MBA1 Human Resource Management Jan 2013

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 © 2013 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 2013

Human Resource Management

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TABLE OF CONTENTS

Section Title of Section Page

Introduction

3 - 10

1

Introduction to Human Resource Management

11 - 40

2

Human Resource Strategy and Business Strategy

41 - 67

3

Human Resource Planning

68 - 90

4

Recruitment, Selection and Induction

91 - 122

5

Employee Training and Development

123 – 157

6

Performance Management

158 – 183

7

Compensation

184 – 209

8

Employee Benefits and Services

210 - 232

9

Human Resource Strategy and Employee Relations

233 – 253

10

Career Planning

254 – 272

11

Bibliography

273 - 279


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INTRODUCTION


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AIMS OF THIS MODULE

The broad aims of this module are to:

• Introduce the learner to the field of human resource management.

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

business strategy.

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

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

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

• Develop the learner’s understanding of performance management.

• Develop the learner’s understanding of the HRM practices of compensation and the provision

of employee benefits and services.

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

context.

• Develop the learner’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 learner to the

fundamentals of the field of human resource management. 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 learner 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 in and contribute to the

strategic management process.

Section 3: Human Resource Planning

This third section examines human resource planning. 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 are 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. 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. 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. The nature of employment relations is studied

and it is established that it is a “living” field of study that revolves around and is played out

daily in workplaces around the world.

Section 10: Career Management

This section explores the area of career management. 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.

How to Use This Module

This module should be studied using this Study Guide and the prescribed textbooks. You

should read about the topic that you intend to study in the appropriate section of this Study

Guide before you start reading in detail in the prescribed textbooks. Ensure that you make

your own notes/summaries as you work through both the textbooks and this Study Guide.

At the commencement of each section of this Study Guide you will find a list of learning

outcomes. These learning outcomes outline the main points that you should understand when

you have completed the section with its supporting chapters in the prescribed textbook.

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

without a break.

As you work through the Study Guide you will come across:

• Think Points

• Activities

• Reading Activities

• Self Check Activities

• Study Group Discussion Activities

• Sample Examination Questions

These are designed to help you study and prepare for the examination.


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� ACTIVITY

You may come across activities which ask you to carry out specific tasks. The aim of

these activities is to give you an opportunity to apply what you have learnt and / or

explore an issue relevant to the particular section.

� READING ACTIVITY

Most sections of this Study Guide contain at least one reading activity. The reading

activity requires that you read one or more of the recommended journal articles and

then answer questions relevant to that journal article. The majority of the

recommended journal articles are available from the Emerald library facility which

learners may access via Mancosa’s website.

? 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.

�� SELF CHECK ACTIVITY

You will 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

section. You should refer to the Study Guide and prescribed textbooks when

attempting to answer the self check activities.


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Reading

• Prescribed Textbook

o Noe, R.A., Hollenbeck, J.R., Gerhart, B. and Wright, P.M. (2012) Human

Resource Management: Gaining a Competitive Advantage 8th Ed. McGraw-Hill.

• Recommended Textbook

o Nel, P.S., Werner, A., Haasbroek, G.D., Poisat, P., Sono, T. & Schultz, H.B.

(2011) Human Resource Management. 8th Edition. Cape Town: Oxford University

Press Southern Africa.

• Recommended Reading

Each section has a list of recommended books and recommended journal articles, which

allow you to develop an understanding of the issues beyond the perspective of the

prescribed textbooks and Study Guide. The majority of recommended journal articles

STUDY GROUP DISCUSSION ACTIVITY

Study group discussion activities are provided at the end of each section of this Study

Guide. You must have worked through the relevant section and supporting chapters in

the prescribed textbooks prior to meeting as a study group. The study group

discussion activities provide an opportunity for learners to apply what they have

learnt, to share experiences with fellow learners and to learn from each other.

� SAMPLE EXAMINATION QUESTIONS

Sample examination questions are provided at the end of each section. These provide

the learner with an understanding of the type of questions which may be asked in the

examination.


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listed per section are available from the Emerald online library facility which is accessible

via Mancosa’s website.

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 The Place of Human Resource Management within an Enterprise

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

1.5 Strategic Human Resource Management

1.6 Human Resource Career Opportunities

1.7 Current Trends and Challenges

1.8 Summary

Self Check Activity

Study Group Discussion Activity

Sample Examination Question


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LEARNING OUTCOMES

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

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

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

outcomes, in that the learner will be able to:

1. Define human resource management.

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

3. Identify and discuss human resource management functions.

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

5. Explain the nature of strategic human resource management.

6. Identify various human resource career opportunities.

7. Identify and critically discuss current trends and challenges in the field of human

resource management.


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� READING

Reading



Resource Management: Gaining a Competitive Advantage 8th Ed. McGraw-

Hill. (pp 2 – 68) Chapter 1



(2011) Human Resource Management. 8th Edition. Cape Town: Oxford

University Press Southern Africa. (2 – 33) Chapter 1

Recommended Reading:

Books

• George, J.M. & Jones, G.R. (2006) Contemporary Management: Creating

Value in Organisations. 4th Ed. Boston: McGraw-Hill International Edition. Pp

525 – 569 (Chapter 15).

• Grobler, P., Wärnich, S., Carrell, M.R., Elbert, N.F. & Hatfield, R.D. (2006)

Human Resource Management in South Africa. 3rd Ed. London: Thomson. pp

2 – 38 (Chapter 1).

• Kleynhans, R., Markham, L., Meyer, W., Van Aswegen, S. & Pilbeam, E.

(2007). Human Resource Management: Fresh Perspectives. 1 – 41 (Chapter 1

& 2).

• Snell, S. & Bohlander, G. (2007) Human Resource Management. Mason:

Thomson. pp 3 – 44 (Chapter 1).

Journals

• Gbadamosi, G. (2003) “HRM and the Commitment Rhetoric: Challenges

for Africa.” Management Decision. Vol. 41, No. 3, pp 274 – 280.

• Voermans, M. and van Veldhoven, M (2007) “Attitude towards e-HRM: an

empirical study at Philips” Personnel Review. Vol. 36, No. 6, pp 887 – 902.


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1.1 Introduction

This section, the first section of the Human Resource Management module, introduces the

learner to the concept of human resource management (HRM). The following issues are

examined:

• Definition 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 trends and challenges

1.2 Definition of Human Resource Management

Comment on Activity

Various management and Human Resources specialists define Human Resource Management

(HRM) differently, placing emphasis on different aspects of HRM. Some definitions include:

• “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’” (Noe, Hollenbeck, Gerhart & Wright, 2012).

• “the process of managing human talent to achieve an organisation’s objectives” (Snell &

Bohlander, 2007: 4).

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

develop a definition of human resource management.


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• “the productive use of people in achieving the organisation’s strategic objectives and the

satisfaction of individual employees needs” (Nel, Werner, Haasbroek, Poisat, Sono &

Schultz, 2011).

Nel et al (2011) also emphasise the need for HRM to create fit between four dynamic

components of the organisation:

• The environment

• The organisation

• The individual

• The job

These organisational components, and their inter-relation, are diagrammatically represented

in Figure 1.1 below.

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

Components (Nel et al, 2008)

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 The Place of Human Resources Management within an Enterprise

Comment on Activity

Human resource management occupies a functional place 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, 2008: 9).

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.

GENERAL MANAGER

MARKETING MANAGER

PRODUCTION

MANAGER

FINANCIAL

MANAGER

Manager: Compensation

Benefits

Manager: Training &

Development

Manager: Recruitment &

Selection

Manager: Employee Relations

Figure 1.3: Human Resource Management – Functional and Staff Authority

HR

MANAGER

Functional Authority

HUMAN RESOURCE

MANAGEMENT

TOP MANAGEMENT

MIDDLE MANAGEMENT

FINANCE DEPARTMENT

OPERATIONS DEPARTMENT

LOWER MANAGEMENT

TASK TEAMS

EMPLOYEES

MARKETING DEPARTMENT

R & D DEPARTMENT

Staff Authority

THE ORGANISATION


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

George and Jones (2006) identify the functions and activities of Human Resource

Management to include:

HRM Functions Activities Performed by HR Manager

Recruitment and Selection

HR Planning

Job Analysis

External and Internal Recruitment

Administering the Selection Process

Outsourcing to meet HR needs

Training and development

Classroom based training

On-the-job training

Varied work experiences

Formal Education

Performance Appraisal and

Feedback

Trait, behavioural and result appraisals

Objective and subjective appraisals

Effective performance feedback

Compensation Determining pay level, pay structure and benefits

Administering wages and salaries

Employee Relations Union engagement

Collective bargaining

Responsibilities of HR Departments

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

his/her department need to fulfill 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 (Snell & Bohlander, 2007).


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Ulrich’s Future Roles for HR

Dave Ulrich (cited in Nel et al, 2011) identifies the following roles which the HR

professional will need to fulfill to assist the organisation to compete in an increasingly

dynamic and changing environment. HRM professionals will need to focus on the creation of

value for the enterprise, and create mechanisms which provide for rapid business results. The

roles are:

• Strategy Execution Partner: which involves 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.

• Administrative Expert through improving and automating administrative systems.

• Employee Champion which would involve being an advocate for employees.

� Change Agent which would involve building the organisation’s capacity to adapt to cope

with and embrace change (Nel et al, 2011)

1.5 Strategic Human Resource Management

Ulrich emphasised the need for the HRM professional to fulfill four roles which will assist

the organisation with the creation and maintenance of its competitive advantage. While in

the past the focus of HR was an administrative one, more recently HR has been recognised as

being critical to the organisation’s overall strategy (Grobler, Wärnich, Carrell, Elbert &

Hatfield, 2006). Table 1.1 below distinguishes between the traditional approach to HR and

the more recent strategic approach.


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Dimensions Strategic HRM Traditional HRM

Planning and

Strategy

Formulation

� Participates in overall formulation of

company strategy.

� Aligns HR functions to company

strategy

� Involved in operational

planning only

Authority � HR Director afforded high status and

authority

� HR Manager has medium

status and authority

Scope

� Concerned with all managers and

employees

� Concerned mainly with

hourly, operational and

administrative employees

Decision-

Making

� Involved in strategic decision making � Involved in operational

decision making only

Integration

� Fully integrated with other

organisational functions (marketing,

finance, operations, etc.)

� Moderate to limited

integration with other

organisational functions

Table 1.1: Differences between Strategic HRM and Traditional HRM (adapted from

Grobler et al, 2006: 6).

Strategic HRM will be addressed in greater depth in Section 2 of this Study Guide.

1.6 Human Resource Career Opportunities

An 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:

� Employee relations

� Recruitment and selection

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


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� Organisational development

� Training and development

� Performance management

� Compensation and benefits

1.7 Current HRM Trends and Challenges

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

currently affected by a number of trends and challenges.

1.7.1 HRM Trends

A summary of the HR trends identified by HR Future (2006) are provided below. It is likely

that the student of HRM identify at least one of these trends in the organisation in which he /

she works.

• Global Labour Shortage: A growing labour shortage is a trend across the world. In

the United States it is expected that by 2010 approximately 10 million jobs will be

unfilled. This will provide qualified employees with the power to choose the job and

organisation which most fulfills them. It is also likely that organisations will

outsource certain functions to organisations in countries such as India and China (HR

Future, 2006).

• Skills Gaps: There are deficiencies in key skills required by organisations which

result in poor performance and a loss of competitive advantage. Organisations will

have to invest considerably in training and development to address these skills gaps

(HR Future, 2006).

• Retention of Key Talent: Research from the USA shows that an employee’s average

tenure with a company is 3.6 years. As organisations compete on human capital it is

imperative that companies find ways to retain their talent through recognition and

reward strategies (HR Future, 2006).

• Loss of Organisational Knowledge: When staff leave an organisation, they take with

them organisational knowledge which is then lost to the organisation. To address this

it is important that organisations put in place measures to retain such knowledge (HR

Future, 2006).


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• Employee Self-Service & Online Forms: The intranet is being used more and more

to provide Human Resource services to employees. Employees and management now

submit HR related forms (such as leave applications) on line which saves time and

money. This requires that HR departments invest in and maintain a suitable IT

infrastructure which will enable them to deliver online services.

• Older Retirement Age: Many employees from the “baby boomer” generation will

continue to work past their retirement age. The reason for this is that they do not have

the funds to stop work and that they are still fit and well to continue to work (HR

Future, 2006).


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1.7.2 HRM Challenges

1.7.2.1 Sustainability Challenge

Noe et al (2012) define sustainability as “the ability of a company to service and succeed in a

dynamic competitive environment”. Sustainability depends on an organisation’s ability to

meet the needs of its stakeholders, as well as the ability to deal with social and economic

changes.

? THINK POINT

Think about the organisation in which you are currently employed. What is the

sustainability challenges facing your organisation? What implications do these

sustainability challenges have for your organisation’s HRM practices?

Comment on Think Point

Some of the commonly experienced sustainability challenges are described below:

• Economic Changes:

Many organisations now have to work within an uncertain economic environment. Some

of the challenges which economic changes bring about for organisations include:

Sustainability Challenge

Global Challenge

Technology Challenge

HRM CHALLENGES

Figure 1.4: HRM Challenges


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o Competition Amongst Organisations for Employees: Research shows that within the

USA employment is expected to increase by 18.9 million (13%) between 2004 and

2014. New employees will need to fill vacant positions within organisations due to

retirement, death and disability. The projected fastest growing occupations within the

USA include network systems and data communications analysts, medical assistants,

physical assistants as well as computer software engineering applications.

o Valuing of Intangible Assets and Human Capital: A company’s value comprises its

financial assets, its physical assets and its intangible assets which include human

capital, intellectual capital, social capital and customer capital. In the knowledge

economy it is the organisation’s intangible assets which provide for competitive

advantage (Noe et al, 2012). One way in which a company can increase its intangible

assets is through the recruitment and selection of knowledge workers who contribute

and apply specialised knowledge in the manufacture of a company’s product or the

rendering of a service. Adopting a learning organisation philosophy will also assist an

organisation in growing its intangible assets (Noe et al, 2008).

o Changes in Employment Expectations: In the past, employees expected to receive job

security and opportunities for promotion in exchange for their time, effort and skills.

However, given the change with which organisations are constantly faced, job

security and promotion opportunities can no longer be guaranteed. Organisations now

demand high levels of performance and longer working hours without job security

from employees and employees expect flexible working schedules, more autonomy,

comfortable working conditions, financial incentives as well as training and

development opportunities (Noe et al, 2012) in return.

o Employee Engagement: Employee engagement refers to “the degree to which

employees are fully involved in their work and the strength of their job and company

commitment” (Noe et al, 2012). Organisations have concerns about employee

engagement as it directly impacts competitive advantage.

o Talent Management: This involves the attraction, selection, development and

motivation of employees. One of the key challenges experienced with respect to talent


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management is the development of employees into high potential managers and then

retaining them in high level positions (Noe et al, 2012).

o Alternative Work Arrangements: This involves the use of contract workers, temporary

workers and independent contractors as and when required.

o Demanding Work but Greater Flexibility: The globalisation of the world economy

and the emergence of e-commerce have resulted in the 40 hour work week becoming

obsolete. Employees are expected to work longer hours and this is made possible

through technological aides (laptops, PDAs, cellphones, etc.). This results in greater

employee stress and lower satisfaction. To offset the negative impact of demanding

work, some employers try to provide employees with greater flexibility to ease the

pressure of trying to balance work and life activities, while at the same time

increasing productivity and satisfaction (Noe et al, 2012).

• Meeting Needs of Stakeholders, Shareholders, Customers, Employees and Community

In order for an organisation to be sustainable, it needs to meet the needs of its

stakeholders:

o Balanced Scorecard: This is “a means of performance measurement that gives

managers a chance to look at their company from the perspectives of internal and

external customers, employees and shareholders” (Noe et al, 2012). It is important

that the balanced scorecard links Human Resource Management to the business

strategy, so that it may evaluate the extent to which HRM is contributing to the

achievement of the organisation’s goals.

o Social Responsibility: Companies that implement social, ethical and environmental

responsibility initiatives improve their image in the marketplace, which in turn

contributes to their sustainability (Noe et al, 2012).

• Customer Service & Quality Emphasis

Due to high levels of competition and knowledgeable customers, customers are in a

position to demand excellent service. This requires that organisations meet and exceed


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these demands so as to attract and retain customers. To ensure their sustainability, many

organisations implement quality standards such as Total Quality Management (TQM),

Malcolm Baldrige National Quality Award, ISO 9000:2000 and the Six Sigma Process

(Noe et al, 2012).

• Workforce Diversity & Changing Demographics

The following three changes to the demographics and diversity of the workforce have

been predicted:

o Aging Workforce: Forecasts in the USA predict that by 2014 the total size of their

country’s workforce will be 162 million of which 34 million workers will be 55 years

and older. This represents a 49% increase in the 55 years and older age group since

2004. The implications for HRM are that considerable attention will need to be given

to career plateauing, retirement planning and the upskilling of older workers (Noe et

al, 2012). While this is the situation that pertains to the United States, it may well be

different in African countries.

o Diversity of Workforce: The workforce of today is increasingly diverse in terms of

race, gender as well as disability.

o Influence of Immigration: Many industries rely on immigrants (often times illegal

immigrants) for labour intensive and / or short term contract work.

The changing nature of the workforce requires HRM practices that ensure that the talents

of a diversity of employees are optimally utilised.

• Legal & Ethical Issues

Countries across the world have numerous pieces of legislation which impact on HRM

practices. HRM issues which these pieces of legislation focus on include equal

opportunity, health and safety as well as pay and benefits. It is important that HRM

practices support the implementation of the relevant pieces of legislation, so as to avoid

court battles and costs (Noe et al, 2012).


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1.7.2.2 The Global Challenge

? THINK POINT

Think about the organisation in which you are currently employed. What are the

global challenges facing your organisation? What implications do these global

challenges have for your organisation’s HRM practices?


For many organisations expansion into the global market is important for creating and

sustaining a competitive advantage. Further, the global economy does not only affect

organisations with international operations, but affects local organisations who buy materials

from international organisations (Noe et al, 2012).

• Entering International Markets: Organisations can enter into international markets

through exporting their products overseas, establishing manufacturing facilities

internationally, entering into alliances with foreign countries and offering products and

services through e-commerce.

• Offshoring: this refers to the “exporting of jobs from developed countries, such as the

United States, to countries where labour and other costs are lower” (Noe et al, 2008: 41).

Countries to which jobs are often offshored include India, China and Russia. The main

reason for offshoring jobs is to reduce labour costs - for example, a computer programmer

in India earns $10 per hour while a computer programmer in the United States earns $60

per hour. Another key reason for offshoring jobs is to capitalise on the available, highly

skilled and motivated labour pool in some of the developing countries. Offshoring does,

however, have its disadvantages which include the costs associated with working with

different languages, cultures and time zones (Noe et al, 2012).


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1.7.2.3 The Technology Challenge

? THINK POINT

Think about the organisation in which you are currently employed. What is the

technology challenges facing your organisation? What implications do these

technology challenges have for your organisation’s HRM practices?


Advancements in technology have resulted in changes to the way in which we plan our work,

the way in which we communicate, as well as the location of our work. For example,

electronic and networked calendars facilitate employees’ setting up of meetings; cell phones

provide organisation’s with 24 hour access to their employees; and laptops enable us to work

from home, from hotels and from airports. These changes in how and where employees work

has a significant impact on HRM practices.

• How and Where People Work

The internet, PDAs, iPods and cellular phones have lead to changes in many aspects of

HRM. Employees are able to access a considerable range of information and resources

via the internet, and they are able to communicate with experts through newsgroups. As a

result of technological advancement, telecommuting is becoming an option for many

employees. Telecommuting has the advantages of reducing traffic, air pollution,

providing for family-friendly work practices as well as increasing employee productivity

(Noe et al, 2012). However, technological advancement has also resulted, in some

instances, in employees being on call 24 hours a day, 7 days a week.

• High Performance Work Systems

High performance work systems refer to “work systems that maximise the fit between the

company’s social system and technical system” (Noe et al, 2012).


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o Working in Teams: Work teams are now frequently used within organisations to offer

high levels of quality and service to customers. The work teams perform many of the

responsibilities which would have previously been executed by a manager, such as

selecting of new team members, scheduling the team’s work and coordinating the

team’s activities with customers and other teams within the organisation. The use of

work designs such as work teams requires new HRM practices such as providing

compensation and rewards linked to team and company performance; providing

ongoing upskilling to team members; and ensuring that team members have

competence in selecting new team members (Noe et al, 2012).

o Changes in Skills Requirements: New technologies which form part of a high

performance work system require that employees have sufficient technical skills to

work with the technological equipment (Noe et al, 2012).

o Working in Partnerships: Technology has enabled organisations to form partnerships

with one or more other companies. Virtual teams are often used as the basis of the

partnership. Virtual teams are “separated by time, geographic distance, culture and /

or organisational boundaries and rely exclusively on technology for interaction

between team members”. (Noe et al, 2012).

o Changes in Company Structure and Reporting Relationships: In the traditional

organisation, managers were responsible for the dissemination of information and the

making of decisions. However, technology allows employees to have immediate

access to information which allows them to make decisions rather than wait for the

manager’s decision. Technology provides for the “adaptive organisation” where

employees are constantly learning and improving performance and traditional

boundaries between management and employees, and employees and customers, are

no longer relevant (Noe et al, 2012).

o Human Resource Information Systems (HRIS): A Human Resource Information

System (HRIS) is “a system used to acquire, store, manipulate, analyse, retrieve, and

distribute HR information” (Noe et al, 2012). An HRIS is used to store large amounts

of employee data, and is also used to distribute information to employees regarding

human resource issues. The HRIS can support the organisation in strategic decision


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making and can assist the HR Department with day to day decision making (Noe et al,

2012).

o Increased Use and Availability of e-HRM: Electronic HRM or e-HRM provides for

the “processing and transmission of digitised information used in HRM” (Noe et al,

2012). e-HRM has the following implications for HRM practices:

� Recruitment: Jobs can be posted online and candidates can apply for jobs online.

� Selection: Online simulations can be used to measure a candidate’s ability to deal

with business challenges.

� Training: Employees can engage in online learning, allowing them to update their

skills from any location at any time.

� Compensation and Benefits: Employees may review their salary and bonus

information on line. They may also seek information about various benefit plans

(Noe et al, 2012).

� READING

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

• Voermans, M. and van Veldhoven, M (2007) “Attitude towards e-HRM: an

empirical study at Philips” Personnel Review. Vol. 36, No. 6, pp 887 – 902.

In the space below, provide a summary of the key points that were made in the journal

article.


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Comment on Reading Activity

Voermans and van Veldhoven (2007) conducted research into the implementation of an e-

HRM system at Philips Electronics Netherlands and Philips Netherlands, the staff

complement of which was 1000 employees all together. The e-HRM system includes a

performance management system, enables employees to view their salary slips online and

includes a learning and development tool.

Voermans and van Veldhonven’s (2007) research focused on whether employees

favoured the introduction of the e-HRM system. It was found that those employees who

viewed the role of HR to be a strategic partner, change agent or administrative expert

favoured the introduction of e-HRM. However, those employees who viewed the role of

HR as being primarily that of a change agent opposed the introduction of e-HRM. The

opposition from these employees could possibly be a result of the fear that the e-HRM

would result in a loss of personal contact with HR specialists (which is a key component

of being a change agent).

The research also showed employees who found the system easy to use and who were

backed up with good IT support were very positive about the e-HRM system (Voermans

and van Veldhonven, 2007). Experienced user support was found to be important to

managers.

Voermans and Veldhonven (2007) conclude that if the image and perceptions around IT

within an organisation are generally positive, the introduction of an e-HRM system is

likely to be favourably received by employees. However, if the image of IT within an

organisation is poor, employees will take quite some time to establish trust in a new e-

HRM system

Voermans and Veldhonven (2007) also comment that HR professionals generally leave

the creation of an e-HRM system to the technical specialists. However, they emphasise

that this is a missed opportunity and HRM should actively participate in the creation of

the e-HRM system.


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1.7.3 HRM and African Specific Challenges


Gbadosmosi (2003) asserts that “western management concepts and writings have dominated the

thinking of academics and managers in Africa for a long time. Such writings have not shown

how culture might be taken into account in the managerial practice. Many Africans would claim

that there are indigenous management practices in Africa…Africans, for example, have a

systematic approach based on historical and practical experience to solving human problems,

� READING

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

• Gbadamosi, G. (2003) “HRM and the Commitment Rhetoric: Challenges

for Africa.” New Mandate for Human Resources’. Management Decision. Vol.

41, No. 3, pp 274 – 280.

In the space below, summarise the Gadamosi’s HRM challenge for Africa.


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and often strive to move from the real to the idea….the need to understand the values of the

average African worker who are the teeming majority of employees that the African manager –

local or foreign – must deal with is thus imperative” (Gbadamosi, 2003: 274).

Gbadosmosi (2003) identifies organisational commitment to be a topical HRM issue as it has a

significant impact on employee performance and organisational effectiveness. “Committed

employee behaviour is at the heart of HRM and is a central feature that distinguishes HRM from

traditional personnel management” (Gbadosmosi, 2003: 274).

The African context is highly communalistic which requires that African managers focus on

inter-personal issues. In seeking to foster organisational commitment amongst its employees, the

African manager should address the following:

• The African manager should focus not only on the career advancement and job

environment of employees, but should also show an interest in non-work activities which

impact on an employee’s performance (Gbadosmosi, 2003).

• If employee commitment is voluntary and dynamic, the manager’s style should be

dynamic and persuasive.

• Relationships at work are important across the globe, and particularly within Africa. The

African manager needs to therefore foster positive working relations with and between

his / her African employees.

• Managerial communication must be consistent and regular.

• Managerial practice must be dynamic and cautious in managing change. This is because

the employee with a high level of organisational commitment will resist change which

they perceive to be harmful to the organisation and will embrace change which they

perceive to be beneficial for the organisation.

• The African manager must understand and address socio-cultural influences in his

managerial practice (Gbadosmosi, 2003).


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1.8 Summary

This section provided the learner with an introduction to the study of Human Resource

Management (HRM). A definition of human resource management was investigated. 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 trends and challenges for the function of

HRM were studied.


Check your understanding of some of the principles and theory addressed in this section by

answering the questions below.

1. Sizwe, the HR Director at Nenaca Pharmaceuticals has emailed the Marketing Director, the

Operations Director and the Financial Director instructing them that their departmental

performance management process must be completed by the end of the month. He

emphasises that no extensions will be allowed. Sizwe’s instruction to the Marketing,

Operations and Financial Directors is an example of:

A. Functional Authority

B. Staff Authority

C. Both A and B

D. None of the above

2. Ismail, the Marketing Director at Nenaca Pharmaceuticals meets with Sizwe to discuss

how he should deal with one of his Sales Manager’s poor levels of performance. Sizwe

advises that before issuing formal warnings to the Sales Manager, a training needs

analysis should be conducted for the Sales Manager and he should be sent on

appropriate training to address the identified needs.

Sizwe’s advice to the Marketing Director is an example of :

A. Functional Authority

B. Staff Authority

C. Both A and B



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3. After his meeting with Ismail, Sizwe conducts a workshop for the employees of the

Operations Department. The purpose of the workshop is to discuss the pending

restructuring of the department and to provide employees with the necessary competence

to cope with the pending changes. This is the third workshop of this nature which

Sizwe has conducted for the Operations Department thus far. He has been conducting

them on a monthly basis, but as the restructuring is to be implemented within two weeks

he feels that he will need to hold them more frequently from now on.

In conducting the “change workshops” for employees within the Operations Department,

identify the HR role that Sizwe is fulfilling:

A. Administrative Expert

B. Employee Champion

C. Change Agent

D. All of the above

4. Krishnie, the HR Manager of Team Build, is concerned about the status which HRM

holds within her organisation, a construction company. There is no HR Director position

and as a result, HR never participates in the strategic planning of the organisation.

Furthermore, her work tends to be limited to processing leave forms and maintaining

employee records.

Based on the information presented in the case study, what approach to HR does Team

Build follow?

A. Strategic HRM

B. Expert HRM

C. Traditional HRM


5. Dewald, the CEO of Modern Furniture, a furniture manufacturing company, is

concerned about the rising cost of labour. Dudu, the HR Director suggests that the

company’s manufacturing operations be moved to India as the cost of labour is cheaper

there.


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Dudu’s suggestion is an example of :

A. Onshoring

B. Offshoring

C. Immigration

D. Alternative work arrangements

Answers to Self-Check Questions

1. A 2. B

3. C 4. C

5. B

STUDY GROUP DISCUSSION

For this section, your Study Group is required to compare and contrast the HRM approach

adopted within the different organisations of team members. Prior to the Study Group

meeting, each individual team member must prepare a summary of the following with respect

to their organisation’s HRM approach:

� Structure of the HR Department

� Size of the HR Department in relation to size of total workforce

� Approach adopted towards HRM (e.g. strategic approach, traditional approach)

� Management and employee’s perceptions of the HRM Department

� Key challenges confronting the organisation, and your HR Department’s approach to

dealing with these challenges

At the Study Group meeting each individual team member must be given the opportunity to

present the information on HRM within their organisation. The differences between

organisations must be critically discussed by the Study Group.

Record your notes on the Study Group discussion in the space provided below.


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This Study Group Discussion activity provides the Study Group with an opportunity to reflect on

and compare different organisational approaches to HRM. Group members, in sharing their

experiences will learn from each other which in turn will enable them to better understand and

respond to HRM practices within their own organisations.


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Instructions:

Read the case study below and then answer the questions which follow.

Pumla has recently been appointed to the position of HR Director at the ‘Box Company’,

a manufacturer of cardboard and plastic boxes used by various manufacturers to

package their goods. The Box Company comprises 500 employees. The position of HR

Director within the Box Company is a new one – while an HR Department did exist prior

to Pumla’s appointment, it was staffed only by three HR administrators who were

responsible for administrative processes such as processing leave forms and printing

payslips.

The position of HR Director was created at the advice of Sipho, a management

consultant who was brought into the organisation to assess the reason behind the low

levels of employee motivation. One of Sipho’s key recommendations was that the Box

Company expand the HR Department to include an HR Director and a number of HR

consultants so that the HR needs of both the organisation and the employees can

adequately be addressed.

When Pumla accepted the position she knew that it was not going to be easy. In

particular she was concerned about turning around the way in which both employees and

managers perceive HR. Indeed, prior to her appointment, HR was simply a lowly

administrative function and Pumla knew that many people within the organisation still

viewed it this way. Thabani, the CEO, shares Pumla’s concerns and so he has asked her

to join each of the departmental meetings in the coming week. During the meetings she

will be given a 15 minute slot to inform employees of the Box Company’s changed

approach to Human Resources Management.


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1. Write the speech which Pumla will deliver to each department and in which she

will outline:

1.1 How the Box Company’s new strategic approach to HRM differs from the

previous traditional approach.

1.2 The various roles of the new HR Department.

1.3 The challenges facing HRM in organisations generally, which are likely

to be relevant to the Box Company as well.

(25 marks)

Guidelines for the Answering of the Examination Questions:

• The length of your answer should be guided by the mark allocation.

Generally one coherent point / fact equals one mark.

• The following sections of this Study Guide are relevant to the sample examination

question:

o Question 1.1: Section 1.5 (Strategic HRM)

o Question 1.2: Section 1.4 (Role of the HR Manager)

o Question 1.3: Section 1.7.2 (HRM Challenges)


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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

Self Check Activity




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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 learner’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




Hill. (pp 70 – 104) Chapter 2




University Press Southern Africa. (466 - 487) Chapter 16


Books



2 - 8 (Chapter 1).


(2007). Human Resource Management: Fresh Perspectives. 15 – 41 (Chapter

2).


Thomson. pp 47 - 89 (Chapter 2).

Journals

• Bergeron, C. (2004) “Build a Talent Strategy to Achieve your Desired

Business Results.” Handbook of Business Strategy. pp 133- 139.

• Human Resource Management (2004) “Maximizing the Return on HR

Investment: The benefits and challenges of global strategic human resource

management.” Human Resource Management. International Digest.Vol. 12,

No. 3, pp 8 – 10.

• Pollitt, D. (2006) “Raise a Glass to HR at Wolverhampton & Dudley

Breweries” Human Resource Management International Digest. pp 9 - 12.

• Sheehan, C. (2005) “A Model for HRM Strategic Integration.” Personnel

Review. Vol. 34, No. 2, pp 192 – 209.

• Wang, D.S. & Shyu, C.L. (2008) “Will the Strategic Fit between Business and

HRM Strategy Influence HRM Effectiveness and Organisational


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2.1 Introduction

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. 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

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

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

cited in Noe et al, 2012). 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 organisation to achieve its goals” (Friedman & Strickler cited in Noe

et al, 2012). Thus HRM is critical in supporting the formulation and implementation of

strategy.

Golden and Ramanujam (cited in Noe et al, 2012) 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. Here 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


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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.

HRM Function

Strategic Planning

Administrative Linkage

HRM Function

Strategic Planning

One-Way Linkage

HRM Function

Strategic Planning

Two-Way Linkage

HRM

Function

Strategic Planning

Integrative Linkage

Figure 2.1: Linkages of Strategic Planning and HRM (Noe et al, 2008)


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2.3.1 Strategy Formulation

? THINK POINT

Think about the organisation in which you are currently employed. What is involved

in strategy formulation in your organisation? Is HR involved at all?


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

components, which are depicted in Figure 2.2. 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.

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, 2012). 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.


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2.3.2 Strategy Implementation

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

strategy needs to take place. Noe et al (2012) 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

HR INPUT

Figure 2.2: Strategy Formulation (adapted from Noe et al, 2010:81).

EXTERNAL

ANALYSIS

Opportunities

Threats

VISION AND MISSION

STRATEGIC CHOICE

STRATEGIC GOALS

INTERNAL

ANALYSIS

Strengths

Weaknesses


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The importance of HRM in strategy implementation is reflected in the first fact 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

2.3 below.

Figure 2.3: Strategy Implementation (from Noe et al , 2012:86)

As shown in Figure 2.3 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.

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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2.3.2.1 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.

Table 1.1 below provides an overview of the various strategies and the supporting HRM

practices which they require.


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Strategy Description of Strategy Impact on HR Practices

Overall Cost

Leadership

Overall cost leadership focuses on

becoming the lowest cost producer

in the industry (Noe et al, 2012)

• 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

A differentiation strategy focuses

on creating a difference between

the organisation’s product and/or

service at its competitors (Noe et al,

2012)

• Broad job descriptions to allow for creativity

• May recruit from outside and provide for limited socialisation 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

Concentration

Strategies

Strategy is focused on increasing

market share, reducing costs, or

creating and maintaining a market

niche for products and services (Noe

et al, 2012)

• Retention 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)


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Strategy Description of Strategy Impact on HR Practices

Internal

Growth

Strategies

Internal growth strategies focus on

new product and market

development, innovation and joint

ventures (Noe et al, 2012).

• 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

Mergers and acquisitions involve a

consolidation of organisations

within industries or even across

industries (Noe et al, 2012).

• Training in conflict resolution

• HR programmes to integrate and standardise culture and practices across

the company’s business

Downsizing

Downsizing is a strategy which

focuses on the planned elimination

of considerable numbers of staff, in

the interests of organisational

effectiveness (Noe et al, 2012).

• 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)

Table 1.1: Overview of Organisational Strategies and their Impact on HRM practices (Noe et al, 2012).


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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, 2012).

2.3.4 Consolidation

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

integration of HR strategy and the strategic management process.


Read the following article and then answer the questions that follow. (This article

is available from the Emerald online library facility which all Mancosa learners

have access to via the MANCOSA website).

• Pollitt, D. (2006) “Raise a Glass to HR at Wolverhampton and Dudley

Breweries” Human Resource Management International Digest. pp 9 - 12.

1. According to Pollitt (2006), what two key business strategies did

Wolverhampton and Dudley Breweries formulate and implement?

2. Evaluate the involvement of an HR Manager in strategy formulation and

strategy implementation.

3. Discuss the strategies and initiatives that were put in place to support the

implementation of the business strategy.

4. Was HR’s involvement in strategy formulation and implementation

effective? Justify your answer.


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Model answers to the questions put forward in the above Reading Activity are provided

below.

Question 1: Business Strategy

Wolverhampton and Dudley Breweries implemented both the strategies of Merger and

Acquisition as well as Downsizing.

Question 2: HR Senior Manager

Wolverhampton and Dudley Breweries’ most senior HR representative, the HR Director, was

actively involved in both the organisation’s strategy formulation and strategy

implementation. Indeed it is stated in the article that “HR played a key part from the start,

with Steve Rowlands, group HR Director, being a member of the senior steering group that

was set up to plan and oversee the acquisition process” (Pollitt, 2006: 9).

Question 3: HR Strategies and Initiatives

In implementing the business strategy of downsizing, the HR strategies implemented were

“consultative arrangements” and “people processes necessary to achieve more than 750 job

losses” (Pollitt, 2006: 9) from a staff complement of 1,900. The HR processes implemented

were effective and no industrial action resulted.

The downsizing did, however, result in the survivors having negative perceptions of the

company, seeing it as cost dominated and hard nosed (Pollitt, 2006: 9) and employee morale

was down. HR strategies to address the impact of the downsizing strategy on surviving

employees and to address the people issues created by the mergers and acquisitions include:

• The restructuring of the organisation into three key trading divisions with new names,

structures and cultures resulting in the old divisions between employees (as a result of

the merger) falling away as all employees had something new and fresh with which to

identify (Pollitt, 2006). This resulted in employees being open to other changes.

• The HR team introduced and defined fundamental behaviours for the group which

were referred to as ‘FIT’: fairness, integrity and transparency (Pollitt, 2006).

• HR gradually harmonised the disparate employee benefits amongst the staff and

management (which were the result of different benefit structures in the organisations


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that were merged). Changes to the benefits provided were also based on feedback

provided by employees in an employee survey. These include:

o Full employee assistance programmes

o More social events such as family days

o Improved long-service and retirement awards

o Improvements in provision for maternity and paternity responsibilities

o Congratulation awards for employees getting married, having babies or

completing further education courses

o The establishment of staff shop facilities and family food discounts at the

organisation’s pubs (Pollitt, 2006)

These changes were also introduced to change the view of many employees that

Wolverhampton and Dudley breweries was hierarchical, traditional and remote.

Other changes that were introduced to address this negative perception were the

removal of all reserved (named) parking spaces as well as the refurbishment of

offices as open plan offices (Pollitt, 2006).

The company also started life long learning seminars which addressed everything

from hair care to salsa dancing – “while there is no direct link to company

performance, other than through improved morale, it got many employees back into

learning who had been missing out and who now feel confident to attend our more

mainstream programs” (Pollitt, 2006: 11)

Question 4: Value of HR’s Involvement

HR’s involvement in the strategy formulation and implementation was invaluable. At the

2004 Human Resource Excellence Awards, Wolverhampton and Dudley Breweries received

commendation for best HR contribution to merger and acquisition integration. An employee

survey conducted in 2004 showed that employee morale had improved significantly since the

merger and acquisitions. The organisation’s HR Director, Steve Rowland asserts that “a key

factor in this transformation has been the HR strategies and initiatives developed in order to

address employee engagement, allowing old prejudices to be replaced with a new identity

and optimism where the results really do speak for themselves” (Pollitt, 2006: 12).


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2.4 Strategic Human Resource Management Competencies


� ACTIVITY

1. Within your organisation, what competencies would an HR professional

require in order to make a valuable contribution to the strategic management

process?

2. Outline the six key competencies which the Society for Human Resource

Management (SHRM) identifies for HR professionals (for information in this

regard, go to www.shrm.org/competencies/benefits.asp or consult page 7-8 of

Noe et al [2010]).

3. How do the competencies which you identified (in your response to question

1) compare with the competencies identified for the HR professional by the

Society for Human Resource Management (SHRM)?

4. Will the competencies identified for the HR professional by the SHRM enable

the HR professional to fulfil a strategic role within an organisation?

Substantiate your answer.


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Comment on Activity

The Society for Human Resource Management identifies six competencies for the HR

profession, as depicted in Figure 2.4 below. These competencies have been identified through

the Human Resource Competency Study which has been identifying HR competencies for over

fifteen years (Noe et al, 2008).

Figure 2.4: HR Professional Competencies

(from SHRM www.shrm.org/competencies/benefits.asp, 2008)

Credible

Activist

Operational

Executor

Business Ally

Talent Manager /

Organizational

Designer

Culture &

Change Steward

Strategy

Architect Organisation Capabilities

Systems & Processes

Relationships


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According to the SHRM, the competencies which HR professionals require include the

following:

• Credible Activist: HR professionals need to be credible and respected. They should have

a point of view and challenge assumptions while keeping commitments (SHRM, 2008).

• Operational Executor: HR professionals need to be able to efficiently and effectively

administer the day to day work of HRM (SHRM, 2008).

• Business Ally: HR professionals must understand the internal business as well as the

external factors which impact on business success.

• Talent Managers / Organisational Designers: HR professionals need to be able to

develop individual employees, teams and the organisation which they support (SHRM,

2008).

• Culture & Change Stewards: HR professionals must have the competence to understand

and evolve an organisation through periods of change.

• Strategy Architects: HR professionals need to be effective business partners and should

work together with the organisation to formulate and implement competitive business

strategies (SHRM, 2008).

The competency of “Strategy Architect”, supported by the competencies of “Culture & Change

Steward”, “Business Ally” and “Credible Activist” will enable the HR professional to fulfill a

strategic role within the organisation.

2.5 Summary

This section has provided 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.


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1. ‘Packaging Inc.’ is a manufacturing company which manufactures packaging materials.

Packaging has recently adopted an “overall cost leadership strategy.”

Which of the following HR practices would support the implementation of this strategy?

A. Promote internally

B. Seek efficiency through worker participation

C. Behavioural management with large performance based pay component

D. All of the above

2. ‘The Recycled Packaging Company’ is ‘Packaging Inc’s’ competitor. The Executive

Committee has recently conducted their annual Strategic Planning workshop where it

was decided that the company would now adopt as strategy of differentiation.

Which of the following HR practices would be most suitable to support the

implementation of a strategy of differentiation?

A. Narrow job descriptions

B. Limited socialisation of new recruits

C. Narrow career paths

D. Seek efficiency through worker participation

3. Bongani is the HR Director at ‘The Recycled Packaging Company’. He is part of the

Executive Committee and was an active participant in the determination of the

company’s new differentiation strategy at the recent Strategic Planning workshop.

Bongani’s involvement in the generation of the company’s strategy is an example of

which of the following types of linkages between the HRM function and the strategic

planning function?


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A. Administrative Linkage

B. One-Way Linkage

C. Two-Way Linkage

D. Integrative Linkage

4. During the Strategic Planning Workshop for ‘The Recycled Packaging Company’, as

part of the strategy formulation process, the Executive conducted an external analysis.

What is an ‘external analysis’?

A. An analysis of the organisation’s strengths and weaknesses

B. An analysis of threats to and opportunities for the organisation

C. Neither A nor B

D. Both A and B

5. The constant monitoring of the effectiveness of the strategy and implementation process

is known as ______________.

A. Strategy Formulation

B. Strategy Implementation

C. Strategy Evaluation and Control



1. D 2. B

3. D 4. B

5. C


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For this section, your Study Group is required to compare and contrast the integration of

business strategy and human resource strategy within the different organisations of the Study

Group members.

Prior to the Study Group meeting, each individual team member must prepare a summary of

the following with respect to their organisation’s integration of business strategy with HR

strategy. To adequately address some of the following questions, study group members may

need to consult their organisation’s CEO, HR Director, and / or other relevant management

representative.

� Outline the business strategy of your organisation.

� Do your organisation’s HR strategies overtly support the implementation of the

business strategy? Justify your answer.

� What is the status of HR within your organisation? Does your organisation have an HR

Director and is this position regarded to be of equal status to the other directors’

positions?

� Based on your answers to the questions above, what type of linkage is there between your

organisation’s strategic planning and the HRM function?

At the Study Group meeting, each individual team member must be given the opportunity to

present the information on their organisation’s integration of strategic planning with the

HRM function. The differences between organisations must be critically discussed by the

Study Group.



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This Study Group Discussion activity provides the Study Group with an opportunity to reflect on

and compare different organisational approaches to the integration of HRM and strategic

management. Group members, in sharing their experiences, will learn from each other, which in

turn will enable them to better understand and respond to strategic HRM practices within their

own organisation.


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Instructions:

Read the case study below taken from your prescribed text, Noe et al (2010: 100-101) and then

answer the questions which follow.

In 1994 top executives at Delta Airlines faced a crucial strategic decision. Delta, which had

established an unrivalled reputation within the industry for having highly committed employees

who delivered the highest quality customer service, had lost over $10 per share for two straight

years. A large portion of its financial trouble was due to the $491 million acquisition of Pan Am

in 1991, which was followed by the Gulf War (driving up fuel costs) and the early 1990s

recession (causing people to fly less). Its costs per available seat mile (the cost to fly one

passenger one mile) were 9.26 cents, among the highest in the industry. In addition, it was

threatened by new discount competitors with significantly lower costs – in particular, Valujet,

which flew out of Delta’s Atlanta hub. How could Delta survive and thrive in such an

environment? Determining the strategy for doing so was the top executives’ challenge.

Chairman and chief executive officer Ron Allen embarked upon the “Leadership 7.5” strategy,

whose goal was to reduce the cost per available seat mile to 7.5 cents, comparable with

Southwest Airlines. Implementing this strategy required a significant downsizing over three

years, trimming 11,458 people from its 69,555 employee workforce (the latter number

representing an 8 percent reduction from two years earlier). Many experienced customer

service representatives were laid off and replaced with lower paid, inexperienced, part-time

workers. Cleaning service of planes as well as baggage handling was outsourced, resulting in

layoffs of long-term Delta employees. The numbers of maintenance workers and flight

attendants were reduced substantially.


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The results of the strategy were mixed as financial performance improved but operational

performance plummeted. Since it began its cost cutting, its stock price more than doubled in just

over two years and its debt was upgraded. On the other hand, customer complaints about dirty

airplanes rose from 219 in 1993 to 358 in 1994 and 634 in 1995. On-time performance was so

bad that passengers joked that Delta stands for “Doesn’t Ever Leave the Airport.” Delta slipped

from fourth to seventh among the top ten carriers in baggage handling. Employee morale hit an

all time low, and unions were beginning to make headway toward organising some of Delta’s

employee groups. In 1996 CEO Allen was quoted as saying, “This has tested our people. There

have been some morale problems. But so be it. You go back to the question of survival, and it

makes the decision very easy.”

Shortly after, employees began donning cynical “so be it” buttons. Delta’s board saw union

organisers stirring blue –collar discontent, employee morale destroyed, the customer reputation

in near shambles, and senior managers exiting the company in droves. Less than one year later,

Allen was fired despite Delta’s financial turnaround. His firing was “not because the company

was going broke, but because its spirit was broken.”

Delta’s Leadership 7.5 strategy destroyed the firm’s core competence of a highly experienced,

highly skilled, and highly committed workforce that delivered the highest quality customer

service in the industry. HRM might have affected the strategy by pointing out the negative

impact that this strategy would have on the firm. Given the strategy and competitive

environment, Delta might have sought to implement the cost cutting differently to reduce the cost

structure but preserve its source of differentiation.

The present state of Delta provides further support to these conclusions. With the family

atmosphere dissolved and the bond between management and rank-and-file employees broken,

employees have begun to seek other ways to gain voice and security. By Fall 2001, Delta had

two union organising drives under way with both the flight attendants and the mechanics. In

addition, labour costs have been driven up as a result of the union activity. The pilots signed a

lucrative five year contract that will place them at the highest pay in the industry. In an effort to

head off the organising drive, the mechanics were recently given raises to similarly put them at


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the industry top. Now the flight attendants are seeking industry-leading pay regardless of but

certainly encouraged by the union drive.

(from: Noe, R.A., Hollenbeck, J.R., Gerhart, B. and Wright, P.M. (2010) Human Resource Management: Gaining a

Competitive Advantage 7th Ed. McGraw-Hill. pp 100-101).

1. Critically discuss Allen’s approach to integrating HR and overall business strategy during

the strategy planning / formulation phase. (10 marks)

2. Critically discuss Allen’s approach to integrating HR and overall business strategy during

the strategy implementation phase. (10 marks)




• The following sections of this Study Guide are relevant to the sample examination

question:

o Question 1: Section 2.2 and 2.3.1

o Question 2: Section 2.2. and 2.3.2


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Suggested Answers to Sample Examination Questions

Question 1 – Integration of Strategy and HRM During Strategy Formulation Phase

While the case study does state that “HRM might have affected the strategy by pointing out the

negative impact that this strategy would have on the firm” (Noe et al, 2008: 94), there is no

evidence in the case to suggest that Allen even considered the input of the HR department when

formulating the company’s strategy. The relationship between strategy planning and HRM

therefore appears to be an administrative one which is the lowest level of integration, where the

HR function is divorced from the strategy management process (Golden & Ramanuajam cited in

Noe et al, 2010).

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 – Integration of Strategy and HRM during Strategy Implementation Phase

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


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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, and so on.

For strategy implementation then, there appears to be a one-way linkage between the

organisation’s strategic management and HRM. A one-way linkage is where management

simply informs HRM of the strategy plan (Golden & Ramanuajam cited in Noe et al, 2010).


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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

Self-Check Activity


Sample Examination Questions


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LEARNING OUTCOMES


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


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.


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Reading




Hill. (pp 192-212) Chapter 5




University Press Southern Africa. (160-183) Chapter 5


Books

• Grobler, P., Wärnich, S., Carrell, M.R., Elbert, N.F. and Hatfield, R.D. (2006)


104 – 113 (Chapter 4).


(2007). Human Resource Management: Fresh Perspectives. 68 – 78 (Chapter

3).

• Snell, S. and Bohlander, G. (2007) Human Resource Management. Mason:


Journals

• Human Resource Management (2004) “From Baby Boomer to Ticking Time

Bomb: Why companies must face up to an impending skills shortage.” Human

Resource Management. Vol. 12, No. 3, pp 23 – 26.

• Marshall, R. (2005) “Reinvest, recruit and rebuild to protect the future of IT.”

Human Resource Management International Digest. Vol. 13, No. 6, pp 3 – 5.

• Phillips, C. (2007) “Today’s Talent Contest: The Battle for Talent in the UK

is Hotting Up.” Human Resource Management International Digest. Vol. 15,

No. 3, pp 3- 5.


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3.1 Introduction

This section investigates the concept of Human Resource (HR) Planning and 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, and demand for, human resources so as to gain or maintain competitive advantage.

A definition provided by Snell and Bohlander (2007: 48) asserts that Human Resource

Planning is “the process of anticipating and providing for the movement of people into,

within, and out of an organisation.”, while Nel et al (2011) maintains that HR Planning

“ensures that a predetermined amount of employees with appropriate skills, knowledge, and

abilities are available at a specified time in the future…HR planning therefore systematically

identifies what is needed to be able to guarantee their availability”.

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

• More effective employment equity planning (Kleynhans et al, 2007; Grobler et al, 2006).


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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, 2012: 195)

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 (Snell and Bohlander, 2007).

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, 2008).

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, 2012). 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


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These strategies may include:

• Strategies for reducing an expected labour surplus

• Strategies for avoiding an expected labour shortage (Noe et al, 2012)

3.3.2.1 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

Table 3.1 Options for Reducing an Expected Labour Surplus (from Noe et al, 2010:199)

3.3.2.2 Options for Avoiding an Expected Labour Shortage

OPTION SPEED

REVOCABILITY

(i.e. how easily the change

can be undone)

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

Table 3.1 Options for Avoiding an Expected Labour Shortage (from Noe et al, 2010:199)


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Comment on Activity

Learners’ responses will differ given the varied nature of the organisations in which they

work. It is important to point out that phase 2 of the Human Resource Planning process is

critical as the strategy options available to the HR Planner are varied, differing in terms of

their expense, speed, effectiveness, amount of human suffering and revocability. It is critical

that the HR Planner seeks to make the best choice of strategy at this stage. Noe et al (2012)

point out that “unfortunately for many workers, in the past decade the typical organisational

� ACTIVITY

A number of strategies to address anticipated labour shortages and labour

surpluses are indicated in the tables above.

1. Chose one of the strategies listed in the tables above which your

organisation has previously used to address a labour shortage or labour

surplus.

2. Was the strategy which your organisation chose, effective in addressing

the labour shortage or labour surplus?

3. In retrospect, could your organisation have selected a better, alternative

HRM strategy to address the labour shortage or labour surplus? Provide

reasons for your answer.


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response to a surplus of labour has been downsizing, which is fast but high in human

suffering…the widespread use of downsizing is a contributing factor in the largest number of

bankruptcies ever recorded in the United States. Beyond the economic impact, the

psychological impact spills over and affects families, increasing the rates of divorce, child

abuse, and drug and alcohol addiction” (Noe et al, 2012). These points to the need for HR

Planners to thoroughly work through the HR Planning process as well as the various

strategies available to them, and avoid using “quick fixes”.

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. It also involves the evaluation of the results of the planning

process (Noe et al, 2012). Some of the questions which need to be asked during the

evaluation phase are “Was the anticipated labour surplus / shortage avoided?” and “In

retrospect, were the best HR strategies chosen to avert the anticipated labour surplus /

shortage?”

3.4 Current Issues Impacting on HR Planning

Issues currently impacting HR planning are that of

• Employment Equity within the South African and Namibian context and Skills

Development within the South African context, and

• The ageing workforce

3.4.1 Employment Equity and Skills Development

South Africa’s Employment Equity Act of 1998 and Skills Development Act of 1998, and

Namibia’s Affirmative Action Act of 1998 impact on the practice of human resource

planning within South African and Namibian organisations.


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� ACTIVITY

This activity has been designed to accommodate the context of South African

learners, Namibian learners as well as learners from other countries other than

Namibia and South Africa.

South African Learners:

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?

Namibian Learners:

Consider the implementation of the Affirmative Action Act within your

organisation. How have the activities associated with the implementation of this

legislation affected your organisation’s approach to HR Planning?

Learners from Countries Other than Namibia and South Africa:

Consider your organisation’s affirmative action / equal opportunities policy

(written or unwritten). How has this policy impacted on your organisation’s

approach to HR Planning?


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Comment on Activity

The South African Context

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 (RSA, 1998a), 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).

The Namibian Context

As with South Africa, Namibia’s Affirmative Action Act of 1998 requires that organisations

develop an Employment Equity Plan, providing goals and objectives to increase the

representivity of previously disadvantaged individuals within the organisation’s workforce

(Republic of Namibia, 1998). These impacts significantly on the HR planning of the

organisation.

Countries without Employment Equity / Affirmative Action Legislation

Although countries other than South Africa and Namibia may not have Employment Equity

or Affirmative Action legislation, learners may find that their organisations have an equal

opportunity policy, which may be written and unwritten. The purpose of such an equal

opportunity policy would be to increase the representivity of previously marginalised or

disadvantaged groups such as women and people with disabilities. This would have an

impact on the HR Planning of an organisation.


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3.4.2 The Ageing Workforce


The journal has conducted a review of three articles written by Arkin, Brown as well as

Rappaport, Bancroft and Okum all of which focus on the ageing workforce and how this is to


Read the following article:

• Human Resource Management (2004) “From Baby Boomer to Ticking Time

Bomb.” Human Resource Management. Vol. 12, No. 3, pp 23 – 26.

1. According to the article, what impact is the current ageing workforce

having on organisations?

2. What can be done in terms of HR planning to address the negative impact

of the ageing workforce?


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affect HR planning going forward. “These are the days when those ‘baby boomers’ may have

already retired, or are thinking about it and companies, not just in the UK and the USA, but

throughout the world, are having to take a whole new look at recruiting, training and retaining

staff” (Human Resource Management, 2004: 23). ‘Baby-boomer’ refers to an individual who

was born between the years 1945 – 1955, a period when there was a sharp increase in the

birthrate.

While the baby-boomer generation have retired, or are getting ready to retire, “fewer younger

and mid career people are coming through the system” (Human Resource Management, 2004:

23). The challenge, therefore, for companies is to find ways to retain older and more

experienced staff. While many older employees may not wish to work for longer than they had

originally planned, their retirement savings are usually insufficient and so they often have to

continue working for a number of years.

As a means of retaining the skills of employees at retirement age, companies often offer phased

retirement, allowing the employee to work part-time. Another, phased retirement option is

where an employee at retirement age may be allowed to take as much time off as he / she pleases

except during exceptionally busy times (Human Resource Management, 2004). Alternatively

the employee could be retained by the company in a less demanding role.

So as to address and prepare for the impact of the aging workforce, Rappaport et al (cited in

Human Resource Management, 2004: 24) advises organisations to “begin with an assessment of

the impact of the projected demographic and labour market changes on its own workforce and

the resulting implications for the talent it needs to execute its business strategy….by

understanding what talent the organisation will possess and what talent it will or will not be

able to obtain outside the organisation, a company can identify areas of vulnerability and make

the business case for addressing them”.

Employee development would be one way of addressing the “areas of vulnerability” which

Rappaport et al (cited in Human Resource Management, 2004: 24) speak about. However,

Brown (cited in Human Resource Management, 2004) cautions that employee development is a


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long term process. The article concludes by asserting that “many organisations will be hoping

they will have the right amount of time left to defuse that ticking baby boomer time bomb”

(Human Resource Management, 2004: 25).

? THINK POINT

The Human Resource Management (2004) journal article on the ageing workforce

which you have just reviewed was based on research conducted in the USA and UK.

While the ageing workforce is certainly relevant to the African context, do you think

that there are other factors which may make the management and retention of the ageing

workforce in Africa more complex than in countries such as the USA and UK.


There are a number of factors which certainly will impact on and make the management of the

ageing workforce more complex within the African context. Two factors which will have a

significant impact in this regard are:

• Employment Equity / Affirmative Action: As discussed in section 3.4.1 countries such as

South Africa and Namibia are legally required to implement Employment Equity measures,

the ultimate aim of which is to achieve workforce representation which mirrors the

economically active population of the region (RSA, 1998a, Republic of Namibia, 1998). It is

probable that a large percentage of an organisation’s ageing workforce is representative of

the non-designated group (i.e. white males), which presents a challenge as their retention

would impede organisational progress in terms of meeting Employment Equity goals.

However, this could potentially be overcome through contracting (rather than full time)

employment and through extending their role to include coaching and mentoring of younger

employees from the designated groups (i.e. African, Indian, Coloured, Women and People

with Disabilities) within the company.


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• HIV / AIDS: According to Avert, an international AIDS charity, Sub-Saharan Africa is the

worst affected in the world by the AIDS epidemic (www.avert.org, 2008) Although this

region has just over 10% of the world’s population, 67% the region’s people are living with

HIV. As at the end of 2007, the total number of people living with HIV / AIDS in this

region was 22 million. In 2007, AIDS killed approximately 1.5 million people in Sub-

Saharan Africa. Although ARV’s can extend survival and provide many years of healthy

living, ARV’s are unavailable to most people in this region (www.avert.org, 2008).

The HIV / AIDs epidemic in Africa could therefore further complicate HR Planning around

the ageing workforce. Indeed, HIV / AIDS infection and affection of employees throughout

a company will impact on HR planning.

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 / Affirmative Action and

Skills Development (within the South African and Namibian context) as well as the impact of

the ageing workforce on HR planning, were explored.




1. Thabani, the HR Director at Airmachines Inc, a manufacturer of light aircraft, is busy

updating the organisation’s HR Plan. Thabani has used various techniques to identify

that in three years time, Airmachines Inc.’s labour demand for aircraft artisans will

exceed the labour supply.

Identify the step in the HR planning process with which Thabani is busy:

A. Forecasting

B. Goal setting and strategic planning


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C. Programme implementation and evaluation


2. After thinking about what to do about the pending aircraft artisan shortage which the

company will experience in three years time Thabani decides that he is not going to do

anything about it at this stage. When the labour shortage does arise in three years times

there are strategies which can be implemented very fast which can address the shortage

almost immediately..

Which of the following HR strategies could Thabani use to quickly address the aircraft

artisan labour shortage as and when it arises?

A. External hires

B. Overtime

C. Temporary Employees

D. Both B and C

3. Thabani informs Edward, the CEO of Airmachines Inc. about the aircraft artisan

shortage which the organisation is to experience in three years time.

“Don’t worry about it Edward,” says Thabani, “I have strategies to address the labour

shortage as and when it arises.”

“But Thabani, what strategies could you possibly use to address the labour shortage only

as and when it arises! Just the other day I received information that the number of

qualified aircraft artisans coming out of the educational system is declining every year. I

definitely think we need to start addressing this pending labour shortage immediately!”

Which of the following HR strategies is a longer term one to addressing the pending

aircraft artisan shortage at Aircraft Inc.?

A. External hires

B. Overtime

C. Temporary Employees

D. Both B and C


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4. In conducting his HR Planning, Thabani also becomes aware that it two years time

Aircraft Inc. will have a surplus of administration staff. Thabani is loath to start a

downsizing exercise in this area as he knows the damaging impact which retrenchments

can have not only on the individual who is to be retrenched and his / her family, but also

on the ‘surviving’ staff who will remain at Aircraft Inc.

Which of the following are longer terms strategies that Thabani could use to address the

surplus of administration staff?

A. Hiring freeze

B. Natural attrition

C. Demotions

D. Both A and B

5. Through conducting the HR Planning exercise, Thabani realises that all three of Aircraft

Inc.’s aircraft designers are scheduled to go on retirement the following year.

Thabani starts to panic, as he knows that there is shortage of experienced and qualified

aircraft designers in the external labour pool. “The only option that I have is to try to

get these aircraft designers to continue to work for us for a couple more years,” thinks

Thabani. “But how do I go about getting them to stay as I am sure that they are looking

forward to their retirement!”

Which of the following could Thabani use to try and get the aircraft designers to continue

to work for Aircraft Inc.?

A. Provide them with information on their retirement funds, showing them how it

will be impossible to maintain their current standard of living on their pension.

B. Providing them with ‘phased’ retirement by contracting them on a part-time basis

C. Both A and B

D. Neither A nor B


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1. A 2. D

3. A 4. D

5. C


For this section, your Study Group is required to compare and contrast the HR Planning

practices within the different organisations of the Study Group members.

Prior to the Study Group meeting, each individual team member must prepare a

summary of the following with respect to their organisation’s HR Planning practices. To

adequately address some of the following questions, study group members may

need to consult their organisation’s CEO, HR Director, and / or other relevant

management or Human Resources representative.

� Describe the approach which your organisation adopts towards HR Planning (i.e. is it

ad hoc, or is it executed on a regular basis using a definite process and techniques).

� What areas in your organisation are experiencing a labour shortage and what

strategies are being used to address this labour shortage?

� What areas in your organisation are experiencing a labour surplus and what strategies

are being used to address this labour surplus?

� Does your organisation’s HR Planning support the implementation of Employment

Equity / Affirmative Action / Equal Opportunity? Provide reasons for your answer.

� Do you believe that your organisation’s HR Planning process is effective?

Justify your answer.

� Make recommendations as to how you could improve your organisation’s HR

Planning process.

At the Study Group meeting each individual team member must be given the opportunity

to present the information on their organisation’s HR Planning practices. The

differences between organisations must be critically discussed by the Study Group.


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This Study Group discussion activity provides the Study Group with an opportunity to reflect

on and compare different organisational approaches to HR planning. Group members, in

sharing their experiences, will learn from each other which in turn will enable them to better

understand and respond to HR planning practices within their own organisation.


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Instructions:

Read the case study below taken from your prescribed text, Noe et al (2010: 225-226) and

then answer the questions which follow.

Southwest Airlines: Focused on Take-Offs, Not Lay-Offs

In the summer of 2001, the airline industry was facing severe problems due to slumping

business travel and vacationer demand. In fact, Northwest Airlines announced draconian

cuts in both schedules and service; Midway Airlines declared bankruptcy in August of that

year, citing a “calamitous” decline in air traffic. However, as bad as things were, they soon

got worse.

The September 11, 2001 terrorist attacks on New York and Washington DC devastated the

whole nation, but few segments of the economy felt the impact as dramatically as the already

struggling airline industry. Even after reducing scheduled flights by more than 20 percent,

most planes were taking off with fewer than half their seats filled, and airline shares lost a

third of their value on the stock exchange. Most airlines needed to cut costs drastically in

order to make ends meet, and over 100,000 employees were eventually laid off from

American Airlines, United Airlines, US Airways, Continental Airlines, and America West.

Southwest Airlines bucked this trend however. Indeed, despite the regular ups and downs of

the airline industry, in its 30 years of operation, Southwest had never laid off employees;

remarkably, it was able to maintain this record even during the difficult Fall 2001 period.

Southwest’s no-layoff policy is one of the core values that underlie its human resource

strategy, and insiders stress that it is one of the main reasons why the Southwest workforce is

so fiercely loyal, productive and flexible.

The high productivity of these workers keeps labour costs low, and these savings are passed

on to consumers in the form of lower prices that are sometimes half those offered by

competitors. High levels of job security also promote a willingness on the part of Southwest


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employees to be innovative on the job without fearing that they will be punished for any

mistakes. Southwest also finds that satisfied employees help create satisfied customers and

can even help in recruiting new employees when economic conditions are conducive to

growth.

In order to keep this perfect no-layoff record in 2001, Southwest executives assembled into an

emergency command and control centre in Dallas and brainstormed methods other than

layoffs that could reduce costs. Decisions were made to delay the planned purchase of new

planes, as well as to scrap ongoing plans to renovate the company’s headquarters. The

company which had no debt and over a billion dollars in cash, also leaned heavily on this

“rainy-day” fund to help get through tough times. It was a difficult and painful process, but

as CEO Jim Parker noted, “We are willing to suffer some damage, even to our stock price, to

protect the jobs of our people.”

(from: Noe, R.A., Hollenbeck, J.R., Gerhart, B. and Wright, P.M. (2010) Human Resource Management:

Gaining a Competitive Advantage 6th Ed. McGraw-Hill. pp 225 -226).

1. Discuss the process of HR Planning. Where possible, use examples from the

Southwest Airlines case study to illustrate components of the HR Planning process.

(10 marks)

2. In the case study it is stated that “Southwest’s no-layoff policy is one of the core

values that underlie its human resource strategy.” Critically discuss Southwest’s

decision not to utilise the downsizing strategy.

(10 marks)




• The following sections of this Study Guide (and corresponding sections in the

prescribed text) are relevant to the sample examination questions:

o Question 1: Section 3.3

o Question 2: Section 3.3.2


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Question 1 – Process of HR Planning, Using Examples from Southwest Airlines Case.

The HR Planning process entails three key phases:

• Phase 1: Forecasting

During the phase of forecasting, the HR manager attempts to determine labour supply and

demand for the various positions within the organisation (Noe et al, 2010). Forecasting

may be implemented using both statistical and judgemental methods. Statistical methods

are useful when there is appropriate historical data available (e.g. the company’s

employment trends), while judgemental methods are appropriate where there is limited or

no historical data available (Noe et al, 2010).

While there are no overt references to Southwest Airlines engaging in forecasting in the

case study, factors are mentioned which would have been considered by the airline during

the forecasting phase. These include the decline in business and vacation travel as well

as the September 11 2001 terrorist attacks on Washington DC and New York.

• Phase 2: Goal Setting & Strategic Planning

The information obtained from the phase of forecasting will lead to the setting of specific

goals and the selection of strategies. To address an anticipated labour surplus the

strategies of downsizing, pay reductions, demotions, natural attrition, early retirement and

retraining may be applied (Noe et al, 2010). To address an anticipated labour shortage

the strategies of overtime, hiring of temporary employees, technological innovation and

turnover reductions may be applied (Noe et al, 2010).

In terms of Southwest’s practices with respect to this phase of HR planning, Southwest’s

decisions were guided by their “no lay-offs” policy. Instead of implementing HR

strategies to decrease the size of the workforce during difficult times in 2001, Southwest

halted the purchase of new planes and stopped the refurbishment of its headquarters.

● Phase 3: Programme Implementation & Evaluation

During this stage, the strategies selected during phase 2 of the HR Planning process are

applied. The effectiveness of the strategies in addressing the labour shortage or surplus


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should be monitored on an ongoing basis (Noe et al, 2010). On completion, the results

achieved through the process should be reviewed.

The Southwest Airlines case study notes that organisation’s protection of employees’

jobs leads to positive results in that it provides for more productive employees, who are

innovative on the job. This contributes to the organisation’s long term sustainability.

Question 2 – Southwest’s Decision Not to Utilize the Downsizing Strategy

Based on the information provided in the case, Southwest’s decision not to utilise the

downsizing strategy has proved effective. Indeed, Noe et al (2010) argue that “although the

jury is still out on whether downsizing efforts have enhanced organisational effectiveness,

some early indications are that the results have not lived up to expectations...one study of 52

Fortune 100 firms shows that most firms that announce a downsizing campaign show worse,

rather than better, financial performance in the following years.” It appears that the more

an organisation relies on its human capital as the source of its competitive advantage, the

more negative the impact of downsizing on the organisation’s performance (Noe et al, 2010).

One of the reasons why downsizings have been found to fail is that the ‘survivors’ (the staff

who remain in the organisation) become self-absorbed, risk aversive and narrow minded.

Motivation and productivity suffer as a result (Noe et al, 2010). It has also been noted that

while downsizing may bring about short term cost savings, the long term impact can be very

negative if not managed properly as it leads to the loss of talent while disrupting

organisational networks which provided the organisation with creativity and flexibility (Noe

et al, 2010). If Southwest’s “no lay-offs” policy is reviewed in relation to this statement we

see that the organisation suffered in the short term (through halting the purchase of new

planes and stopping the refurbishing of offices) but would benefit in the long term through

demonstrating that they value and are committed to their personnel.


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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 programme

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

Self Check Activity




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LEARNING OUTCOMES


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

This overall outcome will be achieved through the learner’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 an induction programme.


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� READING

Reading




Hill. (pp 212 – 229) Chapter 5 and (pp 230-267) Chapter 6




University Press Southern Africa. (pp 169-183) Chapter5 ; (pp184-205)

Chapter 6; (pp 207-229) Chapter 7


Books



166 – 205 (Chapter 6) and pp 206 – 215 (Chapter 7).


(2007). Human Resource Management: Fresh Perspectives. pp 79 – 111

(Chapter 4).


Thomson. pp 170 – 231 (Chapter 5) and pp 232 – 278 (Chapter 6).

Journals

• Johnson, A., Winter, P.A., Reio Jr,T.G., Thompson, H.L. & Petrosko, J.M.

(2007) “Managerial Recruitment: the Influence of Personality and Ideal

Candidate Characteristics.” Journal of Management Development. Vol. 27,

No. 6, pp 631 – 648.

• Pollitt, D. (2007) “Boots has the Prescription for Simpler Staff Recruitment.”

Human Resource Management International Digest. Vol. 15, No. 2, pp 27 –

29.

• Pollitt, D. (2005) “E-Recruitment gets the Nike Tick of Approval.” Human

Resource Management International Digest. Vol. 13, No. 2, pp 33 – 35.


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Journals

• Richardson, J., McBey, K. & McKenna, S. (2008) “Integrating Realistic Job

Previews and Realistic Living Conditions Previews: Realistic Recruitment for

Internationally Mobile Knowledge Workers.” Personnel Review. Vol. 37, No. 5,

pp 490 – 508.

• Sekiguchi, T. (2007) “A Contingency Perspective of the Importance of PJ Fit and

PO Fit in Employee Selection.” Journal of Managerial Psychology. Vol. 22, No.

2, pp 118 – 131.

• Tipper, J. (2004) “How to Increase Diversity through your Recruitment

Practices.” Industrial and Commercial Training. Vol. 36, No. 4, pp 158 – 161.


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4.1 Introduction

Section 3 of this module 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.

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 (2012) define recruitment as “…the practice or activity carried on by the

organisation with the primary purpose of identifying and attracting potential employees.” On

the other hand, Snell and Bohlander (2007: 172) define recruitment as “…the process of

locating potential individuals who might join an organisation and encouraging them to apply

for existing or anticipated job openings”.

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 of this Study Guide, 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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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, 2011).

� 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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Comment on Activity

Organisational recruitment policies can be characterised 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, 2012).

• Extrinsic and Intrinsic Rewards

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

which is higher than the market average. Those organisations who adopt this approach

have a significant advantage in the market (Noe et al, 2012). Organisations that compete

for job applicants based on pay do so through offering not only extrinsic financial

rewards, but intrinsic rewards as well (Noe et al, 2012).

• Employment-At-Will Policies

Employment-at-will policies state that either an employer or an employee can terminate

the employment relationship at any time, regardless of cause (Noe et al, 2012). However,

depending on the country in which a company operates, such a policy may be in

contravention of the country’s labour legislation.

• Image Advertising

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

work (Noe et al, 2012). 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, 2012). In South Africa, the legislation requires

organisations that employ more than 50 employees to exercise an employment equity

policy. In Namibia, organisations employing more than 25 employees are required to

formally implement affirmative action.


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• Person-Organisation Fit versus Diversity

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

optimum fit between the organisation’s culture and the recruit. 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.

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:

• 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 (Nel et al, 2011)

• Labour Market Conditions

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

programme (Nel et al, 2010). 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 versus external recruitment,

employment equity, diversity versus 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, 2011).

• 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 source 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, using the internet as a

recruitment source for computer programmers would be more effective than advertising in a

local newspaper as programmers spend much of their time browsing the internet.

? 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 and Methods

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, 2012).

The disadvantages associated with internal recruitment sources and methods include:

• ‘In-breeding’ and stale ideas are cultivated as a result of the homogenous workforce;

• Political infighting may occur between employees;

• A strong management development programme is required (Noe et al, 2012).

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, 2011).

• Referrals from current employees

• Former employees, which include those who were laid off previously or have worked

seasonally (Nel et al, 2011)

4.2.4.2 External Sources and Methods

External recruitment sources present the organisation with the following advantages:

• Entry-level and specialised 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, 2012)

and it provides for greater diversity.

The disadvantages of external sources and methods of recruitment include:

• Loss of time and productivity due to the new employee adjusting to the organisation


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• Existing employees do not strive for promotion; and

• The new employee may struggle to “fit” with the rest of the organisation (Nel et al,

2011).

External recruitment sources include:

• Employment agencies

• Advertisements (placed in newspapers, trade magazines and the internet)

• Customers, who are familiar with the organisation. The customer could either apply for

the position him / herself, or provide a referral.

• Direct mail is used to attract the attention of professionals who are usually happily

employed and would not ordinarily be seeking another position. The advertisement for

the position could take the form of an attractive flyer included in a professional or trade

journal (Nel et al, 2011).

• Campus recruitment (Nel et al, 2010).

4.2.4.3 E-Recruitment

E-Recruitment is an external method of recruitment, but is being discussed in a separate

section as it is a recent but commonly used method to recruit staff. E-recruitment “also

known as online recruitment refers to the process of recruiting via the intranet (internally)

and the internet (externally)” (Nel et al, 2011).

? THINK POINT

Does the organisation for which you work utilise e-recruitment?

What do you think the benefits of e-recruitment would be?


Nel et al (2011) identifies that e-recruitment is growing very fast. The benefits of using e-

recruitment include:

• Job advertisements receive exposure locally, nationally and internationally

• Reduced advertising costs

• Information about job vacancies is available 24 hours a day


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• There is no limit to the length of the advert (unlike with newspapers where even small

adverts are costly), and

• Online communication devices are used between the organisation and applicant (Nel

et al, 2011)


Read the following article and then answer the questions that follow. (This article

is available from the Emerald online library facility which all Mancosa learners

have access to via Mancosa’s website).

• Pollitt, D. (2005) “E-Recruitment gets the Nike Tick of Approval.” Human


1. What were the reasons behind Nike’s implementation of an e-recruitment

strategy?

2. Describe the key features of the e-recruitment system which Nike

implemented.

3. How has the e-recruitment system improved Nike’s recruitment practices?

4. What lessons has Nike learned from the process of setting up an e-

recruitment system?


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Reasons behind Nike’s Implementation of an E-Recruitment Strategy

Despite the growth in Nike’s recruitment team from five staff to nine staff, the organisation

was not coping with the large number of applications for positions. Over 800 applications

were received every month. Nike’s staffing manager, Rolien Hoogers, explained the extent of

Nike’s inability to cope with all the applications received: “we have a firm policy that each

applicant is a potential employee and customer and so we must respond appropriately , in an

individual letter where possible…we were finding it increasingly hard to do that, and we

were losing track of where CVs were in the company…we were concerned about how well we

were protecting applicants’ personal information, and there were mistakes, such as us

calling someone in for an interview who was already due to come in later that day” (Pollitt,

2005: 33).

Furthermore, a review of Nike’s recruitment practices show that the organisation had to:

• Standardise its HR processes to reduce duplication and improve efficiency;

• Reduce the cost per hire; and

• Improve the overall quality of the talent recruited into the organisation (Pollitt, 2005).

Key Features of Nike’s E-Recruitment System

Nike’s e-recruitment system is known as ‘ActiveRecruiter’. Its key features are:

• It integrates with Nike’s PeopleSoft IT programmes.

• External job applicants may apply for specific jobs or general speculative job

opportunities via Nike’s website.

• Nike’s website is linked with external web-based recruitment organisations as a

further mechanism to attract job applications.

• Nike’s existing employees may apply for positions through the company’s intranet;

• More senior positions are advertised not only on the website but also in newspapers

and with employment agencies.

• ActiveRecruiter allows applicants to attach their CV when applying online. As a

result there are no hard copy CVs at Nike and line managers are able to view an

applicant’s CV in soft copy (Pollitt, 2005).

• ActiveRecruiter holds 8,500 CVs of previous applicants on a database and applicants

in this database are automatically asked to update their CV every six months.


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• ActiveRecruiter is able to search for competencies amongst applicants’ CVs which

provides for a better quality shortlist of applicants (Pollitt, 2005).

• Managers receive updates electronically as to the current status of their job openings.

• ActiveRecruiter has resulted in the staffing team having fewer administrative tasks.

Improvements to Nike’s Recruitment Practices

The e-recruitment system has brought about substantial improvements to Nike’s recruitment

practices. Specific improvements include:

• There has been a saving of approximately 54% in recruitment costs since the

introduction of the system.

• There has been less reliance on recruitment agencies.

• Within a period of a year, 556 positions were filled with 235 internal Nike applicants,

144 external applicants through ActiveRecruiter, 60 through the company’s referral

bonus and 35 through recruitment agencies (Pollitt, 2005).

• The time taken to fill vacancies has been reduced from 62 days to 42 days.

Lessons Learned

The three key lessons which Nike has learned from the implementation of the e-recruitment

system are:

• Recruiters should be involved in the development of the e-recruitment system from an

early stage;

• Involving the recruiters in the process is beneficial in terms of change management

and addressing any potential resistance to change from the recruiters; and

• Communication is imperative to the successful implementation of the system. It is

particularly important that users of the system see the benefits (Pollitt, 2005).

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, recruitment

sources and methods as well as e-recruitment have been examined. Section 4.3 will focus on

the related activity of selection.


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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 of choosing individuals who have relevant

qualifications to fill existing or projected job openings” (Snell and Bohlander, 2007: 234). In

more simplistic terms, selection “involves choosing the best applicant to fill a position” (Grobler

et al, 2006: 182).

4.3.1 Factors Influencing Selection Decisions

Nel et al (2011) 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 process and 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

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

programme to be relatively sophisticated

• Speed of decision making, as a slow decision making process may, for example, bring

production to a stand still, and

• Selection methods can also impact the entire process. Those selection methods which are

chosen are determined by a number of factors including the abilities of the staff involved in

the selection process, the cost of various selection assessments and the complexities of the

administration (Nel et al, 2011)

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, 2011).

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

selection process is executed (Nel et al, 2011). Grobler et al (2006: 183) indicates that in the

South African context, labour legislation has a significant impact on the manner in which

organisations conduct selection activities. Indeed, the legislation 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 recruitment and selection practices are consistent and

equitable and do not discriminate against applicants. Nel et al (2011) 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;


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

preference, disability, etc.);

� Structure the interview around job dimensions;

� To only administer tests which are valid and job related (Nel et al, 2011; Grobler et al,

2006).

4.3.2 Selection Process

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

Comment on

� ACTIVITY

Provide a diagrammatic representation of the process which the practice of

selection follows within your particular organisation.


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Comment on Activity

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

Figure 4.1: The Selection Process

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: Preliminary 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, 2011).

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,

2011).

PRELIMINARY SCREENING

Provisional Selection Interview Application Form

SELECTION METHODS Testing

Interview Reference Checking Medical Examination

APPOINTMENT


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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.

One of the most widely used selection tools is the Interview (Nel et al, 2011). 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, 2011). Interviews may be structured, semi-structured or unstructured.

Employment 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, 2011). Assessments centres are useful in gathering information as

to the performance of potential managers and supervisors.

In South Africa clause 8 of the Employment Equity Act of 1998 states that psychological and

other testing of job applicants is prohibited unless it can be proven that the test being used is:

o Valid and reliable (and has been scientifically proven to be so);

o May be applied in a fair manner to all job candidates; and

o Is not biased against any group (Grobler et al, 2008: 290).

Reference checking is a further selection method, where the organisation seeks information

about the performance of an applicant in previous positions (Nel et al, 2011).

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


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

al, 2011).

• Phase 3: Appointment

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

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

(Nel et al, 2011). These strategies include the compensatory selection strategy and the

multiple hurdles strategy (Grobler et al, 2006: 199). The multiple hurdles strategy requires

that the applicant ‘pass’ each hurdle in the selection process (e.g. provisional interview,

application blank, etc.) while the compensatory selection strategy takes each applicant

through each step in the selection process before making the final selection decision (Grobler

et al, 2006: 199).

In summary, section 4.3 has focused on the HRM activity of Selection. Factors influencing

selection as well as the selection process were examined.

4.4 Induction

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 acclimatise the employee into the organisation and turn him 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. Socialisation means to adapt to life in society. In the

organisation, socialisation is the process of instilling in all employees the prevailing attitudes,

standards, values and patterns of behaviour expected by the organisation and its departments.


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4.4.1 The Objectives and Benefits of Induction

The induction programme helps the new employee to understand the social, technical and

cultural aspects of the workplace and speeds up the socialisation process.

Grobler et al (2006: 207) identifies the goals of the induction programme to be:

• Acquainting the new employee with the procedures relevant to the job

• Introducing the employee to co-workers

• Assisting the employee in understanding how his / her jobs fits into the overall

organisational picture

• Providing employees with an understanding of the goals of the organisation and the

preferred means by which these goals need to be attained

• Understanding the basic requirements of the job

• Providing the employee with insight into the behavioural patterns expected for effective

job performance (Grobler et al, 2006: 207)

? THINK POINT

Think about the induction processes which you have experienced as a new recruit within

an organisation. Based on your experience, what would you say are the benefits of

induction?


According to Nel et al, (2011) the main benefits of a successful induction process are:

• A reduction in reality shock and cognitive dissonance

• An alleviation of employee anxieties

• Creation of positive work values and a reduction in start up costs, and

• An improvement in relationships between managers and subordinates


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4.4.2 Planning, Designing and Implementing the Induction Programme

4.4.2.1 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 (Nel et al, 2011). According to Cascio and Aguinis (cited in Nel et al 2011) these

question are usually:

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

• Who is my boss and what is he / she 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?

4.4.2.2. Designing the Induction Programme

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:

• The target audience

• Essential and desirable information

• The literacy level of the employees (Nel et al, 2011).

4.4.2.3. Implementing the Induction Programme

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


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• Telephone numbers and locations of key company personnel (Nel et al, 2008: 268)

4.4.3 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. A follow up check by the HR representative should be

effected after one month (Nel et al, 2011)

4.5 Summary

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

investigating Recruitment, the nature of recruitment, recruitment policies, and factors

influencing recruitment and recruitment sources and methods were 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 were

discussed. The planning, design and implementation of an induction programme was also

examined.

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


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Check your understanding of some of the principles and theory addressed in this section

by answering the questions below.

1. ‘First Clothing’, a manufacturer of sportswear, has recently changed its recruitment

strategy to one which is internally focused.

Which of the following are advantages of an internal approach to recruitment?

A. The organisation is familiar with the performance of the applicants

B. In-breeding of ideas occurs

C. The filling of vacancies is cheaper and faster

D. A and C

2. Which of the following are disadvantages of an internal approach to recruitment?

A. The organisation is familiar with the performance of the applicants

B. In-breeding of ideas occurs

C. The filling of vacancies is cheaper and faster

D. A and C

3. First Clothing decides to implement an e-recruitment system to facilitate its internally

focused recruitment strategy. However the HR Director is not 100% convinced about

the benefits of an e-recruitment system.

Which of the following are benefits of an e-recruitment system?

A. Information about job vacancies is available during business hours

B. Advertising costs are reduced

C. There is no limit to the length of the advertisement, as there is with newspaper

ads

D. Both B and C


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4. In response to the a job advertisement for the position of Production Supervisor,

John, the HR Director receives over 100 enquiries about the position in just one day.

These enquiries form part of the Preliminary Screening stage of the selection

process.

What is ordinarily involved in the Preliminary Screening phase of the selection

process?

A. Provisional Selection Interview

B. Completion of an Application Blank

C. Reference Checking

D. Both A and B

5. The selection process for the position of Production Supervisor at First Clothing has

been completed and the final decision has been made. Josie is the applicant who

Demonstrated the best fit with both the job and the organisation. It is Josie’s first

day at First Clothing and she is to attend an induction programme.

Which of the following are the main benefits of a successful induction process?

A. Alleviation of employee anxieties

B. Establishment of good working relationships between managers and

subordinates

C. Reduction in employee start-up costs

D. All of the above


1. D 2. B

3. D 4. D

5. D


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For this section, your Study Group is required to compare and contrast the HR Planning

practices within the different organisations of the Study Group members.

Preparation

Prior to the Study Group meeting, each individual group member must prepare the

following with respect to their organisation’s Recruitment and Selection Practices:

• Meet with your organisation’s HR Manager or HR Consultant responsible for

Recruitment and Selection. During this meeting, find out the following information:

o Does the organisation follow a primarily internal or external approach to

recruitment?

o How does the organisation’s approach to recruitment support the business

strategy?

o What selection methods are commonly used by the organisation?

o How does the organisation’s approach to selection support the business

strategy?

At the Study Group Meeting

At the Study Group meeting each individual group member must be given the opportunity

to present the information on their organisation’s Recruitment and Selection practices.

The differences between organisations must be critically discussed by the Study Group.

Particular attention should be given to whether or not recruitment and selection practices

are supportive of the greater organisational strategy.



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This Study Group Discussion activity provides the Study Group with an opportunity to reflect

on and compare different organisational approaches to Recruitment and Selection. Group

members, in sharing their experiences will learn from each other which in turn will enable

them to better understand and respond to Recruitment and Selection practices within their

own organisation.


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Instructions:

Read the case study below taken from your prescribed text, Nel et al (2008: 233) and then


George completed his bachelor’s degree four years ago at one of South Africa’s top

universities, with HRM as one of his two majors. He was employed as an HR manager by

one of the largest internet software companies in Africa, Soft Specials Dot Com that

specialises in B2B network software. They have been in business since 1990, and with the

boom in electronics especially in the software industry they have grown at a rate of 150 %

per year. George has done so well in recruiting the right person for the right job in the right

role that he was promoted to HR Director at the group head office six months ago. The

labour turnover is only 2%, which is actually alarming for George, but he knows it is because

of their excellent remuneration packages and other benefits. They also promote internally

and everybody knows that he or she will get rewarded if he or she works hard in the

organisation. George has recently promoted one of his best candidates, Mthunzi, to fill his

vacancy as HR manager.

George has just been called in by the CEO to help Mthunzi, the new HR manager, at Soft

Specials Dot Com. George was informed that the labour turnover had jumped up to 20% in

the last six months since he had been promoted. The very first thought that came into

George’s mind was “Have I made a mistake by promoting Mthunzi to HR manager?”

Customer demand to license Soft Specials Dot Com’s software boomed so much in the last 2

years that more than 80 new software programmers have been taken on to help develop a

new range of software products. Soft Specials Dot Com’s growth has been so swift that the

company still operates informally, its organisational structure is loose and flexible, and

programmers are encouraged to find solutions to problems as they go along. Although this

structure worked well in the past, George has been told that problems are arising.


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George knows that his job now will be to solve some management problems that have arisen

because of the rapid growth, and also the serious increase in labour turnover, all of a

sudden. George also learned that there have been increasing complaints from employees

that good performance is not being recognised in the organisation, and those they do not feel

equitably treated lately. Moreover, there have been complaints about getting managers to

listen to new ideas and to act on them. A bad atmosphere is developing in the company and

recently several talented employees have left. George can sense a negative organisational

culture developing.

(from: Nel, P.S., Werner, A., Haasbroek, G.D., Poisat, P., Sono, T. & Schultz, H.B. (2008) Human Resource

Management. 7th Edition. Cape Town: Oxford University Press Southern Africa. P 233).

1. Soft Specials Dot Com has operated very informally and it is likely that there is no

recruitment and selection policy which Mthunzi could utilise to guide his recruitment

process.You are required to develop a recruitment and selection policy for George to

give to Mthunzi which will prevent some of the bad recruitment decisions which

Mthunzi has made over the past few months.

(20 marks)

2. Could the labour turnover at Soft Specials Dot Com be improved at all through the

implementation of an induction programme? Provide reasons for your answer.

(5 marks)

What key issues should be covered in an induction programme at Soft Specials Dot

Com? (5 marks)





prescribed text) are relevant to the sample examination question:

o Question 1: Section 4.2 and 4.3



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Question 1 – Recruitment & Selection Policy.

Recruitment and Selection Policy for Soft Specials Dot Com

1. Human capital is recognised to be critical to Soft Specials Dot Com’s ability to fulfill

its business strategy and achieve competitive advantage in the market. Our

recruitment and selection policy has been developed to support the effective

implementation of our business strategy.

2. Recruitment Principles:

The following principles will guide Soft Specials Dot Com’s recruitment practices:

2.1 Our recruitment practices will be in line with legislative requirements.

2.2 So as to promote innovativeness and a diversity of ideas within our business, Soft

Specials Dot Com will in the first instance, seek to recruit from the external labour

market.

2.3 In areas where there is a limited supply of human capital in the external labour

market, Soft Specials Dot Com, will recruit from within. Appropriate training and

development programmes will be offered to existing employees who show

potential in this regard.

2.4 Soft Specials Dot Com will seek to be an ‘Employer of Choice’ as a means to

attract a high calibre of interested applicants to our organisation.

2.5 In line with our core business, and so as to attract suitable applicants, e-

recruitment will be our primary method of recruitment. This will be supported by

the use of recruitment agencies as and when needed.

3. Selection Principles:

The following selection principles will guide Soft Specials Dot Com’s selection

practices:

3.1 Various selection methods will be used in an effort to seek an optimal fit between

the person which we recruit and Soft Specials Dot Com’s organisational culture.


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3.2 The selection strategy that will be employed will be a multiple hurdles strategy

3.3 The selection process that will be implemented will be thorough and will involve:

• An online application form, supported by a CV

• A panel interview involving the direct superior, the HR consultant and a

technical specialist

• An appropriate employment test

• The checking of at least two references

Question 2 – Induction

While it is doubtful that an induction programme could dramatically bring down the high

labour turnover at Soft Specials Dot Com, it is likely that, if it is well designed, an induction

programme will have a positive impact on the labour turnover rate. Indeed the purpose of an

induction programme is to socialise new employees into the workplace and in so doing

reduce the employee’s reality shock and cognitive dissonance, reduce anxieties, as well as

create positive working relationships between the new employee and his manager and peers

(Nel et al, 2008: 262).

For Soft Specials Dot Com’s induction programme to be effective, it is important that the

following is addressed:

• Address from the CEO or key senior manager in which information about the company’s

background and culture is provided. The CEO / senior manager should also detail the

company’s expectations of employees

• Soft Specials Dot Com’s organisational chart

• Map of the company facilities

• Copy of policy and procedure handbooks (if available)

• Emergency and accident prevention procedures

• Sample copy of company newsletter

• Telephone numbers and locations of key personnel (Nel et al, 2008: 268)

• Information on the new employee’s job and people with whom he / she will be working

Such information will assist the new employee in easily settling into his / her role within the

organisation, and may contribute to preventing, or at least delaying, the dissatisfaction

amongst employees which is being expressed in the case study.


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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

Self Check Activity




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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 learner’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

Reading




Hill. (pp 268 – 336) Chapter 7; (pp 394-438) Chapter 9






Books



300 – 347 (Chapter 10).

• Kleynhans, R., Markham, L., Meyer, W., Van Aswegen, S. and Pilbeam, E.


(Chapter 5).

• Meyer, M. & Orpen, M. (2007) Occupationally-Directed Education, Training

and Development Practices. Johannesburg: Lexis Nexis.



Journals

• Auluck, R.K. (2007) “Mere Nip and Tuck? Training and Development’s

Changing Role.” Industrial and Commercial Training. Vol. 39, No. 1, pp 27 –

34.

• Brinkerhoff, R.O. (2006) “Increasing Impact of Training Investments: An

Evaluation Strategy for Building Organisational Learning Capability.”

Industrial and Commercial Training. Vol. 38, No. 6, pp 302 – 307.


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Recommended Reading (continued):

Journals

• Shaw, S. & Farhurst, D. (2008) “Engaging a new Generation of Graduates.”

Education and Training. Vol. 50, No. 5, 2008, pp 366 – 378.

• Skinner, D., Saunders, M.N.K. and Beresford, R. (2004) “Towards a Shared

Understanding of Skill Shortages: Differing Perceptions of Training and

Development Needs.” Education and Training. Vol. 46, No. 4, pp 182 – 193.


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5.1 Introduction

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

following will be examined:

• The concepts: training and development

• Training

o The Training Process

� Needs Assessment

� Employees’ Readiness for Training

� Creating a Learning Environment

� Ensuring Transfer of Training

� Selecting Training Methods

� Evaluating Training Programmes

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 labelled as ‘training’ and which initiatives generally receive

the ‘development’ label?


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Grobler et al (2006: 300) 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 ongoing learning opportunities so that employees can improve over a

longer period of time and learn skills other than those required in the current job”

(Kleynhans et al, 2007: 117).

Snell and Bohlander’s (2006: 282) distinction between the concepts of training and

development focuses on the orientation of the learning intervention. It is argued that training

“tends to more narrowly focused and oriented towards short term performance concerns”

(Snell and Bohlander, 2006: 282) while development is future-oriented and focuses on

“broadening an individuals skills for future responsibilities” (Snell and Bohlander, 2006:

282).

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, 2008: 267). As has

been indicated throughout this Study 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.

5.3.1 The Training Process

The training 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 emphasises effective training practices (Noe et al, 2012: 275)


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Figure 5.1: The Training Process (Noe et al, 2012: 275)

Creating a Learning

Environment

Ensuring Transfer

of Training

Selecting

Training Methods

Needs

Assessment

Employee’s Readiness for

Training

Evaluating Training

Programmes

o Organisational Analysis

o Person analysis

o Task analysis

o Attitudes and Motivation

o Basic Skills

o Identification of objectives and outcomes

o Meaningful material

o Practice

o Feedback

o Observation of others

o Administering and coordination of programme

o Self Management Strategies

o Peer and Manager Support

o Presentational Methods

o Hands-On Methods

o Group Methods

o Identification of Training Outcomes

& Evaluation Design

o Cost Benefit Analysis


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5.3.1.1 Needs Assessment

Needs assessment 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 needs assessment is summarised in Figure 5.2.

Figure 5.2: The Training Needs Analysis Process (adapted from Noe et al, 2012:276)

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, 2012).

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

2012).

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

which need to be emphasised in conducting the training (Noe et al, 2012)

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

the organisations approach to training (Noe et al, 2012). The outcomes may indeed show

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

ORGANISATION ANALYSIS

(What is the context?)

PERSON ANALYSIS

(Who needs training?)

TASK ANALYSIS

(In what do they need training?)


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

intervention, such as job redesign.

5.3.1.2 Ensuring Employees’ Readiness for Training

The second step of the training process involves evaluating an employee’s readiness for the

training.

? THINK POINT

Think about a successful and an unsuccessful training experience that you have had.

Did your readiness for the training have any impact on the success / effectiveness of

your training experience?


A number of research studies have shown that an employee’s motivation to learn impacts on

“knowledge gain, behaviour change, or skill acquisition in training programmes” (Noe et al,

2012). Managers can facilitate an employee’s motivation to learn through ensuring the

following for the employee:

• Self-Efficacy: refers to an employee’s belief that they can successfully learn and master

the outcomes of the training programme. Managers should facilitate employees self-

efficacy by making it clear that the training is a positive, learning experience and is not to

be used to expose any performance gaps which the employee may have (Noe et al, 2012).

It is also important for an employee’s self-efficacy for them to understand the purpose of

the training, before attending the actual training.

• Understanding of the Benefits and Consequences of Training: It is important that

employees understand the potential job-related, personal and career benefits which may

result from the training (Noe et al, 2012).

• Awareness of Training Needs, Career Interests and Goals: Employees need to have an

understanding of their areas of strength and weakness in terms of their existing


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competence so that they are able to chose training programmes which address their areas

of weakness (Noe et al, 2012).

• Understanding of Work Environment Characteristics: To enhance an employee’s

motivation to learn, it is important that he / she has sufficient social support from his / her

colleagues and managers. Having the right tools, equipment, materials and time relevant

to the new skill being learnt is important for the employee’s successful achievement of

competence (Noe et al, 2012).

• Ensuring Employees have a Basic Level of Skill: Having fundamental cognitive,

reading, writing and communication skills are imperative for the success of an employee

on a training programme. It is important therefore that managers do not place employees

on training programmes which require a higher level of cognitive and communication

competency than that which the employee currently possesses (Noe et al, 2012).

5.3.1.3 Creating a Learning Environment

? THINK POINT

Consider the various learning experiences which you have had through your

lifetime. In particular, think about what you learnt at:

• Primary school

• High / Secondary school

• College

• University

• On-the-job training

• Training workshops at your workplace

Out of all the learning experiences that you have reflected on, identify the one from

which you believe that you learnt the most.


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Educational and industrial psychologists have identified the conditions required for an

employee’s learning to be optimal. These conditions are indicated in Figure 5.3 below. All

training programmes need to fulfill these conditions if learning is to take place. It is likely

that these conditions were not met for the learner at school. Ideally, however, they should

have been met in training workshops at the workplace.

Figure 5.3: Conditions for Learning (Noe et al, 2012: 286)

5.3.1.4 Ensuring Transfer of Training

? THINK POINT

Think about a job related training programme which you attended at the

organisation for which you work. Such a training programme could be an end user IT

programme (e.g. MS Word), a continuing professional development programme (e.g.

Tax Update) or an interpersonal skills programme (e.g. Communication Skills).

After attending the actual training workshop, did you apply the skills which you had

learnt in the performance of your job? Provide reasons for your answer.

Need to Know Why They Should

Learn

Meaningful

Training Content

Opportunities for

Practice

Feedback

Experience & Interact with

Others

Good Programme Coordination &

Administration

Commit Training Content to

Memory


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Think Point

Frequently, employees attend training, but fail to apply what they have learnt in the

performance of their jobs. This is often because the factors required for the transfer of the

learning to the job are not present in the work environment.

The factors within the work environment necessary for the transfer of training include:

• Climate for Transfer, which refers to the employee’s perceptions of the work

environment which will facilitate or inhibit their application of learning.

• Technological support

• Manager support: Managers need to not only stress the importance and relevance of

employees attending a particular training programme, but they should also support the

application of skills learnt in the performance of the job (Noe et al, 2012).

• Peer support: This can take the form of two or more employees, who are also

enrolled on the training intervention, forming a support network to aid each other in

the development of skills (Noe et al, 2012).

• Self management skills: These can be developed through the training programme

where employees develop action plans as to how they will apply their skills.

• Opportunities to use learned capability (Noe et al, 2012)

5.3.1.5 Selecting Training Methods

It is important that appropriate training methods are chosen so as to ensure an optimal

learning experience.

� ACTIVITY

Consider the training which you 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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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, 2012)

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

Presentation Methods

(Noe et al, 2012; 291-295)

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 audio conferencing,

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, 2012, pp 295-304)


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


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Hands on Methods

(Noe et al, 2012, pp 295 – 304)


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

Group Building Methods

(Noe et al, 2012, pp 304-310)


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


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5.3.1.6 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 is evaluated.

Four Criteria for Evaluation

Snell and Bohlander (2007: 311) identify four criteria which may be used to evaluate

training. These are:

• Criterion 1: Reaction

This stage is the simplest stage and measures the learner’s opinions about the training

programme.

• Criterion 2: Learning

This involves measuring the change in knowledge, skills and attitudes as a result of the

learner attending the training programme (Snell & Bohlander, 2007: 312). 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.

• Criterion 3: Behaviour

This stage measures the actual on-the-job changes in behaviour which result from

attending the training programme (Snell and, 2007: 313). 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.

• Criterion 4: Results

This stage focuses on how the training intervention has impacted on the organisation.

The questions which are investigated include “How much did quality improve because of

the training?” and “How much has it contributed to profits?”(Snell & Bohlander, 2007:

313).


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� READING

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

• Brinkerhoff, R.O. (2006) “Increasing Impact of Training Investments: An

Evaluation Strategy for Building Organisational Learning Capability.”


1. Discuss Brinkerhoff’s (2006) critique of typical training evaluation methods

2. Discuss Brinkerhoff’s (2006) Success Case Method Evaluation Strategy and

identify the manner in which it supports organisational strategy.


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Brinkerhoff (2006) notes that the impact of training is dependent on the manner in which the

training is implemented. Two organisations may implement the same training programme

but its impact is likely to differ. Brinkerhoff identifies that organisations differ in the way

that they “make use of training, the way it is organised, planned, implemented and above all,

followed up and supported…some companies are reaping huge returns on investment in

learning by changing the way we conceptualise and manage their training process…others,

stuck in the older paradigm as ‘delivery of learning programmes’ continue to waste millions,

and fail to leverage their large investments in learning and training” (Brinkerhoff, 2006:

303).

Critique of Typical Training Evaluation Methods

Brinkerhoff (2006) asserts that the best results a company can achieve through training are

increased capability in employees. The real value from training “comes when capability is

transformed into improved job performance…training that is well learned, but never used, or

poorly used, produces no value for the business that invested in the training….this issue is, in

a nutshell, the challenge for increasing the return on training investments” (Brinkerhoff,

2006: 303). In other words, ensuring performance from improved capability is in effect a

performance management challenge. It is imperative therefore that training is implemented

in conjunction with an aligned performance management system (Brinkerhoff, 2006: 303).

As Brinkerhoff (2006) asserts “the reality is that … performance system factors are the

principal determinants of impact from training and can, if they are not aligned and

integrated, easily overwhelm even the very best of training” (p 303).

Brinkerhoff (2006) identifies that the key challenge for organisations is “how to leverage

learning consistently, quickly, and effectively into improved performance” (Brinkerhoff,

2006: 304). Indeed, this is not something which occurs in typical organisations where the

translation of learning / capability into performance, and therefore impact, amounts to less

than 15%. What organisations therefore require is not an evaluation method which keeps

uncovering the poor impact of training, but rather a strategy and method for changing the

poor impact of training (Brinkerhoff, 2006). Such a strategy should identify and address

factors which prevent the translation of learning to performance on the job, as well as inform

various stakeholders (e.g. supervisors, management, etc.) within the organisation as to what

is required from them to support the application of learning.


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Re-Defining the Evaluation Process

Brinkerhoff (2006) advises that the following training evaluation process, known as the

‘Success Case Method’ should be followed:

• Survey of the Most Successful Trainees: Those trainees who were most successful in

applying what they had learnt during the training are interviewed. During these

interviews the training system factors (e.g. timing of training, opportunities to apply

learning, managerial support) which supported the employees’ in applying what they had

learnt are identified (Brinkerhoff, 2006).

• Survey of the Most Unsuccessful Trainees: The most unsuccessful trainees, in terms of

applying what they have learnt on the job, are also interviewed. These interviews

determine the factors which inhibited the employees’ application of newly acquired skills

(Brinkerhoff, 2006).

The results of these surveys provide the organisation with information regarding “what

worked, what did not, what worthwhile results have been achieved, and most importantly,

what can be done to get better results from future efforts” (Brinkerhoff, 2006: 305).

Brinkerhoff (2006) concludes by asserting that the Success Case Method is effective in

supporting the achievement of the organisation’s overall strategy. He asserts that

“evaluation of training, when embedded in a coherent and constructive strategic framework

like the one presented, is a powerful tool for organisational learning and capability

building” (Brinkerhoff, 2006: 307).

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

contribute to the rebuilding of the economy (Grobler, 2006: 327).

The implementation of the SAQA Act, the Skills Development Act and Skills Development

Levies Act has not been without its challenges. As a result, as at September 2008, a proposed


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new piece of legislation, known as the ‘Skills Development Amendment Bill’ has been under

discussion. This bill aims to bring further changes to the manner in which training is

implemented and governed within South Africa.


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 addresses the weaknesses of the ‘old’

system.

Past System New System

Varying quality between training providers and training programmes

A national quality management system has been put in place to ensure consistent quality across all training providers and training programmes

Focus on inputs and content Focus has shift to outputs or outcomes

Learners rated against each other (norm based assessment)

Learners assessed against a national standard

Teacher/trainer-centred Learner centred

No recognition of prior learning Recognition of prior learning (RPL) – learners are able to gain credit for knowledge and skills they acquire informally

Ad hoc reporting of learning achievements

A national record of learning database has been established to ensure centralised and consistent reporting of learning achievements

Table 5.2: The difference between the ‘past’ and ‘new’ training system within South Africa

(Meyer and Orpen, 2007)

? 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 NQF is a framework on which standards and qualifications, agreed to by education and

training stakeholders throughout the country are registered. Registered unit standards and

qualifications are structured in such a manner that learners are able, on successful completion

of accredited prerequisites, to move between components of the delivery system. It further

allows for multiple pathways to the same learning end. The NQF is essentially a quality

assurance system with the development and registration of standards and qualifications as the

first important step in implementing a quality education and training system in South Africa.

The bodies responsible for quality assurance are called Education and Training Quality

Assurance Bodies (Nel et al.; 2011: 363)

Figure 5.3 The National Qualifications Framework (NQF) structure (Nel et al. ; 2011: 364)


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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 (Nel et al, 2011)

? THINK POINT

Outline the development interventions that are implemented within your organization.


Development interventions include formal education programmes, assessment, job

experiences and interpersonal relationships. Each of these is discussed in sections 5.4.1 –

5.4.4 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,2012)

5.4.2 Assessment

According to Noe et al (2012) assessment involves “collecting information and providing

feedback to employees about their behaviour, communication style, or skills”. 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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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, 2012). 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

• Transfers, Promotions and Downward Moves, and

• Temporary Assignments with Other Organisations

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, 2012). 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, 2012).

A mentor may provide career support and / or psychosocial support to the employee (Noe et

al, 2012). Key factors for the success of a mentorship programme include:

• Voluntary participation in the mentorship programme by both mentor and protégé

• A mentor’s past record in developing employees is a key factor in his / her selection for a

mentorship programme

• The matching of mentor to protégé is based on the degree to which the mentor’s skills

can meet the protégé’s needs

• There is an evaluation of the mentorship programme (Noe et al, 2012)


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Coaching may take the form of:

• one-on-one sessions with the employee for the purpose of giving feedback

• pairing an employee with an expert in an area who helps the employee develop relevant

job related skills, and

• facilitating an employee’s access to relevant mentors, training programmes and job

experiences which the employee would not have been in a position to access without the

coach’s help (Noe et al, 2012)

In summary, this sub-section examined the practice of development. 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. 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 was 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.

�� SELF CHECK ACTIVITY 1

Read the following scenario taken from Noe et al (2010: 451).

“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


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position involves working under stress and coordinating several activities at a time.

She asks you to outline the type of job assessment programme you believe would do

the best job of identifying employees who will be successful managers” (Noe et al, 2010:

451).

Use your knowledge of assessment to formulate an answer to your boss’s question in

the space provided below.

�� SELF CHECK ACTIVITY 2

Check your understanding of some of the principles and theory addressed in this section

by answering the questions below.

1. Twenty-First Consulting, a management consultancy, has decided to implement a

Customer Service Excellence workshop for its entire staff. The workshop will be five

days in duration.

The Customer Service Excellence workshop which is to be implemented for all

staff is an example of

A. Training

B. Development

C. Assessment

D. Both B and C

2. Tshepo, the HR Director at Twenty-First Consulting, came to the decision that all

staff needed to attend the Customer Service Excellence workshop after the recent

Executive Committee Strategic Planning session. During this Strategic Planning

session, it was decided that one of the organisation’s objectives for the next two


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years would be to improve customer service in an attempt to gain competitive

advantage in the market.

Tshepo reached the decision to implement a Customer Service Excellence workshop

as a result of:

A. Organisational Analysis

B. Person Analysis

C. Task Analysis

D. Performance Analysis

3. The staff in Tshepo’s department is reluctant to attend the Customer Service

Excellence Training and one of the reasons for this is that the training involves an

assessment. A few of the HR Consultants and HR Administrators have voiced that it

has been years since they have undergone an assessment and they are concerned that

they will not do as well as expected. Tshepo attempts to address his staff’s fears by

explaining that the training is to be a positive experience and is not meant to be

punitive. Furthermore, he expresses his confidence in all of the HR staff’s ability to

succeed and indeed excel in the assessment.

Tshepo’s efforts described above are an example of which of the following stages of

training?

A. Needs assessment

B. Ensuring the employee’s readiness for training

C. Creating a learning environment

D. Ensuring transfer of training

4. Tshepo is busy working with the service provider, Training Today, to determine the

outcomes and structure of the Customer Service Excellence training programme.

Tshepo is adamant that the training programme should incorporate business games

and case studies.

Business games and case studies are an example of which of the following clusters of

training methods?

A. Hands of Methods

B. Presentation Methods

C. Group Building methods


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D. Input methods

5. Tshepo has decided that on completion of the training, an evaluation will be

conducted. This evaluation will involve getting the participants to fill out a

“smile sheet” on completion of the workshop indicating their level of satisfaction

with the training.

Tshepo’s intention is to utilise which of the following criteria to evaluate the

effectiveness of the training?

A. Reaction

B. Learning

C. Behaviour

D. Results

Answers to Self Check Activities

Self Check Activity 1

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, 2010:420) 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, 2010: 422). 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, 2010: 424). 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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Answers Self Check Activity 2

1. A 2. A

3. B 4. A

5. A


For this section, your Study Group is required to compare and contrast Training

experiences of the different Study Group members.

Preparation


following with respect to their experience of training:

• Select two work related training interventions in which you have participated. The

one training intervention should have been very successful, while the other training

intervention which you choose should have been poor.

o Identify the factors which made the one training intervention successful

o Identify the factors which made the other training intervention unsuccessful



to present a successful and unsuccessful training intervention which they have

experienced.

Based on the presentations and discussions of each group member’s training experiences,

the Study Group should then prepare a one – two page guideline entitled “Training:

Factors for Success”



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on and compare different training experiences. Group members, in sharing their experiences

will learn from each other which in turn will enable them to better understand and respond to

training practices within their own organisation.


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Instructions:

Read the case study below taken from your prescribed text, Noe et al (2010: 271-272) and

then answer the questions which follow.

Learning Isn’t Perishable at Wegman’s Food Markets

At Wegman’s Food Markets, learning is how the company differentiates itself from other

supermarkets. Learning is not part of competitive advantage: it is the competitive strategy.

Wegman’s Food Market is known as much for carrying 700 different types of cheeses as it is

for being one of the best companies to work for. In 2007 Wegmans was named to Fortune

magazine’s 2006 list of the ‘100 Best Companies to Work For’, ranked number 3. This marks

the tenth consecutive year Wegmans has appeared on the annual list and its fifth year ranked

among the top 10. Wegmans makes a considerable investment in training. The company

recently branched out of its traditional locations in New York, Pennsylvania, and New Jersey

to open to stores in Virginia. The company spent more than $1 million training staff.

Because the level of service is as important as is productive knowledge, Wegmans offers

classroom training as well as hands-on training. Because Wegmans is a food business,

learning with the five senses is very important. Employees are put through rigorous courses

in areas such as operations, product knowledge, and cooking. But employees first receive

training about the products they are selling, what makes them good, and how to prepare

them. Wegmans believes that with knowledge, employees can provide real value to

customers. Part of the company’s strategy is to help customers understand the products so

they will buy a new product. Wegmans mails Menu magazine to about 1 million addresses

four times a year. It has recipes, cooking techniques, and product advice. Customers come

to the stores looking for products needed for the recipes and tips on how to prepare them. As

a result, cooking coaches and sales staff go through a session each week on how to make a

meal of the week. This training increases their product knowledge and makes them

comfortable selling products.


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Wegmans wants to teach people the company values. The values include caring and trust.

Wegmans tries to find people who will care about the customers and care about their

Wegmans teammates. High food safety standards are also important and are emphasised in

technical training. Wegmans also has special programmes for teenagers who work in the

stores. For example, the company has an apprenticeship programme with about 250 people

in it each year. The apprentices take on a team project on some aspect of the department

they are working in. After studying for five months, the teams give presentations. The

company also offers a work-study programme which offers more than 1,500 hours of paid,

school-supervised work experience, supported by related instruction at school. Students may

receive high school credit for this experience. With the support of a mentor, students

complete structured rotations through a variety of departments – bakery, produce, seafood,

and other departments – based on career interests. The students learn and enhance their

customer service, teamwork, product knowledge, food safety, and technical skills. Students in

their last rotation during senior year in high school focus on gaining new experience in

merchandising, product preparation, selling skills, and department sales concepts and finish

off the programme by completing a senior research project. Students who successfully finish

the programme receive either a full-time employment opportunity or, if attending college, a

Scholarship Award and an opportunity to compete for the Store Operations Summer

Internship programme immediately after high school graduation.

Why does Wegmans invest time and money in training students? Wegmans has a lot of young

adults working in the stores and they are responsible for making a difference to customers

providing excellent service. How does Wegmans Food Markets measure the return on its

investment in training? CEO Danny Wegman says, “People are continuing to learn and

have more confidence. We don’t have a formula for measuring that, but we ask ourselves

‘Are we being successful as a company? Are we getting good feedback from our people on

the various courses we are offering? Do they feel they [the courses] are relevant to their

successes as individuals and part of the company?”

(from: Noe, R.A., Hollenbeck, J.R., Gerhart, B. and Wright, P.M. (2010) Human Resource Management:

Gaining a Competitive Advantage 6th Ed. McGraw-Hill. pp 271-272)


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1. Critically discuss how Wegmans Food Market’s approach to training contributes to

the achievement of the organisation’s strategy. (10 marks)

2. The case states that CEO Danny Wegman says “People are continuing to learn and

have more confidence. We don’t have a formula for measuring that, but we ask

ourselves ‘Are we being successful as a company?’ ‘Are we getting good feedback

from our people on the various courses we are offering?’ ‘Do they feel [the

courses] are relevant to their successes as individuals.’”

Critically discuss Wegman’s approach to evaluating training from the perspective of

Brinkerhoff’s (2006) Success Case Method (10 marks)

2. Guidelines for the Answering of the Examination Questions:





o Question 1: Section 5.3.1, particularly Section 5.3.1.1

o Question 2: Section 5.3.1.6


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Question 1 – Organisational Strategy & Training

Wegmans approaches training as a critical component of its strategy. Indeed, it is stated at

the beginning of the case study that “learning is how the company differentiates itself from

other supermarkets”.

Indeed, Wegmans uses training in the following ways to differentiate itself from other

supermarkets:

• Employees are able to offer a high level of service given their thorough product

knowledge which has been developed through training. For example, employees are

put through rigorous training interventions which focus on operations, product

knowledge and high food safety standards. This training enables the employees to,

for example, provide customers with tips on how to utilise products in recipes.

• Wegmans also implements apprenticeships for scholars (teenagers) which results in

scholars either receiving fulltime employment at Wegmans on completion of their

schooling or receiving a scholarship.

• Wegmans’ intense focus on the development of its employees results in a positive

working and learning environment which in turn promotes motivation and high

performance. This has also lead to Wegmans being acknowledged in the ‘100 Best

Companies to Work For’.

It may therefore be argued that Wegmans’ implements ‘high-leverage’ training which “is

linked to strategic business goals and has top management support” (Noe et al, 2010: 273).

There is also evidence in the case study which suggests that Wegmans adopts a ‘continuous

learning’ approach, which refers to a learning system “that requires employees to

understand the entire work process and expects them to acquire new skills, apply them on the

job, and share what they have learned with other employees” (Noe et al, 2010: 273). Indeed

there is evidence in the case study to show that employees develop an understanding of the

entire work process (e.g. students undergo structured rotations in various departments under

the guidance of a mentor) and that they are required to apply the new skills which they have

learnt on the job (e.g. advising customers on how to make the ‘meal of the week’ or

providing tips on the use of a product, based on the training which they have received).

There is, however, no overt evidence in the case study that employees are encouraged to


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share what they have learned with other employees. If this is something which Wegmans has

not yet encouraged their staff to do, it is recommended that they do so as to further leverage

the strategic benefit of the training implemented.

Question 2 – Evaluation of Training

CEO Danny Wegman’s stages that “people are continuing to learn and have more

confidence. We don’t have a formula for measuring that, but we ask ourselves ‘Are we being

successful as a company?’ ‘Are we getting good feedback from our people on the various

courses we are offering?’ ‘Do they feel the [courses] are relevant to their successes as

individuals?’” In response to this statement, from Brinkerhoff’s (2006) perspective, it is

important that the impact of training is fully understood. While Wegmans is certainly an

example of an organisation which has strategically used training to improve its competitive

advantage, it would be useful for the organisation to implement a formal training impact

assessment so as to ascertain and maximise the benefit of all training interventions

implemented.

Brinkerhoff (2006) stresses that the real value of training is only realised once the learnings

from the training intervention are applied in the workplace situation. It would therefore be

beneficial for Wegmans’ to apply Brinkerhoff’s (2006) Success Case Method. This would

involve conducting the following process for each of the training interventions implemented:

• Survey of the Most Successful Trainees: Those employees (trainees) who were most

successful in applying on-the-job what they had learnt during the training (e.g. cooking

training) are interviewed. During these interviews the training system factors (e.g. timing

of training, opportunities to apply learning, managerial support) which supported the

employees in applying what they had learnt are identified (Brinkerhoff, 2006).

• Survey of the Most Unsuccessful Trainees: The most unsuccessful employees (trainees),

in terms of applying what they have learnt on the job, are also interviewed. These

interviews determine the factors which inhibited the employees’ application of newly

acquired skills (Brinkerhoff, 2006).

The results of these two surveys will provide Wegmans with information regarding “what

worked, what did not, what worthwhile results have been achieved, and most importantly,

what can be done to get better results from future efforts” (Brinkerhoff, 2006: 305). Such

results will enable to Wegmans to better align and maximise the impact of those training


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areas which the Success Case Method reveals are not currently having the impact which is

expected. In so doing, Wegmans would be better able to leverage its training so as to gain

greater competitive advantage.


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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

Self Check Activity




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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 learner’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

Reading










Books



262 – 299 (Chapter 9).


(2007). Human Resource Management: Fresh Perspectives. pp 141 - 170

(Chapter 6).



Journals

• Andersen, B., Henriksen, B. and Aarseth, W. (2006) “Holistic Performance

Management: An Integrated Framework.” International Journal of

Productivity and Performance Management. Vol. 55, No. 1, 2006, pp 61 – 78.

• Ahn, H. (2005) “Insights from Research: How to Individualise your Balanced

Scorecard.” Measuring Business Excellence. Vol. 9, No. 1, pp 5 – 12.

• De Waal, A.A. (2003) “The Future of the Balanced Scorecard: An Interview

with Professor Dr Robert S. Kaplan.” Measuring Business Success. Vol. 7,

No. 1, pp 30 – 35.


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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 (2010) 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 (2010) emphasise 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 (Noe et al, 2010 : 351)

6.3 The Performance Management Model

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 organisation.

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? Provide reasons for your

answer.


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Comment on Activity

Noe et al (2008:343) stress that performance management is critical to gaining and sustaining

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: The Performance Management Model (from Noe et al, 2010: 354)

Figure 6.2 provides an overview of a model of performance management within the

organisation. This particular model identifies the individual employee, with his / her relevant

attributes such as knowledge, skills and personality (Noe et al, 2010). So as to perform, the

individual employee needs to translate his individual attributes into individual behaviour.

This behaviour will then lead to results. For example, a car sales person who possesses

interpersonal skills and product knowledge will be able to use these attributes to positively

interact with customers and provide them with important information regarding the motor

vehicle which they are interested in purchasing. A car sales person who is able to apply his /

her attributes effectively will achieve good sales (results).

Individual Attributes

Individual Behaviour

Objective Results

Situational Constraints

Organisational

Strategy


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Figure 6.1 also highlights the impact of the organisational strategy on the performance of

individual employees. It is imperative, for the success of the organisation, that individual

behaviours are directed towards the achievement of organisational goals (Noe et al, 2010).

The model also recognises that situational constraints will impact on individual employee’s

abilities to achieve effective results.

6.4 Purposes of Performance Management


Performance management essentially has three purposes:

• Strategic purpose

• Administrative purpose

• Developmental purpose

Strategic Purpose

A performance management system serves to link employee performance to the overall

organisational strategy and organisational objectives (Noe et al, 2012). 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, 2012).

? THINK POINT

Based on your experience of performance management within the organisation in

which you work, what do you think is the purpose of performance management?


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Administrative Purpose

Performance management systems provide information which assists organisations with

administrative decisions relating to issues such as to salary administration (pay raises),

layoffs and promotions (Noe et al, 2012).

Developmental Purpose

Performance management systems provide information about employee strengths and

weaknesses and in so doing identify employee developmental needs (Noe et al, 2012).

6.5 Approaches to Performance Management

There are a number of approaches to performance management (Noe et al, 2012)

• 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, 2012)


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, 2012).

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

? THINK POINT

What, in your opinion, are the strengths and weaknesses of the comparative

approach to performance management?


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• 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, 2012)

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, 2012).

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, 2012).


The strengths of the attribute-based techniques include:

• They are commonly used by organisations as they are easy to develop and can be

generalised across a range of jobs, and

• If designed properly, they can be reliable and valid (Noe et al, 2012)

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, 2012)

? THINK POINT

In your opinion, what are the strengths and weaknesses of the attribute approach?


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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, 2012). Behavioural-based techniques

include:

• Critical Incidents

• Behaviourally Anchored Rating Scales

• Behavioural Observation Scales

• Organisational Behaviour Modification

• Assessment Centres (Noe et al, 2012)


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, 2012)

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, 2012)

? THINK POINT

What strengths and weaknesses of the behavioural approach can you identify?


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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, 2012).

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, 2012).

• Balanced Scorecards, which may be used to manage the performance of individual

employees, teams, business units as well as the organisation itself (Snell and Bohlander,

2007:358). The appraisal considers four related categories:

o Financial

o Customer

o Processes

o Learning

The Balanced Scorecard enables managers to translate organisational goals into business

unit, team and individual employee goals for each of the above categories (Snell and

Bohlander, 2007: 359).


Read the following journal article which documents an interview with Robert

Kaplan, who may be argued to be the most influential thinker in the field of

performance management. Then answer the questions which follow:

• De Waal, A.A. (2003) “The Future of the Balanced Scorecard: An Interview

with Professor Dr Robert S. Kaplan.” Measuring Business Success. Vol. 7,

No. 1, pp 30 – 35.

1. According to Kaplan, why is the balanced scorecard approach to performance

management so successful?


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Model responses to the questions posed in the Reading Activity above are provided

below.

Success of Balanced Scorecard

Kaplan argues that the success of the balanced scorecard is that it is the first performance

management approach that “links vision and strategy to employees’ everyday actions by

translating the abstract strategy into clear strategic priorities and initiatives and relating

these to clear tangible strategic outcomes the organisation and its employees have to

strive for: satisfied shareholders, delighted customers, efficient and effective processes

and a motivated workforce” (De Waal, 2003: 31). In so doing, the balanced scorecard

“makes strategy everyone’s job” (De Waal, 2003: 31).

Is the Balanced Scorecard a Management Fad?

Kaplan is quite adamant that the balanced scorecard is not a management fad, and he

supports this with evidence about the growing use of the balanced scorecard. Kaplan

2. How does Kaplan respond to the criticism that the balanced scorecard is a

management fad?

3. How does Kaplan view the future of the balanced scorecard?


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reports that more and more large organisations are using the balanced scorecard and that

it is being used more and more in Asia. Kaplan also indicates that non-profit

organisations are showing great interest in implementing the balanced scorecard as well

(De Waal, 2003: 31).

Future of the Balanced Scorecard

Kaplan believes that the balanced scorecard will still be in use even in ten years

following the interview (i.e. 2013) which is documented in the journal article. However,

he indicates that it is likely that the balanced scorecard will increasingly be used together

with the strategy map which will assist organisations and employees in fully

understanding and implementing their strategy (De Waal, 2003: 33). The strategy map is

essentially a “logical architecture that defines strategy by specifying the relationships

between shareholders, customers, business processes and competencies. A strategy map

makes sure that the balanced scorecard is linked to the organisation’s strategy” (De

Waal, 2003: 34).



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,

2012)

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

? THINK POINT

In your opinion, what are the strengths and weaknesses of the results approach?


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• Employees may only focus on the performance criteria against which they are to be

measured (Noe et al, 2012)

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, 2012). 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, 2012).

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, 2012).

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.

6.5.6 The Multi-Rater Approach

Many organisations adopt 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) (Snell and Bohlander, 2007:

343).

This approach allows employees to receive an accurate view of their performance as

“different people see different things” (Snell and Bohlander, 2007: 343). This approach

usually involves the administration of a questionnaire to a number of people with whom the

employee interacts, in which they indicate how well the employee performs in a number of

behavioural areas (Nel et al, 2011).


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The strengths of the 360 degree approach include:

• As the employee is appraised from multiple perspectives, the approach is more

comprehensive than other approaches (Snell & Bohlander, 2007: 345).

• The information produced is quality information.

• There is an emphasis on internal and external customers as well as the team.

• Bias and prejudice is lessened as the appraisal is not dependent on one person’s view

alone.

• Feedback from people other than the manager contributes considerably to an

employee’s development (Snell & Bohlander, 2007: 345).

The weaknesses of the 360 degree approach include:

• It is a complex system in that numerous appraisals need to be combined.

• It can be intimidating, resulting in resentment on the part of the employee being

appraised (Snell & Bohlander, 2007: 345).

• Appraisals from differing individuals may be different and confusing.

• Considerable training is required to ensure that the system works as it should.

• Employees could undermine the reliability of the approach through colluding in terms

of the appraisals which they are to give each other (Snell & Bohlander, 2007: 345).

In summary, this section has focused on the various approaches towards performance

measurement: the comparative approach, the attribute approach, the behavioural approach,

the results approach, the quality approach and the multi-rater approach.

? THINK POINT

In your opinion, what are the strengths and weaknesses of the 360 degree

approach?


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6.6 Summary

This section investigated Performance Management. 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.




1. Pavesh, the Store Manager of Trends Furniture is about to conduct the annual round of

performance appraisals for his staff. The performance appraisal form which he is to use

looks as follows:

Based on the information provided in the Performance Appraisal Form above, which of

the following techniques is Pavesh using to appraise his staff’s performance?

A. Paired Comparison

B. Graphic Rating Scale

C. Critical Incidents

D. Behavioural Observation Scale

TRENDS FURNITURE PERFORMANCE APPRAISAL FORM

Name of Staff Member:

Name of Manager Appraising Staff Member:

Date:

Performance Dimension

Excellent Commendable Adequate Poor

Knowledge 4 3 2 1

Communication 4 3 2 1

Team Work 4 3 2 1

Interpersonal Skills

4 3 2 1

Initiative 4 3 2 1


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2. Mpho, the Assistant Store Manager at Trends Furniture, meets with Pavesh for lunch.

Pavesh shows Mpho the performance appraisal form which he is going to use in

conducting the upcoming performance appraisals in his store. Mpho is not very

impressed with the performance appraisal form and informs Pavesh that she has a better

one. Later that day when Mpho gets back to her office, she emails Pavesh an example of

a form which she believes would be a better performance appraisal tool than the one

which Pavesh has developed. Mpho’s performance appraisal form looks as follows:

Which of the following performance management techniques does Mpho’s form support?

A. Paired Comparison

B. Graphic Rating Scale

C. Critical Incidents

D. Behavioural Observation Scale

3. After perusing Mpho’s performance appraisal form, Pavesh realises that he should

ideally get some professional advice regarding the performance management system

TRENDS FURNITURE PERFORMANCE APPRAISAL FORM

Name of Staff Member:

Name of Manager Appraising Staff Member:

Date:

Serving Customers

Customers are greeted within 20 seconds of arriving at the store.

Almost Never

1 2 3 4 5 Almost Always

Customers are served in a professional, yet friendly, manner

Almost Never


Customers with special requests are provided with feedback within 4 hours of requesting the product.

Almost Never


Total:

Key:

Poor 0-5

Below Adequate 4-6

Adequate 7- 9

Good 10 – 12

Excellent 13 - 15


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which he is to implement. So he phones Betty, who was a close friend of his during

university and currently is employed as the HR Manager responsible performance

management at a large bank. Betty asks Pavesh a number of questions before advising

him to adopt a 360 degree approach to performance management.

Which of the following are strengths of the 360 degree approach to performance

management?

A. It is more comprehensive than other approaches

B. Bias and prejudice is lessened

C. There is an emphasis on internal and external customers

D. All of the above

4. Pavesh decides to go ahead with Betty’s recommendation and adopt a 360 degree

approach to performance management. He calls a general staff meeting to inform the

staff of the pending performance appraisals. During the staff meeting, a group of sales

consultants start questioning Pavesh about the purpose of the performance appraisal. In

particular the sales consultants want to know what the results of the performance

appraisal will be used for. Pavesh explains, “the primary purpose of implementing this

performance appraisal is to provide me with information regarding your performance –

this will assist in determining bonuses and increases which are due in three months

time.”

The purpose of Pavesh implementing the performance appraisal is an example of :

A. Strategic Purpose

B. Developmental Purpose

C. Administrative Purpose

D. All of the above

5. Josie is a junior sales consultant at Trends Furniture. She has recently attended a

“Delight Your Customers!” training workshop during which she developed skills in the

latest customer service methods. However, Josie is now frustrated – following the

training workshop Josie approached Nicholas, a senior sales consultant and her boss at

Trends Furniture. Josie suggested a few ideas to Nicholas as to how she and her

department could go about delivering a higher level of service to customers. However,


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Nicholas was not keen on introducing the new customer service initiatives which Josie

was suggesting, indicating that he believed them to be a waste of time.

Nicholas is a barrier to Josie implementing new customer service methods in the store.

This is an example of which of the following components of Noe et al’s (2008)

Performance Management Model:

A. Organisational Strategy

B. Individual Attributes

C. Objective Results

D. Situational Constraints

Answers Self Check Activity 2

1. B 2. D

3. D 4. C

5. D


For this section, your Study Group is required to compare and contrast the Performance

Management Systems from the different organisations in which the Study Group

members work.

Preparation


following with respect to their organisation’s approach to performance management (you

may need to consult your HR Manager in doing this preparation if you have not

previously received training on and applied the performance management system):

• Source your organisation’s performance management policy and procedure. If there

is no policy and procedure, prepare a flowchart indicating how the performance

management process is implemented within your organisation.

• Source the tools that are used to implement the performance management process


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(e.g. appraisal questionnaires, appraisal reports, etc.)

• Reflect on and make notes on the strengths and weaknesses of the performance

management system.



to present their organisation’s performance management approach. The performance

management policies, procedures and tools should be perused by the group.

On completion of each individual presentation, the group should critique the performance

management system and should identify the key approach which it follows (e.g.

comparative approach, results approach, etc.). The group should discuss whether the

approach followed is the one which is the most appropriate for the organisation.

Following the group discussions of the various performance management approaches, it

would be useful for the group to prepare a one-two page summary document entitled

“Guidelines for the Implementation of an Effective Performance Management System”.



on and compare different experiences of implementing performance management within

organisations. Group members, in sharing their experiences will learn from each other which


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in turn will enable them to better understand and respond to performance management

practices within their own organisation.


Instructions:



In the Dark on 360 Degree Feedback

Based on his strong technical background and sound track record as a successful manager,

Ed Scott was hired to manage a technical department at Allitech, a company of 850

employees, producing high-fibre optics. After four years at Allitech, Ed’s department had

accomplished its objectives and he received good performance reviews and bonuses each

year. Ed had just completed a major project, when his manager, Julian Haynes, suggested

that Ed participate in the senior management 360 degree feedback programme. The multi-

rater feedback programme was used only for senior managers and Ed was unsure whether to

feel excited and flattered to be included in the top management’s evaluation programme, or

whether he should be apprehensive of its possible outcomes. He knew that, while under

stress, he had been a little hard on a few poor-performing workers. He still believed

however, that he had an excellent reputation, and assumed his feedback would reflect that.

Ed was shocked when he read the feedback from the 19 people who had completed the

questionnaire as part of the review. Five of the eight people who reported to him commented

that they disliked his management style so much, that they would take a transfer out of his

department if the chance arose. The remaining reviews emanated from senior managers,

internal customers (in the form of other departmental heads), and external clients of the

company. Of these, four respondents gave him an excellent review, and the rest were mixed

in their responses.

Ed Scott was astonished that some people no longer considered him to be a good manager.

He wondered whether he had been subjected to the 360 degree process because Julian felt


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threatened by him, or because some of his more competitive colleagues were trying to

undermine him. Although there was some truth in the feedback, Ed felt harassed by the

experience. However, he agreed to work with a consultant to address some of the problems

which helped him to realise that he would have to work on his management style. For

example, he learnt that when he reprimanded a few workers, it affected the morale of the

whole team.

Nevertheless, long after the multi-rater feedback issue had been laid to rest, Ed still felt

aggrieved by the whole affair. Six months later, he left Allitech for another company. Other

factors entered into his decision, but the 360 degree feedback definitely played a big role.

(from: Nel, P.S., Werner, A., Haasbroek, G.D., Poisat, P., Sono, T. & Schultz, H.B. (2008) Human Resource

Management. 7th Edition. Cape Town: Oxford University Press Southern Africa. p 508).

1. Why was the 360 degree performance approach not successful for Ed? (5 marks)

2. What other performance management approaches (other than the 360 degree

performance approach) would have been useful, and perhaps even more appropriate,

for Ed?

(5 marks)






o Question 1: Section 6.5.6



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Question 1 - Why was the 360 degree performance approach not successful for Ed?

Snell and Bohlander (2007: 345) identify that a key weakness of the 360 degree system is

that “feedback can be intimidating and cause resentment if the employee feels that the

respondents have ‘ganged up.’” This is exactly what Ed experienced and it ultimately led to

him leaving the organisation six months after receiving the 360 degree feedback. The

feedback which Ed received was unexpected and dashed his belief that he was perceived as a

“good manager”. Ed seems to have essentially only focused on the negative feedback

received, to his and the organisation’s detriment.

Question 2 - What other performance management approaches (other than the 360 degree

performance approach) would have been useful, and perhaps even more appropriate, for

Ed?

Alternative performance management approaches which would have perhaps been more

useful for Ed than the 360 degree feedback system would be:

• The Balanced Scorecard, which is a results oriented approach to performance

management and provides for the setting of goals and assessment from the

perspective of the following four categories: Financial, Customer, Processes and

Learning. (Nel et al, 2008:508). This approach translates organisational strategy into

departmental, team and individual goals which are objective and quantifiable.

• Management by Objectives could also have been used for Ed in place of the 360

degree feedback system. This is a performance management technique “that

provides for an initial goal-setting phase, based on the formation long range

organisational objectives that are cascaded through to departmental goals and finally

individualized goals (Nel et al, 2008:501).

The benefit of utilising either of the above results oriented performance management

approaches is that subjectivity is minimised and performance is judged against quantifiable,

objective indicators. (Noe et al, 2010).


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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

Self Check Activity

Group Discussion Activity



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LEARNING OUTCOMES


demonstrate a comprehensive understanding of the HR practice of compensation. This


outcomes:

1. Define the HR practice of compensation.

2. Identify and critically discuss and address the factors influencing the

determination of compensation.

3. Identify, discuss and apply compensation structures and levels.

4. Identify and critically discuss current challenges to compensation systems.

5. Discuss, evaluate and effectively apply the various incentive-based compensation

systems.


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� READING

Reading




Hill. (pp 480-518) Chapter 11 and (pp 520-554) Chapter 12




University Press Southern Africa. (pp498-539) Chapter 11 and (pp 540-577)


Books



350 - 385 (Chapter 11).


(2007). Human Resource Management: Fresh Perspectives. pp 193 - 208

(Chapter 8).



Journals

• Adams, S.M., Gupta, A., Haughton, D.M. & Leeth, J.D. (2007) “Gender

Differences in CEO Compensation: Evidence from the USA” Women in

Management Review. Vol. 22, No. 3, pp 208 – 224.

• Hoi, C.K. & Robin, A. (2004) “The Design of Incentive Compensation for

Directors.” Corporate Governance. Vol. 4, No. 3, pp 47 – 53.

• Nourayi, M.N. and Mintz, S.M. (2008) “Tenure, Firm’s Performance and

CEO’s Compensation.” Managerial Finance. Vol. 34, No. 8, pp 524 – 536.

• Petra, S.T. & Dorata, N.T. (2008) “Corporate Governance and Chief

Executive Officer Compensation.” Corporate Governance. Vol. 8, No. 2, pp

141 – 152.


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� READING (continued)

Recommended Reading (continued)

Journals (continued)

• Williamson, J.A. and Kleiner, B.H. (2004) “The Use of Options in

Compensation Packages.” Management Research News. Vol 27, No. 4/5, pp

23 – 31).


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7.1 Introduction

In this section the HR practice of Compensation is investigated. 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 Ensuring the effectiveness of incentive compensation systems

7.2 The Nature of Compensation

Grobler et al (2006: 35) identifies that “the term compensation is often used interchangeably

with wage and salary administration; however the term compensation is actually a broader

concept…compensation refers not only to extrinsic rewards such as salary and benefits, but

also to intrinsic rewards such as achieving personal goals, autonomy and more challenging

job opportunities.”

Snell and Bohlander (2007: 378) make use of the term “strategic compensation planning”

which refers to “the compensation of employees in ways that enhance motivation and

growth, while at the same time aligning their efforts with the objectives, philosophies and

culture of the organisation.” Indeed, Noe et al (2008: 486) emphasise the need to align the

compensation strategy to the overall organisational strategy. Ideally, the compensation

system should promote the organisational culture and employee behaviours necessary for the

achievement of the organisation’s strategic goals

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, 2012).


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Noe et al (2012) 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, 2012). 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

Snell & Bohlander (2007: 384 – 388) identify external and internal factors which influence

the organisation’s choice of compensation system, as outlined in Figure 7.1.

? THINK POINT

Outline the factors that influence the approach to compensation in your

organization.


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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

(Snell and Bohlander, 2007: 387).

• Economic Conditions where high degrees of competitiveness within industries

negatively affect the ability of the organisation to pay high wages.

• 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 (Snell and Bohlander, 2007:388).

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

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


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• Labour Budget where the amount of money available within the organisation for

employee compensation during a given year is specified

• Compensation Decision Makers which includes top management and possibly the

organisation’s employees (Snell and Bohlander, 2007: 384)

7.4 Compensation Structures and Levels

When developing compensation structures and levels it is important that the organisation

considers:

• Current market pressures, which include product market competition and labour market

competition;

• 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, 2012)

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, 2012). Job structure

development is dependent on a process of job evaluation.

� ACTIVITY

Consider your organisation.

1. Identify the system of job evaluation used by your organisation (consider

Peromnes, Paterson, Hay, the ‘Q’ method).

2. What does this job evaluation system mean to you? How does it impact on

you?


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Comment on Activity

Job evaluation is an administrative procedure which is used to measure job worth (Noe et al,

2012). A job evaluation system identifies compensatable factors which are the

“characteristics of jobs that an organisation values and chooses to pay for” (Noe et al,

2012). These compensatable factors are weighted during job evaluation so as to indicate their

value to the organisation. Compensatable factors include:

• Job complexity

• Required experience

• Required education

• Working conditions

• Responsibility (Noe et al, 2012).

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, 2011).

7.4.2 Pay Structure Development

Noe et al (2012) 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

• 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, 2012).


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� ACTIVITY

Consider the following scenario and the answer the questions that follow.

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. Describe how you would 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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Comment on Activity

Model answers are provided below

Question 1 – Determining Whether an Organisation’s Pay Structure is Market Related

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, 2012). 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, 2012)

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.

Question 2 – Reasons for Different Compensation Structures in Competing Organisations

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.

Question 3 - Consequences of Not Having a Compensation System in Line with Competitors

Noe et al (2012) 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.

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.


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7.5.1 Job-Based Compensation

Thus far, this section of the module 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

promote promotion-seeking and discourages lateral employee movement (Noe et al,

2012)

In order to address the limitations of job-based compensation systems, Noe et al (2012)

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, 2012).

? THINK POINT

Think about a job-based compensation system which you have experienced.

What were the disadvantages of this approach?


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7.5.2 Executive Pay

Noe et al (2012) asserts 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.

Grobler et al (2006: 373) identify that executive pay usually involves:

• a base salary

• an annual bonus, which usually includes cash and stock payments

• long term incentives, which are designed to enable executives to accumulate wealth.

• benefits and perquisites (perks) which could include an executive motor vehicle, a

private dining room, country club membership, personal legal counseling and private

use of the company’s aircraft (Grobler et al, 2006: 273)

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 (2012) identify a number of incentive-based compensation systems. These include

merit pay programmes, individual incentives, profit sharing and ownership, gainsharing and

the balanced scorecard.

Figure 6.2: Types of Incentive-Based Compensation Systems (Noe et al, 2010:548).

INCENTIVE COMPENSATION SYSTEMS

MERIT

PAY

INDIVIDUAL

INCENTIVES

PROFIT

SHARING OWNERSHIP GAIN

SHARING

GROUP

INCENTIVES

BALANCED SCORECARD


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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, 2012). The employee’s performance is essentially

rated only by his/her direct supervisor.

Merit pay programmes have been criticised by Deming (cited in Noe et al, 2012) 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”. 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, 2012).

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, 2012). Further, as

with merit pay programmes, individual incentives tend to undermine teamwork.

7.6.1.3 Profit Sharing

Profit sharing provides for payments (not incorporated into base salary) which are “based on

a measure of organisation performance (profits)” (Noe et al, 2012).

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, 2012). 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, 2012).


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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 (Noe et al, 2012)

7.6.1.5 Gainsharing

Gainsharing provides “a means of sharing productivity gains with employees” (Noe et al,

2012). 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.

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,

2012). 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 capitalise 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 and Norton cited in Noe et al,

2012).


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7.6.2 Ensuring the Effectiveness of Incentive Compensation Systems

In order ensure the effectiveness of incentive compensation systems Noe et al (2012)

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, 2012)

7.7 Summary

This section of the HRM module 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.




1. Atul is a senior researcher at Mezac Pharmaceuticals. He has recently found out that his

friend Jerry, who works at Mezac’s competitor, New Health Pharmaceuticals, earns 20%

more than he does despite being less qualified and experienced. Atul is now demotivated

– he feels unappreciated at Mezac Pharmaceuticals and has decided to start looking for a

new job where he will earn what he is worth.

The comparison which Atul has made between his earnings and Jerry’s earnings is known

as:


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A. Equity

B. Internal Equity

C. External Equity

D. All of the above

2. Which of the following could be the reason for New Health Pharmaceuticals providing

higher compensation than its competitor, Mezac Pharmaceuticals, for the position of

senior researcher?

A. Mezac Pharmaceuticals offers rewards other than compensation such as intensive

training for high performing employees.

B. New Health Pharmaceuticals does not offer any other rewards, other than salary

C. Both A and B

D. Neither A nor B

3. Ncanyiswa works as a legal secretary within a large law firm. She is a single mom and is

finding it difficult to make ends meet on her current salary, so she decides that she needs

to look for a better paying job. However, after going to five interviews with different law

firms, the highest salary which she has been offered is only 2% higher than her existing

one. Most of the law firms that she has had interviews with have acknowledged her high

level of skills but have indicated that there are so many highly skilled legal secretaries

available for the position that it is not possible to increase the salary package.

Which of the following external environmental factors are negatively impacting on

Ncanyiswa’s ability to find a job with higher pay than her existing job?

A. Labour Market Conditions

B. Government Influences

C. Union Influences

D. Both A and B

4. Thabo is the HR Manager responsible for Compensation at Future Technologies, an IT

company providing a range of IT services to corporate clients. Thabo has recently

implemented an organisational job evaluation throughout the company. The results of

the job evaluation are now being used to determine pay structures for the various


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positions. Thabo is currently perusing the results of the job evaluation system for three

critical technical positions within the organisation.

Based on the results of the job evaluation, which of the positions should receive the

highest pay?

A. Computer Operator

B. Computer Programmer

C. Systems Analyst

D. All three positions should receive equal pay

5. Craig is a Computer Programmer at Future Technologies. He is very happy as he has

just been issued with 1000 share options as a reward for his continuous high level

performance.

Share options are an example of which incentive compensation systems?

A. Individual Incentive

B. Merit Pay

C. Profit Sharing

D. Ownership

Answers Self Check Activity

1. C 2. C

3. A 4. C

5. D

FUTURE TECHNOLOGIES

RESULTS OF JOB EVALUATION FOR CRITICAL IT POSITIONS

JOB TITLE COMPENSABLE FACTORS

TOTAL EXPERIENCE EDUCATION COMPLEXITY

Computer Operator 40 30 40 110

Computer Programmer 40 50 65 155

Systems Analyst 65 60 85 210

(from Noe et al, 2008: 493)


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For this section, your Study Group is required to analyse a case study entitled “Paying for

Good Employee Relations” taken from your prescribed text, Noe et al (2010: 572-573).

Paying for Good Employee Relations

Organisations understand that reaching financial objectives, or satisfying shareholders,

depends to a considerable degree on how well they manage relationships with other

important stakeholders such as customers and employees. One suggestion has been to link

compensation, in part, to customer satisfaction and employee satisfaction. Is this a good idea

in the case of employee satisfaction? There is some disagreement on this issue. Eastman

Kodak has, since 1995, used employee opinion survey results as one factor in deciding

executive bonuses. Likewise, United Airlines, which is employee owned, is moving to a

system where executive bonuses will depend to some degree on employee-satisfaction

surveys. Although the idea of rewarding managers for good employee relations has some

intuitive appeal, there may be unintended consequences. Indeed, Gordon Bethune, CEO of

Continental Airlines, described such an idea as “absolutely stupid”. Bethune argues, “being

an effective leader and having a company where people enjoy coming to work is not a

popularity contest. When you run popularity contests, you tend to do things that may get you

more points. That may not be good for shareholders and may not be good for the company.”

This is not to say that Bethune and Continental do not see employee relations as an important

part of their competitive advantage. Continental was named the 2001 airline of the year by

Air Transport World and is number 18 on Fortune’s 2001 list of best companies to work for

in America. And many companies use employee opinion survey results to adjust their

employee relations policies as needed. Rather, the issue is whether an incentive plan that

explicitly rewards employee satisfaction will produce only intended positive consequences or

might also produce unintended, less desirable consequences. Eastman Kodak and United are

two examples of companies that have decided some direct incentive makes sense, even if it is

small relative to other factors (like financial performance,) that determine executive pay.

Other companies, even those that use strong employee relations as an important source of

competitive advantage, have been too concerned about unintended consequences to use

explicit incentives.


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(from Noe, R.A., Hollenbeck, J.R., Gerhart, B. and Wright, P.M. (2010) Human Resource Management:

Gaining a Competitive Advantage 6th Ed. McGraw-Hill. P 572-573).

Preparation

Prior to the Study Group meeting it is important that each individual group member has

completed the following:

• Studied Section 7 (Compensation) of this Study Guide

• Read the supporting chapters on Compensation in the prescribed texts

• Read the case study “Paying for Good Employee Relations”


The Study Group’s discussion should focus on the case study “Paying for Good

Employee Relations”. In particular, the following questions should be discussed:

1. Should organisations worry about the attitudes of employees? Provide reasons for

your answer.

2. If an objective of the organisation is to achieve positive employee attitudes, is it

appropriate to link pay incentives to attitudes? Justify your answer.

3. Consider your situation as a manager (or aspiring manager) within your organisation.

Discuss how you would feel if ‘positive employee relations’ was a criterion for the

award of part of your incentive pay?

Comment on Study Group Discussion

Responses will differ across Study Groups. The response to question 3 is dependent on an

individual’s personal feelings and therefore there is no model answer for question 3.


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Model Answers

Question 1: Attitudes of Employees

Organisations should certainly be concerned about the attitudes of employees as these have a

direct impact on the performance of the organisation. Indeed, research has shown that

positive employee attitudes lead to higher productivity. Both employees and managers who

have high levels of job satisfaction “generally like their jobs, feel that they are being fairly

treated, and believe that their jobs have many desirable features or characteristics (such as

interesting work, good pay and job security, autonomy, or nice co-workers)” (Jones and

George, 2003:83). Therefore, positive employee attitudes are generally an indication of a

healthy and productive organisation.

Question 2 – Linking of Pay Incentives to Employee Attitudes

It may well be argued that if one of the organisation’s objectives is to achieve positive

employee attitudes, then it would be appropriate to link a component of a manager’s pay

incentive to this objective. The argument for this is that a workplace which has positive

employee attitudes will most likely be a workplace that is productive and achieving (or even

exceeding) its organisational goals. A further argument is that in today’s knowledge

economy, organisations compete on human capital. If a manager is failing to create and

sustain positive employee attitudes, he / she is effectively eroding the competitive advantage

(human capital) of the organisation in that this will lead to poor performance by employees

and will impact negatively on the organisation’s ability to retain them.

However, others may argue that it is more appropriate to measure a manager against the

outcome which will accrue from a positive workforce, that of achieving business results and

making a profit. If a workforce is positive, it generally follows that the business is likely to

perform well.


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Instructions:

Read the case study below taken from your prescribed text, Noe et al (2010: 535) and then


Changing Compensation to Support Changes in Corporate Strategy

By realigning its strategy and compensation and benefits programmes, Corning Inc., once a

traditional economy company, hopes to compete successfully in the new economy. First, the

company divested itself of several business units, including Corning Consumer Products.

These divestitures reduced its annual revenues from $5 billion to $3 billion. Next Corning

pursued a ‘high octane’ growth strategy in optical communications (optical fibre, cable

systems, photo technologies, optical networking devices), environmental technologies,

display technologies, and speciality materials. To support this shift in corporate strategy,

Corning sought to support growth by creating an environment that bolstered innovation, risk

taking, teaming, and speed. One major change was in its compensation system. The salary

structure was streamlined from 11 grades to 5 broad bands for exempt employees and from 7

grades to 3 broad bands for non-exempt employees. In a new economy company, products

have a short life cycle and change in markets is a way of life. This means that the nature of

work also changes rapidly, so the detailed job descriptions and traditional promotion paths

of the past may not fit this fluid environment. By changing its salary structure, Corning hopes

to increase its ability to move quickly in responding to and anticipating customer needs in

rapidly changing markets by encouraging flexibility, teamwork and learning among its

employees. Decentralising more pay decisions to managers contributes to this flexibility, and

giving employees an increasing stake in the success of the company by making more

employees eligible for stock options contributes to the increased focus on teamwork. Finally,

employee compensation is increasingly tied to individual employee learning and performance

as the broad bands allow managers more flexibility to recognise outstanding achievements.

(from Noe, R.A., Hollenbeck, J.R., Gerhart, B. and Wright, P.M. (2010) Human Resource Management:

Gaining a Competitive Advantage 6th Ed. McGraw-Hill. p 535).


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1. Critically discuss the advantages and disadvantages of Corning’s new pay structure.

(15 marks)

2. Discuss how the shifting product market conditions impacted on Corning’s

restructuring and success. (5 marks)






o Question 1: Section 7.4 and 7.5



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Question 1 – Critically discuss the advantages and disadvantages of Corning’s new pay

structure.

Corning has recently moved from a graded salary system to a broad band system. The

advantages of this particular system are as follows:

• The broad band compensation system facilitates the achievement of Corning’s new

strategy and enables the organisation to effectively compete in the new economy

• It provides for greater flexibility in the assignment and fulfillment of job assignments

• It provides for greater flexibility in assigning merit increases (Noe et al, 2010) and the

recognition of high performing employees

• It reduces the bureaucratic nature of the compensation system

The disadvantages of Corning adopting a broad banding approach to its pay structure are:

• There is reduced opportunity for promotion. This may be a particular disadvantage

for employees who comfortably enjoyed working for Corning when it was a

“traditional economy company”.

• Broadbanding can lead to weaker budgetary control and labour costs could rise (Noe

et al, 2010). This is a particular potential disadvantage for Corning who has

decentralised more pay decision to managers.

Corning also implemented stock options for eligible employees in an effort to increase

teamwork. Stock options have the advantage of encouraging employees to work together in

the interest of the organisation (Noe et al, 2010). However, while studies have shown that

stock options impact positively on the performance of top and middle level managers, it is

not clear whether they impact positively on the performance of lower level employees.

Indeed Noe et al, (2010) assert that “the Golden Age of stock options may be coming to an

end”. This is partly due to changing accounting standards as well as the fact that the stock of

IT companies (such as Microsoft), who previously used stock options as an incentive, is not

likely to increase as rapidly as it once did (Noe et al, 2010). It is recommended therefore that

Corning reassess the value of including stock options in its compensation strategy.


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Question 2 – Discuss how the shifting product market conditions impacted on Corning’s

restructuring and success.

The shifting product market conditions necessitated that Corning restructure in a manner

which would make it more flexible and innovative. It is clear that, had Corning not

restructured in this manner, it would not have been able to compete in the new economy. A

potential challenge going forward is for Corning to manage its labour costs as these directly

impact the price of Corning’s products, which is one of the most important dimensions on

which organisations compete (Noe et al, 2010). The banding approach to pay structure

potentially and decentralisation of certain aspects of pay decisions to Corning managers

could potentially result in labour costs becoming too high.


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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

Self Check Activity




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LEARNING OUTCOMES


demonstrate a comprehensive understanding of employee benefits and services. This overall

outcome will be achieved through the learner’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

Reading




Hill. (pp 556- 596) Chapter 13




University Press Southern Africa. (pp 230-263) Chapter 8


Books



373 – 387 (Chapter 11).



(Chapter 8).



Journals and Legislation

• Cole, N.D. and Flint, D.H. (2004) “Perceptions of Distributive and

Procedural Justice in Employee Benefits: Flexible versus Traditional Benefit

Plans.” Journal of Managerial Psychology. Vol. 19, No. 1, pp 19 – 40.

• Lee, S.H., Lee, T.W. and Lum, C.F. (2008) “The Effects of Employee Services

on Organisational Commitment and Intentions to Quit.” Personnel Review.

Vol. 37, No. 2, pp 222 – 237.

• Marsh, B. and Kleiner, B.H. (2004) “An Overview of Trends in Employee

Benefits Programmes.” Management Research News. Vol. 27, No. 4/5, pp 2-

8.


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Journals and Legislation (continued)

• RSA (1997) ‘Basic Conditions of Employment Act (Act No 75 of 1997)’.

Government Gazette No. 18491. Pretoria: Government Printer.

• RSA (2001) ‘Unemployment Insurance Act (Act No 63 of 2001).’ Government

Gazette. Pretoria: Government Printer.

• Straub, C. (2007) “A Comparative Analysis of the Use of Work-Life Balance

Practices in Europe: Do Practices Enhance Females’ Career Advancement?”

Women in Management Review. Vol 22, No. 4, pp 289 – 304.


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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.

� 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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Comment on Activity

Nel et al, (2011) defines employee benefits as “items in total package offered to employees

over and above salary, which increase their wealth or well-being at some cost to the

employer.” On the other hand, Snell & Bohlander (2007: 448) define employee benefits as

“an indirect form of compensation intended to improve the quality of work lives and the

personal lives of employees.”

Organisations may provide employee benefits and services to keep the organisation

competitive in attracting and retaining human capital, to improve employee performance, to

fulfil agreements with trade unions, and/or to comply with legislation (Nel et al, 2011). Nel

et al (2011) 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.

Factors which may influence the organisation’s provision of services and benefits include:

• 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 seek to provide better benefits and

services than their competitors.

• The Aims of Management may affect the benefits and services offered. 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: 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 (Snell &

Bohlander, 2007; Noe et al, 2012).

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, 2012). A further factor

which initiated the growth in employee benefits and services is the tight wage control and


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labour shortage brought about by World War II, which resulted in employers using benefits

to attract and retain suitable employees (Noe et al, 2012).


The following relatively recent factors 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 cost effectively for their

employees as a group.

• The Influence of Trade Unions: Trade unions 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, 2012).

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

(Nel et al, 2011: 249-251)

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?

Note: If you do not work within an organisation in South Africa, complete this

activity from the perspective of your country’s legal environment.


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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 refers to time off from work which may be paid or unpaid (Grobler et al, 2006: 376).

Legislation provides for the following leave benefits within the South African context:

• 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.

• Sick leave: 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 (Grobler et al, 2006:

374).

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. More recently, this piece of legislation was replaced with the

Unemployment Insurance Act, No 63 of 2001. This latest piece of legislation requires that

certain employees, who qualify as contributors, contribute 1% of their monthly income to the

Unemployment Insurance Fund (UIF). Employers are also required to contribute 1% of an

employee’s monthly remuneration to the UIF (Grobler et al, 2006: 374).


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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 (Grobler et al, 2006: 374).

8.4.4 Pension Funds

Pension funds are a voluntary benefit provided by employers (Nel et al, 2011). A pension

provides for the funding of an employee’s retirement. Its objective is to ensure that after

retirement employees has a continued source of income in order to maintain approximately

the same standard of living as before (Nel et al, 2011).

There are two types of pension plans:

• The contributory plan where the employee and employer both contribute to the plan; and

• The non-contributory plan that is financed entirely by the employer (Grobler et al, 2006:

374).

8.4.5 Insurance

Employers normally provide employees with medical insurance as well as life and disability

insurance.

8.4.5.1 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 (Grobler et al, 2006: 377).

8.4.5.2 Disability and Life Insurance

Many employers, in recognising the importance of salary continuation after illness or

disability, provide their employees with disability insurance (Grobler et al, 2006: 377).

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

(Grobler et al, 2006: 377).


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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 (Grobler et al, 2006: 378);

• 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 (Grobler et al, 2006: 378).


Read the following journal article and then answer the question which follows:

• Lee, S.H., Lee, T.W. & Lum, C.F. (2008) “The Effects of Employee Services

on Organisational Commitment and Intentions to Quit.” Personnel Review.

Vol. 37, No. 2, pp 222 – 237.

Provide a summary of some of the key research findings into employee services

presented by Lee et al (2008).


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Lee, Lee and Lum (2008: 223) identify that employee services “comprising childcare

services, health club memberships and financial assistance programs, are innovative

employee benefits provided to employees to help them integrate their work and family

responsibilities.”

Research shows that employees generally want to work for companies who seek to assist

them in balancing their work and family responsibilities, and in so doing eliminate the stress

which ordinarily emerges from trying to address both these areas of responsibility (Lee et al,

2008: 223). Research has generally found that organisations providing effective employee

services have employees who are generally happier and more satisfied than employees in

organisations who do not have such services. For example, “organisations that had on-site

childcare facilities had more satisfied employees and higher employee retention

rates…however organisations that were unable to help their employees shoulder eldercare

obligations had significantly higher employee absenteeism and intentions to quit, lower work

productivity and more employees with health problems because of care giving stress” (Lee et

al, 2008: 223).

Recent research conducted by Lee et al (2008: 235) found that organisations that provide

employee services “help their employees balance their work and family responsibilities,

thereby enhancing employee retention and preventing a premature loss of human capital in

the workforce. Given that the industrial structure of most developed nations has transformed

towards a knowledge-based economy, retaining knowledge workers and high performing

employees are vitally important for organisationl success and global competitiveness” (Lee

et al, 2008:235).

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. The impact of employee services on

organisational commitment and retention were also explored.


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8.5 Benefit Planning

Grobler et al (2006: 379) assert that benefits generally amount to 40% of payroll costs, which

is considerable. It is therefore important that organisations offer benefit packages which

meet the specific needs of employees and which have strategic value.

Trends in benefit planning show that flexible benefit plans are increasingly being offered to

employees. This allows employees to choose those benefits which best meet their needs

(Grobler et al, 2008: 379). There are essentially three types of flexible benefit plans:

• Core Cafeteria Plan: This plan provides core coverage to all employees in certain areas

(e.g. medical aid scheme) and allows employees to select further benefit options, or

alternatively cash equivalent to the benefit options (Grobler et al, 2008: 379).

• Buffet Plan: This plan gives all employees the same benefits and coverage, but then

allows employees to reduce coverage in certain areas (e.g. life insurance) so as to earn

benefits in other areas (e.g. childcare).

• Alternative Dinners Plans: This plan comprises a number of alternative plans structured

to meet the needs of different groups of employees (e.g. the single working mother, the

married employee with no children, etc.) (Grobler et al, 2008: 379).


The advantages of flexible benefit plans are that:

• The diverse needs of a range of employees are met

• Benefit costs are controlled

• Improved benefits may be offered (e.g. childcare)

• Facilitates the attraction and retention of employees is facilitated, and

• Avoids duplicate coverage, particularly for married employees with dual careers is

avoided (Grobler et al, 2008: 381)

? THINK POINT

What do you think would be some of the advantages of flexible benefit plans?


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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 were investigated. The types of employee benefits and

services offered by organisations were also studied. An exploration of benefit planning

concluded this section.

Section 9 will focus on Human Resource Management and Employment Relations.




1. Sumaya, the HR Director for a large aircraft manufacturer has been asked by the

Executive Committee to review and improve the employee benefits and services offered by

the organisation. Lately the organisation has experienced difficulty in employing and

retaining skilled and experienced artisans to build aircraft. The Executive Committee is

hoping that an improvement in the benefits and services offered will help to attract

qualified staff from the organisation’s competitors and also facilitate the retention of

staff.

Based on the information provided in the brief case study above, which of the following

factors are impacting on the organisation’s decisions around employee benefits and

services?

A. Economic and labour market conditions

B. The aims of management

C. Competition

D. All of the above

2. Sumaya has prepared a revised structure of employee benefits and services which she

presents to the Executive Committee at the next meeting. Included in her revised benefits

and services structure are the following: leave, unemployment insurance, compensation


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for injuries and diseases, pension, life and disability insurance, medical aid,

transportation services, childcare and financial counselling.

In the South African context, leave, unemployment insurance and compensation for

injuries and diseases would be classified as………

A. mandatory benefits

B. voluntary benefits

C. employee services


3. Childcare facilities, financial counselling and transportation services are….….





4. Pension, life and disability insurance and medical aid included in Sumaya’s revised

employee benefits and services plan are……..…





5. Sumaya has just completed her presentation of the revised employee benefits and services

programme to the Executive Committee. Jerry, the CEO, asks Sumaya what the reason is

behind including employee services which the organisation previously did not do. In

response, Sumaya informs Jerry of the research findings about the impact of employee

services on employees.

Which of the following are research findings which Sumaya could use to motivate the

need for employee services?

A. employee services help employees balance work and life responsibilities

B. employee services prevent the premature loss of human capital

C. employee services result in a more satisfied workforce.

D. All of the above


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1. D 2. A

3. C 4. B

5. D


For this section, your Study Group is required to compare and contrast the Employee

Benefits and Services from the different organisations in which the Study Group members

work.

Preparation


following with respect to their organisation’s employee benefits and services programme

(you may need to consult your HR Manager in doing this preparation if you are not

familiar with the organisation’s employee benefits and services):

• Source your organisation’s employee benefits and services policy and procedure.

• Identify whether your organisation’s employee benefits and services programme is a

fixed or flexible plan.

• Find out how the benefits and services programme supports the overall organisational

strategy

• Find out which stakeholders were involved in the generation of the benefits and

services programme.



to present their organisation’s employee benefits and services programme. The policy

and procedure document, as well as any other supporting documentation (e.g. pamphlets

with employee service details), if available, should be perused by the group.

On completion of each individual presentation, the group should critique each benefits

and services programme. The extent to which the programme supports the overall


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organisational strategy should also be discussed. Suggestions for improvement of the

benefits and services programme should be made.

Following the Study Group discussions of the various employee benefits and services

programmes, it would be useful for the group to prepare a one to two page summary

document entitled “Guidelines for the Design and Implementation of an Effective

Employee Benefits and Services Programme”.



on and compare different experiences of employee benefits and services programmes within

organisations. Group members, in sharing their experiences will learn from each other which

in turn will enable them to better understand and respond to the employee benefits and

services practices within their own organisation.


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Instructions:



Dropping a Stitch at Jabula Textiles

Mary Mabuza is the owner and CEO of Jabula Textiles, a textile manufacturer situated near

Cato Ridge. Mary’s father started the business in 1980 and she took over the reins from her

father when he retired in 2004. Revenues and profits increased slowly but surely during her

father’s term of office, but during the latter part of the last decade, Mary has had to face

many financial problems as a result of foreign competition, mounting raw material costs, and

the increasing burden of providing employee benefits.

Mary is very concerned about HIV / Aids, and as a local regional representative, was

sponsored to attend the 17th World Conference on HIV / Aids and Welfare, held in Dar es

Salaam, Tanzania in 2007. The focus of the conference was on the pandemic, as is manifest

in East and Southern Africa. Local newspapers reported that delegates at the conference

agreed that health care costs had grown faster than overall inflation, and faster than any

other segment of the regional economies since 2000. Besides the HIV / Aids crisis, many of

the delegates at the conference cited large catastrophic-illness claims, increased use of

mental health and substance abuse services, increased use of medical services, high-

technology medicine and the demographics of blue collar workers – a higher percentage of

older employees requiring medical treatment for ageing conditions, and an increasing

percentage of younger employees requiring medical treatment for HIV / Aids related

diseases.

After Mary returned from the conference, she realised that she must do something about

managing the benefits programme in her company of 74 employees. There is currently no

structure to the benefits programme and she does not know where to start. She knows she

has to do something before matters get out of hand, as she has already had a few Aids-related


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deaths in her business, and therefore, benefits for spouses or other affected individuals are of

paramount importance. Mary has decided to procure the services of a benefits consultant.

(from Nel, P.S., Werner, A., Haasbroek, G.D., Poisat, P., Sono, T. & Schultz, H.B. (2011) Human Resource

Management. 7th Edition. Cape Town: Oxford University Press Southern Africa. pp 260.)

Mary Mabuza has hired you as the benefits consultant to Jabula Textiles. You are required to

write a report in which you analyse Jabula Textiles’ situation and provide recommendations

for a structured employee benefits programme. (25 marks)

Guidelines for the Answering of the Examination Question:



• Sections 8.4 and 8.5 of this Study Guide (and corresponding sections in the

prescribed text) are relevant to this sample examination question


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Suggested Answer to Sample Examination Question

Report to Jabula Textiles

The Implementation of a Structured Employee Benefit Programme

July 2009

1. Introduction

Mary Mabuza, CEO of Jabula Textiles, has contracted my employee benefit consulting

services for the purposes of advising as to a structured employee benefit programme which

would be most appropriate for her organisation. This report provides an analysis of the

situation at Jabula Textiles, as well as recommendations for a structured employee benefit

programme.

2. Analysis of Jabula Textiles Situation and Needs

Jabula Textiles is a medium sized organisation comprising 74 employees. Currently no

structured employee benefits programme is implemented within the company. The CEO has

expressed concern in this regard, particularly as the organisation has already experienced a

few Aids related deaths. In addition to concerns about HIV / Aids, the CEO has also

expressed concern around:

o The possibility of claims associated with large catastrophic illness

o Trends showing an increase in the use of mental health and substance abuse services

o An increase in the use of medical services

o The cost of high technology medicine, and

o The demographics of blue collar workers where a higher percentage of older

employees require medical treatment for ageing conditions while an increasing

percentage of younger employees require medical treatment for HIV / Aids related

diseases

It is also noted that Jabula Textiles regularly faces financial challenges and therefore it is

important that the structured employee benefit programme which is implemented is as cost

effective as possible.


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2. Recommendations for a Structured Employee Benefit Programme

Research shows that employees require benefit packages which reflect the dynamic labour

market. Over 75% of workers prefer health benefits, while young workers require a savings

plan as a second preference and older workers require a pension (Nel et al, 2011). It is

important therefore that the employee benefit programme which is put in place for the staff

of Jabula Textiles is one which takes into account the current trends identified in section 1 of

this report, as well as the needs of both the younger and older employees.

It is recommended that Jabula Textile’s Employee Benefit Programme be structured as

follows:

o Medical Aid: A medical aid scheme which covers both the employee and his / her

dependents needs to be put in place. It is recommended that Jabula Textiles pay 50%

of the medical aid scheme and that the employee cover the remaining half. Such a

medical aid scheme would go a long way to ensuring that employees are able to cover

medical expenses which result from HIV / Aids related illnesses, other illness as well

as the use of mental health and substance abuse professionals.

o Life and Disability Insurance: Given the impact which HIV / Aids has had thus far

on the Jabula Textiles workforce, it is recommended that life and disability insurance

is offered to all employees. This will ensure the continuation of salary should an

employee become disabled or pass away, thereby providing for his / her dependents

(Grobler et al, 2006: 377). The cost of the life and disability insurance may be

deducted from the employee’s monthly remuneration and may be subsidised by the

organisation if necessary.

o Pension Fund: Although my analysis of Jabula Textiles needs did not overtly show

the need for a pension fund, it would be in the organisation’s interest to provide a

pension or provident fund to the employees so as to enable them to start saving for

their retirement. It is customary, in the administration of pension funds, for the

organisation to deduct the employee’s contribution to the fund and pay it on their

behalf. It is also customary, although not essential, for the organisation to subsidise a

portion of the monthly pension payment (Nel et al, 2011).

o Employee Services: Should finances allow, so as to increase the commitment and

motivation of the workforce, it would be of value if Jabula Textiles could provide one

or more of the following employee services:


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• Subsidised cafeteria

• Wellness programme

• Financial counseling

• Retirement counselling

• Child care on site

• Transportation services (Nel et al, 2011).

Research has found that the provision of such employee services contributes to a

more satisfied workforce (Lee, Lee and Lum, 2008).

In addition to the voluntary benefits recommended above, it is essential that Jabula Textiles

ensures that it is providing the necessary mandatory benefits as well. In South Africa,

mandatory benefits include:

• Unemployment insurance

• Compensation for injuries and diseases

• Leave

Given the financial challenges which Jabula Textiles experiences, it may be prudent for the

organisation to offer a ‘cafeteria package’ of benefits from which employees may select

those which are most appropriate to their specific needs (Nel et al, 2011).

3. Conclusion

Given the current needs of Jabula Textiles employees, it is imperative that a structured

employee benefits programme be implemented as soon as possible.


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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

Self Check Activity




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LEARNING OUTCOMES

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

demonstrate a basic understanding of employment relations within his / her country’s context.

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

outcomes, in that a learner 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 display awareness of the various environmental factors that impact on the

labour relationship.


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� READING










Books

• Bendix, S. (2000) Industrial Relations in the new South Africa.3rd edition

revised). Cape Town: Juta and Co.



416 – 477 (Chapter 13).



(Chapter 10).

• Nel, P.S., Werner, A., Haasbroek, G.D., Poisat, P., Sono, T. & Schultz, H.B.



• 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

• Lotte Hansen, L. (2002) “Rethinking the Industrial Relations Tradition from a

Gender Perspective.” Employee Relations. Vol. 24, No. 3, pp 190 - 210

• Simelane, X. (2008) “Textiles and Employee Relations in Swaziland.”

Employee Relations. Vol. 30, No. 4, pp 452 – 465.

• Wood, G. (2008) “Introduction: Employment Relations in Africa.” Employee

Relations. Vol. 30, No. 4, pp 329 – 332.


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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’ organisations and the state) and individuals, or between one collective

body and another, are regulated.

Industrial relations is often perceived as being synonymous with stereotypical blue-collar, all-

male unionised workers in the mining or manufacturing industry (Lotte Hansen, 2002). 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 realisation of their respective aspirations, whether they be

work or non-work related (Nel et al, 2011). 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 specialised government agencies), certain contexts (technological

characteristics, the market and 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).”

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


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also emphasised 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 covers everything that emanates from or impacts on the employment

relationship.

9.3 The Major Theories of Employment Relations

There are three major approaches to employment relations namely the pluralist approach, the

unitarist approach and the radical or Marxist approach. Each of these will be discussed in

more detail below.

? THINK POINT

What is your understanding of the terms ‘pluralist’, ‘unitarist’ and ‘Marxist’ ?


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Keep your understanding of the terms ‘pluralist’, ‘unitarist’ and ‘Marxist’ in mind as you

read through the following theories on employment relations.

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 organisations are

multifaceted, complex groupings of individuals who align themselves with other members of

the organisation sharing similar views, values and objectives (Venter 2003:7). The different

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 (Nel, Swanepoel, Kirsten, Erasmus and Tsabadi, 2005).

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 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 organisational 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, 2003:7).

The pluralist perspective therefore typically concentrates on how to regulate and

institutionalise 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 institutionalise 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


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only source of authority in the organisation. Its right to manage is legitimate and any

objections to this are seen as irrational (Nel et al, 2005). Conflict is perceived as being

irrational and is most often of a direct clash between opposing ideologies. 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, 2003:7). 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.

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 (Swanepoel et al, 2003: 623)

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 (Venter, 2003).

Industrial conflict can therefore be seen from a Marxist perspective as an expression not only

of organisational conflict but of wider divisions within society as a whole (Nel et al, 2005).

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. (Venter, 2003). Ideally people will work for the sake

of working and not what they stand to gain in return.


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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).

Figure 9.1: The Tripartite Relationship (Venter, 2003:9)

? THINK POINT

Based on your experience of employment relations within your organisation, who

would you say are the parties to the employment relationship?

Primary employment relationship

The State

Employers and employer

organisations

Labour and Trade Unions

Secondary employment relationship

Secondary employment relationship


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It is important to realise 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 (Venter, 2003: 9)

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.

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. The

interaction is characterised 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


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Figure 9.2 The Interaction Continuum (Bendix, 2000:16)

Task related

decisions

Joint problem-solving

NEGATIVE POLE

POSITIVE POLE

Diverging interests, goals, values and

needs

Common interest in continuation of the

organisation

Conflict

Co-Operation

No or little trust

Increasing trust

Power Over (Coercive Power)

Power To (Expert / Reward

Power)

Institutionalisation of Conflict

Participation & Co-Decision Making

COLLECTIVE

INDIVIDUAL

INDIVIDUAL &

COLLECTIVE

Power Sharing


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9.5 The Employment 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.

Figure 9.3: The LabourRelationsEnvironment, (Venter, 2003:17)

9.5.1 The Micro-environment

According to Venter (2003:17) the micro-environment comprises the following:

• 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 (Venter, 2003: 17).

• Leadership: Strong leadership is increasing in importance as an ingredient for a

successful organisation. The age-old debate regarding the interchangeability of the terms


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“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 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, 2003: 18).

• Communication structures: Effective labour relations obviously depend on positive

communication. Organisations often make the mistake of relying extensively on top-

down communication. This contradicts 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 organisations

need to be aware of the language requirements of their workforces and to adjust their

communications policies accordingly (Venter, 2003:19).

• 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 is also an important issue. Generally speaking, Southern African

organisations are still lax in promoting gender empowerment and many are still male

dominated. Sexual orientation is also another sensitive matter to be considered (Venter,

2003: 20). 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 organisation and its members. Organisations have a

range of policies and procedures that co-ordinate and facilitate the labour relationship

(Venter, 2003:20).

9.5.2 The Macro-environment

According to Venter (2003: 20) the macro environment comprises:

• The Economy: The economic environment can be further sub-divided into a number of

factors that typically impact on the employment relationship. These are:

o Government policy

o Inflation and unemployment


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o Globalisation and retaining the competitive edge

o 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, 2003:20).

• 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). 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

9.6 The Changing Face of the Employment Relationship

Venter (2003: 525) identifies that 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. This will involve the following changes:

• 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 organisations 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 (Venter, 2003: 525).


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Learners’ responses will differ and will be dependent on the context in which they work.


Read the following journal article:

• Wood, G. (2008) “Introduction: Employment Relations in Africa.” Employee


In his introductory paper to a 2008 edition of the Employee Relations journal

which is dedicated to employment relations in Africa, Wood (2008) summarises

key employment relations dynamics which are taking place throughout Africa.

Summarise these in the space provided below.

? THINK POINT

Consider whether some of the changes to the employment relationship which

Venter (2003) identifies are applicable to your organisation.


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Wood (2008: 329) introduces his article by saying that articles dealing with African

employment relations have not been frequently published. This is problematic as “the study

of employment relations in Africa can shed light on a wide range of contemporary issues and

debates: the dynamics of working in insecure and non-standard contracts; strategies for

union outreach and renewal; the consequences of the uneven enforcement of labour

legislation; contemporary advances in institutional theory; and the pressures posed on

working life by the intensification of international competition” (Wood, 2008: 329).

Wood (2008) summarises the key points of five journal articles focusing on employment

relations within Africa. The countries addressed include:

• South Africa: where it is found that unions have failed to penetrate the informal sector of

the economy. The need for unions to “develop a broader discourse, highlighting social

injustices and the need to secure the rights of women and marginalised communities”

(Wood, 2008: 330) is emphasized. However, within the formal sector, unions have made

considerable progress and have succeeded in deterring managers from repression, and

organisations have been forced to utilise labour more effectively (Wood, 2008: 331).

• Namibia: where there has been a fragmentation of collective bargaining and a

reproduction of racial and gender discrimination in the informal sector of the economy

(Wood, 2008:330).

• Nigeria: where the enforcement of labour legislation is weak, in both the formal and

informal sector. “Government weaknesses mean that unions will have to rely on their own

resources and that of the NGO sector in fighting for better conditions of employment in

the informal sector” (Wood, 2008:331).

• Algeria: where “state sponsorship of a specific strand of unionism has not only weakened

attempts to independently organise workers, but also the broader position of

employees…independent unions face a stark choice between continuing to autonomously

organise in a very difficult climate, or opt for cooptation and emasculation” (Wood,

2008: 331).

• Botswana: where expatriate workers “constitute a labour aristocracy, occupying

positions formally occupied by colonial officials and settlers” (Wood, 2008: 331). As is

the case throughout Africa, many workers in Botswana face insecure livings and do not

have effective union representation.


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• Swaziland: where foreign owned companies are attracted to Swaziland because of low

labour costs and access to southern African markets. Labour repression is rife and Swazi

workers are confronted with daily indignities (Wood, 2008: 331).

Despite the diversity of the countries studied in the issue of Employee Relations journal

devoted to Africa, there are a number of commonalities which emerge. These include:

• The sharp divide between work in the formal and informal sectors of the economy

• The challenges which face unions in trying to organise in contexts where the formal

economy is shrinking

• The negative effects of liberalisation (Wood, 2008: 332)

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 is played out daily in workplaces around the world.




1. In employment relations, who are the parties to the tripartite relationship?

A. The state and the employer

B. The employer and the employee

C. The state, employer and the employee


2. The nature of the employer and employee’s relationship is...

A. Primary

B. Secondary

C. Tertiary



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3. The nature of the relationship between the employer and the state is …

A. Primary

B. Secondary

C. Tertiary


4. Which of the following perspectives holds that the organisation is a coalition of people

with different beliefs, interests and goals and as not all employees have the same goals,

conflict is likely to arise?

A. Marxist perspective

B. Unitarist perspective

C. Radical perspective

D. Pluralist perspective

5. Which of the following perspectives stresses a common goal in all organisations and that

there is no need for divisions in the organisation as all employees have similar needs and

values - therefore conflict is unnecessary and unnatural?

A. Marxist perspective

B. Unitarist perspective

C. Radical perspective

D. Pluralist perspective


1. C 2. A

3. B 4. D

5. B


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For this section, your Study Group is required to review your country’s labour legislation

which impacts on employment relations within your organisation.

Preparation

Prior to the Study Group meeting it is important that each individual group member

prepares as follows. Each member of the Study group must:

• Source their organisation’s policy which deals with employment relations

• Source at least one relevant piece of labour legislation. This piece of legislation must

be read and summarised for presentation to your Study Group.

• To what extent does your organisation’s employment relations policy support the

implementation of the piece of labour legislation which you have reviewed?


At the Study Group Meeting, each individual group member is to present his/her

• Organisation’s employment policy

• Summary of the piece of labour legislation which was assigned to him / her

• Explain the extent to which the organisation’s employment relations policy supports

the labour legislation reviewed.

The presentations of each individual should be discussed by the group.

On completion of the presentations and discussions, the Study Group should prepare a

one to two page summary of their key learnings around Employment Relations which

emerged as a result of the individual presentations and discussions.


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on their country’s labour legislation and the impact which it has on organisational practices.

Group members, in sharing their experiences will learn from each other which in turn will

develop a better understanding of the application of employment relations within the context

of their country and organisations.

� SAMPLE EXAMINATION QUESTION

Instructions:

The Executive Committee of your organisation has requested that you provide an overview of

Employment Relations. Prepare a speech in which you detail the key issues underpinning

this important area of HRM. (20 marks)


• The length of your answer should be guided by the mark allocation. Generally one

coherent point / fact equals one mark.

• Section 9 of this Study Guide in its entirety (and corresponding sections in the prescribed

text) is relevant to the sample examination question.


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The answer will essentially be a summary of all the issues addressed in this section of the

Study Guide. It is important that the answer be formatted as a report and that it addresses the

following:

• Definition of Employment Relations

• Major Theories of Employment Relations

• Parties to the Employment Relationship

• Employment Relations Environment

• The Changing Face of the Employment Relationship

• Employment Relations in Africa


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SECTION 10

CAREER MANAGEMENT


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CONTENTS

Learning Outcomes

Reading

10.1 Introduction

10.2 The Changing Nature of the Career

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

Self Check Activity




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LEARNING OUTCOMES


demonstrate a comprehensive understanding of career management. This overall outcome

will be achieved through the learner’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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10.1 Introduction

� READING










Books



245 – 259 (Chapter 8).



(Chapter 7).



Journals

• Ballout, H.I (2007) “Career success: the effects of human capital, person-

environment fit and organisational support.” Journal of Managerial

Psychology. Vol. 22, No. 8, pp 741 – 765.

• Chiaburu, D.S., Baker, V.L. & Pitariu, A.H. (2006) “Beyond Being Proactive:

What (Else) Matters for Career Self-Management Behaviours.” Career

Development International. Vol. 11, No. 7, pp 619 – 632.

• De Vos, A, Dewettinck, K. & Buyens, D. (2008) “To Move or Not to Move?

The Relationship Between Career Management and Preferred Career Moves.”

Employee Relations. Vol. 30, No. 2, pp 156 – 175.

• Dries, N. & Pepermans, R. (2008) “Real High Potential Careers: An

Empirical Study into the Perspectives of Organisations and High Potentials.”

Personnel Review. Vol. 37, No. 1, pp 85 – 108.


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Journals (continued):

• Kelly, A., Brannick, T., Hulpke, J., Levine, J., and To, M. (2003) “Linking

Organisational Training and Development Practices with New Forms of

Career Structure: A Cross-National Exploration.” Journal of European

Industrial training. Vol. 27, No. 2/3/4, pp 160 – 168.

• Quigley, N.R. & Tymon Jr, W.G. (2006) “Towards a Integrated Model of

Intrinsic Motivation and Career Self-Management.” Career Development

International. Vol. 11, No. 6, pp 522 – 543.

• Smith-Ruig, T. (2008) “Making sense of careers through the lens of a path

metaphor.” Career Development International. Vol. 13, No. 1, pp 20 – 32.


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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 changing nature of the career

• The importance of career management

• Career stages

• Career planning

• Career development

10.2 The Changing Nature of the Career

A career may be defined as “a sequence of jobs held during a person’s working life”

(Grobler et al, 2007: 246). Grobler et al (2007: 246) identifies, however, that the nature of

the employer-employee relationship has changed significantly over the past couple of years

and as a result the traditional career has also changed.


Before reading the journal article 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 journal article and answer the question which follows.

• Kelly, A., Brannick, T., Hulpke, J., Levine, J., & To, M. (2003) “Linking

Organisational Training and Development Practices with New Forms of

Career Structure: A Cross-National Exploration.” Journal of European

Industrial training. Vol. 27, No. 2/3/4, pp 160 – 168.

2. From your reading of pages 160 – 162 of Kelly et al (2003) how has the career

changed over the years?


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Kelly, Brannick, Hulpke, Levine & To (2003: 16) provide a review of the management

literature which focuses on the changing nature of the career. They point out that there are

three dominant viewpoints about the changing nature of the career in the literature:

• The first viewpoint is that “the demise of the traditional career is inevitable; they see

organisations and individuals abandoning the traditional organisational framework,

within which stable, long-term career planning was feasible” (Kelly et al, 2003: 160).

• The second viewpoint is that “the career is merely adapting to changing economic

conditions and that no fundamental change is evident” (Kelly et al, 2003: 160).

• The third viewpoint is that “the changes taking place may be random, rather than

indicative of a new patterned stability, or, indeed, that the orderly form of a career that

has existed during the past 50 years or so has itself been the aberration” (Kelly et al,

2003: 160).

Factors such as globalisation, the pace of change and more intense competition have resulted

in dramatic changes to the structure of organisations. As a result, the traditional

understanding of careers, which focused on vertical, upward movement coupled with

increasing status, income and authority within a single organisation no longer applies (Kelly

et al, 2003: 160). A number of theorists propose that the order and predictability of the

traditional career has decreased and has been replaced with horizontal and lateral movement.

While in the traditional career, individuals moved upwards within the same function,

nowadays individuals often move across functions. Alternative career paths have replaced

the traditional upward career path and include:

• Horizontal cross-functional moves

• Job switches

• Downward moves

• Temporary moves

Kelly et al (2003: 161) assert that “those who support the new order of careers have

formulated various models to represent what they see as the new reality…such models focus

on the dissolution of boundaries, the emergence of employee self-management and the

accumulation of marketable skills.” Some of these new career models include:

• Arthur and Rosseau’s Boundaryless Career


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• Peiperl and Baruch’s Post Corporate Career

• Hall’s Protean Career

• Handy’s Portfolio Career

These new career models identify a new employment contract where

• individuals take responsibility for managing their own careers

• there is extensive mobility across organisations

• boundaries have dissolved

• job security has changed form, and is dependent on the marketable skills which the

individual possesses (Kelly et al, 2003: 162)

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” (Grobler et al, 2007: 246).


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, 2011)

? THINK POINT

Consider your organisation. What benefits could result from the implementation

of an effective career management programme?


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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 (Nel et al, 2011).


Nel et al (2008:481) argue that all individuals experience a number of career stages, each of

which serves to address particular individual needs. The various career stages and the

corresponding needs which these stages address are depicted in Figure 10.1.

Figure 10.1: Career Stages (adapted from Nel et al, 2011: 393)

The career stages depicted in Figure 10.1 include:

• Pre-Work where the individual is supported by his / her parents and may be preparing

him / herself for a career through studying.

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

? 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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• Establishment where the individual enters into an organisation and becomes an

employee.

• Advancement where the individual starts progressing in his/her career (Nel, 2008: 481).

• 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 (Nel,

2011).

10.5 Career Planning

Career planning should be performed by both the individual and the organisation.

� 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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Comment on Activity

Information regarding organisational career planning is addressed in section 10.5.1 below

and information regarding individual career planning is addressed in section 10.5.2.

10.5.1 Organisational Career Planning

Section 3 of this HRM module 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 (Grobler et al, 2007: 249).

Organisational career planning may be achieved through the development of individual

development plans for employees (Grobler et al, 2007: 249). 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,

2011).

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.

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. Individual employees therefore, need to

engage in their own career planning.

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 (Nel et al, 2011)

• Seeking developmental feedback so as to identify and address one’s strengths and

weaknesses


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• 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 (Nel et al, 2011; Grobler et al, 2007: 250).

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, 2011).

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.


Read the following journal article:

• Chiaburu, D.S., Baker, V.L. and Pitariu, A.H. (2006) “Beyond Being

Proactive: What (Else) Matters for Career Self-Management Behaviours.”

Career Development International. Vol. 11, No. 7, pp 619 – 632.

Discuss Chiaburu et al’s (2006) findings regarding the proactive personality’s

impact on career self-management behaviours.


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Career self management may be defined as “the degree to which employees regularly gather

information and plan for career problem solving and decision-making” (Kossek cited in

Chiaburu, Baker and Pitariu, 2006: 619).

Chiaburu et al (2006) conducted a study which focused on the impact of the proactive

personality on career self management behaviours. The proactive personality is defined as

“one who is relatively unconstrained by situational forces and who effects environmental

change” (Crant cited in Chiaburu et al, 2006: 621). Research studies have shown that

individuals with a proactive personality engage in life long learning and that they take

responsibility for career progression, while “individuals who do not exhibit proactive

personality are much more reactive and content with maintaining status quo within a career

context” (Chiaburu et al, 2006: 621).

Chiaburu et al (2006) cites studies conducted by Kossek which found that formal training

programmes implemented by organisations in an attempt to develop career self-management

skills within employees were not effective.

The results of Chiaburu et al’s (2006) study show that the proactive personality is positively

related to career self management behaviours such as job mobility and developmental

feedback seeking. Career resilience, which refers to “a belief in oneself, a willingness to take

risks and a need for achievement” (Chiaburu et al, 2006: 622) is also an important

determinant in the proactive personality’s implementation of career self management

behaviours.


Responses will differ per learner.

? THINK POINT

Do you have a proactive personality, as defined by Chiaburu et al (2006)?

How does your personality impact on your career self management behaviours?

Is your behaviour in line with Chiaburu et al’s (2006) findings?


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10.7 Summary

This section investigated Career Management. In so doing, the changing nature of the career

was explored and the importance of career management to the employer and employee and

were examined. Various career stages, career planning and career development were also

explored.




1. Farhana, the HR Director of Cars Inc., a motor vehicle manufacturing organisation, is

preparing a presentation to the Executive Committee on career management within the

organisation. She is currently preparing the slide where she is to list the alternative

career paths which are replacing traditional career paths.

Which of the following characteristics should Farhana include on her slide for alternative

career paths?

A. Horizontal cross-functional moves

B. Upward moves

C. Temporary moves

D. Both A and C

2. Farhana is at the Executive Committee meeting and is about to present her presentation

on career management within the organisation. Aidan, the Financial Director, does not

want to waste time as he has a considerable amount of work to get through back at his

office. Before Farhana can start her presentation, Aidan interrupts her, “Really Farhana,

with all due respect, is career management so important that it needs to take up time in

the Executive Committee meeting. I really think we should leave the presentation and

discussion to our middle managers.”

Farhana responds to Aidan’s objection by identifying the benefits of implementing an

effective career management programme as her motivation for making the presentation to

the Executive Committee.


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Which of the following could Farhana list as a benefit of career management?

A. Gaining competitive advantage as a result of maintaining the organisation’s

intellectual capital

B. Reduction in staff turnover due to satisfied employees

C. Avoidance of the negative effects of obsolescence

D. All of the above

3. After the Executive Committee meeting, Farhana returns to her office in the HR

Department. On her way she walks past Thabo, one of the organisation’s young and

upcoming employees. Thabo was employed as an HR Administrator three years ago and

due to his commitment and high levels of performance he rapidly progressed to the

position of HR Consultant. Last month he was promoted to Senior HR Consultant. Thabo

has also been identified as a successor for the position of HR Director in the

organisation’s successions plan.

“How did the meeting go, Farhana?” asks Thabo.

“It was tough Thabo,” responds Farhana, “But I think I got through to them. At least on

completion of my presentation they seemed to understand why this organisation needs to

take career management more seriously.”

In which career stage is Thabo?

A. Establishment

B. Advancement

C. Maintenance

D. Retirement

4. Farhana sits down at her desk and reflects. The Executive Committee has given her the

go ahead to design a proposed career management programme for the organisation.

Farahana starts working on this right away and starts thinking about the organisational

career planning which could be implemented.

Which of the following are organisational career planning interventions which Farhana

could consider?

A. Individual development plans

B. Training and development interventions

C. Seeking developmental feedback


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D. Both A and B

5. In designing Car Inc.’s career management plan, Farhana’s thoughts turn to Thabo, the

Senior HR Consultant. “Hhhmm,” thinks Farhana, “if we had more employees like

Thabo we certainly wouldn’t even need an organisational career management plan.

People like him so easily engage in career self-management behaviours – it must be that

they have a specific type of personality!”

Which of the following personality types is positively linked to career self-management

behaviours?

A. Introverted Personality

B. Proactive Personality

C. Analytical Personality

D. Extroverted Personality


1. D 2. D

3. B 4. D

5. B


For this section, the individual members of the Study Group are required to reflect on and

discuss the progress and experiences which they have had in their careers thus far.

Preparation

Prior to the Study Group meeting it is important that each individual group member

prepares as follows:

• Study section 10 (Career Management) of this Study Guide

• Read the supporting chapters on Career Management in the prescribed texts

• Read the recommended journal articles by Chiaburu et al (2006) and Kelly et al

(2003)

• Reflect on the following questions regarding your personal career.


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1. Does your career fall within the “traditional” career model or the “new” career

model? Provide reasons for your answer.

2. In which career stage are you currently?

Which of the career stages have you found most fulfilling thus far? Provide

reasons for your answer.

3. What career self-management behaviours do you engage in, if any?

Is your career self-management effective? Justify your answer.

4. Identify the organisational career planning interventions does your

organisation implements?

What is the purpose of these interventions and do they fulfil their objective?

5. How do you see the future of your career?


At the Study Group Meeting, each individual group member is to present his/her

responses to the questions above, and group members are to discuss their different career

experiences.

On completion of the presentations and discussions, the Study Group should prepare a

one to two page summary of their key learnings around Career Management which

emerged as a result of the individual presentations and discussions.


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on and compare different career experiences. Group members, in sharing their experiences

will learn from each other, which in turn will enable them to engage in better career self-

management as well as improve the career management of their employees.


Instructions:

Read the case study below and then answer the questions which follow.

Career Non-Management at Progress Software

Progress Software, a software development company with a staff complement of 200

employees, has called in Absolute Management Consulting to assist them with their low staff

morale and high staff turnover. Eighty percent of Progress Software’s staff is technical

specialists involved in software development work.

In order to adequately diagnose the reasons for the low staff morale and high staff turnover,

Absolute Management Consulting implements an organisational climate audit. The results of

the audit show that staff are:

• Generally happy with the leadership and management of the organisation

• Satisfied with the compensation and incentives which they receive

• Enjoy opportunities for teamwork which their work often provides

• Very dissatisfied with the lack of career development opportunities

• Dissatisfied with the lack of opportunities for growth

• Dissatisfied with the career management structure in the organisation which only

provides for vertical mobility

You are a management consultant from Absolute Management Consulting. You are required

to prepare a report in which you recommend a new career management approach for Progress

Software. (20 marks)


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• The length of your answer should be guided by the mark allocation. Generally one

coherent point / fact equals one mark.

• Section 10 of this Study Guide in its entirety (and corresponding sections in the

prescribed text) is relevant to the sample examination question.


The answer will essentially be a summary of all the issues addressed in this section of the

Study Guide. It is important that the answer be formatted as a report and that it addresses the

following:

• The changing nature of the career and the implications that this has for Progress

Software’s career management

• The importance of career management to Progress Software and its employees

• Career stages

• Career planning – organisational and individual

• Career development


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SECTION 11

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