affect the organization as a whole and the immediate group;
– progress – how the organization and the group are getting on;
– people – new appointments, points about personnel matters (pay, security,
procedures).
3. Sequence – the briefing groups should work to a brief prepared by the board on
key issues. This briefing is written up and cascaded down the organization. The
briefing group meetings should, however, allow for discussion of the brief, and
the system should cater for any reactions or comments to be fed back to the top.
This provides for two-way communication.
4. Timing and duration:
– a minimum of once a month for those in charge of others and once every two
months for every individual in the organization – but meet only if there is
something to say;
– duration not longer than 20–30 minutes.
The merit of team briefing is that it enables face-to-face communications to be
planned and, to a reasonable degree, formalized. It is easy, however, for it to start on
a wave of enthusiasm and then to wither away because of lack of sufficient drive and
enthusiasm from the top downward, inadequately trained and motivated managers
and team leaders, reluctance of management to allow subjects of real importance to
be discussed throughout the system, and insufficient feedback upwards through each
level.
824 ❚ Employee relations
A team briefing system must be led and controlled effectively from the top, but it
does require a senior manager with specific responsibility to advise on the subject
matter and the preparation of briefs (it is important to have well-prepared material to
ensure that briefing is carried out consistently and thoroughly at each level), to train
managers and team leaders, and to monitor the system by checking on the effective-
ness and frequency of meetings.
Communications ❚ 825
Health, safety and
welfare
This part deals with the services provided by the HR department in order to help the
organization meet its legal and social responsibilities to ensure a healthy and safe
place of work, to help employees cope with their personal problems, to help elderly and
retired employees and, in some cases, to make recreational facilities available.
Part XI
Health and safety
Health and safety policies and programmes are concerned with protecting employees
– and other people affected by what the company produces and does – against the
hazards arising from their employment or their links with the company.
Occupational health programmes deal with the prevention of ill-health arising
from working conditions. They consist of two elements:
● occupational medicine, which is a specialized branch of preventive medicine
concerned with the diagnosis and prevention of health hazards at work and
dealing with any ill-health or stress that has occurred in spite of preventive
actions;
● occupational hygiene, which is the province of the chemist and the engineer or
ergonomist engaged in the measurement and control of environmental hazards.
Safety programmes deal with the prevention of accidents and with minimizing the
resulting loss and damage to persons and property. They relate more to systems of
work than the working environment, but both health and safety programmes are
concerned with protection against hazards, and their aims and methods are clearly
inter-linked.
The Royal Society for the Prevention of Accidents (Bibbings, 2003) has made the
following observation on accident prevention:
55
We fail to prevent accidents not just because of incomplete control of the circumstances
which give rise to them, but because of our partial knowledge of how things really are
and, of course, our inevitably incomplete knowledge of what will happen in the future.
Human beings in this sense fail to bring order to an essentially chaotic and dangerous
world – not just because it defies their efforts to control it but because they do not fully
understand its complexity and randomness. The result is a potentially dangerous
tendency to deny that error and disorder are permanent features of the natural world and
all human undertakings in particular. We become complacent and fail to take preventa-
tive action. Good investigation of accidents, where it takes place, tends almost invari-
ably to show that failures to prevent them are rooted either in weaknesses in risk
assessment or in the implementation of control measures.
MANAGING HEALTH AND SAFETY AT WORK
It is estimated by the Health and Safety Executive (HSE) that in the UK about 500
people are killed at work every year and several hundred thousand more are injured
or suffer ill-health. It is also estimated that, apart from the pain and misery caused to
those directly or indirectly concerned, the total cost to British employers of work-
related injury and illness exceeds £4 billion a year.
The achievement of a healthy and safe place of work and the elimination to the
maximum extent possible of hazards to health and safety are the responsibility of
everyone employed in an organization, as well as those working there under
contract. But the onus is on management to achieve and indeed go beyond the high
standard in health and safety matters required by the legislation – the Health and
Safety at Work etc. Act in 1974 and the various regulations laid down in the Codes of
Practice.
The importance of healthy and safe policies and practices is, sadly, often under-
estimated by those concerned with managing businesses and by individual
managers within those businesses. But it cannot be emphasized too strongly that
the prevention of accidents and elimination of health and safety hazards are a
prime responsibility of management and managers in order to minimize suffering
and loss.
THE IMPORTANCE OF HEALTH AND SAFETY IN THE
WORKPLACE
The achievement of the highest standards of health and safety in the workplace is
important because the elimination, or at least minimization, of health and safety
hazards and risks is the moral as well as the legal responsibility of employers – this is
830 ❚ Health, safety and welfare
the over-riding reason. Close and continuous attention to health and safety is
important because ill-health and injuries inflicted by the system of work or working
conditions cause suffering and loss to individuals and their dependants. In addition,
accidents and absences through ill-health or injuries result in losses and damage for
the organization. This ‘business’ reason is very much less significant than the
‘human’ reasons given above but it is still a consideration, albeit a tangential one.
As described in this chapter, managing health and safety at work is a matter of:
● developing health and safety policies;
● conducting risk assessments which identify hazards and assess the risks attached
to them;
● carrying out health and safety audits and inspections;
● implementing occupational health programmes;
● managing stress;
● preventing accidents;
● measuring health and safety performance;
● communicating the need for good health and safety practices;
● training in good health and safety practices;
● organizing health and safety.
BENEFITS OF WORKPLACE HEALTH AND SAFETY
Research by the Health and Safety Executive (2004a) in 19 case-study organizations
such as AstraZeneca, Severn Trent Water and Transco, established that the tangible
benefits from better health and safety management include higher productivity,
lower absence, avoiding the cost of accidents and litigation, meeting client demands,
and improved staff morale and employee relations. These organizations have
managed to overcome the common perception that health and safety is a compliance
or staff welfare issue, and use initiatives in this area to add value to the business.
Employers in the study made a number of headline savings from investing in occu-
pational health and safety:
● Rolls Royce saved £11 million through improved absence management;
● in one month, St Bartholomew’s Hospital and the London NHS Trust recouped
the cost of flu injections for staff;
● manual-handling injuries were eliminated and the resultant lost hours reduced to
zero at furniture retailer MFI;
Health and safety ❚ 831
● British Polythene Industries saved £12 for every £1 spent on manual handling
improvements;
● The Port of London Authority cut absence by 70 per cent.
HEALTH AND SAFETY POLICIES
Written health and safety policies are required to demonstrate that top management
is concerned about the protection of the organization’s employees from hazards at
work and to indicate how this protection will be provided. They are, therefore,
first, a declaration of intent, second, a definition of the means by which that intent
will be realized, and third, a statement of the guidelines that should be followed by
everyone concerned – which means all employees – in implementing the policy.
The policy statement should consist of three parts:
● the general policy statement;
● the description of the organization for health and safety;
● details of arrangements for implementing the policy.
The general policy statement
The general policy statement should be a declaration of the intention of the employer
to safeguard the health and safety of employees. It should emphasize four funda-
mental points:
● that the safety of employees and the public is of paramount importance;
● that safety takes precedence over expediency;
● that every effort will be made to involve all managers, team leaders and
employees in the development and implementation of health and safety proce-
dures;
● that health and safety legislation will be complied with in the spirit as well as the
letter of the law.
Organization
This section of the policy statement should describe the health and safety organiza-
tion of the company through which high standards are set and achieved by people at
all levels in the organization.
This statement should underline the ultimate responsibility of top management
832 ❚ Health, safety and welfare
for the health and safety performance of the organization. It should then indicate
how key management personnel are held accountable for performance in their areas.
The role of safety representatives and safety committees should be defined, and the
duties of specialists such as the safety adviser and the medical officer should be
summarized.
CONDUCTING RISK ASSESSMENTS
What is a risk assessment?
Risk assessments are concerned with the identification of hazards and the analysis of
the risks attached to them.
A hazard is anything that can cause harm (eg working on roofs, lifting heavy
objects, chemicals, electricity etc). A risk is the chance, large or small, of harm actually
being done by the hazard. Risk assessments are concerned with looking for hazards
and estimating the level of risk associated with them. As suggested by Holt and
Andrews (1993), risk can be calculated by multiplying a severity estimate by a proba-
bility estimate. That is, risk = severity × probability.
The purpose of risk assessments is, of course, to initiate preventive action. They
enable control measures to be devised on the basis of an understanding of the relative
importance of risks. Risk assessments must be recorded if there are five or more
employees.
There are two types of risk assessment. The first is quantitative risk assessment,
which produces an objective probability estimate based upon risk information that is
immediately applicable to the circumstances in which the risk occurs. The second is
qualitative risk assessment, which is more subjective and is based on judgement backed
by generalized data. Quantitative risk assessment is preferable if the specific data are
available. Qualitative risk assessment may be acceptable if there are little or no
specific data as long as it is made systematically on the basis of an analysis of working
conditions and hazards and informed judgement of the likelihood of harm actually
being done.
Looking for hazards
The following, as suggested by the HSE and others, are typical activities where acci-
dents happen or there are high risks:
● receipt of raw materials, eg lifting, carrying;
● stacking and storage, eg falling materials;
Health and safety ❚ 833
● movement of people and materials, eg falls, collisions;
● processing of raw materials, eg exposure to toxic substances;
● maintenance of buildings, eg roof work, gutter cleaning;
● maintenance of plant and machinery, eg lifting tackle, installation of equipment;
● using electricity, eg using hand tools, extension leads;
● operating machines, eg operating without sufficient clearance, or at an unsafe
speed; not using safety devices;
● failure to wear protective equipment, eg hats, boots, clothing;
● distribution of finished jobs, eg movement of vehicles;
● dealing with emergencies, eg spillages, fires, explosions;
● health hazards arising from the use of equipment or methods of working, eg
VDUs, repetitive strain injuries from badly designed work stations or working
practices.
The HSE suggests that most accidents are caused by a few key activities. It advises
that assessors should concentrate initially on those that could cause serious harm.
Operations such as roof work, maintenance and transport movement cause far more
deaths and injuries each year than many mainstream activities.
When carrying out a risk assessment it is also necessary to consider who might be
harmed, eg employees, visitors (including cleaners and contractors and the public
when calling in to buy products or enlist services).
Hazards should be ranked according to their potential severity as a basis for
producing one side of the risk equation. A simple three-point scale can be used such
as ‘low’, ‘moderate’ and ‘high’. A more complex severity rating scale has been
proposed by Holt and Andrews (1993), as follows:
1. Catastrophic – imminent danger exists, hazard capable of causing death and
illness on a wide scale.
2. Critical – hazard can result in serious illness, severe injury, property and equip-
ment damage.
3. Marginal – hazard can cause illness, injury, or equipment damage, but the results
would not be expected to be serious.
4. Negligible – hazard will not result in serious injury or illness; remote possibility of
damage beyond minor first-aid case.
Assessing the risk
When the hazards have been identified it is necessary to assess how high the risks are.
The HSE suggests that this involves answering three questions:
834 ❚ Health, safety and welfare
● What is the worst result?
● How likely is it to happen?
● How many people could be hurt if things go wrong?
A probability rating system can be used such as the one recommended by Holt and
Andrews:
1. Probable – likely to occur immediately or shortly.
2. Reasonably probable – probably will occur in time.
3. Remote – may occur in time.
4. Extremely remote – unlikely to occur.
Taking action
Risk assessment should lead to action. The type of action can be ranked in order of
potential effectiveness in the form of a ‘safety precedence sequence’ as proposed by
Holt and Andrews:
● Hazard elimination – use of alternatives, design improvements, change of
process.
● Substitution – for example, replacement of a chemical with one which is less
risky.
● Use of barriers – removing the hazard from the worker or removing the worker
from the hazard.
● Use of procedures – limitation of exposure, dilution of exposure, safe systems of
work (these depend on human response).
● Use of warning systems – signs, instructions, labels (these also depend on human
response).
● Use of personal protective clothing – this depends on human response and is used as
a side measure only when all other options have been exhausted.
Monitoring and evaluation
Risk assessment is not completed when action has been initiated. It is essential to
monitor the hazard and evaluate the effectiveness of the action in eliminating it or at
least reducing it to an acceptable level.
Health and safety ❚ 835
HEALTH AND SAFETY AUDITS
What is a health and safety audit?
Risk assessments identify specific hazards and quantify the risks attached to them.
Health and safety audits provide for a much more comprehensive review of all
aspects of health and safety policies, and procedures and practices programmes. As
defined by Saunders (1992):
A safety audit will examine the whole organisation in order to test whether it is meeting
its safety aims and objectives. It will examine hierarchies, safety planning processes,
decision-making, delegation, policy-making and implementation as well as all areas of
safety programme planning.
Who carries out a health and safety audit?
Safety audits can be conducted by safety advisers and/or personnel specialists but
the more managers, employees and trade union representatives are involved, the
better. Audits are often carried out under the auspices of a health and safety
committee with its members taking an active part in conducting them.
Managers can also be held responsible for conducting audits within their depart-
ments and, even better, individual members of these departments can be trained to
carry out audits in particular areas. The conduct of an audit will be facilitated if check
lists are prepared and a simple form used to record results.
Some organizations also use outside agencies such as the British Safety Institute to
conduct independent audits.
What is covered by a health and safety audit?
A health and safety audit should cover:
Policies
● Do health and safety policies meet legal requirements?
● Are senior managers committed to health and safety?
● How committed are other managers, team leaders and supervisors to health and
safety?
● Is there a health and safety committee? If not, why not?
● How effective is the committee in getting things done?
836 ❚ Health, safety and welfare
Procedures:
How effectively do the procedures:
● support the implementation of health and safety policies?
● communicate the need for good health and safety practices?
● provide for systematic risk assessments?
● ensure that accidents are investigated thoroughly?
● record data on health and safety which are used to evaluate performance and
initiate action?
● ensure that health and safety considerations are given proper weight when
designing systems of work or manufacturing and operational processes (includ-
ing the design of equipment and work stations, the specification for the product
or service, and the use of materials)?
● provide safety training, especially induction training and training when jobs or
working methods are changed?
Safety practices
● To what extent do health and safety practices in all areas of the organization
conform to the general requirements of the Health and Safety at Work Act and the
specific requirements of the various regulations and codes of practice?
● What risk assessments have been carried out? What were the findings? What
actions were taken?
● What is the health and safety performance of the organization as shown by the
performance indicators? Is the trend positive or negative? If the latter, what is
being done about it?
● How thoroughly are accidents investigated? What steps have been taken to
prevent their recurrence?
● What is the evidence that managers and supervisors are really concerned about
health and safety?
What should be done with the audit?
The audit should cover the questions above but its purpose is to generate action.
Those conducting the audit will have to assess priorities and costs and draw up
action programmes for approval by the Board.
Health and safety ❚ 837
SAFETY INSPECTIONS
Safety inspections are designed to examine a specific area of the organization – oper-
ational department or manufacturing process – in order to locate and define any
faults in the system, equipment, plant or machines, or any operational errors that
might be the source of accidents. Safety inspections should be carried out on a regular
and systematic basis by line managers and supervisors with the advice and help of
health and safety advisers. The steps to be taken in carrying out safety inspections are
as follows:
● Allocate the responsibility for conducting the inspection.
● Define the points to be covered in the form of a checklist.
● Divide the department or plant into areas and list the points to which attention
needs to be given in each area.
● Define the frequency with which inspections should be carried out – daily in
critical areas.
● Use the check lists as the basis for the inspection.
● Carry out sample or spot checks on a random basis.
● Carry out special investigations as necessary to deal with special problems such
as operating machinery without guards to increase throughput.
● Set up a reporting system (a form should be used for recording the results of
inspections).
● Set up a system for monitoring that safety inspections are being conducted
properly and on schedule and that corrective action has been taken where
necessary.
OCCUPATIONAL HEALTH PROGRAMMES
Almost 20 million working days a year are lost because of work-related illness. Two
million people say they suffer from an illness they believe was caused by their work.
Muscular disorders, including repetitive strain injury and back pain, are by far the
most commonly reported illnesses with 1.2 million affected, and the numbers are
rising. The next biggest problem is stress, which 500,000 people say is so bad that it is
making them ill. These are large and disturbing figures and they show that high
priority must be given to creating and maintaining programmes for the improvement
of occupational health.
The control of occupational health and hygiene problems can be achieved by:
838 ❚ Health, safety and welfare
● eliminating the hazard at source through design and process engineering;
● isolating hazardous processes and substances so that workers do not come into
contact with them;
● changing the processes or substances used, to promote better protection or elimi-
nate the risk;
● providing protective equipment, but only if changes to the design, process or
specification cannot completely remove the hazard;
● training workers to avoid risk;
● maintaining plant and equipment to eliminate the possibility of harmful
emissions, controlling the use of toxic substances and eliminating radiation
hazards;
● good housekeeping to keep premises and machinery clean and free from toxic
substances;
● regular inspections to ensure that potential health risks are identified in good
time;
● pre-employment medical examinations and regular checks on those exposed to
risk;
● ensuring that ergonomic considerations (ie, those concerning the design and use
of equipment, machines, processes and workstations) are taken into account in
design specifications, establishing work routines and training – this is particularly
important as a means of minimizing the incidence of repetitive strain injury
(RSI);
● maintaining preventive medicine programmes which develop health standards
for each job and involve regular audits of potential health hazards and regular
examinations for anyone at risk.
Particular attention needs to be exercised on the control of noise, fatigue and stress.
Control of stress should be regarded as a major part of any occupational health
programme.
MANAGING STRESS
There are four main reasons why organizations should take account of stress and do
something about it:
1. They have the social responsibility to provide a good quality of working life.
2. Excessive stress causes illness.
3. Stress can result in inability to cope with the demands of the job, which, of
course, creates more stress.
Health and safety ❚ 839
4. Excessive stress can reduce employee effectiveness and therefore organizational
performance.
The ways in which stress can be managed by an organization include:
● job design – clarifying roles, reducing the danger of role ambiguity and conflict
and giving people more autonomy within a defined structure to manage their
responsibilities;
● targets and performance standards – setting reasonable and achievable targets which
may stretch people but do not place impossible burdens on them;
● placement – taking care to place people in jobs that are within their capabilities;
● career development – planning careers and promoting staff in accordance with their
capabilities, taking care not to over- or under-promote;
● performance management processes, which allow a dialogue to take place between
managers and individuals about the latter’s work, problems and ambitions;
● counselling – giving individuals the opportunity to talk about their problems with
a member of the personnel department or the company medical officer, or
through an employee assistance programme;
● management training in performance review and counselling techniques and in
what managers can do to alleviate their own stress and reduce it in others;
● work–life balance policies which take account of the pressures on employees who
have responsibilities as parents, partners or carers, and which can include such
provisions as special leave and flexible working hours.
The Health and Safety Executive (2003) has named the following ‘beacons of excel-
lence’ for stress prevention:
● Senior management commitment – stress interventions are unlikely to be imple-
mented successfully without the long-term commitment of management.
● Participative approach – involving employees from all levels of the organization at
every stage in a stress management programme increases the likelihood of a
successful outcome.
● Stress prevention strategy – this should cover the aims of interventions, tasks,
responsibilities and resources available.
● Risk assessment and task analysis – an appraisal of work activities should enable an
employer to recognize stress hazards before interventions are designed.
● Work-related and worker-related prevention and management – interventions should
be designed to tackle the causes of stress emanating from the work environment
and support individuals who are not protected by the first set of interventions, or
who are subject to special stressors.
840 ❚ Health, safety and welfare
ACCIDENT PREVENTION
The prevention of accidents is achieved by:
● identifying the causes of accidents and the conditions under which they are most
likely to occur;
● taking account of safety factors at the design stage – building safety into the
system;
● designing safety equipment and protective devices and providing protective
clothing;
● carrying out regular risk assessments audits, inspections and checks and taking
action to eliminate risks;
● investigating all accidents resulting in damage to establish the cause and to
initiate corrective action;
● maintaining good records and statistics in order to identify problem areas and
unsatisfactory trends;
● conducting a continuous programme of education and training on safe working
habits and methods of avoiding accidents;
● leadership and motivation – encouraging methods of leadership and motivation
that do not place excessive demands on people.
MEASURING HEALTH AND SAFETY PERFORMANCE
The saying that ‘if you can’t measure it you can’t manage it’ is totally applicable to
health and safety. It is essential to know what is happening, and it is even more essen-
tial to measure trends as a means of identifying in good time where actions are neces-
sary.
The most common measures are:
● The frequency rate:
Number of injuries × 100,000
Number of hours worked
● The incidence rate:
Number of injuries × 1,000
Average number employed during the period
Health and safety ❚ 841
● The severity rate – the days lost through accidents or occupation health problems
per 1,000,000 hours worked.
Some organizations adopt a ‘total loss control’ approach which covers the
cost of accidents to the business under such headings as pay to people off work,
damage to plant or equipment and loss of production. A cost severity rate
can then be calculated, which is the total cost of accidents per 1,000,000 hours
worked.
COMMUNICATING THE NEED FOR BETTER HEALTH
AND SAFETY PRACTICES
As Holt and Andrews (1993) observe, various forms of propaganda selling the health
and safety message have been used for many years, although: ‘They are now widely
felt to be of little value in measurable terms in changing behaviour and influencing
attitudes to health and safety issues.’ But they believe that it is still necessary to
deliver the message that health and safety is important as long as this supplements
rather than replaces other initiatives. They suggest that the following steps can be
taken to increase the effectiveness of safety messages:
● Avoid negatives – successful safety propaganda should contain positive messages,
not warnings of the unpleasant consequences of actions.
● Expose correctly – address the message to the right people at the point of danger.
● Use attention-getting techniques carefully – lurid images may only be remembered
for what they are, not for the message they are trying to convey.
● Maximize comprehension – messages should be simple and specific.
● Messages must be believable – they should address real issues and be perceived as
being delivered by people (ie. managers) who believe in what they say and are
doing something about it.
● Messages must point the way to action – the most effective messages call for positive
actions that can be achieved by the receivers and will offer them a tangible
benefit.
Approaches to briefing staff on the importance of health and safety
Advice to a group of staff on the importance of health and safety in the workplace
must be based on a thorough understanding of the organization’s health and safety
policies and procedures and an appreciation of the particular factors affecting the
health and safety of the group of people concerned. The latter can be based on
842 ❚ Health, safety and welfare
information provided by risk assessments, safety audits and accident reports. But the
advice must be positive – why health and safety is important and how accidents can
be prevented. The advice should not be over-weighted by awful warnings.
The points to be made include:
● a review of the health and safety policies of the organization with explanations of
the reasoning behind them and a positive statement of management’s belief that
health and safety is a major consideration because (1) it directly affects the well-
being of all concerned; and (2) it can, and does, minimize suffering and loss;
● a review of the procedures used by the organization for the business as a whole
and in the particular area to assess risks and audit safety position;
● an explanation of the roles of the members of the group in carrying out their work
safely and giving full consideration to the safety of others;
● a reiteration of the statement that one of the core values of the organization is
the maintenance of safe systems of work and the promotion of safe working
practices.
HEALTH AND SAFETY TRAINING
Health and safety training is a key part of the preventative programme. It should start
as part of the induction course. It should also take place following a transfer to a new
job or a change in working methods. Safety training spells out the rules and provides
information on potential hazards and how to avoid them. Further refresher training
should be provided and special courses laid on to deal with new aspects of health and
safety or areas in which safety problems have emerged.
ORGANIZING HEALTH AND SAFETY
Health and safety concerns everyone in an establishment although the main respon-
sibility lies with management in general and individual managers in particular. The
specific roles are summarized below:
● Management develops and implements health and safety policies and ensures
that procedures for carrying out risk assessments, safety audits and inspections
are implemented. Importantly, management has the duty of monitoring and
evaluating health and safety performance and taking corrective action as
necessary.
Health and safety ❚ 843
● Managers can exert the greater influence on health and safety. They are in imme-
diate control and it is up to them to keep a constant watch for unsafe conditions or
practices and to take immediate action. They are also directly responsible for
ensuring that employees are conscious of health and safety hazards and do not
take risks.
● Employees should be aware of what constitutes safe working practices as they
affect them and their fellow workers. While management and managers have the
duty to communicate and train, individuals also have the duty to take account of
what they have heard and learned in the ways they carry out their work.
● Health and safety advisers advise on policies and procedures and on healthy and
safe methods of working. They conduct risk assessments and safety audits and
investigations into accidents in conjunction with managers and health and safety
representatives, maintain statistics and report on trends and necessary actions.
● Medical advisers have two functions: preventive and clinical. The preventive func-
tion is most important, especially on occupational health matters. The clinical
function is to deal with industrial accidents and diseases and to advise on the
steps necessary to recover from injury or illness arising from work. They do not
usurp the role of the family doctor in non-work-related illnesses.
● Safety committees consisting of health and safety representatives advise on health
and safety policies and procedures, help in conducting risk assessments and
safety audits, and make suggestions on improving health and safety per-
formance.
844 ❚ Health, safety and welfare
Welfare services
Welfare services may be provided for matters concerning employees which are not
immediately connected with their jobs although they may be connected generally
with their place of work. These matters will include individual services relating to
employees’ welfare such as private help with counselling on personal problems,
assistance with problems of health or sickness and special services for retired
employees. Group services may include the provision of social and sporting activities
and restaurants. Child-care facilities may be provided for individual employees but
on a collective basis.
WHY PROVIDE WELFARE SERVICES?
There are arguments against the provision of welfare services. They imply do-
gooding and the HR fraternity has spent many years trying to shake off its association
with what it, and others, like to think of as at best peripheral and at worst redundant
welfare activities. Welfare is provided by the state services – why should industrial,
commercial or public sector organizations duplicate what is already there? The
private affairs of employees and their out-of-work interests should not be the concern
of their employers. It is selfish to maintain large playing fields and sports pavilions if
they are going to be used by a minute proportion of staff for a very limited period of
56
time – the space and facilities could be better used by the community. The argument
that the provision of employee welfare services increases the loyalty and motivation
of employees has long been exploded. If such services are used at all, they are taken
for granted. Gratitude, even if it exists, is not a motivating factor.
The case against employee welfare services is formidable; the last point is particu-
larly telling and there is some truth in each of the others – although there are limita-
tions to their validity. State welfare services are, in theory, available to all, but the
ability of social workers to give individual advice, especially on problems arising
from work, is limited in terms of both time and knowledge. It is all too easy for people
to fall into the cracks existing in the decaying edifice of the welfare state.
The case for providing employee welfare services rests mainly on the abstract
grounds of the social responsibility of organizations for those who work in them. This
is not paternalism in the Victorian sense – turkeys at Christmas – nor in the traditional
Japanese sense, where the worker’s whole life centres on the employer. Rather, it is
simply the realization that in exchange for offering their services, employees are enti-
tled to rather more than their pay, benefits and healthy and safe systems of work.
They are also entitled to consideration as human beings, especially when it is remem-
bered that many of their personal problems arise in the context of work and are best
dealt with there. People’s worries and the resulting stress may well arise from work
and their concerns about security, money, health, and relationships with others. But
they also bring their personal problems to work; and many of these cannot be solved
without reference to the situation there – they may require time off to deal with sick
children or partners, or care for relatives, or advice on how to solve their problems
and so minimize interference with their work.
The argument for employee welfare services at work was well put by Martin
(1967):
Staff spend at least half their waking time at work or in getting to it or leaving it. They
know they contribute to the organization when they are reasonably free from worry, and
they feel, perhaps inarticulately, that when they are in trouble they are due to get some-
thing back from the organization. People are entitled to be treated as full human beings
with personal needs, hopes and anxieties; they are employed as people; they bring
themselves to work, not just their hands, and they cannot readily leave their troubles at
home.
The social argument for employee welfare services is the most compelling one, but
there is also an economic argument. Increases in morale or loyalty may not result in
commensurate or, indeed, in any increases in productivity, but undue anxiety can
result in reduced effectiveness. Even if welfare services cannot increase individual
productivity, they can help to minimize decreases. Herzberg’s two-factor model, in
846 ❚ Health, safety and welfare
effect, placed welfare among the hygiene factors, but he did not underestimate the
importance of ‘hygiene’ as a means of eliminating or at least reducing causes of
anxiety or dissatisfaction.
A further practical argument in favour of employee welfare services is that a repu-
tation for showing concern helps to improve the image of the firm as a good
employer and thus assists in recruitment. Welfare may not directly increase produc-
tivity, but it may increase commitment and help in the retention of key employees.
A strong case for employee welfare services therefore exists, and the real question
is not ‘Why welfare?’ but ‘What sort of welfare?’ This question needs to be answered
in general terms before discussing the type of welfare services that can be provided
and how they should be organized.
WHAT SORT OF WELFARE SERVICES?
Welfare services fall into two categories:
● individual or personal services in connection with sickness, bereavement,
domestic problems, employment problems, and elderly and retired employees;
● group services, which consist of sports and social activities, clubs for retired staff
and benevolent organizations.
Principles of personal casework
Individual services require personal casework, and the most important principle to
adopt is that this work should aim to help individuals to help themselves. The
employer, manager or HR specialist should not try to stand between individuals and
their problems by taking them out of their hands. Emergency action may sometimes
have to be taken on behalf of individuals, but, if so, it should be taken in such a way
that they can later cope with their own difficulties. Welfare action must start on the
basis that disengagement will take place at the earliest possible moment when indi-
viduals can, figuratively, stand on their own two feet. This does not mean that follow-
up action is unnecessary, but it is only to check that things are going according to
plan, not to provide additional help unless something is seriously wrong.
Personal services should be provided when a need is established, and a welfare
need exists where it is clear that help is required, that it cannot be given more effec-
tively from another source, and that the individual is likely to benefit from the
services that can be offered.
In an organizational setting, an essential element in personal casework services is
confidentiality. There is no point in offering help or advice to people if they think that
Welfare services ❚ 847
their personal problems are going to be revealed to others, possibly to the detriment
of their future careers. This is the argument for having specialized welfare officers in
organizations large enough to be able to afford them. They can be detached in a way
that line managers and even personnel managers cannot be.
Principles for providing group services
Group services, such as sports or social clubs, should not be laid on because they
are ‘good for morale’. There is no evidence that they are. They are costly and should
be provided only if there is a real need and demand for them, arising from a very
strong community spirit in a company or lack of local facilities. In the latter case,
the facilities should be shared in an agreed and controlled way with the local
community.
INDIVIDUAL SERVICES
Sickness
These services aim to provide help and advice to employees absent from work for
long periods because of illness. The practical reason for providing them is that they
should help to speed the return of the employee to work, although it is not part of the
employee services function to check up on possible malingerers. The social reason is
to provide employees with support and counsel where a need exists. In this context, a
need exists where employees cannot help themselves without support and where
such aid is not forthcoming from the state medical or welfare services or the
employees’ own families.
Needs can be established by keeping in touch with an absent employee. This
should be not done by rushing round as soon as anyone has been absent for more
than, say, 10 days or has exhausted sickness benefit from work. It is generally better to
write to sick absentees, expressing general concern and good wishes for a speedy
recovery and reminding them that the firm can provide help if they wish, or simply
asking them if they would like someone to visit them – with a stamped, addressed
envelope for their reply. Such letters should preferably be sent by the employee’s line
manager.
There will be some cases where the employee is reluctant to request help or a visit,
and the company may have to decide whether a visit should be made to establish if
help is required. This will be a matter of judgement based on the known facts about
employees and their circumstances.
Visits can be made by the line manager, a personnel officer, or a specialized full- or
848 ❚ Health, safety and welfare
part-time sick visitor. Some organizations use retired employees for this purpose.
Alternatively, arrangements can be made for a colleague to pay the visit. The aims of
the visit should be, first, to show employees that their firm and colleagues are
concerned about their welfare; second, to alleviate any loneliness they may feel; and,
third, to provide practical advice or help. The latter may consist of putting them in
touch with suitable organizations or ensuring that such organizations are informed
and take action. Or more immediate help may be provided to deal with pressing
domestic problems.
Bereavement
Bereavement is a time when many people need all the help and advice they can get.
The state welfare services may not be able to assist and families are often non-existent
or unhelpful. Established welfare organizations in industry, commerce or the public
sector attach a lot of importance to this service. The advice may often be no more than
putting the bereaved employee or the widow or widower of an employee in touch
with the right organizations, but it is often extended to help with funeral arrange-
ments and dealing with will and probate matters.
Domestic problems
Domestic problems seem the least likely area for employee welfare services. Why
should the organization intervene, even when asked, in purely private matters? If, for
example, employees get into debt, that is surely their own affair. What business is it of
the organization?
These are fair questions. But employers who have any real interest in the well-
being of staff cannot ignore appeals for help. The assistance should not consist of
bailing people out of debt whenever they get into trouble, or acting as an amateur
marriage guidance or family casework officer. But, in accordance with the basic prin-
ciple of personal casework already mentioned, employees can be counselled on how
to help themselves or where to go for expert advice. A counselling service could be
provided by company staff or through an employee assistance programme (see page
852). It can do an immense amount of good simply by providing an opportunity for
employees to talk through their problems with a disinterested person. The help can
be provided either through internal counselling services or by means of employee
assistance programmes as described later in this chapter.
There is indeed a limit to how much can or should be done in the way of allow-
ing employees to pour out their troubles but, used with discretion, it is a valuable
service.
Welfare services ❚ 849
Employment problems
Employment problems should normally be solved by discussion between the indi-
vidual and his or her manager or team leader, or through the company’s grievance
procedure. There may be times, however, when employees have problems over
interpersonal relations, bullying, or feelings of inadequacy, about which they want to
talk to a third party. Such counselling talks, as a means of relieving feelings and
helping people to work through their problems for themselves, can do a lot of good,
but extreme caution must be displayed by any HR people who are involved. They
must not cut across line management authority, but, at the same time, they must
preserve the confidentiality of the discussion. It is a delicate business, and where it
affects relationships between individuals and their managers, it is one in which the
giving of advice can be dangerous. The most that can be done is to provide a
counselling service which gives employees an opportunity to talk about their
problems and allows the counsellor to suggest actions the employee can take to put
things right. Counsellors must not comment on the actions of anyone else who is
involved. They can comment only on what the employee who seeks their help is
doing or might do.
Elderly and retired employees
Employee services for elderly employees are primarily a matter of preparing them for
retirement and dealing with any problems they have in coping with their work.
Preparation for retirement is a valuable service that many firms offer. This may be
limited to advising on the classes and facilities local authorities provide for people
prior to retirement, or when they have retired, or it may be extended to running
special pre-retirement courses held during working hours.
Some companies have made special provision for elderly employees by setting
aside jobs or work areas for them. This has its dangers. Treating employees as special
cases ahead of their time may make them over-aware of their condition or too depen-
dent on the services provided for them. There is much to be said for treating elderly
employees as normal workers, even though the health and safety services may take
particular care to ensure that the age of the worker does not increase the danger of
accident or industrial disease.
Retired employees, particularly those with long service, deserve the continuing
interest of their former employer. The interest need not be oppressive, but
continuing sick visiting can be carried out, and social occasions can be provided
for them.
850 ❚ Health, safety and welfare
GROUP WELFARE SERVICES
Group employee services mainly consist of restaurants, sports and social clubs, and
nursery facilities, although some companies still support various benevolent societies
which provide additional help and finance in times of need.
Company restaurant facilities are obviously desirable in any reasonably sized
establishment where there is relatively little choice of facilities in the vicinity.
Alternatively, luncheon vouchers can be provided.
A massive investment in sports facilities is usually of doubtful value unless there is
nothing else in the neighbourhood and, in accordance with the principles mentioned
earlier, the company is prepared to share its facilities with the local community. In a
large company in a large town, it is very difficult to develop feelings of loyalty
towards the company teams or to encourage people to use the sports club. Why
should they support an obscure side when their loyalties have always been directed
to the local club? Why should they travel miles when they have perfectly adequate
facilities near at hand? Such clubs are usually supported by small cliques who have
little or no influence over the feelings of other employees, who leave the enthusiasts
to get on with whatever they are doing.
The same argument applies to social clubs, especially those run by paternalistic
companies. It is different when they arise spontaneously from the needs of
employees. If they want to club together, then the company should say good luck to
them and provide them with a reasonable amount of support. The subsidy, however,
should not be complete. The clubs should generate their own funds as well as their
own enthusiasm. Facilities can be provided within the firm’s premises if they are
needed and readily available. An investment in special facilities should be made only
if there is a real likelihood of their being used regularly by a large proportion of
employees. This is an area where prior consultation, before setting up the facility, and
self-government, when it has been established, are essential.
Child care or nursery facilities (crèches) have obvious value as a means of
attracting and retaining parents who would not otherwise be able to work on a full or
part-time basis.
PROVISION OF EMPLOYEE WELFARE SERVICES
It seems obvious that the HR department should provide employee welfare services.
Inevitably, HR staff will be dealing with cases and providing advice because they are
in constant contact with employees and may be seen to be disinterested. It is to be
hoped that they will also have some expertise in counselling.
Welfare services ❚ 851
Increasingly, however, it is being recognized that employee welfare is the responsi-
bility of line management and supervision. If the latter take on their proper role as
team leaders rather than their traditional autocratic and directive role, they should be
close enough to each member of their team to be aware of any personal problems
affecting their work. They should be trained in identifying symptoms and at least be
able to refer people for counselling if it is clear that they need more help than the team
leader can provide.
Employee welfare services can be provided for either internally by means of a
counselling service or externally through an agency which runs employee assistance
programmes (EAPs).
INTERNAL COUNSELLING SERVICES
Internal counselling services can be provided by full-time staff or volunteers who
may work on a part-time basis. No specific academic qualifications are required for
this work, but those carrying it out should be carefully assessed for suitable and rele-
vant experience and they should have undergone extended training in counselling
methods.
EMPLOYEE ASSISTANCE PROGRAMMES
Employee assistance programmes (EAPs) originated in the US in the 1960s. The idea
was slow to catch on in the UK, but it is now becoming more accepted.
There are a number of external agencies which provide EAP services. They offer, on
a contractual basis, a 24-hour phone service giving employees and their families
access to counselling on a range of problems including stress, alcohol and drug abuse,
marital breakdown and financial and legal problems. Most services identify the
problem and arrange for a relevant specialist to phone back, although face-to-face
counselling may also be offered, either at local offices or at surgeries on company
premises. In addition, employers may refer employees direct to the service. Where
long-term treatment relating to alcohol and drug problems or psychological problems
is needed, employees are referred to state services.
Confidentiality is guaranteed by all EAPs to users, although employers are usually
provided with a periodic statistical report on take-up of the service, which may be
broken down by sex, seniority, department or type of problem. Advocates of the
programmes argue that the anonymity they offer makes them particularly suitable
for use in this country since it helps overcome the traditional British reluctance to
852 ❚ Health, safety and welfare
discuss personal matters. Larger EAP providers offer clients the option of reports on
average statistics based on work for comparable companies. Additional services
include workplace seminars on problems identified as particularly prevalent,
training of managers and personnel staff and related literature. The service may be
charged for at a per capita rate or according to take-up, which can be as much as 25
per cent of the workforce.
Welfare services ❚ 853
Employment and HRM services
This handbook emphasizes the importance of strategic considerations in formulating
HR policies and planning HR programmes to achieve defined objectives. The fact
remains, however, that much of human resource management is about managing the
employment relationship, service delivery and dealing with the problems that will
always arise when people work together, as considered in Chapter 57.
This also includes the various employment policies and procedures and approaches
needed to ensure that both employees and the organization feel that their needs are
being satisfied, as discussed in Chapter 58.
Organizations also need to maintain a comprehensive HR information system, not
only to maintain employee records but also, and importantly, to build a computerized
database which will assist in strategic decision taking. This is covered in Chapter 59.
Part XII
Employment practices
Employment practices should be concerned with fundamental aspects of the employ-
ment relationship as expressed in the organization’s HR policies (see Chapter 10) and
procedures. They should take account of the requirements of relevant UK and
European legislation and case law, which it is beyond the scope of the handbook to
cover in detail. Recent Acts and Regulations which are important include those
concerning the minimum wage, working time and part-time workers. The last of
these is especially significant because it requires that part-time workers should be
entitled to the same terms and conditions as full-time workers, including pro rata pay.
Note should also be taken of the UK Human Rights Act (1998) which gave further
effect to rights and freedoms guaranteed under the European Convention on Human
Rights. However, the rights are essentially civil and political rather than economic or
social rights, and they only apply to a narrow range of employment. Moreover, they
are not directly enforceable against an employer unless it is an ‘obvious’ public
authority. It has, however, been held by the European Court of Human Rights that
statutory rights should not be unlawfully dismissed or discriminated against as they
can be regarded as ‘civil rights’. Provisions inserted into the Employment Rights Act
must be interpreted by employment tribunals in a way that is compatible with the
European Convention right to freedom of expression. This could apply to whistle-
blowing.
57
Employment practices need to be established in the following areas as described in
this chapter:
● terms and conditions and contracts of employment;
● mobility clauses;
● transfer practices (including transfer between undertakings);
● promotion practices;
● flexible working;
● attendance management;
● equal opportunity and ethnic monitoring;
● managing diversity;
● data protection;
● sexual harassment;
● smoking;
● bullying;
● substance abuse at work;
● AIDS;
● use of e-mails;
● work-life balance.
Administrative procedures for dealing with the legal requirements for maternity
leave and pay and sick pay will also have to be developed.
TERMS AND CONDITIONS AND CONTRACTS OF
EMPLOYMENT
Terms and conditions of employment which apply generally or to groups of
employees need to be defined in the areas included in the contract of employment as
described below.
Individual contracts of employment must satisfy the provisions of contracts of
employment legislation. They include a statement of the capacity in which the person
is employed and the name or job title of the individual to whom he or she is respon-
sible. They also include details of pay, allowances, hours, holidays, leave and pension
arrangements and refer to relevant company policies, procedures and rules.
Increasing use is being made of fixed-term contracts.
The basic information that should be included in a written contract of employment
varies according to the level of job, but the following check list sets out the typical
headings:
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● job title;
● duties, preferably including a flexibility clause such as: ‘The employee will
perform such duties and will be responsible to such person, as the company may
from time to time require’, and, in certain cases: ‘The employee will work at
different locations as required by the company.’
● the date when continuous employment starts and basis for calculating service;
● the rate of pay, allowances, overtime and shift rates, method and timing of
payment;
● hours of work including lunch break and overtime and shift arrangements;
● holiday arrangements:
– days paid holiday per year;
– calculation of holiday pay;
– qualifying period;
– accrual of holidays and holiday pay;
– details of holiday year;
– dates when holidays can be taken;
– maximum holiday that can be taken at any one time;
– carry-over of holiday entitlement;
– public holidays.
● sickness:
– pay for time lost;
– duration of sickness payments;
– deductions of National Insurance benefits;
– termination due to continued illness;
– notification of illness (medical certificate);
● length of notice due to and from employee;
● grievance procedure (or reference to it);
● disciplinary procedure (or reference to it);
● works rules (or reference to them);
● arrangements for terminating employment;
● arrangements for union membership (if applicable);
● special terms relating to rights to patents and designs, confidential information
and restraints on trade after termination of employment;
● employer’s right to vary terms of the contract subject to proper notification being
given.
Employment practices ❚ 859
MOBILITY CLAUSES
Case law has established that employers can invoke mobility clauses which specify
that the employee must work in any location as required by the employer as long as
that discretion is exercised reasonably and not in such a way as to prevent the
employee being able to carry out his or her part of the contract. A mobility clause
could, however, be held to discriminate against women, who may not be in a position
to move (Meade-Hill and another vs British Council, 1995). The acid test is whether or
not the employer acts reasonably.
TRANSFER PRACTICES
Flexibility and redeployment in response to changing or seasonal demands for labour
is a necessary feature of any large enterprise. The clumsy handling of transfers by
management, however, can do as much long-lasting harm to the climate of employee
relations as ill-considered managerial actions in any other sphere of personnel prac-
tice.
Management may be compelled to move people in the interests of production. But
in making the move, managers should be aware of the fears of those affected in order
that they can be alleviated as much as possible.
The basic fear will be of change itself – a fear of the unknown and of the disruption
of a well-established situation: work, pay, environment, colleagues and workmates,
and travelling arrangements. There will be immediate fears that the new work will
make additional and unpalatable demands for extra skill or effort. There will be
concern about loss of earnings because new jobs have to be tackled or because of
different pay scales or bonus systems. Loss of overtime opportunities or the danger of
shift or night work may also arouse concern.
Transfer policies should establish the circumstances when employees can be trans-
ferred and the arrangements for pay, resettlement and retraining. If the transfer is at
the company’s request and to suit the convenience of the company, it is normal to pay
the employee’s present rate or the rate for the new job, whichever is higher. This
policy is easiest to apply in temporary transfers. It may have to be modified in the
case of long-term or permanent transfers to eliminate the possibility of a multi-tiered
pay structure emerging in the new location, which must cause serious dissatisfaction
among those already employed there.
When transfers are made to avoid redundancy in the present location, the rate for
the job in the new department should be paid. Employees affected in this way would,
of course, be given the choice between being made redundant or accepting a lower-
paid job.
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The policies should also provide guidelines on how requests from employees for
transfer should be treated. The normal approach should be to give a sympathetic
hearing to such requests from long-serving employees, especially if the transfer is
wanted for health or family reasons. But the transferred employees would have to
accept the rate for the job in their new department.
The procedures for handling transfers may have to include joint consultation or
discussions with workers’ representatives on any major transfer programme. If
regular transfers take place because of seasonal changes, it is best to establish a stan-
dard procedure for making transfers which would be managed by department super-
visors, but they should be made aware of company policies and procedures and the
need to treat the human problems involved with care and consideration.
The Transfer of Undertakings (Protection of Employment) Regulations 1981
(TUPE) provided that, following a business transfer arising from a merger or acquisi-
tion, all employees working in the business to be transferred automatically transfer
into the employment of the merged business or the business making the acquisition.
Following the transfer, they retain their existing terms and conditions of employment
except for pensions. Employers have to give information about the business transfer
to a recognized trade union.
PROMOTION PRACTICES
The aims of the promotion procedures of a company should be, first, to enable
management to obtain the best talent available within the company to fill more senior
posts and, second, to provide employees with the opportunity to advance their
careers within the company, in accordance with the opportunities available (taking
into account equal opportunity policies) and their own abilities.
In any organization where there are frequent promotional moves and where
promotion arrangements cause problems, it is advisable to have a promotion policy
and procedure which is known to both management and employees and this proce-
dure should take full account of equal opportunity policies (it is often incorporated in
equal opportunity policy statements). The basic points that should be included in
such a procedure are:
● Promotion vacancies should be notified to the HR department.
● Vacancies should be advertised internally.
● Departmental managers should not be allowed to refuse promotions within a
reasonable time unless the individual has been in the department for less than,
say, one year, or the department has recently suffered heavy losses through
promotions or transfers.
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● Promotion opportunities should be open to all, irrespective of race, creed, sex or
marital status.
FLEXIBLE WORKING
The range of possible working patterns as listed by IRS (2004d) is:
● Part-time working – an employee’s contractual hours are less than the standard
full-time hours, which can involve working any number of hours over any
number of days.
● Job-sharing – the contractual hours are split between two employees, although not
necessarily on a 50/50 basis.
● Time-off-in lieu (TOIL) – any additional hours worked can be taken as time off at a
later date.
● Flexitime – start and finish times are flexible, provided they are outside core hours,
and any excess or deficit in the time worked is carried over to the next period.
● Homeworking or teleworking – ranging from occasional days spent working at
home or an arrangement where an employee works entirely from home.
● Career breaks – unpaid leave with an understanding that an employee can return
to employment at the end of the agreed period.
● Shift working – set periods of working, often designed to provide 24-hour cover as
a three-shift system or sometimes operating as a two-shift system or a ‘twilight
shift’ which lasts from, say, 5 pm to 9 pm.
● Shift swapping – employees are able to exchange their allocated shifts amongst
themselves on the understanding that full cover will be provided.
● Self-rostering – employees have responsibility for negotiating which shifts they
will work but the employer determines the shift pattern.
● Annualized hours – where contractual hours are calculated over a 12-month period
to potentially suit both an employee’s needs and business demand.
● Compressed hours – an employee works their standard number of hours but within
a shorter time scale, such as fewer days.
● Staggered hours – this allows for alternative start, break and finish times.
● Additional leave entitlement – either paid or unpaid, with the necessary adjustment
of salary payments.
● V-time working – a reduction in hours for a set period.
● Unique working pattern – an individualized arrangement that can combine more
than one flexible working option.
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The Workshop Employee Relations Survey (2005) found that the following flexible
arrangements were used:
● Reduced hours – 70 per cent.
● Change in working pattern – 45 per cent.
● Flexitime – 35 per cent.
● Job-sharing – 31 per cent.
● Homeworking – 26 per cent.
● Term-time only – 20 per cent.
● Compressed hours – 16 per cent.
● Annualized hours – 6 per cent.
As reported by IRS (2004d), the Yorkshire Building Society has a flexible working
policy that makes clear the availability of flexible working to all employees. A busi-
ness case has to be made for working flexibly and the criteria used to make a decision
are:
● an analysis of the role’s tasks, their frequency and duration;
● the workflow of the role, including an analysis of the telephone log;
● the complexity of tasks undertaken;
● the workload of the role, using work measurement data where available;
● the structure of the department and staff resourcing;
● the level of supervision needed for the role and back-up available;
● the effect on other staff of the flexible working arrangement;
● the cost impact of the new arrangement;
● other issues particular to the working of the department or branch.
ATTENDANCE MANAGEMENT
Attendance management is the process of controlling absenteeism and time-
keeping.
Absenteeism
Absenteeism is a serious problem. A CIPD survey (IPD 1993a) established that the
average absence rate per employee was equivalent to nine working days a year.
Employment practices ❚ 863
Causes of absence
The causes of absence have been analysed by Huczynski and Fitzpatrick (1989) under
three headings: job situation factors, personal factors and attendance factors.
Job situation factors include:
● Job scope – a high degree of task repetitiveness is associated with absenteeism
although job dissatisfaction itself is a contributory rather than a primary cause of
absence.
● Stress – it is estimated that 40 million working days are lost each year in the UK
through stress. This can be attributed to workload, poor working conditions, shift
work, role ambiguity or conflict, relationships and organizational climate.
● Frequent job transfers increase absenteeism.
● Management style — the quality of management, especially immediate super-
visors, affects the level of absenteeism.
● Physical working conditions.
● Work group size — the larger the organization, the higher the absence rate.
Personal factors include:
● Employee values – for some workers, doing less work for the same reward
improves the deal made with the employer (the effort-reward bargain). The
following positive outcomes of absence have been shown by research to be partic-
ularly important to employees: break from routine, leisure time, dealing with
personal business and a break from co-workers.
● Age – younger employees are more frequently absent than older ones.
● Sex – women are more prone to sickness absence than men.
● Personality – some people are absence-prone (studies have noted that between 5
and 10 per cent of workers account for about half of the total absence, while a few
are never absent at all).
Attendance factors include:
● Reward systems — as pay increases, attendance improves.
● Sick pay schemes may increase absenteeism.
● Work group norms can exert pressure for or against attendance.
Control of absenteeism
Absenteeism can be disruptive and costly. It needs to be controlled. The steps
required to achieve effective absence control are:
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● commitment on the part of management to reduce the cost of absenteeism;
● trust – the control of absenteeism is more likely to be achieved if employees are
trusted – companies that are operating on this basis provide sickness benefit for
all workers and rely upon the commitment and motivation of their employees
(which they work hard at achieving) to minimize abuse, but they reserve the right
to review sickness benefit if the level of sickness absence is unacceptable;
● information – sadly, a trusting approach will not necessarily work and hard, accu-
rate information on absence is required – this can be provided by computerized
systems;
● a documented attendance policy which spells out the organization’s views on absen-
teeism and the rules for sick pay;
● regular training for managers and team leaders which ensures that they are aware of
their responsibilities for controlling absenteeism and indicates the actions they
can take;
● getting managers to conduct return-to-work interviews to welcome employees back
and, if appropriate, enquire about the cause of absence and what can be done by
the employee or the manager to reduce future occurrences;
● communications which inform employees why absence control is important;
● counselling for employees at return-to-work interviews which provides advice on
any attendance problems they may have and creates trust;
● disciplinary procedure – this must be operated fairly and consistently.
In addition, as reported by IRS (2004d): ‘It is now increasingly recognized that
offering employees flexible working options can play a significant role in developing
a more positive and longer-lasting solution to non-attendance.’ In a survey by the
Work Foundation on maximizing attendance (2003a), 36 per cent of respondents cited
flexible working patterns as one of the five most effective ways of managing atten-
dance and reducing absence.
The importance of keeping contact with employees absent through sickness has
been emphasized by the Health and Safety Executive (HSE) and IRS. The HSE (2004b)
guidelines to employees confirm that keeping in contact represents a key factor in
helping employees return to work after a long-term absence. However, they note that
contact can be a sensitive topic because some employees may feel pressed to come
back to work too early. The HSE suggests that discussions with absent staff must be
clearly focused on the employee’s well-being and their return to work. Managers
need to address issues where the employee might need help and also what the
employer can do to aid their return to work. IRS (2005) reported that their survey on
long-term absence had shown that ‘easy and regular contact with employees on sick
leave leads to a quicker return to work’. The most frequently used method of contact
Employment practices ❚ 865
is by letter (65 per cent) followed by telephone calls to the employee’s house by their
line manager (57 per cent) or by the HR department (55 per cent). Visits to the
employee’s home are used less frequently. Many organizations have policies or guid-
ance notes that stipulate the method, timing and frequency of contacts.
EQUAL OPPORTUNITY
Equal opportunity policies were considered in Chapter 10. To get them into action the
following are the key steps as set out in the Chartered Institute of Personnel and
Development’s 2002 code of conduct:
1. The recruitment process:
– have accurate, up-to-date job descriptions which are not sex biased;
– avoid over-inflated job criteria in person specifications;
– check that job requirements are really necessary to the job and are not a reflec-
tion of traditional biased practices;
– guard against sex/race stereotyping in advertisements and recruitment liter-
ature.
2. The interview – to reduce interview bias:
– provide training to all who conduct selection interviews;
– ensure that only trained interviewers conduct preliminary interviews;
– avoid discriminatory questions, although interviews can discuss with appli-
cants any domestic or personal circumstances which might have an adverse
effect on job performance as long as this is done without making assumptions
based on the sex of the applicant.
3. Training:
– check that women and men have equal opportunities to participate in
training and development programmes;
– take late entrants into training schemes;
– ensure that selection criteria for training do not discriminate against women;
– consider using positive training provisions for women and ethnic minorities.
4. Promotion:
– improve performance review procedures to minimize bias;
– avoid perpetuating the effects of past discriminatory practices in selection for
promotion;
– do not presume that women or minorities do not want promotion.
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ETHNIC MONITORING
The Commission for Racial Equality’s (CRE) guide on ethnic monitoring recom-
mends that analyses of the workforce should be conducted in sufficient detail to show
whether there is an under-representation in more skilled jobs and grades, as well as
whether there are general concentrations of ethnic minority employees in certain jobs,
levels or departments in the organization. The Chartered Institute of Personnel and
Development Equal Opportunities Code states that the most important processes to
monitor are recruitment and selection since these are easily influenced by prejudice
or indirect discrimination. But the proportion of ethnic minorities at different levels in
the organization should also be checked regularly.
The CRE has suggested that ethnic monitoring should collect employment infor-
mation under the following ethnic classifications:
● white;
● black-Caribbean;
● black-African;
● black-other;
● Indian;
● Pakistani;
● Bangladeshi;
● Chinese;
● other (those describing themselves in this category should be invited to provide
further information).
The results of ethnic monitoring should be used to establish whether:
● in comparison with the workforce as a whole, or in comparison with the local
labour market, ethnic minority workers are significantly under- or over-
represented in any area;
● representative numbers of ethnic minorities apply for and are accepted for
jobs;
● higher or lower proportions of employees from ethnic minorities leave the
organization;
● there are any disparities in the proportion of members of ethnic minorities.
If necessary, positive affirmative action, as recommended by the CRE, can be taken
along the following lines:
Employment practices ❚ 867
● job advertisements designed to reach members of under-represented groups;
● the use of employment agencies and careers offices in areas where these groups
are concentrated;
● recruitment and training for school leavers designed to reach members of these
groups;
● encouragement of employees from these groups to apply for promotion or
transfer opportunities;
● training for promotion or skill training for employees of these groups who lack
particular expertise but show potential.
MANAGING DIVERSITY
The CIPD (2005b) states that:
Diversity is an inclusive term based on recognizing all kinds of difference. It is about
‘valuing everyone as an individual’. It recognizes that people from different back-
grounds can bring fresh ideas and perceptions… which can make the work done more
efficient and products and services better… Diversity is an inclusive concept that covers
all kinds of difference that go beyond the traditional understanding of what equal oppor-
tunity is about.
As described by Kandola and Fullerton (1998):
The basic concept of managing diversity accepts that the workforce consists of a diverse
population of people. The diversity consists of visible and non-visible differences which
will include factors such as sex, age, background, race, disability, personality and work-
style. It is founded on the premise that harnessing these differences will create a produc-
tive environment in which everybody feels valued, where their talents are being fully
utilized and in which organizational goals are met.
Managing diversity is about ensuring that all people maximize their potential and
their contribution to the organization. It means valuing diversity, that is, valuing the
differences between people and the different qualities they bring to their jobs
which can lead to the development of a more rewarding and productive environ-
ment.
Kandola and Fullerton quote the following 10 most successful initiatives adopted
by organizations who are pursuing diversity policies:
1. introducing equal rights and benefits for part-time workers (compared with full-
time workers);
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2. allowing flexibility in uniform/dress requirements;
3. allowing time off for caring for dependants beyond that required by law, eg
extended maternity/paternity leave;
4. benefits provided for employees’ partners are equally available to same-sex and
different-sex partners;
5. buying specialized equipment, eg braille keyboards;
6. employing helpers/signers for those who need them;
7. training trainers in equal opportunities;
8. eliminating age criteria from selection decisions;
9. providing assistance with child care;
10. allowing staff to take career breaks.
They use the acronym MOSAIC to describe the characteristics of a diversity oriented
organization:
Mission and values that are strong and positive and where effective successful diver-
sity management is a necessary long-term goal.
Objective and fair processes exist within the organization and these are audited regu-
larly to ensure that power does not sit within informal networks, and no one
group of employees dominates at any level.
Skilled workforces aware of the effects of biases and prejudices on their decision-
making, and managers who manage the diversity effectively while stressing
excellence in individual and team performance.
Active flexibility means that the diversity-oriented organization will display
increasing flexibility, not only in its working patterns but also in its practices,
policies and procedures.
Individual focus – organizations must guard against averaging out group differences
or similarities by creating segregated groups.
Culture that empowers achieved through openness, engendering trust between all
individuals through an absence of prejudice and discrimination.
THE DATA PROTECTION ACT
The Data Protection Act (1998) is built round the eight data protection principles
included in the 1984 Data Protection Act. The most important of these is that data
should be accessible to the individuals concerned, who may, where appropriate,
correct or erase them. The 1998 Act covers manually maintained records (eg filing
Employment practices ❚ 869
systems) as well as records held on a computer database. It also places restrictions on
the processing of sensitive data, which includes data on racial or ethnic origin, polit-
ical opinions, religious beliefs, trade union membership, physical or mental health,
sex life, and the commission or alleged commission of any offence. Under the Act,
employees must give explicit consent to the processing of personal data, especially
sensitive data.
SEXUAL HARASSMENT
Sadly, sexual harassment has always been a feature of life at work. Perhaps it is not
always quite so blatant today as it has been in the past, but it is still there, in more or
less subtle forms, and it is just as unpleasant.
Persons subject to harassment can take legal action but, of course, it must be the
policy of the company to make it clear that it will not be tolerated.
Problems of dealing with harassment
The first problem always met in stamping out sexual harassment is that it can be diffi-
cult to make a clear-cut case. An accusation of harassment can be hard to prove unless
there are witnesses. And those who indulge in this practice usually take care to carry
it out on a one-to-one basis. In this situation, it may be a case of one person’s word
against another’s. The harasser, almost inevitably a man, resorts to two defences: one,
that it did not take place (‘it was all in her mind’); and two, that if anything did take
place, it was provoked by the behaviour of the female. In these situations, whoever
deals with the case has to exercise judgement and attempt, difficult though it may be,
to remove any prejudice in favour of the word of the man, the woman, the boss or the
subordinate.
The second problem is that victims of sexual harassment are often unwilling to take
action and in practice seldom do so. This is because of the actual or perceived diffi-
culty of proving their case. But they may also feel that they will not get a fair hearing
and are worried about the effect making such accusations will have on how they are
treated by their boss or their colleagues in future – whether or not they will have
substantiated their accusation.
The third and possibly the most deep-rooted and difficult problem of all is that
sexual harassment can be part of the culture of the organization – a way of life, a
‘norm’, practised at all levels.
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Solutions
There are no easy solutions to these problems. It may be very hard to eradicate sexual
harassment completely. But an effort must be made to deal with it and the following
approaches should be considered:
1. Issue a clear statement by the chief executive that sexual harassment will not be
tolerated. The absolute requirement to treat all people equally, irrespective of
sex, role, creed, sexual orientation or disability, should be one of the funda-
mental values of the organization. This should be reinforced by the explicit
condemnation of harassment as a direct and unacceptable contravention of that
value.
2. Back up the value statement with a policy directive on sexual harassment (see
Chapter 8) which spells out in more detail how the company deplores it, why it
is not acceptable and what people who believe they are being subjected to
harassment can do about it.
3. Reinforce the value and policy statements by behaviour at senior level which
demonstrates that they are not simply words but that these exhortations have
meaning.
4. Ensure that the company’s policy on harassment is stated clearly in induction
courses and is conveyed to everyone in the form of a strong reminder on promo-
tion.
5. Make arrangements for employees subjected to sexual harassment to be able to
seek advice, support and counselling in total confidence without any obligation
to take a complaint further. A counsellor can be designated to provide advice
and assistance covering such functions as:
– offering guidance on handling sexual harassment problems;
– assisting in resolving problems informally by seeking, with the consent of the
complainant, a confidential and voluntary interview with the person com-
plained against in order to pursue a solution without resource to the formal
disciplinary or grievance procedure;
– assisting in submitting a grievance if the employee wishes to complain
formally;
– securing an undertaking, where appropriate, by the person who is the subject
of the complaint to stop the behaviour which has caused offence;
– counselling the parties as to their future conduct where a problem has been
resolved without recourse to formal procedures.
6. Create a special procedure for hearing complaints about sexual harassment – the
normal grievance procedure may not be suitable because the sexual harasser
Employment practices ❚ 871
could be the employee’s line manager. The procedure should provide for
employees to bring their complaint to someone of their own sex, should they so
choose.
7. Handle investigations of complaints with sensitivity and due respect for the
rights of both the complainant and the accused. Ensure that hearings are
conducted fairly, both parties being given an equal opportunity to put their case.
The principles of natural justice mentioned earlier in this chapter should prevail.
Care should be taken to ensure that the careers and reputations of neither party
are unjustly affected.
8. Where sexual harassment has taken place, crack down on it. It should be stated
in the policy that it is regarded as gross industrial misconduct and, if it is proved,
makes the individual liable to instant dismissal. Less severe penalties may be
reserved for minor cases but there should always be a warning that repetition
will result in dismissal.
9. Ensure that everyone is aware that the organization does take action when
required to punish those who indulge in sexual harassment.
10. Provide training to managers and team leaders to ensure that the policy is prop-
erly implemented and to make them aware of their direct responsibility to
prevent harassment taking place and to take action if it does.
SMOKING
Smoking policies at work are designed to provide employees with a healthy and
efficient workplace and to avoid conflict. A smoking policy should be developed
in consultation with employees and may involve the use of an opinion survey.
Most smokers agree to the right of non-smokers to work in air free from tobacco
smoke. Smoking policies can involve a total ban on all smoking except, usually,
in a smoking-permitted area away from the workplace. Remember that smokers
do have some rights and that a ban in all areas may be oppressive. Sometimes,
by agreement, there is a partial ban with separate working areas for those who wish
to smoke. Kitchens and lifts are always non-smoking areas and rest rooms generally
are.
It is sometimes appropriate to introduce smoking bans in stages, starting by
restricting smoking in meeting rooms, corridors and canteens before extending the
restriction to other communal and work areas.
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SUBSTANCE ABUSE AT WORK
Substance abuse is the use of alcohol, drugs or other substances which cause difficul-
ties at work such as absenteeism, low performance standards and interpersonal prob-
lems, for example, unpredictable reactions to criticism, paranoia, irritability, avoiding
colleagues, borrowing money or physical or verbal abuse of colleagues. A policy on
how to deal with incidents of substance abuse (see Chapter 8) is necessary because:
● many employers have some employees with a drink problem and possibly a drug
problem;
● substance abuse may be a result of work pressures, for which employers must
take some responsibility;
● employers are required to maintain a safe and healthy work environment.
BULLYING
Bullying is a form of harassment and can be very unpleasant. It is perhaps one of
the most difficult aspects of employee relationship to control – it can be hard to
prove that bullying has taken place and employees may be very reluctant to com-
plain about a bullying boss, simply because he or she is a bully. But this does
not mean that the organization should ignore the problem. A policy should be
published which states that bullying constitutes unacceptable behaviour and indi-
cating that those who indulge in the practice can face severe disciplinary action. It
should be announced that anyone who is being bullied has the right to discuss the
problem with someone in the HR department or lodge a complaint, and in such
discussions employees should also have the right to be accompanied by a representa-
tive.
But as the CIPD (2005a) states: ‘Tackling a difficult and complex subject like bully-
ing at work is about much more than having a policy in the staff handbook. It is not
just about an absence of negatives, but about actively defining and promoting posi-
tive working relationships.’ The emphasis, according to the CIPD, must be on
building a culture of respect with the following features:
● Positive behaviours that everyone can expect from one another are defined and
communicated.
● Everyone is supported in accepting responsibility for his or her behaviour and
actions. Bullies are not punished and isolated but helped to acknowledge the
impact of their behaviours, and to change.
Employment practices ❚ 873
● Everyone accepts responsibility for finding solutions.
● Top team behaviour is regarded as vital in reinforcing positive behaviours and
creating a culture that goes beyond lip-service.
● Internal buddies/listeners and trained mediators can also help to deal with
bullying at an early stage before conflict becomes entrenched, relationships break
down and more formal routes are taken.
AIDS
There are no logical reasons why AIDS should be treated differently from any other
disease that employees may be carrying, many of which are contagious and some of
which are fatal. However, AIDS is a frightening and threatening disease which has
received enormous publicity, not all of which has been accurate. Because of this fact it
is necessary to develop a company policy (see Chapter 8).
E-MAILS
Increasingly, companies are cracking down on staff using e-mails at work for private
purposes (eg online shopping), surfing the internet, or sending pornographic e-mails
through the company’s intranet. Employers are concerned about the waste of time
and money and the undesirability of pornographic or defamatory material being
distributed round the office. They are often, therefore, introducing policies which
state that the sending of offensive e-mails is prohibited and that the senders of such
messages are subject to normal disciplinary procedures. They may also prohibit any
browsing or downloading of material not related to the business, although this can be
difficult to enforce. Some companies have always believed that reasonable use of the
telephone is acceptable, and that policy may be extended to e-mails.
If it is decided that employees’ e-mails should be monitored to check on excessive
or unacceptable use, then this should be included in an e-mail policy as set out in
Chapter 8.
The legal position needs to be considered. The Lawful Business Practice Regu-
lations (2000) permit access to e-mails by employers as long as they have taken
reasonable steps to inform the parties concerned. However, the Code of Practice
issued by the Data Protection Commission suggests that employers should not check
sites accessed by employees, but should clarify what can or cannot be downloaded.
The Code also suggests that the term ‘pornography’ is not sufficiently precise, and
the Commissioner does not believe that there needs to be a ban on downloading
874 ❚ Employment and HRM services
unsuitable material even if other employees find it offensive, and that employers
should simply deal with cases as they arise. Many employers may find it difficult to
accept this suggestion, but ‘proportionality’ is required in dealing with any problems,
ie there may be situations when a dismissal for ‘gross misconduct’ is inappropriate,
and employers should be aware that downloading unsuitable material can be done
innocently.
WORK-LIFE BALANCE
Work-life balance employment practices are concerned with providing scope for
employees to balance what they do at work with the responsibilities and interests
they have outside work and so reconcile the competing claims of work and home by
meeting their own needs as well as those of their employers. The term work-life
balance has largely replaced ‘family friendly policy’. As Kodz et al (2002) explain, the
principle of work-life balance is that: ‘There should be a balance between an indi-
vidual’s work and their life outside work, and that this balance should be healthy.’
As defined by the Work Foundation (2003b), the concept of work-life balance is
‘about employees achieving a satisfactory equilibrium between work and non-work
activities (ie parental responsibilities and wider caring duties, as well as other activi-
ties and interests). The Work Foundation recommends that practical day-to-day busi-
ness and related needs should be considered when organizations set about selecting
the range of work-life options that should be made available to staff, whether on a
collective basis (as for example flexitime arrangements) or on an individual level (say,
allowing an individual to move to term-time working provisions). Individual
requests for particular working arrangements generally need to be considered on a
case-by-case basis, but it is important for a culture to exist that does not discourage
employees from making such requests. In addition to fearing the reaction of line
managers, the risk of career-damage is a common reason for poor take-up of work-
life balance arrangements. Line management will need to be convinced that work-life
balance measures are important and pay off in terms of increased engagement.
The IRS (2002) considers that, ‘Flexible working is considered the most practical
solution to establishing an effective work-life balance.’ The term ‘flexible working’
covers flexitime, home working, part-time working, compressed working weeks,
annualized hours, job sharing and term-time only working. It also refers to special
leave schemes, which provide employees with the freedom to respond to a domestic
crisis or to take a career break without jeopardizing their employment status. For
example, ASDA operates a range of schemes designed to give carers and others the
flexibility to maintain a healthy work-life balance. Work-life options available for
Employment practices ❚ 875
ASDA ‘colleagues’ include childcare leave, shift-swapping and study leave.
However, as IRS points out, there is more to work-life balance than flexible
working: ‘Creating an environment in which staff who opt to work flexibly and those
who raise work-life issues will require a cultural shift in many organizations, backed
by senior level support.’
Kodz et al (2002) quote figures from an IES survey that showed the following
proportion of employees offering some form of flexibility:
● Part-time working – 76 per cent.
● Care leave – 55 per cent.
● Varying hours – 38 per cent.
● Compassionate leave – 38 per cent.
● Career breaks – 27 per cent.
● Workplace counselling or stress management – 26 per cent.
● Working from home – 22 per cent.
● Flexitime – 11 per cent.
● Term-time working – 6 per cent.
● Help with child care in school holidays – 6 per cent.
● Job sharing – 5 per cent.
● Reduced hours – 4 per cent.
● Crèche – 1 per cent.
The respondents to the survey indicated that the successful implementation of work-
life balance practices required a change in culture and attitudes within the organiza-
tion. Also, line managers have a key role.
The Work Foundation (2003b) survey of work-life balance established that the most
common work-life balance measures taken by employers were the provision of part-
time working (90 per cent), family/emergency leave (85 per cent) and general unpaid
leave (78 per cent). Formal policies are most likely to be found in public and volun-
tary sector organizations (35 per cent) and least likely to be found in manufacturing
(14 per cent). Management resistance is the most common difficulty met in intro-
ducing work-life balance policies.
But the work-life balance survey conducted by the DTI in 2003 found that there
was a high level of support amongst employers (65 per cent). But 65 per cent
also said that it was not easy. A large proportion of employers (74 per cent)
believed that people who work flexibly are just as likely to be promoted as those that
do not.
The DTI survey established that the benefits claimed for introducing work-life
balance policies were:
876 ❚ Employment and HRM services
● improved productivity and quality of work;
● improved commitment and morale;
● reduced staff turnover;
● reduced casual absence;
● improved utilization of new recruits.
Work-life balance policies can lower absence and help to tackle the low morale and
high degrees of stress that can lead to retention problems as employees tire of
juggling work and life responsibilities. The research conducted by the Institute of
Employment Studies (Kodz et al, 2002) identified employees who were staying longer
with their firms because of access to flexible working arrangements.
Employment practices ❚ 877
HRM procedures
Human resource management procedures set out the ways in which certain actions
concerning people should be carried out by the management or individual managers.
In effect they constitute a formalized approach to dealing with specific matters of
policy and practice. They should be distinguished from HR policies as described in
Chapter 10. These describe the approach the organization adopts to various aspects of
people management and define key aspects of the employment relationship. They
serve as guidelines on people management practices but do not necessarily lay down
precisely the steps that should be taken in particular situations. Procedures are more
exacting. They state what must be done as well as spelling out how to do it. It is desir-
able to have the key HRM procedures written down to ensure that HR policies are
applied consistently and in accordance with both legal requirements and ethical
considerations. The existence of a written and well-publicized procedure ensures that
everyone knows precisely what steps need to be taken when dealing with certain
significant and possibly recurring employment issues.
The introduction or development of HR procedures should be carried out in
consultation with employees and, where appropriate, their representatives. It is
essential to brief everyone on how the procedures operate and they should be
published either in an employee handbook or as a separate document. Line managers
may need special training on how they should apply the procedures and the HR
department should provide guidance wherever necessary. HR will normally have the
responsibility of ensuring that procedures are followed consistently.
58
The main areas where procedures are required are those concerned with handling
grievances and disciplinary, capability and redundancy issues.
GRIEVANCE PROCEDURE
Grievance procedures spell out the policy on handling grievances and the approach
to dealing with them. An example of a grievance procedure is given below.
880 ❚ Employment and HRM services
Grievance procedure
POLICY
It is the policy of the company that employees should:
● be given a fair hearing by their immediate supervisor or manager concerning
any grievances they may wish to raise;
● have the right to appeal to a more senior manager against a decision made by
their immediate supervisor or manager;
● have the right to be accompanied by a fellow employee of their own choice,
when raising a grievance or appealing against a decision.
The aim of the procedure is to settle the grievance as nearly as possible to its point
of origin.
PROCEDURE
The main stages through which a grievance may be raised are as follows:
1. The employee raises the matter with his or her immediate team leader or
manager and may be accompanied by a fellow employee of his or her own
choice.
2. If the employee is not satisfied with the decision, the employee requests a
meeting with a member of management who is more senior than the team
leader or manager who initially heard the grievance. This meeting takes place
within five working days of the request and is attended by the manager, the
manager responsible for personnel, the employee appealing against the deci-
DISCIPLINARY PROCEDURE
Disciplinary procedures set out the stages through which any disciplinary action
should proceed. An example is given below.
HRM procedures ❚ 881
sion, and, if desired, his or her representative. The manager responsible for
personnel records the result of the meeting in writing and issues copies to all
concerned.
3. If the employee is still not satisfied with the decision, he or she may appeal to
the appropriate director. The meeting to hear this appeal is held within five
working days of the request and is attended by the director, the manager
responsible for personnel, the employee making the appeal, and, if desired,
his or her representative. The manager responsible for personnel records the
result of this meeting in writing and issues copies to all concerned.
Disciplinary procedure (part 1)
POLICY
It is the policy of the company that if disciplinary action has to be taken against
employees it should:
● be undertaken only in cases where good reason and clear evidence exist;
● be appropriate to the nature of the offence that has been committed;
● be demonstrably fair and consistent with previous action in similar circum-
stances;
● take place only when employees are aware of the standards that are expected
of them or the rules with which they are required to conform;
● allow employees the right to be represented by a representative or colleague
during any formal proceedings;
● allow employees the right to know exactly what charges are being made
against them and to respond to those charges;
● allow employees the right of appeal against any disciplinary action.
882 ❚ Employment and HRM services
RULES
The company is responsible for ensuring that up-to-date rules are published and
available to all employees.
PROCEDURE
The procedure is carried out in the following stages:
1. Informal warning. A verbal or informal warning is given to the employee in the
first instance or instances of minor offences. The warning is administered by
the employee’s immediate team leader or manager.
2. Formal warning. A written formal warning is given to the employee in the first
instance of more serious offences or after repeated instances of minor
offences. The warning is administered by the employee’s immediate team
leader or manager – it states the exact nature of the offence and indicates any
future disciplinary action which will be taken against the employee if the
offence is repeated within a specified time limit. A copy of the written
warning is placed in the employee’s personnel record file but is destroyed 12
months after the date on which it was given, if the intervening service has
been satisfactory. The employee is required to read and sign the formal
warning and has the right to appeal to higher management if he or she thinks
the warning is unjustified. The HR manager should be asked to advise on the
text of the written warning.
3. Further disciplinary action. If, despite previous warnings, an employee still
fails to reach the required standards in a reasonable period of time, it may
become necessary to consider further disciplinary action. The action taken
may be up to three days’ suspension without pay, or dismissal. In either case
the departmental manager should discuss the matter with the personnel
manager before taking action. Staff below the rank of departmental manager
may only recommend disciplinary action to higher management, except
when their manager is not present (for example, on night-shift), when they
may suspend the employee for up to one day pending an inquiry on the
following day. Disciplinary action should not be confirmed until the appeal
procedure has been carried out.
CAPABILITY PROCEDURE
Some organizations deal with matters of capability under a disciplinary procedure,
but there is a good case to be made for dealing with poor performance issues sepa-
rately, leaving the disciplinary procedure to be invoked for situations such as poor
timekeeping. An example of a capability procedure follows.
HRM procedures ❚ 883
Disciplinary procedure (part 2)
SUMMARY DISMISSAL
An employee may be summarily dismissed (ie given instant dismissal without
notice) only in the event of gross misconduct, as defined in company rules. Only
departmental managers and above can recommend summary dismissal, and the
action should not be finalized until the case has been discussed with the HR
manager and the appeal procedure has been carried out. To enable this review to
take place, employees should be suspended pending further investigation, which
must take place within 24 hours.
APPEALS
In all circumstances, an employee may appeal against suspension, dismissal with
notice, or summary dismissal. The appeal is conducted by a member of manage-
ment who is more senior than the manager who initially administered the disci-
plinary action. The HR manager should also be present at the hearing. If he or she
wishes, the employee may be represented at the appeal by a fellow employee of
his or her own choice. Appeal against summary dismissal or suspension should
be heard immediately. Appeals against dismissal with notice should be held
within two days. No disciplinary action that is subject to appeal is confirmed until
the outcome of the appeal.
If an appeal against dismissal (but not suspension) is rejected at this level, the
employee has the right to appeal to the chief executive. The head of HR and, if
required, the employee’s representative should be present at this appeal.
884 ❚ Employment and HRM services
Capability procedure
POLICY
The company aims to ensure that performance expectations and standards are
defined, performance is monitored and employees are given appropriate feed-
back, training and support to meet these standards.
Procedure
1. If a manager/team leader believes that an employee’s performance is not up
to standard an informal discussion will be held with the employee to try to
establish the reason and to agree the actions required to improve performance
by the employee and/or the manager/team leader. If, however:
(a) it is agreed that the established standards are not reasonably attainable,
they will be reviewed;
(b) it is established that the performance problems are related to the
employee’s personal life, the necessary counselling/support will be
provided;
(c) it is decided that the poor performance emanates from a change in the
organizations’ standards, those standards will be explained to the
employee and help will be offered to obtain conformity with the stan-
dards;
(d) it is apparent that the poor performance constitutes misconduct, the
disciplinary procedure will be invoked.
2. Should the employee show no (or insufficient) improvement over a defined
period (weeks/months), a formal interview will be arranged with the
employee (together with a representative if so desired). The aims of this inter-
view will be to:
(a) explain clearly the shortfall between the employee’s performance and the
required standard;
(b) identify the cause(s) of the unsatisfactory performance and to determine
what – if any – remedial treatment (eg training, retraining, support, etc)
can be given;
(c) obtain the employee’s commitment to reaching that standard;
(d) set a reasonable period for the employee to reach the standard and agree
on a monitoring system during that period; and
(e) tell the employee what will happen if that standard is not met.
The outcome of this interview will be recorded in writing and a copy will be
given to the employee.
REDUNDANCY PROCEDURE
Redundancy procedures aim to meet statutory, ethical and practical considerations
when dealing with this painful process. An example of a procedure is given below.
HRM procedures ❚ 885
3. At the end of the review period a further formal interview will be held, at
which time:
(a) if the required improvement has been made, the employee will be told of
this and encouraged to maintain the improvement;
(b) if some improvement has been made but the standard has not yet been
met, the review period will be extended;
(c) if there has been no discernible improvement this will be indicated to the
employee and consideration will be given to whether there are alterna-
tive vacancies that the employee would be competent to fill; if there are,
the employee will be given the option of accepting such a vacancy or
being dismissed;
(d) if such vacancies are available, the employee will be given full details of
them in writing before being required to make a decision;
(e) in the absence of suitable alternative work, the employee will be
informed and invited to give his or her views on this before the final
decision is taken, to take disciplinary action, including dismissal.
4. Employees may appeal against their dismissal. The appeal must be made
within three working days.
Redundancy procedure (part 1)
DEFINITION
Redundancy is defined as the situation in which management decides that an
employee or employees are surplus to requirements in a particular occupation
and cannot be offered suitable alternative work.
Employees may be surplus to requirements because changes in the economic
circumstances of the company mean that fewer employees are required, or
because changes in methods of working mean that a job no longer exists in its
previous form. An employee who is given notice because he or she is unsuitable
or inefficient is not regarded as redundant and would be dealt with in accordance
with the usual disciplinary or capability procedure.
886 ❚ Employment and HRM services
OBJECTIVES
The objectives of the procedure are to ensure that:
● employees who may be affected by the discontinuance of their work are given
fair and equitable treatment;
● the minimum disruption is caused to employees and the company;
● as far as possible, changes are effected with the understanding and agreement
of the unions and employees concerned.
PRINCIPLES
The principles governing the procedure are as follows:
● The trade unions concerned will be informed as soon as possible of the possi-
bility of redundancy.
● Every attempt will be made to:
– absorb redundancy by the natural wastage of employees;
– find suitable alternative employment within the company for employees
who might be affected, and provide training if this is necessary;
– give individuals reasonable warning of pending redundancy in addition
to the statutory period of notice.
● If alternative employment in the company is not available and more than one
individual is affected, the factors to be taken into consideration in deciding
who should be made redundant will include:
– length of service with the company;
– age (especially those who could be retired early);
– value to the company;
– opportunities for alternative employment elsewhere.
● The first three of these factors should normally be regarded as the most
important; other things being equal, however, length of service should be the
determining factor.
● The company will make every endeavour to help employees find alternative
work if that is necessary.
HRM procedures ❚ 887
Redundancy procedure (part 2)
PROCEDURE
The procedure for dealing with employees who are surplus to requirements is set
out below.
Review of employee requirements
Management will continuously keep under review possible future developments
which might affect the number of employees required, and will prepare overall
plans for dealing with possible redundancies.
Measures to avoid redundancies
If the likelihood of redundancy is foreseen, the company will inform the union(s),
explaining the reasons, and in consultation with the union(s) will give considera-
tion to taking appropriate measures to prevent redundancy.
Departmental managers will be warned by the management of future develop-
ments that might affect them in order that detailed plans can be made for running
down staff, retraining, or transfers.
Departmental managers will be expected to keep under review the work situa-
tion in their departments in order that contingency plans can be prepared and the
manager responsible for personnel warned of any likely surpluses.
Consultation on redundancies
If all measures to avoid redundancy fail, the company will consult the union(s) at
the earliest opportunity in order to reach agreement.
Selection of redundant employees
In the event of impending redundancy, the individuals who might be surplus to
requirements should be selected by the departmental manager with the advice of
the manager responsible for personnel on the principles that should be adopted.
The manager responsible for personnel should explore the possibilities of trans-
ferring affected staff to alternative work.
The manager responsible for personnel should inform management of
proposed action (either redundancy or transfer) to obtain approval.
The union(s) will be informed of the numbers affected but not of individual
names.
888 ❚ Employment and HRM services
Redundancy procedure (part 3)
An appropriate director will hear any appeals with the manager responsible for
personnel.
The manager responsible for personnel will ensure that all the required admin-
istrative arrangements are made.
If the union(s) have any points to raise about the selection of employees or the
actions taken by the company, these should be discussed in the first place with the
manager responsible for personnel. If the results of these discussions are unsatis-
factory, a meeting will be arranged with an appropriate director.
Alternative work within the company
If an employee is offered and accepts suitable alternative work within the
company, it will take effect without a break from the previous employment and
will be confirmed in writing. If the offer is refused, the employee may forfeit his or
her redundancy payment. Employees will receive appropriate training and will
be entitled to a four-week trial period to see if the work is suitable. This trial
period may be extended by mutual agreement to provide additional training.
During this period, employees are free to terminate their employment and if they
do, would be treated as if they had been made redundant on the day the old job
ended. They would then receive any redundancy pay to which they are entitled.
Alternative employment
Employees for whom no suitable work is available in the company will be given
reasonable opportunities to look for alternative employment.
The departmental manager and the HR manager responsible for personnel will
jointly interview the employees affected either to offer a transfer or, if a suitable
alternative is not available, to inform them they will be redundant. At this inter-
view, full information should be available to give to the employee on, as appro-
priate:
● the reasons for being surplus;
● the alternative jobs that are available;
● the date when the employee will become surplus (that is, the period of notice);
● the entitlement to redundancy pay;
● the employee’s right to appeal to an appropriate director;
● the help the company will provide.
Computerized human resource
information systems
As defined by Kettley and Reilly (2003), a computerized human resource information
system consists of ‘a fully integrated, organization-wide network of HR-related data,
information, services, databases, tools and transactions’. Such a system can be
described as ‘e-HR’, meaning ‘the application of conventional, web and voice tech-
nologies to improve HR administration, transactions and process performance’. They
suggest that the reasons for adopting e-HR are:
● HR service improvement;
● cost-cutting and operational efficiency;
● the desire of the HR function to change the nature of its relationship with
employees and line managers;
● the transformation of HR into a customer-focused and responsive function;
● the offer of services that fit the new world of work and are attractive to current
and future staff.
59
BENEFITS OF A COMPUTERIZED HUMAN RESOURCE
INFORMATION SYSTEM
According to IDS (2002), the benefits of a computerized human resource management
system are:
● increased access to HR data;
● streamlined and standardized processes;
● more consistent and accurate data;
● a higher internal profile for HR.
HR INFORMATION STRATEGY
The HR strategy of an organization in relation to HR information is concerned
first with the use of computerized information for strategic decision making,
second with the range of applications which should be included in the system
and finally with the provision to line managers of the facility to have direct access
to any personnel data they need to manage their own teams in a devolved organiza-
tion.
Strategic decision taking
The strategic areas involving computerized information and the knowledge gained
from analysing that information include macro concerns about organization, human
resource requirements, the utilization of human resources, employee development
and organizational health.
Specifically the information may focus on areas such as:
● organization development – how the structure may need to adapt to future needs
and how IT can enable structural change, for example, high performance team
structures;
● human resource plans, especially those concerned with ‘mapping’ future compe-
tence requirements and enlarging the skills base;
● determination of future development and training needs;
● determination of the performance and personality characteristics of the people
who will be successful in the organization;
● assessment of the ‘health’ of the organization measured by attitude surveys and
turnover and absence statistics, leading to the development of motivation, reten-
tion and absence control strategies;
890 ❚ Employment and HRM services
● analysis of productivity levels as the basis for productivity improvement
programmes;
● analysis of the scope for cutting down the number of employees – taking unnec-
essary costs out of the business.
Range of applications
There is an immense range of applications to choose from, starting from basic
employee records and extending to highly sophisticated ‘expert’ systems which focus
on fundamental HR decision areas.
THE FUNCTIONS OF A COMPUTERIZED HR SYSTEM
The basic functions of a computerized HR system are to:
● hold personal details about individual employees including career history, skills
and qualifications, leave and absence records;
● hold details about employees’ jobs, including grade, pay and benefits, hours,
locations, job description or role definition;
● produce reports summarizing different aspects of this information.
The additional ‘functionality’ that a system can incorporate comprises:
● the recording and analysis of absence, attendance and labour turnover, which
includes making comparisons between different occupations and locations and
producing data on trends;
● recruitment and training administration;
● job evaluation;
● sophisticated modelling tools for such activities as human resource planning and
reward management, which enable the system to be used to support strategic
decision-making;
● linkages to the internet (for example as part of an internet recruitment system) or
to the internal intranet.
It is useful to distinguish between transactional (HR processes such as records,
recruitment and e-learning) application and relational systems (communication,
knowledge management and enhancing the employer brand).
Systems may be completely integrated with payroll, or more commonly they
Computerized HR information systems ❚ 891
maintain a direct link. Some systems are entirely stand-alone. There may be one
comprehensive software package to cover all applications, or specialized software for
such functions as attendance management or job evaluation may be used.
THE TECHNICAL INFRASTRUCTURE
Human resource information system
This provides the information required to manage HR processes. These may be core
employee database and payroll systems but can be extended to include such systems
as recruitment, e-learning, performance management and reward. The system may
be web-based, enabling access to be remote or online and at any time.
HR/corporate intranet
An intranet is an electronic network that enables information to be communicated
across organizations. It posts static data such as information on HR policies and
communications about employee facilities such as learning opportunities and flexible
benefits. It can include links that enable managers and other employees to interface
directly with HR applications and make changes or enquiries.
B2E portal
A B2E portal provides a single intranet screen that enables the organization to gather
and present information and gives people ready access to it.
Application service provider
An application service provider (ASP) carries out on behalf of the organization all
or much of the administration of the human resource information system.
Organizations, often smaller or medium-sized, can use an ASP to outsource the
burden of running the system.
RATING OF SYSTEM FEATURES
Research conducted by the IPD and the Institute for Employment Studies (IPD,
1999b) established that the systems features rated highly by organizations were:
892 ❚ Employment and HRM services
● employee records;
● payroll;
● sick pay and maternity pay calculations;
● equal opportunity monitoring;
● production of standard letters and contracts;
● absence recording and monitoring;
● annual leave records;
● enquiries;
● attendance recording;
● disciplinary recording.
The features that were not so highly rated were:
● psychometric testing;
● IiP evaluation;
● shift or roster planning;
● organization charting;
● succession planning;
● ’what-if’ modelling;
● jobs/skills matching;
● workforce planning;
● training needs analysis;
● appraisal records;
● salary modelling.
AN EFFECTIVE SYSTEM
The IPD guide on using computerized personnel systems (1999b) states that an effec-
tive system will have the following features:
● meets business needs;
● user-friendliness;
● good reporting facilities;
● flexibility;
● value for money;
● good supplier support;
● reliability.
Computerized HR information systems ❚ 893
PROBLEMS AND HOW TO DEAL WITH THEM
The 1999 IPD guide lists a number of typical problems and suggests how they can be
dealt with. The problems and their solutions are set out in Table 59.1.
Involving line managers
With the universal availability of personal computers (PCs) and the development of
distributed data processing in local area networks (LANS) and the wide area
894 ❚ Employment and HRM services
Problem Solution
Poor data quality Pay particular attention to getting accurate data into the
system by training and monitoring
Lack of understanding of the Provide ‘contextual training’ covering:
system by users ● data sources (who provides the data and in what
form)
● why different pieces of data are collected
● links to other systems
Inadequate coding of data Take care in setting up coding structures and train
producing unhelpful reports users in how to use codes
Lack of clarity about responsibilities Ensure that care is taken in specifying responsibilities
for generating information on how and spelling out how information can be used
the system can be used to supported by training and continuing guidance (a ‘help
generate useful information line’ to a systems or networks manager is a good idea)
Inadequate reporting capability – ● Define report specifications carefully in advance
this is an aspect of systems that ● Take care in designing report layouts and contents on
causes most dissatisfaction the basis of surveys of user needs
● Check views about the quality of reports and
amend them as necessary
Line managers resent having to ● Minimize form filling
contribute or maintain ● Ensure that managers can access the system easily,
information possibly via the intranet
● Advise managers on how they can use the system
to their benefit
Table 59.1 Computer system problems and solutions
networks (WANS), it is possible for data for use by line managers to be downloaded
from the centre (a mainframe, minicomputer or UNIX system). Managers can also
maintain their own data and manipulate the figures by the use of spreadsheets, for
example, considering alternative ways of distributing their budget for a payroll
increase among their staff. All this will, of course, be subjected to intensive security so
that information goes only to authorized people and some data may be on a ‘read
only’ basis.
The strategy for extending the system to line managers will clearly be entirely
dependent on the organization‘s policies for devolving personnel decisions to them.
But if this is the policy, its implementation will be much more likely to take place if
the information required by line managers is made available.
DEVELOPING A COMPUTERIZED HR INFORMATION
SYSTEM
The design decisions that have to be made when developing an e-HR system are
concerned with the type and proportion of services to be delivered, the best means of
delivery and the use of the system shared by HR service centres. The challenges, as
described by Kettley and Reilly (2003) are:
● aligning e-HR investment with the strategy of the business;
● taking into account the needs of a varied workforce, including their access to and
familiarity with technology;
● customizing e-HR;
● avoiding information overload;
● making an impact on HR and organizational performance.
They emphasize that it is important to avoid simply computerizing an existing
process. It is necessary to take a ‘process thinking’ approach, ie to redesign the
process and then computerize. This might involve significant streamlining of existing
processes.
Overall approach
The following are the typical stages in the development of an HR information system.
● Establish the current and future needs of the business and how these impinge on
HR, and the implications for information systems.
Computerized HR information systems ❚ 895
● Define what outputs are required from the system in the form of information and
reports.
● Prepare a high-level statement of requirement.
● Identify the options available to meet the HR business requirements.
● Prepare a recommendation on how to proceed for executive approval and buy-in.
This must be supported both by a financial evaluation and by an analysis of the
benefits to the business and any associated changes in business practices. A tran-
sition plan will be required which sets out the sequence of activities that would
allow the organization to move swiftly and efficiently to any new system with the
minimum of disruption.
Preferred characteristics of an information system
The preferred characteristics of an information system are:
● direct input of data at source;
● systems that can be used by the ‘occasional user’, not just a dedicated expert;
● systems able to deal with administrative processes, not simply a management
information system;
● systems that provide the information needed by line managers in an easily under-
stood format.
The range of applications will be defined by the information strategy. It will be vital
to ensure that the hardware is appropriate to the organizational requirements in that
PCs and terminals are provided where needed and are linked together in a network
as required.
It is equally essential to ensure that the system is designed in such a way as to hold
all the base data needed to provide management information. The system should be
user-friendly, bearing in mind that the task which demands most time in using a
system is data entry and that the enquiry system for obtaining information must be as
easy to learn and use as possible.
The detailed points to be considered when developing a system are:
● the choice of hardware;
● database management;
● the degree to which the system is integrated with the payroll;
● the choice of software;
● the development programme.
896 ❚ Employment and HRM services
Choice of hardware
There may be no choice of hardware – some systems are still linked to a mainframe
computer. But networked PC systems using either mini or microcomputers are
common, especially in larger organizations.
Database management
The system should be founded on a database – a self-describing collection of inte-
grated personnel records. Particular attention has to be paid to the database manage-
ment system (DBMS), the program or set of programs that develops and uses the
database and database applications. Careful attention has also to be given to the
design of database forms: data entry forms which are custom developed, video
displays used to enter and change data, queries using standard query language (SQL)
and report forms which are the hard copy output of database data. The base data is
likely to be of much better quality if it is used in such day-to-day processes as recruit-
ment, training administration and job evaluation.
Integration
Although many organizations have separated the payroll and purely personnel
applications (the former usually being controlled by the accounts department), there
is a lot to be said for having an integrated system. This makes economic use of one
comprehensive database and facilitates such processes as flexible payment (cafeteria)
systems.
Software
There is a massive and almost bewildering choice of software packages for applica-
tion programs to provide information and generate reports. The software houses are
constantly innovating and developing their products and between them provide
something for everyone. However, if the organization has its own systems analysis
and programming resources there are advantages in developing tailor-made soft-
ware. But great care will need to be taken to debug the system, especially if a distrib-
uted system involving line managers is being created.
However, most organizations use an external supplier although the HR application
market is highly fragmented, as an IRSI (2004i) survey into the use of human resource
management information systems found. The two basic approaches are the ‘inte-
grated best-of-breed model’, which links applications from separate specialist
providers to produce what is in effect a bespoke system, or the ‘application suite’
Computerized HR information systems ❚ 897
model, with one vendor supplying a linked group of modules. If an external supplier
is used the choice should be made as follows:
● research the HR software market through trade exhibitions and publications;
● review HR processes and existing systems;
● produce a specification of system requirements;
● send an invitation to tender to several suppliers;
● invite suppliers to demonstrate their products;
● obtain references from existing customers, including site visits;
● analyse and score the product against the specification.
The development programme
The 10 steps required to develop and implement an information system are:
1. Determine objectives – are they to save administrative costs, speed up
processing, provide advanced decision support, or a combination of any of
these?
2. Prepare a business case for the system, setting out the benefits and the costs.
3. Carry out a feasibility study to consider applications and their likely costs and
benefits. This study could be carried out in-house or with the help of outside
consultants or software houses who provide a consultancy service. The feasi-
bility study will broadly analyse and define user requirements and ensure that all
concerned are aware of what is being planned, how they will benefit from it and
the contribution they will be expected to make to the development and applica-
tion of the system. The information the system will be required to store and
process and the uses to which the information will be put should be specified.
Account should be taken of the provisions of the Data Protection Act (1998) as
described in Chapter 55.
4. Prepare a requirements specification which will set out in detail what the system
is expected to do and how the company would like to use it. This specification
can be used to brief hardware and software suppliers before selecting the system.
5. Select the system in the form of the hardware and the software required. This
may involve decisions on the extent to which existing hardware or systems (eg
payroll systems) will be used. The need and scope for networking, that is, linking
users by means of terminals, will also need to be considered.
6. Plan the implementation programme to ensure that the objectives will be
achieved within a given time scale and in line with the cost budget.
7. Involve users to ensure that everyone who will benefit from the system (line
898 ❚ Employment and HRM services
managers as well as members of the personnel department) can contribute
their ideas and thus feel that it is their system rather than one imposed upon
them.
8. Control the project against the implementation programme to ensure that it
delivers what is required, on time and within the budget. As The IPD Guide on
Implementing Computerized Personnel Systems (1997b) emphasizes, it is essential to
ensure that the selection and implementation of a system is a managed process.
This means selecting an individual to act as project manager with the responsi-
bility for dealing with all the steps listed above.
9. Provide training to all users to ensure that they can operate and get the most out
of the system.
10. Monitor performance to ensure that the system lives up to expectations.
APPLICATIONS
As established by the IRSI (2004i) survey, in many respects the core functionality in
use is concerned with administrative processes, particularly absence management
(very popular), training and development, reward, payroll and recruitment and
selection. Most HR functions use their HRM information system to change pay rates,
alter employee records, monitor absence figures and download forms for manual
completion. Not many organizations use their IT systems strategically for workforce
planning, tracking the skills of individuals and making the data available for analysis
and action. Some but by no means all organizations were developing self-service
applications such as employees changing their personal details, and booking on
training courses directly. The main potential applications are summarized below.
Personal records
These can include personal details, job details, employment contracts, pay details,
performance appraisal, contacts and addresses and employee transactional data. The
latter includes all the special items of information a company may need for its
employees including qualifications, special skills and competences, training, absence,
medical history and discipline.
Business to employees (B2E)
As defined by Watson Wyatt Worldwide (2002), business to employee (B2E) processes
involve the application of any computer technology enabling managers and
Computerized HR information systems ❚ 899
employees to have direct access to HR and other workplace services for communica-
tion, performance reporting, team management and learning, in addition to adminis-
trative applications. A self-service approach can be adopted, which allows managers
or staff to access personal records and update them or add new information, subject
to rigorous security arrangements.
Human resource planning
An information system can be used to model the effects on groups of people within
the organization of change over time in the numbers and structure of each group and
movements into, through and out of each group. Such a model looks at the organiza-
tion, using a staffing system consisting of grades and flows. The user has consider-
able freedom in defining the number and type of flows required whether into,
through, or out of each level of the system, ie:
● flows in – recruitment, transfers in;
● flows out – transfers out, retirement, resignation (uncontrolled losses), early
retirement (controlled losses).
Employee turnover monitoring and control
Computer models can monitor and help in the control of employee turnover. They
can therefore provide a critical input to other areas of human resource decision
making such as policies on recruitment, promotion, redeployment, training and
career planning.
Employee scheduling
An information system can be used to provide an integral system for matching the
numbers of employees to business needs. The process of scheduling human resources
to meet output in processing targets is becoming increasingly complex with the avail-
ability of more flexible ways of deploying people. They include multi-skilling
(employees who are capable of carrying out different tasks and are not subject to
trade-union-imposed constraints in doing so), the use of contract workers, the use of
outworkers (people working at home or in another centre, a process which is facili-
tated by computer networking and electronic mailing), twilight shifts, more part-
timers, job sharing etc.
Human resource planning is an interactive process which is always using output
from one part of the process to influence another part of the process. Thus, assess-
ments of the demand and supply of people, scheduling policies and possibilities, and
900 ❚ Employment and HRM services
the scope for flexing workloads and the use of people all influence the human
resource supply policies adopted by the organization.
Employee profiling
Profiling is a particular aspect of employee scheduling concerned with the matching
of staff to workloads and ensuring that the right number of people are available to
meet fluctuations in activity levels over time. Profiling techniques are used where
there are measurable volumes of work that can be costed and forecast with reason-
able accuracy. Profiling can be linked with employee budgeting control in the sense
that the use of people is both constrained and influenced by the cash budget and
performance and employee establishment targets.
Profiling models can be used to:
● monitor and analyse employee utilization;
● test the effects of moving some activities to different times of the year and analyse
their predicted impact on the employment profile;
● monitor movements in expenditure on pay and other employee benefits and
carry out sensitivity tests on the impact of different pay assumptions;
● forecast future employee requirements;
● synchronize the recruitment of permanent and temporary employees with fore-
cast workloads;
● flex employee budgets on the basis of revised activity level forecasts;
● control employee budgets.
Skills inventories and audits
Many organizations need to store detailed information about the skills, competences
and experience of the individuals they employ. A separate skills inventory can be
linked to a personnel database in order that any individual changes in experience or
additional training can be fed through automatically to it.
Periodical audits can be carried out by the information system of the skills and
competences available in the organization. These can be compared with estimates of
current and future requirements to identify areas where recruitment or training
action is required.
Competency modelling
Competency modelling brings together organization planning and performance
management data to establish the skills or competencies required to do particular
Computerized HR information systems ❚ 901
jobs. This assists in appointment, promotion and training decisions. Competency
analysis looks both at what tasks have to be carried out and the competencies
required. Profiles can then be developed by the computer and matched to assess-
ments of current job holders or job applicants.
Recruitment
A recruitment system can carry out the following tasks:
● storage of applicants’ details;
● retrieval and amendment of those details;
● matching CVs to person specifications for short-listing purposes;
● link with Internet recruiting processes;
● letter writing (linking the system to word-processing facilities) – acknowledge-
ments, invitations to interview, offers and rejections;
● management reports, analysis of response by media and monitoring recruitment
costs.
Computerized recruitment control packages not only automate recruitment corre-
spondence (coupling the system with word processors) but also enable users to deter-
mine instantly who has applied for which post, track progress in recruiting for a
specific post and match and process internal candidates (applicant tracking systems).
The database can be used in more advanced applications to assist in establishing
selection profiles with the standards against which potential job holders can be
assessed in order that the right people can be appointed to or promoted into jobs.
As reported by Kettley and Reilly (2003), the United Biscuits graduate recruitment
portal is a competency-based pre-screening tool. It allows people to review online
details of the company, its jobs and career development opportunities. Interested
applicants are invited to go through pre-screening by entering their personal details,
filing academic information, and completing a questionnaire focused on United
Biscuits’ high performance behaviours derived from the company’s top 100
managers.
If successful at this level, applicants are given a unique password enabling access to
the website’s next level, where applications to specific functions can be made.
Reward management
The system can be used for pay modelling and to carry out a number of reward ad-
ministration activities. It can also be used in job evaluation.
Pay models provide the answers to ‘what if?’ questions such as, ‘How much would
902 ❚ Employment and HRM services
it cost if we gave x per cent to this part of the company, y per cent to another part of
the company, and implemented the following special package across these job func-
tions?’
A system can also:
● analyse and report on average pay or pay distributions by job, grade, age or
length of service;
● calculate compa-ratios to show how average pay in a range differs from the target
pay;
● calculate the effects of attrition;
● assist in job evaluation;
● forecast future payroll costs on the basis of assumptions about numbers, promo-
tions and pay levels;
● administer pay reviews, producing review forms, analysing proposals against the
budgets and calculating the cost of performance-related pay awards in accor-
dance with different assumptions about amounts and the distribution of awards
within a budget;
● provide information to line managers which will guide them to their pay deci-
sions;
● generate instructions to adjust pay as well as letters to individuals informing
them of their increases.
Performance management
An information system can help to operate performance management, generating
forms, analysing and reporting on the result of performance reviews showing the
distribution of people with different degrees of potential or performing at different
levels, and highlighting individuals with particular skills or special promise. This
system can be linked to others to provide an integrated basis for creating and imple-
menting human resource management policies.
Computer-managed learning
A system can be used for computer-managed learning by:
● storing e-learning modules on the database, which enables trainers to select an
appropriate module or mix of modules to meet a specified learning need;
● analysing the training recommendations contained in performance review
reports to identify collective and individual training needs;
● identifying suitable training courses to meet training needs;
Computerized HR information systems ❚ 903
● making arrangements for off-the-job courses;
● informing employees about the arrangements for courses;
● handling correspondence about training courses;
● storing data on standard or individually tailored induction, continuation or
development training programmes, including syllabi, routings, responsibilities
for giving training, test procedures and progress reporting;
● generating instructions and notes for guidance for all concerned with providing
or undergoing on-the-job training programmes;
● storing progress reports and monitoring achievements against training objectives;
● producing reports summarizing current and projected training activities and
calculating the output of training programmes – this can be linked to human
resource planning models including those designed to determine the input of
trainees required for training schemes;
● recording and monitoring training expenditure against budget.
Computers can also be used as training aids.
Career management
A system can help in the implementation of career management policies and proce-
dures which embrace both career planning and management development. The
system does this by analysing the progression of individuals and comparing the
results of that analysis, first, with assessments of organizational requirements as
generated by the human resource planning models and, second, with the outputs of
the performance management system.
Absence control
Absence control can be carried out with the help of computerized time recording and
attendance systems which:
● record clocking-on or -out time and the hours actually worked;
● enable employees to record the time spent on particular jobs;
● get employees to explain the reason for late arrival, early departure, or any other
absence;
● can be linked to the payroll system for pay and bonus calculation purposes and to
a flexible working hours system;
● provide team leaders with a statement showing the length and reasons for
absence.
904 ❚ Employment and HRM services
Advanced systems link information obtained from clocking-on or -out direct to a
screen in team leaders’ offices so that they can have instant information on how many
people are at work and on the incidence of lateness.
Equal opportunity monitoring
The system can store records of the ethnic composition of the workforce. This
information can be analysed to produce data on the distribution of ethnic minorities
by occupation, job grade, age, service and location. The analysis could show the
overall proportion of ethnic minority employees compared with the proportion in
each job grade. Similar statistics can be produced for men and women. The analysis
can be extended to cover career progression, splitting the results of the overall
analysis into comparisons of the rate at which women and men of different ethnic
groups progress.
Expert systems
Knowledge-based software or expert systems are computer programs which contain
knowledge about particular fields of human activity and experience, which, through
linkages and rules built into the system design, can help solve human resource
management problems. Unlike a database system which stores, sorts, manipulates,
and presents bits of information – ie data – expert systems store, sort, manipulate and
present managers with ready-to-use knowledge of management practice, written in a
language that management understands, as opposed to computerese.
Expert systems are developed through a process of knowledge engineering which
starts from a knowledge base containing facts and a body of expertise (‘heuristics’, or
rules of thumb) about the use of those facts. These ‘rules’ enable decisions to be made
on the basis of factual information presented to the computer. Thus, a fact may be
information on employee turnover during the last three years, and the rule of thumb
may be the method by which turnover could be predicted over the next three years.
These facts and rules are processed by what is termed the ‘inference engine’, which
solves problems or makes predictions, and the results of this process are presented to
the user in the ‘user interface’.
An expert system can produce a list of suitable candidates for promotion by using
information from the database. If more information were required, it would ask the
user to answer questions. It would also respond to users’ questions about why partic-
ular candidates had been identified, by giving details of qualifications, performance
appraisal results and so on.
What can loosely be described as expert systems are also used in job evaluation
Computerized HR information systems ❚ 905
applications where they make use of a database of job analyses and evaluations in
order to make consistent judgements about evaluation scores. This is done by:
● defining the evaluation rules;
● programming the computer to ask appropriate questions concerning each factor
in a job to enable it to apply the evaluation rules – this involves the analysis of
structured questionnaires which have been specially designed to facilitate the
systematic collection and analysis of data;
● applying the rules consistently and determining the factor score for the job;
● grading and ranking jobs;
● storing the information in the computer’s memory so that it can be called to the
screen or printed at any time.
AUDITING THE SYSTEM
As suggested by Robinson (1999), regular audit of the system should be carried out to
obtain answers to these questions:
● Is the system being used efficiently and effectively?
● Are there any barriers to the effective use of the system?
● Does the technology enable managers or merely dictate to them?
● Are there any aspects of the system which are causing dissatisfaction in the HR
department, with senior management or line managers?
● Are there any problems with data inaccuracy?
● Are reports accurate, helpful and used for decision-making?
● What is the functionality of the system? That is, what does the system do, and
how well does it do it? What additional functions might be useful?
● How effective are the systems links, the use of data in different applications?
906 ❚ Employment and HRM services
Example of an attitude survey
Appendix
Purpose
The purpose of this survey is to obtain your opinion on the existing pay arrange-
ments and the performance appraisal process in XYZ Ltd. Your views and those of
all the other staff of the company who are being asked to complete this question-
naire will provide a valuable input to the work currently being carried out to devise
new approaches to pay and performance appraisal. Feedback on the overall results
of the survey will be provided to all staff.
Confidentiality
Your answers to the questionnaire will be completely confidential. No individual
will be identified and no one in the company will see the forms, which will be
analysed by an independent research firm. You are being asked to identify your
function but that is simply to make comparisons; the forms will not be analysed on
an individual basis.
Completing and forwarding the survey form
Please complete the form and send it by 1st July in the attached envelope which is
addressed to the firm which will be carrying out the analysis.
908 ❚ Appendix
How to complete the questionnaire
The questionnaire will take about 15 minutes to complete. Please indicate your
views about the statements overleaf by placing a ring around the number which
most closely matches your opinion. For example:
Strongly Inclined to Neither agree Inclined to Strongly
agree agree nor disagree disagree disagree
I like my job 2 3 4 51
Function/department
Please circle one of the following:
1. corporate office;
2. marketing;
3. manufacturing;
4. finance;
5. IT;
6. HR;
7. customer service;
8. marketing, development, fundraising, PR, HR.
Appendix ❚ 909
QUESTIONNAIRE
I believe that: Strongly Inclined to Neither agree Inclined to Strongly
agree agree nor disagree disagree disagree
1 My pay adequately rewards me 1 2 3 4 5
for my contribution
2 The pay system is clear and easy 1 2 3 4 5
to understand
3 It is right for staff to be rewarded 1 2 3 4 5
according to their contribution
4 The basis upon which my pay is 1 2 3 4 5
determined is fair
5 Highly competent staff should be 1 2 3 4 5
paid more than less competent
staff
6 Rates of pay in the Company are 1 2 3 4 5
not consistent with levels of
responsibility
7 My rate of pay compares favourably 1 2 3 4 5
with rates paid outside the Company
8 My pay does not reflect my 1 2 3 4 5
performance
9 The current pay system 1 2 3 4 5
encourages better performance
10 The pay system badly needs to 1 2 3 4 5
be reviewed
11 I am clear about the standards of 1 2 3 4 5
performance I am expected to
achieve
12 I do not understand the competence 1 2 3 4 5
levels I am expected to reach
13 The performance appraisal 1 2 3 4 5
scheme is helpful
14 I receive good feedback from my 1 2 3 4 5
manager on my performance
15 My manager is not really interested 1 2 3 4 5
in carrying out my appraisal
16 I am motivated by my performance 1 2 3 4 5
review meeting
17 The process of setting objectives 1 2 3 4 5
and reviewing achievements is fair
18 The assessment of my performance 1 2 3 4 5
by my manager is objective and fair
19 Performance appraisal does not help 1 2 3 4 5
me to improve my performance
20 Performance appraisal clearly 1 2 3 4 5
indicates any further training I
might need
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References ❚ 951
ability 240
ability tests 466
absenteeism
causes of absence 864
control of absenteeism 864–66
dealing with sickness 848–49
and human capital measurement 40
use of computers 904–05
ACAS (Advisory, Conciliation and Arbitration
Service) 754, 770
accident prevention 829–30, 841
Accounting for People Task Force 30, 48
action learning 573–74
action research 341
activity analysis 322
adaptive learning 541
added value 35, 40, 66, 82
adhocracies 290
advertising (recruitment)
advertising agency, use of 416–17
analysis of requirement 416
copy writing 417–18
evaluate response 419
media planning 419
successful advertising 419–20
types of advertisements 418–19
Aegon 125, 653
affective learning 560
age and employment 151
agency theory 207, 626
AIDS, policy on 155, 874
alignment of individual and organizational
objectives 498–99
allowances and other payments 735
analytical job evaluation 660–62
analytical matching 662–63
Anglia Polytechnic University 793
annual hours 386
application forms 425, 426
appraisal
defined 4
aptitude tests 466
arbitration 787
artefacts 308
assessment centres 430–31
attainment tests 466
attendance management
causes of absence 864–65
control of absenteeism 864–66
defined 863
attitude surveys 265–67, 812–13, 907–09
attitudes 244
Subject index
attraction policies and programmes 391–92
attraction strategies 395
attrition, labour turnover 40
attrition, pay 740
B&Q 125, 590, 650, 655
Bae Systems 573
balanced learning 615
balanced score card 42–44, 68
bargaining
collective bargaining 756–58
conventions 797–98
and negotiating 795
process of 796–97
single table 786–87
skills 804–05
tactics 802–03
base pay 627
behaviour, influences on 244–45
behaviour modelling 342
behavioural competencies
analysis of 193–98
defined 160
behavioural expectations 226
behavioural science 284–85
benchmarking
and best fit 138
use in assessing HR effectiveness 67
best fit 138–39
best place to work 82, 394
best practice 135–38
big idea, the 8, 305–06
biodata 429–29
Black & Decker 590
black box, the 20
blended learning 563, 566, 570
bounded rationality 226
briefing groups see team briefing
Britannia Building Society 411
British Psychological Society 469
broad-banded grade and pay structures 693–94
broad-graded grade and pay structures 691–92
bulletins 823
bullying 154
bundling 139–40, 873–74
business partner role of HR practitioners 32, 73,
79
business planning and human resource
planning 363–64
business process re-engineering 26, 357
business strategy 54
business strategy, integrating HR strategy
with 134
business to employees 899–900
cafeteria scheme 730
call-out allowances 735
capability procedure 883–85
career dynamics 400, 481–82
career family grade and pay stricture 696
career management
aims 400
defined 399
demand and supply forecasts 403
dynamics 400
modelling 403
performance and potential assessments 402
policies 400, 402
process of 400, 401
succession planning 403–04
talent audits 402
and talent management 393
use of computers 904
career map 405
career path 406
career planning
competency band approach 405
defined 404
use of career family grade structures 406
career progression 400
case study 581
CBI 769
Central Arbitration Committee (CAC) 770
Centrica 407–08
change
incremental change 74
operational change 345
resistance to 345–47
role of HR in facilitating 54–6
strategic change 344–45
change agents, HR practitioners as 74
change management
Beckhard’s change model 347–48
change management models 347–51
the change process 343–44
contribution of HR 55
guidelines for 56, 75, 351–52
Lewin’s change model 347
Thurley’s change model 348
transformational change 74
954 ❚ Subject index
characteristics of people see people, characteristics
of
Chartered Institute of Personnel and
Development (CIPD) 37, 48–49, 84, 86, 92,
535, 593, 613, 652, 734, 742, 742, 743, 866, 868,
873
check-off system 790
Children’s Society 127
CIFO Research 38
closed shop 790
coaching 567–69
Code of Professional Conduct, CIPD 84
cognitive learning 560
cognitive theory
of learning 551
of motivation 258–59
coherence in HRM 54, 139–40
collective agreements
as frameworks for collective bargaining 783
partnership 784–85
procedural agreements 783–84
substantive agreements 784
collective bargaining
bargaining levels 786
bargaining power 756–57
conjunctive bargaining 757
co-operative bargaining 757
defined 756, 783
distributive bargaining 757
as an exchange relationship 756
integrative bargaining 757–58
as a joint regulating process 756
and negotiating 795
as a political relationship 756
as a power relationship 756
procedural agreements 783–84
single-table bargaining 786–87
substantive agreements 783
collectivism 759
commitment
concept of commitment and engagement 271
contribution of HR to developing commitment
defined 271–72, 273–74
and employee relations 761
enhancing 281–82
factors affecting 277–78
and flexibility 276
gaining 83, 181–82
‘hearts and minds’ approach 12, 761
and HRM 12, 13–14, 59
impact of 276–77
influences on 280–81
and motivation 277
mutual commitment strategy and
mutuality 275
orientation 4
problems with concept 275–77
significance of 274–75
strategy 278–79
and trust 220
and the unitary frame of reference 275–76
committed employee 472
communications
analysing problems 821–22
areas 819–20
bulletins 823
DVDs 823
employee involvement 823
‘good communications’ theory 818
importance of 817
intranet 822
magazines 822
news letters 822
notice boards 823
objectives 820
on reward matters 748–49
strategy 819, 821
team briefing 824–25
what employees want to hear 821
what management wants to say 819, 821
communities of practice 178, 181, 182, 609
compa-ratios 691, 739–40
competence defined 161
competence-related pay 714–16
competencies
analysis of 193–98
behavioural 160
clusters 160
coverage 164
defined 159
and emotional intelligence 170–71
graded 164–65
performance 160
reasons for using 163
role-specific 164
technical 161
threshold 160
typical competencies 162–63
competencies, use of
in assessment centres 166
Subject index ❚ 955
defining technical competencies 169
in learning and development 166
in performance management 165–66
in recruitment and selection 166
in reward management 166–67
competency
analysis 193–98
competency band approach to career
planning 406
competency-based approach to recruitment and
selection 413–14
competency-based approach to management
development 600
defined 159, 160
frameworks 161–63
competency analysis
analysing behavioural competencies 193
analysing technical competencies 198
critical-incident technique 196
expert opinion 193
functional analysis 198
modelling 901–02
purpose 193
repertory grid 196–98
structured interview 193–95
workshop 194–95
competency frameworks
defined 161
development of 167–69
headings 161–63
competitive advantage 14, 26, 29, 73, 113, 116,
117, 220
competitive edge 305
competitive pressures 25–26
competitive strategy 135, 136
computer-assisted job evaluation 667–68
computer-managed learning 903–04
computerized HR information systems
applications 899–906
auditing 906
benefits of 890
characteristics of 896
defined 889
developing an information system 895–99
an effective system, features of 893
expert systems 905–06
functions of 891–92
problems 894–95
rating of system features 892–93
reasons for 889
strategy 890–91
technical infrastructure 892
conciliation 787
Confederation of British Industry (CBI) 769
configuration 139–40
conflict 301
conjunctive bargaining 757
consultation see joint consultation
content (needs) theory of motivation 254, 255,
257–58
contingency theory 24, 138
contingent pay
alternatives to 712
arguments for and against 710–11
choice of approach 721
comparison of schemes 722–23
competence-related pay 71, 714–15
contribution-related pay 716–17
criteria for 713
defined 628, 708
developing and implementing contingent
pay 724
incentives and rewards 709–10
incidence of 708–09
as a motivator 709
nature of 709
organization-wide schemes 725–27
performance-related pay 713–14
readiness for 721–23
service related pay 720–21
skill-based pay 718–20
team-based pay 724–25
continuous improvement 54, 126, 356–57
contracts of employment 858–59
contribution-related pay 712, 716–18
convergence of international HR policies
101–02
cooperative bargaining 757
core workers 761
corporate culture see organizational culture
corporate governance 634
corporate university 544, 573
Counsel for Excellence in Management
46–47
counselling 852
criterion behaviour 616
critical-incident competence analysis
technique 196
culture see organizational culture
culture fit 135
956 ❚ Subject index
custom and practice 755, 776
CVs 486
dashboard 51
Data Protection Act 1998 469, 869–70
data warehouse 178
Delloite and Touche 42–43
demand forecasting 373
dependency culture 96
de-recognition, trade unions 782–83
development
action learning 573–74
blended learning 570–71
defined 535, 570–71
impact of 574
personal development planning 571–72
planned experience 572
development and talent management 393
development centres 600–02
Diageo 127
directors and executives, rewards for
corporate governance 634
elements of pay 635–36
discipline 881
approach to handling cases 489–90
disciplinary procedure 881–83
discretionary behaviour 34, 247, 264, 499
discretionary effort 251–52
discussion 580–81
dismissal
definition 487
fair dismissal 488
fundamental questions 487–88
handling disciplinary cases 489–90
legal framework 487
reasonable in the circumstances, concept
of 488–89
remedies 489
unfair dismissal 488
dispute resolution
arbitration 787–88
conciliation 787
mediation 788
distributive bargaining 757
distributive justice 222
divergence of international HR practices 101–02
diverse needs, meeting 10
diversity see managing diversity
Donovan Commission 763–64
double-loop learning 541–42
downsizing 208, 387, 482
dress codes 863
Economic and Social Research Council 211
Education 535
efficiency wage theory 626
effort bargain 626
Egg 125
e-HR see computerized HR information
systems
e-learning
aim 584
blended 586, 587
business case for 586–87
defined 583
delivery 586
development of 588–89
examples 590
process of 585–87
programme content 585–86
technology 584–85
types 583–84
elderly employees 850
e-mails, policy on 156, 874–75
emotional intelligence
and competencies 170–71
components of 170, 602–03
defined 170, 602
development of 171, 603
employee assistance programmes (EAPs)
852–53
employee benefits
defined 628, 729
flexible benefits 730–31
objectives 729–30
taxation 730
types of 730
employee engagement see engagement
employee handbook 474–75
employee profiling 901
employee relations
defined 751–52
elements of 754
and HRM 761–62
individualism 759
informal processes 788–89
pluralist view 758–59
policies 774–78
power sharing 774
strategy 127, 778–79
Subject index ❚ 957
unitary view 758
employee relations climate
defined 779
an ethical approach 780
improving the climate 780
employee relations policies
approaches to 774
expressing policy 777–78
formulation 776–77
nature and purpose 774
policy areas 775
policy choices 775–76
policy formulation 776–77
employee relations strategies
formulating 779
nature and purpose 778
trategic directions 778–79
employee resourcing see resourcing
employee satisfaction measures 67
employee share schemes 698
employee scheduling 900–01
employee turnover/wastage
choice of measurement 379–80
cost of 381
half-life index 379
incidence of 382
labour turnover index 376–77
length of service analysis 379
methods of measurement 369–74
reasons for analysing labour turnover 375
reasons for turnover 380–81
significance of 376
stability index 379
survival rate 377–78
use of computers 900
employee voice
attitude surveys 813–15
defined 807
concept of 807
factors affecting 810
forms of 810–11
framework for 808–09
involvement 808
joint consultation 811–12
participation 808, 810
planning for 815
suggestion schemes 814
upward problem solving 810–11
employee welfare see welfare
employees, gaining support and commitment 83
employer brand 82
employer branding 395–96
‘employer of choice’ 383, 396
employers’ associations 769
employment relationship
basis of 217
changes to 218
defined 215
defining the employment relationship 217
and employee relations 751
and employee relations policies 775
managing the employment
relationship 218–19
nature of 215–16
and the psychological contract 225, 229
significance of 218
and trust 220–23
Employment Appeal Tribunal 771
employment practices 857
employment tribunals 770
empowerment 12, 13, 75
engaged performance 282
see also engagement
engagement 29, 272–73
equal opportunity 866
equal opportunity monitoring 905
equity theory of motivation 261–62
e-recruitment
advantages 421
approach 422
sites 422
usage 421–22
e-reward 742
ERG theory of motivation (Alderfer) 257
ethical considerations
approach to employee relations 780
for HR practitioners 84
in recruitment and selection 443
ethical standards in the firm 85
ethnic monitoring 867–68
ethnocentric policy 101
European Foundation for Quality management
(EFQM) 44–45
European works councils 810
evaluating the HR function 66–69
evaluating learning
application of 619–20
levels of 616–18
reason for 615
by return on investment 618
958 ❚ Subject index
training evaluation 616
use of evaluation tools 619
exchange theory 207
executive search consultants 424
exit interviews 380–81
expatriates, management of
expense of 104
preparation policy 106
realistic previews 106
recruitment and selection policies 105–06
resourcing policies 105
role specifications 106
training 107
expatriate pay
home-based pay 107–08
host-based pay 109
policies 107–08
expectancy theory of motivation 226, 259–60,
556
experienced worker’s standard (ESW) 554
experiential learning 551
expert systems 403
external relativities 739
extrinsic motivation 254
face validity of psychological tests 463
factor comparison 663
factor comparison 663
factor plan 677–78
factor weighting 678
factors affecting people at work
attribution theory 245–46
implications for HR specialists 248–49
individual differences 239–44
orientation to work 246
personalities 241–43
role theory 247
factors, job evaluation 677
faults analysis 200
feedback 226
felt-fair principle 268
financial flexibility 210
Financial Times, best workplace survey 394
fit, strategic 24, 54
five-fold grading 413
flexible benefits 730–31
flexible firm 25
flexible hours 386
flexibility
financial 210
functional 210
numerical 210
plan 384–87
flexible benefits 730–31
flexible firm, the 210
flexible working 862–63, 875–76
frequency rate 841
front line managers
basic role 93–94
devolving responsibility for pay
decisions 746–48
gaining support of 82–83
and HR practitioners 72, 89, 95–97
HRM role of 81
implementation of HR policies role 97–98,
157
improving front-line managers as people
managers 98
people management responsibilities of 94
and reward strategy 657
functional analysis 198
functional flexibility 210
gain sharing 726
General Electric 56
generic role 327
generic role profile 188
Genome human capital investment model
(Nationwide) 41–42
GlaxoSmithKline 125
global firms 99
globalization 26
goal theory of motivation 261, 556
golden handcuffs 393
grade and pay structures
analysis of different types 699–700
broad-banded 693–94
broad-graded 691–93
career family 696
defined 628
design of 698, 701–05
function 688
guiding principles 690
incidence of different types 698
individual job grades 698
job family 695
narrow-graded 691
pay spine 696–97
spot rates 697–98
types of 691–98
Subject index ❚ 959
grade structure defined 689
graphology 431–32
great place to work, creation of 394
grievance procedure 880–81
group behaviour
formal groups 292
group ideology 295
group processes 293
impact on group members 295
informal groups 293
interaction 294
reference group 296
task and maintenance functions 294
group dynamics 356
group exercises 582
half-life index 379
halo effect 458
hard HRM 11–12
hard strategic HRM 117
harmonization 789–90
Harvard framework of HRM 6–8
the Hawthorne studies 284
Hay Group 282
Hayes Committee 85–86
health and safety
accident prevention 841
audits 836–37
benefits 831–32
communicating on 842–43
importance of 830–31
management of 830
measuring performance 841–42
occupational health programmes 838–39
organizing 843–44
policies 829, 832–33
programmes 829
risk assessments 830, 834–35
stress management 839–40
training 843
Health and Safety Executive 831, 840, 865
‘hearts and minds’ approach 12, 761
hierarchy of needs (Maslow) 257–58
high-commitment management 119–20,
364–65
high-involvement management 120
high-performance culture 314
high-performance management 118–19
high performance work design 334
high performance work systems 38, 138
Higher Education Funding Council 127
home-based international pay 108–09
home-working 385
horizontal fit 139, 140
horizontal integration of HR strategy 54, 116,
134, 140
horns effect 458
host-based international pay 109
HR see human resources, see also HR function, HR
philosophies, HR strategies, HR policies, HR
practices, HR practitioners, HR processes, HR
programmes, and human resource
management
HR expertise 74
HR philosophies 4
HR practices 4
HR processes 4
HR programmes 4
HRD see human resource development
HR function
contribution to managing change 55
employee relations role 771
evaluation of 66–69
and the facilitation of change 54–56
justifying the HR budget 60
marketing of 59–60
organization of 57–59
outsourcing HR work 61–64
preparing the HR budget 60
protecting the HR budget 60–61
ratio of HR specialists to number of
employees 57–58
role of 53, 54
shared HR services provision 58, 63–64
variations in the practice of HR 56–57
HR information systems see computerised HR
information systems
HR philosophies 4
HR policies
AIDS 155
age and employment 151
areas of 148–56
bullying 873
defined 4, 147
discipline 153
e-mails 156
employee development 152
employee relations 153, 774–78
equal opportunity 150, 866
formalization 148, 156–57
960 ❚ Subject index
formulation of 156
goals 10–11
grievances 153
health and safety 153, 832–33
implementation 157
involvement and participation 153
managing diversity 151
new technology 153
overall policy 148–49
and procedures 147
promotion 151–52, 861–62
reason for 247–48
redundancy 154
reward 152
sexual harassment 154, 871–72
smoking 155, 872
substance-abuse 155, 873
transfer 860–61
work-life balance 152
HR practices 4
HR practitioners
advisory role 72
ambiguities in the role 87–88
basic roles 71–76
business partner role 32, 73, 79
change agent role 74
competencies required 89–92
competency framework 90
conflict in the HR contribution 88–89
employee advocate role 80
as functional experts 80
gaining support and commitment 81–83
guardian of values role 76
guidance role 72–73
as a human capital developer 80
innovation role 74
internal consultancy role 75
and front-line managers 95–97
models of HR practitioners’ roles 76–81
monitoring role 75–76
and personnel specialists 32
professional standards (CIPD) 89–90
professionalism in HRM 85–86
as reactive pragmatists 73
as service providers 72
as a strategic partner 80
strategist role 73
as ‘thinking performers’ 92
values 84
variations in 71
HR procedures
capability 884–85
defined 4, 879
disciplinary 881–83
grievance 880–81
introduction of 879
procedures and policies 147
promotion 861–62
redundancy 885–86
reward 745–46
HR processes 4
HR professionals/specialists see HR practitioners
HR programmes 4
HR scorecard 68
HR service centre 58, 63–64
HR strategies
attraction 395–97
communications 819
continuous improvement 126
criteria for 129
defined 4, 123
the development process 132
employee relations 127, 778–79
human capital 37
human resource development 536–37
implementation of 143–45
information 890–91
knowledge management 127
learning and development 127, 607–09
levels of strategic decision-making 132–33
management development 595–96
overarching strategies 124–26
purpose 124
resourcing 360–61, 371–72, 390–91
retention 397–98
reward 127, 643–57
setting out strategies 143
specific strategies 126–28
and strategic HRM 115, 124
strategic options and choices 133–34
strategy development 134–40
talent management 126
types of 124–28
HR strategy development
aligning HR strategy 134
approaches to 134–40
best fit approach 138–39
best practice approach 135–38
culture fit 135
integration with business strategy 134–35
Subject index ❚ 961
linking HR with competitive strategies 136
methodology for 140–41
setting out strategies 143
strategic review, conduct of 141–42
HR vision 74
HRM see human resource management
human asset worth 40
human capital
defined 8–9, 30, 33–34
and market worth 38
people as 14
significance of human capital theory 35–36
theory of pay levels 626
human capital advantage 35, 36
human capital index 39–40
human capital management
benefits of 36
defined 2, 29–30, 36
and human resource management 9, 30–32
purpose 36
questions 36–37
strategy 37
human capital measurement
approaches to 39–45
defined 38
elements of measurement 45–47
points concerning measurement 47
rationale for 36–38
human capital monitor 40
human capital reporting
defined 47–48
external reporting 48–49
internal reporting 49
human process advantage 35
human relations school 12,
human resource advantage 118, 121
human resource development (HRD)
defined 521
strategic HRD 533–37
human resource function see HR function
human resource management (HRM)
activities 5
aims of 8–11
approach to recruitment 432
aspects of 3–4
and business values 15
challenges to 26–27
characteristics 7, 11–15
and commitment 13,
and competitive pressures 25–26
defined 2, 3, 6, 31
diversity of 11–12
and employee relations 761–62
‘hard’ HRM 11–12
Harvard framework 6–8
and HR specialists 72
and human capital management 9, 30–32
human resource cycle 4
and human resource development 535
impact on organizational performance
20–24
and integration 12
matching model of HRM 5–6
models of HRM 5–8
morality of 16–17,
and mutuality 13
and organizational effectiveness 8
and personnel management 18–20, 31, 88
philosophy of 12
policy goals 10–11
radical critique view of 17
rhetoric of 12
reservations about 15–18
and resourcing 359–60
soft HRM 12
strategic nature of 13
as a strategic process 113
and technology 25
unitary philosophy of 14
human resource planning
action planning 382–88
aims 368
analysing demand and supply forecasts 375
and business planning 363–64
contribution of HR 388
defined 363, 364
demand forecasting 373
downsizing plan 387
employer of choice plans 383
estimating future requirements 373
expert judgement 373–78
flexibility plan 384
hard and soft versions 364–65
incidence of 366
the labour market context 367–68
limitations of 365–66
make or buy decisions 368
managerial judgement 373–74
mathematical modelling 375
organizational context of 367
962 ❚ Subject index
process of 368–70
ratio-trend analysis 374
rationale for 367
recruitment plan 383
resourcing plans 372, 382–83
resourcing strategy 361, 371–72
retention plan 372
scenario planning 372–73
supply forecasting 374–75
use of information system 900
human resource policies see HR policies
human resource practitioners/professionals/
specialists see HR practitioners
human resource strategies see HR strategies
human resource system 4
human resources 3
Human Rights Act 857
humanistic viewpoint of people 284
identification of learning needs
analysis of business and HR plans 610–11
areas for analysis 610
basis of analysis 610
performance and development
reviews 611–12
role analysis 612
surveys 611
IDS see Incomes Data Services
IES see Institute of Employment Studies
impression management 74
incidence rate 341
Incomes Data Services (IDS) 38
incremental change 74
individualism 759
induction
defined 471
documentation 474–75
employee handbook 474–75
formal induction courses 476–77
importance of 472–73
induction training on the job 477–78
initial briefing 475
introduction to the workplace 475–76
reception 473–74
industrial relations
bargaining power 756–57
collective bargaining 756
conjunctive bargaining 757
context of 762–63
cooperative bargaining 756
developments in 763–66
distributive bargaining 756
the Donovan analysis 763–64
HRM approach to 761–62
integrative bargaining 757
interventionism 764–65
parties to 766–71
procedural agreements 783–84
role of Confederation of British Industry
(CBI) 769–70
role of employers’ organizations 769
role of HR function 771
role of management 768–69
role of shop stewards 768
role of staff associations 768
role of trade unions 765, 766–67
role of Trade Union Congress (TUC) 768
as a system of rules 754–55
traditional system 763
types of regulations and rules 755–56
Workplace Employee Relations Survey (2004),
conclusions of 766
see also employee relations
Industrial Relations Services (IRS) 38, 53, 58,
419, 422, 615, 619, 774, 787, 862, 863, 865–66,
875, 876
Industrial Society 567, 619
Institute of Employment Studies (IES) 39, 63–64
Institute of Personnel and Development
(IPD) 208–09, 220, 233, 469, 774–78, 781
see also Chartered Institute of Personnel and
Development
instruction 579–80
instrumental learning 560
instrumentality theory of motivation 254, 255
integration
of business and resourcing strategies 360–61
horizontal integration of HR strategy 54, 116,
134
of HR strategy with business strategy 134–35
vertical integration of HR strategy 54, 116, 134
integrative bargaining 757
intellectual capital
and competitive advantage 26–27
defined 34
intelligence 241
intelligence tests 464
interaction 301
inter-group conflict interventions (OD) 342
internal relativities 739
Subject index ❚ 963
international firms 99
international human resource management
approach to international HRM 102
convergence 100, 101–02
cultural diversity 102–04
defined 99
divergence 100, 101–02
ethnocentric policy 101
expatriates, management of 100, 104–09
global firms 99
international firm 99
international organizational models 100
issues in 99–100
third-country nationals 100
international trade union organizations 768
interventions (OD) 341, 342
interviews, see selection interviewing
intranet 178, 810, 822
intrinsic motivation 254, 329
introduction to the organization 471
involvement 808, 810
IRS see Industrial Relations Services
Japanese ‘excellence’ school 274, 275
job
definition of 188, 327
and roles 188
job analysis 188
job breakdown 199
job classification 664
job descriptions 188, 247
job design
aims 331
approaches to 332
defined 330
factors affecting 328
high-performance work design 334
job characteristics model 330
motivating characteristics of jobs 329–30,
331–32
principles 331–32
and providing intrinsic motivation 329, 330
task structure, characteristics of 329
job engagement see engagement
job enlargement 332
job enrichment 332–33
job evaluation
aims 660
analytical job evaluation 660–62
analytical matching 662–63
approaches 660, 669
case for and against 671–72
choice of scheme 671
computer-assisted job evaluation 667–68
criteria for choice 668
defined 628, 660
design principles 679
designing a point-factor scheme 672–79
factor comparison 663
factor plan 677–78
factor weighting 678
factors 677
incidence of 666–67
internal benchmarking 665
job classification 664
job ranking 664
market pricing 665–66
non-analytical schemes 664
paired comparison ranking 664–65
point-factor rating 662
process principles 673
proprietary brands 663
job family grade and pay structures 695
job learning analysis 200–01
job ranking 664
job regulation 755
job-related well-being 212–13
job rotation 332
job satisfaction 263–67
job sharing 385
joint consultation 811–12
joint consultative committees 811
justice 222
just-in-time learning 561
just-in-time training 577–78
key result area 191
knowledge
concept of 175
defined 175
explicit knowledge 175, 177
forms of 175
tacit knowledge 176, 177, 179
knowledge creation 177
and the learning organization 545
and social capital 34
and organizational learning 185
personalization strategy 177
and performance management 184
problems with the concept 545–47
964 ❚ Subject index
purpose of 176
resource-based approach 176
and resourcing 183
significance of 176
and social capital 179
systems 178
use of technology 179
knowledge management
approaches to 176–78
codification strategy 176–77, 179
communities of practice 178, 181
contribution of HR 180–81
defined 9, 173, 174, 178
and human capital 36
issues 178–80
knowledge workers
career management for 407
as human capital 35
and knowledge management 180
motivators for knowledge workers 183
recruitment of 368
and role development 328
Kolb’s learning cycle and styles theories 552–53
Kwik-fit 655
labour process theory 206–07
labour turnover see employee turnover
Lands’ End 116
law of effect 253
law of supply and demand 626
leadership 299–300, 353
leadership style 309
leading edge practices 138
lean organization 25, 208–09
learning
adaptive 541
affective learning 560
aim 560
blended learning 563, 566, 570
coaching 567–68
cognitive learning 560
cognitive theory 551
computer-managed learning 903–04
culture 609
defined 535, 549–50, 559
and development 560
double loop 541–42
experiential learning 551
feedback 562
formal learning 563, 565
goals 562
hidden learning 540
Honey and Mumford’s learning styles 553
identifying learning needs 567
implications of learning theory 556–57
informal learning 563, 564
instrumental learning 560
just-in-time learning 561
Kolb’s learning cycle 552–53
Kolb’s learning styles 553
the learning curve 554–55
the learning cycle 542
learning and development strategies 607–09
learning to learn 554
learning opportunities 566–67
the learning process 550
learning programmes 566
learning styles 552–53
learning theory 550–51
levels of 563
mentoring 569
methods 562–63
motivation to learn 555–56, 561
organizational 540–43
philosophy 560
reinforcement 551
responsibility for implementation of
learning 614
self-directed/managed learning 561–62
self-reflective learning 560, 562
single-loop 541–42
social learning 551
spectrum of 563
and talent management 393
and training 560–61
types of learning 560
workplace learning 564–65
learning culture, development of 609
learning curve 473, 554–55
learning and development
activities 615
basis of learning and development
programmes 612–14
formulating learning and development
strategies 607–09
learning culture, development of 609
making the business case 607–08
process of 535
skill requirements 613
Subject index ❚ 965
learning needs, identification of 610–12
learning organization
characteristics of 185
defined 543–44
development of 545
and knowledge management 545
and organizational learning 539
philosophy 543
principles of 544
learning specification 612, 613
lecture 580
line managers see front line managers
location allowances 735
magazines 822
make or buy policies 368
management by agreement 393
management by control 393
management consultants, use of 64–66
management development
activities 594–95
aims 592
analysis of needs 595
approaches to 596
assessment of skills and competences 595
competency-based management
development 600
defined 591
development centres 600–01
elements of 594
formal approaches to 598
how managers learn 597
informal approaches to 598–99
integrated approach to 599–600
nature of 594
needs 592–93
personal development plans 605
priorities 593
requirements 593
responsibility for 603–04
role of HRD specialist 605–06
strategy 595–96
management style 308
management succession planning 393
managing change see change management
managing diversity
aim 868
concept of 868
initiatives 868–69
meeting diverse needs 10
managing expectations 499
manpower planning 365
see also human resource planning
manual skills analysis 199
manual workers pay 636–41
market worth 38
market pricing, job evaluation 665–66
market rate analysis
advertisements 685
club surveys 685
defined 628
information required 682
job matching 682–83
market intelligence 685
market rate, concept of 681–82
presentation of data 683
published surveys 683–84
purpose 681
sources of information (market data) 683, 686
special surveys 684–85
using survey data 685
market rate, concept of 681–82
market stance 685
marketing the HR function 59–60
matching model of HRM 5
mediation 788
mentoring 569
Mercer HR Consulting 37, 40
metrics 29, 30, 38
Michigan School 4
Mobile workers 211
mobility clauses 860
motivation
complexity of process 252
components of 252
content (needs) theory 254, 255, 257–62
and contingent pay 679
defined 252
and discretionary effort 251–52
equity theory 261–62
ERG theory (Alderfer) 257
expectancy theory 259–60
extrinsic motivation 254
goal theory 261
hierarchy of needs (Maslow) 257–58
instrumentality theory 254, 255
intrinsic motivation 254
and job satisfaction 251, 263–67
law of effect 253
and money 267–68
966 ❚ Subject index
motivation to learn 555–56, 561
motivation theory 251
needs (content) theory 255–62
needs-related model of 253
and organizational commitment 277
process of 252–53
process theory 254, 258–62
reinforcement 253
strategies 268–69
two-factor model (Herzberg) 262–63
types of 253–254
multi-skilling 761
mutual commitment strategy 19
mutuality 13, 761
Myers Briggs Types Indicator 243
narrow-graded grade and pay structures
691
National Vocational Qualifications (NVQs) 159,
161
Nationwide 41, 50–51
needs theory of motivation 255–62
negotiating
and bargaining 795, 802
convergent negotiations 796
closing 802
defined 796
divergent negotiations 796
nature of 795–96
opening 802
preparing for 798–802
process of 796
skills 803–04
networking 301
new style agreement 786
news letters 822
non-financial rewards 629
normal curve (test results) 467
norms (cultural) 303, 307–08
norms (test) 467
Norwich Union Insurance 43–44, 653–55
notice boards 823
numerical flexibility 210
NVQs/SNVQs 159, 161
objectives
criteria for 505–06
defined 505
SMART objectives 506
types of 505
occupational health programmes 829, 838–39
occupational hygiene 820
occupational medicine 829
occupational pension schemes
approved scheme 732
benefits statements 733
contribution of HR 734
contributions 732
defined 731
defined benefit/final salary scheme 733
defined contribution/money purchase
scheme 733
developments in pensions provision 734
operation 731–32
reasons for 731
retiring age 732–33
sex discrimination 732
stakeholder pensions 733
OD see organization development
Operating and Financial Review (OFR) 47, 48
organization charts 289, 290
organization design
aim 320–21
conducting organization reviews 321
guidelines 323–24
organization analysis 321–22
organization diagnosis 322–23
process of organizing 319–20
of process-based organizations 183
responsibility for 325
organization development (OD)
activities 341–42
in communities of practice 182
defined 338–39
history of 339–40
programmes, features of 341
traditional approach to 340–41
use of 343
organization planning 324–25
organization structure
defined 288
organization charts 288–89
organization theory
behavioural science school 284–85
bureaucratic model 284
classical school 283–84
contingency school 286
framework for examining organizations
(Kotter) 287
human relations school 284
Subject index ❚ 967
influence of technology (Drucker) 287
new organization paradigm (Pascale) 287
socio-technical model 285
systems school 285
types of organizations (Handy) 287
types of organizations (Minzberg) 287
organizational behaviour 237
organizational capability 540
organizational capital 34–35
organizational climate
defined 305
measurement of 312–13
organizational commitment
concept of commitment and engagement 271
contribution of HR to developing commitment
defined 271–72, 273–74
enhancing 281–82
factors affecting 277–78
and flexibility 276
gaining 83, 181–82
‘hearts and minds’ approach 12,
and HRM 5, 9, 12, 13–14
impact of 276–77
influences on 280–81
and motivation 277
mutual commitment strategy 19
and mutuality 13, 761,
orientation 4
problems with concept 275–77
significance of 274–75
strategy 278–79
and trust 220
and the unitary frame of reference 275–76
organizational culture
analysis of 314–15
appropriate cultures 313–14
artefacts 308
assessment of 311–12
changing cultures 314–16
classification of 309–11
components of 307
defined 303–04
development of 181
diversity of 307
how it develops 306
leadership/management style 309
norms 303, 307–08
and organizational climate 305
problems with the concept 304–05
significance of 305–06
supporting and reinforcing cultures 315
values 303, 307
organizational development 337–38
see also organization development
organizational effectiveness 8, 340
organizational learning
defined 540
double–loop learning 541–42
the learning cycle 542
and the learning organization 539
outcomes 540
principles of 541, 543
single–loop (adaptive) learning 541–42
organizational performance, impact of HR
on 20–24
organizational performance model 40
organizational processes
conflict 301
group behaviour 292–96
interaction 301
leadership 299–300
networking 301
politics 300
power 300
teamwork 296
organizational transformation
defined 352
and organization development 352–53
role of HR 355
transactional change 352
transactional leaders 353
transformation programme 354–55
transformational change 352
transformational leaders 353
transition management 354
types of 353
organizations
decentralised 290
divisionalized 289–90
flexible 290
how they function 283
line and staff 289
matrix 290
process-based 182, 291
shamrock 290
organizing, process of 319–20
orientation to work 246
outdoor learning 574
outplacement 484, 485–87
output criteria 66
968 ❚ Subject index
outsourcing
areas of 61
case for 61
deciding to 62
implications of 62–63
problems with 61–62
selecting service providers 62
overtime 387
paired comparison ranking 664–65
participation
defined 808
and employee voice 807
forms of 810
partnership agreements with trade unions
defined 784
features 785
problems 785
rationale for 784–85
part-time workers 384–85
pay for expatriates 107–09
pay levels – economic factors 626
pay matrix 742
pay reviews, general 740–41
pay reviews, individual
based on ratings 742
conduct of 744
defined 741
doing without ratings 742–43
guidelines to managers 743–44
pay spines 696–97
ranking 743
pay structures 690
see also grade and pay structures
payment-by-results 639–41
pension schemes see occupational pension
schemes
people as assets 6, 14, 29, 30, 31, 35
people as human capital 14
people, characteristics of
ability 240
attitudes 244
attribution theory 245–46
differences in gender, race or disability 243–44
implications for HR specialists 248–49
individual differences 239–30
influence of background 243
influences on behaviour at work 244–45
intelligence 241
orientation to work 246
personality 241–43
roles 247–48
people management 2, 32, 116, 117
people resourcing
defined 359
and HRM 359–60
integrating business and resourcing
strategies 360–61
performance
and job satisfaction 264–65
meaning of 497–98
see also organizational
performance appraisal and performance
management 500
see also performance management
performance drivers 36
performance management
aims 496
alignment of individual and organizational
objectives 498–99
basis of 493
characteristics 496–97
use of computers 903
conducting a performance review
meeting 510–12
criteria for assessing performance 510
as a cycle 503–04
defined 495
and discretionary behaviour 499
guiding principles 499–500
as an integrating force 493
introduction of 517–19
and knowledge management 184
managing expectations 499
managing performance throughout the
year 508–09
meaning of performance 497–98
measuring performance 506–07
mixed model 498
objectives 505–06
and organizational effectiveness 357
and performance appraisal 500
performance agreements 504–08
performance measures 507
performance planning 507
performance–related pay 713–14
performance reviews 509–10
personal development planning 507–08
as a process 503
rating performance 512–15
Subject index ❚ 969
and role analysis 190–91
and role profiles 190
use of role profiles 504–05
and talent management 392–93
understanding performance management 497
dealing with under-performers 515–17
and values 498
views on 500–02
Performance Management Group 523
performance measures 506–07
performance rating
achieving consistency 514–15
problems with 514
rating scales 513–14
rationale for 512–13
performance-related pay 713–14
performance reviews 509
person specification 410
personal case work 847–48
personal development planning 507–08, 571–72,
605
personal records 899
personality
classification of 464–65
defined 241, 464
traits 241–42
types 242–43
personality tests 464–66
personnel function see HR function
personnel management 2, 6
personnel management and HRM 18–20, 31, 88
see also human resource management
personnel practitioners/professionals see HR
practitioners
Personnel Today 42–43
PESTLE analysis 143
piecework 639
Pilkington Optronics 126
planned experience 572
pluralist frame of reference 208
pluralist view of employee relations 758–59
point-factor rating, job evaluation 662
policies see HR policies
politics 300
power 300
power sharing 774
principal agent theory 207
procedural agreements 783–84
procedural rules 755–56
process 75, 141, 179
process consulting 75, 342
process criteria 66
process theory of motivation 254, 258–59
process worker, changing role of 209–10
professional conduct, CIPD code 84
profit-sharing 726
promotion 861–62
Prudential Financial 590
psychological contract
changing nature of 231–33
defined 225–26
developing a positive psychological
contract 234–35
development of 229–30
and the employment relationship 225
and the HR function 55
and induction 472–73
model of 229, 230
significance of 227–28
state of 235–36
psychological tests 461–62
see also selection tests
psychometric questionnaires 463–64
psychometric tests 463
see also selection tests
quality of working life 149
Race Relations Act 1976 418
radical critique view of HRM 17
ratio-trend analysis 374
reactive pragmatists (HR practitioners as) 73
realistic job previews 106
recognition, trade unions 781, 782–83
recruitment agencies 423
recruitment consultants 423
recruitment plan 383
recruitment and selection
advertising 416–20
analysis of recruitment strengths and
weaknesses 415
application forms 425, 426
assessment centres 430–31
attracting candidates 414–15
biodata 428–29
competency-based approach 413–14
confirming the offer 436
contracts of employment 437
defining requirements 409–14
electronic CVs 429
970 ❚ Subject index
e-recruitment 420–22
fivefold grading system 413
follow-up 437
graphology 431–32
improving effectiveness of 432–33
individual interviews 430
interviewing panels 430
interviews, types of 430
outsourcing recruitment 423–24
person specifications 410–12
process 409
qualifications 436
realistic references 434–36
role profiles, use of 410, 411
selection boards 430
selection methods 429, 432
seven-point plan 412–13
sifting applications 425, 427
sources of candidates 415
structured interviews 445
targeted approach 396–97
use of computers 902
use of educational and training
establishments 424
use of executive search consultants 424
use of recruitment agencies 423
use of recruitment consultants 423–24
redundancy
avoiding 483
causes of 479–80
handling 484–85
outplacement 484, 485–87
procedure 484, 885–88
voluntary 483
reference group 296, 818
references 434–36
reinforcement 253, 550, 557
relational rewards 629
release from the organization
dismissal 487–90
ethical considerations 481
exit interviews 380–81
general considerations 479–82
outplacement 485–87
redundancy 482–85
references 434–36
retirement 490–91
role of HR function 480–81
voluntary leavers 490
repertory grid 196–98
resource-based strategic HRM 117–18
resource-based strategy 113, 371
resource-based view of the firm 35
resource capability 116, 371
resourcing
defined 359
and HRM 359–60
integrating business and resource
strategies 360–61
and knowledge management 183
resourcing strategy 361, 371–72, 390–91
retention
analysis of reasons for leaving 398
areas for action 398–99
factors affecting 397
retention policies and programmes
391–92
retention strategy 397–98
risk analysis 398
retirement 490–91, 850
return on investment 82, 608, 618
reward management
aims 624
defined 623
elements of 625–29
philosophy 624–25
use of computers 902–03
reward policy
content 152
issues 627
reward procedures 745–46
reward strategy
broad-brush 645, 648
components of an effective reward
strategy 651
content 645, 648
defined 625, 643–44
development of 649–51
examples 653–57
gap analysis 645, 646–47
guiding principles 649, 650
implementing 656–57
and line managers 657
priorities 652
reason for 644
specific reward initiatives 648
structure of 644–5
reward system
defined 625
and organizational performance 5
Subject index ❚ 971
reward systems, management of
attrition 740
communicating to employees about
rewards 748–49
compa-ratio analysis 739–40
control 744
dealing with anomalies 746
evaluating the system 739–40
fixing rates of pay 745
grading jobs 745
pay matrix 742
pay modelling 738
pay reviews 740–44
payroll budgets 737–38
procedures 745–46
promotion increases 746
responsibility for reward 746–48
review budgets 738
reward audit 739
use of computers 902–03
rhetoric and reality, gap between 10
risk assessments
assessing the risk 834–35
defined 833
hazards, looking for 833–34
monitoring and evaluation 835
significance of 830
taking action 835
role
ambiguity 247
conflict 248
defined 247, 327
distinction between roles and jobs 327
generic 327
incompatibility 248
theory 247
role analysis
approach to 189
defined 187
interviews 189–90
and performance management 190–91
purpose 188
questionnaire 190
observation 191
role definition see role profile
role development
and engagement 281–82
process of 334–35
and talent management 392
role perceptions 260
role-playing 581–82
role profile
content of 191–92
defined 188, 327–28
distinguished from job descriptions 247
example of 192
generic 188
and the identification of learning needs 612
in performance management 504–05
for recruitment purposes 410
role set 247
sales staff pay 636, 637–38
Saratoga 67
satisfaction 263
save-as-you-earn schemes 727
scenario planning 372–73
Scottish national Vocational Qualifications
(SNVQs) 159, 161
Sears Roebuck 41
selection see recruitment and selection
defined 4
selection boards 430
selection interviewing
advantages and disadvantages 440–41
arrangements for 442–43
asking questions 450–54
behavioural-based interviews 447–48
behavioural based questions 448
behavioural event questions 452–53
biographical interview 445–46
briefing interviewers 443
capability questions 453–54
career questions 455
choice of interviewing approach 449–50
closed questions 452
coming to a conclusion 458–59
continuity, maintenance of 458
continuity questions 454–55
control, keeping 458
dos and don’ts of selection
interviewing 459–60
ethical considerations 443
focused work questions 455
halo effect 458
horns effect 458
hypothetical questions 452
nature of 441–42
note-taking 458
open questions 450–51
972 ❚ Subject index
planning the programme 443
planning and structuring interviews 444–45
play-back questions 455
preparation 443–44
probing questions 451–52
psychometric interviews 448–49
purpose 419–20
questions to be avoided 456
questions about motivation 454
questions about outside interests 456
situational-based interviews 447
skills 457–58
starting and finishing 450
structured interviews 445
ten useful questions 456–57
timing 444
unhelpful questions 456
unstructured interviews 445
use of assessment headings to plan
interview 447
use of person specification to structure
interview 446–47
selection tests
ability tests 466
aptitude tests 466
attainment tests 466
characteristics of a good test 462
choosing tests 468
concurrent validity 462
construct validity 463
content validity 463
criteria for 469
face validity 463
intelligence tests 464
interpreting test results 467
normal curve 467
norms 467
personality tests 464–66
predictive validity 462
psychological tests 461–62
psychometric tests 461
purpose 461–6
reliability 462
use of tests 468–69
validity, measurement of 463
validity, types of 462–63
self-directed learning 557, 561–62
self-efficacy theory 342
self-managed learning see self-directed learning
self-managing teams 333
self-paced learning 585
self-reflective learning 560, 562
sensitivity training 342
service level agreements 57, 67
service-related pay 720–21
seven-point plan 412–13
severity rate 842
Sex Discrimination Act 1975 418
sexual harassment 154, 870–72
share owning schemes 726
shared HR services (HR service centre) 58, 63–4
shift payments 735
shift-working 387
shop-floor payment-by-result schemes 639–40
shop stewards 767
SHRM see strategic human resource management
sickness 848–49
simulation 582
single-loop learning 541–42
single-table bargaining 786–87
single-union deals 781–82
skill-based pay 718–20
skills analysis
defined 198
faults analysis 200
job breakdown 199
job learning analysis 200
manual skills analysis 199
task analysis 199–200
skills inventories and audits 901
SMART objectives 506
smoking policy 872
social capital
defined 34
and knowledge management 34, 179
social learning theory 342, 551
social networks 180
socio-technical model of organization 285
soft HRM 12
soft strategic HRM 117
stability index 379
staff associations 768
stakeholders
and employee relations 781
and HR practitioners 71
and HR strategy 117
and human capital management 32
as judges of HRM effectiveness 69
and the pluralist perspective 208
Standard Chartered Bank 50, 498
Subject index ❚ 973
stand-by allowances 735
strategic business units (SBUs) 322
strategic capability 113–14, 371
strategic change 344–45
strategic coherence 54
strategic fit 24, 114, 118
strategic goals 114
strategic human resource development (strategic
HRD)
aims 534
components 534
creating the strategy 536
defined 533
delivering the strategy 536–37
and HRM 535
philosophy 537
process of learning and development 535
strategies for 536–37
strategic human resource management (strategic
HRM)
aims 116–17
approaches to 117–20
defined 115, 124, 131
hard strategic HRM 117
and HR strategies 115, 124
implementing 121
rationale for 131
resource-based approach to 117–18
soft strategic HRM 117
and strategy 113–15
strategic integration 54, 116
strategic intent 113
strategic review, conduct of 141–42
strategies, HR see HR strategies
strategy
defined 113
formulation of 114–15
meanings of 114
process of 113–14
stress
management of 840
prevention of 840
reasons for taking account of stress
839–40
strikes 790–91
sub-contracting 386
substance abuse 155, 873
substantive rules 755–56
succession planning 403–04
suggestion schemes 814
Sunday Times best companies to work for
survey 394
supply forecasting 374–75
survey feedback (OD) 341
survival rate 377–78
SWOT analysis 143
systematic training 577
systems school of organization 285
systems theory of industrial relations 755
talent audit 392
talent flow 391
talent pool 391
talent management
approaches to 389
attraction and retention policies and
programmes 391–92
attraction strategies 395–97
and career management 393, 399–07
creating a great place to work 394–95
defined 9, 390
elements of 390–93
employer branding 395–96
employer of choice 396
for knowledge workers 407
and learning and development 393
and performance management 392–93
in practice 407–08
resourcing strategy 390–91
retention strategies 397–99
and role development 392
strategy 126
talent audit 392
talent flow 391
talent pool 391
targeted recruitment and selection
396–97
and total reward 393
war for talent 389
talent relationship management 392
task analysis 199–200
task structure 329
team-based pay 724–25
team briefing 824–25
team-building
activities 355
aim 355
criteria for effectiveness 356
in organization development 342
team roles 298
974 ❚ Subject index
teamwork
characteristics of effective teams 296–97
definition of a team 296
dysfunctional teams 297
technical competencies
analysis of 198
defined 161
technology 25, 26
teleworking 210–11, 385
terms and conditions of employment 858–57
tests see selection tests
thinking performers 92
third-country nationals 100
third-party dispute resolution 787–88
time rates 636
T-groups 342
360-degree feedback
advantages and disadvantages 527–28
criteria for success 528–29
defined 521–22
development of 526–27
methodology 524–26
rationale for 523–24
use of 522–23
threshold competencies 160
total quality management 356
total remuneration 627, 731
total reward
benefits of 632
defined 627, 629–31
model of 633
significance of 632
and talent management 393
Towers Perrin 633
Trade Union Congress (TUC) 768
trade unions
and collective bargaining 767
collective voice of 766–77
decline of 766
factors affecting recognition or de-
recognition 782–83
managing with trade unions 791–92
managing without trade unions 792–94
purpose 766
recognition 781
roles of 767
single union recognition 781–82
structure 767
training
defined 535, 575
effective training 578
evaluating training 570–72
just-in-time training 577–78
justification for 576
role of 575–76
systematic training 577
techniques 579–82
transferring 576
types of 578
traits 241–42
transactional change 352
transactional rewards 629
transfers 860–61
transformational change 74, 352
see also organizational transformation
trust
building 781
climate of trust 182
developing a high trust organization 221–22
and the employment relationship 220
high-trust organizations 182
and justice 222
meaning of 221
renewing 222–23
when do employees trust
management? 221–22
turnover, employee see labour turnover
turnover index, labour 376–77
two-factor model of motivation
(Herzberg) 262–63
under-performers, dealing with 515–17
unemployment 212
Unilever 590
unions see trade unions
unitary frame of reference 207, 275–78
unitary philosophy 14
unitary view of employee relations 758
US Department of Labor 137
utility analysis 66
validity in selection tests 462–63
value added 39, 40
value proposition 396
values 303, 307
as expressed in HR policies 149–50
of HR specialists 84
vertical fit 139
vertical integration of HR strategy 54, 116, 134
virtual firm, the 25
Subject index ❚ 975
voice see employee voice
voluntarism 759–60
voluntary release 480
war for talent 389
Watson Wyatt 39–40, 899–900
welfare
case for 845–47
categories of welfare services 847
counselling services 852
elderly and retired employees 851
employee assistance programmes
(EAPs) 852–53
group services 848
individual services 848–50
personal case work 847–48
provision of 851–52
well-being 212–13
work
attitudes to work 212
career expectations 211
changing patterns of 210–11
job related well-being 212–13
organizational factors affecting work
208–10
orientation to work 246–47
theories about work 206–08
unemployment 212
what it is 205
Work Foundation 875, 876
work-life balance
benefits of policies on 876–77
defined 875
measures 876
options 875
policy 152
work processes 37
work study 374
Workplace Employee Relations Survey
(2004) 212–13, 766, 793
workplace learning 564–65
workshops, for competency analysis 194–95
World Bank 34
world class manufacturing 208
world class organization 82
976 ❚ Subject index
Adair, J 299
Adams, J S 222, 262
Adams, K 57
Adler N J 101
Albanese, M 120
Alderfer, C 257
Allport, G 252
Andrews, H 834, 835, 842
Araujo, J 540
Argyle, M 240, 241
Argyris, C 180, 284, 339, 341, 540, 541, 546, 550
Armstrong, M 14, 17, 124, 133, 207, 500, 501, 507,
521, 523, 712, 717, 742
Arnold, J 244, 252
Arthur, J 21
Athos A 274, 275
Atkinson, J 290, 757
Austin, N 275
Balkin, D B 207
Bandura, A 342, 349–350, 551
Barnard, C 284
Barney, J 35, 117, 18
Baron, A 14, 124, 500, 501, 507, 521, 523, 742
Bartlett, C A 99–100, 104, 291
Bass, B M 535
Bayliss, F 765, 769
Beardwell, I 807
Beatty, R W 523–24
Beckhard, R 339, 347–48, 353
Becker, B E 9, 21, 37–38, 138
Beer, M 6, 7, 14, 30, 119–20, 350–51
Belbin, M 298, 356
Bell, C H 338, 339
Bennis, W 339
Bento, R 103
Bessant, J 356
Bevan, S 272, 398
Bibbings, R 829
Bies, R J 262
Birchall, D 550
Blackburn, R M 246
Blackler, F 175, 179
Blake, P 176
Blake, R 339
Blinkorn, S 465
Blyton, P 141
Bontis, N 8, 33, 34
Boudreau, J W 66
Bowey, A 711
Boxall, P 6, 7–8, 11, 35, 118, 123, 132, 807
Boyatzis, R 160
Author index
Bradley, P 107–08
Braverman, H 206
Brayfield, A H 264–65
Brewster, C 101-02, 103–04
Brockbank, W 79–81, 89
Brown, D 644, 651–52, 712, 717
Brumbach, G B 498
Buchanan, D 277
Bula, D N 363
Burgoyne, J 544, 546
Burns, J M 286, 353
Burt, C 240
Caldwell, R 10–11, 16, 31, 74
Caligiri, P 107
Cappelli, P 8, 31, 133, 135, 180, 393, 398, 399
Carter, A 536–37, 567, 573, 596–97, 614
Carter, C 175, 539, 545
Casson, J 365
Cattell, R B 242
Cave, A 758–59
Chamberlain, N W 756, 757
Chell, E 242
Child, J 284, 287
Chiumento J 272
Clegg, H 758
Clutterbuck, D 569
Conway, N 16, 94, 221, 227, 233–34
Cooke, R 312
Cooper, R 331
Coopey, J 275, 276
Costa, P 464
Crocker-Hefter, A 8, 135, 180
Crockett, W H 264–65
Crombie, A 304
Cyert, R M 208, 275
Dale, M 541
Davenport, T H 179
Davenport, T O 33, 35
Davis, L E 330
De Cotiis, T 313
Deal, T 304
Deary, I J 242
Delery, J E 139
deLong, T 390
Denison, D R 305
Dickson, W 284
Doty, H D 139
Drucker, P 74, 180, 287, 604, 758
Dulewicz, V 171
Duncan, C 789
Dunlop, J T 755
Dyer, L 123, 139, 140–41, 277–78
Easterby-Smith, M 540, 546
Edenborough, R 447, 463
Edvinson, L 35
Egan, G 499–500
Eggert, M 486
Ehrenberg, R G 540
Eisenstat, R 350–51
Eldridge, J 304
Elias, J 33, 39
Elliott, L 233
Eraut, M J 564
Eysenck, H J 243
Farnham, D 786
Fayol, H 283
Fell, A 77, 86, 87–88
Ferreira, L 103
Findlay, F 206–07
Fine, S A 198
Fitzpatrick, M J 864
Flanders, A 756–57
Fletcher, C 465–66, 498–99
Follett, M P 324
Fombrun, C J 4, 30–31
Fowler, A 13, 431, 472
Fox, A 22, 756–57, 758
Freeman, R 766–67
French, W L 300, 305, 338, 339
Friedman, A 206
Fullerton, J 868–69
Furnham, A 304–05, 306, 313–14
Gagne, R M 240, 551
Gallie, D 218
Garratt, R 545
Garvin, D A 185, 543–44
Gennard, J 18, 207, 759
Geppert, M 540
Gerhart, S 138
Ghader, F 101
Ghoshal, S 99–100, 104, 180, 291
Giles, L 209
Gilmer, B 264
Gold, J 559, 591
Goldthorpe, J H 246, 267
978 ❚ Author index
Goleman, D 170, 602, 603
Gomez-Mejia, L R 66, 207
Graham, M D 629
Grant, D 176
Grant, R M 31
Gratton, L 10, 12, 16, 132, 143–44
Greller, M M 226
Guest, D E 12, 15, 16, 17, 18, 22, 23, 31, 68–69,
86–87, 94, 137, 221, 227, 228, 229, 233–34,
246, 258–59, 277, 759, 761–62, 765–66,
776, 792
Guilford, J P 241
Gunter, B 304–05, 306, 313–14
Guzzo, R A 217
Haley, J 102–03
Hall, D 231
Hall, D T 533
Hall, P 601–02
Hamblin, A C 616, 619
Hamel, G 117
Handy, C 287–88, 290, 310, 481–82
Handy, L 522
Hansen, M T 173, 176–77, 179, 183–84
Harris, H 103
Harrison, R 301, 311, 539, 543, 545–46
Harrison, Rosemary 533, 536, 540, 570
Hartley, J 275, 276
Hartley V 39
Hawkins, K A 757
Heller, R 366
Hendry, C 11, 20, 73, 101, 115–116, 139, 368–69
Herriott, P 220, 221, 222
Herzberg, F 254, 262–63, 267, 284, 333
Higgs, M 171
Hillage, J 583
Hiltrop, J M 103, 232–33
Hirsh, W 404, 407, 567, 593, 596–97
Hofstede, G 103
Holbeche, L 397
Holder, G W 140–41
Holt, A 834, 835, 842
Honey, P 550, 553, 554, 559
Hope-Hailey, V 18, 56–57, 97
Hoque, K 32, 71
Horwood, R 86–87
Hoyle, E 185, 546
Hucyznski, A 277, 864
Hull, C 253
Huselid, M A 21, 66
Hutchinson, S 64, 93–94, 96, 97
James, R 244–45
Jaques, E 268
Johnson, C 465
Johnson, G 55, 113
Jones, T W 208
Judge, G 207, 759
Jung, C 243
Kahn, R 247, 285, 339–40
Kahn-Freund, O 760
Kakabadse, A 300
Kandola, R 200, 868–69
Kant 12
Kanuk, J 307
Kaplan, R S 42
Katz, D 247, 285
Katzenbach, J 296–97
Kearns, P 29, 30, 32, 607, 618
Keenoy, T 18
Keep, E 371
Kelley, H H 245
Kelly, G 197
Kelly, J 18
Kennedy, A 304
Kessels, J 185
Kessler, S 215–16, 711, 765, 769
Kettley, P 889
Kirkpatrick, D L 616–18, 619
Kissler, G D 231–32
Kochan, T A 277–78, 808
Kodz, J 876, 877
Kolb, D A 552–53
Kotter, J P 286, 354
Koys, D 313
Kuhn, J 756, 757
Lafferty, J 312
Lake, D 8
Latham, G 261
Laurent, A 100, 102
Lawler, E E 55, 259, 260
Lawrence, P R 286, 331
Leadbetter, C 39
Leary-Joyce, J 397
Leavitt, H J 293–94
Leblanc, B 106
Legge, K 13, 14, 15, 17, 18, 76, 92, 138, 275–76
Leon, L S 543
Author index ❚ 979
Leventhal, S 222
Levinson, D 243
Lewin, K 339, 341, 347
Liff, S 365
Likert, R 284, 285
Littler, C 206
Litwin, G H 312–13
Locke, R 261
London, M 523–24
Long, P 124, 133
Lorsch, J 286
Low, J 45
Lyons, L 550
Mabey, C 16, 17, 540
MacDuffie, J P 119–20, 139
Mackay, L 87
Macneil, R 217
Makin, P 241, 243, 244
Malone, M S 35
Mangham, L L 275
Mann, R 246
Mansfield, B 159, 198
Mant, A 233
Manus, T M 629
March, J G 208, 275
Marchington, M 74, 365, 793, 808
Margerison, C 298, 356
Marginson, P 786
Marsden, D 711
Marsick, V J 540, 563
Martin, A O 846
Martin, J 304
Marx, K 206
Maslow, A 255–56, 263
Matthews, G 242
Mayo, A 30,
McCann, R 298, 356
McClelland, G 758
McCrae, R 464
MacDuffie, J P 120
McGregor, D 263, 284–85, 339, 604
McKersie, R B 757
McLean, A 340
Mecklenberg, S 176
Meyerson, D 304
Mezirow, J A 562
Miles, R E 361
Miller, L 170–71, 198
Miller, R 185, 544
Miller, T 607, 618
Millward, N 792–93, 807
Mintzberg, H 114–15, 275, 287, 290
Mitchell, L 198
Mohrman, S A 55
Monks, K 77–78
Morton, G 792
Mueller, F 21
Mumford, A 553, 559, 591, 594
Munro-Fraser, J 412
Nadler, D A 237, 349
Nahpiet, J 180
Newton, T 206–07
Nonaka, I 175, 177
Noon, M 15, 32, 71
Noonan, K A 217
Norris, P 601–02
Norton, D P 42
O’Neal, S 632
O’Reilly, C A 389
Ouchi, W G 275
Pascale, R 274, 275, 287, 352
Patterson, M G 22, 137
Payne, T 414
Pearn, K 200
Peccei, R 68–69
Pedler, M 543, 550
Penrose, E 117
Perkins, S 101, 105
Perrow, C 284
Peters, J 797
Peters, T 61, 274, 275
Pettigrew, A 11, 20, 73, 115–116, 139, 344–45, 540
Pfeffer, J 137, 389, 632
Phelps-Brown, H 765
Pickard, J 85, 542
Pil, F K 120
Pollard, E 583
Porter, L W 260, 272–73
Porter, M 135
Prahalad, C K 117
Purcell, J 8, 10, 14–15, 20, 22–23, 24, 55, 71, 93,
97–98, 116, 117–18, 133, 135, 139, 157, 209, 264,
305–06, 499, 711, 759, 792, 807
Putman, R 34
Quinn, J B 349
980 ❚ Author index
Quinn Mills, D 117, 360, 364
Rankin, N 159, 164, 167
Raven B 300
Reed, A 395
Reeves, T 123, 139
Reich, R 35
Reid, M A 619
Reilly, P 63–64, 79, 366–67, 372, 397, 785, 889
Revans, R W 573
Reynolds, J 549, 551, 555–56, 562, 564, 575, 576,
609
Richardson, R 123, 139, 711
Roberts, C 789
Roberts, G 413, 464, 465
Robertson, I T 331, 462, 463
Robinson, D 906
Rodger, A 412
Roethlisberger, F 284
Rogers, A 555
Rothwell, S 366
Rousseau, D M 217, 225–26, 305
Rucci, A J 41
Ruggles, R 178
Ryle, G 175
Salaman, G 206, 540
Salancik, G R 272, 273
Salmon, G 585
Saville, P 465
Scarborough, H 9, 39, 173, 174, 175, 178, 179, 539,
545, 546
Schein E H 181, 225, 306, 310, 339, 609
Schiffman, A 307
Schmitt, N 465
Scholes, K 55, 113
Schon, D A 540, 546
Schramm, J 570
Schuler, R S 35, 36
Schulz, T W 33
Scott, A 18
Scott, P M 363
Scott-Jackson, W 32
Sears, D 396
Sells, S B 244–45
Senge, P 539, 543, 545
Shaw, R B 220
Shepart, H 339
Siesfield, T 45
Sik, G 465
Singh, R 31
Sims, R R 227
Sisson, K 15, 18, 56, 786, 792
Skinner, B F 226, 255
Sloan A P 289
Sloman, M 546, 560, 561, 570
Smilansky, J 390
Smith, D 296-97
Smith, M 331, 462, 463, 465
Smith, P 792
Smith R S 540
Snell, S A 135
Snow, C C 361
Snyder, W M 182, 540, 545
Sparrow, P 103, 108, 226
Spearman, C 464
Spector, B 350–51
Spindler, G S 227, 229–30
Stalker, G 286
Stewart, J 118, 185, 544
Storey, J 3–4, 11–12, 18, 31, 72, 76, 78
Stringer, R A 312–13
Takeuchi, H 175, 177
Tamkin, P 592–93, 615–16
Tampoe, M 183
Tan, J 174
Tannenbaum, S I 339
Tarique, I 107
Taylor, A 241, 413
Taylor, F W 255, 283
Thompson, M 22, 123, 139, 220, 221, 711
Thompson, P 272, 634
Thurley, K 87, 88, 348
Thurstone, L L 240, 241
Toplis, J 241, 463, 464
Torrington, D P 18, 31, 87
Townley, B 359–60, 432, 501
Truss, C 12, 20
Trussler, S 176
Tsui, A S 66
Turner, A N 331
Turnow, W W 523
Tushman, M L 237, 349
Twitchell, S 619
Tyler, T R 262
Tyson, S 56, 73, 77 86, 87–88, 115
Ulrich, D 8, 20, 26–27, 54, 55, 56, 79–81, 104,
173
Author index ❚ 981
Undy, R 215–16
Urwick, L F 283
van Dam, N 58–78
Vaughan, J A 535
Vernon, P E 240
Vijayaraghavan, V 390
Vroom,V 226, 259
Wade-Benzoni, K A 217, 225–26
Walker, J W 116
Walker, N 574
Walton, J 533
Walton, R E 119–20, 274–75, 276–77, 757
Waterman, R 274, 275
Watkins, K 563
Watson, A 86
Weber, M 284
Weiner, B 245–46
Wenger, E 182, 540, 545
West, P 541
Whipp, R 344–45, 540
Wick, C W 543
Wickens, P 434
Wilkinson, A 365
Williams, A 311, 559
Willmott, H 17
Womack, J 208
Wood, R 414
Wood, S 64, 96, 119, 120
Woodward, J 128, 345
Wright, D S 241
Wright, P M 135
Wright, V 711
Youndt, M A 34
Zuboff, S 565
982 ❚ Author index
