Figure 1
A survey conducted by PWC, Price Waterhouse Coopers (2007), stated that leadership development proves to be a big challenge. HR professionals continue to wrestle with understanding the best ways to keep people in the pipeline and develop leaders for future succession planning. Increasingly recognized as becoming strategic business partners within their organizations, HR professionals are expected to provide the essential frameworks, processes, tools, and points of view needed for the selection and development of future leaders. Across the globe leadership development has been identified as a critical strategic initiative in ensuring that the right employees are retained, that the culture of the organization supports performance from within to gain market position, and that managers are equipped to take on leadership roles of the future so that the organization is viable in the long term. Charles Handy (1999), asks is leadership an innate characteristic, and are leaders born or made? This point could be argued as there are differing and disparate management styles within Unique Party, whereby each manager has good and bad traits, as opposed to having an all-pervasive suite of skills, either gained through training or from natural ability. Mabey, C. (1995) contends that the HR function must have a strategic approach to training and development, to attempt to identify the dynamics in an organisation which demonstrate that the development of self and others is being taken seriously at all levels and that such investment is having a positive impact on individual and corporate performance. Unique Party’s HR Manager has identified this necessary training, and has successfully justified the expenditure to the company’s owners and has implemented the strategy into the business training and development policy (Figure 2). Key managers are now undertaking professional training, some to degree level; others have been placed on specific supervisory and leadership training. Those who have completed their training have demonstrated tangible and beneficial differences which have impacted successfully and positively on the organisations costs, general people management, and have resulted in improved morale throughout their respective areas of responsibility, increasing expertise, creativity, productivity and ultimately profitability.
Figure 2
Recruitment issues / Labour market
Unique Party have been unsuccessful in the past at recruiting and retaining high calibre personnel. Several factors have led to this issue, namely inadequate salaries offered, over-stating positions to the extent that potential suitable candidates have been discouraged from applying for positions they could have comfortably undertaken, believing that they were not capable of fulfilling the requisite duties. Tyson, S. (1995) contends that employment levels directly affect HR policies. The availability of labour influences recruitment policy, reward policy, and training policy. The unemployment levels create the general climate of economic activity. Skills and labour shortages or conversely abundant cheap labour, can influence strategic decisions on locations, acquisitions and expansion plans. Unique party have an abundance of manual labourers, and are within the regional salary scale expectations for this type of work, however more skilled positions are prone to shortages of labour, as the organisation historically has not maintained pace with the salary scales for the region and targeted demographic group. Clear and current reward policies must be implemented by HR to attract individuals to any business. Organisations must be in the labour market to compete successfully in it. Wage rates are the product of market forces, i.e. supply and demand.
Unique Party have often advertised positions without pre-communicating salary scales, only to receive an abundance of applicants who after being made offers of employment, have subsequently turned such offers down due to the overall package not meeting recognised market expectations, even the lower quartile packages. Since the arrival of the HR Manager into the organisation, appropriate remuneration strategy has been built into the business policy for recruitment, and is one of the most important elements within (Figure 3).
Figure 3.
Armstrong, M. (1991) suggests that through the use of a ‘compa-ratio’ (short for Comparison Ratio). a measure can be taken of the average salaries in a grade to the extent to which they deviate from the target salary, and thus suggest where action must be taken to adopt a more generous policy. The formula for calculating the ‘compa-ratio’ is derived from dividing the midpoint of the salary range, by the average of the market value salaries for the role. (Figure 4 – example).
Figure 4
Armstrong, M. (1991) goes on to contend that market rate pressures must be absorbed, and that there is a need for the HR strategy to keep pace with what other companies pay to preserve equitable internal relativities, i.e. maintaining the market valuation of salaries. Providing that market values are met, Palmer Mabey, C. (1995) contends that this HR strategy should enable the recruitment, motivation, to retain staff of the right calibtre tro ensure business success.
Temporary employees / Employment law
Unique Party has witnessed many changes in the overall HR recruitment policies and business strategy. The production operation has quickly increased in size significantly. Significantly enough to represent issues recruiting adequate numbers of personnel at short notice. These contingent workers include agency workers, part-time workers, and temporary contract workers. The business has seen a shift from agency workers to in-house temporary contingent workers, primarily to reduce costs as agency workers are subject to higher premiums of pay. The organisation must also retain this ultimate flexibility as it seeks to out-source more and more work to the Far East, where considerable cost savings can be achieved to provide more competitive margins. Workers recruited from agencies can be flexed up and down at relatively minimal notice, however the price to pay for this flexibility is the premium rate charged by the employment agency. In the UK the temporary worker is technically employed by the recruitment agency whilst working on site for the client, who pays the bills. Anthony, W. et al (1996) state that the agency is responsible for paying the temporary worker plus paying employers national insurance to the government and setting aside holiday pay (working time directive or WTR regulations). This total cost then has a profit margin added and is charged per hour to the client. The HR policy, driven by the global business strategy is to recruit in-house temporary employed contingent workers with a ‘zero hours’ clause built into their contracts of employment. This stipulates that the workers contract may be cancelled without lieu of notice, with no financial impediments. This is an entirely legal process, however a selection process similar to that used during redundancy situations must be used, i.e. it must be criteria based, not merely a ‘last in, first out’ scenario. The in-house temporary contingent workers are not subject to the premium rates charged by the employment agencies, and are typically based on current minimum wage rates, thus saving twenty five to thirty percent on the weekly payroll costs. Further strategic plans will be necessary for the organisations HR role, as the Temporary and Agency Workers bill is brought into affect this year. This bill aims to provide equal treatment for temporary and agency workers, whereby they will be eligible to the same rights as long-term and directly employed staff in key areas, including basic wages, sick pay and holiday pay. Unions claim it would prevent unscrupulous employers exploiting workers and undercutting the pay and conditions of their permanent employees. Tom Hadley, external relations manager at the Recruitment and Employment Confederation speaking in the Personneltoday.com (2008) publication, contends that in its current form, the Bill would damage the UK economy and British business, and reduce the opportunities for temporary labour. The Bill would add substantial bureaucracy and ultimately enormous additional costs to the employers and agencies. This additional cost would represent a key driver to the HR departments forward recruitment plans, as the additional costs would directly impact on the business margin.
The flexibility provided by the temporary and agency contingent workers is characteristic of the theory published by Atkinson, J. (1984), (Figure5) who contends that employers are increasingly segmenting their workers between a permanent `core' of full-time employees, and a `periphery' of part-time, temporary, subcontract and `outsourced' workers. The `core' provides `functional flexibility' through lowered job demarcations and multi-skilling, while the `periphery' provides `numerical flexibility'. i.e. being able to flex the workforce up and down with minimal financial risks or infringements of employment law.
Figure 5
Armstrong, M. (1998) suggests there are four reasons for organisations to implement such flexibility. They are: The need to achieve a competitive edge, the need to be adaptive, the impact of new technology, and the impact of new organisational structures. In the case of Unique Party, both the need to be adaptive and be competitive is paramount to the future success of the organisation. Emeraldinsight.com (2008) defines the flexible firm as one which embodies non-standard employment contracts for the majority of its workers, or primary flexibility. (‘Primary’ because flexibility is built into the job contract rather than superimposed). Non-standard employment contracts have been ‘lumped’ together with other flexible working practices, (e.g. overtime or shift work), under the umbrella of ‘flexibility’ or the concept of the ‘flexible firm’, which may employ one or a number of labour supply adjustment mechanisms (temporary or agency workers) in response to product market demand volatility. The peripheral workers provide a ‘buffer’ that protects core workers from external market pressures. When faced in a dip in demand for its product, the firm will cut peripheral jobs while retaining core workers, as contended by Beardwell et al. (2004). The flexible firm model offers a starting point for examining flexibility in the workplace and provides evidence that organisations can offer flexible working arrangements to their core employees while still meeting production strategies.
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