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Noreen Malik Chrm Business Issues and The Contexts of Human Resources Key Forces Which Shape Hr

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The role of HR has changed considerably in organisations due to the external business environment. Some of the forces which have shaped HR are funding and staffing issues. There is widespread competition amongst organisations and they are fighting to survive. Decisions need to be made around funding and certain techniques put in place to meet the changing requirements of the market. Competition brings uncertainty and unpredictability. Organisations cannot plan ahead, economic trends and the changing face of HR all play a part in these radical changes. An example is outsourcing. Outsourcing promotes benefits such as:

• reduced cost, access to expertise not available within HR, increased flexibility and speedy responses, which frees up HR to focus on other activities.

It also promotes problems such as:

• suppliers increasing their charges, making quick and short-term decisions on what can be outsourced, and generally lower employee morale.

Dave Ulrich identified four key HR segments, which make an organization effective to employees. Strategic Partner, Change Agent, Administrative Expert, Employee Champion. He proposed to change the structure of the HR Model. As with anything, it’s often not what you do, but how – or rather how intelligently – you do it,” said Ulrich. (1). He also spoke of the Three-Legged Stool model or the Business Partner model. As described (2) This consists of:

– Centres of excellence – these specialize in the provision of high-level advice and services on recruitment.

– Strategic Business Partners – these work with line managers to help them reach their goals through effective strategy formulation and execution. They are often ‘embedded’ in business units or departments.

– Shared Service Centres – these handle all the routine ‘transactional’ services across the business. These include such activities as recruitment, absence monitoring and advice on dealing with employee issues like discipline and absenteeism.

Ulrich argued that in order to survive every organisation needs to have these areas so HR becomes a more strategic contributor and maximises its contribution to business performance.

Every organisation must adhere to their professional ethics based on principles which

determine the way the organisation’s employees behave. It is imperative for an organisation to

promote brand values such as caring for their staffs’ wellbeing. To be respectful

towards employees’ privacy and to respond to their individual needs. They need to be an

‘enabler’ to promote knowledge and experience helping decide on the most appropriate

solutions. An organisation is accountable towards the quality and efficiency to the services they

provide and acting in the best interest of their customers. It needs to evaluate it’s

current position and identify its key strategies and plans. Objectives need to be set

and achieved. These could include costing; controlling the use of resources in the most

productive way. Recruiting and retaining staff and offering more training and development

opportunities. Even the introduction of flexible working hours to work with

the organisations changing business needs.

As (Reilly and Williams, 2006) (3) spoke: the future of the HR function comes back to the capability of HR and its ability to learn, especially from other functions, on data, customer experience and branding. Structures can change and sway but it is the quality of HR staff, their ability to innovate and help the business improve, that is critical.

Tools for Analysing Business Environment

There are many tools to measure performance and set targets. Business analysis models are useful techniques and tools that can help understand an organisational environment and think more strategically about the business. I will concentrate on two models the PESTLEE analysis and Porters Five Forces. PESTLEE stands for six external factors which affect a business: political, economic, sociological, technological, legal and environmental. PESTLEE analysis can be used for business and strategic planning, for major organisational change, research, marketing planning etc. The PESTLEE model came to understand how external factors affect a business or organisation, it can help with:

• determine the long-term effect on the performance and activities of a business

• review any strategies in place

• work out a new direction, product or plan for your business

• identify solutions to problems

• gain strategic advantage on competitors

• evaluate the risks associated with markets you’re interested in (2018)

Porters Five Forces was a tool created by Harvard Business School professor Michael Porter, to analyse an industry’s attractiveness and likely profitability. It is used to look at the strength of five important factors that affect competition –

  1. potential entrants – threats of any new entrants and threats they bring. How easily can they enter the market.
  2. existing competitors – the number and strength of competitors. How many rivals are there? Who are they, and how does the quality of their products and services compare with ours? Where rivalry is intense, companies can attract customers with price cuts and marketing campaigns. Where competitive rivalry is minimal, and no one else is doing what you do, then you’ll likely to have tremendous healthy profits.
  3. buyers – how easy it is for buyers to drive your prices down. How many buyers are there, and how big are their orders? How much would it cost them to switch from your products and services to those of a rival? Are your buyers strong enough to dictate terms to you? When you deal with only a few customers, they have more power, but your power increases if you have many customers.
  4. suppliers -This is determined by how easy it is for your suppliers to increase their prices. How many potential suppliers do you have? How unique is the product or service that they provide, and how expensive would it be to switch from one supplier to another? The more you have to choose from, the easier it will be to switch to a cheaper alternative. But the fewer suppliers there are, and the more you need their help, the stronger their position and their ability to charge you more. That can impact your profit.
  5. alternative products/services – This refers to the likelihood of your customers finding a different way of doing what you do. A substitution that is easy and cheap to make can weaken your position and threaten your profitability.

Using this model, strategies can be built to keep ahead of influences. It is also useful whereby when there is an understanding of the forces in the organisation that can affect profitability, you’ll be able to adjust your strategies accordingly. For example, you could take advantage of a situation or make improvements where required and avoid taking any wrong steps in the future.

Porter’s Five Forces are brought together in the model below: (Anon., 2018)

By thinking about how each force affects an organisation, and by identifying its strength and direction, a position can quickly be assessed. Then any strategic changes needed can be looked at to deliver long-term profit.

Factors which impact on an organisation and it’s HR Function

All organisations must continually monitor internal and external environmental factors and adjust its HR strategies accordingly. These can include competition, legislation, employee relations to list just a few.

An external factor affecting any organisation is competition. It is imperative for an organisation to be aware of it’s competitive market. I.e. during recruitment HR would need to focus on developing recruitment and attending job fairs to promote the organisation and to attract the right staff. There should be incentives to retain valuable employees.

Technology is another external factor which affects an organisation. The rapid development in technology has meant that staff are able to communicate with colleagues, suppliers, customers at a touch of a button. This advancement allows the organisation to keep up with the varying demands of the market. The internet for an example has allowed organisations to work in ‘real-time’ which have impacted on skills required to do a task, role structures, hours employees work and the overall role and work of HR. However, on the other hand technology will mean we will need far fewer jobs. As technologies are introduced in an HR department they could be looking at downsizing and at ways to save money where it can. Whilst the number of manual jobs has reduced, other work is still present and rather than entering a period of leisure, some staff find themselves working extended hours and therefore staying with the organisation for a longer period of time which means more paperwork for HR in terms of appraisals, professional development etc.

Another external factor is the carbon footprint. All organisations are pressurised into being aware of its environment and to make sure that they follow green measures to reduce the carbon footprint and to reduce waste and to encourage recycling.

Another driver for change in an organisation internally could be the growing diversity of its workforce demographics. These could be in the form of employee expectations, with some seeking to optimise work/life balance while others seek meaning and purpose for being at work. The 9 to 5, Monday to Friday employee is changing drastically with more staff working reduced hours or shift work or job sharing. Just as managers may become increasingly impatient with any signs of a ponderous HR, employees will increasingly expect instant responses and answers delivered to any problems. The HR department must listen to its staff and follow proper procedures to avoid conflict or sanctions.

Government regulations is an external factor which will affect an organisation and it’s HR department. Any compliance standards must be achieved by HR and kept within the law. These could include hiring, firing, compensations, training etc. especially the processing and storing of personal data in terms of the new GDPR policy.

As (Reilly and Williams, 2006) (Williams, 2006) said “In the end, the future of the HR function all comes back to the capability of HR and its ability to learn, especially from other functions, on data, customer experience, branding and the like. Structures can change this way or that but it is the quality of the HR staff, their ability to innovate and help the business improve, that is critical.”

Summarise key stages in strategy formation and implementation

All organisations need to focus on its strategies and actions it intends to take to meet its aims and objectives in the long term. A HR strategy refers to an organisation’s use of HR to keep afloat and ahead in it’s competitive environment. A good business strategy is one which is likely to succeed; because of this there is a greater need for HR strategies in an organisation. The HR function is a strategic partner in the formulation of the organisation’s strategies as well as the implementation of these strategies through HR. This could include recruiting, motivating, rewarding etc. Any strategies set must reflect the organisation’s mission and vision and the objectives it needs to achieve. HR’s role is constantly developing and growing at implementing starategies.

As Taylor and Woodhams (2016) (Taylor, n.d.) pointed out business strategy is developed throuh three approaches – these being:

  • rational/classical
  • emergent/logical incrementalism and
  • symbolic/radical

The rational/classical approach is the most common approach used and is mainy used by the enior members of an organisatikon. Exterfnal and internal factors are continually being considered usingthe SWOT analysis in order for the organisation to know which strategic direction to take. Afterthis, rsources are then put together and identified to achieve the chosen strategy. (Mintzberg, 1990) clearly identified the ‘basic premises’ of the classical approach as being (Anon., 2018) the disciplined ‘readiness and capacity of managers to adopt profit-maximising strategies through rational long-term planning’ (Whittington, 2001: 15). He questioned the feasibility of adopting this approach as either a model for prescription of best practice or as a model of analysis, as he considered it to be an inflexible and oversimplified view of the ‘strategymaking’ process, relying too heavily on military models and their assumed culture of discipline.

An emergent strategy emerges overtime as it responds to its internal and externl factors. Emergent strategy is a set of actions, or behavior, consistent over time, “a realized pattern [that] was not expressly intended” (Anon., 2018) in the original planning of strategy. An emergent strategy develops when an organization takes a series of actions that with time turn into a consistent pattern of behavior, regardless of intentions. An emergent strategy implies that an organization is learning what works in practice.

And finally the symbolic/radical approach is centred on innovation and is a much more complicated process. It implies a difficult, lengthy and risky process. An organisation does not fight for a slice of the market. Rather that, it creates a new market for itself, stepping aside from any competition. This could give an organisation the chance to monopolise a market, setting up the rules to gain it’s own profit. New areas are wide open to further development and ideas. Once you have created a new innovation, the options for further innovations are usually high. (Anon., 2018)

An organisation’s success is highly dependent on it’s skills, knowledge and the abilities of it’s staff. Professional ethics need to be adhered to in detrmining how staff behave.

(team, 2018)Porter’s Five Forces is a simple but powerful tool for understanding the competitiveness of a business environment, and for identifying strategy’s and potential profitability for an organisation. This is useful, because, when you understand the forces in your organisation that can affect your profitability, you’ll be able to adjust the business strategies accordingly.

Porter recognized that organizations watch their competitors, but he encouraged them to look beyond the actions of their competitors and examine what factors could impact the business environment. He identified five forces that make up the competitive environment, and which can erode profitability. These are:

  1. Competitive Rivalry. This looks at the number and strength of your competitors. How many rivals do you have? Who are they, and how does the quality of their products and services compare with yours?
  2. Supplier Power. how easy it is for suppliers to increase their prices. How many potential suppliers do you have? How unique is the product or service, and how expensive would it be to switch from one supplier to another?
  3. Buyer Power. how easy it is for buyers to drive your prices down. How many buyers are there, How much would it cost them to switch from your products and services to those of a rival When you deal with only a few savvy customers, they have more power, but your power increases if you have many customers.
  4. Threat of Substitution. What is the likelihood of an organisations customers finding a different way of doing what you do. A substitution that is easy and cheap to make can weaken an organisation’s position and threaten profitability.
  5. Threat of New Entry. An organisation’s position can be affected by people’s ability to enter your market. How easy is it to get a foothold in your industry or market? How much would it cost. If it takes little money and effort to enter your market and compete effectively, or if you have little protection then rivals can quickly enter your market and weaken your position.

The Institute of Business Ethics defines business ethics as the application of ethical values (such as fairness, honesty, openness, and integrity) to business behaviour. Are colleagues treated with dignity and respect? Are customers treated fairly? Are suppliers paid on time? Does the business acknowledge its responsibilities to wider society? Put simply, business ethics is about how business is done, and doing the right thing because it is the right thing to do. (CIPD, 2018)

“Ethics in business is about ‘doing the right thing’ because it’s the right thing to do. An organisation’s reputation can be easily damaged if it doesn’t embed its core values inside an ethics programme. HR plays a vital role in facilitating an ethical culture. Organisations need to adopt a principles-based approach to decision-making if they want to apply and develop ethical values. Individuals are better equipped to face ethical dilemmas if organisations support a principles-based approach.” (CIPD, 2018)

While ethical issues arising in high profile companies such as Starbucks, Zara, Facebook and FIFA attract wide media attention, ethical issues can be just as potentially damaging in small- and medium-sized enterprises. Any organisation can find itself at risk of reputational damage and of having detrimental rumours spread through social media. HR’s role in the ethical conduct within an organisation can be present at various points such as, in the recruitment of staff who can uphold an organisations values and ethical climate, in the resolution of ethical conflict if it occurs; and in dealing with conflict. Ethical conflict, presents a number of challenges; avoidance of involvement by witnesses for fear of jeopardising their own relationships. HR can help to ensure that organisations operate with fairness and integrity to reduce the likelihood of ethical conflicts arising. Ethically unhealthy organisations will lose good staff and motivation by them. In handling situations HR need to avoid escalation of the issue and protect staff against the emotional and reputational impact that can result from them.

Accountability in HR is about accepting the responsibilities and consequences. As (Lloyd, 2004) said “When everyone is accountable, they can work together with a much higher level of trust and cooperation, then achieve a real teamwork.” To get maximum results from employees, the organization needs to build a strong relationship. Accountability is not a problem when relationships are built on trust, mutual respect and clear communication. There should be defined goals.

HR accountability is highly visible and significant, some HR professionals are still reluctant to accept this responsibility and meet the demands of accountability. It requires planning and a change in attitude. The relationship between HR and staff is key to maximum accountability. A relationship built on mutual trust and respect, effective communication, and good problem solving skills is more likely to foster accountability for achieving desired results. The need for the increase accountability of the HRM function in organizations is continuing to grow in importance and influence. To develop accountability, HR have to encourage, nurture, teach, and reward it in others.

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