Critical analysis of the change from personnel management to HRM free essay sample

Course: Master in Management (MiM part-time) Module: HRM4003D Human Resource Management Essay Title: ‘HRM can be seen as a distinctive approach to the management of people, which contrasts with more traditional approaches to personnel management’. Critically explore and analysis this statement and the challenges of implementing HRM. Submitted by: Liesel Butterfield Student Number: 13204579 Lecturer: Sile O’Donnell Submission Date: 2nd of December 2013 Word Count: 3,700 The development of Personnel Management From the 1940s to the 1970s increased status and focus was given to the personnel function within organisations. During this period there was dramatic growth in the size and complexity of organisations which demanded a greater knowledge of the management of the workforce (Gunnigle et al, 2011). The growth in workforce management came to the forefront particularly as a result of the growing significance of industrial relations. Derry (1991) defines industrial relations as ‘the behaviour and interaction of people that shape the employment relationship between management and labour’. Personnel management developed as a specialist area concerned with the staffing function within organizations (Gardner et al, 1992). Personnel management specialists developed as experts in areas such as recruitment, selection, job design, and motivation (Gardner et al, 1992). Specialists had appropriate knowledge, experience and training in the field of human relationships (Singh et al, 1996). People are the most complex factor in an organisation and personnel management recognised the need for correct management of their personalities in order to maintain good industrial relations (Reddy, 2004). It concerned itself with solving the human problems of the organisation in a manner where maximum satisfaction of the employee were achieved and the goals of the organisation were accomplished to the fullest extent (Reddy, 2004). It was regarded as a major sub-system of the total management process as it aimed to attain the goals of the organisation through maintaining the relations of the organisations most valued asset (Reddy, 2004). Personnel management was inseparable from management as it was always concerned with how human resources could be utilised to benefit the organisation as a whole. Employees account for a large proportion of enterprise expenditure therefore depending on how they are managed; the personnel department could make a contribution to either a firm’s success or failure. The department undertook a varied and comprehensive array of tasks in order to ensure the successful management of the manpower resource. Reddy (2004) describes some of the core tasks undertaken: Organizational Planning Personnel specialists were specifically concerned with planning which concerns the allocation of the various jobs to be performed into effective units, divisions or positions (Reddy, 2004). For planning to be successful it is necessary that the organisations needs are defined in terms of both long term and short term objectives. Based on their capabilities and strengths, employees will be placed in positions where it is regarded that objectives will be met to the fullest extent. The division of jobs aimed to create and maintain a cohesive, homogenous and interacting workforce. It is necessary for every employee to know what their job is, what results are expected of them, the standard by which performance is measured and how their work fits in with the organisations (Singh et al, 1996). An employee’s job definition must be clear in order to avoid confusion which can result in reduced efficiency. Employment Employment involves activities such as the recruitment, selection, placement and induction. They identified potential or future vacancies, aimed to attract qualified personnel, develop policies and procedures for the selection and place a person to a job that his qualifications and personality traits are best suited to. Performance reviews, promotion policies and the maintenance of employee records were also responsibilities of the department. Training and development of personnel They implemented various training programmes to increase the skills of employees with the aim of contributing to the organizations objectives. Wage and salary administration The personnel department developed a suitable wage structure for individuals based on various factors such as demand and supply in the labour market, salaries in other organizations and the capacity for the organisation to pay. Employee benefits and services The personnel department also managed welfare activities such as the provision of pensions, welfare provisions, fringe benefits and fulfilment of social security. Modern organisations are very volatile and frequently major changes in the systems, procedures, structures and techniques can be embarked on by management without necessary consideration given to the effects these changes may have on the human beings involved (Singh et al, 1996). Defiance, lack of cooperation, resentment, suspicion, fear and reduced motivation can occur when employees are not considered in major changes. Personnel specialists provided careful consideration of human aspects which helped to achieve the successful implementation of new plans and policies (Singh et al, 1996). It has become clear that organisations struggle to operate efficiently if employees are not satisfied in terms of job satisfaction, working conditions and chances of progression. The personnel specialists’ role was regarded as one of an advisory nature to management. A blurring of personnel specialist’s roles with line managers responsibilities created a situation where the specialist was an arbitrage between employees and management (Singh et al, 1996). Specialists assisted, advised and serviced but ultimate control of executive decisions remained with the line managers provided with the advice (Singh et al, 1996). The development of Human Resource Management The 1980s saw the HR function come to surface ultimately replacing personnel management. This development began a sterile debate concerned with the differences between personnel management and HRM. Michael Armstrong (2003) defines human resource management as a ‘strategic and coherent approach to the management of an organisations most valued assets; the people working there who individually and collectively contribute to the achievement of its objectives’. Strategic integration is often regarded as a key policy goal for HRM, which is concerned with an organizations integration of HRM into the overall strategic plan (Armstrong, 2006). Fombrun et al (1984) was a major contributor to this philosophy. He developed a term called the â€Å"matching model† which emphasises that HR systems and the organizational structure should be managed in a way that is in line with the overlying organizational strategy (Fombrun cited by Armstrong, 2006: 7). The integration of HRM with management enables line managers to see the long-term importance of HRM for the achievement of organizational goals. The modern HR department is one which is decentralised meaning line managers now have the primary responsibility of managing employee relations. In this modern organisation human resource specialists have the role of providing people management systems which assist managers in the management of their employees (Dransfield, 2000). All aspects of the HRM system must cohere and consist of interrelated and supportive practices to enable line managers to make informed decisions that contribute to the goals of the organisation (Armstrong, 2006). As HRM is given a strategic importance this filters down to all the actions of an organisation (Dransfield, 2000). Important to HRM is the achievement of high organizational performance through human capital by enhancing employee’s motivation and job commitment. Motivation encourages people to apply their abilities while commitment is about identification with an organisations goals and values, both of which will assist in the achievement of organizational goals (Armstrong, 2003). HRM aims to create policies and practices which best serve both the organisation and the individual. The model aims to generate â€Å"human capital advantage† which can be regarded as the accumulation of employees who possess valuable skill and knowledge. Millmore et al (2007) argued ‘people form a significant component of an organisations strategic capability and the ability to understand the organizations strategic position will largely be a function of the capabilities of the organizations people’. This stems from the ‘Resource-based theory’ which is an underpinning theory of HRM. A firm develops a competitive advantage if its resources which include its human resources are valuable, rare and costly to imitate (Armstrong, 2006). The pluralist ideology underpins the HRM approach to people management. It recognizes that within an organization various interest groups most notably management and employees, who have interests which are conflicting but of equal importance (Wilton, 2011). The existence of various interest groups makes conflict both inevitable and normal. HRM policies and practices are created to consider the various interest groups and to manage workforce conflict if it occurs. HR practices and policies within Enterprise Ireland Enterprise Ireland is a government organisation responsible for the development and growth of Irish enterprises in world markets. The organisation works in partnership with Irish enterprises to help them start, grow, innovate, and win export sales on global markets. The fundamental goals of Enterprise Ireland are to support sustainable economic growth, regional development and secure employment. Enterprise Ireland was established under the Industrial Development (Enterprise Ireland) act of 1998. The agency was established as an integrated service bringing together the skills and resources of the previous Irish Trade Board, Forbairt and the Services to Business function of FAS. The establishment of Enterprise Ireland in 1998 marked the end to the multiplicity of agency schemes and the introduction of a more concentrated approach to the development of Irish firms. It currently has 28 regional offices nationwide with its headquarters located in Dublin, and also has 53 global offices in various locations worldwide. When Enterprise Ireland was established HR policies and practices were already in place from the predecessors. However the end of a multiplicity of agency schemes created two important actions for the department: 1) The removal of certain non-core business units which were no longer needed. This action resulted in a reduction of the headcount within Enterprise Ireland. 2) Recruitment of staff with the appropriate specialist skills and expertise to work with Irish indigenous industries. Human resources together with policy and investment form a distinct unit within the corporate structure. HR consists of four units which are; resourcing, training and development, employer relations and administration. When Enterprise Ireland was established importance was given to the recruitment of professionals with formal education and relevant experience in the field of human resources. The HR department needed to be strategic and properly equipped to cope with the changes occurring and HR professionals were recognised as a necessity for this. The HR department have always been regarded as a strategic department within the organisation. The head of the department reports directly to the Executive Director who then reports to the CEO. The HR department consult with management on all decisions and changes that are felt could affect employees. Since the introduction of the moratorium on recruitment and promotions in the public service, Enterprise Ireland staff numbers have been significantly reduced resulting in key posts remaining vacant in Ireland and overseas. Currently 740 people work for the Enterprise Ireland Irish offices, 16% less than there was before the introduction of the moratorium. In 2010 the Government committed to reducing its general deficit to less than 3% of GDP by 2015. In order to do so, it entered into two significant Public Service Agreements Croke Park Agreement (2010-2014) and Haddington Road Agreement (2013-2016). Croke Park introduced cuts and freezes to pay and allowances, a moratorium of staff through the Employment Control Framework, pension levies and greater standardisation of employment conditions across sector (Ireland. DPER, 2010). The focus of the Haddington Road Agreement was on consolidating the series of pay and productivity measures to achieve necessary savings in the Public Service Pay and Pensions bill, namely by reduced headcount through voluntary redundancies, increased working hours, redeployment, strengthening of performance management and flexible work sharing agreements (Ireland. DPER, 2013). Over the last few years’ significant work has gone in to reducing organizational costs while also maintaining and improving the standard of services for clients. Many of the actions implemented to reduce costs and maintain quality of service have been the responsibility of the HR department. The department began reorganising the structure of staff allocation on a regular basis to ensure the delivery of quality service to clients despite a reduction in the staff numbers. The reduction in staff numbers called for a focus on strategic resource planning. The aim of this was to ensure adequate resources and skill sets remained in areas of expertise such as IT and technology. Since the introduction of the moratorium 9% of employees have been assigned to new roles within the agency. The HR department have engaged with trade unions and implemented a process which facilitates the reassignment of staff into key priority positions. A number of employees have engaged in programmes supported by the agency which have provided them with necessary skills to meet the requirements of new positions. Learn on the job training and shadowing have also been implemented. It has been the role of HR to ensure that employees are fully equipped to perform their new roles to the highest possible standard. The HR department now implement a performance management system with a dedicated member of the department working solely on this. The performance management system sets out goals and objectives very clearly for employees. The performance of employees and departments are rigorously reviewed every six months. The past few years have proved as very challenging for the department as they themselves have experienced a reduction in staff numbers from 27 in 2008 to 15 in 2013 while trying to cope with the overall impact the public service agreements on the organisation. Staff morale is low due to increased work hours and workload for a reduced salary. Those who joined enterprise Ireland from 2008 onwards have remained in the same positions since they started due to the lack of movement in terms of promotion. Maintaining employee motivation and commitment has proved a struggle for the department due to the current working conditions. Recruitment of new employees has commenced in overseas offices however the freeze remains in place in Ireland. Critical analysis of the contrasts between Personnel Management and Human Resource Management based on academic literature Personnel management can often be considered as an old-fashioned name for human resource management, and in some organisations there is often little difference between today’s HR departments and their predecessors. However HRM is often regarded as a revolutionary approach to people management which focuses on achieving organizational goals. The transition of personnel management to HRM caused a sterile debate between many academics. Some commentators have emphasised the revolutionary nature of HRM while others have denied that there is any significant difference between both. Both human resource professionals and academics have encountered problems in clearly identifying the differences between the two. A quote by Armstrong (1987:32) emphasises this issue: ‘It could be no more and no less than another name for personnel management, but, as usually perceived, at least it has the virtue of emphasising the need to treat people as a key resource, the management of which is the direct concern of top management as part of the strategic planning process of the enterprise’. Legge (1989) identifies four clear similarities between the two. 1. Both models emphasize the importance of integrating personnel/HRM with organizational goals. 2. Both emphasize a need for involvement with line management. 3. Both see the importance of individuals developing their abilities fully to make a contribution to the organizations success. 4. Both identify the importance of placing employees in positions where they are best suited and their skills are utilised to the highest potential. Armstrong (2003) also identifies that ‘same range of selection, competency analysis, performance management, training, management development and reward management techniques are used in both personnel management and HRM’. While many academics see the clear similarities between normative models of personnel management and HRM, clear distinctions have also been recognised. First, HRM is seen as focusing on the relations between line management and the individual worker. On the other hand personnel management appears to be a management activity directed largely at non managers who are essentially subordinates of management (Legge, 1989). Second, in HRM workforce management is fully integrated into managements strategic decision making (Gunnigle et al, 2011). A clear relationship is drawn between the proactive use of human resources to achieve organizational goals. The importance of personnel policies in the pursuit of the bottom line appear to be more specified in HRM than in personnel management (Legge, 1989). Third, personnel management is regarded as workforce centred, while HRM is resource centred. Personnel specialists direct their efforts towards employees. Their actions include; finding and training them, organizing their pay, justifying management’s actions, dealing with conflict and seeking to change actions which may have a negative response from employees (Torrington et al, 2005). HRM is directed more towards management needs rather than employees. Fourth, HRM is regarded as pluralist while personnel management is unitarist. Pluralism sees organisations as consisting of various interest groups while the unitarist view is based on employees and management sharing a collective interest. HRM recognizes that managers and workers have different yet equally legitimate interests and conflict of their viewpoints will be inevitable (Wilton, 2011). From the literature, in theory, HRM is more strategic than personnel management as it is experienced by managers, concerns itself with the achievement of business goals and regards the employee as a valued resource to be managed (Legge, 1989). Purcell (2001) comments ‘The distinction between personnel management and HRM too many practitioners is about the centrality of the role they play in the organization. It is nothing to do with a particular approach to labour management, one best set of practices’. Critical analysis of the contrasts between Personnel Management and Human Resource Management based on the policies and practices of Enterprise Ireland. Since its establishment in 1998, a human resource department has always been an important part of the organizational structure within Enterprise Ireland. The agency was established as an integrated service bringing together The Irish Trade Board, Forbairt and the Services to Business function of FAS, all of which previously also had human resource departments. The HR department today consist of four units which are; resourcing, training and development, employer relations and administration. The structure of the HR department was continued on from its predecessors even though there department was labelled as a personnel management one. HR has always been regarded as a strategic department due to its direct involvement in the overall management of the agency. The head of the HR department reports directly to an Executive Officer who then reports to the Chief Executive Officer. Ever since its establishment, HR has been involved in any decisions which could potentially affect the employee relations within the agency. The head of the department has been present at all board meetings regarding any relevant changes to Enterprise Ireland Upon establishment in 1998, the decision was made to remove a number of non-core departments that were regarded as no longer necessary. It was also decided that there would be recruitment of highly skilled professionals in order to provide a high quality of service to Irish firms. The decision to take these important actions was a result of lengthy consultation between the head of HR and senior management. HR worked closely with senior management to ensure the successful implementation of these changes to the agency. Highly skilled professionals within the agency are a necessity for delivering high quality skills and guidance to indigenous Irish firms. Employees have always been regarded as a resource necessary for the success of Enterprise Ireland. All services available to Enterprise Ireland clients are made available through development advisors who are the primary point of contact for all Enterprise Irelands services. The HR department and management have recognised from the beginning that employees are fundamental to the successful delivery of services to clients which is the core goal of Enterprise Ireland. Ever since its establishment training programmes approved by the agency have been available for employees to up skill and expand their expertise. Training and development has become more important due to lateral reassignments occurring as a result of the moratorium on recruitment. The HR department have the role of ensuring that programmes provide existing employees with the necessary skillsets to take on new positions within the organization. Enterprise Ireland and its predecessors placed emphasis on employee commitment and integration. Industrial harmony was of great importance to the agency. Enterprise Ireland works closely with Siptu and Unite, the two trade unions representing employees. While the organization still works on a day to day basis with unions their influence has significantly reduced due to the current economic climate. The public service agreements have dramatically affected employee commitment and integration. Administrative roles remain very important within the department. While administration is often associated with more traditional approaches to people management, these activities are necessary to keep the integrity of the department. In order to have employee’s full commitment and motivation administrative duties such as payrolls and pensions must be managed to an excellent standard. Enterprise Ireland has always carried out roles characteristic of a strategic human resource department. The department carries out the same roles and responsibilities as the personnel management departments of its predecessors. The focus of the department has changed since 2008 in order to cope with the effects of the economic downturn on public service employees. It is now more important than ever for the HR department to be as strategic as possible in order to maintain quality services despite a significantly reduced employee headcount. Conclusions From a review of academic literature and the practices and policies of Enterprise Ireland, contrasts between HRM and personnel management depend on how either are interpreted. HRM can be regarded as a revolutionary approach because of its emphasis on the importance of human capital to the success of an organisation. The differences between a HR department and personnel department in terms of policies and practices are few and far between. HRM is regarded now as a management practice which poses the question of how strategic a department is depends on the management which controls it.