Effects Of History Of An Organization On Its HR Functions

Published by MBA Skool Team, Published on March 29, 2012

How does the history of organization affect its HR functions? If it does then in which way and how much it affects.History of organization affects its HR function and makes changes in them so that the organization can sustain. Some organizations, which didn’t align their HR functions with the historical events of organization and didn’t learn from their mistakes that they committed in past,got vanished and are no more in existence today. In the article, some theoretical concepts of HR functions and impact of organization’s history on these functions have been given. Examples of many companies have been given in support of this theoretical concept.  Organization’s HR policies are continually changing and affecting its performance.

What are the HR functions?

HR functions are very crucial factors that should be properly implemented, if any organization aims to achieve its objectives. HR functions enable employees to utilize their capacities and potentials in favor of organization.But these functions should be properly integrated with organization culture, environment, and real work of organization. According to Dave Ulrich (1998), HR activities appear to be and often are disconnected from real work of organization. He believes that HR should not be known by definition what it does; instead it should be known by what it delivers and what values it add to organization.  According to Schuler and Jackson (1999), the strategic management of any organization depends on HR management that is basically composition of all HR functions.HR functions can’t be restricted or counted easily because most of the organization’s HR functions are differed according to their working styles and core competencies. However, there are some basic HR functions like

  • Manpower planning
  • Leadership
  • Staffing
  • Training and development
  • Employee motivation
  • Performance management
  • Employee Relations

HR functions and History of organization

These functions are very much dependent on the culture and environment of organization. Important questions are how organization culture and environment are defined and how they evolve over a period. History of each organization plays a vital role in evolution of these. History of organization consists of all the past events from which company has gone through his entire life till now. Company’s HR functions do get affected by history of company because as company goes through organizational lifecycle, means from its foundation to present day of company, it passes through different phases and each phase of company cultivates HR functions so that the company can sustain its growth and existence.

For instance, GM evidenced use of accommodation strategy to avert strike by united auto workers in 1987 and they promised job security to union workers contingent upon productivity gains to be developed by labor management committees (Zellner&Berstein, 1987).This is the way how history of organization changes HR policies. GM changed their job policy because they were afraid of strike and its repercussions.

Manpower planning is a process of ensuring right workforce on right time and at right place to achieve organizational goals.An alternative approach to manpower planning is based on optimization theory.  The theoretical foundations of the optimization approach were developed in Holt et al. (Holt et al.1960) Holt develops a cost model that includes both the costs of maintaining and changing the workforce.

A very good example of the same is Southwest airlines, they learnt from their history of manpower planning policies. Southwest airline planned and recruited very less number of employees when they commenced their operation in 1971and they stuck with that policy even they were growing very fast. Therefore, productivity and operational performance declined. Finally they learnt from their mistake and increased manpower and made themselves sustainable. There are some more examples of organizations. In 2004, India based Infosys hired 11597 new employees and grew their headcount by 37%.

History of these organizations forces them to change in their HR policies and they did and survived.

According to W.A. Brantley, leadership failure is not easy to define because it depends on expectations of audience. Michael Roberto (2002), presented his view of leadership failure by the example of Everest climbing and gave three factor responsible for leadership failure; cognitive bias, psychological safety, and system complexity. A very good example of leadership crisis is Arthur Anderson case where CEO of company Jeffery skilling was very overconfidence and he overlooked company’s negative earnings and increased debt up to such extent that company’s trading partners lost faith in them. It resulted in downgrading of credit rating of Enron and their bond turned to “junk bond”. Finally CEO of company had to resign and filed for bankruptcy. Accenture that was consultancy arm of the firm and they renamed themselves in 2000 and said that we were not involved in Enron audit. It indicates that history of any organization is very much affected by leadership that is selected by a HR function.

According to Robert E. Polyhart, Staffing is broadly defined as the process of attracting, selecting, and retaining competent employees to achieve organizational goals. Staffing is the key HR function because all other functions of HR depend on it. Good staffing or recruitment reduces the cost of production and increase operating efficiency. That’s why some researchers of HR say that human resource is human capital that can be measured in terms of money and return. Sir William Petty was the first who gave the concept of “monetary value of human being” in 1691. Petty ignored the cost of maintenance in human capitalization.

Infosys is an example that uses this method of calculating its employee value. Infosys HR practices for recruiting personnel are mainly based on this concept of human capital. But due to some external factors like recession recruitment policies of many companies has been changed. Retaining employees are not the area of focus for them. GE’s example in the tenure of jack welch (1981-2001) is good one of high firing rate of 10% every year. Jack welch changed company’s HR staffing function and announced that he would fire 10% employees every year and still value of company grew by 4000% in his tenure. History of GE affected its staffing function tremendously.

Training and development is a composition of two individual processes that a company deploys whenever up gradation in employees’ attitude, skills, and knowledge required to do a task with proficiency. That is the first part called training. Development is the outcomes of training process that growth of individual in terms of ability, understanding and, awareness.  Some organization think that train those employees who involve in day to day business enhance their performance. For example, BP which said that first-level employees are main players of organization as they do all day to day activities and make contact with customers.

Another example of Ions consulting, company’s was full of experienced employees but due to downturn, they laid off some experienced employees to reduce cost and hired some inexperienced employees. But company’s cost is not much reduced as they were not utilizing their full human resources because of lack of synchronization between experienced and inexperienced employees. Therefore they developed MP^2 training program so that new employees can get chance to work with experienced employees and to hone their skills and knowledge required to perform job. Hence, history of ions consulting affected its training and development process.

Employee motivation is vital part of any organization’s HR functions. Motivation represents “those psychological processes that cause the arousal, direction, and persistence of voluntary actions that are goal oriented (Mitchell, 1982, p.81).  Motivation as defined by Robbins (1993) is the “willingness to exert high levels of effort toward organizational goals, conditioned by the effort’s ability to satisfy some individual need.Motivation is concerned with the factors that influence the behavior of people.Motivation in organizations is required to get employees in the direction of you want to achieve organization goals. HR function of motivating employees is about providing incentives, rewards, culture in which they can work very productively.

Starbucks is very good example of employee motivation in which retention of employees is the outcome of good motivation process of Starbucks. Starbucks is in the business of fast food and coffee chain that’s very vulnerable business in terms of employee retention rate. CEO of Starbucks, Howard Schultz says that the main competencies of Starbucks are not its coffee but its employees. That’s why they make their employees more comfortable and more satisfactory with their job. Company’s guiding principle includes the concept of “to provide a great work environment and treat each other with respect and dignity”. They provide all incentives to the part-time employees that they provide to fulltime employees. History of Starbucks is very high attrition rate but after these HR policy change they realize very less attrition rate compare to overall industry rate.

Performance management is the process of measuring organization performance in terms of financial goals. According to Gubata, Joyce (2008), Performance management, in its broadest form, involves setting performance goals and managing and measuring an organization against those goals. He said that there are three key factors which are involved in improving performance; clarity, communication, and consistency. He said that the performance goals should be clear so that each employee can understand their role to achieve them. Communication should be rich. Poor communication can affect the reach of goal. Consistency matters lot as goal of any organization doesn’t change much and frequent but if company shifts frequently, it can undermine its ability to achieve performance goals. organization like IBM is very conscious about performance management. Various performance measuring tools evolved over time like 360 degree feedback, balance scorecard, and performance appraisal. History of each company makes them compatible with different type of performance measuring tool.

This article has been authored by Abhishek Rajpoot from IIM Rohtak.

Image: nokhoog_buchachon / FreeDigitalPhotos.net

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