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HRM in Large Organizations

Based on Human Resource Management (4th Edition) by Alan Price published by CENGAGE

Objectives

The purpose of this section is to:
  • Investigate why organizations structure their people management systems in different ways.
  • Determine the influence of organizational goals on the management of human resources.
  • Outline the advantages and disadvantages of alternative organizational structures.
  • Compare and contrast the work of human resource specialists in different forms of organization.

Overview

Organizations are taking increasingly divergent forms. The key dimensions of size and structure constrain the people function. HRM is conducted in a variety of ways, due to these constraints and also because of strategic decisions taken to meet organizational goals. Businesses can choose to vary their structures and their people management systems for a number of reasons. Increasingly, flexibility is required from employees and managers to meet new circumstances. Centralized personnel departments have been largely replaced with more specialized units, some of which may be sub-contracted outside the organization. Nevertheless there are opportunities for human resource specialists dealing with complex issues arising from new organizational structures and flexible working patterns. These include contract arrangements, selection, control, assessment and training.

Dimensions of organization

Like Russian dolls, most organizations are part of larger entities. They are the complex products of a world subject to the international division of labour, geographic rationalization and product differentiation. There is nothing unusual in a business section in Cork reporting to a Dublin-based department within the Irish operating division of the European subsidiary of a US multinational (...).

How can we differentiate one organization from another? (...) From our perspective, the first question to ask is: who manages the people? Should the management of people be part of the role of every manager in an organization; or does it demand an expertise which can be expected only from trained specialists? (...) One view is that managing people is what business is all about and therefore that every manager and supervisor should deal with the individuals within their area of responsibility.(...)

In reality, examples are found along the entire range from specialist to non-specialist. The decision to manage people in a particular way depends on a number of factors, including the basic organizational dimensions of goals, size and structure.

Organizational goals

The rhetoric of HRM attaches great importance to strategy and the linking of employee performance to organizational goals. What are these goals? They are expressions of a company's purpose and long-term objectives.

Size

Organizations can range from single-person businesses to multinational corporations employing hundreds of thousands of people. Generally, the sophistication and importance of HR is greater in larger organizations. However, sophistication does not necessarily lead to effect people management.

As organizations grow larger and technology becomes more complex, it also becomes increasingly difficult to coordinate the people involved in an enterprise. Beyond a certain size it is impossible for one person to know what people are doing or even what their names are.

Cooperatives

The work team has been a fashionable obsession amongst human resource theorists and consultants since the 1990s. In the small cooperative the work team isthe organization.

Managerial structures

Organizations can be regarded as people management systems. They range from simple hierachies along traditional lines to complex networks dependent on computer systems and telecommunications. (...) Human resource managers can encourage organizations to adopt strategies (for their structures) which foster both cost-effectveness and employee commitment. (...) Organizational structures can be classified into a number of types, including functional, divisional, matrix, federations and networks.

Functional structures

Early organizational design divided enterprises into relatively simple parts, splitting them into defined activities such as production, marketing or personnel. (...) functional organizations have the advantage of being simple to understand with clear lines of command, specified tasks and responsibilities. Staff can specialize in a particular business area such as production or marketing and follow well-defined career paths. This is equally true of human resource specialists who can develop expertise in specific areas such as employee relations or reward management. (...)

There are also major disadvantages to functional structures. People managers have to tread carefully because this form of organization is prone to interdepartmental conflict, often degenerating into 'them and us' tribal warfare. Coherence and good communication are particularly hard to achieve between virtually independent functions.

Divisional organizations

Split into self-contained units, able to react to environmental changes as quickly as small companies, they are also described as multidivisional or 'M-form' organizations. (...) Divisions encourage team spirit and identification with a product or region. Managers can develop broad skills as they have control of all basic functions. (...) Each division is likely to have a devolved human resource function. But there is a risk of duplicating activities between head office and divisional human resource departments and of conflict between staff in successful and unsuccessful divisions. (...) The divisional function may play a coordinating role, reconciling decisions taken at the corporate and business unit levels. This results in a complex picture of people management.

Federations

One variant of the divisional form which has a particular relevance because of its human resource implications is the 'federation', a loosely connected arrangement of businesses with a single holding company or separate firms in alliance. (...) This form of organization has attracted criticism from stock market analysts who find difficulty in comprehending its subtle informality.

Matrix Organizations

Matrix forms of management can be regarded (arguably) as an early form of 'network' structure. They focus on project teams, bringing skilled individuals together from different parts of the organization. Individuals were made responsible both to their line manager and the project manager involved. Before the advent of network technology, many matrix organizations were dogged by duplication and confusion: the 'matrix muddle'.

New structures

The new people management relationships proposed by management writers such as Tom Peters are different from the formal, 'top-down' command structures seen in traditional organizations. Modern technology allows us to develop organizations which are differentiated - allowing local flexibility and autonomy - but highly integrated at the same time.

Networks

Networks and networking have a number of distinct meanings in HRM. In this context the terms are employed in an analagous fashion to their use in computing. It is not necessary and probably not a good idea for organizations to perform all their functions in-house. Businesses can concentrate on their individual strengths and work as alliances or business partners to provide a service or manufacture a product.

Virtual organizations

These are organizations which do not necessarily have any physical presence or permanence. E-commerce companies such as amazon.com are good examples: they have a 'reality' only on the worldwide web. They can be formed and re-formed to meet the needs of new projects. From a HR perspective, virtual teams may be composed of specialists working from home, 'telecottages' or small companies. They work together for the purposes of the project. Selecting, managing and  assessing the performance of virtual team members is a whole new ball game.

According to Price (2000): "Teams dissolve on completion, to reappear in new combinations for other tasks. Departments, divisions and offices disappear leaving an amorphous mass of people connected electronically and meeting - perhaps through video-conferencing - only if and when required. Traditional hierarchical structures have no role in this kind of organizational structure.

"Truly virtual organizations create new problems for human resource management. A networked company does not require a personnel function but its core management must be adept in managing people at a distance, some of whom may not be 'employees' as such. They are true 'human resource managers' (Thomson and Mabey, 1994: 5). How does performance management or HR development take place in such circumstances? How are they 'managed' on a day-to-day basis? Who resolves conflict and disagreement? These questions are especially relevant in the case of teleworkers (...)

"Bradt (1998) cites the case of a manager working for the Bank of Montreal in Toronto, Canada. She and her husband decided to return to Dorset, England on his retirement. She was reluctant to leave her job and the bank did not want to lose a good manager. The Bank arranged for her to manage her group in Toronto by means of teleconferencing, e-mail and voicemail. The experiment was apparently successful, despite a 5-hour time difference. According to Bradt (after a visit to her home): 'The image of a little office in the very archetype of English thatched cottage tied to a group of people in a glass building in Toronto is a striking one.'

"Avery points out, however, that in practice most virtual organizations are only partly virtual. Most companies of this kind have 'real world' elements which still use offices and have face-to-face meetings. After all, human contact is invaluable for engendering good relationships and sparking off creative ideas.

"In fact, there may be a continuum of virtuality. Bradt (1998) divides virtual organizations into four types:

  1. "The alliance organization, in which functions previously carried out within the boundaries of one organisation are conducted by linked partners which concentrate on their 'core competencies' (best strengths).
  2. "Displaced organizations where individual members are distributed geographically and connected by information technology, but appear to outsiders to be a single unified organisation. One of the most common forms has customer-facing units or corporate headquarters in one country and back office or support activities in another. For example, software companies have made use of the considerable (and comparatively cheap) talents of Indian programmers and data input staff. Clerical support for investment and insurance companies can be placed in less expensive locations than the cities of London, New York or Tokyo. Businesses can choose to centralise global or regional back offices or call centres or decentralise them to staff working at home or in rural locations.
    "Internationally, a virtual shift system may operate when teams around the globe deal with the same project at different times, each group leaving progress reports for the next as they conclude their working day. Virtual shifts operate in circumstances such as global investment or vehicle design.
  3. "The invisible organization has no physical structure as such. Bradt cites DirectLine Insurance as a typical example. There are no visible high street branches, simply a network of call-centres and back offices. Business is conducted by telephone.
  4. "The truly virtual, such as the online Amazon.com bookstore. This is a combination of the first three types. Customers come to the company via Internet Service Providers (ISP)s, often from links on the web pages of 'affiliates' who promote particular books and are paid by commission. Orders are processed centrally but relatively few books are held in stock - mostly they are despatched from publishers' warehouses. Delivery is handled by independent agents such as UPS or ParcelForce."

References:

Bradt, R. (1998) Virtual Organisations: A Simple Taxonomy, Infothink..

Price, A.J. (2000) Principles of Human Resource Management: An Action-Learning Approach, Blackwell, Oxford.

Thomson, R. and Mabey, C. (1994) Developing Human Resources, Butterworth-Heinemann.

Flexibility

An immensely complex and highly-debated topic. Sociologists and economists get very emotional about this word. The term is used in a variety of overlapping senses, including:

- Labour market flexibility, where it is argued that regulation and consequent rigidity of the job market act against growth and should be minimised. However, this usually means cutting worker protection rights and social benefits. 

- The flexible firm: a model of organization developed by the former Institute of Manpower Studies in the UK during the 1980s. Argues for a workforce composed of 'core' and 'peripheral' workforces. Core workers are permanent, have full range of benefits and job security. They take care of the organization's key functions. Peripheral workers are split into three categories:-

a) Regular employees engaged in relatively low-skill, routine work (example: back office administration in banking). Fairly low pay and insecure - the next wave of technology can eliminate the need for these people.

b) Contingent employees working on high-skill tasks, perhaps on short-term contracts or projects. High pay, no job security but this is compensated for by the freedom to pick and choose projects.

c) Low-skill, low pay contract workers often provided by an agency for cleaning, routine security, catering, etc.

Within the model there are some key explanatory concepts: numerical, functional and pay flexibility and also 'distancing'. The model has its critics and there is little evidence that organizations have made much use of it as a strategic concept. However, individual components such as sub-contracting are commonplace.

- Flexible specialization. An argument that 'fordism' or mass production is declining in favour of smaller niche market manufacturing. Consumers are more demanding, it seems, wanting more individual products. Questionable.

Benchmarking

Benchmarking and 'best practice' have become widely used terms in the past decades. HRM benchmarking is a process which provides:

  • Knowledge of the key HR 'levers' which are important to business success;
  • Comparison with other businesses with better performance;
  • Ways of using that information improve HR processes.

It allows us to quantify HR processes and outcomes so that objectives and targets can be set meaningfully. Cost, quality and quantity are measurable and indices can be devised to estimate the effectiveness of a variety of processes. This is revolutionary thinking for many HR professionals who have traditionally used subjective descriptions and values for their work. Often they have been more concerned with process than results. As a consequence, the profession has had little respect from other business specialists accustomed to 'objective', quantified measures of performance.

Benchmarking helps us identify best practice in particular areas of HRM such as development or induction. 'Best practice' has an obvious common sense meaning: literally the methods and techniques ways which produce superior results in HRM. In reality the concept is more problematic. Often it is difficult to demonstrate that a particular initiative produced 'superior' result. Fitz-enz (1993) surveyed 600 large US companies and found that excellent outcomes might be reported by two companies with diametrically opposed HR practices. His conclusion was that the 'best practices' they examined was just 'the visible tip of something much deeper in the organization's management philosophy and system'.

He argued that the critical elements were the sets of qualities and values which drive and support an organization's decision making. Eight traits were developed to categorise these qualities and values in order to 'benchmark' (compare and rate) best practices in different organizations:

  • Strategic commitment - Making sure that an element of HR is a priority for the organization. There is no point in setting up a best practice career development scheme within a company which is about to close major units.
  • Culture - Ensure that a particular practice fits the culture of the business. Some best practices are highly effective but depend on a specific kind of culture. Most practices need to adapting when they are copied from another organization.
  • Dual value focus - Practice needs to be both value-added and value-driven. Value-added entails a measurable benefit to business costs; value-driven implies more global values, human as well as financial.
  • Communication - People need to be consulted and informed about new practices. Understanding and commitment do not come readily when practices are imposed from on high.
  • Partnership and customer focus - Taking care of the needs of external customers and using the opportunities opened up by external partnerships.
  • Interdependence - All HR practices should fit into an integrated framework so that strategy, structure and systems work together to promote maximum effectiveness and efficiency.
  • Risk taking - Maintain a balanced degree of risk .
  • Continuous improvement - Create a feedback loop, so that new or 'improved' practices are continuously evaluated and adjusted as necessary.
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