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By the end of this chapter, you should be able to:
Outline the history of personnel/human resources.
Identify the qualities recommended for today's successful HR practitioner.
Prepare to address various human resources challenges.
Determine when to establish a human resources function.
Differentiate between the HR function in small and mid-sized versus large organizations.
Distinguish between the respective responsibilities of HR specialists and non-HR practitioners.
Several years ago, I was introduced to Jake, a financial executive with a major oil company. When he asked about my occupation, I provided my "short" response: "I'm a human resources practitioner."
"Forgive me," he stated, "but I really don't understand what human resources is all about."
I smiled and replied, "Don't worry; you're not alone."
Then he added, "No really, I'm interested. Obviously I know some of HR's areas of responsibility, but I don't understand the purpose of human resources management. Can you give me an abridged answer?"
I was somewhat taken aback. I was used to describing HR in terms of its many components, and could easily talk at length about hiring, employment-related legislation, testing, compensation, and performance management, but explaining HR's purpose in a sentence or two posed a challenge. I thought for a moment and then asked Jake, "What does every organization need in order to function?"
Without pausing he replied, "A product or service, competent employees, and a viable market."
"Agreed," I responded. "Now let me ask you this: could a business prosper without any one of these ingredients?"
"I don't see how," he said. "All three components are dependent on one another and together create a formula for success or failure."
"And that's where HR enters the picture," I stated. "The primary purpose of human resources management is to strike a balance between meeting the needs of employees and what best serves the market-driven needs of an organization. When done right, the end result should be growth and prosperity for both the individual employees and the organization as a whole. Of course, there are other factors that influence an organization's success or failure, such as the economy. But, generally speaking, if a company's human resources are managed fairly, employees will help employers reach their goals."
Jake smiled and commented, "It seems to me, then, that every organization requires effective human resources management, regardless of the product or service, size, or corporate status."
"Correct," I replied. "Every organization has human resources, and, therefore, requires human resources management. The composition and staffing of an HR department, as well as its areas of responsibilities, will vary somewhat, but every business needs to have an HR function."
The History of Personnel/Human Resources
It might surprise some readers to learn that the human resources function dates as far back as the mid-1920s. During that time, managers did their own hiring and firing, while selected office employees handled the few other necessary employee-related tasks. By the early 1930s, the duties and responsibilities of managers were expanding, leaving them little time to focus on the employment process, so most were only too glad to have others recruit, screen, and refer applicants for hire.
Soon, other unwanted tasks, such as record keeping and ensuring compliance with government regulations, were relegated to this new, yet unnamed group (in some places it was unofficially referred to as the central office). Gradually, the scope of responsibility expanded to encompass directing recreational and social programs, organizing athletic teams, and arranging company picnics and dinners.
The department, now called Personnel, lacked organizational authority or cohesion. It was staffed initially by former teachers, who anticipated earning more money, and former supervisors, all of whom had no authority to make decisions. Personnel became known as a refuge for burned-out executives from every field, including sales, production, and accounting. The function had limited influence and provided little direction. With many different practitioners with various job titles and no formal training, management held the personnel function in low regard.
Gradually, however, the rise of big unions in the 1930s brought with it a high demand for more sophisticated labor relations. Of necessity, personnel staff members became specialists in negotiating collective-bargaining agreements and handling matters requiring arbitration.
World War II marked a turning point for the personnel function. Labor relations required increasing levels of expertise; psychological testing and training became important issues due to the shortage of skilled workers; compensation required monitoring as government wage and price controls were imposed; auditing of social legislation was needed; benefit plans increasingly became a subject of collective bargaining; and safety became a predominant need in plants. All of these tasks fell into the laps of the people in personnel. As a result, the department slowly began to gain credibility and personnel staff began to receive some respect from their peers in other departments.
The greatest period of growth for the personnel function occurred after World War II ended. Due to the rapid industrial development and burst of technology, the need for college-educated and exempt-level employees increased (exempt-level employees are, by definition, exempt from overtime compensation): specifically, engineers and technically trained workers were in demand. When fully qualified people could not be found, personnel offered training and educational opportunities. With this increase in hiring came the need to expand wage and salary programs and benefits administration. Personnel also had to develop and monitor performance appraisal systems. In addition, workers, including those not unionized, were gaining a stronger collective voice, and management no longer had an unqualified upper hand. Consequently, there was a greater need for formalized employer/employee relations programs. A field that was originally marked by mediocrity and staffed by misfits, personnel now began to attract practitioners of a higher caliber.
Up until now, managers had always made employee-related decisions as they went along. If a worker needed time off to tend to some personal need, managers would arbitrarily decide how much time off that worker could take. There was little concern for consistency within a department, and rarely, if ever, throughout the organization. During the 1950s, however, this began to change. Personnel developed policies and procedures manuals both to clearly identify the burgeoning areas of employer/employee relations and to ensure the fair and equitable treatment of all workers. In addition, it issued employee handbooks so that workers clearly understood what was expected of them and what they, in turn, could expect from their employers. This greatly altered the relationship between managers and personnel; whereas previously managers did as they pleased, they were now obliged to abide by uniform policies set by personnel. The balance of power had begun to shift.
The 1960s and 1970s brought major employment-related legislation. Businesses were forced to focus on multiple issues surrounding equal employment opportunity (EEO) and affirmative action, which had an impact on all aspects of employment from recruitment through termination. Not surprisingly, these often thorny issues were turned over to personnel. Once again, personnel practitioners found themselves performing tasks for which they had no formal training; and, once again, they scrambled to develop sufficient knowledge and expertise to function effectively in this new legal arena.
During this time personnel was also increasingly called on to become more involved with acquisitions and mergers, specifically, the assessment of problems connected with the merging of benefit plans and the difficulties accompanying the acquisition of added labor, now more frequently being referred to as a company's "human resources."
The term human resources soon came to replace personnel when referring to the function or department. This was partially in recognition of the fact that personnel reflected a more traditional reactive function, primarily concerned only with employee utilization. Human resources, on the other hand, suggested a concern for making the most of human resources potential and a commitment to management by anticipation.
Throughout the 1980s, equal employment opportunity and affirmative action remained HR's primary areas of responsibility. In addition, with the increased role of computers in the workplace, human resources information systems (HRIS) became an important area of HR focus, serving as an electronic filing system and providing information to nontechnical managers. Add to the mix organizational development, career planning, employee grievances, and disciplinary proceedings, and it became clear that HR was emerging as an important function in any work setting.
During the 1990s, HR's EEO responsibilities expanded to encompass such issues as employment- and termination-at-will, and negligent hiring and termination. In addition, workplace diversity occupied much of HR's time. HRIS grew in sophistication, and electronic recruitment took its place next to more conventional methods of recruitment.
Midway into the first decade of the new millennium, HR continues to fine-tune its work in these areas while taking on still more tasks. Employee relations-related responsibilities continue to expand, e.g., increased employee demands for flexible work options have led to HR-managed work/life programs, and an expanding multicultural workforce requires greater attention to diversity. Also, a tumultuous economy demands more focus on increased numbers of employees who are telecommuting, hiring more contingent workers, and combating illiteracy in the workplace. And, while doing all this, HR moves decisively toward becoming more strategically aligned with an organization's business side.
Exhibit 1–1 outlines the history of personnel/human resources.
Today's Successful HR Practitioner
At this time, then, human resources practitioners are positioned to take on a more strategic role in achieving an organization's missions and goals. They are developing a sound working knowledge of various business matters, such as how to impact revenue growth and productivity, and are learning to build organizational capabilities. This is increasingly being accomplished through a collaborative effort with an organization's financial professionals. While these two disciplines have very different areas of emphasis traditionally, a recent survey of CFOs conducted by CRO Research Services reports that HR and finance work better together than separately. Thirty-nine percent of respondents said they view HR as "mainly or somewhat as a strategic partner, one-third said they see HR as an even mix of cost center and strategic partner, and 28 percent said they see HR as somewhat or mainly a cost center (HR Magazine, September 2003). The majority of respondents said they view "human capital as a key driver of shareholder value," impacting customer satisfaction, profitability, product development, and growth. That's quite a departure from Personnel/HR's early days when the department was seen as a dumping ground for managers who couldn't make it in other departments, and HR managers were viewed as being little more than social directors.
As an example of how HR and finance can work together, consider the HR manager who wants to increase spending for improved staffing: He or she approaches finance for cost options; then, together, HR and finance analyze the findings and present a solid, joint plan reflecting the people and money side to senior management.
Organizations that have linked HR and financial operations include Delta Air Lines, where collaboration has resulted in a successful incentive plan for 16,000 employees targeted for downsizing, as well as a program that resulted in reduced benefits costs; SHI-APD Cryogenics, Inc., of Allentown, Pennsylvania, where the finance and HR managers are considered equals and frequently consult with one another regarding various employee-related issues; and Memphis-based First Tennessee National Corp., where a cooperative effort between HR and finance helped lead to a reduction in turnover.
HR's changing role means a greater voice in the accomplishment of organizational goals and, consequently, increased credibility. Today's ideal HR manager, then, is someone with both HR and operational experience, possessing a keen sense of how a business operates. Indeed, many HR professionals today are earning MBA degrees and gaining line manager experience. They are also acutely aware of industry and national economic trends, are in sync with their company's long-term goals, can develop an HR strategic plan that maps out how they are going to support the company's objectives, and have demonstrated leadership. Additional desirable intangible competencies include a willingness to take risks, conviction, organizational skills, and resiliency.
These qualities are echoed and elaborated in a comprehensive 2002 study conducted by Wayne Brockbank and David Ulrich of the University of Michigan entitled the Human Resource Competency Study (HRCS), as reported in the Institute of Management and Administration's (IOMA's) August 2003 Human Resources Department Management Report. In it, 27,000 HR professionals and line managers agreed that today's HR professionals need to be both process and content experts, facilitating change, but also helping to set the direction of change. They went on to identify five key competencies HR managers need in order to stay current and make an impact on their organizations:
1. Strategic contribution. Survey respondents determined that strategic contribution accounted for 43 percent of HR's total impact on business performance. Specifically, successful HR professionals focus on culture management, facilitate rapid change while simultaneously eliminating "low-value work and information clutter," and identify problems central to business strategy while suggesting alternative solutions.
2. Personal credibility. Survey respondents felt strongly that successful HR managers need to establish a successful track record to "HR counterparts and business line managers whom they serve."
3. HR delivery. Today's HR managers are expected to deliver in the areas of staffing, development of challenging work experiences, career planning services, and internal communications.
4. Business knowledge. This goes beyond knowing the nature of a particular business; it entails "the ability to apply that knowledge—contributing to strategic decision making, developing competitive cultures, making change happen fast, and creating market-driven connectivity."
5. HR technology. HR professionals are expected to use technology to deliver HR services and to shift from "transaction processing to strategic functioning." In this regard, technology's impact is more in time savings than cost savings.
An HR Competency Toolkit, produced jointly by the University of Michigan Business School, the Society for Human Resource Management (SHRM), and the Global Consulting Alliance, is available at shrm.org/competencies.
At the same time as they are striving to become more strategically aligned with an organization's business side, HR practitioners continue to address many workplace challenges, including:
Telecommuting and virtual management
Integrating a contingent workforce
Savvy HR practitioners recognize that success in today's economy hinges on strengthening the link between diversity and business results, thereby being responsive to the needs and demands of an increasingly diverse workforce. Organizations view diversity differently. For example, Texas Instruments defines diversity as their "effectiveness at using the talents of people of different backgrounds, experiences and perspective"; at the company that was formerly BankBoston, diversity includes group differences such as age, race, gender, sexual orientation, and disabilities, and individual differences, such as communication style and career experience; and Harvard Pilgrim Healthcare pays special attention to improving the representation of women and minorities in key positions.
The statistics are staggering: the Department of Labor reveals that some 2.5 million illiterate Americans enter the workforce each year; the U.S. Department of Education reports that one in every seven American adults is functionally illiterate, unable to read, write, calculate, or solve even simple problems; and one-half of our nation's industrial workers read at or below the eighth-grade level. The impact of illiteracy on business is far-reaching, including a loss of billions of dollars in profits each year; lowered productivity; declining international competitiveness; and reduced promotability.
Excerpted from Fundamentals of Human Resources Management by Diane Arthur Copyright © 2004 by American Management Association International. Excerpted by permission of AMACOM. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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