HRM

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Tools to meet the strategic needs of a business

  • Workforce planning
  • Recruitment and selection
  • Training and development
  • Rewarding and motivating staff
  • Communication
  • Roles and responsibilities
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Internal and External influences in HR objectives

Internal

  • Corporate objectives
  • Operational strategies
  • Marketing strategies
  • Financial strategies

External

  • Market changes
  • Economic changes
  • Technological changes
  • Social changes
  • Political and legal changes
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Hard HR management

  • Treats employees as a resource of a business (like machinery and buildings)
  • Strong link with corporate business planning - finance etc.
  • Focus - Identify workforce needs of the business, recruit and manage accordingly
  • Key features:
    - short-term changes in employee numbers
    - minimal communication from the top down
    - pay enough to recruit and retain staff (e.g. minimum wage)
    - little empowerment or delegation
    - appraisal systems focused on making judgements about staff
    - taller organisational structure
    - suits autocratic leadership style 

This results in a more cost-effective workforce where decision making is quicker and focused on senior managers. However, this approach pays relatively little attention to the needs ot employees and a business employing a genuinely 'hard' HRM approach might expect to suffer from high absenteeism and staff turnover, and less successful recruitment.

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Soft HR management

  • Treats employees as the most important resource in the business and a source of competitive advantage
  • Employees treated as individuals and their needs planned accordingly
  • Focus - concentrate on the needs of employees
  • Key features:
    - strategic focus on longer-term workforce planning
    - strong and regular two-way communication
    - competitive pay structure, with rewards
    - employees are empowered and encouraged to seek delegation and take responsibility
    - appraisal systems focused on identifying and addressing training and other employee development needs
    - flatter organisational structures
    - suits democratic leadership style

This type of approach will appeal to the 'touchy-feely' people who like to see people being treated nicely. You can also make a good business case for an approach which rewards employee performance and motivates staff more effectively. However, if the approach is too soft, all the benefits can leave a business at a disadvantage

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Stages and components of a workforce plan

  • Corporate objectives set HR needs
    - indicates likely demand for labour
    - the corporate objectives set in the HR objective which in turn set the agenda for the workforce plan
  • Analyse existing workforce
    - numbers, skill, location, productivity etc.
  • Assess future needs
    - shaped by plans for markets, products and targets for efficiency and costs
    - impact of changes in technology should be taken into account
    - consider changing economic, social and political environment
    - remember that the workforce plan needs to make a series of assumptions which need to be as realistic as possible
  • Identify gaps in the workforce
    - a workforce gap arises if the business does not have staff with the right skills for future needs, or enough staff to meet demand
    - the 'gap analysis' should identify the strategy for closing the gap, usually a combination of recruitment, internal promotion and training, including an estimate of the likely cost
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Internal influences on workforce planning

  • Corporate objectives - any significant change in, or new corporate objective will influence the workforce plan
  • Production and marketing objectives - the required production capacity, product quality, and delivery timetables are significant to the business demand for labour
  • Financial position and objectives - the workforce plan must take account of the financial budgets in place and the cash flow forecasting. Staff renumeration is usually a major operating cost and cash flow
  • Strength of the current labour supply - the number, skills, and experience of the existing workforce clearly influences workforce planning since the process examines whether the existing supply is sufficient to meet demand 
  • Existing organisational structure - how production is organised and management structure all affect existing internal supply of labour
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External influences on workforce planning

  • Market demand - demand for the firm's products determines production output which in turn sets out the requirement for labour
  • Labour market trends - the strength of the overall labour market determines how easy or difficult it is to recruit staff and the market rate for paying them
  • Economic conditions - a weak economy may lower wage rates and make it easir to recruit. But poor economic growth is likely to result in lower market demand, too
  • Social and political change - demographic factors may affect the supply of labour. Legislation such as the minimum wage directly affects staff costs in many industries
  • Local factors - local labour market may be affected by specific factors such as changes in transport links, quality of local schools, major changes in substantial local business employers etc.
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Reasons labour shortages can occur

  • Short-term increase in demand which cannot be handled by the existing production capacity
  • Business experiences a loss of experienced staff through higher staff turnover
  • A competitor expands its operations and offers better pay terms, which encourages staff to change jobs
  • Changes to the business' products or production processes mean that existing staff do not have the required skills or experience
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Workforce planning assessing a labour shortage

  • Increase production capacity by introducing additional shifts, extending working hours, or by employing temporary/seasonal staff
  • Review whether the existing pay and reward systems are competitive and make any changes necessary
  • Invest in training to address the skills gap in the workforce
  • Recruit more aggressively, perhaps by promoting job opportunities in new ways or by offering incentives to staff to introduce potential recruits
  • Offer flexible working options to broaden the pool of potential recruits to the business
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Dealing with excess labour

  • Make employees redundant - the job that the employee was doing must disappear - the business can still take on new staff but not to do the work the redundant employee was doing
  • Ban or restrict overtime, introduce short-time working or lay-off employees for a short period. This is likely to result in financial hardships for the employees, but is preferable to losing their jobs
  • Flexible working arrangements may also offer an opportunity
  • Temporary workplace shut-down which affects nearly all staff and management
  • If the excess labour arises in specific departments or units, relocating or retraining employees may be an option so they can go to other parts of the business where there is still demand for labour
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Advantages of workforce planning

  • Helps a business achieve it's corporate objectives - with a workforce the right size, with the right skills, in the right place, you can argue that good workforce planning is a source of competitive advantage
  • Encourages managers to plan for changes - instead of simply reacting to change, HRM managers can be at the heart of strategic decision making
  • Businesses going through significant change are better able to handle the workforce implications
  • Improved communication - staff feel they are closer to the decision-making process, are working for a business that takes HRM seriously etc. 
  • Business image - a business that has an effective workforce plan that has the support of employees is more likely to enjoy a better brand image than one which is perceived to be poorly managed and uncaring towards its employees
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Disadvantages of workforce planning

  • Cost - a workforce plan needs to be supported by sufficient financial resources for it to be effective. The cost must be justified and should be consistent with the corporate objectives
  • Employer/employee relations - businesses perform best when there are strong working relationships. Decisions make as a result of teh workforce plan can affect both sides of the relationship
  • Training - whilst training is important, it is easy to underestimate the difficulty of getting the right amount and type of training done. This is because training is:
    - disruptive
    - expensive
    - difficult to measure the benefits of
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Factors affecting the organisational structure

  • Size of the business - small business will tend to have informal or flat hierarchical structures. Larger and more complex businesses will develop more complicated and detailed structures involving more layers of hierarchy, departments and functions
  • Type of business - does the business operate from just one or several locations? Is the business in the service or manufactoring sector? Does it have overseas operations or outsource any significant business activities? Is the workforce mainly unskilled, semi-skilled or highly skilled?
  • Management and leadership style - an autocratic leadership style will often result in a very different structure compared with one designed by a leader who prefers to delegate responsibility
  • The competitive environment - organisational structure is influenced and changed by developments in the markets
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Principles of functional structures

  • Specialisation - employees should be a member of one specialisation or function
  • Authority - in every organisation, authority for decision maing must rest somewhere, and the line of authority should be clear
  • Responsibility - a superior is responsible for the actions of his/her subordinates
  • Definition - each position in the structure has a clearly defined role and responsibility
  • Span of control - no person should supervise too many subordinates
  • Chain of command - there is a clear, unbroken line of authority and responsibility from the top of the organisation down to the bottom
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Ads and disads of functional structures

Advantages

  • Simple to understand
  • Control from the top down - gives business a strong sense of direction
  • Clear lines of communication and command
  • Allows specialists to manage in their relevant functional areas
  • Encourages employees to seek promotion

Disadvantages

  • Decision-making can become bureaucratic and too slow
  • Structure is prone to inter-deparmental conflicts
  • Not always easy to get co-ordinated action across departments or functions
  • Employees not encouraged to develop an overview of the whole business
  • Little reward for functions working together
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Matrix structures

These combine the traditional departments seen in functional structures with project teams. Individuals work across teams and projects as well as in their own departments. These teams can be temporary or permanent depending on the tasks they're asked to do. Each team member can find themselves with 2 managers - their normal functioning manager as well as the team leader of the project.

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Advantages and disadvantages of matrix structures

Advantages

  • Can help to break down the traditional department barriers, improving communication across the entire organisation
  • Can allow individuals to use particular skills within a variety of contexts
  • Avoid the need for several departments to meet regularly, so reducing costs and improving coordination
  • Likely to result in greater motivation amongst team members
  • Encourages cross-fertilisation of ideas across departments
  • A good way of sharing resources across departments, making projects more cost-effective

Disadvantages

  • Members of project teams may have divided loyalties as they report to 2 managers.
  • There may not be a clear line of accountability for project teams
  • Difficult to co-ordinate
  • It takes time for matrix team members to get used to working in this kind of structure
  • Team members may neglect their functional responsibilities
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Informal structures

It is relatively rare to find a clearly labelled organisational structure in real businesses. Organisation charts and structures usually do not describe what really happens in business. Many businesses rely on informal structures to make decisions rather than the command and control approach of functional structures.

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Centralised Structures

Businesses that have a centralised structure keep decision making firmly at the top of the hierarchy. 

Advantages

  • Easier to implement common policies and practices for the business as a whole
  • Prevents other parts of the business from becoming too independent
  • Easier to coordinate and control from the center
  • Economies of scale and overhead savings easier to achieve
  • Greater use of specialisation
  • Usually quicjer decision making - easier to show strong leadership

Disadvantages

  • More bureaucratic 
  • Local or junior managers are likely to be closer to customer needs
  • Lack of authority down the hierarchy may reduce manager motivation
  • Customer service does not benefit from flexibility and speed in local decision-making
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Decentralised structures

Decision making is spread out to include junior managers, as well as individual business units or trading locations. 

Advantages

  • Decisions are closer to the customer
  • Better able to respond to local circumstances
  • Improved level of customer service
  • Consistent with aiming for a flatter hierarchy
  • Good way of training and developing junior management
  • Should improve staff motivation

Disadvantages

  • Decision making is not necessarily 'strategic' 
  • More difficult to ensure consistent practices and policies
  • May be some diseconomies of scale
  • Who provides strong leadership when needed?
  • Harder to achieve tight financial control
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Delayering

The traditional way of achieving a flatter organisational structure is by delayering. This involves removing one or more levels of hierarchy from the organisational structure. This does not necessarily involve cutting jobs and overheads. It does usually mean increasing the span of control of senior managers within a business.

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Advantages of delayering

  • Offers opportunities for better delegation, empowerment and motivation as the number of managers is reduced and more authority passed down the hierarchy
  • It can improve communication within the business as messages have to pass through fewer levels of hierarchy
  • It can remove deparmental rivalry if deparment heads are removed ad the workforce is organised more in teams
  • It can reduce costs as fewer managers are needed
  • It can encourage innovation
  • It brings managers into closer contact with the business' customers which should result in better customer service
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Disadvantages of delayering

  • Not all organisations are suited to flatter organisational structures - mass production industries with low-skilled employees may not adapt easily
  • Delayering can have a negative impact on motivation due to job losses, especially if it's just an excuse for redundancies
  • A period of disruption mau occur as people take on new responsibilities or adapt to new roles
  • Those managers remaining will have a wider span of control, which can damage communication
  • There is a danger of increasing the workload of managers beyond what is reasonable
  • Delayering may create skills shortages within the business
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Reasons businesses offer flexible working

  • Savings on costs - businesses can make substantial savings on overheads if it does not have to provide office and other accomodation for so many employees or if staff can work from home rather than commute every day
  • To help with recruitment and staff retention - there is lots of evidence to suggest that flexible working results in better job satisfaction and higher staff morale
  • To reflect the changing profile of the UK workforce - there are more women in the labour market and an ageing population, so it is increasingly common for staff to have caring responsibilities outside of work
  • To take advantage of developments in technology - it is now simple and cost-effective for employees to be able to access their employers online and other networked systems, and to communicate digitally with colleagues
  • An increasing need for businesses to be able to deliver services on a 24/7 basis - flexible working hours now makes it easier for businesses to offer extended working hours
  • The 'credit crunch' - some organisations have offered part-time work or career breaks as a method of avoiding or minimising redundancies
  • To meet employment legislation - increasing the law allows certain groups of employees the legal right to request flexible working
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Concerns about flexible working

  • Additional administration and 'red-tape' involved in setting up and running flexible working 
  • The potential loss of customers if key employees reduce their working hours
  • Lower employee productivity
  • Inability to substitute for certain skills if certain employees are absent
  • Managers finding it difficult to manage or administer flexibility
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Outsourcing

"The delegation of one or more business processes to an external provider, who then owns, manages and administers the selected processes to an agreed standard."

In-house

  • Quality - easier to ensure quality and trace problems
  • Cost - in-house departments don't have to make a profit so may be cheaper. May be too small to obtain economies of scale. Easier communication
  • Speed - easier to schedule work or production to fit in with the business needs
  • Flexibility - closest to the needs of the business. Ability may be limited by capacity

Outsourced

  • Quality - supplier may be a specialist with greater experience and better equipment
  • Cost - supplier likely to achieve economies of scale. Motivated to keep costs low in order to make a profit. Extra costs of communication
  • Speed - speed can be set as a requirement. Pressure should encourage good performance
  • Flexibility - suppliers likely to have greater capacity and flexibility. May have to balance demands from other customers
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