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15 JANUARY 2008
Key issues facing Human Resources Management

by Frank Horwitz: Director of the Graduate School of Business. His academic specialisation is in human resources management, organisation change and industrial relations.

Thinking and acting strategically

There is a need for human resources management to focus on the impact of what they do on organisational objectives. Human resources (HR) have tended to be more concerned with procedural and maintenance issues and not with aligning HR strategy with organisational strategy. The link between human resources and organisational performance must be strengthened.

There is a real need for a synergy between two ostensibly competing priorities. These are (1) fair employment practices and workplace justice, and (2) high performance for effectiveness and global competitiveness. There are times when these seem dissonant with each other. In South Africa, the focus in the past has been more on industrial relations and fair labour practices than on competitiveness through human capital. Understandably there is an historical context in which the field of HR and IR emerged. They have been at the forefront of workplace change. Industrial relations was paramount in achieving human rights at work. The next phase was the institutionalisation of these rights and practices in law and in public policy. Now we have to be more strategic in linking strategic HR initiatives and business strategy.

A key facet of strategic HR is differentiation – a unique HR value proposition and employer brand which makes it both different and more competitive than other firms in its industry. How the organisation attracts, motivates and retains human capital – especially intellectual capital in the area of the core competence of its business – is critical. Allied to this is the notion of talent management. Another substantive issue in HR is that of HR development – this must play a pivotal role in the future. We now have the legislative infrastructure and incentives like the levy approach – and it's encouraging to see the number of learnerships increasing.

Developing an entrepreneurial culture

Developing an entrepreneurial culture is a huge labour market challenge. With high unemployment and large organisations shedding jobs, creating sustainable employment is vital. So many organisations have downsized, reducing their staff to an extent that will never be upped to earlier levels. Who will be creating sustainable employment in the long term? We have to develop an entrepreneurial class in SA. Mature organisations looking to compete in global markets are not creating new and higher levels of employment locally other than non-core and informal work.

Diversity challenges

Another key area is that of diversity – we have to improve the level of diversity at senior executive level. This is allied to black economic empowerment, an imperative which needs to expand in scope and inclusiveness. In both areas, HR and executives have a key role to play to shift our organisational paradigm from compliance to commitment. Employment equity plans focus on meeting targets and timetables. An enduring challenge is to change the institutional culture of our organisations. We can achieve targets but if we are not changing the culture we won’t achieve external competitiveness. We cannot readily compete in the market place if we do not have cooperation and development in the workplace.

Aligning market driven human resource initiatives

Traditionally one thinks of employment relations largely as a two way relationship between management and employees. A more strategic view is to start with the external market. We must align whatever we do on the inside and how we do it to ensure that a customer will buy and keep buying our products or services. Employment growth and decent work are in part a function of customer demand for what firms do. Human resources management tends to forget this. There’s an overemphasis on procedularising our management employee relationship. We must therefore have an external focus. Here are some key points:

  1. Customer alignment – what are we doing to attract, motivate and retain employees to achieve good customer service. Leading retail firms like Pick n Pay have focused on this – their employee development is key.
  2. Leadership and talent management alignment – the extent to which HR practices are playing a role in identifying potential leaders and developing them in an innovative and strategic way.
  3. Performance alignment – the extent to which performance management and reward systems explicitly align to the values of business objectives and priorities. Traditionally these have been developed in isolation.
  4. Culture alignment - change management and leadership practices are inclusive and engaging participatively with the organisation’s priorities.

HR as a profession needs to address these challenges more insightfully – through bodies like the SA Board for Personnel Practice, and IPM, universities and universities of technology’s HR education, HR has established a code of professional ethics, a knowledge base and a set of competencies. But its one thing to have all the right academic qualifications, this does not guarantee HR leadership. There are a lot of HR practitioners (even an oversupply at entry level) but not enough HR leaders who’ve established credibility at board level. There is a challenge ahead to improve the credibility of HR. The profession needs to have people in it who are passionate – not just visionaries but missionaries! It is the missionaries who make things happen.

HR practitioners have to understand the following key challenges:

  • They have to have a fundamental knowledge of business – they must have financial, strategic and technological capability
  • They must have knowledge of state-of-the-art HR practices
  • They must move beyond change management to change leadership – this means creating a new culture
  • They must have a problem solving capability
  • They must be willing to embrace the challenge of transformation

Innovative HR people are constantly investigating and adapting leading practices that might help achieve competitive advantage, and work on how to reinvent and apply these in their own context. Like Cisco systems, they will look for new and creative ways to attract, motivate and retain people. HR people are good at benchmarking – it helps them to catch up with what the leaders are doing. But as soon as they’ve caught up, the leaders are in a new cycle already.

HR people must develop a unique value proposition, just as companies have a product brand – the real strategic challenge is to create an employer brand where the labour market will perceive the organisation as an employer of choice. It is seen to be offering something different that can’t easily be replicated by competitors. Rewards, employment equity, black economic empowerment are all a means to developing a unique value proposition.

Knowledge and Human Capital

Knowledge management is far more than the use of technology – it’s about finding ways to attract, deploy and retain intellectual capital. Knowledge management is about the HR role trying to internalise core competencies that the organisation has and the collective memory of what organisations know are their strengths - and what are they doing to prevent losing these. The era of “re” words is still with us - restructuring, re-engineering, re-organising, redeployment and unfortunately, too many retrenchments. HR must play a proactive role when “re- word” processes occur, so that the organisation doesn’t lose the key skills and intellectual capital it needs to retain.

We need more skills and knowledge that are in demand globally. There are many South Africans working overseas, and a lot do not necessarily emigrate. High value human capital is clearly mobile. South Africa has emerged as part of the global economy in the last decade. There are several ‘push’ and ‘pull’ factors in the global labour market - reasons local talent work overseas are not only crime, or perceived limitations of employment equity policies. A key factor is the increased portability of priority skills in global demand. There is a price for this talent and people will follow the demand and the price.

International Human Resource Management (IHRM)

Another challenge follows the positive growth and expansion of many South African companies post 1994. More of our companies are becoming multinationals – they are expanding into other economies and becoming global. HRM is becoming important in helping to deploy talent in globalising firms. HRM practices and policies for deploying expatriate staff are becoming a very important strategic issue. There is a lot of research on international HRM – for example: how to select, culturally integrate, remunerate and organisationally integrate expatriate employees into the host country, and then reintegrate them back into the home country and organisation. Work opportunities and international assignments are more readily available in East Asian markets. HR must develop criteria for recruitment and selection of professional and managerial expatriate employees. For example, considering to a greater extent than before the family situation, the partner’s career, schooling stage of children etc. There is a range of new HR issues around international HRM that some of our organisations like Old Mutual, SAB Miller, ABSA and Chevron are working with.

This is a fascinating area. Remuneration for example, considering the different taxation, legal issues, policy issues e.g in China, to what extent do you employ expatriate vs. locals in a multi-national – in key positions. If there’s a mix, what is the basis for this? You have to give attention to developing local expertise. Johnson and Johnson is one of the most progressive companies in these areas – putting a lot of time and effort to developing local talent in host countries like China and South Africa.

International remuneration practice is strategically more important for companies who are multinational. Take for example a pension scheme – if one works in a multinational firm abroad for a number of years, are you given your pension in dollars? Our taxation rates are much higher. This has sometimes prohibited people from coming back. There are a host of new conditions of employment to consider in international HRM work.

Human Resource Development

Some additional HRD trends include more companies wanting customised programmes in dealing with specific challenges that the organisation faces. One recent programme in Impala Platinum for example: senior HR participants would focus on generating specific organisational value propositions from their own case experience, mastering scorecard metrics and identifying HR outputs and deliverables.

Value creation and Human Capital

Despite all of this, HR is sometimes considered less important than other organisational functions. Why is this?

  1. HR people have to ask themselves the fundamental question about their contribution. They don’t think enough about this. HR is not just about implementing systems but about contributing – it has to be about strategic capability and how we create value through mobilising people for high performance and service excellence.
  2. Understanding your business – something not always evident in the priorities and language of HR practitioners.
  3. They must be business people with HR expertise. HR must develop a unique value proposition for their organisations – then line executives will take notice.

What will HR do to create value? Do we know:

  1. what our organisation’s strategic intent is?
  2. what the key value creating HR areas might be?
  3. what deliverables and performance outcomes are needed
  4. what metrics to use to assess performance improvement and to help build value?

I am not sure we understand enough about the importance of measurement and outcomes. HR people need to understand relevant metrics on the impact of what they do. Becker, Huselid and Ulrich’s book, the HR Scorecard; Jac Fitz-enz’s The ROI on Human Capital; Wayne Cascio’s work; and Huselid, Becker and Beaty’s book The Workforce Scorecard, are really important in this regard. There is a lot of work being done on quantifying effectiveness and the outcomes of HR. We have to start getting into this domain, which need not detract from the importance of relationship and alliance building which HR practitioners have to do. Business schools need to be offering more strategic HR programmes. Universities and Universities of Technology are doing a relatively sound job of the maintenance, systems and consulting roles in professional HR development, but are weaker at developing strategic thinking capabilities. This is our HR leadership challenge.

Useful resources:

University of Cape Town Graduate School of Business, Executive Education
Executive Education at the UCT Graduate School of Business is dedicated to growing the leadership backbone in organisations and individuals and inspiring a new generation of leaders to engage with the challenges of the African continent in a hyper-connected and globalised world. Visit our InfoCentre or website.

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