10: Human Resource Management Flashcards
Purpose of HRM
HR strategy involves two interrelated activities:
Identifying the number and type of people needed by an organisation to enable it to meet its strategic business objectives
Putting in place the programmes and initiatives to attract, develop and retain appropriate staff
Strategic HRM
HR strategy needs to be related to business strategy and mission, with the aims of:
Adding value to products and services
Gaining employees’ commitment to the organisation’s values and goals.
The HR Cycle
Planning
Selection
Performance
Appraisal
Rewards / Training
Appraisals
Appraisals are fundamental to the performance management process. Appraisals assess overall
capabilities and potential based on assessment of employees’ work.
Staff appraisal is often linked to remuneration and rewards.
Remuneration and reward packages
Reward is all the monetary, non-monetary and psychological payments that an organisation provides for its employees in exchange for the work that they perform.
The reward system should encourage the achievement of both the strategic goals of the business and the goals of the individual. Important principles of a good reward system are that it should be:
Transparent
Equitable
Sustainable
Motivational
Controllable
Competitive
Linked to strategy
Rewards can be categorised
Extrinsic rewards – pay and other material benefits, also working conditions and management style.
Intrinsic rewards – derive from job content and areas such as self-esteem and personal development.
Financial reward packages may comprise of:
Salary
Performance related pay (individual or group)
Benefits in kind
Share options
Pension
Linking reward schemes and performance measurement
Linking of reward schemes to individual goals should provide an incentive to achieve a good level of
performance and emphasise key performance indicators of the business.
However, linking rewards and performance can be problematic if they are poorly designed or wrongly focused, with the consequences that they encourage short-termism, or excessive (or insufficient) risk taking.
IAS 19 Employee Benefits
IAS 19 requires recognition of a liability in respect of service and an expense from consuming the economic benefit relating to service. IAS 19 covers short-term benefits (recognised in P/L) and postemployment benefits, in particular pension plans.
IFRS 2 Share-based payments
IFRS 2 requires share-based payments to be measured as an expense in P/L and recognition of liabilities in SOFP in
relation to:
Total carrying amount at end of period
Total intrinsic value at end of period of liabilities for which counterparty’s right to cash or other assets had vested by the end of the period
Directors’ remuneration disclosure
The Companies Act requires companies to disclose all remuneration paid to directors.
HRM and change management
HR departments have a key role in managing change effectively.
Change can occur at a number of different organisational levels:
Individuals – changing skills, values, attitudes and behaviours, individual changes supporting
overall organisational changes
Structures – changing both formal and informal structures, also changing business processes,
roles, responsibilities and relationships
Organisational – changing the way people relate to each other, management style and overall
structure of organisation
Lewin’s three stage model
Lewin suggested that for an organisation to successfully implement a significant change, there are
three stages required:
Unfreeze
At this stage, motivation for the change must be created. Reasons why change is needed must be clearly communicated to all stakeholders concerned in order to break down resistance.
Move
In this stage, the change is made. Staff should ideally participate in the transition to encourage buy-in. Practical steps may be taken, such as recruitment, relocation, redefining organisational structures, etc.
Refreeze
Change is now embedded so that staff do not lapse back into old behaviours. Rewards such as bonuses may be used to encourage staff to embrace the new systems and processes.
Changes after acquisition
As well as internal change, HRM will have to cope with the changes required (to both parties) when an acquisition takes place. Ensuring personnel are happy is vital to achieving the planned synergies from the merger that may have driven the acquisition bid and influenced significantly the price paid.
The following issues will be particularly important:
Determining the organisational structure of the new company
Integrating the organisational cultures of the different companies
Retaining key talent and key managers
Communicating to staff in both companies, and addressing any concerns they may have
Dealing with any redundancies which may be necessary
Aligning the remuneration and reward systems of both companies
HR due diligence on takeover
Not only could protecting and developing the rights and interests of human resources be crucial to a
successful acquisition, but there may also be legal obligations associated to it (for example, obligations
relating to a pension plan, or obligations arising if employees’ terms and conditions of employment are protected when a business is transferred from one owner to another).
In this respect, HR due diligence will be an important element of a takeover. The functions which are
relevant to HR due diligence are likely to include the following:
(a) HR audit:
– Benefits and compensation programmes
– Recruitment process
– Practices for recruitment and dismissal
– Exit procedures
– Employee contracts and employee handbooks
– Personnel files
– Organisation charts
– Performance reviews, and guidelines for how employee performances are evaluated
– Training and education programmes
– HR strategy
(b) Obligations under the pension plan
(c) Union contracts/union memberships
(d) Evaluation of synergies, gaps and duplications in numbers and skills
(e) Review of potential redundancies (and redundancy costs, including senior management compensation plans) and cost savings post-acquisition
(f) Talent retention
(g) Legal compliance (e.g., group insurance, employment legislation, health and safety)
