A colleague recently told me that if it were not for legal statutes, we would not need human resource departments in organizations. A common misperception is the primary function of HR is to ensure and monitor legal compliance and ensure that line managers do not violate statutes in performing their duties.
Right alongside the compliance function is the transactional function of HR in which the many transactions required to hiring and maintain a workforce are performance.
To many people, this sums up HR, and to many line managers, HR is the "big brother" getting in the way of them doing their jobs. Another frequently held view is that HR is a cost center that does not contribute to the competitiveness of the firm. When looking to cut costs, many firms look to HR as a way to trim budgets, often turning to outsourcing and computerizing many of these transaction and compliance functions.
When I think of the HR professional of the present and the future, I do not think of the transactional and compliance functions. Careers will not be made in these functions, even if they are performed very well. The HR department of the future will have to secure a place at the adult table of strategic planning and utilize the best practices of evidenced-based management to demonstrate that the functions performed clearly and directly contribute to the firm's competitive advantage.
What does this entail? For many years, academics have been arguing that the best performing companies view their human resources and as assets. When employees are viewed as assets, firms consider employment decisions more from an investment perspective than a cost perspective. The initial costs investments are recouped over time and the payback generally far exceeds the initial outlay.
We also see a divide in HR strategies that are employed by firms. Many companies, like WalMart take what is called a control approach to the management of people. The goal of control human resource systems is to reduce direct labor costs, or improve efficiency, by enforcing employee compliance with specified rules and procedures and basing employee rewards on some set of measurable output criteria. Other firms work from a commitment approach such as Costco, whereby attempting to build a long-term relationship with employees whose social identities are tied to the company and its goals. Both can work, but the choice of a human management system should be linked to the strategic planning process of the firm.
How does the HR department contribute the greatest to its organization? In addition to performing the transactional and compliance functions, HR departments must move into three other higher level functions. These valued-added functions are HR strategy, performance management, and change and culture management. Here is a brief overview of these functions.
Transactional Human Resources
This function is concerned with insuring that processes are documented, employee records are accurately maintained and safeguarded, employee get paid, employment adds are placed along with many others daily activities that are essential to the smooth operation of a business. These are very important functions that must be performed accurately, efficiently and in a timely fashion.
Labor and employment law has become very complex and it take specialized knowledge to be able to navigate the potential legal hazards involved in employment decision. In areas as safety (OSHA), selection and recruitment (CRA, EPA), response to organizing efforts (NRLA), requests for time off (FLMA), accommodations to employees with disabilities (ADA) there are numerous statutes and regulations governing management behavior. Compliance with the many laws affecting the acquiring and management of human resources is very important, but is certainly not the only important HR function.
Strategic Human Resources
Business firms all have a strategic planning process. Some are more formal while in other companies strategies emerge through a set of high level strategic decisions. Whichever the approach, the top management teams (TMT) look to functional experts for advice. The TMT would not consider taking on a new product, altering the competitive strategy, or any other large scale strategic level change with consulting with its finance and marketing experts, but in many firms it is only after a strategic plan is developed or and strategic change is announced does the TMT turn to its HR head and says, make it so.
When the HR function is viewed as a strategic partner, the HR head is an integral part of the strategic decision-making process. Questions such as the potential availability of talent, the ability to change employee behavior and an analysis of current skills are all considered in making these important strategic decisions.
What is a performance management system (PMS)? Many people equate a performance management system with a performance evaluation form. In these cases, performance management consists of administering a performance appraisal system once a year, communicating the results to employees and sticking the form in a file. More advanced systems may attempt to tie the appraisal form to compensation decisions and to training and development needs assessments.
In its complete form, the PMS is an integrated system of managing and improving the performance of all organizational members. It starts with identification of the firm's competitive advantages, moves to identification of behaviors and work outcomes required to maintain its competitive advantages and integrates behavioral change, leadership compensation, training and development, recruitment and selection and motivation systems in an effort to eliminate any performance gaps between desired and observed employee performance and behavior. HR professionals are involved in designing PMS, but work with line managers to implement them.
As you move through the HR curriculum you will study many of these components of a PMS in detail, but it is important to understand they do not stand alone and must be well integrated to succeed. Two important theories help to guide the development of a performance management system: control theory and the performance model. Control theory looks at human behavior as a cybernetic control system of activities, feedback loops, and results. Each element in a PMS can be matched up with fundamental elements in a behavioral control system.
The performance model view individual performance as a function of four major determinants: motivation, effort, skills, and resources. An effective PMS is designed to identify performance or behavioral gaps, determinant to what extent each of the four determinants contribute to this gap, and development interventions to improve performance by changing the appropriate performance determinant.
Organizational Change and Cultural Management
In most organizations, a lot of time is devoted to designing new structures, IT systems, compensation plans, competitive strategies, work processes and other determinants of organizational performance. Generally, there is not as much time devotes to implementation of the organizational changes required by these new plans. It is important to remember that every large scale organizational changes come down to individual behavioral change, that is, for implementation to occur people must change what they do. Whether it is changing from a manual filing to electronic filing system or major changes in the way work is performed, it requires some level of behavioral change. Advanced HR departments are an integral part of managing this change process, and make use of fundamental behavioral models such as the Transtheoretical Model of Behavioral Change to guide their efforts.