Ocbc human resource management

Chapter 1

Introduction to Human Resource Management

Learning Objectives

After reading this chapter, you should be able to do the following:

• Explain what human resource management (HRM) is and how it relates to the manage- ment process.

• Identify major events in the history of HRM and explain how they have shaped the current field of HRM.

• Describe the strategic importance of HRM activities performed in the organizational setting.

• Identify your own HRM responsibilities and challenges as an organizational participant and decision maker.

• Define the major responsibilities of a human resources (HR) department.

• Describe the role of the legal environment in HR operations and activities.

• Define each of the major HRM functions and processes of strategic HRM planning, job analysis and design, recruitment, selection, training and development, compensation and benefits, and performance appraisal.

• Identify major recent trends in HRM.

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Frances Roberts/age fotostock/SuperStock

Pre-Test Chapter 1

Pre-Test 1. HR personal credibility is one of the critical competencies required in order for HR profes-

sionals to be able to carry out their duties successfully.

a) True

b) False

2. Human resource management has been defined as:

a) managing people’s skills and talents to effectively align them with organizational goals.

b) all decisions made by human resource departments that improve morale for employees.

c) decisions made by human resource departments that balance the needs of the management team and employee bargaining units.

d) decisions made by management and by employees that help reach the organization’s goals.

3. The market value per employee of publicly traded companies in the United States can indicate the effectiveness of HR practices on organizational performance.

a) True

b) False

4. Corporate governance refers to the relationship between managers and unions in terms of shared corporate rights and responsibilities.

a) True

b) False

5. Which of the following is one of the HR department’s major everyday tasks?

a) Sales and operations planning

b) Supply chain management

c) Inventory accounting

d) Planning and alignment

6. Any of the following can be a reason for employees to join unions EXCEPT:

a) an employee’s personal need to make a difference in the work environment.

b) employee dissatisfaction and discomfort with the existing work environment.

c) unions’ prospective advantages.

d) a greater chance of joining an organization’s board of directors.

7. Which of the following is one of the HRM practices?

a) Union activities

b) Supply chain management

c) Benefits administration

d) Operations management

8. Taking work that used to be done within an organization and contracting it to a third party is called:

a) globalization.

Introduction Chapter 1

b) outsourcing.

c) free trade.

d) economic shifting.

Answers 1. a) True. The correct answer can be found in Section 1.1.

2. a) managing people’s skills and talents to effectively align them with organizational goals. The correct answer can be found in Section 1.2.

3. a) True. The correct answer can be found in Section 1.3.

4. b) False. The correct answer can be found in Section 1.4.

5. d) Planning and alignment. The correct answer can be found in Section 1.5.

6. d) a greater chance of joining an organization’s board of directors. The correct answer can be found in Section 1.6.

7. c) Benefits administration. The correct answer can be found in Section 1.7.

8. b) outsourcing. The correct answer can be found in Section 1.8.

Introduction Consider the various organizations you have been involved in—as an employee, as a customer, as a volunteer, and as a member. From grocery stores and banks to sports teams and political parties, all organizations share a common theme: they have goals, and they need to accom- plish these goals through people. Of course, they also need financial resources, a viable busi- ness plan, the right technology, and a market. However, an organization’s success depends not only on the availability of these resources but also on the people who will organize, lead, control, and use the resources to achieve the organization’s goals. Critical to an organization’s success is the effective management of its people. That’s why Bill Gates of Microsoft and Herb Kelleher of Southwest Airlines, along with many other well-known leaders of highly successful organizations, have often asserted that people are their most important assets.

O P E N I N G C A S E S T U DY

OCBC Bank

Read the following article: http://www.hrmasia.com/case-studies/putting-the-person-in-personnel/144268/

Browse OCBC's website at: http://www.ocbc.com/group/Group-Home.html

OCBC Bank has been recently ranked as the strongest bank in the world for two consecutive years. One of OCBC’s notable strengths is its emphasis on proactive talent management and development. For example, OCBC has an extensive three-year training program for its new employees, ongo- ing career development plans, and a structured approach to job rotations across functions to give employees diversified exposure. Managers are evaluated and rewarded as much for their effective- ness in managing talent as for their functional roles. In this chapter and throughout this textbook, you will learn about many of these practices and how you can apply them.

(continued)

http://www.hrmasia.com/case-studies/putting-the-person-in-personnel/144268/

http://www.ocbc.com/group/Group-Home.html

What Is HRM? Chapter 1

1.1 What Is HRM? Human resource management (HRM) is the managing of human skills and talents to make sure they are used effectively and in alignment with an organization’s goals. Neither the size nor type of a company affects this definition. Whether big or small, for-profit or nonprofit, all organizations perform HR functions that relate to the recruitment, selection, training, and management of their workforces. In addition, every organization is concerned with offering competitive salaries and benefits to attract, motivate, and retain talented employees. Even nonprofit organizations that rely on volunteers are often concerned with attracting, moti- vating, and retaining the best volunteers by providing nonfinancial incentives and designing meaningful roles for them.

It is important to note that HRM activities exist throughout any organization, whether or not there is a recognized HRM department. For instance, you will find managers of various func- tions such as finance, production, and marketing doing such HR activities as hiring, training,

and scheduling employees and appraising their performance. And HRM activities extend further. HRM also involves handling the legal issues related to hiring, training, compensating, rewarding, disciplining, promoting, demoting, and even firing people.

HRM can provide a competitive advantage to organizations through the efficient and effective use of the tools, data, and processes provided by HRM specialists. Yet HRM should also focus on pursuing one strategic priority: helping the organiza- tion function as an exceptional employer that provides rewarding work to qualified and exceptional employees. HRM should not be seen as merely performing routine administrative activities. While these activities are important for organizational and legal purposes, human resources should, first and foremost, be looked on as an asset that plays a strategic role in giving the organization a competitive advantage in the marketplace.

The University of Michigan and the Society for Human Resource Management identify a critical set of competencies that enable HR professionals to carry out their duties successfully:

Maurizio Gambarini/picture-alliance/dpa/AP Images

▲▲ Bill Gates, founder and former CEO of Microsoft, believes the success of an organization depends not on the availability of resources but on its employees’ ability to organize, lead, and control the use of these resources to achieve organizational goals.

Discussion Questions 1. Describe OCBC’s distinctive approach to talent management and development.

2. Compare OCBC’s approach to talent management and development to other organizations you are familiar with (e.g., current or past employers, a family business).

3. To what extent do you agree that OCBC’s approach to talent management and development is a primary contributing factor in its success? What can be other contributing factors?

4. To what extent does OCBC’s approach to talent management and development fit other types of organizations or industries? What can be some limitations if it is applied elsewhere without modification?

5. Conduct some additional Internet research on OCBC. How has OCBC performed recently, and what has it done more of, less of, or differently in the area of human resource management?

What Is HRM? Chapter 1

1. Strategic contribution means that HR has to be able to be a key contributor to organizational success.

2. HR professionals must attain business mastery—that is, a deep understanding of their organization’s business and its technological, economic, and financial aspects.

3. HR professionals must also attain HR mastery—the ability to execute their practices effec- tively and to ensure that these practices meet employees’ needs and are also aligned with organizational goals.

4. HR professionals must embrace and leverage HR technology to be able to transform HR’s performance of its roles and functions.

5. And it is very important for HR professionals to acquire a fifth competency: HR personal credibility, which occurs through building and developing both internal and external rela- tionships (Brockbank & Ulrich, 2003).

Firms usually deal with four types of capital assets: physical (e.g., buildings, land, and equip- ment), financial (e.g., cash and financial securities), intangible (e.g., patents and information systems), and human assets (e.g., people’s talents, knowledge, skills, abilities, experience, personalities, attitudes, and motives). Each of these assets has a different role in an organiza- tion. However, human assets are the only ones capable of managing all the other assets to accomplish organizational goals.

For example, retail chains such as Target and Wal-Mart possess substantial physi- cal, financial, and intangible assets. However, these assets are meaningless until they are coordinated, integrated, and offered to the customer in terms of the right products at the right prices. Decision makers at the top of the organization per- form these key strategic coordination and integration functions. However, even this strategic work by those at the top can be meaningless if it is not implemented effectively by frontline employees, who are often the only employees a customer will ever meet or be directly affected by. For example, you may never meet or inter- act with the CEO of your grocery store, yet your experience (and willingness to return) is directly influenced by whether employees promptly stock the shelves with your favorite items; whether the janitor properly cleans the aisles and bathrooms; whether the customer service representative knows the answers to your questions and offers them in a friendly manner; and whether the cashier rings up your selections accurately, efficiently, and courteously. Thus, all those organizational human assets, not just those at the top, perform the roles necessary to transform other types of assets into effective means to achieve organizational goals and maintain a competitive advantage.

The efficient use of the organization’s human assets affects its market value. For example, an enormous gap is revealed by comparing the market value of publicly traded companies to the value of their physical, financial, and even their intangible assets. This gap can only be accounted for through the value added by the companies’ human assets (Echols, 2007).

AP Photo/The Canadian Press/Dave Chidley

▲▲ Retail chains such as Target have substantial physical and finan- cial assets that are meaningless unless they are managed, coordi- nated, and offered to the customer by employees.

The History of Human Resource Management Chapter 1

Firms in the United States seem to be aware of this truth. U.S. firms spend almost double the amount that European firms spend on salaries and benefits, and in the United States there is slightly more than a 150% return on this investment in human assets (Burton & Pollack, 2006).

1.2 The History of Human Resource Management It has only been since the late 1970s and early 1980s that the term “human resources man- agement” (HRM) has come to identify what was previously known in organizations as “per- sonnel administration” (PA; Liu, Combs, Ketchen, & Ireland, 2007). The function we now know as HRM has evolved over the last one hundred years in response to changes in tech- nology, business environments, legislation, and society. To appreciate the concept of HRM, a familiarity with the path that has been traveled and the individuals who have influenced our understanding of the concept is necessary.

Precursors to HRM

Prior to 1900, most employment was within small businesses and professional guilds where owners or craft masters were primarily responsible for dealing with the job performance of individual employees. In larger organizations such as manufacturing plants or railroad compa- nies, issues of employee welfare or how employee welfare might relate to efficiency and pro- ductivity were seldom a concern. During this period there was no unemployment or disability

insurance for workers, so that if a worker lost a job through discharge or injury there was no safety net to prevent a fall into destitution. Thus, any discus- sion of human resource management was limited to a job foreman who closely monitored the efforts of individual workers and often resorted to the threat of discharge as inducement for employees to worker harder. In response, workers did attempt to gain some degree of collective protection against their employers through groups such as the Knights of Labor and the Railroad Brotherhoods. However, such groups seldom were given any legal status, and in labor disputes state and local governments most often sided with the employer and brought resources to bear against the employees.

From 1900 to about 1920, employment numbers shifted away from small businesses and professional guilds toward quickly growing businesses in manu- facturing, transportation, and mining. As businesses and industries grew in the United States, so did worker demands for collective protection against the power of employers. Somewhat grudgingly, state and federal government came to recognize the legal status of employee unions such as the American Federation of Labor and the United Mine Workers of America. The drive for worker rights culminated

H -D Falkenstein/imagebroker.net/SuperStock

▲▲ Before the existence of human resources depart- ments, employees depended on professional guilds for direction when dealing with individual employees. Pictured here is Carpenters’ Hall in Philadelphia, home to the Carpenters’ Company, the oldest guild in the United States.

The History of Human Resource Management Chapter 1

in the National Labor Relations Act of 1935, which gave unions wide-ranging latitude to orga- nize and bargain with management. In response, businesses in various industries established industrial relations departments, which attempted to manage human resources by formalizing a process that would acknowledge workers’ rights in compliance with legal requirements. Generally, however, employees were still considered as interchangeable parts of any business.

The period from 1920 through World War II saw emergence of the principles of scientific man- agement advanced by individuals such as industrial psychologists Frank and Lillian Gilbreth, who gained notice for their study of time and motion efficiency in manufacturing plants. Perhaps the most notable use of the principles of scientific management at the time occurred at the Ford Motor Company. Traditionally, when constructing automobiles, craftsmen worked at their own pace and exercised their own judgment. Henry Ford sought to speed up auto- mobile production, and he was influenced by the writings of a mechanical engineer, Fredrick Taylor, who believed that left to their own devices workers would try to determine just how slowly they could work without getting fired. Using Taylor’s management principles, Ford broke down what had once been the domain of skilled craftsmen into simple and repetitive steps that anyone could be trained to do. Further, he established an assembly line that allowed workers to stand in one place and complete their individual, repetitive tasks while the pace of the assembly line was set by the principles of scientific management. Attempts to manage human resources were, at best, characterized by personnel administration departments in which the focus was on the creation and implementation of policies intended to maximize the operational efficiency of human labor. While Ford was noted for paying a generous wage for the time, the policies he used to implement scientific management gave little consideration to employees as important resources. For instance, workers had to ask permission to leave the assembly line to go to the restroom, guards checked the restrooms for malingerers, and job foremen could fire workers for smiling while on the assembly line in the belief that they were not taking their jobs seriously.

From the end of WWII until the early 1960s, PA functions slowly began to look beyond the principles of scientific management and achieving greater financial efficiency from a firm’s employees. A Harvard University professor of industrial management, Elton Mayo, and his colleague, Fritz Roethlisberger, delved deeply into the complex and sometimes confusing data generated from 1924–1932 in a study at Western Electric. Frequently referred to as the Hawthorn Effect, their analysis suggested that there is a connection between the social needs of employees in the workplace and their job performance. From their work emerged the principles of what became known as the Human Relations Movement. Influenced by these principles, Peter Drucker in 1954 first coined the term human resources in calling on managers to consider the moral and social needs of humans in the design of work. Shortly thereafter, in 1958, sociologist E. Wright Bakke identified human resources as an ignored function of general management equally as important to business success as accounting and finance. Interestingly, the concept of humans as resources critical to success was not immediately embraced by business and industry.

Personnel administration departments in the 1960s were confronted with a substantial increase in labor legislation emerging from the social disruption associated with the civil rights and antiwar movements. This legislation was designed to ensure nondiscriminatory employ- ment practices and increased worker safety. Compliance with the plethora of new legislation forced PA departments to develop more sophisticated personnel-related policies and proce- dures (Salvatore, Weitzman, & Halem, 2005). Because of the potential loss that might result

The Strategic Value of HRM Chapter 1

from legislative noncompliance, PA departments could claim to make a demonstrable contri- bution to a firm’s bottom line. Overwhelmed by issues of legal compliance, PA departments had little time to notice research by R. E. Miles suggesting that when managing their subor- dinates managers preferred using principles of human relations whereby the worker is made to feel useful and important through constant communication, but when being managed by their superiors managers preferred that their superiors use principles of human resources in which great value is placed on their knowledge and experience (Marciano, 1995). With this research, the stage was set for the appearance of HRM.

From Personnel Administration to Strategic HRM

During the decade between 1970 and the early 1980s, HRM gained wider acceptance in management circles. Textbooks written by authors with scholarly backgrounds all came to link HRM with activities traditionally associated with PA. However, it remained for thought leaders in the 1980s to fully develop the concept of HRM. The most influential was likely a book by Beer, Spector, Lawrence, Mills, and Walton in 1984 entitled Managing Human Assets in which the authors defined HRM as all management decisions affecting the relationship between the organization and employees. The authors further identified four areas of HRM policy: 1) choices regarding mechanisms to influence employee behavior, 2) choices regarding human resource flows, 3) choices regarding reward systems, 4) choices regarding work systems.

In 1997, David Ulrich wrote the seminal work most likely responsible for the latest evolution of HRM: Strategic Human Resource Management. Abbreviated as SHRM, strategic human resource management can be defined as leveraging the linkages between human resource practices and organizational objectives to achieve a competitive edge. Based on that defini- tion, it follows that HRM serves a critical, strategic function, and thus HR should be involved in the design and implementation of organizational plans and strategies. In HR Champions, Ulrich argued that because the operational aspects of HRM are easily outsourced, if the HRM function could not define the value it creates and could not implement metrics necessary to measure its performance, it would become irrelevant to a firm’s success. Today, SHRM’s transformational aspects (i.e., strategic player, administrative expert, employee champion, and change agent) are argued to be central components in any plan for organizational effective- ness. As such, HRM is now perceived as having moved beyond “putting out fires” to maintain- ing a strategic focus on issues such human capital, culture, and internal customers, all having the potential to provide a firm with a competitive edge.