Human Resource Management

HUMAN RESOURCE MANAGEMENT STUDY GUIDE

PROGRAMME : MBA Year 1

CREDIT POINTS : 20 points

NOTIONAL LEARNING : 200 hours over 1 semester TUTOR SUPPORT : [email protected]

Copyright © 2007 MANAGEMENT COLLEGE OF SOUTHERN AFRICA

All rights reserved; no part of this book may be reproduced in any form or by any means, including photocopying machines, without the written permission of the publisher

REF: HRM 2008

Human Resource Management

MANCOSA - MBA 1

TABLE OF CONTENTS

Section Title of Section Page

Introduction

3 - 10

1

Introduction to Human Resource Management

11 - 26

2

Human Resource Strategy and Business Strategy

27 - 46

3

Human Resource Planning

47 - 64

4

Recruitment, Selection and Induction

65 - 84

5

Employee Training and Development

85 - 106

6

Performance Management

107 - 126

7

Compensation

127 - 148

8

Employee Benefits and Services

149 - 162

9

Human Resource Strategy and Employee Relations

163 - 176

10

Career Planning

177 - 190

11

Bibliography

191 - 202


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SECTION

___________________________________________

INTRODUCTION

___________________________________________


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AIMS OF THIS MODULE

The broad aims of this module are to:

• Introduce the student to the field of human resource management

• Develop the student’s understanding of the integration of human resource strategy and

business strategy.

• Develop the student’s understanding of human resource planning.

• Develop the student’s understanding of the HRM practices of recruitment and selection.

• Develop the student’s understanding of employee training and development.

• Develop the student’s understanding of performance management.

• Develop the student’s understanding of the HRM practices of compensation and the

provision of employee benefits and services.

• Develop the student’s understanding of employment relations within the Southern African

context.

• Develop the student’s understanding of career management.


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Introduction

This module, Human Resource Management, forms an integral part of the MANCOSA Master of

Business Administration (MBA) qualification and serves to introduce the student to the

fundamentals of the field of human resource management. In so doing, the module explores the

integration of human resource strategy and business strategy, as well as human resource

planning, recruitment and selection, employee training and development, performance

management, compensation, employee benefits and services, employment relations and career

management.

Contents and Structure

Section 1: Introduction to Human Resource Management

This first section introduces the student to the field of human resource management (HRM). In

this section a definition of HRM is formulated, the aims of HRM are explored and the place of

HRM within the enterprise is examined. HRM functions and the role of the HR manager are also

given attention. This section also explores the nature of strategic human resource management,

human resource career opportunities as well as current HRM issues and challenges.

Section 2: Human Resource Strategy and Business Strategy

Section 2 explores the integration of human resource strategy and business strategy. Here the

importance of the relationship between HR strategy and business strategy is examined. The

manner in which HR strategy may be integrated into the process of business strategy

formulation, implementation and evaluation is explored. This section also studies the

competencies required by the HR manager to successfully participate and contribute to the

strategic management process.

Section 3: Human Resource Planning

This third section examines human resource planning. In so doing, the nature of HR planning,

the process of HR planning and current issues impacting on HR planning are explored.


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Section 4: Recruitment, Selection and Induction

Section 4 explores the HR practices of recruitment, selection and induction. In this section the

nature of recruitment, recruitment policies, factors influencing recruitment and recruitment

sources are studied. The factors affecting selection decisions and the selection process are also

explored. The objectives and benefits of an induction programme are studied. The planning,

design, implementation and evaluation of an induction programme is also explored.

Section 5: Employee Training and Development

This section examines employee training and development. A distinction is made between the

concepts training and development. The training process is examined, and the impact of the

South African context on training within South African organisations is explored. The various

approaches to development are also examined.

Section 6: Performance Management

Section 6 focuses on performance management. In so doing performance management is

defined, the performance management process is explored and the various approaches to

performance management are investigated.

Section 7: Compensation

This section focuses on the HRM practice of compensation. The nature of compensation and

factors influencing the determination of compensation are investigated. This section also

explores compensation levels, the development of a compensation structure and challenges to

compensation systems. Incentive compensation systems are also investigated.

Section 8: Employee Benefits and Services

Section 8 focuses on employee benefits and services. In so doing, the nature of employee

benefits and services is explored and the reasons for growth in employee benefits and services

are investigated. This section also examines the different types of benefits and services. The

administration of benefits and services is also studied.


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Section 9: Human Resource Management and Employment Relations

Section 9 focuses on employment relations. In so doing, the nature of employment relations is

studied and it is established that it is a “living” field of study that evolves around and is played

out daily in workplaces around the world.

Section 10: Career Management

This section explores the area of career management. In so doing, the nature of the career in the

twenty-first century is explored and the importance of career management is established. The

various career stages, career planning and career development are also explored.


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How to Use This Module

This module should be studied using this unit and the recommended textbook(s). You should

read about the topic that you intend to study in the appropriate chapter before you start

reading in detail in the recommended textbook(s). Ensure that you make your own

notes/summaries as you work through both the textbook(s) and this module.

At the commencement of each chapter you will find a list of objectives. These objectives

outline the main points that you should understand when you have completed the chapter

with its accompanying section(s).

Avoid reading all the material at once. Each study session should be no longer than two hours

without a break.

In the course module chapter, you will find the following symbols and instructions. These are

designed to help you study.

SELF CHECK QUESTION

You may come across self-assessment questions which will test your understanding of

what you have learnt so far. Answers to these questions are given at the end of each

chapter. You should refer to the textbook(s) when attempting to answer the question.

ACTIVITY You may come across activities which ask you to carry out specific tasks.

In most cases there are no right or wrong answers to these activities. The aim of

these activities is to give you an opportunity to apply what you have learnt.


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READING

At this point you should read the suggested reference.

? THINK POINT

A think point asks you to stop and think about an issue. Sometimes you are asked to

apply a concept to your own experience or to think of an example.

READING

The core texts for this module are:

• Noe, R.A., Hollenbeck, J.R., Gerhart, B. and Wright, P.M. (2006) Human

Resource Management: Gaining a Competitive Advantage 5th Ed. Boston:

Irwin McGraw-Hill.

• Nel, P.S., Van Dyk, P.S., Haasbroek, G.D., Schultz, H.B, Sono, T. and Werner, A.

(2004) Human Resource Management 6th Ed. Cape Town: Oxford.


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Module Assessment

Assignment

You will be required to complete and submit an assignment. This assignment is assessed as

part of your coursework. Therefore, it is very important that you complete it.

Examination

An examination will be written at the end of the semester. The assessment strategy will focus

on application of theory to practice.


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SECTION 1

INTRODUCTION TO

HUMAN RESOURCE MANAGEMENT


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CONTENTS

Learning Outcomes

Reading

1.1 Introduction

1.2 Definition of Human Resource Management

1.3 Aims of Human Resource Management

1.4 The Place of Human Resource Management within an Enterprise

1.5 Human Resource Management Functions and The Role of the HR Manager

1.6 Strategic Human Resource Management

1.7 Human Resource Career Opportunities

1.8 Current Issues and Challenges

Summary


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LEARNING OUTCOMES

The overall outcome for this section is that, on its completion, the student should be able to

demonstrate a basic understanding of the field of human resource management (HRM). This

overall outcome will be achieved through the student’s mastery of the following specific

outcomes, in that the student will be able to:

1. Define human resource management.

2. Identify the aims of human resource management.

3. Identify and discuss the place of human resource management within the enterprise.

4. Identify and discuss human resource management functions.

5. Identify and critically discuss the role of the human resource manager.

6. Explain the nature of strategic human resource management.

7. Identify various human resource career opportunities.

8. Identify and critically discuss current issues and challenges in the field of human

resource management.


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READING

Prescribed Reading:



Irwin McGraw-Hill. pp 2 -51

• Nel, P.S., Van Dyk, P.S., Haasbroek, G.D., Schultz, H.B, Sono, T. and

Werner, A. (2004) Human Resource Management 6th Ed. Cape Town:

Oxford. pp 3-31

Recommended Reading:

Books

• Brewster, C., Dowling, T., Grobler, P., Holland, P. & Warnich, S. (2000)

Contemporary Issues in Human Resource Management. Cape Town: Oxford

University Press Southern Africa.

• Carrell, M.R., Elbert, N.F., Hatfield, R.D., Grobler, P.A., Marx, M. & Van der

Schyf, S. (1997) Human Resource Management in South Africa. New Jersey:

Prentice-Hall Inc. pp 1 – 44.

• Ivancevich, J.M. (1998) Human Resource Management. 7th Ed. Boston: Irwin

McGraw-Hill. pp 2 – 35.


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Journals

• Delantey, J.T. & Huselid, M.A. (1996) ‘The Impact of Human Resource

Management Practices on Perceptions of Organizational Performance’.

Academy of Management Journal. August, 39(4), pp 949 – 970.

• Eisenstat, R.A. (1996) ‘What Corporate Human Resources Brings to the

Picnic: Four Models for Functional Management’. Organizational Dynamics.

Autumn, 25(2), pp 7 – 23.

• Huselid, M.A. (1995) ‘The Impact of Human Resource Management Practices

on Turnover, Productivity and Corporate Financial Performance’. Academy

of Management Journal. June, 38 (3), pp 635 – 673.

• Ulrich, D. (1998) ‘A New Mandate for Human Resources’. Harvard Business

Review. Jan – Feb, pp 124 – 134.


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1.1 Introduction

This section, the first section of the Human Resource Management module, serves to

introduce the student to the concept of human resource management (HRM). In so doing the

following issues are examined:

• Definition of human resource management

• Aims of human resource management

• Place of human resource management in the enterprise

• Human resource management functions and the role of the human resource manager

• Strategic human resource management

• Human resource career opportunities

• Current HRM issues and challenges

1.2 Definition of Human Resource Management

Comment on Activity

Various definitions of human resource management exist. Noe, Hollenbeck, Gerhart &

Wright (2006:5) assert that:

“Human resource management (HRM) refers to the policies, practices and systems

that influence employees’ behaviour, attitudes and performance. Many companies

refer to HRM as involving ‘people practices’”.

In Ivancevich’s (1998:5) definition emphasis is placed on the ‘people’ aspect of HRM:

“Human resource management (HRM) is used to describe the function that is

concerned with people – the employees. Human resource management is the function

performed in organizations that facilitates the most effective use of people

(employees) to achieve organizational and individual goals” .

ACTIVITY From your experience as an employee and/or manager within an organisation,

develop a definition of human resource management


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Nel & Van Dyk (2004) distinguish between personnel management and human resource

management, and argue that the latter is more appropriate for today’s organisation in that it

provides for a holistic and strategic approach to the management of people. Nel et al

(2004:6) identify the following definition of HRM as being most appropriate:

“Human resources management…[refers to]...the process through which an optimal

fit is achieved among the employee, job, organisation and environment so that

employees reach their desired level of satisfaction and performance and the

organisation meets its goals” (Hall & Goodale cited in Nel et al, 2004:6).

This definition is more holistic than that provided by Noe et al (2006:5) and Ivancevich

(1998:5) in that it addresses the inter-relation of four dynamic components. These

components, and their inter-relation, are diagrammatically represented in Figure 1.1.

Figure 1.1: Human Resources Management: The Inter-Relation of Four

Dynamic Components (adapted from Nel et al, 2004: 17)

ENVIRONMENT Economic Social Political Technological

INDIVIDUAL

Abilities Knowledge Personality Values

FIT

THE JOB Challenge Variety Autonomy

THE ORGANISATION

Size Culture Structure Human Resources

Policy Technology


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1.3 Objectives of Human Resources Management

Nel et al (2004) identifies three generally accepted aims of human resource management.

These are:

• To establish a culture within an organisation that recognizes the uniqueness of the

individuals who make a meaningful contribution to the organisation’s success;

• To establish how employees and the organisation can inter-relate to the advantage of both

parties;

• To support managers in the execution of their tasks related to the management of people.

1.4 The Place of Human Resources Management within an Enterprise

Comment on Activity

Human resource management may be depicted to occupy a place functionally within the

organisation’s structure, as depicted in Figure 1.2. This diagram depicts the line authority

vested in the HR Manager, where he/she holds a position of authority which provides for the

issuing of instructions to his/her subordinates.

ACTIVITY Based on your experience of the human resource management function within the

organisation, provide a diagrammatic representation of the place of HRM within

the enterprise.


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Figure 1.2: The Place of the Human Resource Management Function in an organisation

(adapted from Nel et al, 2004:11).

Human resource management may also be depicted as occupying the heart of the organisation

(see Figure 1.3), where functional authority and staff authority are exercised. Functional

authority gives the HR manager the right to issue enforceable HRM-related instructions to

individuals and departments throughout the organisation. On the other hand, staff authority

enables the HR manager to issue advice (which is not enforceable) to various entities within

the organisation.

THE ORGANISATION

HUMAN

RESOURCE MANAGEMENT

FUNCTIONAL AUTHORITY

TOP MANAGEMENT

MIDDLE MANAGEMENT

FINANCE DEPARTMENT

OPERATIONS DEPARTMENT

LOWER MANAGEMENT

TASK TEAMS

EMPLOYEES

MARKETING DEPARTMENT

R & D DEPARTMENT

GENERAL MANAGER

HR MANAGER

MARKETING MANAGER

PRODUCTION MANAGER

FINANCIAL MANAGER

Manager: Compensation Benefits

Manager: Training &

Development

Manager: Recruitment &

Selection Placement

Manager: Labour Relations

STAFF AUTHORITY

Figure 1.3: Human Resource Management – Functional and Staff Authority


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1.4 Human Resource Management Functions and The Role of the HR Manager

Noe et al (2006:6) identify the functions of human resource management to include:

Employment and recruiting Interviewing, recruiting, testing, temporary labour

co-ordination.

Training and development Orientation, performance management skills training,

productivity enhancement.

Compensation Wage and salary administration, job descriptions,

executive compensation, incentive pay and job evaluation

Benefits Insurance, vacation leave administration, retirement plans,

profit sharing, stock plans.

Employee services Employee assistance programmes, relocation services,

outplacement services

Employee and community relations Attitude surveys, labour relations, publications, labour law,

compliance, discipline

Personnel records Information systems, records

Health and safety Safety inspection, drug testing, health, wellness

Strategic planning International human resources, forecasting, planning,

mergers and acquisitions

Source: Noe et al (2006:6)

Responsibilities of HR Departments

In order to effectively carry out these functions within the organisation, the HR Manager and

his/her department need to fulfil the following roles:

• A Service Role which incorporates the everyday functions of the HR department, which

includes activities relating to recruitment, selection, training and compensation;

• A Control Role which is more strategic in nature and could involve, for example, an

analysis of key HRM outputs such as labour turnover;

• An Advisory Role which involves the provision of expert HRM related advice to various

parties within the organisation (Nel et al, 2004:10).


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Comment on Reading Activity

Eisenstat (1996:7-23) identifies four roles which the HRM department within an organisation

may adopt to fulfil its function. These roles emerge from four models:

• The Hierarchical Model:

If an organisation adopts the hierarchical model, the HRM function adopts the role of agent

for, as well as an advisor and support to, top management. In so doing, the HRM function

takes on responsibility for:

o The provision of high-level advice to assist top management with HR issues; and

o The administration of HR related activities (Eisenstat, 1996:7-23).

• The Professional Model:

If an organisation follows the professional model, the HRM function adopts a representative

role in that the focus of HRM activities is on the management of relations between the

organisation and external officials such as union representatives and government agencies.

• The Service Business Model:

The service business model places emphasis on the importance of the HRM function

improving the quality and effectiveness of the services which it provides to the various

divisions within the organisation. The HRM function takes on the role of an external

service provider (consulting firm) and much attention is given to the level of satisfaction

which its customers acquire from the delivery of services (Eisenstat, 1996:7-23).

READING Read the following journal article and then answer the questions which follow:

• Eisenstat, R.A. (1996) ‘What Corporate Human Resources Brings to the

Picnic: Four Models for Functional Management’. Organizational Dynamics.

Autumn, 25(2), pp 7 – 23.

1. What is Eisenstat’s (1996) approach to the role of the HRM function?

2. Is Eisenstat’s (1996) approach appropriate to today’s organisation?

Why / Why not?


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Eisenstat (1996:7-23) points out that the various models addressed above adopt particular

roles which serve to address the demands of a particular constituency:

• The hierarchical model places the HRM function in the role of agent/advisor where the

needs of top management are addressed;

• The professional model places the HRM function in the role of representative which

provides for consultation and communication with external parties; and

• The service business model places the HRM function in the role of service provider to

individual operating divisions.

Eisenstat (1996:7-23) emphasises the need for organisations of today to follow a fourth

model, the partnership model, which serves to integrate and supplement the roles particular

to the hierarchical, professional and service business models. The partnership model involves

the HRM function in a strategic role where creation of value for the corporation as a whole

provides the focus, and higher levels of teamwork between the HRM function, top

management, individual operating divisions and external groups (e.g. unions) are achieved.

In such a model therefore, the HRM function not only adopts the roles of agent/advisor,

representative and service provider, but of strategic catalyst as well.

1.6 Strategic Human Resource Management

The journal article by Eisenstat (1996:7-23) discussed in section 1.5 above emphasised the

importance of the HRM function assuming an active role in the strategic management of the

company. Indeed, Noe et al (2003:6) points out that the “HR function is in transition from an

administrative function to a strategic business partnership”. This is evident in Table 1.1

below which shows how the percentage of time the HR department devotes to administrative

duties (such as maintaining records, auditing and controlling, and providing services) has

decreased over the last couple of years.

Current 5 – 7 yrs ago Maintaining Records 15% 22% Auditing & Controlling 12% 19%

Administrative Tasks

HR Service Provider 31% 35% Product Development 19% 14% Strategic Tasks Strategic Business Partner 22% 11%

Table 1.1: The Percentage of Time Spent on Administrative Tasks and Strategic Tasks by

the HRM Function (adapted from Noe et al, 2000: 6)


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Strategic HRM will be addressed in greater depth in Section 2 of this module guide.

1.7 Human Resource Career Opportunities

A HR professional may enter into the HRM field through various types of positions. Various

generalist and specialist HR positions exist throughout all levels of the organisation.

These include positions in:

Labour relations

Employee relations

Recruitment and selection

Organisational development

Training

Compensation and benefits

1.8 Current Issues and Challenges

Given the dynamic and competitive nature of the current business environment, HRM is

currently faced with a number of challenges.

Noe et al (2006:13) identify three categories of competitive challenges for human resource

management. These are:

• Competing through Globalisation which involves the expansion of organisations into

global markets and the challenge of preparing employees for work in foreign countries;

• Competing through Sustainability which involves providing a return to shareholders, the

development of employees and the creation of a positive work environment; and

• Competing through Technology which requires changes in employee and manager work

roles, and the integration of technology and organisational social systems.

? THINK POINT What types of human resource career opportunities exist within your organisation?


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Ulrich (1998:124-134) identifies five challenges which are to impact on HRM within

companies. These challenges are:

Globalisation which requires that “organizations increase their ability to learn and

collaborate and to manage diversity, complexity and ambiguity” (Ulrich, 1998: 126).

Profitability Through Growth where organisations will need to grow revenue through

becoming more market focused, acquiring new customers and developing new,

innovative products.

Technology where managers will need to figure out how to make good use of

technology and effectively integrate it into the work setting and work processes.

Intellectual Capital provides direct and indirect competitive advantage and the

challenge for organisations in “making sure they have the capability to find,

assimilate, develop and compensate, and retain such talented individuals” (Ulrich,

1998: 127).

Change, Change and More Change presents the greatest competitive challenge in

that it requires that organisations learn rapidly and continuously, constantly innovate,

and readily adapt and change strategy.

READING

Read the following journal article and answer the questions which follow.

• Ulrich, D. (1998) ‘A New Mandate for Human Resources’. Harvard Business

Review. Jan – Feb, pp 124 – 134.

1. What challenges does Ulrich identify for the HRM function?

2. How does Ulrich recommend that HRM deal with these challenges?


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Ulrich (1998:124-134) argues that HRM will be critical in addressing the challenges

identified above, in that these challenges require that organisations build new capabilities

(such as speed, learning capacity, agility, responsiveness). HRM will need to play a

leadership role in developing these new capabilities and therefore HRM’s ‘new’ mandate

would be:

• To become a partner in strategy execution which would involve the HRM function in:

o Defining an organisational structure;

o Conducting an organisational audit;

o Identifying methods for renovating parts of the organisational architecture;

o Taking stock of its own (HR) work and set clear priorities.

• Becoming an Administrative Expert by improving and automating administrative

systems.

• Becoming an Employee Champion which would involve being an advocate for

employees

Becoming a Change Agent which would involve building the organisation’s capacity to

adapt to, cope with and embrace change.

HRM professionals will need to focus on the creation of value for the enterprise, and create

mechanisms which provide for rapid business results (Ulrich, 1998:124-134).

Summary

This section served to provide the student with an introduction to the study of Human

Resource Management (HRM). In so doing, a definition of human resource management was

investigated and the aims of HRM were established. The place of HRM, the functions of the

HR department, the role of the HR manager, and HR career opportunities were also

investigated. In closing, current issues and challenges for the function of HRM were studied.


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NOTES :


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SECTION 2

HUMAN RESOURCE STRATEGY

AND

BUSINESS STRATEGY


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CONTENTS

Learning Outcomes

Reading

2.1 Introduction

2.2 The Importance of the Relationship Between HR and Business Strategy

2.3 Linking HR Strategy with Business Strategy

2.3.1 Strategy Formulation

2.3.2 Strategy Implementation

2.3.3 Strategy Evaluation and Control

2.3.4 Consolidation

2.4 Strategic Human Resource Management Competencies

2.5 Summary

Answers to Self-Check Questions


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LEARNING OUTCOMES


demonstrate a holistic understanding of the integration of human resource strategy and

business strategy. This overall outcome will be achieved through the student’s mastery of the

following specific outcomes:

1. Explain the importance of integrating a company’s human resource strategy with

overall business strategy.

2. Explain the strategic management process.

3. Discuss the strategic management phases of strategy formulation, strategy

implementation and strategy evaluation and control.

4. Critically discuss the function and role of human resource management within the

strategic management process.

5. Discuss the various human resource practices associated with the various generic and

directional strategies.

6. Identify and discuss the competencies which an HR professional requires to effectively

participate in the strategic management process.


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READING

Prescribed Reading:



Irwin McGraw-Hill. pp 664-703



Oxford. Pp 519-535


Books

• Brewster, C., Dowling, P., Grobler, P., Holland, P. & Warnich, S. (2000)

Contemporary Issues in Human Resource Management. Cape Town: Oxford

University Press Southern Africa.

• Ivancevich, J.M. (1998) Human Resource Management 7th Ed. Boston: Irwin


• Porter, M.E. (1980) Competitive Strategy: Techniques for Analyzing

Industries & Competitors. New York: Free Press.


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Journals

• Christensen, C.M. (1997) ‘Making Strategy: Learning By Doing’. Harvard

Business Review. Nov-Dec, pp 141 – 156.

• Hamel, G. (1996) ‘Strategy as Revolution’. Harvard Business Review. July-

August, pp 69 – 82.

• Hodgetts, R.M., Luthans, F. & Slocum, J.W. (1999) ‘Strategy and HRM

Initiatives for the ‘00s: Environment Redefining Roles and Boundaries,

Linking Competencies & Resources’. Organizational Dynamics. Autumn, pp 7

– 18.

• Nadler, D.A. & Tushman, M. (1999) ‘The Organization of the Future:

Strategic Imperatives and Core Competencies for the 21st Century’.

Organizational Dynamics. July, 27 (1), pp 45 – 58.

• Nellis, S. & Schuler, R.S. (1994) ‘AT & T Global Business Communication

Systems: Linking HR with Business Strategy’. Organizational Dynamics.

Winter, 22 (3), pp 59 – 73.

• Porter, M.E. (1979) ‘How Competitive Forces Shape Strategy’. Harvard

Business Review. March-April, pp 137 – 145.

• Porter, M.E. (1996) ‘What is Strategy?’. Harvard Business Review. Nov-Dec,

pp 61 – 78.


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2.1 Introduction

While section 1 introduced the student to the field of Human Resource Management (HRM),

this section examines the relation between Human Resource Strategy and Business Strategy.

In so doing the following will be studied:

• The importance of the relationship between HR and business strategy

• Linking HR strategy and business strategy

o Strategy formulation

o Strategy implementation

o Strategy evaluation and control

• Strategic human resource management competencies

ACTIVITY Read the short case entitled ‘Strategy and HR at Delta Airlines’

Noe et al (2003:85-86), and then answer the following questions.

1. Comment on Allen’s approach to integrating HR and overall business

strategy during the strategy planning / formulation phase.

2. Comment on Allen’s approach to integrating HR and overall business

strategy during the strategy implementation phase.


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Comment on Activity

Question 1

There is no evidence in the case to suggest that Allen considered the input of the HR

department when formulating the company’s strategy. However, there is evidence in the case

that Delta’s human resources were a highly committed, customer-focused and competent

workforce. Thus, the workforce could be regarded as the resource which could have

provided for Delta’s competitive advantage. It is probable that this would have been brought

to Allen’s attention if the company’s HR department had been involved in the formulation of

strategy. Indeed, the HR department could have pointed out to Allen that:

• Delta’s existing highly committed workforce is a source of the company’s competitive

advantage. Delta could have used this as the basis for a strategy which differentiated

itself from its competitors.

• Alternatively, a strategy which reduced costs without sacrificing the workforce could

have been considered. The workforce could have been drawn into the process and asked

to come up with ways to perform certain tasks more efficiently.

Question 2

While there is no evidence to suggest that Allen consulted with the HRM function in

formulating Delta’s strategy, the HRM function would have been involved in the

implementation of Allen’s downsizing strategy. From the evidence provided in the case it is

suggested that the HR department would have primarily been involved in administering

workforce reduction programmes such as early retirements and retrenchments.

However, no evidence is provided in the case of the HR Department adopting a more holistic

role in implementing the strategy, such as the provision of outplacement services,

interventions to boost the morale of survivor employees, effective communication with the

employees regarding the downsizing initiative, etc.


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It may be concluded that had Allen actively integrated HRM into Delta’s business strategy,

the decisions emerging from the strategy formulation and strategy implementation processes

would have been more holistic, and probably more effective.

2.2 The Importance of the Relationship Between HR and Business Strategy

Strategic management may be defined as managing the “pattern or plan that integrates an

organization’s major goals, policies, and action sequences into a cohesive whole” (Quinn

cited in Noe et al, 2006:58). On the other hand, strategic human resource management

(SHRM) may be defined as “the pattern of planned human resource deployments and

activities intended to enable an organization to achieve its goals” (Friedman & Strickler

cited in Noe et al, 2006:59). Thus HRM is critical in supporting the formulation and

implementation of strategy.


___________________________________________________________________ MANCOSA - MBA 35

Golden and Ramanujam (1985:429-451) identify four levels of integration between the HRM

function and the strategic management function which may emerge within organisations.

These are:

• Administrative Linkage which is the lowest level of integration and the HR function is

primarily focused on day-to-day activities. The HR function is divorced from the strategic

management process.

• One-Way Linkage which involves the strategic management function in simply

informing the HR function of the strategic plan. (This does not constitute strategic HRM).

• Two-Way Linkage which allows for sequential consideration of HR issues during the

strategy formulation process in that the HR function is informed of the various strategies

which are being considered and the HR executive provides input as to the HR

implications. Once the strategic plan has been determined, the HR function prepares

various programmes to support the implementation of the strategy.

• Integrative Linkage is dynamic and is based on continuing interaction between the

strategic management and HRM function. The HR function forms part of the strategic

management team, and actively participates in the formulation and implementation of

strategy.

2.3 Linking HR Strategy with Business Strategy

Strategic management involves three phases:

• Strategy formulation

• Strategy implementation

• Strategy evaluation and control

HR strategy issues need to be considered during each of these strategic phases.


___________________________________________________________________ MANCOSA - MBA 36

2.3.1 Strategy Formulation

The formulation of strategy involves the consideration and establishment of five major

components, which are depicted in Figure 2.1. These components include the:

Organisation’s Mission which specifies the organisation’s reason for existence.

Organisation’s Strategic Goals which specify what the organisation aims to achieve in

the medium and long term.

External Analysis which provides information as to the threats and opportunities which

exist for the company within the external environment.

Internal Analysis which provides information as to the strengths and weaknesses of the

company’s resources.

Strategic Choice which is the organisation’s chosen strategy and specifies the way in

which the mission and strategic goals are to be achieved.

EXTERNAL

ANALYSIS

Oppurtunities

Threats

VISION AND MISSION

STRATEGIC CHOICE

STRATEGIC GOALS

INTERNAL

ANALYSIS

Strengths

Weaknesses

HR INPUT

Figure 2.1: Strategy Formulation (adapted from Noe et al, 2006:64).


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It is important to note that in the consideration of the five components discussed above, it is

critical that input from the HRM function is considered and that people-related issues are

contemplated (Noe et al, 2006:60-61). For example, if an IT organisation were to conduct an

external analysis at this point in time, a major external threat would be the considerable lack

of skilled IT professionals within the labour market.

1.3.2 Strategy Implementation

Once an organisation has completed the strategy formulation phase, the implementation of

strategy needs to take place. Noe et al (2006:68) argue that five variables influence the

success of strategy implementation:

Organisational structure

Types of information and information systems

Task design

Selection, training and development of people

Reward systems

The importance of HRM in strategy implementation is highlighted if it is considered that

HRM is directly responsible for the latter three variables and is in a position to influence the

former two variables.

The involvement of the HRM function in strategy implementation is depicted in the Figure

2.2 on the following page.


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Figure 2.2: Strategy Implementation (from Noe et al , 2006:69)

As shown in Figure 2.2 the choice of strategies (made during the strategy implementation

phase) determine the organisation’s HR needs. These HR needs give rise to specific HR

practices (such as job analysis and design, recruitment and selection, etc.) which in turn

provide the organisation with HR capability and behaviours. This HR capability and

behaviours enable the organisation to perform in accordance with the organisation’s chosen

strategies.

1.3.2.1 Types of Strategies and HR Practice

The type(s) of strategies employed will impact on the nature of the HR practices

implemented by the HRM function within an organisation.

STRATEGIC

CHOICE

HUMAN

RESOURCE NEEDS

Skills

Behaviour Culture

HUMAN

RESOURCE CAPABILITY

Skills

Abilities Knowledge

HUMAN

RESOURCE ACTIONS Behaviours

Results (Productivity, Absenteeism,

Turnover)

HUMAN RESOURCE PRACTICES

Recruitment Job Analysis Training Job Design Performance Management Selection Labour Relations Development Employee Relations Pay Structure Incentives Benefits

FIRM’S PERFORMANCE Productivity Quality Profitability


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SELF CHECK QUESTION 1

Identify the impact which each of the following strategies will have on the

organisation’s HR Practices.

1. Generic Strategies:

* Overall Cost Leadership

* Differentiation

2. Directional Strategies

* Concentration

* Internal Growth

* Mergers and Acquisitions

* Downsizing

The answer to this Self-Check Question may be found at the end of this section


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2.3.3 Strategy Evaluation and Control

Strategy evaluation and control is the final phase in the strategic management process and

requires both the strategic management function as well as the HRM function in constantly

monitoring the effectiveness of the strategy and implementation process (Noe et al, 2003).

2.3.4 Consolidation

The following reading activity serves to consolidate the student’s understanding of the

integration of HR strategy and the strategic management process.

READING ACTIVITY

Read the following article and then answer the question that follows:

• Nellis, S. & Schuler, R.S. (1994) ‘AT & T Global Business Communication

Systems: Linking HR with Business Strategy. Organizational Dynamics.

Winter, 22 (3), pp 59 – 73.

Discuss AT&T’s approach to integrating HRM into business strategy.

In particular focus on GBCS’s approach to strategy formulation and strategy

implementation.


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Nellis & Schuler (1994:59-73) outline how AT&T managed to effectively integrate its HRM

function into its business strategy.

During 1992, in order to save AT&T from further decline, AT&T Business Communications

Systems (BCS) merged with AT&T General Business Units to form GBCS. GBCS then

embarked on a strategic management process which focused strongly on integrating GBCS’s

HRM function into its business strategy.

Strategy Formulation

Six strategic principles were identified to guide the formulation of strategy. These principles

were:

• Make people a key priority

• Life-long customer relationships

• Total quality management

• Technology applications leadership

• Globalisation

• Being the best value supplier

GBCS’s vision, mission and values were then reconstructed, based on the six principles

identified above (Nellis & Schuler, 1994:59-73). The integration of HR into GBCS’s

strategy formulation process is made evident in the first of the six principles: “Make people

a key priority”.

HRM was further integrated with the overall business strategy, in that the CEO tasked the

HR executive and his team to develop an HR strategic plan and management system which

would provide for the linking of the GBCS’s employees to the overall company business

strategy. The HR strategic plan which was prepared was linked to the six strategic principles

on which the overall business strategy was based. The application of these principles

enabled the HR team to identify three HR areas which would be critical in linking the GBCS

employees to the overall business strategy.


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These critical areas were:

• Culture change

• Rewards and recognition

• Ownership

Strategy Implementation

The HR initiatives which were implemented served to link the GBCS employees to the

overall business strategy. These initiatives included:

• A redesign of the performance management process;

• A redesign of the compensation system to reinforce the link between employees’

achievements and business success;

• The implementation of a recognition platform to motivate, build self-esteem and

commend role-model behaviour;

• Various communication programmes to provide support to the compensation,

recognition and performance practices.

In implementing these initiatives, it came to the attention of management that the HRM

function would need to be repositioned and reorganized. This included:

• HR becoming a key member of the senior management team with responsibility to

provide leadership on key HR issues; and

• The re-organisation of the HRM function into various teams to maximize its ability to

focus on people-related strategic imperatives.

Nellis & Schuler (1994:59-73) report that GBCS’s initiative to integrate HRM into overall

business strategy has proved to be successful and that business results have significantly

improved.

2.4 Strategic Human Resource Management Competencies

? THINK POINT

Within your organisation, what competencies would an HR professional require in

order to make a valuable contribution to the strategic management process?


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Comment on Think Point

Noe et al (2006) identifies four basic competences which the HR professional requires in

order to participate in an organisation’s strategic management process. These competences

are highlighted in Figure 2.3 below.

Figure 2.3: Strategic Human Resource Competencies (adapted from Noe et al, 2006:82).

1.4 Summary

This section has served to provide an overview of HR Strategy and Business Strategy. In so

doing the importance of integrating a company’s HRM into its business strategy was

established. The strategic management process was examined and the implications for HRM

at each stage in this process were explored. In closing, the competencies required by the HR

professional to successfully participate in an organisation’s strategic management process,

were examined.

THE HUMAN RESOURCE PROFESSIONAL

BUSINESS COMPETENCE

Knowing the organisation’s

business Understanding the

organisation’s economic capabilities

PROFESSIONAL &

TECHNICAL KNOWLEDGE

State-of-the-art HR Practices

INTEGRATION COMPETENCE

Ability to increase

organisation’s value through the integration of the

previous 3 competencies

ABILITY TO

MANAGE CHANGE

Diagnosing problems Implementing changes

Evaluating results


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1.5 Answers to Self-Check Questions

Self-Check Question 1

The impact which the various strategies will have on the organisation’s HR practices are

summarised in the tables below:

1. Generic Strategies

Generic

Strategies

Impact on HR Practices

Overall Cost

Leadership

• Focus on efficiency requires specific definition of skills

requirements and investment in training in these areas.

• Behavioural performance management with large

performance-based compensation component.

• Promote internally.

• Develop internally consistent pay systems with high

differential between subordinates and superiors

• Seek efficiency through worker participation

Differentiation • Broad job descriptions to allow for creativity.

• May recruit from outside and provide for limited

socialization of new recruits.

• Provide broad career paths.

• Cooperation is the focus on training and development

activities.

• Compensation influenced by external equity and

recruiting needs.

• Results-based performance management systems.


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3. Directional Strategies

Directional

Strategy

Impact on HR Practices

Concentration

Strategies

• Maintenance of current skills.

• Training focused on maintaining current skills.

• Compensation focused on retaining employees who have

the required existing skills.

• Behaviour-based performance appraisals (due to stable

environment).

Internal

Growth

Strategies

• Company must constantly hire, transfer and promote

individuals.

• Expansion into new markets requires changes in skills or

prospective employees.

• Combination of behaviour-based and results-based

appraisals.

• Compensation structured as an incentive for achieving

growth goals.

• Training needs dependent on how the company decides to

grow internally (e.g. growth through innovation and product

development – training technical in nature).

Mergers &

Acquisitions

• Training in conflict resolution.

• HR programmes to integrate and standardize culture and

practices across the company’s business.

Downsizing • Surgical reduction of the workforce through the offering of

early retirement programmes, retrenchment packages, etc.

• Boost morale of ‘survivor’ employees.

• Compensation programmes linked to the company’s success

(e.g. gainsharing plans).


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NOTES :


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SECTION 3

HUMAN RESOURCE PLANNING


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CONTENTS

Learning Outcomes

Readings

3.1 Introduction

3.2 The Nature of Human Resource Planning

3.3 The Process of Human Resource Planning

3.3.1 Forecasting

3.3.2 Goal Setting and Strategic Planning

3.3.3 Programme Implementation and Evaluation

3.4 Current Issues Impacting on Human Resource Planning

3.4.1 Employment Equity and Skills Development

3.4.2 Strategic Management and HR Planning

3.5 Summary

Answer to Self-Check Question


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LEARNING OUTCOMES


demonstrate a holistic understanding of the Human Resource Planning and its application.

This overall outcome will be achieved through the student’s mastery of the following specific

outcomes:

1. Explain the concept of human resource planning.

2. Critically discuss the importance of human resource planning for organisations.

3. Identify, critically discuss and apply the process of human resource planning.

4. Integrate employment equity and skills development issues with human resource

planning.

5. Integrate human resource planning into the organisation’s strategic management

process.


___________________________________________________________________ MANCOSA - MBA 50

READING

Prescribed Reading:






Oxford. pp 212-227


Books


Schyf, S. (1997) Human Resource Management. New Jersey: Prentice Hall

Inc. pp 137 – 148.




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Journals & Legislation

• Burack, E.H. (1986) ‘Corporate Business and Human Resources Planning

Practices: Strategic Issues and Concerns’. Organizational Dynamics.

Summer, 15 (1), pp 73 – 88.

• Caudron, S. (1994) ‘Contingent Work Force Spurs HR Planning’. Personnel

Journal. July, pp 52 – 60.

• Department of Labour (1999) Preparing an Employment Equity Plan. Pretoria:

Government Printers.

• Huselid, M.A. (1993) ‘The Impact of Environmental Volatility on Human

Resource Planning & Strategic Human Resource Management’. Human

Resource Planning. 16 (3), pp 35 – 51.

• RSA (1998a) ‘Employment Equity Act, No. 55 of 1998’. Government Gazette

No. 19370. Pretoria: Government Printer.

• RSA (1998b) ‘Skills Development Act, No. 97 of 1998’. Government Gazette

No. 19420. Pretoria: Government Printer.

• Schuler, R.S. & Walker, J.W. (1990) ‘Human Resources Strategy: Focusing

on Issues and Actions’. Organizational Dynamics. Summer, 19 (1), pp 4 – 20.

• Ulrich, D. (1992) ‘Strategic and Human Resource Planning: Linking

Customers & Employees’. Organizational Dynamics. 15 (2), pp 47 – 63.


___________________________________________________________________ MANCOSA - MBA 52

3.1 Introduction

This section investigates the concept of Human Resource (HR) Planning and in so doing will

examine:

• The nature of HR planning

• The process of HR planning

o Forecasting

o Goal setting and strategic planning

o Programme implementation and evaluation

• Current issues impacting on HR planning

o Employment equity and skills development

o Strategic management and HR planning

3.2 The Nature of HR Planning

Organisations engage in the process of human resource planning to determine the future

supply of, and demand for, human resources so as to gain or maintain competitive advantage.

A definition provided by Huselid (1993:36) asserts that “[Human resource planning] is…the

process of matching a firm’s long-term demand for labour with its supply”, while Ivancevich

(1998:145) maintains that “HR planning determines the numbers and types of employees to

be recruited into the organization or phased out of it”.

Human resource planning is an important activity in that in provides for:

• More effective and efficient use of people at work;

• Greater employee satisfaction;

• Better developed employees; and

• More effective employment equity planning (Ivancevich, 1998).

? THINK POINT

Does your organisation conduct human resource planning? Why / Why not?


___________________________________________________________________ MANCOSA - MBA 53


Both Huselid (1993:36) and Grobler (1993:16) assert that a substantial number of

organisations do not engage in human resource planning.

During 1990 a study of the HR practices of 400 manufacturing companies was conducted.

The study found that “….the implementation of …[human resource planning] in companies

in the manufacturing industry in the PWV area has only been adopted to a limited extent.”

(Grobler, 1993:16). The reasons which Grobler (1993:16) provides for the limited HR

planning include:

• The assumption amongst companies that an adequate supply of labour will be available

when needed;

• The assumption that human resources (employees) are a highly flexible resource that can

be laid off, trained and recruited at short notice;

• The responsibility for company planning typically resting with financial and marketing

executives (Grobler, 1993:16).

In a study conducted by Huselid (1993) the impact of workforce volatility (which refers to

the instability in the firm’s level of employment from year to year) on HR planning (HRP)

was investigated. It was found that “…firms exhibiting moderate levels of workforce

volatility were much more likely to adopt HRP….than were firms in highly stable and

dynamic environments. Thus it is likely that high levels of workforce volatility render HRP

ineffective, while low levels of workforce volatility make it unnecessary” (Huselid, 1993: 47).

Thus, it can be seen from the above discussion that companies refrain from conducting HR

Planning due to both external and internal environmental factors.


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3.3 The Process of HR Planning

Human resource planning generally follows the process depicted in Figure 3.l:

Figure 3.1: The Human Resources Planning Process (from Noe et al, 2006: 178)

3.3.1 Phase 1: Forecasting

The first phase of the HR planning process involves forecasting so as to determine labour

demand and labour supply. The forecasting techniques which may be used range from

sophisticated statistical models (involving, for example, regression analysis) to relatively

unrefined expert estimates (Ivancevich, 1998).

The figures established from the labour demand and labour supply forecasts will be used to

determine potential labour shortages or labour surpluses for particular job categories (Noe et

al, 2006:179).

3.3.2 Phase 2: Goal Setting and Strategic Planning

The forecasted labour surplus and labour shortages will be used to determine measurable

goals for each particular skill area or job category (Noe et al, 2006:181). The organisation

will then need to choose a strategy which will provide for the achievement of the set goals.

FORECASTS OF LABOUR DEMAND

FORECASTS OF LABOUR SUPPLY

FORECASTS OF LABOUR SURPLUS OR SHORTAGE

GOAL SETTING & STRATEGIC PLANNING

PROGRAMME IMPLEMENTATION &

EVALUATION


___________________________________________________________________ MANCOSA - MBA 55

These strategies may include:

1. Options for reducing expected labour surplus

OPTION SPEED HUMAN SUFFERING

1. Downsizing Fast High

2. Pay reductions Fast High

3. Demotions Fast High

4. Transfers Fast Moderate

5. Work sharing Fast Moderate

6. Hiring freeze Slow Low

7. Natural attrition Slow Low

8. Early retirement Slow Low

9. Retraining Slow Low


2. Options for avoiding an expected labour shortage

OPTION SPEED REVOCABILITY

1. Overtime Fast High

2. Temporary employees Fast High

3. Outsourcing Fast High

4. Retained transfers Slow High

5. Turnover reductions Slow Moderate

6. New external hires Slow Low

7. Technological innovation Slow Low


3.


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3.3.3 Phase 3: Programme Implementation and Evaluation

This phase involves the implementation of strategy so as to achieve the goals set in phase 2

of the HR planning process.

3.4 Current Issues Impacting on HR Planning

Issues currently impacting on HR planning are that of Employment Equity and Skills

Development within the South African context, as well as the integration of HR planning

with strategic management.

3.4.1 Employment Equity and Skills Development

The Employment Equity Act of 1998 and Skills Development Act of 1998 impact on the

practice of human resource planning within South African organisations.

Comment on Activity

The Employment Equity Act requires South African organisations to develop Employment

Equity Plans, ranging between one and five years. The Employment Equity Plans serve to

provide a mechanism to introduce individuals from previously disadvantaged groups into

organisations (Department of Labour, 2000), and in so doing impact on the HR planning of

the company.

The Skills Development Act of 1998 also impacts on the HR planning of the South African

organisation in that it provides incentives for organisations to develop Workplace Skills

Plans to address both skills shortages particular to the workplace as well as to the sector in

which the organisation operates (RSA, 1998b).

ACTIVITY

Consider the implementation of the Employment Equity Act and Skills

Development Act within your organisation. How have the activities associated

with the implementation of these two pieces of legislation affected your

organisation’s approach to HR Planning?


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3.4.2 Strategic Management and HR Planning

The recognition of the importance of integrating HRM into an organisation’s strategic

management process, has resulted in the concept of HR planning being expanded.


Schuler & Walker (1994:4-20)

Schuler & Walker (1990) focus on how the dynamic nature of today’s business environment

has required that HR planning focus on short-term and immediate issues. This new focus

contrasts considerably with the traditional notion of HR planning which is argued to be

characterized as “…the process by which management determine[d] how the organization

should move from its current to its desired human resources position” (Schuler & Walker,

1990: 4). It is argued that as strategic business planning is becoming more tentative in the

constantly changing business environment of today, HR planning is considered “…useful

more as a tool for provoking thought and discussion” (Schuler & Walker: 1990:4).

READING ACTIVITY

Read the following two articles:

• Schuler, R.S. & Walker, J.W. (1990) ‘Human Resources Strategy: Focusing

on Issues and Actions. Organizational Dynamics. Summer, 19 (1), pp 4 – 20.

• Ulrich, D. (1992) ‘Strategic and Human Resource Planning: Linking

Customers & Employees’. Organizational Dynamics. 15 (2), pp 47 – 63.

1. Comment on how Schuler & Walker’s (1990) approach has brought about

an adjusted / expanded understanding of the concept of HR planning.

2. Comment on how Ulrich’s approach has brought about an adjusted /

expanded understanding of the concept of HR planning.


___________________________________________________________________ MANCOSA - MBA 58

Ulrich (1992:47-63)

While Schuler & Walker (1990) focus on HR planning’s focus on issues of a short term and

immediate nature, Ulrich (1992) emphasises the expansion of the traditional HR planning

function. Indeed, as a result of its integration with business strategy, HR planning expands to

include a customer-employee linkage where “…customers and employees come to agreement

about organizational ends {strategies, goals, missions and visions}and the means to be used

to reach the ends {structure, staffing, rewards, etc}….a unity exists when customers and

employees are jointly aware of , accept, and act on a shared mindset about the firm” (Ulrich,

1992: 49).

3.5 Summary

This section has served to investigate the concept of Human Resource Planning. In so doing

the nature and importance of HR planning was examined and the HR planning process was

studied. Current issues impacting on HR planning, such as Employment Equity and Skills

Development (within the South African context) and the integration of HR Planning into

business strategy, were also addressed.


Read the case study entitled ‘Forget the Huddled Masses: Send the Nerds’ below

and then answer the following questions:

1. What characteristics of the product demand market have led to the

explosion in demand for programmers?

2. What characteristics of the programming job have limited the number of

people willing to develop the skills necessary to meet this demand?

3. What options do employers in this market have to address the labour

shortage? Which option would be most successful?


___________________________________________________________________ MANCOSA - MBA 59

FORGET THE HUDDLED MASSES: SEND NERDS

A critical shortage of programmers has prompted a worldwide labor hunt

As a headhunter, George Van Derven has an unlikely connection: Russia's former state airline, Aeroflot. Not that Van Derven trades in pilots, flight mechanics, or surly Russian flight attendants. But in a former career, he sold a computerized reservation system to Aeroflot and came to know the talented programmers stashed in the back offices. When Aeroflot broke up into regional carriers in 1992, Van Derven promptly tapped its brain pool. Now, as president of Alternative Technology Resources Inc. in Sacramento, Van Derven is mining a rich lode of programming talent and busily dispatching it to understaffed computer departments throughout the Western world. Other recruiters should be so lucky. High-tech headhunters for Andersen Consulting tramp through technical schools in Budapest and job fairs in Manila. At a recent training session for programmers in Holland, Microsoft Corp. hired bouncers to keep headhunters at bay. And a recruiter for IBM's Global Services Div., who is trying to hire 15,000 software hands this year alone, introduces himself as James R. Bunch, ''as in bunch of jobs.'' The Information Revolution is racing ahead of its vital raw material: brainpower. As demand explodes for computerized applications for everything from electronic commerce on the Internet to sorting out the Year 2000 glitch, companies are finding themselves strapped for programmers. In the U.S., alone, which accounts for two-thirds of the world's $300 billion market in software products and services, some 190,000 high-tech jobs stand open, most of them for programmers, according to the Information Technology Assn. SOARING SALARIES. That's sending companies scouring the globe for talent--and lifting salaries skyward. A typical programmer's wages, now some $70,000, is jumping 13% a year, and far higher in the hottest niches, such as Java Internet software and SAP business applications. These days, $20,000 signing bonuses are commonplace and stock options are being handed out with as little fanfare as office supplies. If the pace keeps up, experts say, ballooning salaries could wind up damaging the global tech machine as margins are squeezed and investments postponed. And relief is nowhere in sight. Experts predict the gap between computer-science students and expected demand won't ease for a decade, if then. Too many bright young people, especially in Europe and the U.S., consider programming geek work and choose other careers. In the U.S., the number of computer-science graduates has plummeted in the past decade or so, from 48,000 graduates in 1984 to an estimated 26,000 this year. ''This is a real limiting factor to growth,'' says Avron Barr, a researcher at Stanford Computer Industry Project who is investigating the shortage. Indeed, for high-tech companies, the dearth of programmers is the greatest threat to expansion in the coming year--far more menacing, they say, than an economic slump or competition in the marketplace. And it's not just a problem for tech companies. Plenty of others are desperate for the same talent. Auto makers from Tokyo to Detroit are packing more computing power into their cars and plants. Banks, brokerages, and phone companies are rushing to outdo each other with the zippiest online services, all requiring herds of nerds. Those that choose not to install the newest technology, says Owens Corning CIO Michael Radcliff, are ''creating a competitive liability.'' Of course, if you're willing to pay--or have the stock options to entice--you could be up to your propeller hats in programmers. In Silicon Valley, star programmers are swimming in stock options, driving Porsches, and buying homes in the pricey Los Altos hills. At Netscape Communications Corp., which plans to hire more than 1,000 programmers this year, employees receive up to $5,000 just for a successful referral and the pampered programmers are treated to onsite massages, teeth-cleanings, and laundry service. The company lines up their 49ers tickets and books their white-water rafting vacations. All this to keep them from succumbing to a stream of calls from headhunters.


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''Everybody's going crazy now trying to find these folks,'' says Margie Mader, Netscape's human-resources director. How did the shortage get so bad? For years, tech companies had little reason to fret. In the early '90s, the industry snapped up hundreds of thousands of workers who were dropped into the job market when large corporations downsized--a source now running dry. TEDIOUS WORK. At the same time, the very act of writing software has not speeded up despite the computer revolution and the terabytes of information hurtling around the globe. Today, even the best of programmers painstakingly turns out some 10 lines of code a day. To whip up today's software programs--even a cellular telephone requires some 300,000 lines of code--takes armies of programmers laboriously writing away. Consider this: There are six million software programmers and counting in the world today, two million of them in the U.S. and one million in Japan. As an industrial model, it's akin to pre-Gutenberg monasteries with their legions of scribbling monks. For years, global savants pooh-poohed the pending programmer crunch by pointing to India, which boasted a seemingly bottomless reserve of techies. India, they said, would be to software what Saudi Arabia was to oil. And true, with 50,000 programmers pouring out of schools every year--twice the American total--India is a valuable labor pool. But with global technology bursting to $3 trillion this decade--four times higher than in the '80s--India's supply simply isn't enough. And no other plentiful source of software skills appears to be on the horizon. Russia has promise, but it's limited: Few of its programmers speak English or understand business applications. China is a possibility, but it's likely to employ most of its programmers over the next decade for its own massive development projects. ''I had this one programmer from China,'' laments one official at Electronic Data Systems Corp. ''I took him through the whole immigration process, got his papers. Then he got a better offer.'' RAID BAIT. Naturally, in this world of predators, there's a pecking order. Sitting on top are the fast-growth companies with hot Internet technologies. They're magnets for talented programmers, and they can pad their offers with rich stock options. Service companies such as Andersen Consulting, IBM Global Services, and Ernst & Young, which are helping companies install systems worldwide, are forced to routinely dole out six-figure salaries to programmers with experience in business applications. They compete with countless body shops--outsourcing companies that pay as much as $300,000 for skilled programmers willing to live on the road. At the bottom of the pile are the corporate tech departments throughout the world. Many are short on money and stock options. And if they install a popular system, bringing their staff up to date on something new from, say, Oracle Corp. or the German software giant SAP, their departments get raided in no time. Don Yates became familiar with SAP's leading software package for business while helping install the system in the early '90s at Royal LePage Ltd., a real estate company in Toronto. Within a year, the 18-person department was picked clean. ''I was the last one to go,'' says Yates, who now makes three times as much money, some $150,000, as an itinerant programmer for EMI, a Pittsburgh-based company that rents out software talent. No surprise, then, that companies are trying any tactic, including turning to the World Wide Web. Since the Net is where most programmers spend idle hours, growing numbers of recruiters are using it to chase them down. That's where Michael L. McNeal casts his global net. McNeal, human-resources chief at Cisco Systems Inc., needs to hire 1,000 people each quarter, many of them programmers. Like other recruiters, he buys ads on popular Web sites like the Dilbert page, which funnels traffic to Cisco's Web site. There, the company lists some 500 current job openings. Applicants in foreign countries can hit hot buttons to translate the page into Cantonese, Mandarin, Russian. And, by filling out a short questionnaire, they can create a resume and zap it to Cisco.


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Cisco's Web page draws 500,000 job searches per month. This gives Cisco gobs of data about the job market, including which companies have interested employees. Armed with the best prospects, McNeal then turns to Cisco employees for help, asking them to call recruits, who speak the same language. Like the others, Microsoft recruits on the Web and snaps up startups for talent--some 20 companies in 1996, alone. But to get its software up and running throughout the world, Microsoft relies on service companies, which are grossly understaffed. Microsoft calculates that its service partners are short 41,000 professionals trained to install Microsoft products. This is forcing the company to educate new recruits. With an effort known as Skills 2000, Microsoft is pushing into 350 schools and colleges around the world. It hammers out curricula that will produce more programmers, such as adding computer training in business schools. A big part of the effort is in Europe, a major market that has 18 million unemployed workers. Microsoft's solution is to invite jobless Europeans in 11 countries into free training programs. In the past year, 3,000 Europeans have gone through the program, with 98% of them landing jobs. It's in this $170 billion market for global software services, including the Big Six consulting firms, IBM Global Servics, Manpower, and many others, that demand for programmers is especially hot. This is because corporations need loads of help to link far-flung operations with the latest in E-mail networks, inventory control, and finance packages. ''The productive sector of the economy is becoming absolutely dependent on software systems,'' says reengineering author Michael Hammer. ''If SAP vanished, you couldn't buy a can of Coke.'' SPECIALTIES. In the finance capitals of London, Tokyo and Hong Kong, banks are installing vast new systems to adapt to Europe's single currency and Japan's financial deregulation. Meanwhile, they're working overtime to sort out the Year 2000 glitch, the dating problem companies face when the year of double zeroes rolls around. Mastech Corp., a Pittsburgh-based outsourcer, sent a handful of programmers a year ago to follow a Citibank contract from Singapore to London (page 116). Once in London, they found a wealth of other business and started importing more programmers from South Africa, Sri Lanka, India, and Australia. ''We have 50 people now, and we'd hire another 50 today if we could find them,'' says country manager Guil Hastings. As recruiters travel, they focus on regional specialties. The Russians are whizzes at math. India's university at Puna has a strong Japanese language program, which positions it well for Japan's Year 2000 work-load. South African programmers learned to cope during the years of the anti-apartheid boycott with a motley collection of jerry-rigged mainframes. This makes them especially adept at Year 2000 work, which is targeted toward aging mainframe software. As for programmers, the world is their oyster. In a computer lab in Austin, Tex., Natalia Bogataya and her husband, Konstantin Bobovich, both Belorussians and products of Van Derven's so-called Russian connection, labor away on a mainframe program. They've left their college-age children with relatives in Minsk and are debugging insurance software for Computer Sciences Corp. ''We can't use our experience in our country,'' Bobovich explains, ''and my wife said, 'Let's see America.''' Why not? In today's fervid market, programmers can write their own tickets. By Stephen Baker, with Gary McWilliams in Austin, Tex., and Manjeet Kripalani in Bombay Source: http://www.businessweek.com/1997/29/b3536106.htm


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3.6 Answer to Self Check Questions

Self Check Question 1

Case Study: ‘Forget the Huddled Masses: Send the Nerds’ (Noe et al, 2003: 210 – 213)

1. What characteristics of the product demand market have led to the explosion in demand

for programmers.

The explosion in the demand for programmers has resulted from the information

revolution where computer applications are not just used by technology companies, but

also by companies which operate within other industries such as banks, brokerages,

phone companies, automobile manufacturers.

The explosion in the demand for programmers has also been exacerbated by the fact that

“the very act of writing software has not speeded up despite the computer revolution”

(Noe et al, 2003: 211). Thus the nature of programming work is tedious and takes up a

significant amount of time.

2. What characteristics of the programming job have limited the number of people willing

to develop the skills necessary to meet this demand?

The characteristics of the job of programming which have limited the number of people

wanting to develop the skills necessary to meet this demand include:

• Programming is considered to be ‘geek’ or ‘nerd’ work and therefore a significant

number of bright young students choose to follow other careers;

• The work of programming tends to be laborious: the case states that “even the best of

programmers painstakingly turn out some 10 lines of code a day”

(Noe et al, 2003: 211).


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3. What options do employers in this market have to address the labour shortage?

Which option would be most successful?

Noe et al (2003) identifies seven options which could be used by employers in the

technology market to address the labour shortage. These include:

• Overtime

• Temporary employees

• Outsourcing

• Retrained transfers

• Turnover reductions

• New external hires

• Technological innovation

It may be argued that the option that would be most successful in the medium term is that

of technological innovation. Indeed, an innovation which would provide for the

acceleration of the programming process would provide significant relief to the demand

for programmers. A further medium term to long term option that would be most

successful in the absence of technological innovation would be new external hires, where

the organisations are involved in the programmers’ pre-employment education by

providing bursaries to school leavers. Such an approach would also provide the

organisation with temporary workers during university vacations.


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SECTION 4

RECRUITMENT, SELECTION AND INDUCTION


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CONTENTS

Learning Outcomes

Reading

4.1 Introduction

4.2 Recruitment

4.2.1 The Nature of Recruitment

4.2.2 Recruitment Policy

4.2.3 Factors Influencing Recruitment

4.2.4 Recruitment Sources

4.2.5 Advantages and Disadvantages of Internal and External Recruitment

4.3 Selection

4.3.1 Factors Influencing Selection Decisions

4.3.2 Selection Process

4.4 Induction

4.4.1 Introduction

4.4.2 The objectives and benefits of induction

4.4.3 Planning, designing and implementing the induction programe

4.4.3.1 Planning the induction programme

4.4.3.2 Designing the induction programme

4.4.3.3 Implementing the induction programme

4.4.4 Follow-up and evaluation of the induction programme

4.5 Summary


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LEARNING OUTCOMES


demonstrate an holistic understanding of the HRM practices of Recruitment and Selection.

This overall outcome will be achieved through the student’s mastery of the following specific

outcomes:

1. Demonstrate an understanding of the nature of recruitment and its application.

2. Identify and apply the various recruitment policies organisations may adopt.

3. Identify and critically discuss the factors influencing recruitment within an organisation.

4. Critically discuss the various sources from which an organisation may draw job

applicants.

5. Demonstrate an understanding of the nature of selection and its application.

6. Identify and critically discuss the factors influencing selection within an organisation.

7. Critically discuss and effectively apply the selection process within an organisation.

8. Distinguish between the concepts of induction, orientation and socialisation.

9. Explain the objectives and benefits of an induction programme.

10. Plan, design, implement and evaluate and induction programme.


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READING

Prescribed Reading:






Oxford. pp 231-244


Books



Prentice Hall Inc. pp 137 – 202.

• Ivancevich, J.M. (1998) Human Resource Management. 7th Ed. Boston: Irwin



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Journals

• Behling, O. (1998) ‘Employee Selection: Will Intelligence and

Conscientiousness Do the Job?’. Academy of Management Executive.

February, 12 (1), pp 77 – 87.

• Cook, J. (1996) ‘From Assessment to Learning? The Widening Scope of

Assessment Centres’. People Dynamics. November – December, 14 (11), pp

66 – 72.

• Erasmus, P. & Arumugam, S. (1998) ‘Psychometric Testing is Dead’. People

Dynamics. September, pp 38 – 41.

• Personnel Journal (1996) ‘Building a Global Workforce Starts with

Recruitment’. Personnel Journal: Supplement. March, pp 9 – 11.

• Powell, G.N. (1998) ‘Reinforcing and Extending Today’s Organization: The

Simultaneous Pursuit of Person-Organization Fit & Diversity’. Organizational

Dynamics. Winter, 26 (3), pp 50 – 62.

• Roodt, P.F. (1998) ‘Challenges in Psychological Assessment’. People

Dynamics. November-December, 16 (11), pp 30 – 34.

• Ward, J. (1998) ‘Recruitment: The Bottom Line’. People Dynamics.

September, 16 (9), pp 16 – 23.

• Williams, C. (1996) ‘Some Suggestions for Staff Selection’. Human Resource

Management. July, pp 27 – 30.


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4.1 Introduction

Section 3 of this module guide focused on the activity of Human Resource Planning.

Following on the activity of Human Resource Planning are the activities of Recruitment and

Selection, which are to be the focus of this section of the module guide.

The following recruitment and selection related issues will be examined in this section:

• Recruitment

o The nature of recruitment

o Recruitment policies

o Factors influencing recruitment

o Recruitment sources

• Selection

o Factors affecting selection decisions

o The selection process

4.2 Recruitment

This section examines the nature of recruitment, recruitment policies, factors influencing

recruitment as well as recruitment sources.

4.2.1 The Nature of Recruitment

Noe et al (2006:194) define recruitment as “…the practice or activity carried on by the

organization with the primary purpose of identifying and attracting potential employees”

On the other hand, Cherrington (cited in Nel et al, 2004:219) defines recruitment where

“…Every organisation must be able to attract a sufficient number of job candidate who have

the capabilities and aptitudes that will help the organisation achieve its objectives”. It also

needs to be noted that recruitment is an activity that is related to, and influenced by, the

human resource planning activity, discussed in section 3, in that if an organisation identifies a

labour surplus through HR planning, management would want to reduce the supply of labour

and therefore recruitment would not be appropriate for the organisation at that stage.


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Ward (1998:16-23) identifies that most employers respond to the question ‘Why recruit?’

with the following answers:

• To get work done;

• To sell products and/or services;

• To reduce work-loads;

• To create new products;

• To manage staff;

• To train and develop staff.

Ward (1998:16-23) emphasises that such responses are inadequate and identifies the actual

reasons for the recruitment of people to be:

• “….to directly or indirectly add to the company’s revenue;

• to directly or indirectly add to the company’s expenditure;

• through accommodation of the two preceding criteria, enhance the company’s

profitability” (Ward, 1998: 18).

4.2.2 Recruitment Policy

An organisation’s recruitment policy outlines the objectives of the recruitment process and

provides guidelines as to how the recruitment process should be carried out (Nel et al,

2004:219).

? THINK POINT

Why does your organisation recruit?


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Comment on Activity

Organisational recruitment policies can be characterized by a number of factors including:

• Internal vs External Recruiting

Organisations differ in the extent to which they ‘promote from within’. A policy of

internal recruiting provides greater opportunities for the advancement of the

organisation’s existing employees (Noe et al, 2006:195).

• Lead-the-Market Pay Strategies

A ‘lead-the-market’ approach to pay involves the organisation in providing remuneration

which is higher than the market average. Those organisation’s who adopt this approach

have a significant advantage in the market (Noe et al, 2006:196).

• Image Advertising

Organisations may have a policy of advertising to promote themselves as a good place to

work (Noe et al, 2006:196). Such advertising is important for organisations that operate

within highly competitive labour markets.

• Employment Equity & Affirmative Action

While an Affirmative Action policy serves to address past discriminatory recruitment

practices, an employment equity policy serves to prevent future discrimination in

recruitment practices (Nel et al, 2004:161). In South Africa, the legislation requires

organisations who employ in excess of 50 employees to exercise an employment equity

policy.

ACTIVITY

Contact your organisation’s HR Manager and request a copy of your

organisation’s recruitment policy. Read through and analyse the recruitment

policy.

1. Identify the characteristics of your organisation’s approach to recruitment.

2. In your opinion is your organisation’s recruitment policy appropriate? In

other words is there ‘fit’ or ‘congruence’ between the recruitment policy and

the organisation’s activities and environment?


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• Person-Organisation Fit vs Diversity

Certain organisations may choose to follow a recruitment policy which provides for

optimum fit between the organisation’s culture and the recruit (Powell, 1998). On the

other hand, organisations may follow a recruitment policy which promotes the

employment of diverse individuals so as to enrich the composition and the creativity of

its workforce.

• Employment – at - will Policies

Policies which state that either an employer or an employee can terminate the

employment relationship at any time, regardless of cause (Noe et al, 2006:196).

4.2.3 Factors Influencing Recruitment

Both external and internal factors influence an organisation’s recruitment practices.

4.2.3.1 External Factors

External factors influencing recruitment include: (Nel et al, 2004:220).

• Government and Trade Union Limitations

Countries, such as South Africa, have put in place equal rights legislation to address

unfair recruitment practices. Trade Unions often participate in the recruitment process so

as to ensure that the process is fair.

• Labour Market Conditions

Labour market conditions significantly impact an organisation’s choice of recruitment

programme (Nel et al, 2004:220). For example, if there is an undersupply of skills within

the labour market, an intensive and multi-pronged recruitment programme would need to

be implemented.

4.2.3.2 Internal Factors

Internal factors which influence recruitment include:

• Organisational Policy

Organisational recruitment policies with regards to internal vs external recruitment,

employment equity, diversity vs person-organisation fit, etc. (see section 4.2.2) will

influence the nature of the organisation’s recruitment.


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• The Image of the Organisation

The public image of the organisation, as well as the image which the prospective

employee has of the organisation, will impact on the organisation’s recruitment

programme (Nel, et al, 2004:220).

• Recruitment Requirements

It is important that the organisation, through effective job analysis, job descriptions and

job specifications, sets out realistic requirements for the potential job incumbent. Should

unrealistic requirements be set, the success of the recruitment programme will be

impeded.

4.2.4 Recruitment Sources

Due to the expansive nature of the labour market, the sources from which an organisation

recruits potential employees is a critical aspect of its overall recruitment strategy.


There are a number of sources from which an organisation can draw recruits. It is important,

however, that organisations select their recruitment sources carefully as different sources

present the organisation with different types of recruits. For example, if one considers the

case study entitled ‘Forget the Huddled Masses: Send the Nerds’ (Noe et al, 2003: 210-213)

which was studied in section 3 of this module guide, using the internet as a recruitment

source for programmers would be more effective than advertising in a local newspaper as

programmers spend most of their ‘idle hours’ browsing the World Wide Web (as indicated in

the case).

? THINK POINT

Consider the organisations for which you have worked. What source mechanisms

were used in your recruitment? (i.e. did you submit your CV electronically in

response to an internet advertisement, or did you register with a private

employment agency?) In your opinion, how effective were these recruitment

sources?


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4.2.4.1 Internal Recruitment Sources

Using internal recruitment sources presents the organisation with a number of advantages,

which include:

• The organisation is familiar with the performance of the applicants;

• The applicants have a better understanding of the organisation and the vacant position if

compared to outside applicants; and

• The filling of vacancies proves to be cheaper and faster (Noe et al, 2006:197).

Internal recruitment sources include:

• Promotion and transfer of present employees;

• Job advertisements circulated to present employees;

• Personal records to identify present employees with potential;

• Skills inventories which provide information on the qualification, skills, performance and

experience of present employees (Nel et al, 2004:221).

4.2.4.2 External Sources

External recruitment sources present the organisation with the following advantages:

• Entry-level and specialized upper-level positions often require that the organisation look

externally, as the skills required of these positions may not exist within the organisation;

• Introducing outsiders into the organisation will provide for new ideas (Noe et al, 2003).

External recruitment sources include:

• Employment agencies

• Head hunting

• Walk-ins

• Referrals

• Professional associations

• Advertisments (placed in newspapers, trade magazines, the internet, etc)

• College, Technikon and University campus recruitment (Nel et al, 2004:221-222).

In summary, section 4.2 has focused on the HRM activity of recruitment. In so doing, the

nature of recruitment, recruitment policies, factors influencing recruitment and recruitment

sources have been examined. Section 4.3 will focus on the related activity of selection.


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4.2.5 The Advantages and Disadvantages of Internal and External Recruitment

This can be summarised in the table below:

Internal Recruitment

Advantages

• Provides greater motivation for good

performance

• Provides greater promotion opportunities

for present employees

• Provides better opportunity to assess

abilities

• Improves morale and organisational loyalty

• Enables the employee to perform the new

job with little lost time

Disadvantages

• Creates “inbreeding” and stale ideas

• Creates political infighting and pressures to

compete

• Requires a strong management development

programme

• Creates a homogenous workforce

External Recruitment

Advantages

• Provides new ideas and insights

• The existing organisational hierarchy

remains relatively unchanged

• Provides greater diversity

Disadvantages

• Loss of time due to adjustment

• Present employees cease to strive for

promotions

• Individual may not be able to fit with the rest

of the organisation

Source: Nel et al, (2004:221)

4.3 Selection

This section will focus on the HR activity of selection. In so doing, the factors influencing

selection decisions and the selection process will be examined.

Selection may be defined as “…the process by which an organization chooses from a list of

applicants the person or persons who best meet the selection criteria for the position

available, considering current environmental conditions” (Ivancevich, 1998: 227).

ACTIVITY

1. Read the short case entitled ‘Never having to say you never know’

Source: Noe et al (2006:247-248).


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4.3.1 Factors Influencing Selection Decisions

Nel (et al 2004:232-234) identify both internal and external environmental factors which

influence selection decisions.


The various internal and external environmental factors impacting on selection programmes

and decisions are discussed below in section 4.3.1.1 and section 4.3.1.2.

4.3.1.1 Internal Environmental Factors

Internal environmental factors which influence selection decisions include:

• The size of the organisation where the smaller the organisation, the more informal the

selection decision;

• The type of the organisation where greater complexity requires more sophisticated

selection techniques;

• The nature of social pressure emerging from, for example, legislation and trade unions;

• Applicant pool for a certain job, where larger numbers would require the selection

programme to be relatively sophisticated

• Speed of decision making

• Selection methods (Nel et al, 2004:234).

4.3.1.2 External Environmental Factors

External environmental factors which impact on selection decisions include:

• The nature of the labour market where, for example, in the instance that there are few

individuals with the skills required, the selection process would be unsophisticated and short.

• Trade unions where employees who belong to a trade union, can make certain demands

in accordance with the trade union contract (Nel et al, 2004: 232).

• Government regulations where, for example, legislation may affect the manner in which

the selection process is executed (Nel et al, 2004:232).

? THINK POINT

In your experience, what are the internal and external factors which influence

selection programmes and decisions within your organisation?


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Williams (1996:27-30) shows that the Labour Relations Act has a significant impact on the

manner in which organisations within South Africa conduct selection activities. Indeed, the

Act stipulates that an organisation that either directly or indirectly discriminates against a job

applicant will be regarded to have committed an unfair labour practice.

Therefore South African organisations need to ensure that their selection practices are

consistent and equitable and do not discriminate against applicants. Williams (1996:27-30)

points out that this would, for example, require organisations:

• To conduct effective job analyses in order to develop solid and realistic job requirements

and selection criteria;

• To give attention to the manner in which job advertisements are formulated;

• To handle applicants in a consistent manner;

• In interviewing applicants to:

o Carefully phrase questions;

o Avoid potentially risky questions (e.g. questions which enquire about age, sexual

preference, disability, etc.);

o Structure the interview around job dimensions;

• To only administer tests which are valid and job related.


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4.3.2 Selection Process

The HR activity of selection may be understood as a process.

Comment on Activity

A diagrammatic representation of the selection process is provided in Figure 4.1 below:

Figure 4.1: The Selection Process (Adapted from Nel et al, 2004:235)

PRELIMINARY SCREENING

Provisional Selection Interview Application Form

SELECTION METHODS Testing

Interview Reference Checking Medical Examination

APPOINTMENT

ACTIVITY

Provide a diagrammatic representation of the process which the practice of

selection follows within your particular organisation.


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As indicated in Figure 4.1, the selection process consists of three main steps. The following

provides a brief description of each of the steps:

• Phase 1: Initial Screening

This represents the first phase in the selection process and involves the provisional selection

interview and the completion of a company application form.

The provisional selection interview usually lasts in the region of 10 minutes and is used to

determine whether the applicant meets the minimum requirements (Nel et al, 2004:234).

The application form is designed to meet the needs and requirements of the organisation, and

provides information as to the applicant’s qualifications, experience, interests, etc. (Nel et al,

2004:235).

Applicants who are judged to have the minimum requirements, based on the provisional

selection interview and completed application form, will proceed to the next phase of the

selection process.

• Phase 2: Selection Methods

During this phase of the selection process various selection methods are applied including

testing, interviews, reference checking and the medical examination.

Tests which could assist the organisation with selection include assessments to measure

cognitive aptitude, psychomotor, job knowledge, work sample, vocational interest and

personality (Nel et al, 2004:239-240). Assessments centres are useful in gathering

information as to the performance of potential managers and supervisors.


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Clause 8 of the Employment Equity Act of 1998 states “Psychological testing and other

similar assessments of an employee are prohibited unless the test or assessment being used

has been scientifically shown to be valid and reliable, can be applied fairly to all employees

and is not biased against any employee or group” (cited in Roodt, 1998: 33).

Roodt (1998) points out that this particular clause of the Employment Equity Act has

received much negative publicity, to the extent that it is has been misinterpreted and that

there have been suggestions of abandoning psychological assessment in its entirety.

However, Roodt (1998) asserts the value of psychological testing for organisations and

emphasises that psychological assessments should continue to be administered, provided that

this is done in a sound and ethical manner, and in accordance with the relevant labour

legislation.

• Phase 2: Selection Methods (continued)

One of the most widely used selection tools is the interview (Ivancevich, 1998). The

interview provides for face-to-face communication, and allows the interviewer to gain

considerable information about the applicant’s background, experience, attitude, value and

interests. It also provides the applicant with an opportunity to find out more about the job

and the organisation (Nel et al, 2004:237-239). Interviews may be structured, semi-structured

or unstructured.

Personal references is a further selection method, where the organisation seeks information

about the performance of an applicant in previous positions.

The medical examination is usually the last selection method which is administered in the

selection process. The medical examination serves to determine the general state of the

applicant’s health, but also tests for specific illnesses such as cardiovascular problems (Nel et

al, 2004:241).

• Phase 3: Appointment

The final phase in the selection process involves making a choice between the applicants.

Various selection strategies can be utilized to assist the organisation in making this decision

(Nel et al, 2004:242). These strategies include the multiple predictor approach, the

placement approach and cost benefit analysis (Nel et al, 2004:235).

In summary, section 4.3 has focused on the HRM activity of Selection. In so doing factors

influencing selection as well as the selection process were examined.


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4.4 Induction

4.4.1 Introduction

Starting a new job is considered to be one of the most stressful life experiences and a proper

induction process that is sensitive to the anxieties, uncertainties and needs of a new employee

is of the utmost importance.

Although induction means to introduce, or to initiate it is only part of the process that

endeavours to acclimatize the employee into the organisation and turn them into a productive

worker. Orientation means to become familiar with or adjusted to facts or circumstances. It is

the process of informing new employees about what is expected of them in the job and

helping them cope with the stresses of transition. Socialization means to adapt to life in

society. In the organisation, socialization is the process of instilling in all employees the

prevailing attitudes, standards, values and patterns of behaviour expected by the organisation

and its departments.

4.4.2 The objectives and benefits of induction

Werther and Davis (1993:281) state that the induction programme helps the new employee to

understand the social, technical and cultural aspects of the workplace and speeds up the

socialisation process.

The goals of the induction programme should be to:

• Help the employee understand the “big picture”

• Make the new employee part of the team

• Develop plans and goals for the new employee

• Gather information from the new hire

• Anticipate and answer their questions

• Celebrate the new employee’s arrival.

According to Nel et al, (2004:252) the main benefits of a successful induction process are:

• A reduction in reality shock and cognitive dissonance

• An alleviation of employee anxieties

• A creation of positive work values and a reduction in start up costs

• An improvement in relationships between managers and subordinates


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4.4.3 Planning, designing and implementing the induction programme

4.4.3.1 Planning the induction programme

Research has shown that in many organisations 50% of voluntary resignations occur within

the first six months after organisational entry, often because employee expectations are not

met. Most companies base their induction programmes on what they think the employee

should know, however the most common questions that new employees have should form the

basis of the induction. According to Casio (1995:240) these question are usually:

• What are the expectations of this company regarding the services I can offer?

• Who is my boss and what is s/he like?

• What kind of social behaviour is regarded as a norm in this company?

• Will I be able to carry out the technical aspects of my job?

• What is my future with this company?

4.4.3.2. Designing the induction programme

Byars and Rue (1997:207) believe that the induction programme must be based on a good

balance between the company’s and the employee’s needs. A concise yet comprehensive

programme can be achieved by reviewing the following items:

• The target audience

• Essential and desirable information

• The literacy level of the employees

4.4.3.3. Implementing the induction programme

Byars and Rue (1997:207) state that it is desirable for each new employee to receive an

induction kit, or a packet of information to supplement the verbal and visual induction

programme. Material that could be included:

• Company organisation chart

• Map of company facilities

• Copy of policy and procedures handbook

• List of holidays and fringe benefits

• Copies of performance appraisal forms, dates and procedures

• Emergency and accident prevention procedures

• Sample copy of company newsletter or magazine

• Telephone numbers and locations of key company personnel


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4.4.4 Follow-up and evaluation of the induction programme

Many companies make the mistake of believing that once a new employee has attended the

induction programme, nothing more is needed from the supervisor or manager. Instead,

regular checks should be initiated and conducted by the line manager after the employee has

been on the job one day and again after one week and by the HR representative after one

month (Casio, 1995:242).

4.5 Summary

Section 4 has focused on the HRM activities of Recruitment and Selection. In investigating

Recruitment, the nature of recruitment, recruitment policies, factors influencing recruitment

and recruitment sources were been examined. In the sub-section on Selection, the factors

influencing selection, as well as the selection process were examined. In the sub-section on

Induction, the objectives and benefits of the induction programme are discussed. The

planning and benefits of an induction programme is also examined.

Section 5 of this module guide will focus on Employee Training & Development.


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SECTION 5

EMPLOYEE TRAINING AND DEVELOPMENT


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CONTENTS

Learning Outcomes

Reading

5.1 Introduction

5.2 The Concepts: Training and Development

5.3 Training

5.3.1 The Training Process

5.3.2 Training Within the South African Context

5.4 Development

5.4.1 Formal Education Programmes

5.4.2 Assessment

5.4.3 Job Experiences

5.4.4 Interpersonal Relationships

5.5 Summary

5.6 Answer to Self Check Question


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LEARNING OUTCOMES


demonstrate a holistic and practical understanding of employee training and development

within organisations. This overall outcome will be achieved through the student’s mastery of

the following specific outcomes:

1. Distinguish between the concepts of training and development.

2. Identify, critically discuss and apply the training process.

3. Discuss and conduct a training needs analysis.

4. Discuss and manage the design, development and delivery of training.

5. Critically discuss and manage the evaluation of training.

6. Critically discuss the impact of the South African context on training.

7. Identify, critically discuss and effectively utilise the development approaches of formal

education, assessment, job experiences and interpersonal relationships.


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READING

Prescribed Reading:



Irwin McGraw-Hill. pp 254-318 and pp 380-419



Oxford. pp 424-467


Books

• Bellis, I. (2000) Skills Development: A Practitioner’s Guide to SAQA, the

NQF and the Skills Development Acts. Randburg: Knowledge Resources.

• Carrell, M.R., Elbert, N.F., Hatfield, R.D., Grobler, P.A., Marx, M. and Van

der Schyf, S. (1997) Human Resource Management in South Africa. New

Jersey: Prentice Hall Inc. pp 307 – 368.

• Erasmus, B.J. and Van Dyk, P.S. (1999) Training Management in South

Africa 2nd Ed. Johannesburg: International Thomson Publishing.


McGraw-Hill. pp 408 – 443 and pp 444 - 482.


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Journals

• ASTD (2000) ‘The E List’. Training and Development. November, 54 (11), p

21.

• Cline, E.B. and Seibert, P.S. (1993) ‘Help for First Time Assessors’. Training

and Development. May, 47 (5), pp 99 – 101.

• Cohen, S.L. (1993) ‘The Art, Science, and Business of Programme

Development’. Training and Development. May, pp 49 – 56.

• Deller, K. (2001) ‘The Human Element is Critical to E-Learning Success’.

People Dynamics. January, 19 (1), pp 24 – 25.

• Du Plessis, H., Fourie, S. and Hamburg, S. (1996) ‘Foundational Learning

Skills’. People Dynamics. November – December14 (11), pp 74 – 88.

• Filipczak, B. (1996) ‘To ISD or not to ISD’. Training. March, 33 (3), pp 73 –

75.

• Gordon, J. and Zemke, R. (2000) ‘The Attack on ISD’. Training. April, 37

(4), pp 42 – 57.

• Kirkpatrick, D.L. (1983) ‘Four Steps to Measuring Training Effectiveness’.

Personnel Administrator. November, pp 19 – 25.

• Kimmerling, G. (1993) ‘Gathering Best Practices’. Training and

Development. September, 47 (9), pp 28 – 36.

• Khoza, K. (1999) ‘Barriers to Transfer of Training’. People Dynamics.

November – December, 17 (110, pp 26 – 33.

• Khoza, K. (2000) ‘Training Needs Analysis Under the Microscope’. People

Dynamics. September, 18 (9), pp 40 – 43.

• Meyer, T. (1998) ‘Corporate Training Centres’. People Dynamics. June, 17

(6), pp 40 – 45.

• Thach, L. and Heinselman, T. (1999) ‘Executive Coaching Defined’. Training

and Development. 53 (3), pp 34 – 40.

• Tyers, J. (1995) ‘National Qualifications Framework: Who are the

Beneficiaries?’. Human Resource Management. October, pp 28 – 31.


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5.1 Introduction

This section will explore the HR practices of Employee Training and Development. In so

doing, the following will be examined:

• The concepts: training and development

• Training

o The training process

Training needs analysis

Design and development of training

Delivery of training

Evaluation of training

o Training in the South African context

• Development

o Approaches to development

Formal education

Assessment

Job experiences

Interpersonal relationships

5.2 The Concepts: Training and Development

A distinction can be made between the related concepts, Training and Development.

? THINK POINT

Consider the Training and Development initiatives within your organisation.

What activities are labeled as ‘training’ and which initiatives generally receive the

‘development’ label?


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Van Dyk and Erasmus (1999) identify training as being task oriented and focused on

improving the learner’s job performance. Development, on the other hand, is argued to be

directed towards “creating learning opportunities and making learning possible within an

enterprise” (Van Dyk and Erasmus, 1999: 3).

Noe et al’s (2006) distinction between the concepts of training and development focuses on

the orientation of the learning intervention. It is argued that training “is focused on helping

employees’ performance in their current jobs” (Noe et al, 2003: 376) while development is

future-oriented in that it helps employees prepare “for other positions in the company and

increases their ability to move into jobs that may not yet exist” (Noe et al, 2003: 376).

Further distinctions between the concepts of training and development are highlighted in

Table 5.1 below.

TRAINING DEVELOPMENT

Focus Current Future

Use of Work Experiences Low High

Goal: Preparation for… Existing Job Changes

Participation Required Voluntary

Table 5.1: The Differences Between Training and Development

(adapted from Noe et al, 2006: 383).

5.3 Training

Training may be defined as the “planned effort by a company to facilitate employees’

learning of job-related competencies. These competencies include knowledge, skills or

behaviour that are critical for successful job performance” (Noe et al, 2006:257). As has

been indicated throughout this module guide, in the dynamic business environment of today,

a company’s human resources provide the intellectual capital necessary to enable the firm to

successfully compete within its industry. In order to ensure that the organisation’s

intellectual capital is maintained, training is necessary.


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5.3.1 The Training Design Process

The training design process refers to a systematic approach for developing training

programmes designed to contribute to competitiveness. Figure 5.1 below represents the six

steps of this process, which emphasizes effective training practices (Noe at al, 2006:260)

1. Needs Assessment

• Organisational Analysis

• Person Analysis

• Task Analysis

2. Ensuring Employees’ readiness for training

• Attitudes and motivation

• Basic skills

3. Creating a learning environment

• Identification of learning objectives and training outcomes

• Meaningful material

• Practice

• Feedback

• Observation of others

• Administering and co-ordinating program

4. Ensuring transfer of training

• Self-management strategies

• Peer and manager support

5. Selecting training methods

• Presentational methods

• Hands-on method

• Group methods

6. Evaluating training methods

• Identification of training outcomes and evaluation design

• Cost-benefit analysis

Figure 5.1: The Training Design Process


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5.3.1.1 Training Needs Analysis

Training needs analysis is the first stage in the training process and involves a procedure to

determine whether training will indeed address the problem which has been identified. The

process involved in conducting a training needs analysis is summarised in Figure 5.2.

Figure 5.2: The Training Needs Analysis Process (adapated from Noe et al, 2006:261)

As can be seen from Figure 5.2, the needs analysis process starts with the identification of a

‘pressure point’ such as poor performance, new technology or job redesign. This pressure

point prompts the conducting of a needs analysis, which involves the following:

• Organisational analysis where aspects of the organisational context (such as the firm’s

strategic impact, the training resources available and the support of managers and peers)

are considered (Noe et al, 2006:262).

• Person analysis where the employees who require training are identified (Noe et al,

2006:262).

• Task analysis which involves identifying the tasks, knowledge, behaviour and skills

which need to be emphasised in conducting the training.

The organisational, task and person analysis will produce certain outcomes which will direct

the organisations approach to training (Noe et al, 2006:262). The outcomes may indeed

show that the problem initially identified cannot be solved by training, but rather by another

HR intervention, such as job redesign.

REASONS

TO CONDUCT

NEEDS ANALYSIS

• Legislation • Lack of basic

skills • Poor performance • New technology • Customer

requests • Higher

performance standards

• New jobs

OUTCOMES • What trainees need to

learn

• Who receives training

• Type of training

• Frequency of training

• Buy-versus-build

decision

• Training vs other HR

options such as

selection or job

redesign

ORGANIZATION ANALYSIS

(What is the context?)

PERSON ANALYSIS

(Who needs training?)

TASK ANALYSIS

(In what do they need training?)


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5.3.1.2 Design and Development of Training

The second and third phase in the training process involves the design and development of

training. The activities of design and development use the information from the training

needs analysis to:

• Formulate learning outcomes (or objectives);

• Prepare lesson plans (Erasmus and Van Dyk, 1999); and

• Develop training materials.

During this phase it is also important to consider the readiness of the employees who will be

attending the training (Noe et al, 2003).

5.3.1.3 Delivery of Training

The fourth phase of the training process involves the actual presentation of the training. The

trainer must pay attention to the factors affecting the transfer of training, such as technology

support, peer support and management support (Noe et al, 2003). The trainer also makes use

of various training methods to facilitate the transfer of training.

Comment on Activity

Training methodologies may be divided into three groups:

• Presentation Methods where learners are passive recipients of information;

• Hands-on-Methods where the learner is actively involved in the learning; and

• Group Building Methods where learners work together to build a team identity

(Noe et al, 2006:281-297)

ACTIVITY

Consider the training which you have received within the organisations for which

you have worked. Identify the various training methods which were used, and

comment on the effectiveness of each.


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Examples of the methods used in each of these categories are provided below:

• Presentation Methods (Noe et al, 2006:281-283)

Method Description Advantages Classroom Instruction

• Trainer lectures the group • May include question and answer sessions,

discussion and case studies to provide for participation

• Least expensive • Least time-consuming • Large number of learners

Distance Learning

• Used by geographically dispersed companies • Two-way communication between learners

and trainer • Includes audioconferencing,

videoconferencing and docuconferencing

• Company saves on travel costs • Employees at remote locations

have the opportunity to receive training

Audiovisual Techniques

• Includes overheads, slides, video • Rarely used alone

• Video provides trainer with flexibility

• Video exposes trainees to actual problems

• Hands-On-Methods (Noe et al, 2006:283-284)

Method Description Advantages On-the-Job Training

• Philosophy: employees learn by observing peers or supervisors and imitate their behaviour

• Used to train new recruits, and to upgrade skills of experienced employees

• Forms include apprenticeships (or learnerships) and self-directed learning

• Advantages of self-directed learning include the learner learns at own pace and receives feedback on learning performance

• Advantages of apprenticeships include the learner being able to earn pay while he/she learns

Simulations • Method that represents real life situation and learners observe the impact of their decisions

• Used to develop technical and management skills

• Learners need not be afraid of the impact of wrong decisions

• Errors are not as costly

Business Games and Case Studies

• Used for management skills development • Case studies present business scenarios for

analysis • Games require learners to gather

information, analyse it and make decisions

• Stimulate learning as learners are actively involved

• Games mimic competitive nature of business

• Cases assist in developing higher order intellectual skills

Web-Based Training

• Refers to training that is delivered over the internet and intranet

• Supports virtual reality, interactions & animation

• Ability to deliver training to learners anywhere in the world

• Ease of updating training programmes


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• Group-Building Methods (Noe et al, 2006:294-297)

Method Description Advantages Adventure Learning

• Development of teamwork and leadership skills using structured outdoor activities

• May involve challenging physical activities

• Participants report that they gain an improved understanding of themselves and their interactions with co-workers

Team Training

• Promotes the ability of team members to work together effectively

• Usually uses multiple methods

• Provides for the development of procedures to address team issues, coordinate information gathering, and support individual team members.

Action Learning

• Provides groups with a problem which they are required to solve and for which they are required to produce an action plan

• Appears to maximise learning as it involves real-time problems

• Useful for identifying dysfunctional team dynamics

5.3.1.4 Evaluation of Training

The final phase in the training process involves the evaluation of training. Given that

training is conducted to assist firms in gaining competitive advantage, it is important that the

effectiveness of training interventions are evaluated.

READING

Read the following journal article and then answer the questions which follow.

• Kirkpatrick, D.L. (1983) ‘Four Steps to Measuring Training Effectiveness’.

Personnel Administrator. November, pp 19 – 25.

1. What reasons does Kirkpatrick (1983) identify for the evaluation of training?

2. Discuss the four stage evaluation model presented by Kirkpatrick (1983).

3. Use Kirkpatrick’s (1983) model to critique your organisation’s approach to the

evaluation of training.


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Reasons for the Evaluation of Training

Kirkpatrick (1983:19-25) identifies the following reasons for conducting training

evaluations:

• To justify the trainer’s and trainer department’s existence;

• To decide whether the particular training programme should be continued; and

• To provide guidance as to the development of future training programmes.

Four Stage Evaluation Model

Kirkpatrick (1983:19-25) divides the evaluation of training into four stages:

• Stage 1: Reaction

This stage is the simplest stage and measures the learner’s opinions about the training

programme.

• Stage 2: Learning

This involves measuring the change in knowledge, skills and attitudes as a result of the

learner attending the training programme (Kirkpatrick, 1983:19-25). The trainer may

consider using a pre-test/post-test with control group assessment design to ensure that

changes in knowledge, skills and attitudes did indeed result from the training programme.

• Stage 3: Behaviour

This stage measures the actual on-the-job changes in behaviour which result from

attending the training programme (Kirkpatrick, 1983:19-25). It is recommended that this

appraisal of behaviour should be made by a couple of individuals including the learner,

his superior, his subordinates and his peers. Such an appraisal should only be conducted

three months after the training was presented.

• Stage 4: Results

This stage focuses on how the training intervention has impacted on the organisation.

The questions which are investigated include “Was productivity increased? Quality

improved? Costs reduced? Morale improved? Turnover reduced? Accidents

prevented?…” (Kirkpatrick, 1983: 24).

Thus, Kirkpatrick’s (1993) four stage model of evaluation provides for the assessment of

training effectiveness not only at the level of the individual, but at the level of the

organisation as well. In so doing, Kirkpatrick acknowledges the role which training has to

play in contributing to the competitive advantage of the firm.


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5.3.2 Training Within the South African Context

Training and development within South Africa is currently in a state of flux. Legislation,

such as the SAQA Act of 1995, the Skills Development Act of 1998 and the Skills

Development Levies Act of 1999 have been promulgated to bring about improvements to the

effectiveness of learning initiatives within enterprises. The focus of this legislation is to

address the weaknesses of South Africa’s past training and development system, so as to

build a “…work force equipped with the right skills to make the country competitive

internationally and a system of developing, recognising and rewarding these skills which are

coherent and understandable”(Tyers, 1995:28).


The ‘new’ education, training and development system which is currently being built in

South Africa strives to address the weaknesses of the past system. The following table

provides an indication as to how the ‘new’ system will improve on the weaknesses of the

‘old’ system.

PAST SYSTEM FUTURE SYSTEM Varying quality between training providers and training programmes

A national quality management system is to be put in place to ensure consistent quality across all training providers and training programmes

Focus on inputs and content Focus is to shift to outputs or outcomes Learners rated against each other (norm based assessment)

Learners assessed against national standard

Teacher/trainer-centred Learner centred No recognition of prior learning Recognition of prior learning (RPL) – learners will be able to

gain credit for knowledge and skills they acquire informally Ad hoc reporting of learning achievements

A national record of learning database will be established to ensure centralised and consistent reporting of learning achievements

Table 5.2:The differences between the ‘past’ and ‘future’ training and development system

within South Africa (adapted from Phillips, cited in Erasmus & Van Dyk, 1999: 13).

? THINK POINT

Consider the education, training and development system which you have

experienced within South Africa or the country of your choice over the past 15 to

20 years. What characteristics of this system did you find to be limiting?


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5.3.2.1 The National Qualifications Framework (NQF)

The mechanism which is central to the changes within the South African training and

development system is the National Qualifications Framework or NQF. The NQF is a

structure which provides an integrated framework of learning achievements. It consists of

eight levels and three bands: the higher education and training band, the further education

and training band and the general education and training band. Figure 5.3 provides a

diagrammatic representation of the NQF.

NQF LEVEL HIGHER EDUCATION and TRAINING BAND

8 Doctorates and Further Research Degrees

7 Higher Degrees and Professional Qualifications

6 First Degrees and Higher Diplomas

5 Diplomas and Occupational Certificates

NQF LEVEL FURTHER EDUCATION and TRANING BAND

4 Further Education and Training Certificates

3

2

NQF LEVEL GENERAL EDUCATION and TRAINING BAND

1 General Education and Training Certificate

Grades 1 – 9 ABET Level 1 – 4

Pre-School

Figure 5.3:The National Qualifications Framework (NQF)(adapted from Bellis, 2000: 16).

The legislation which provides for the implementation of the NQF within South African

organisations will be discussed in section 9 of this module guide.

In summary, sub-section 5.3 focused on the HRM activity of training. In so doing the

training process was investigated and issues impacting on training within the South African

context were examined.


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5.4 Development

As identified in sub-section 5.2, development interventions are future oriented and serve to

develop skills within employees which will enable them to move into jobs that possibly do

not yet exist (Noe et al, 2006:383)

Comment on Activity

This activity serves to provide the student with a sense of what development entails. The

following characteristics of development interventions may be deduced from the case study:

• Development initiatives focus on producing high-quality managers;

• Development approaches include:

o Recruiting college graduates and placing them on an accelerated development

programme which would prepare them for a management position within 3 to 5

years;

o Providing recruits with supervision from senior managers who oversee their training

and development and ensure that they receive the necessary experience;

o Identifying current employees who have potential to take on managerial

responsibilities. These employees receive financial support to get a management-

related education; and

o All of the above three programmes include individual coaching with a psychologist,

who works with the employees and their managers to improve on-the-job training

and development.

It is important to note that the First USA Bank case focuses on management development.

Indeed, traditionally development initiatives have focused on management level employees.

ACTIVITY

Read the short case study on page 375 of Noe et al (2003) entitled ‘Developing

employees reduces risk for First USA Bank’. What characteristics of development

can you deduce from your reading of this case study?


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However, given the competitive demands of today’s business environment, organisation’s

have recognised the benefits of offering development interventions to all types and levels of

employees (Noe et al, 2006:386).

The First USA Bank case directly and indirectly points to the development approaches of

formal education, assessment, job experiences and interpersonal relationships (coaching).

These approaches will be discussed below.

5.4.1 Formal Education Programmes

Formal education programmes include:

• Off-site and in-house programmes customised for the organisation’s employees;

• Short courses presented by universities and/or consultants;

• Executive MBA programmes; and

• General public university programmes (Noe et al, 2006:389).

Smith (1999) emphasises the need for formal education programmes, such as those identified

above, in equipping employees with the competencies necessary to cope with current

business trends such as globalisation and competitiveness, the knowledge economy and

knowledge management and the re-engineering of organisations.

5.4.2 Assessment

According to Noe et al (2003) assessment involves “collecting information and providing

feedback to employees about their behaviour, communication style, or skills” (p 383).

Assessment is frequently used to identify employees with managerial potential.

Organisations vary in their use of assessment methods. Popular methods, however, include:

• The Myers-Briggs Type Indicator

• The Assessment Centre

• Benchmarks

• Performance Appraisals and 360 Degree Feedback Systems


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SELF CHECK QUESTION

Read the following scenario taken from Noe et al (2003), page 409.

“Your boss is interested in hiring a consultant to help identify potential managers

among current employees of a fast food restaurant. The manager’s job is to help

wait on customers and prepare food during busy times, oversee all aspects of

restaurant operations (including scheduling, maintenance, on-the-job training,

and food purchase), and help motivate employees to provide high-quality service.

The manager is also responsible for resolving disputes that might occur between

employees. The position involves working under stress and coordinating several

activities at a time. She asks you to outline the type of job assessment program you

believe would do the best job of identifying employees who will be successful

managers”(Noe et al, 2003: 409).

Use your knowledge of assessment to formulate an answer to your boss’s

question.

The answer to this Self-Check Question may be found at the end of this section.


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5.4.3 Job Experiences

Job experiences refer to “relationships, problems, demands, tasks, or other features that

employees face in their jobs” (Noe et al, 2006:396). Job experiences may be used for

employee development in various ways including:

• Job enlargement where the employee’s existing job is expanded horizontally so as to

include a greater variety of activities;

• Job enrichment where the employee’s existing job is expanded vertically so as to

provide the employee with greater challenge and responsibility;

• Job rotation where the employee moves among jobs within a particular department (Noe

et al, 2006:398);

• Transfers, Promotions and Downward Moves; and

• Temporary Assignments with Other Organisations (Noe et al, 2006:399-400).

5.4.4 Interpersonal Relationships

Development can also occur through the establishment of interpersonal relationships through

mentoring and coaching programmes.

A mentor is “an experienced, productive senior employee who helps develop a less

experienced employee” (Noe et al, 2006:402). On the other hand, a coach may be defined as

“a peer or a manager who works with an employee to motivate him, help him develop skills

and provide reinforcement and feedback” (Noe et al, 2006: 404).

ASTD (1997) outlines guidelines for successful coaching and mentoring.

These include:

• Establish a performance-contract approach to coaching where the employee’s

development benefits are outlined, the outcome of the initiative is specified, and the

manner in which the initiative will benefit the organization and the employee is

highlighted.

• Emphasise to employees that they are primarily responsible for their own professional

development, but that the organisation will strive to provide to contribute to their

development through, for example, providing them with challenging projects.


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• Assist employees in compiling and reviewing their development plans. Ensure these

development plans provide a balance between training initiatives to address skills

deficiencies, as well as development initiatives which address their marketability and

employability.

• Be prepared to be an effective coach even if time is limited (ASTD, 1997).

In summary, this sub-section examined the practice of development. In so doing, the

development approaches of formal education, assessment, job experiences and interpersonal

relationships were studied.

5.5 Summary

This section has focused on Employee Training and Development. In so doing, the concepts

of training and development were examined. In investigating the activity of Training, the

training process as well as South Africa’s approach to training were studied. In investigating

the activity of Development the various development activities of assessment, job experience,

formal education and interpersonal relations were examined.

The following section, Section 6, will focus on the HRM issue of Performance Management.


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5.6 Answers to Self Check Questions


Model Answer

The assessment approach which would best suit this scenario is the Myers-Briggs Type

Indicator (MBTI). The MBTI would provide the consultant with an indicator of the

employee’s personality (Noe et al, 2003) and this would provide valuable information as to

whether or not the particular employee would be able to operate effectively within the high-

pressured and stressful job of a fast-food restaurant manager.

The consultant may also consider the assessment approach of the assessment centre, where

multiple assessors would evaluate the employee’s performance on a number of exercises

(Noe et al, 2006:391). The exercises would provide the consultant with information as to the

employee’s administrative and interpersonal skills.

A further assessment approach which the consultant may consider is benchmarks. This is

“an instrument designed to measure the factors that are important to being a successful

manager”(Noe et al, 2006:393). The items measured by this instrument include the

employee’s competence in dealing with subordinates, creating a productive work

environment and utilising resources.


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NOTES :


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SECTION 6

PERFORMANCE MANAGEMENT


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CONTENTS

Learning Outcomes

Reading

6.1 Introduction

6.2 Performance Management Defined

6.3 The Performance Management Process

6.4 Purposes of Performance Management

6.5 Approaches to Performance Management

6.5.1 Comparative Approach

6.5.2 Attribute Approach

6.5.3 Behavioural Approach

6.5.4 Results Approach

6.5.5 Quality Approach

6.6 Summary

Answers to Self-Check Questions


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LEARNING OUTCOMES


demonstrate a comprehensive understanding of performance management and its application

within organisations. This overall outcome will be achieved through the student’s mastery of

the following specific outcomes:

1. Define performance management.

2. Distinguish between performance management and performance appraisal.

3. Identify and discuss the three purposes of performance management within

organisations.

4. Critically discuss the performance management process and its integration with the

organisation’s strategy.

5. Discuss, evaluate and implement the comparative, attribute, behavioural, results and

quality approaches to performance management.


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READING

Prescribed Reading:






Oxford. pp 473-487


Books


Schyf, S. (1997) Human Resource Management in South Africa. pp 257 – 306.




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Journals

• Antonioni, D. (1996) ‘Designing an Effective 360-Degree Appraisal Feedback

Process’. Organizational Dynamics. Autumn, 25 (2), pp 24 – 39.

• Conger, J., Finegold, D. & Lawler, E.E. (1998) ‘CEO Appraisals: Holding

Corporate Leadership Accountable’. Organizational Dynamics. Summer, 27 (1),

pp 7 – 21.

• Gioia, D.A. & Longenecker, C.O. (1994) ‘Delving into the Dark Side: the

Politics of Executive Appraisal’. Organizational Dynamics. Winter, 22 (3), pp 47

– 59.

• Grensing-Pophal, L. (2001) ‘Motivate Managers to Review Performance’. HR

Magazine. March, 46 (3), pp 45 – 49.

• Grote, D. & Wimberley, J. (1993) ‘Peer Review’. Training. March, 30, pp 51 –

52.

• Joinson, C. (2001) ‘Making Sure Employees Measure Up’. HR Magazine. March,

46 (3), pp 36 – 50.

• Kaplan, R.E. (1993) ‘360 Degree Feedback Plus: Boosting the Power of Co-

Worker Rating for Executives’. Human Resource Management. Fall, pp299 –315.

• Kaplan, R.S. & Norton, D.P. (1996) ‘Using the Balanced Scorecard as a Strategic

Management System’. Harvard Business Review. January – February, pp 76 – 85.

• Koziel, M.J. (2000) ‘Giving and Receiving Performance Evaluations’. The CPA

Journal. December, 70 (12), pp 22 – 27.

• Milliman, J.F., Zawacki, R.A., Norman, C., Powell, L. & Kirksey, J. (1994)

‘Companies Evaluate Employees From All Perspectives’. Personnel Journal.

November, 73 (11), pp 99 – 104.

• Murphy, K.J. (1993) ‘Performance Measurement & Appraisal: Merck Tries to

Motivate Managers to do it Right’. Employment Relations Today. Spring, 20, pp

47.

• Taylor, R.L. & Zawacki, R.A. (1984) ‘Trends in Performance Appraisal:

Guidelines for Managers’. Personnel Administrator. March, 29 (3), pp 71 -80.

• Viedge, C. & Conidaris, C. (2000) ‘The Magic of the Balanced Scorecard’.

People Dynamics. July 18 (7), pp 38 – 43.

• Winstanley, D. & Stuart-Smith, K. (1996) ‘Policing Performance: The Ethics of

Performance Management’. Personnel Review. November, 25 (6), pp 66 – 82.


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6.1 Introduction

This section focuses on Performance Management. In so doing, the following will be

examined:

• Performance management defined

• The performance management process

• Purposes of performance management

• Performance management approaches

6.2 Performance Management Defined

Noe et al (2006:330) define performance management as “the process through which

managers ensure that employees’ activities and outputs are congruent with the

organisation’s goals”. This definition emphasises the need for performance management to

be aligned to the strategy of the organisation.


Noe et al (2006:330) emphasises that performance appraisal is only a component of

performance management as it involves the administrative and relatively isolated duty of

measuring aspects of an employee’s performance. As indicated in Figure 6.1 on the

following page, performance management is a broader concept than performance appraisal in

that it provides not only for the measurement of performance (performance appraisal), but the

defining of performance according to organisational goals as well as the provision of

performance feedback.

? THINK POINT

What, in your opinion, is the difference between Performance Management and

Performance Appraisal?


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Figure 6.1: Performance Management (adapted from Noe et al, 2006:330)

6.3 The Performance Management Process

As indicated in section 6.2 above, it is important for an organisation to align its performance

management system to the overall strategy of the enterprise.

Comment on Activity

Noe et al (2003:330) assert that “performance management is central to gaining competitive

advantage” and therefore it is important that the organisation’s performance management

system is aligned to the overall organisational strategy and goals. Figure 6.2

diagrammatically depicts how the organisation’s performance management process may be

aligned to the enterprise’s organisational strategy.

SPECIFICATION

OF PERFORMANCE

CRITERIA

PERFORMANCE

APPRAISAL (Performance Measurement)

PERFORMANCE FEEDBACK

ACTIVITY

Consider performance management within your organisation.

1. Describe your organisation’s performance management system.

2. Does the design of your organisation’s performance management system

support the overall strategy of the organisation? Give reasons for your

answer.


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Figure 6.2: The Performance Management Process

(from Philpott & Sheppard cited in Carrell et al, 1997: 259).

MISSION

STRATEGIES

OBJECTIVES VALUES

CRITICAL SUCCESS FACTORS

PERFORMANCE INDICATORS &

STANDARDS

PERFORMANCE REVIEW

IDENTIFICATION OF POTENTIAL

SUCCESSION PLANNING

TOTAL REWARD SYSTEM

PERFORMANCE IMPROVEMENT PROGRAMMES

BETTER PERFORMANCE


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Figure 6.2 clearly demonstrates how the performance management process is integrated

with, and supports, the overall organisational strategy. The diagram shows that the

performance management process is essentially initiated with the formulation of the

organisation’s mission and strategy. While the mission provides the organisation with future

direction, the strategies specify the manner in which the organisation is to behave in order to

achieve the mission. From the strategies, objectives are formed, which precisely specify the

performance goals of the organisation, and organisational values are also determined

(Philpott & Sheppard cited in Carrell, 1997:259). The critical success factors identify the

key issues which contribute to successful performance. The performance indicators and

standards are determined in conjunction with the critical success factors and serve to identify

the standards required for effective performance (Philpott & Sheppard cited in Carrell,

1997:259). The performance review provides for the evaluation of individual performance

against the relevant objectives, values, critical success factors and performance indicators

and standards. The performance review will also serve to identify potential and will

contribute to succession planning. The results of the performance review will influence the

reward system which is implemented as well as the kinds of performance improvement

programmes (e.g. counseling, training, etc.) which will be initiated so as to bring about better

performance (Philpott & Sheppard cited in Carrell, 1997:259).

6.4 Purposes of Performance Management

Performance management essentially has three purposes:

• Strategic purpose

• Administrative purpose

• Developmental purpose

SELF CHECK QUESTION

After having studied Noe et al (2006) pp 332 – 336, discuss the three purposes of

performance management.

The answer to this self-check question may be found at the end of this section


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6.5 Approaches to Performance Management

A number of performance management approaches exist (Noe et al, 2006:340-359).

• The comparative approach

• The attribute approach

• The behavioural approach

• The results approach

• The quality approach

ACTIVITY

Consider the performance management system which your organisation utilises

(which you described in section 6.3).

1. What in your opinion are the strengths of your organisation’s performance

management system?

2. What in your opinion are the weaknesses of your organisation’s

performance management system?


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Comment on Activity

The various approaches to performance management each have their own respective

strengths and weaknesses. These will be identified in the discussion of the various

performance management systems below.

6.5.1 Comparative Approach

The comparative approach measures an individual’s performance by comparing his/her

performance to the performance of others. Three techniques adopt the comparative

approach:

• Ranking where the supervisor ranks his subordinates from best performer to worst

performer;

• Forced Distribution where employees are ranked in groups;

• Paired Comparison where the supervisor compares ‘every employee with every other

employee in the work group, giving an employee a score of 1 every time she is considered

to be the higher performer’ (Noe et al, 2006: 343).


The main strength of the comparative approach is that it is useful when employee

performance needs to be differentiated. This approach also eliminates the problems of

leniency, strictness and central tendency, which is valuable in making administrative

decisions (Noe et al, 2006:343).

? THINK POINT

What in your opinion are the strengths and weaknesses of the comparative

approach to performance management?


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However, the weaknesses of the comparative approach include:

• The techniques are not linked to the overall strategy of the organisation;

• The ratings are subjective and therefore the validity and reliability of the assessment is

dependent on the rater himself;

• The techniques do not provide the specific information necessary for feedback purposes.

• The techniques do not measure performance against absolute standards of performance

(Noe et al, 2006:343).

6.5.2 The Attribute Approach

The attribute approach focuses on the identification of employee attributes necessary for the

organisation’s success. The employee is measured against these attributes (Noe et al, 2006:344).

This approach includes techniques such as:

• Graphic Rating Scales where the supervisor rates the subordinate on particular traits and

characteristics; and

• Mixed Standard Scales where the supervisor rates the subordinate against relevant

performance dimensions (Noe et al, 2006:344).


The strengths of the attribute-based techniques include:

• They are commonly used by organisations as they are easy to develop and can be

generalized across a range of jobs; and

• If designed properly, they can be reliable and valid (Noe et al, 2006:344).

? THINK POINT

In your opinion, what are the strengths and weaknesses of the attribute approach?


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The weaknesses of the attribute approach to performance management include:

• The techniques provide for little strategic congruence;

• Performance standards are usually vague and may be interpreted differently by different

raters (providing for low validity and reliability);

• The techniques do not provide specific and relevant performance feedback information;

and

• The techniques may bring about defensiveness in employees (Noe et al, 2006:346).

6.5.3 The Behavioural Approach

The behavioural approach defines behaviours necessary for effective performance in a

particular job. In assessing performance, managers identify the extent to which a subordinate

has exhibited the required behaviours (Noe et al, 2003). Behavioural-based techniques

include:

• Critical Incidents

• Behaviourally Anchored Rating Scales

• Behavioural Observation Scales

• Organisational Behaviour Modification

• Assessment Centres (Noe et al, 2006:346-351).

? THINK POINT

What strengths and weaknesses of the behavioural approach can you identify?


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The strengths of behavioural approach include:

• It provides for the linking of the organisational strategy and goals to the behaviour

required of the employee necessary for strategy implementation;

• It provides employees with specific feedback about their performance;

• The techniques used rely on thorough job analysis which in turn ensures reliability and

validity; and

• Acceptability of this approach by employees and managers is usually high

(Noe et al, 2006:351).

The weaknesses of the behavioural approach include:

• Behaviours and behaviour measured need to be monitored and revised to ensure that they

are linked to the organisational strategy (which regularly changes);

• It assumes that there is ‘one best way’ to do the job; and

• It is least suited to complex jobs (Noe et al, 2006:351).

6.5.4 The Results Approach

This approach is based on the premise that results are the one best indicator of how a

subordinate’s performance has contributed to organisational success (Noe et al, 2003).

Results-based techniques include:

• Management By Objectives (MBO) where goal setting is cascaded down throughout the

organisation and the goals become the standard against which an employee’s

performance is measured; and

• Productivity Measurement and Evaluation Systems (PROMES) which involves a

process of motivating employees to higher productivity (Noe et al, 2006:353).

? THINK POINT

In your opinion, what are the strengths and weaknesses of the results approach?


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The strengths of the results approach include:

• Subjectivity is minimised as objective and quantifiable indicators of performance are

used;

• Usually highly acceptable to both supervisors and subordinates; and

• An employee’s results (performance) are linked to organisational strategy

(Noe et al, 2006:354).

The weaknesses of result-based techniques include:

• Objective measurements may be deficient in that they may be influenced by factors

beyond the employee’s control (such as an economic recession); and

• Employees may only focus on the performance criteria against which they are to be

measured (Noe et al, 2006:354).

6.5.5 The Quality Approach

The focus of the quality approach is on improving customer satisfaction through a customer

orientation and the prevention of errors (Noe et al, 2006:355). The design of a quality-based

performance management system should focus on:

• The assessment of employee and system factors;

• The relationship between managers and employees in solving performance problems;

• Internal and external customers in setting standards and measuring performance; and

• Using a number of sources to evaluate employee and system factors (Noe et al, 2006:355).

The strengths of the quality approach include:

• It incorporates and capitalises on the strengths of both the attribute and results approach

to performance measurement; and

• It adopts a systems approach to performance measurement (Noe et al, 2006:358).

However, a possible weakness of the quality approach would be that organisations may be

hesitant to adopt it as a result of their long established use of more traditional approaches.


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READING ACTIVITY

Read the following journal articles and then answer the questions which follow:

• Kaplan, R.S. & Norton, D.P. (1996) ‘Using the Balanced Scorecard as a

Strategic Management System’. Harvard Business Review.

January – February , 74(1), pp 76 – 85.

• Milliman, J.F.; Zawacki, R.A., Norman, C., Powell, L. & Kirksey, J. (1994)

‘Companies Evaluate Employees From All Perspectives’. Personnel Journal.

November, 73 (11) pp 99 – 104.

1. How do Milliman et al (1994) approach performance management?

2. How do Kaplan & Norton (1996) approach performance management?

3. Are the approaches of Milliman et al (1994) and Kaplan & Norton (1996)

practical? Would your organisation benefit from the implementation of either

of these approaches?


___________________________________________________________________ MANCOSA - MBA 123


Kaplan & Norton (1996:76-85) and Milliman et al (1994:99-104) present approaches to

performance management which differ from the traditional approaches.

Milliman et al (1994:99-104) describe a 360-degree feedback approach to performance

measurement where information on an employee’s performance is not only provided by the

employee’s immediate supervisor, but by those people whom he/she deals with on a day to

day basis (e.g. customers, subordinates, coworkers, suppliers, consultants). This approach

overcomes what Milliman et al (1994:99-104) describe as the “subjective, simplistic and

political” nature of traditional approaches. The 360-degree feedback approach not only

provides a broader view of an employee’s performance, but increases the credibility of the

performance appraisal, facilitates greater employee self development and increases the

employee’s accountability towards his/her internal and external customers (Milliman et al,

1994:99-104).

While Milliman et al (1994:99-104) focus on including both internal and external customers

in the appraisal of an employee’s performance, (Kaplan & Norton, 1996:76-85). Balanced

Scorecard approach provides for considerable integration of the employee’s performance

with organisational strategy. The balanced scorecard is a strategic management system

which channels the abilities of employees towards achieving organisational goals (Kaplan &

Norton, 1996:76-85). In devising the organisation’s strategy, objectives and measures are set

which relate to four areas: finance, customer, internal business processes and learning and

growth. Individual employees are required to draw up their own Personal Scorecards which

serve to set their own performance objectives and measures in line with those identified by

the organisation (Kaplan & Norton, 1996:76-85). In identifying objectives and measures for

these four areas, the balanced scorecard not only facilitates a customer orientation but also

addresses system factors of assessment.

In summary, this section has focused on the five approaches towards performance

measurement: the comparative approach, the attribute approach, the behavioural approach,

the results approach and the quality approach.


___________________________________________________________________ MANCOSA - MBA 124

.

6.6 Summary

This section investigated Performance Management. In so doing, the concept was defined

and the process of performance management was examined. The purposes of performance

management were also given attention, as were the various approaches to performance

management.

Section 7 will investigate the HRM function of Compensation.


Read the case study entitled “Focusing on the Softer Side of Managing” - Noe et

al (2006:375-376) and answer the questions which follow:

1. What performance management approach would you recommend Granite

use in order to improve productivity?

2. The quality approach argues that systems factors need to be taken into

account in performance management systems.

How would you control for systems factors in the performance

management approach which you recommended in your answer

to question 1?

Questions have been adapted from Noe et al, (2006: 376).

The answer to this Self-Check Question may be found at the end of this section


___________________________________________________________________ MANCOSA - MBA 125



Model Answer

The purposes of performance management are strategic, administrative and developmental.

Strategic Purpose

A performance management system serves to link employee performance to the overall

organisational strategy and organisational objectives (Noe et al, 2003). However, research

has shown that very few organisations utilise performance management in a manner which

supports the strategy of the organisation.

This strategic purpose may be achieved through designing evaluation mechanisms which

define employee performance in terms of the organisation’s strategy and goals. It is

important, however, that the performance management system is sufficiently flexible so as to

adapt to changes in the organisational strategies and goals (Noe et al, 2003).

Administrative Purpose

Performance management systems provide information which assist organisations with

administrative decisions relating to issues such as to salary administration (pay raises),

layoffs and promotions (Noe et al, 2003).

Developmental Purpose

Performance management systems provide information about employee strengths and

weaknesses and in so doing identify employee developmental needs (Noe et al, 2003).


___________________________________________________________________ MANCOSA - MBA 126


Model Answer

1. What performance management approach would you recommend Granite use in order to

improve productivity?

The comparative approach, which involves a comparison of an individual’s / group’s

performance to that of others (Noe et al, 2003) would be effective in that the performance of

Granite Construction could be compared to that of other airlines.

A results-based technique, such as Management By Objectives, could also be used. This

would ensure that employee and group performance are measured against pre-formulated and

strategically aligned individual and group objectives (Noe et al, 2003). This approach would

also be highly acceptable to the employees.

The quality approach may also be used. As this approach focuses on the customer, as well as

the elimination of errors (Noe et al, 2003) it would therefore be effective in targeting the

improvement of Granite on-time flight performance. A specific quality-based technique

which it is recommended that Granite use is 360-degree feedback (Milliman et al, 1994)

which provides for feedback on employees’ performance from both internal and external

customers.

2. The quality approach argues that systems factors need to be taken into account in

performance management systems.

How would you control for systems factors in the performance management approach

which you recommended in your answer to question 1?

If the comparative approach to performance measurement is adopted, systems factors could

be controlled by making comparisons with airlines which experience the same system

factors, such as weather conditions, as Granite.

If a Management By Objectives approach is utilised, it is recommended that the effect of

systems factors be considered when assessing the extent to which Granite’s employees have

met their performance objectives.


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SECTION 7

COMPENSATION


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CONTENTS

Learning Outcomes

Reading

7.1 Introduction

7.2 The Nature of Compensation

7.3 Factors Influencing the Determination of Compensation

7.4 Compensation Structures and Levels

7.4.1 Job Structure Development

7.4.2 Pay Structure Development

7.5 Challenges to Compensation Systems

7.5.1 Job-Based Compensation

7.5.2 Executive Pay

7.6 Incentive Compensation Systems

7.6.1 Types of Incentive Compensation Systems

7.6.2 Ensuring the Effectiveness of Incentive Compensation Systems

7.7 Summary



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LEARNING OUTCOMES


demonstrate a comprehensive understanding of the HR practice of compensation This overall

outcome will be achieved through the student’s mastery of the following specific outcomes:

Define the HR practice of compensation.

1. Identify and critically discuss and address the factors influencing the determination of

compensation.

2. Identify, discuss and apply compensation structures and levels.

3. Identify and critically discuss current challenges to compensation systems.

4. Discuss, evaluate and effectively apply the various incentive-based compensation

systems.


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READING

Prescribed Reading:



Irwin McGraw-Hill. pp 460-493 and pp 498-527



Oxford. pp 267-283


Books



Prentice Hall Inc. pp 369 – 390.


McGraw-Hill. pp 306 – 341 & pp 345 – 374.


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Journals

• Bergesen, M. (1996) ‘Total Compensation Strategy Should Look After

Performance’. Human Resource Management. June, pp 31 – 32.

• Christopher, D. & Bussin, M. (2000) ‘What are Remuneration Committees All

About?’. People Dynamics. July, 18 (7), pp 28 – 31.

• Du Toit, A. (2000) ‘Restructuring of Employees’ Packages’. People

Dynamics. November – December, 18 (11), pp 46 – 47.

• Elliott, M.A. (1993) ‘Redesigning Management Incentives’. Human Resource

Management. May, pp 11 – 16.

• Giblin, E.J., Wiegman, G.A. & Sanfilippo, F. (1990) ‘Bringing Pay Up To

Date’. Personnel. November, 67 (11), pp 17 – 19.

• Kaplan, R.S. & Norton, D.P. (1996) ‘Using the Balanced Scorecard as a

Strategic Management System’. Harvard Business Review. 1996, pp 75 – 85.

• Olivier, M. (1995) ‘Directors’ Remuneration: Executive Compensation in a

Changing South Africa’. Accountancy SA. August, pp 5 – 9.

• Pokroy, S. (2000) ‘Driving Empowerment Through Ownership’. People

Dynamics. April, 18 (4), pp 28 – 32.

• Sunoo, B.P. (1996) ‘Tie Merit Increases to Goal-Setting and Employer

Objectives’. Personnel Journal. November, 75 (11), pp 109 – 111.

• Thomson, D (1996) ‘Sharing Corporate Wealth – Have We Forgotten How To

Share?’. Human Resource Management. October, pp 10 – 12.

• Thomson, D (1997) ‘Institutional Barriers to Profit Sharing’. Management

Today. February, pp 34 – 37.

• Walter, I.S. (1993) ‘Incentive Compensation Must Create Shareholder Value’.

Human Resource Management. April, pp 12 – 15.


___________________________________________________________________ MANCOSA - MBA 132

7.1 Introduction

In this section the HR practice of Compensation is investigated. In so doing the following

issues are examined:

• The nature of compensation

• Factors influencing the determination of compensation

• Compensation structures and levels

• Developing a compensation structure

• Challenges to compensation systems

• Incentive compensation systems

o Types of incentive compensation systems

o Advantages of incentive compensation systems

o Factors causing failure in incentive compensation systems

The Nature of Compensation

Compensation may be defined as “…the human resource management function that deals

with every type of reward individuals receive in exchange for performing organizational

tasks” (Ivancevich, 1998: 307).

Comment on Activity

The case entitled “Changing Compensation to Support Changes in Corporate Strategy”

highlights how Corning Inc’s approach to compensation was changed so as to support the

company’s turnaround strategy. Aligning the compensation strategy to the overall company

strategy was effective, in that the new compensation system served to promote the altered

culture and employee behaviours necessary for the achievement of Corning’s strategic goals.

ACTIVITY

As an introduction to Compensation, read the short case study in Noe et al

(2006:494) entitled “Changing Compensation to Support Changes in Corporate

Strategy”.

What particular issue regarding Compensation does this case emphasise?


___________________________________________________________________ MANCOSA - MBA 133

7.3 Factors Influencing the Determination of Compensation

Compensation has a considerable impact on employee attitudes and behaviour and is critical

to assisting the organisation in attaining its strategic goals (Noe et al, 2006:462).


Noe et al (2006:463) emphasise how Equity Theory influences compensation. Equity theory

argues that “a person compares her own ratio of perceived outcomes (e.g. pay, benefits,

working conditions) to perceived inputs (e.g. effort, ability, experience) to the ratio of a

comparison other” (Noe et al, 2006:463). If equity is perceived, no change will occur in the

employee’s behaviour or attitudes. However, if inequity is perceived, the employee will take

steps to restore equity through, for example, reducing the amount of effort he/she exerts.

The implication which Equity Theory has for compensation is that employees’ behaviour and

attitudes will be affected if inequity with other employees is perceived. The types of

comparisons which are possible include:

• External equity: where comparisons are made with employees holding similar positions

within other organisations;

• Internal equity: where comparisons are not only made with employees performing the

same job, but with employees in different jobs and at different levels within the same

organisation.

? THINK POINT

Within your organisation, what factors in your view influence the approach

adopted towards compensation?


___________________________________________________________________ MANCOSA - MBA 134

Ivancevich (1998) identifies external and internal factors which influence the organisation’s

choice of compensation system.

Figure 7.1: Internal and External Factors Influencing Compensation

As identified in Figure 7.1 above, the External Environmental Factors which influence the

organisation’s choice of compensation system include:

• The Labour Market where supply and demand may impact on levels of pay, e.g. higher

levels of pay may apply if few skilled employees are available within the job market.

• Economic Conditions where high degrees of competitiveness within industries

negatively affect the ability of the organisation to pay high wages (Ivancevich, 1998);

• Government Influences where legislation, such as the Basic Conditions of Employment

Act in South Africa, controls and guides issues such as minimum wage and overtime

pay.

• Union Influences where unions affect compensation levels through entering into

negotiations with management.

COMPENSATION SYSTEM Influenced by

EXTERNAL ENVIRONMENTAL

FACTORS • Labour Market • Economic Conditions • Government Influences • Union Influences

INTERNAL ENVIRONMENTAL

FACTORS • Organisational strategy &

goals • Labour Budget • Compensation Decision

Makers


___________________________________________________________________ MANCOSA - MBA 135

Internal Environmental Factors which influence an organisation’s approach to

compensation include:

• Organisational Strategy and Goals where the compensation approach adopted by the

organisation should support the effective implementation of the company’s strategy;

• Labour Budget where the amount of money available within the organisation for

employee compensation during a given year is specified (Ivancevich, 1998);

• Compensation Decision Makers which includes top management and possibly the

organisation’s employees.

7.4 Compensation Structures and Levels

When developing compensation structures and levels it is important that the organisation

considers:

• Current market pressures;

• Whether the organisation views the employee as a resource (rather than just a cost);

• Whether the organisation wishes to pay at, below or above the market; and

• Whether the organisation wishes to conduct a pay survey so as to benchmark its practices

against those of the competition (Noe et al, 2006:466)

The development of compensation structures and levels requires the development of job

structures on which the development of pay structures is based.

7.4.1 Job Structure Development

A job structure is based on internal comparisons between jobs and serves to delineate the

relative worth of various jobs in the organisation (Noe et al, 2006:468). Job structure

development is dependent on a process of job evaluation.

ACTIVITY

Consider your organisation. Identify the system of job evaluation used by your

organisation (consider Peromnes, Paterson, Hay, the ‘Q’ method). What does this

job evaluation system mean to you?


___________________________________________________________________ MANCOSA - MBA 136

Comment on Activity

Job evaluation is an administrative procedure which is used to measure job worth (Noe et al,

2006:468). A job evaluation system identifies compensable factors which are the

“characteristics of jobs that an organization values and chooses to pay for” (Noe et al, 2006:

468). These compensable factors are weighted during job evaluation so as to indicate their

value to the organisation. Compensable factors include:

• Job complexity

• Required experience

• Required education

• Working conditions

• Responsibility (Noe et al, 2006:468).

Job evaluation usually involves committees in rating particular jobs on the compensable

factors.

Various job evaluation systems are in operation. These include the Peromnes system which

was developed by SA Breweries, the Paterson decision making band model, the Hay method

which was developed in the 1950s in the USA and the Q-method developed by the National

Institute for Personnel Research (Nel et al, 2004:272).

7.4.2 Pay Structure Development

Noe et al (2000) assert that different organisations differ in respect to the emphasis which is

placed on internal and external factors when developing pay structures. Three pay structure

approaches may be identified. These are based on:

• Market Survey Data where compensation is structured according to what similar

organisations are paying similar positions (Noe et al, 2006:470).

• Pay Policy Line where compensation structuring is based on a combination of internal

and external compensation related information.

• Pay Grades where jobs are classified into a number of pay grades. The pay grades

specify the pay range for particular categories of jobs (Noe et al, 2006:472).


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SELF CHECK QUESTION

After having read Noe et al (2000:460-496) and having worked through section

7.1 – 7.4.2 above, consider the following scenario and answer the following

questions.

You are the HR Manager for a medium sized organisation. The Managing

Director has asked you to evaluate whether your organisation’s current pay

structure is market related.

1. How would you go about doing this?

2. If you were to find that your organisation’s compensation structure differed

from competing organisations, what might the reasons for this be?

3. What could the consequences be for your organisation for having a

compensation system which is not in line with your competitors?



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7.5 Challenges to Compensation Systems

This section examines the compensation challenges of job-based compensation structures as

well as those associated with executive pay.

7.5.1 Job-Based Compensation

Thus far, this section of the module guide has focused on compensation systems which are

job-based.


There are a number of disadvantages associated with a job-based compensation approach.

These include:

• Job-based compensation systems promote bureaucracy.

• The system’s hierarchical nature promotes top-down decision making and emphasis of

status at various levels of the organisation.

• The revision of job descriptions and conducting of job evaluations is costly and time

consuming.

• Job-based compensation systems may fail to reward the required performance.

• Job-based compensation systems place emphasis on status differentials and in so doing

promotes promotion-seeking and discourages lateral employee movement (Noe et al,

2006:477).

? THINK POINT

Think about a job-based compensation system which you have experienced.

What were the disadvantages of this approach?


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In order to address the limitations of job-based compensation systems, Noe et al (2000)

recommend:

• Delayering and Banding where job levels are reduced and grouped into broad bands.

• Skills Based / Competency Based Pay where “employees are paid for the skills they are

capable of using, not for the job they are performing at a particular point in time”

(Ledford, cited in Noe et al, 2006: 479-482).

7.5.2 Executive Pay

Noe et al (2006:487) assert that executives tend to be paid very highly, and that a trust gap is

often created between the employees and the executive, where employees resent the

executive’s high pay.

Oliver (1995:5) in addressing the issue of executive compensation within the South African

context asserts that “historically, companies have developed each component of executive

compensation discreetly ….[and]….the relationship between performance and reward has

seldom been articulated in clear and unambiguous terms”. He emphasises that executive

compensation within South Africa needs to involve a performance contract which serves to

align pay with performance.

7.6 Incentive Compensation Systems

In section 7.5 the challenges of job-based compensation systems were discussed. This

section serves to examine compensation systems which are structured to reward employees

for contributions to the organisation’s success.

7.6.1 Types of Incentive Compensation Systems

Noe et al (2006) identify a number of incentive-based compensation systems. These include

merit pay programmes, individual incentives, profit sharing and ownership, gainsharing and

the balanced scorecard.


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Figure 6.2: Types of Incentive-Based Compensation Systems

Adapted from (Noe et al, 2006:505).

7.6.1.1 Merit Pay Programmes

Merit pay programmes link pay to performance by basing an employee’s annual increase on

performance appraisal ratings (Noe et al, 2006:504). The employee’s performance is

essentially rated only by the his/her direct supervisor.

Merit pay programmes have been criticized by Deming (cited in Noe et al, 2006:507) who

argues that it is unfair to rate individual performance as “apparent differences between

people arise almost entirely from the system that they work in, not the people themselves”

(Deming cited in Noe et al, 2006:508). A further criticism of this approach is that it

discourages teamwork. It is also argued that merit pay programmes do not actually exist in

that merit increases are allocated within the boundaries of predetermined merit increase

budgets.

7.6.1.2 Individual Incentives

Individual incentives, like merit pay programmes, are based on an individual’s performance.

However, in contrast to merit pay programmes, they are not incorporated into an employee’s

base pay and therefore need to be earned and re-earned (Noe et al, 2006:510).

Individual incentives tend to be rare and therefore have the disadvantage of not providing for

the development of a problem solving, proactive workforce (Noe et al, 2006:510). Further,

as with merit pay programmes, individual incentives tend to undermine teamwork.

INCENTIVE COMPENSATION SYSTEMS

MERIT PAY

INDIVIDUAL INCENTIVES

PROFIT SHARING

OWNERSHIP GAIN SHARING

GROUP INCENTIVES

BALANCED SCORECARD


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7.6.1.3 Profit Sharing

Profit sharing provides for payments (not incorporated into base salary) which are “based on

a measure of organization performance (profits)” (Noe et al, 2006: 510).

The advantages of profit sharing include employees in approaching issues from the

perspective of the business owner and labour costs being reduced during difficult periods

(Noe et al, 2006:511). Disadvantages of profit sharing include the failure of employees to

identify the relationship between the work which they perform and the organisation’s profit.

Also, profit sharing does not necessarily provide for the high motivation of individual

employees (Noe et al, 2006:512).

Comment on Activity

The two articles by Thomson recognise the importance of profit sharing within today’s

business environment.

The article entitled ‘Sharing Corporate Wealth – Have We Forgotten How to Share?’

highlights the weaknesses of a number of compensation systems in that it asserts that after

concluding individual employment contracts “….we have one contract per employee…we do

not have any other contracts or arrangements in terms of which these individual employees

READING ACTIVITY

Read the following journal articles and then answer the questions which follow.

• Thomson, D (1996) ‘Sharing Corporate Wealth – Have We Forgotten How To

Share?’. Human Resource Management. October, pp 10 – 12.

• Thomson, D (1997) ‘Institutional Barriers to Profit Sharing’. Management

Today. February, pp 34 – 37.

1. In these two articles, what are the key issues which Thomson identifies with

regards to profit sharing?


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will be persuaded to work together as a team. Surely we should have some group sharing to

secure the involvement of employees in the enterprise?” (Thomson, 1996: 11). In addition to

identifying how profit sharing can secure employee involvement and promote teamwork,

Thomson (1996:10-12) questions why many organisations have failed to provide for profit

sharing.

In Thomson’s (1997:34-37) second article he focuses on how economic sharing should be

provided for within today’s organisation. It is argued that a number of institutional barriers,

such as hierarchy and industry wide collective bargaining, prevent organisations from

engaging in profit sharing. So as to successfully implement profit sharing, Thomson

(1997:34-37) argues that it is important that:

• management understand profit sharing as partnership between “the contributors of

capital (the shareholders) and labour (the employees)” (Thomson, 1997:37);

• profit sharing schemes are developed participatively within the organisation; and

• once developed, the profit sharing scheme should be submitted to the trade union for

approval (Thomson, 1997:38).

7.6.1.4 Ownership

Ownership may be achieved through the issuing of share options to employees or by

implementing employee stock ownership plans (ESOPs). The advantages and disadvantages

of ownership are similar to that of profit sharing.

7.6.1.5 Gainsharing

Gainsharing provides “a means of sharing productivity gains with employees” (Noe et al,

2006:516). This differs from profit sharing in two ways: the programme measures

departmental / group performance and payments are made more frequently than with profit

sharing schemes.

An advantage of gainsharing is that it usually involves rewards such as employee

participation and problem solving.


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7.6.1.6 Group Incentives and Team Awards

In contrast to gain sharing plans, group incentives and team awards are applied to the smaller

work group. This approach involves rewarding employees at the level of the team or group.

An advantage of this approach is that competition between individuals is reduced (Noe et al,

2006:517). However, this competition may be replaced by competition between teams and

groups, which is a disadvantage.

7.6.1.7 Balanced Scorecard

It has been shown that the various incentive based compensation programmes have both

advantages and disadvantages. So as to overcome the disadvantages and capitalize on the

advantages, it is recommended that organisations design a mix of compensation programmes

to meet the needs of the particular enterprise and its employees. The balanced scorecard is

an approach which would provide for this in that it enables companies to “track financial

results while simultaneously monitoring progress in building capabilities and acquiring

intangible assets they would need for future growth” (Kaplan & Norton, 1996:75).

7.6.2 Ensuring the Effectiveness of Incentive Compensation Systems

In order ensure the effectiveness of incentive compensation systems Noe et al (200:525)

emphasise that:

• Employees should participate in decisions relating to incentive compensation systems;

• Effective communication should take place to ensure that employees understand the

incentive based compensation system; and

• Organisations should take note of the fact that not only incentive pay plans impact on

productivity and performance, but so too does the manner in which employees are treated

(Noe et al, 2006:525).


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Case Study : At Northwest, An ESOP in Name Only When Northwest Airlines Inc. staved off bankruptcy in 1993 by selling a third of the company to employees, both sides hailed the pact as the start of a new relationship between workers and managers. “Airlines historians,” predicted Northwest’s top spokesman, “will probably record the events of the last year as the metamorphosis of a company and perhaps an industry.” Well, not quiet. Today, Northwest’s labour relations are the industries worst. It’s pilots struck on August 29th and neither side seems in a hurry to settle. Even if they do soon, the unrest is likely to spread to the mechanics, who rejected a tentative pact on August 19th. Flight attendants may not be far behind. Still, don’t blame employee stock ownership plans for Northwest’s woes. Northwest’s experience shows, by conspicuous absence, what ESOPs needs to successful : genuine employee inputs into corporate decisions. Only by coupling a financial stake with worker involvement can employee ownership deliver on its promise. “An ESOP raises expectations that need to be met,” says Corey Rosen, executive director at the National Centre for Employee Ownership. Otherwise, “You can cause a company to perform worst because people feel manipulated.” SHORTCHANGED. Where did Northwest’s ESOP go wrong? For starters, the stakes of many of its employees don’t vary with the stock price. Northwest was a private company in 1993 and the $900 million that 39 000 employees gave in concessions was as much a loan as a true piece of the company. Only the pilots – whose large salaries allow them to take more risk – converted their take to common stock when Northwest went public in 1994. Most flight attendants and machinists did not follow suite. They can still do so – but at a conversion rate 50% below the pilots’. The rst will be paid back their concessions in 2003. Their prospects remain the same whether Northwest stock trades at $60 as it did in March or at today’s $28.


Read the case study entitled ‘At Northwest, An ESOP in Name Only’ provided

below and answer the following questions:

1. Is money alone sufficient to make an ESOP effective?

2. How do the ESOPs at Northwest and United differ?

3. Would you suggest any changes be made to the Northwest ESOP?

(Questions above have been taken from Noe et al, 2000: 444)



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Even the pilots feel short changed, Sure, they have sold 40% of their stock so far at a gain of $117 million. But that goes into their retirement accounts, while top Northwest executives were able to cash in millions of dollars worth of stock while it was near its peak. When the company then took out TV ads calling pilots greedy, many were outraged. Northwest and its workers also failed to change how the company is run. Yes, 3 union representatives joined the board and the company asked them to stay on after the givebacks ended in 1996. But at the airport and in the sky little changed. “We still have some of the employee committees,” says pilot spokesman Paul Omodt, “But obviously, they are not listening to us.” Compare that with UAL corp’s United Airlines Inc., whose employees bought fifty five percent of the company in 1994. At UNITED, the workers share came back in stock and ticker-watching is now a daily ritual among employees, Moreover the two sides set up procedures so that employees have a say in running the place; workers vetoed a proposed merger with the US Airways in 1995. The two sides also used mediation more often to resolve such issues such as retiree benefits. United pilots hoped to reach a new contract before the current one expires in April of 2000 – a rare feat in the industry. Of course, United has its own labour troubles, but even those reflect the holes in its ESOP. Last spring, the airline and the International Association of Machinists and Aerospace Workers traded angry words when the IAM tried to sign up ticket agents. The union succeeded largely because agents felt excluded by the 1994 ESOP. Still, United culture helped to prevent outright warfare. Says United CEO Gerald Greenwald, “To me the test is whether we are able to talk out way trough the tough issues.” That’s a test Northwest and its unions have failed miserably. Pilots and executives are staring each other down while planes sits idle and other workers mull their own strikes. The question now is whether managers and employees can patch up their differences and get off the ground. If they wait too long, they risk a fate similar to that of Eastern Airlines Inc. or Pan American airways Inc.- carriers that set up ESOPs in the 1980’s without really changing relations with employees. Just look at the corporate obituaries to see what happened to them. Source: Noe et al (2000:443-444)

7.7 Summary

This section of the HRM module guide examined the HRM activity of Compensation. In so

doing, the nature of compensation was investigated and the development of compensation

structures and levels was studied. The types of incentive-based compensation systems and

the criteria for their effective implementation were also examined.

Section 8 of this module guide will focus on Employee Benefits and Services.


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7.8 Answers to Self Check Questions


Model Answers

You are the HR Manager for a medium sized organization. The Managing Director has

asked you to evaluate whether your organisation’s current pay structure is market related.

1. How would you go about doing this?

In order to determine whether your organisation’s current pay structure is market related you

would need to conduct a market pay survey in which you would benchmark your

organisation’s compensation practices against those of your competitors (Noe et al, 2000). In

conducting the market pay survey you would need to determine:

• Who your product-market and labour-market competitors are so that you may include

them in the survey;

• Which jobs are sufficiently representative in terms of level, functional area and product

market to include in the survey (Noe et al, 2000).

Your survey should also investigate the return on investment which your competitors are

receiving for the compensation packages which they are offering to their employees.

2. If you were to find that your organisation’s compensation structure differed from

competing organisations, what might the reasons for this be?

Your organisation’s compensation structure may differ from your competitor’s in that you

may provide rewards other than compensation. For example, your organisation may use

flexible working hours or intensive training for all employees as a means to reward

employees.

3. What could the consequences be for your organisation for having a compensation system

which is not in line with your competitors?

Noe et al (2000) point out that if your organisation’s compensation structure is above that of

your competitors, your organisation may find it difficult to compete because of its high

labour costs. On the other hand, if the market pay survey shows that your organisation is

paying below your competitor’s compensation structure, your organisation may have

difficulty in attracting and retaining suitably qualified and experienced employees.


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Model Answers

Case Study: ‘At Northwest, An ESOP in Name Only’ (Noe et al, 2000: 443-444)

1. Is money alone sufficient to make an ESOP effective?

Money alone is not sufficient to ensure that an ESOP is effective. As Noe et al (2000) point

out, monetary incentives need to be supported by an environment which fosters trust,

cooperation and employee commitment. Thus when implementing an ESOP it is imperative

that management give attention to the creation of a company culture which encourages

employee belonging, involvement and commitment.

2. How do the ESOPs at Northwest and United differ?

The ESOPs at Northwest and United differ with regards to the following:

• Northwest employees hold only one third of the company’s stock, while United

employees hold 55% of the company’s stock.

• Northwest do not feel as if they have the ability to contribute to the company’s decisions,

while United employees do have a say in the running of the company.

• Fewer strikes occur at United than at Northwest.

3. Would you suggest any changes be made to the Northwest ESOP?

The changes which need to be made at Northwest would primarily revolve around the

creation of a climate which values employee participation. Employees should be allowed to

vote on major issues and contribute to Northwest’s operational decisions.


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SECTION 8

EMPLOYEE BENEFITS AND SERVICES


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CONTENTS

Learning Outcomes

Reading

8.1 Introduction

8.2 The Nature of Employee Benefits and Services

8.3 Reasons for Growth in Employee Benefits and Services

8.4 Types of Employee Benefits and Services

8.4.1 Leave

8.4.2 Unemployment Insurance

8.4.3 Compensation for Injuries and Diseases

8.4.4 Pension Funds

8.4.5 Insurance

8.4.6 Other Employee Benefits and Services

8.5 Administration of Employee Benefits and Services

8.6 Summary


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LEARNING OUTCOMES


demonstrate a comprehensive understanding of employee benefits and services. This overall

outcome will be achieved through the student’s mastery of the following specific outcomes:

1. Discuss the nature of employee benefits and services.

2. Identify and discuss the reasons for the growth in employee benefits and services.

3. Identify and critically discuss the various types of employee benefits and services.

4. Discuss the importance, and the process involved, in effectively administering employee

benefits and services.


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READING

Prescribed Reading:






Oxford. Chapter 11


Books





Journals and Legislation

• Boase, N. (1996) ‘Childcare – Logical Extension of Parental Rights?’. People

Dynamics. April, 14 (3), p 37.

• Cockrum, R.B. (1982) ‘Has the Time Come for Employee Cafeteria Plans?’.

Personnel Administrator. July, 27 (7), pp 66 – 69.

• RSA (1997) ‘Basic Conditions of Employment Act (Act No 75 of 1997)’.

Government Gazette No. 18491. Pretoria: Government Printer.

• RSA (2000) ‘Unemployment Insurance Bill’. Government Gazette No. 20952.

Pretoria: Government Printer.

• RSA (2001) ‘Pension Funds Second Amendment Bill, 2001’. Government

Gazette No. 22021. Pretoria: Government Printer.

• Ryland, E.K. & Rosen, B. (1988) ‘Attracting Job Applicants with Flexible

Benefits’. Personnel. March, pp 71 – 73.


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8.1 Introduction

This section focuses on Employee Benefits and Services. In so doing, the following will be

examined:

• The nature of employee benefits and services

• Reasons for growth in employee benefits and services

• Different types of benefits and services

• Administration of benefits and services

8.2 The Nature of Employee Benefits and Services

Today, organisations provide employees with a range of benefits and services.

Comment on Activity

Nel et al, (2006:534) defines employee benefits as “items in total package offered to

employees over and above salary, which increase their wealth or well-being… such as

pensions, sick pay, … ” On the other hand, Ivancevich (1998:376) defines employee benefits

as “indirect financial compensation….employer provided rewards and services other than

wages and salaries”.

ACTIVITY

Consider your organisation’s approach to employee benefits and services

1. What benefits and services does your organisation provide for its employees?

2. Why does your organisation provide its employees with benefits and services?

3. What factors might influence your organisation’s approach to the provision of

benefits and services?


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Organisations may provide employee benefits and services to keep the organisation

competitive in attracting and retaining employees, to improve employee performance, to

fulfil agreements with trade unions, and/or to comply with legislation (Ivancevich,1998:376).

Nel et al (2004:268-272) emphasise that the reward environment is thus the starting point for

adding value to the organisation and it would result in lower labour turnover, lower

absenteeism and better public relations.

Identify five factors which may influence the organisation’s provision of services and

benefits. These are:

• Government requirements as stipulated by legislation, for example unemployment

insurance, accident insurance and pensions.

• Economic and labour market conditions. Under difficult economic conditions,

organisations looking for the best employees will look for better benefits and services,

which usually mean non-taxable income.

• The aims of management may affect these benefits and services. For example,

management might strive for employee satisfaction or oppose trade unions.

• Competition can prompt an organisation to adapt or expand its benefit plans.

• The preferences or attitude of employees towards the programme. In order for benefits to

increase employee satisfaction. Employees must know what their benefits are and must

prefer the benefits in their organisation to those offered by competitors. In addition, they

must know that the benefits will satisfy their needs better than the benefits offered by

competitors.

8.3 Reasons for the Growth in Employee Benefits and Services

The offering of employee benefits and services effectively emerged during the Great

Depression of 1929 to 1933, as a result of Franklin Roosevelt’s legislative programme to

buffer the devastating effects of the Great Depression (Noe et al, 2006:536). A further factor

which initiated the growth in employee benefits and services is the tight wage control and

labour shortage brought about by World War II, which resulted in employers using benefits

to attract and retain suitable employees (Noe et al, 2006:536).


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The following relatively recent factors which have contributed to the growth in employee

benefits and services:

• Taxation: in order to provide employees with some form of tax relief, salaries may be

structured to incorporate tax-free benefits.

• Labour Market Conditions: organisations often use employee benefits in order to attract

and retain employees.

• Insurance Costs: in order to address the rising costs of medical treatment, disability

insurance and pension funds, employers attain insurance for their employees as a group.

• The Influence of Trade Unions: their biggest contribution has been the improvement

and increase in the number of benefits initiated by the employers.

• Changed Employee Needs: The rise in living standards has resulted in employees

focusing on the satisfaction of their higher order needs (Noe et al, 2006:536-538).

8.4 Types of Employee Benefits and Services

Employee benefits and services may be classified as voluntary or mandatory. As Figure 8.1

shows, in South Africa, mandatory employee benefits and services include leave,

unemployment insurance and compensation for injuries and diseases. Voluntary employee

benefits and services within South Africa include pension, insurance and employee services

such as childcare programmes and food services.

? THINK POINT

The passage above identifies two reasons which initiated the growth in employee

benefits and services. What more recent factors have contributed to the expansion

of employee benefits and services?


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Figure 8.1: Voluntary and Mandatory Employee Benefits and Services

Adapted from Nel et al (2004:279-281)

Comment on Activity

The impact of the South African context on an organisation’s provision of employee benefits

and services will be addressed in the discussion of the various types of benefits below.

8.4.1 Leave

Leave benefits include:

• Annual leave

In South Africa, the Basic Conditions of Employment Act of 1997 specifies that employees

are entitled to at least 21 days paid annual leave per 12 months of employment.

EMPLOYEE BENEFITS & SERVICES

MANDATORY

• Leave • Unemployment

Insurance • Compensation for

Injuries & Diseases

VOLUNTARY

• Pension • Insurance • Employee

Services

ACTIVITY

Consider your experience within South African organisations. How does the

South African environment (particularly the legal environment) affect an

organisation’s provision of the employee benefits and services identified in Figure

8.1 above.


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• Sick leave

This refers to the “The number of days sick leave to which an employee is entitled depends

on company policy regarding seniority and period of service” (Nel et al, 2004:280). In South

Africa, the Basic Conditions of Employment Act of 1997 specifies that employees are entitled

to six weeks paid sick leave per 36 months of employment.

• Maternity leave

Expecting female employees are entitled to maternity leave. In South Africa, the Basic

Conditions of Employment Act of 1997 specifies that “an employee is entitled to at least four

consecutive months maternity leave” (section 25[1]).

• Family responsibility leave

Family responsibility leave provides for the taking of paid leave

o When an employee’s child is born or an employee’s child falls ill; or

o On the death of the employee’s spouse or close family member.

8.4.2 Unemployment Insurance

Unemployment insurance essentially provides for the insurance of employees who may lose

their earnings as a result of illness, pregnancy or termination of service.

In South Africa, the Unemployment Insurance Fund came into effect as a result of the

Unemployment Insurance Act of 1946, which was later replaced by the Unemployment

Insurance Act of 1966. This piece of legislation is currently under review and the

Unemployment Insurance Bill was released in 2000. This bill serves to address the

shortcomings of the 1966 Act which include:

• Weak enforcement and compliance measures;

• A rigid benefit structure;

• No comprehensive database of contributors; and

• Discrimination against certain categories of employees (RSA, 2000).

8.4.3 Compensation for Injuries and Diseases

In South Africa the Compensation for Occupational Injuries and Diseases Act of 1993 has

replaced the Workmen’s Compensation Act of 1941. This piece of legislation serves to

regulate the compensation received by employees who contract a disease or are injured while

working (Carrell et al, 1997:395).


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8.4.4 Pension Funds

A pension provides for the funding of an employee’s retirement. Objective of a pension fund:

• to ensure that after retirement employees have a continued source of income in order to

maintain approximately the same standard of living as before (Nel et al, 2004: 280); and

Two types of pension plans exist:

• The contributory plan where the employee and employer both contribute to the plan; and

• The non-contributory plan that is financed by the employer (Carrell et al, 1997).

In South Africa the Pension Fund Act of 1956 is currently being reviewed so as to bring the

legislation in line with current international practice. The Pension Funds Second Amendment

Bill of 2001 was released during January 2001.

8.4.5 Insurance

Employers normally provide employees with medical insurance as well as life and disability

insurance.

Medical Aid Schemes

Medical aid schemes provide medical coverage for both the employee and his/her

dependants. Employers and employees both contribute to the costs of the medical aid

scheme (Carrell et al, 1997:400). In South Africa, recent legislation regarding medical aid

schemes presents a number of challenges to the administration of these schemes.

Disability and Life Insurance

Many employers, in recognizing the importance of salary continuation after illness or

disability, provide their employees with disability insurance (Carrell et al, 1997:401).

Further, a number of employers also offer life insurance for their employees where the

standard policy provides a death benefit of five times an employee’s annual rate of pay

(Carrell et al, 1997:401).


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8.4.6 Other Employee Benefits and Services

Organisations may also offer the following employee benefits and services:

• Food Services where tea and lunch facilities are provided, such as cafeterias;

• Education Expenses where employers provide partial or full reimbursement for an

employee’s study fees (Carrell et al, 1997:403);

• Transportation Programmes where employers may, for example, provide the services of

a company bus or offer company cars to certain grades of employees;

• Housing Subsidy where an employer may subsidise the employee’s repayment of his/her

housing loan;

• Childcare Programmes where the employer will either subsidise childcare costs or

provide childcare facilities (Carrell et al, 1997:401).


Boase (1996:37) emphasises that parental rights (not just maternity rights) of employees

should be given attention in the workplace. It is argued that “traditionally employers have

not been willing to assume responsibility for childcare, even though working-class parents

with preschool children make up the largest proportion of the workforce”.

Boase (1996:37) argues that companies should address this issue by:

• Recognising that childcare is a social responsibility of the company;

• Recognising that childcare is not solely a mother’s responsibility;

• Recognising that the use of family members (e.g. grandparents) to care for children is

becoming less common;

• Providing flexi-time for working mothers;

• Providing a childcare facility in the workplace;

• Subsidising crèches and the training of childminders.

READING ACTIVITY

Read the following journal article:

• Boase, N. (1996) ‘Childcare – A Logical Extension of Parental Rights?’.

People Dynamics. April, 14 (3), p 37.

What issues does Boase (1996) raise?


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In summary section 8.4 addressed the types of employee benefits and services which

organisations may provide. These include leave, unemployment insurance, compensation for

injuries and diseases, pensions, medical insurance, life and disability insurance and other

employee services such as childcare programmes.

8.5 Administration of Employee Benefits and Services

Employee benefits and services programmes need to be managed effectively.


Ivancevich (1998) argues that the following process will assist a company in effectively

managing its employee benefits and services programme:

• Step 1: Set Objectives and Strategy for Benefits

The organisation needs to decide whether to adopt a:

o pacesetter strategy where the organisation will be first with the latest benefits which

employees desire;

o comparable benefits strategy where the organisation will match the benefits provided by

its competitors;

o minimum benefits strategy where the organisation will only provide mandatory benefits

(Ivancevich, 1998).

It is important that the benefits strategy which is chosen supports the overall organisational

strategy.

• Step 2: Involve Participants and Unions

Input from an organisation’s employees and unions will enable the HRM function to

implement appropriate employee benefits and services (Ivancevich, 1998). This will enhance

the value of the benefits to the employees and in so doing increase their effectiveness.

? THINK POINT

How does your organisation go about managing its employee benefit and service

programme? Is your organisation’s approach effective? Why / Why not?


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• Step 3: Communicate Benefits

The communication of benefits to employees also serves to increase their effectiveness.

• Step 4: Monitor Costs Closely

It is important that the HRM function ensures not only that the benefits which the

organisation offers are cost effective, but that the administration of the benefits and services

is efficient as well (Ivancevich, 1998).

8.6 Summary

This section addressed the HR issue of Employee Benefits and Services. In so doing, the

nature of employee benefits and services was examined and reasons for the growth in

employee benefits and services was investigated. The types of employee benefits and

services offered by organisations, as well as the administration of such benefits, were also

studied.

Section 9 will focus on Human Resource Management and Employment Relations.


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SECTION 9

HUMAN RESOURCE MANAGEMENT

AND EMPLOYMENT RELATIONS


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CONTENTS

Learning Outcomes

Reading

9.1 Introduction

9.2 In search of a definition: from industrial relations to employment relations

9.3 The major theories of employment relations

9.3.1 The pluralist perspective

9.3.2 The unitarist perspective

9.3.3. The radical or “Marxist” approach

9.4 The parties to the employment relationship and their respective roles

9.5 The Labour Relations Environment

9.5.1The Micro-environment

9.5.2 The Macro-environment

9.6 Summary


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LEARNING OUTCOMES

The overall outcome for this section is that, on completion, the student should be able to

demonstrate a basic understanding of employment relations within a national context. This

overall outcome will be achieved through the students mastery of the following specific

outcomes, in that a student will be able to:

1. Define the concept of employment relations

2. Identify and discuss the major theories of employment relations.

3. Explain the concept of the tripartite relationship by having identified the parties to the

labour relationship.

4. Identify and be aware of how the various environmental factors impact on the labour

relationship.


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READING

Prescribed Reading:






Oxford. Chapter 11

Recommended reading:

• Bendix, S. (2000) Industrial Relations in the new South Africa.3rd edition

revised). Cape Town: Juta and Co.

• Nel, P.S, Swanepoel, B.J., Kirsten, M., Erasmus, B.J. and Tsabadi, M.J. (2005)

South African Employment Relations: Theory and Practice.5th edition.

Pretoria: Van Schaik Publishers.

• Venter, R. (ed) (2003) Labour Relations in South Africa (revised edition) Cape

Town: Oxford University Press.

Journals and Legislation

• Boase, N. (1996) ‘Childcare – Logical Extension of Parental Rights?’. People

Dynamics. April, 14 (3), p 37.

• Cockrum, R.B. (1982) ‘Has the Time Come for Employee Cafeteria Plans?’.

Personnel Administrator. July, 27 (7), pp 66 – 69.

• RSA (1997) ‘Basic Conditions of Employment Act (Act No 75 of 1997)’.

Government Gazette No. 18491. Pretoria: Government Printer.

• RSA (2000) ‘Unemployment Insurance Bill’. Government Gazette No. 20952.


• RSA (2001) ‘Pension Funds Second Amendment Bill, 2001’. Government


• Ryland, E.K. & Rosen, B. (1988) ‘Attracting Job Applicants with Flexible

Benefits’. Personnel. March, pp 71 – 73.


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9.1 Introduction

“Labour relations” is an all-encompassing term used to describe the dynamic complexities of

the various relationships between the parties to the employment relationship. It provides a

theoretical and practical framework by means of which the relationship between individual

employees and employers and also the relationship between the collectives (such as trade

unions, employers’ organizations and the state) and individuals or between one collective

body and another are regulated.

Salamon (1998:3) suggests that industrial relations is often perceived as being synonymous

with stereotypical blue-collar, all-male unionized workers in the mining or manufacturing

industry. The term labour relations however tends to reflect to a greater extent the realities of

the employment relationships in the post-industrialized era.

The growth of the services industries facilitated to a large extent by the growth in

information technologies and changing global demographics has prompted the need for an

accurate definition and study of the employment relationship. Although the relationship

between employees and employers does include an element of conflict it is actually

interdependent. This interdependence between the parties to the employment relationship

ensures mutual reliance for the realization of their respective aspirations whether they be

work or non-work related. Thus the purpose of labour relations can be seen as the creation

and promotion of harmonious working environments through the regulation of the

employment relationship.

9.2 In search of a definition: from industrial relations to employment relations

An early attempt to define the field of industrial relations was made by Dunlop (1958) He

defined an industrial relations system as follows:

“ It is comprised of certain actors (managers, workers, and specialized government agencies),

certain contexts (technological characteristics, the market an the distribution of power in the

society), an ideology which binds the industrial relations system together and body of rules

created to govern the actors at the workplace and the work community (Dunlop, 1958:7).”


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According to Dunlop (1958), the actors establish rules for the workplace and work

community. These rules are essentially aimed at governing the relations and the interaction

between the actors and therefore include the establishment of justice in the workplace. He

also emphasized that the environment surrounding the workplace influences the actors and as

such the industrial relations system of any country exists alongside other systems such as the

economic systems and the technological system.

Flanders (1965:4) defined industrial relations as a study of the institutions of job regulation.

Hyman (1975: 12) preferred to focus on the processes of industrial relations describing the

field as the study of the processes of control over work relations which include job regulation.

Early perspectives tended to focus on the conflict regulatory aspects and the institutions

involved in the rule making and work control processes in the employment context.

Gradually other perspectives developed and since the 1980’s the definition and scope of this

field has attracted renewed interest and debate in the early 1990’s the debate was taken

further when it was renamed employment relations.

The acknowledgement of the centrality of the employment relationship – in its totality –to

industrial relations thus greatly facilitated the broadening of this field both in theory and

practice. This shift has brought about the merging of human resource management and

industrial relations into what has now become known as employment relations. Employment

relations as a field thus cover everything that emanates from or impacts on the employment

relationship.

9.3 The major theories of employment relations

Salamon (1998:5-9) suggests three major approaches to labour relations namely the pluralist

approach, the unitarist approach and the radical or Marxist approach. Each of these will be

discussed in more detail below.

9.3.1 The pluralist perspective

The pluralist perspective views the employing organisation as a coalition of individuals and

groups with diverse objectives, values and interests. It presupposes that organizations are

multifaceted, complex groupings of individuals who align themselves with other members of

the organisation sharing similar views, values and objectives (Venter 2004:7). The different


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groups in the organisation are competitive in terms of leadership, authority and loyalty. Trade

unions are accordingly accepted as a legitimate forum for coordinating various interests and

expressing them accordingly. There is a greater scope for conflict because of this interface

between a variety of interest groups and a greater dissemination of power that has now been

accepted as rationale and inevitable (Salamon, 1998:7).

Conflict is primarily the result of the tensions that arise between the parties to the

employment relationship as a consequence of the differing roles they play. Management is

responsible for the efficiency, productivity and productivity and profitability of the

organisation. The concerns of the individual worker are, however wider than this and include

personal aspects such as higher pay, better working conditions, job security and more

meaningful work. Conflict results from industrial and organizational factors rather than from

individual, personal factors. The conflict that does arise is manageable through a system of

negotiated trade-offs and settlements. The pluralists argue that in the employment

relationship there is a constantly shifting balance of power that needs to be maintained

through compromise and collaboration (Venter, 2004:7).

The pluralist perspective therefore typically concentrates on how to regulate and

institutionalize conflict in order to contain and control its impact on the parties and their

relationships. The state is viewed as the guardian of public interest and should provide the

machinery to institutionalize the conflict.

9.3.2 The unitarist perspective

The unitarist perspective views the organisation as an integrated group of people having a

unified authority structure with common values, interests and objectives. Management is the

only source of authority in the organisation. Its right to manage is legitimate and any

objections to this are seen as irrational ((Nel, Swanepoel, Kirsten, Erasmus and Tsabadi,

2005:7). Conflict is perceived as being irrational and is most often of a direct clash between

opposing ideologies (Salamon, 1998:6). Managers generally attribute conflict to a clash of

personalities or a general failure on the part of employees to understand the decisions taken

by management as a whole or to a breakdown in managerial communication (Venter,

2004:7). Trade unions are viewed as being subversive providing a direct affront to the power

and authority of management who “know what is best for their employees” and make

decisions accordingly.


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9.3.3. The radical or “Marxist” approach

The radical approach is also known as the “ Marxist” or “class conflict” perspective. Its

proponents concentrate on the nature of the society that the organisation finds itself in. It

assumes that workers are oppressed for the sake of capitalist interests. Labour-management

relations are viewed as a mere extension of the class conflict, between the “haves” and the

“have-nots” which permeates the capitalist society as a whole.

Organisations are accordingly geared to wealth generation and the labour relationship is

structured to conform to the devolution of power from top to bottom. Marxism by contrast

promotes an order in which productive capacity (including land, capital and labour) and the

fruits thereof are owned by and shared among the people (Vories, 1991:88).

Industrial conflict can therefore be seen from a Marxist perspective as an expression not only

of organizational conflict but of wider divisions within society as a whole (Salamon, 1998:9).

Accordingly trade unions should only be seen as vehicles of fundamental societal change.

One of Marx’s biggest criticisms was that it alienates workers mainly due to the strict

division of labour that seeks to achieve maximum efficiency. A factory system ultimately

alienates workers from their produce, their potential, their efforts and each other. All

employees efforts are geared toward the production for the benefit of employer and the

employee. Under a Marxist system there is no division of labour. Everything is produced for

the benefit of the whole rather than the individual and society rather than the market will thus

determine what is produced for whom. (Vorhies, 1991:88). Ideally people will work for the

sake of working and not what they stand to gain in return.

9.4 The parties to the employment relationship and their respective roles

The labour relationship is essentially a relationship between employer and employees, as well

as between employer/employee and the state, thus making it a tripartite relationship (Venter,

2003:9).

The role of the state is to create, by means of policy and legislation a framework within

which the other parties can conduct their relationships.

The employer refers to the organisation as a legal entity and the employing organisation. The

employee traditionally refers to the workers and their representative bodies, namely trade

unions (Nel, et al. 2005:13).


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The Tripartite Relationship (Venter, 2003:9)

It is important to realize that the state plays a less than equal role in the relationship, except

when it is the employer itself. The primary focus of the employment and labour relationship

is therefore the relationship between employer and employee, with the state filling a

secondary or supportive role.

The relationship is therefore divided into two categories:

• The secondary employment relationship –which is the relationship between the state ,

the employee and the employer.

• The primary employment relationship – which is the relationship between the

employee and the employer.

The labour relationship is a dynamic one, as the interactions between parties often occur in a

turbulent environment. The secondary employment relationship is a facilitative relationship

in which the state provides the framework for conducting the primary employment

relationship. The state establishes the rules and regulations governing the interactions

between employee and employer. The degree to which the state intervenes in the primary

employment relationship ranges along a continuum from minimal to maximal intervention.

Primary employment relationship

The State

Employers and employer organisations

Labour and Trade Unions

Secondary employment relationship

Secondary employment relationship


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The degree of state intervention is an extension of the prevailing system of government and

its socio-economic policies.

Bendix (2000:16) points out that in the employment relationship there is continuum between

conflict and co-operation, each governed by its own power relations and processes.

NEGATIVE POLE POSITIVE POLE

Diverging interests, Common interest in

goals, values and needs continuation of the organisation

CONFLICT CO-OPERATION

No or little Increasing

trust trust

POWER OVER POWER TO

(Coercive Power, (Expert power, Referent Power) Reward

Power)

POWER SHARING

Joint Task-related

problem-solving decisions

INSTITUTIONALISATION PARTICIPATION

OF CONFLICT

CO - DECISIONMAKING

COLLECTIVE INDIVIDUAL INDIVIDUAL AND

COLLECTIVE

The Interaction Continuum (Bendix, 2000:16)


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The interaction is characterized by the following (Bendix, 2000: 17-19):

• Custom and tradition

• Legislation

• Mutual agreement

• Ethical considerations: trust, integrity and fairness

External influences on the employment relationship are:

• The socio-political system

• Societal influences

• The economic dispensation

• The influence of trade unions

• Technological developments

9.5 The Labour Relations Environment

Every organisation is influenced by the environment in which it operates. A good

organisation is earmarked by its ability to anticipate change and respond accordingly. The

human capital and the labour relationship are in essence prone to influence by a number of

moderating factors from both within and outside the organisation.

The labour relations environment, (Venter, 2003:17)


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9.5.1 The Micro-environment

This comprises of its:

• Culture

An organisation’s culture consists of shared values, norms and beliefs that help to unite

the members of that organisation in a common purpose. A strong culture will enable a

firm to adapt to environmental changes and to co-ordinate and integrate its internal

operations (Wright, Kroll and Parnell, 1998:244).

• Leadership

Strong leadership is increasing in importance as an ingredient for a successful

organisation. The age-old debate regarding the interchangeability of the terms

“management” and “leadership” continues unabated. However, while all leaders are

managers, it does not necessarily mean that all managers are leaders. What distinguishes a

leader from a leader from a manager is that leaders secure the co-operation of their

followers. Thus, a positive labour relationship is dependent on the ability of an

organisation’s leadership to create a harmonious, productive and sound working

environment (Venter, 2004: 18).

• Communication structures

Effective labour relations obviously depend on positive communication. Organisation’s

often make the mistake of relying extensively on top-down communication. This

contradicts from the principles of participation and co-operation that form the basis of

much of the new age labour dispensation. Language increasingly becomes an issue

especially in diverse countries like South Africa, thus organisation’s need to be aware of

the language requirements of their workforces and to adjust their communications

policies accordingly (Venter, 2004:19).

• The nature of the workforce

Cultural diversity is one component of a workforce that needs to be considered by an

organisation sensitive to its diverse nature. The number of women employed as also an

important issue. Generally speaking, Southern African organisation’s are still lax in

promoting gender empowerment and many are still male dominated. Sexual orientation is


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also another sensitive matter to be considered (Grobler, Warnich, Carrell, Elbert and

Hatfield, 2002:45). Finally, sight, hearing, physical, psychological, or other disabilities

need to be considered.

• Policies and procedures

Policies and procedures are the elements that provide direction in and regulate the

activities of the organization and its members. Organisations have a range of policies and

procedures that co-ordinate and facilitate the labour relationship (Venter, 2004:20).

9.5.2 The Macro-environment

This comprises of its external environment:

• The economy

The economic environment can be further sub-divided into a number of factors that

typically impact on the employment relationship.

These are:

• Government policy

• Inflation and unemployment

• Globalisation and retaining the competitive edge

• Technology

• The socio-political environment

The prevailing political dispensation should reflect the ideology supported by the

majority of the constituents. Since these are employers and employees their political

aspirations will often be reflected in the workplace. In the same vein, worker’s ideals may

be reflected in the political arena since they would typically vote for the party that best

accommodates their socio-economic needs (Venter, 2004:20).

• The legal framework

A country’s labour legislative framework comprehensively regulates all facets of the

employment relationship, from basic employment rights and the conditions of

employment at one end to the employment practices at the other (Nel et al,2005:26).


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Within the South African context, the following legislation is important:

• The Labour Relations Act of 1995

• The Basic Conditions of Employment Act of 1997

• The Occupational Health and Safety Act of 1993

• The Employment Equity Act of 1998

• The Skills Development Act of 1998

? THINK POINT The Changing face of the employment relationship (Venter, 2003:525)

• The relationship between the employer and employee will move away from what can be

loosely described as a ‘master-servant’ relationship in which employees are subservient to

the employer. Instead, alliances will be formed between providers of labour and suppliers

of work. Within these alliances the parties will interact on an equal contractual footing.

• The role of trade unions will become increasingly redundant as the suppliers of labour

and employers increasingly negotiate on a contractually equal footing.

• The roles of the lower to middle management tiers in organizations will increasingly

become redundant as employees are given increased autonomy and control.

• Work itself will be less rigidly governed by rules and regulations.

• There will be less commitment and loyalty and a higher turnover of contingent and

contract workers.

9.6 Summary

This section focused on Human Resource Management and Employment Relations. In doing

so the nature of the subject has been examined and it has been established that employment

relations is a “living” field of study that evolves around and is played out daily in workplaces

around the world


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SECTION 10

CAREER MANAGEMENT


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CONTENTS

Learning Outcomes

Reading

10.1 Introduction

10.2 The Career in the Twenty-First Century

10.3 The Importance of Career Management to Employers and Employees

10.4 Career Stages

10.5 Career Planning

10.5.1 Organisational Career Planning

10.5.2 Individual Career Planning

10.6 Career Development

10.7 Summary


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LEARNING OUTCOMES


demonstrate a comprehensive understanding of career management. This overall outcome

will be achieved through the student’s mastery of the following specific outcomes:

1. Define the concept of the ‘career’.

2. Critically discuss the changing nature of the career.

3. Identify the importance of career management for employers and employees.

4. Identify, discuss and apply the various career stages.

5. Critically discuss organisational and individual career planning.

6. Critically discuss career development.


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READING

Prescribed Reading:

Prescribed Reading:






Oxford. pp 424-467


Books






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Journals

• Caudron, S. (1994) ‘HR Revamps Career Itineraries’. Personnel Journal.

April, 73 (4), pp 64 – 76.

• Ettorre, B. (1996) ‘A Conversation with Charles Handy on the Future of Work

and an End to the “Century of the Organization”’. Organizational Dynamics.

Summer, 25 (1), pp 15 – 27.

• Greengard, G. & Kinnard, W. (1995) ‘The Key to Your Career Growth May

Be a Job Change’. Personnel Journal. October, 74 (10), pp 100 – 106.

• Hall, D.T. & Moss, J.E. (1998) ‘The New Protean Career Contract: Helping

Organizations and Employees Adapt’. Organizational Dynamics. Winter, 26

(3), pp 22 – 38.

• Hardijzer, C. (1999) ‘Careers: Treading a Tricky Path within the Changing

World of Work’. People Dynamics. November – December, 17 (11),

pp 42 – 46.

• Kossek, E.E., Roberts, K., Fisher, S. & DeMarr, B. (1998) ‘Career Self-

Management: A Quasi-Experimental Assessment of the Effects of a Training

Intervention’. Personnel Psychology. Winter, 51 (4), pp 935 – 954.

• Thompson, P.H., Zenger Baker, R. & Smallwood, N. (1986) ‘Improving

Professional Development by Applying the Four-Stage Career Model’.

Organizational Dynamics. Autumn, 15 (2), pp 49 – 63.


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10.1 Introduction

This, the final section of the HRM module guide, focuses on Career Management. In so

doing, the following will be examined:

• The Career in the twenty-first century

• The importance of career management

• Career stages

• Career planning

• Career development

10.2 The Career in the Twenty-First Century

Graham & Bennett (cited in Nel et al, 2004) define the concept of a career as “a series of

jobs that follow a hierarchy of levels or degrees of difficulty, responsibility and status

” (p 500).

READING ACTIVITY

Before reading the two journal articles listed below, answer the following

question.

1. In your opinion how does the ‘career of today’ differ from the ‘career of 30

years ago’?

Now read the following two journal articles and answer the question which

follows.

• Ettorre, B. (1996) ‘A Conversation with Charles Handy on the Future of Work

and an End to the ‘Century of the Organization’. Organizational Dynamics.

Summer, 25 (1), pp 15 – 27.

• Hardijzer, C. (1999) ‘Careers: Treading a Tricky Path Within the Changing

World of Work’. People Dynamics. November – December, pp 42 – 46.

2. According to Handy (cited in Ettorre, 1996) and Hardijzer (1999), what does

the career of today (and the near future) comprise?


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The articles of Ettorre (1996) and Hardijzer (1999) outline the nature of the ‘career’ at the

beginning of the twenty-first century.

Ettorre (1996) presents a conversation with the management philosopher Charles Handy

regarding his views on the future of work and the organisation. In his discussion with Ettorre

(1996), Handy asserts that in the near future he sees “…. a withering of the ‘employment

organization’….a lot of scripts will need to be rewritten, including the script that includes

job security in a corporation followed by a comfortable retirement. A lot of us will become

‘portfolio workers’ – selling our skills to a variety of clients…and all of us will be looking

beyond work to find meaning and identity” (Handy cited in Ettorre, 1996: 16). Handy argues

that the organisation of the future will be ‘Athenian’ in nature which focuses on teamwork

and expertise in the solving of organisational problems (Ettorre, 1996). According to Handy,

within the twenty-first century ‘Athenian’ organisations will employ half the people that

were employed by organisations in the twentieth century, and those individuals who are the

most competent “will become independent workers, selling back into the organization for the

most part, but into several organizations at the same time” (Handy cited in Ettorre, 1996:

20).

Like Handy (cited in Ettorre, 1996), Hardijzer (1999) also recognizes the dynamic nature of

the twenty-first century career. Hardijzer (1999:43) emphasises that “…in past decades,

companies played a far more prominent role in defining career options and determining the

career progress of individuals…the idea that a career lies primarily within a company is a

myth”. Hardijzer (1999:46) identifies the career of today to be ‘protean’ which refers to a

career which is “shaped more by the individual than the organisation and may be redirected

from time to time to meet the needs of the person”. Given this protean career, the challenge

for employees lies in proactively managing their volatile career path.


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10.3 The Importance of Career Management to Employers and Employees

Career management may be defined as “the process of designing and implementing goals,

plans, and strategies that enable HR professionals and managers to satisfy workforce needs

and allow individuals to achieve their career objectives” (Carrell et al, 1997: 347).


The implementation of an effective career management programme could bring about a

number of benefits for both the employer and the employee. These include:

• The ability of the organisation to gain competitive advantage within both the local and

global context as a result of the maintenance of the organisation’s intellectual capital;

• The organisation would avoid the negative effects of obsolescence;

• Increased employee job satisfaction and motivation; and

• Reduction in staff turnover due to satisfied employees (Nel et al, 2004:459).

10.4 Career Stages

A career may be viewed in terms of career stages, each of which corresponds to a particular

life stage of an individual (Ivancevich, 1998).

? THINK POINT

Consider your organisaton. What benefits could result from the implementation

of an effective career management programme?

? THINK POINT

Consider your career thus far. Are you able to identify in the region of two to four

‘stages’ in your career?


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Nel et al (2004:460) argues that all individuals experience a number of career stages, each of

which serves to address particular individual needs. The various career stages identified by

and the corresponding needs which these stages address are depicted in Figure 10.1.

Figure 10.1: Career Stages (adapted from Nel et al, 2004:460)

The career stages depicted in Figure 10.1 include:

• Establishment where the individual enters into an organisation and becomes an

employee.

• Advancement where the individual starts progressing in his/her career (Ivancevich,

1998).

• Maintenance where the individual strives to maintain the gains which he/she has made

from his/her past performance.

• Retirement where the individual completes one career and may move to another

(Ivancevich, 1998).

Safety, Security, Physiological

Needs

Safety & Security Needs

Achievement, Autonomy &

Self Actualisation Needs

Esteem & Self Actualisation

Needs

Self Actualisation

Needs

NEEDS

Pre-Work

Establishment

Advancement

Maintenance

Retirement

CAREER STAGES


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10.5 Career Planning

Career planning should be performed by both the individual and the organisation.

Comment on Activity

10.5.1 Organisational Career Planning

Section 3 of this HRM module guide explored the HRM function of HR planning. It was

identified in this section that organisations need to forecast in order to identify the number

and nature of employees which the organisation will require in both the short and the long

term future. In order to meet the future labour needs of the organisation, management should

engage in career planning (Carrell et al, 1997:348).

Organisational career planning may be achieved through the development of individual

development plans for employees (Carrell et al, 1997:348). Such a plan provides details of

an employee’s potential progression (vertical, lateral or diagonal) from one job to another

according the goals of the organisation. The plan also specifies the development activities

which will be conducted to prepare the employee for the identified future positions (Nel et al,

2004:462).

Such career planning enables the organisation to not only successfully prepare for and

achieve its goals, but it also serves to ensure that individual employee’s career goals are

realistic.

ACTIVITY

1. Identify the career planning programmes which your organisation has

implemented. Comment on the effectiveness of these programmes.

2. Identify the career planning initiatives which you as an individual have

taken, and comment on their effectiveness.


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10.5.2 Individual Career Planning

As identified in section 10.2, the changing nature of work requires that the individual

employee take charge of his/her career management. Kossek, Roberts, Fisher & De Marr

(1998:935) identify that the career environment is “changing from a traditional one that is

‘bounded’ and driven by orderly employment relations with one employer to one that is

boundaryless and increasingly self-directed by the employee”.

In order to be career self-managers employees need to engage in career planning through:

• Career exploration which involves the collection and analysis of career-related

information (Kossek et al, 1998:935);

• Seeking developmental feedback so as to identify and address one’s strengths and

weaknesses;

• Enhancing one’s job mobility preparedness which involves developing competence in

informal networking internal and external to the employee’s organisation, and being

proactive in gathering information on new job opportunities and acting on these

opportunities (Kossek et al, 1998:936).

10.6 Career Development

Career development needs to take place in order to ensure that the goals established in career

plans may be achieved. Career development programmes may involve a wide range of

training and development interventions, such as on-the-job training, in-house training

programmes, off-site training programmes and coaching (Nel et al, 2004:463).

Given the dynamic nature of today’s career, as identified in section 10.2, career development

interventions should also focus on developing the employee’s career self-management

competence.


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READING ACTIVITY

Read the following journal article:

• Kossek, E.E., Roberts, K., Fisher, S. & DeMarr, B. (1998) ‘Career Self-

Management: A Quasi-Experimental Assessment of the Effects of a Training

Intervention’. Personnel Psychology. Winter, 51 (4), pp 935 – 954.

1. Kossek et al (1998) conducted an investigation into the effectiveness of

interventions which focused on improving an employee’s career self-

management competency. Discuss the findings of this study.


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The study conducted by Kossek et al (1998) found that the formal training programmes were

used by organisations in an attempt to develop career self-management skills within

employees. These training programmes involved employees in undergoing self assessments

to increase their awareness of their individual values and attitudes. The programmes also

provided the employees with information and skills to enhance their understanding of, and

commitment to career self-management.

The results of the study showed, however, that career-self management interventions did

“…influence employees’ career self management behaviours, but in the opposite direction of

the training’s intent” (Kossek et al, 1998: 946). The researchers noted that this result was

probably influenced by the fact that the concept of career self-management was “far ahead of

the reality the employees faced in the current culture and the existing human resource

systems” (Kossek et al, 1998: 948). It was emphasised that attention should be given to the

organisational culture and climate and supporting HR interventions when implementing

career self-management programmes.

10.7 Summary

This section investigated Career Management. In so doing the career in the twenty-first

century, the importance of career management to the employer and employee and the various

career stages were examined. Career planning and career development were also studied.


___________________________________________________________________ MANCOSA - MBA 190

NOTES :


___________________________________________________________________ MANCOSA - MBA 191

SECTION 11

BIBLIOGRAPHY


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