In the business world today there is a constant pressure to achieve ever-higher standards of performance. There is little or no room for complacency in the global market. Companies are always in search of getting more for less. As a result of this the stress factor has gone up in many companies. “Downsizing” and “restructuring” is just a couple of expressions that employees and their representatives have come up with as the employees try to improve the company by reducing staff costs. (Mabey 1998)
Yet we have seen the development of a management philosophy that can be summarized in the phrase “our people are our greatest advantage”. Human resource management is an example of that philosophy. And arguably, human resource management has become the leading theory to people management in English-speaking countries. But it is important to state that human resource management has not come out of nowhere, it has taken ideas from many areas. And a lot of literature has been written about the topic, showing how you best can manage your employees.
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But throughout the twentieth century, practitioners and academics have searched for theories that can help them manage people at work. A lot of things happen in a business that both influence the employees and the employer alike for instance: new equipment must be bought, old procedures are replaced with new, staff must be reorganised, retained or dismissed. And this shows that workers and managers must deal with events that need fresh thinking. (Price 1997)
Many sociologists, psychologists and management practitioners have tried to work out theories that can help companies in developing their human resource management. They have given ideas in areas like people management such as recruitment and selection, team building and organizational design. These theories have been a part of the development of human resource management. The most significant theories are:
- Scientific management: detailed task specifications and selection of the ‘best man’ for the job. It was the function of managers to think – workers were expected to do exactly as they were told.
- Fordism: a philosophy of production based on the continuous assembly line.
- Human relations: In the 1920s and 30s researchers in the USA demonstrated that work performance and motivation did not depend simply on pay and discipline. People worked for many other reasons.
- Management by objectives: The workers could clarify and set their own targets.
- Strategic management: This is about directing people to achieve strategic objectives so that individual goals are tied to the business needs of the whole organization.
These concepts have had a strong influence on managers and their human resource management. But like many other things ideas come and go. And as we all understand some of the theories that are shown above are not used any more.
There are scientific management and fordism. But many people say that the management concept today will not survive long before being taken over by the next one. But there is one thing that all theories do agree on whether they are 5 or 20 years old: the most successful organizations are those that can effectively use their human resources. (www.hrmguide.co.uk)
For many years has managers in the west have had to change rapidly, expected to deliver better and better results for their business by whatever means they could muster. Their own career and salary was dependent on how well the business went. And many have been fired for not doing it good enough and for not reaching quickly enough when there were changes in the market.
This is a figure that shows some of the aspects that a leader must take care of and make work in an organization. (www.hrmguide.co.uk) And with the need to be a good manager and at the same time have a fear of failure, managers have come up with many ideas for the business to survive. One of these is perhaps the one that has been most used in the last few years: failure to take care of human resources.
It is easy to get rid of people when something goes “wrong” in an organization. Some people might call it effective people management. Is this really necessary? Many leaders would say so. If the business is to survive they must cut their costs, and then it is often easy to cut human resources.
But the criticism has been the way that it is done. On the one hand they meet the workers individual needs, and develop them in the organization telling them how important they are and then the next day “get rid of them”.
Reduction in work force is becoming increasingly common in nearly all industries and is often caused by organisational restructuring and of course it is often used to make an organisation more competitive because it reduces costs. There are three main reasons why organisations reduce the size of the workforce: inefficiency, lack of adaptability in the marketplace, and a weakened competitive position within the industry. (Mello 2001)
Reduction in work force is a good way for an organisation to reduce their costs. In many organisations, payroll is one of the largest expenses. This is especially true in service organisations because they are making up more and more of the economy and the gross national product. These (and other) organisations are trying to be more efficient by having fewer people doing more tasks, and trying to redesign the work tasks.
They also help the people that have been fired by getting them a new job, paying them a salary for a while and funding a new education. (This is the system in Norway difficult to find much info about how things are done in UK, but probably some difference) This does not only help the employees that have been dismissed but also the organisation. The organisation does not only reduce costs, (eventually it hopefully does) but also these services help to retain the support and goodwill of the remaining employees by making them feel that the organisation takes care of the people that have been dismissed and that the organisation will do the same for them.
Dismissing people from an organisation however can often be avoided by proper planning. The main benefit with human resource planning is that the cost of having employees can be controlled because they don’t have extra cost because of under or over staffing, they don’t have to fire or hire any people.
Effective human resource planning can in most instances reduce the need for any large-scale reductions in staff. This can be achieved by, for instance, early retirement, reorganisation within the organisation or offering voluntary redundancy with compensation. (Mello 2001)
One of the things that organisations often forget is that they need to develop a proper plan for managing the remaining employees. One of the biggest challenges for managers is to make sure that the “surviving” employees can adjust to the changes. It is not automatically the case that the remaining workers will be relived to have kept their jobs, and will be motivated to do their best for the organisation, as perhaps their best friend has been dismissed.
The workers that are left in the organisation may feel less secure about keeping their jobs, and do more work than previously without getting more money.
Consequently they may be less loyal to their employer and want to leave the organisation. Challenge for the organisation in these times is to make a strategy to ensure that the remaining employees remains committed, loyal, high performers. But when downsizing takes place often these facts are ignored and it is assumed that the remaining employees are happy simply because they have kept their jobs. Reality shows that this is not true. (Mello 2001)
One example of a company that had/has a major problem is IBM, which at the beginning of the 80s, used to be the leading business in world computing with 37 per cent of the total market. But in the 1990s IBM had serious problems and was forced into major restructuring and job losses.
IBM had a policy of taking care of their employees and they offered employment for life and excellent career paths for its best workers. The collective feeling was good and “everybody” felt that his or her job was secure. For half a century this culture was based on excellent working conditions that were implicit in human resource policies that included:
- Sophisticated human resource planning
- A system of lifetime employment
- Equal status for all IBM employees
- Centrally determined salaries
- Considerable emphasis on training
- An audit of staff opinion held every two years
But in the early 1990s the company was in serious trouble. The pc was an IBM invention, but pc clones were now much cheaper and delivered by companies that had much lower overheads. And IBM was forced to cut 64,000 jobs in a period of 5 years, but this still left the company with a worldwide workforce of over 350,000.
IBM’s strongest points its culture and structure, had now become its major weaknesses. IBM had not the ability to change when they really needed to. A loss of $4 billion in 1992 led to the replacement of the leader of the company. And the new leader listed four immediate changes:
- Major staff reduction reducing the global workforce to 250,000
- Defining IBM’s core areas
- Improving customer relations
In 1993 the new leader announced a quarterly loss of $8 billion, and that included money for dismissing 50,000 employees that year. The leader said: “getting IBM’s costs and expense structured in line with revenue realities of our industry – right-sizing company-is my highest near-term priority.”
The leader of IBM chose a formula accountant and ex-banker Gerald Czarnecki to take charge of the human recourses. And according to the new Czarnecki: “IBM did deliberately foster paternalism, with a social contract between employer and employee. But economic realities forced us to rethink the relationship. Now we’re no longer asking people for total commitment to us. They’re eager to stay, but prepared to leave” (Sampson, 1995.p. 228)
After this things started to go better for IBM and by 1995 the company returned to profitability. But the remaining staff felt stigmatised and rejected by the firm. And local mental health services reported a massive increase in request for stress counselling. This shows how IBM went from hard to soft human resource management in a few years. (Price 1997)
Organisations have just started to look at the human resource function of employee separation. For many years the dismissing of people was an unknown problem for many organisations. And managing turnover had been ignored, taken for granted, or assumed to be a easy way to get rid of employees that didn’t do a good job, and trying to fill the gap when someone involuntarily left the organisation.
It was more of a repeating process than any kind of active strategic management. However, today organisations have realised that the effective strategic management of turnover can be a thing that can affect the performance of the employees. (Mello 2001)
The question that many people are asking today is: will human resource management survive as a separate organisational discipline? It seems like it is going towards the integration of many disciplines.
Old fashioned functions, such as the human resource or personnel departments in many organisations are likely to be replaced in the same way as production and distribution. Stewart (1996) says that most of the human resource functions consists of “administrivia” that can be outsourced. (www.hrmguide.co.uk)
Human resource managers need to look at their effectiveness in the organisation. A 21st century human resource specialist must have the ability to see a connection between human resource management and the other processes that go on in business.
It is not enough to be an expert in human recourse management you also need to know what happens in the rest of the organisation to know how to administrate human recourses in the best way for the employees and the employer.
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