Labor Market Will Affect Human Resource Planning Management Essay
Terpstra, Rozell said that Human Resource management practices are divided into five area, which are planning, staffing, appraising, compensating, as well as training and development. Apply human resource practices into the strategy can increase the organization’s competitiveness and effectiveness (Terpstra, 1993).
However, not all organizations will achieve sufficient quantity of human resource to gain competitive advantages. This study mainly focuses on relationship and effectiveness of Human Resource Planning (HRP) for external sources which are economic conditions, labor markets, technology and labor unions that influences on staffing.
HRP helps organizations to ensure that employees have the adequate skills and competencies to succeed in business world today. Besides, it is also important to retain high skilled staff as the organization wants to gain long-term capability. Human resource planning also determines the number of workforce to be employed by the organization at a new plant or location.
If there is surplus or underutilized staff, the management will take initiative in determining the problem and defining the workforce requirement for the organization. They also need to get new fresh blood for organization by improving the current career system and understand the characteristic of those senior positions. Otherwise, shortage of long term managerial supply and short-term skilled workers will occur (Reilly, 1996).
Staffing represents a group that already accumulated a sufficient number of people to perform its prescribed set of tasks at an acceptable level of quality and efficiency (MacKenzie, 2010). The use of staffing practices might benefit most organization regardless of varying internal or external factors. Some organization will moderate the relationship between the use of effective staffing and its level outcomes.
The importance of staffing level can be understood by taking resource-based approach (MacKenzie, 2010). According to this approach, resource which posses potential characteristics will lead to competitive advantage (MacKenzie, 2010). A clear staffing practice is important to succeed in many industries nowadays as human resource rises as an important resource and factor to the organization. Thus, it is better for the Human resource Department to well prepare for staff turnover, recruitment and strategic hiring.
2.1 Labor Market
One of the reasons how the labor market will affect human resource planning (HRP) is the characteristics of labor demand and supply. The characteristics of the current demand for a labor which consists of level of education, experiences, skills and knowledge, training, sector or regional affiliation will influences HRP. They recruit employees based on these characteristics they request to occupy job vacancies. Most of company would like to hire candidate with high qualification.
Thus, a list of requirement of job vacancies should clearly identify in order to hire right people in holding the right position. Apart from that, the above characteristics are also peculiar to the supply of labor due to a potential employee have a right to accept or reject the offer of particular vacancy. An employee will make a decision depend on company’s work conditions, offered wage level, benefits and remuneration. This definitely will bring an effect on staffing decision made by human resource management (HRM). According to economic theory, this means that his decision-making will depend on the relationship between the reserved and the offer level of wages for a given person. Different labors have different features that can directly influence its efficiency and capacity.
Besides that, productivity growth rate in labor market will have impact on effectiveness of HRP. This means that greater growth increase the job finding rate and minimize the separation rate will lead to lower unemployment rate. When higher productivity growth rate exists, HRM will facilitate the reallocation of employees to generate more vacancies which refers to on-the-job search. Apart from that, when growth accelerates, the increase effort of employed employees search for job can make it easier for company to find a worker which may handle new jobs successfully. This will bring more job creation and reduce unemployment rate.
On-the-job search also can reduces job separation rate by using matching model which the company and employees are match with each other. In this model, those employees are low productivity job may search for better job. The search and matching theory estimates that the impact of productivity growth on unemployment depends on the extent to which new technology embodies in new jobs (Mortensen and Pissarides, 1998; Pissarides and Vallanti, 2007). The standard search and matching model without embodied technological progress estimates that faster productivity growth reduces unemployment through the so called capitalization effect (Pissarides, 2000 chapter 3). Therefore, it has effects on staffing planning by reason of productivity growth rate in dynamic of labor market.
2.2 Economic Conditions
Economy has a major impact on the ability of Human Resource (HR) to address hiring, employee engagement, compensation, and other major workplace issues as according to the recent interviews with business and legal experts.
“In 2011, we were a lot more focused on restructuring, downsizing, rebalancing the workforce, consolidation of HR into smaller, more centralized groups, budget-cutting, and trying to prepare for the economic recovery,” said by Josh Bersin, Chief Executive Of¬cer and President of Bersin & Associates, a research and advisory consulting firm in Oakland, Calif (“As Economy Recovers, HR Will Have More Opportunities To Show Value”,2012).
When economy is downturn, HR lay off a lot of employees or cut pay raises to save money for the company to operate until economy is recovering. Besides that, employee engagement can be a major focus on HR because many employers ask workers to perform more, double-up on their jobs, and work more hours as overtime. Since workers have to be committed to their works, so they are not allowed to quit from the job without any reasonable reason (“As Economy Recovers, HR Will Have More Opportunities To Show Value”,2012).
Apart from that, HR professionals are most likely to contribute in helping organizations with their efforts to deal with the economy by working with management and executives on re-planning compensation and benefits expenditures (“HR Strategies To Cope With The Economy”, 2009). Furthermore, HR also helps in developing communications materials on how the organization is responding to the changing economy. This includes e-mails, planning department meetings, working with department heads on information to deliver to employees (“HR Strategies To Cope With The Economy”, 2009).
In the beginning of 2012, when the economy is recovered, HR professionals make the case by providing organizations with positive benefits. HR highlights benefit measures that show HR-related improvements, the risks it is heading off, and the ways practitioners are saving money of the employers (“As Economy Recovers, HR Will Have More Opportunities To Show Value”,2012).
Technology is getting advance and better than before nowadays. It changes the way people do business, improve the workplace and enhance the efficiency of Human Resource (HR) and complexness at the same time. Technology creates benefit to HR in term of the recruiting applicants, recording employment performance, and tracking compensation and benefits. Moreover, the advancement in information technology field has created a niche for many HR recruiters (Mayhew, 2012). As a result, there will be some changes in the workplace, which is technology starts to replace the technical labor.
One of the reason causes by the changes in technology on the Human Resource Planning (HRP) is the new developments in job design. The largest growth in transaction using the Internet in the area of transactions between businesses, old economy companies using Internet to expand and improve current collaborative relationships among supplier, deciding on e-commerce and supply chain strategies in old-economy organization is happening in e-business. The changes however imply a need to learn the changes of technology in reshape environment and to accept the climate of constant changes (Oliva & Coronas, 2005). HRP need to take serious attention in this matter because job design plays an important role in the successful implementation of advanced manufacturing technology. Furthermore, right employees in right position can complete the development plan that needed to integrate the components of technology. Besides, job design is use to the benefit the employee and the company. Introduction of new computer-based technologies become one of the major challenges facing in the workplace and existing job design and will impact the HRP as well (Baytos, Kimberly, & Brian, 1995).
One of the technology innovation bring to HRP is the creation of automated self-service enrollment. Many employers have already introduced employee self-service modules connected to the employer’s intranet. It allows workers to check their benefits status, update personal information, supervise their tax withholding rates, and request for vacation time (Mayhew, 2012). By using employee self-service and other automated systems to connect human administrative process not only servicing in-house customers but also create free time for strategic planning and implementation. This technology innovation brings convenience to the routine of HR process. As a result, it provide better customer service, better employee relations and generate management report faster and provides better result (Tart & Jim, 1997).
Last but not least, technology also reduces personal involvement in the HR department workforce. The research carried out by Bell, Lee and Yeung (2006) evaluate the reduction of human contact in the use of application icons to answer questions. For example, the online application for vacant positions, online resumes posting and interview applicant by electronic technology (Polen, 2009).
2.4 Labor Union
The goal of Human Resources Management (HRM) is to ensure that the organization attracts and retains qualified employees in order to achieve organizational goals and objectives. On the other hand, the labor union consists of employees within an organization who join together forming a union to ensure that leave, meal breaks, promotions, working environment, compensation and other employment-related issues are handled fairly by the organization.
As reported by the U.S. Bureau of Labor Statistics, the number of wage and salary workers belonging to unions is 14.8 million in 2011. In 2011, there are 7.6 million employees in the public sector belonged to a union and there are only 7.2 million of union workers in private sector. The private sector unionization rate was 6.9 percent compared to the public sector unionization rate of 37.0 percent (Bureau of Labor Statistics, 2012).
With a more pro-labor National Labor Relations Board (NLRB), it is expected that union organizing will be more extensive and aggressive as union view the current environment as their best opportunity to grow membership and power (Schuster, 2009). Union also argued that only through greater union membership, the standard of living of middle and working class can only be improved. Besides, there is also more emphasis on the power sharing agreements by the union to regain power and rebalance bargaining relationship with the employers (Schuster, 2009). The potential time, money and staff of managing human resource would be increase. Thus, Human Resource Department should pay more attention in managing these changes. One of the areas to be focused on is the workforce planning.
The workforce planning that focuses on the operating level in an organization is the integration of labor and human resource strategy to the needs of the business. It integrates the issues of critical skill development, labor cost, cultures as well as labor relations in meeting the organization needs.
In additions, when there is a union in an organization, employees training programs and the budget for training and development of employees will be increased. This is because labor union is there to address employees’ dissatisfaction caused by the lack of training, forcing organization to pay more attention in terms of employees training and development. Through training, organizations can develop a well-trained workforce that is more competent in the future. There is also an increase in the use of various internal recruiting methods such as promotions or transfers. Internal recruiting is an important practice for firms that wish to develop their human resource since it can enhance worker motivation and organization commitment (Pfeffer, 1995).
3.0 Findings and Recommendations
3.1 Labor Market
There was a problem that is structural changes and imbalances of labor market which are conditioned by the discordance of quantitative and qualitative characteristics of labor demand and supply such as Russian. The standard of the characteristics are too broad will cause their total coincidence becomes impossible. This will directly bring negative impacts on HRP due to candidates have high demand for job as well as difficult to achieve company’s expectation. Nonetheless, if there are not so huge differences, the labor demand and supply in the labor market will agree with each other. Otherwise, they create a situation where demand and supply are consistent with unsatisfied in the labor market.
Through this problem, HRM have to evaluate the compliance with the efficiency of labor demand and supply and it is necessary to include their different characteristics. Sometimes, HRM shall make consideration in aspect of benefits, remuneration, paid, training and work condition to attract candidate and motivate their potential employee to avoid resignation. In addition, a structural policy also can be implementing and include in HRP to minimize the structural problems of the labor market, reduce the shortage of skilled labor and enhance the efficiency in labor use. They may plan to make adjustment of the structure of manpower preparation to the structural of demand for labor. This leads to higher quality of expertise preparation is meet at all levels of professional education.
According to productivity growth changes in labor market, higher productivity growth will contribute to lower unemployment in a search and matching model by introduce suck costs for job creation and on-the-job search. Fujita and Ramey (2007) consider the matching model in which company trigger sunk costs of creating new job positions and distinguish between job flows and worker flows. If company demand more labor to occupy the new position, HRM have to recruit more employees in resulting of lower unemployment. Thus, incorporation of on-the-job search and costs for job creation enables HRM to carry on the process of job replacement through the model after employees quitting from the jobs. This also contributes to faster growth in order to increase employment by increasing job creation and decreasing job separation in HRP.
To enhance and maintain the productivity growth, HRM play important role in managing recruiting employees who suitable to take part for the right job position. Leading employees, coordinating employee’s benefits and, providing appropriate training and development strategies also must include in HRP. They need to organize training system that requires the development of skills for suitable employees to prevent mismatch between supply and demand of skills and incompetence of existing skill development system to achieve the demands of a dynamically changes in labor market. Furthermore, an employment policy which enables contribute to higher labor productivity and creation of new jobs can also implement by HRM. They may take concern on employment policy in conducting HRP to improve the quality of old jobs.
3.2 Economic Conditions
During inflation, private-practice firms are most likely to adopt freezing strategy as a way to cope with the economy (“HR Strategies To Cope With The Economy”, 2009). The firms do cut pay raises for their workers. Besides that, they will not hire new employees to work for them during inflation. This is because the company does not have strong financial abilities to pay for higher salary and benefits for the newly hired workers. Besides, inflation will cause the job growth to decrease as well as the job opportunities in the market.
Thus, during inflation, employees will be sent to undergo training and development in order to learn and develop new skills, knowledge and leadership opportunities for their current working position. Besides that, workers can increase their personal and professional networks and able to represent the company to deal with other in the industry. After the period of inflation, the performance and knowledge that the workers learned from their training will be applied into the job. It can bring more opportunities for the company as the employees are able to infuse a business with new ideas and creative ways of solving old problems. This action can make employees’ morale and productivity keeping on increasing.
During the economic recession, companies will try to cut on budgets as a way to reduce cost. Therefore, HR’s job is to reduce the budget include cutting salaries increase, reducing or delaying planned health Reform Implementation Taskforce (HRIT) upgrades or projects, reassigning staff responsibilities while trying to keep current HR department staff levels, and cutting back on their HR training (“HR Strategies To Cope With The Economy”, 2009).
Although the pay raise is cut, HR has to show the potential for improving the performance in order to remain current staff levels while waiting for the economy to recover.
To solve this problem, HRM can adopt a proactive and creative way to deliver high performing services with reduced access to cash, revenues and profit margins, which can support broader business strategy during economy downturn. According to Suri and Nishchae (2009), HR has an opportunity to show how it can contribute in assessing and managing the talent within the organization it serves and to provide leadership in creating organizational cultures that motivate employees at a time when they are feeling insecure by events beyond their control. HRM can also be outsourced to an HR outsourcing service provider. The provider will deploy technology, develop and implement new recruitment processes that would allow centralized control of hiring and the method of hire. It can help the company to get the benefits of access to skills, cost savings and speed of delivery.
Human Resource Planning is enjoying some benefit from the technology advancement. They help companies to gain competitive edge in the market by speeding all the processes from recruitment to retirement functions, get connected to people with niche skills more easily, achieve economical way to publish job openings (Morison Menon, 2011) and faster access to human administrative process (Tart & Jim, 1997). Technology enhance Human Resource Management (HRM) functions in recruiting, training and development, performance management, payroll and attendance records, employment benefits and other related (Morison Menon, 2011).
Recruiting using technology has been significantly impact HR. Previously, HR recruiters had to rely on print publications, such as newspapers to attract applicant. Nowadays, technology makes recruiting more efficient by posting a job in one or more locations and allowing millions of people to see it all at once. It also allows organizations to have more pool of applicants to choose from.
Technology brings convenience and efficiency in allowing HR professionals to train new staff members in a virtual classrooms. It allows HR professionals to train a large number of workers quickly and follow up their progress through computerized testing programs.
Apart from that, technology also helps HRM in data storage and retrieval files in an electronic format. It is because HR systems were “paper-based”, they have to process paperwork and keep much of that paperwork on file for some period of time (Lewis, 2011). Furthermore, technology also allows HR to access to employee performance and allow employee to give feedback to organization (Lewis, 2011). Many software programs can be use to examine employee performance to keep them in track. HR can use the Employee Self Service (ESS) to manage the employee’s data more accurate and updated. Besides, employee also can keep their information up-to-date, payroll information or training material online (Morison Menon, 2011).
On the other hand, there are also some negative impact of using technology such as wasting of time and cost, privacy threaten, and loss of data. In the case of recruitment, the personal qualification and quality is important in this process. If the HR did not fill in the position fast enough, it will become the new hires lack of needed skill to make best performance for the position (Cook, 2010). Besides, when large volume of resumes are posted online, HR need to take time for screening and short listing of resumes. If not done properly, the company might lose the right candidates and performance on position will get affect as well, thus leading to inefficiency (Morison Menon, 2011).
Technology will lead to cost increases in HR department. It is because although technology innovation saves some paperwork and face-to-face communication but it needs HR personnel to deal with web-based technology. If the HR personnel are not competent in dealing with this technology, the organization could lose out on valuable, qualified candidates and fully trained on human capital. In the case, the organization need spend more money to train on these HR personnel and it may take time and huge cost (Page, 2012).
Last but not least is the technology obsolescence. Technology increase very fast and the information that rely on obsolete technology will be inaccessible in certain cases. Hence, the investment made for the HR technology systems need to be properly measured and estimate to avoid big problems (Morison Menon, 2011) .
Thus, HRM should not too depend too much on technology although it provides many benefits to them. HRP need make more face-to-face communication to get closer with the employees and manager. In addition, HR also needs to keep the hardcopy up-to-date to avoid loss of data or data being stolen. To increase the efficiency and effectiveness of recruitment, work process, and organization performance, HR should always update themselves with new software and technology to avoid lose of right candidate and bring high performance on position.
3.4 Labor Union
Studies had showed that labor unions have a major impact on HRM practices of firms, especially for those who strive to build a competitive advantage through human resources. There are certain HRM practices that have been identified as crucial in developing sustainable competitive advantage. Those practices include selectivity in recruiting, high wages, training, performance-based rewards, job security, teamwork, flexibility, information sharing and empowerment (Pfeffer, 1995; Lado and Wilson, 1994).
According to the studies done previously, union can have both positive and negative influence on the organization’s Human Resource Planning (HRP). Whether the influence of union is positive or negative depends on how the organizations view it. Many researchers argue that, labor union can exert limitation on an organization discretionary authority to change the workplace practices. Besides, unionize firms may have lower worker productivity as compared to non-unionized firm (Holly and Jennings, 1994). According to Freeman (1994), union workers generally report a lower job satisfaction and higher conflict with their managers and supervisors than non-union workers (Flanagan & Deshpande, 1996).
However, there are also many arguments that labor unions can have a positive influence on the firm’s productivity. Bluestone and Bluestone (1992) argue that most of the unionized firms keep the management working hard to improve their productivity in order to satisfy their worker’s demands for higher salaries and benefits. In addition, the Harvard model argues that unions provides an excellent means for getting worker’s valuable opinions aired and for “shocking” management into adopting better practices (Turnbull, 1991). For example, Southwest Airlines is an airline company that has 82 percent of employees belongs to a union (Southwest.com, 2012). However, Southwest airline has never had a strike because the employees are generally the highest paid in the industry with attractive benefits and salaries.
As the productivity of an organization is significantly affected by employee motivation and the quality of human resource, organization should finds ways to improve the productivity so that it can compete more effectively in the global market. Organization should put more attention in planning of compensation plans, training, team formation and flexible work allocation for both the union and non-union workers to boost their productivity level.
In the globalization world nowadays, companies are competing with each others to gain significant market shares in their respective industries. Thus, valuable human resources have become one of their ways of gaining competitive advantage over their competitors.
By having a well-trained, knowledgeable and skilled workforce, companies can boost up their performance as well as their profitability. In additions, to have a capable workforce that is competent, companies need invest more in their Human Resource Planning (HRP). A well-developed HRP will provide plan for the company to cope with the changes in its external environment such economic, technology, labor market and also labor union.