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perceived to be taking sides or demonstrating partiality towards one group or another (even if this is not the case), both the consultancy itself and labour– management relations in the organization may be compromised.
The consultant is nevertheless well advised to recommend that every opportunity for constructive consultations between management and workers’ representatives be seized (whether or not there are legal requirements in this regard). This is almost always desirable, but is particularly so when new labour– management relations policies are being considered or introduced. The cooperation or acquiescence of trade union or other workers’ representatives resulting from such consultations can often be a crucial factor in the success or failure of the consultant’s efforts.
18.8 New areas and issues
International human resource management
One issue in human resource management that is attracting increasing attention
– and is a rapidly growing area of consultancy work – concerns international HRM. The growing internationalization of business and of HRM has already been noted. Increasing numbers of people are living and working outside their home country (expatriates). Traditionally these people were government representatives (civil and armed services), members of religious groups and charities, and staff of major multinational corporations (MNCs) sent from developed to developing countries. This pattern has changed, as the large MNCs have generally reduced the number of international transferees, while smaller companies have moved into the area. This process has been facilitated by the growth of international trade blocs such as the Association of South-East Asian Nations (ASEAN), the North American Free Trade Agreement (NAFTA) and the EU. Within the EU in particular, there are now Union-wide legislation and policies aimed at easing the movement of people seeking employment across national boundaries.
This is a field that has tended to be dominated by consultants from two broad areas. Accounting firms, financial consultancies and employee benefits consultants advise on pay, taxation and pension issues. Recruitment consultancies have gradually moved into international assignments as their clients have become more international. There are now a number of organizations specializing in international recruitment, particularly for the three main groups of internationally mobile employees: senior managers, technical specialists and, somewhat paradoxically, relatively unskilled people such as hotel workers, construction industry labourers and household servants. One criticism that may be levelled here is that, for the managerial jobs in particular, too much attention is paid to previous experience and not enough to intercultural adaptability. In other words, it is assumed that a manager who is successful in one country will also be successful in another country. However, there is now considerable evidence to show that the process of managing varies from country to country.
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Box 18.2 Current issues in Japanese human resource management
In Japan, consultants are finding a need for a bifocal approach to the management of human resource issues in their client organizations. For the immediate and near term, they must help the clients restructure their HR strategies, systems and practices to allow the transition from the traditional economy to the new economy. At the same time, for the longer term, they must assist clients in reorganizing their HR management to face the next generation of HR issues that is certain to be brought upon them by the accelerating demographic shift.
(1) Current and near-term issues
With the transformation of the national economy from a domestically oriented, regulated and manufacturing-based one to a globally driven, deregulated and knowledge-based one, industries and companies have found their traditional HR systems built on lifetime employment and the seniority principle increasingly rigid, costly and uncompetitive. These systems have saddled them with a constantly rising proportion of aged workers whose cost has been rising relentlessly with seniority. Their traditional revenue base, on the other hand, has been steadily eroding with the transformation of the national economy.
While companies have reduced their workforce costs through massive programmes of early retirement, layoff, plant and office closing, and business divestment, they have called upon management consultants to redesign and redevelop their HR management into merit-based systems linked more directly with performance. Consultants, playing a larger role than ever, have introduced compensation, performance management and career management systems that, in place of seniority, are based on jobs (shokumu), results or outcomes (seika), roles (yakuwari) or, alternatively, competency (kompitensi).
More importantly, their consulting level has moved up from functional management, where HR managers and specialists are their main clients, to the strategic planning level, with top management making key decisions on the consulting project. Frequently, projects arise from the decision of corporate management to change their business model. Even a project coming from HR executives more often has a strategic orientation, as they themselves respond to the challenge of business transformation and raise their sights above their conventional functional priorities.
(2) Longer-term issues
The demographic bomb, which is seen in developed societies all over the world, is ticking most loudly in Japan and promises to change the face of the national HR system possibly faster and more forcefully than in any other developed society. Already in 2000, the proportion of the population aged between 15 and 44 years fell below 40 per cent. By 2025, it is most likely to drop further to somewhere near 30 per cent. Japan will then have the highest proportion of elderly people (65 and older) and the lowest proportion of productive-age population (15–64) of all the developed countries.
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This “age shock” will first tear apart the pension system of the country unless it is revised soon with the expert assistance of HR and benefits consultants, incorporating the self-help principle and the defined contribution design. The new demographics will further alter the new HR management equation formulated in 2000, by driving companies and consultants to introduce new systems that entice retired and retiring employees to stay on the job and work much longer than they are allowed to work now.
Other HR management systems and practices that companies have developed to deal with the current and near-term issues are also likely to have severely limited life-spans if the new economy, as widely expected, generates a fast-rising, insatiable demand for workers with high knowledge skills. Consultants will then be recruited to help companies remodel their HR management systems to make them more diverse, flexible, friendly and attractive to a non-traditional workforce, inevitably composed of female and foreign workers as well as male workers, young and old.
To respond to this highly complex professional demand, consultants will need to remodel themselves into professionals with broader social competence in addition to greater technical expertise.
Authors: Eiji Mizutani and Osamu Ida.
Expatriate managers are expensive and crucial people in their organization, under pressure to establish themselves and their families in the new country and having to adapt to different cultural requirements. Often they fail to make the transition successfully – at great personal and organizational cost.
A growing number of organizations specialize in the full range of expatriate HRM consultancy: recruitment, training, briefing, transfer, adaptation, pay and benefits, evaluation and return. Before addressing the technical issues of recruitment or pay and benefits, consultants in this area should press the client to answer key strategic questions: “Why send expensive expatriates when there are talented and well-educated locals?”, “Why not use more (or fewer) expatriates?”, “How do you know that the expatriates are adding more value than they cost?” and “What role will the expatriate undertake at the end of the assignment?”
New forms of work
New forms of work outside the standard full-time, long-term employment package (called contingent work, atypical work or flexibility) have become established in developed countries, at least, as a key aspect of the management of human resources. Flexible ways and times of working are traditionally more common in less developed economies. As economies advance they create established patterns of doing things: job descriptions, normal working hours, legal constraints on employment contracts, and so on. However, in some of the
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Box 18.3 Current issues in European HR management
A major HRM research programme, the Cranet survey, now has over 25,000 responses from employers in 22 European and a dozen other countries. It provides hard evidence on the roles and functions of human resource departments, recruitment, compensation, training, industrial relations, communication with employees and flexible working practices.
The evidence from the survey confirms differences in HRM policies between different sizes of organization and different sectors of the economy (in particular between the public and the private sectors). The central finding of the research, however, is that while there are common trends throughout Europe there are also significant national differences.
Five key areas of common development can be identified:
(1)Pay. Pay determination is being increasingly decentralized from the national industry collective bargaining level to individual organizations or even to units within organizations. Furthermore, pay is becoming an area for increased variability, with individuals having their pay and rewards determined outside national or sector-level bargaining arrangements. Performance-related pay, however, seems to have stopped spreading as organizations are now more likely to pay for competence, leaving it to managers to ensure the best use of that competence.
(2)Flexibility. There has been widespread growth in “atypical” work (temporary, casual, fixed-term, part-time, etc.). This extension of different forms of employment varies by country, and countries are at different levels in their use of these new employment relationships – but growth is the norm in all countries.
(3)Equal opportunities. Policies for providing equal opportunities for women are widespread throughout Europe, but are frequently not translated into action. Despite recent tensions, action against discrimination on grounds of race or ethnic origin is still rare.
(4)Training. Training is seen as the key issue for HRM in most European countries. Spending on training continues to increase even during periods of lower economic growth. The manner in which training is assessed, organized and evaluated varies markedly between countries.
(5)Trade unions. Trade unions are entrenched and influential bodies throughout Europe, although membership figures vary considerably. In most, but not all, countries, unions have declining memberships.
Although the evidence shows common trends, there is also considerable variation across countries, and noticeably in the way these common issues are handled. The role and influence of human resource departments differ from country to country. Consultants need to be knowledgeable about the common trends in issues – but aware of the national variations in human resource departments and the way they manage these issues.
Author: Chris Brewster.
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more developed economies these have come to seem restrictive. The increasingly difficult, and often internationally competitive, environment is leading the most sophisticated organizations to stress flexibility of human resource practices to meet the requirements of the business more exactly.
The growth in flexibility can be seen in various forms. Numerical flexibility – the ability to employ different numbers of people – is now widespread. Even the famous lifetime employment in the major Japanese companies or companies such as IBM or Daimler Benz has been overtaken by economic pressures and production requirements, and these companies have started reducing numbers. Working-time flexibility – working outside the usual morning to evening hours – is spreading as organizations find that they have to use their equipment for longer hours to cover their costs, or to be available to customers early or late in the day.
A wide variety of innovative arrangements involving part-time working, varying shift patterns, minimum/maximum hours and annual hours contracts are now common in North America and Europe. Contractual flexibility – appointing people to share jobs, or accept short-term jobs or a less-committed relationship with the organization – is now quite usual. Finally, financial flexibility – varying pay in accordance with the individual’s performance or the organization’s ability to pay – is also growing.
One important result of flexibility for workers is that it opens up new job possibilities for many people, both women and men, who would not otherwise be able to go to work. Work that offers flexible hours or that is limited to certain periods of the year may allow people to choose jobs that suit their personal needs and preferences regarding family responsibilities (care of children or elderly relatives), educational requirements, or lifestyle. Parents of school-age children, for example, could well be available for work on a part-time basis for a few hours in the middle of each day or in the evening, or at particular times of the year (e.g. outside school holidays). Thus, flexible working not only attempts to match the available work much more closely to the employer’s work requirements, it also opens up the labour market to a wider group of employees and hence improves the employer’s ability to select the best people.
In dealing with issues of work and employment flexibility, the consultant should not overlook the wider social implications. There may be a need for improved social services, changes in public transport scheduling, and so on. The HR consultant may be well placed to suggest to the client what new services could facilitate work flexibility, or what new arrangements should be proposed to local government or transport authorities.
Human asset (human capital) accounting
A growing area of consultancy, particularly for the major companies, is in measuring and controlling the costs and benefits of employment. In most organizations, the people employed account for the largest single operating cost. Consultants should be able to help organizations manage this resource in the same way as they do others – to assess its costs and show its value. Of course,
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this is more complicated for people than it is for, say, electricity, but an attempt should be made. Employers often do not realize the total costs of employment: not just wages, but benefits, accommodation, recruitment, administration etc. Equally, they often find it hard to identify the added value of each employee. The major consultancies now have differently titled approaches aimed at reducing the complexity of humans to financial numbers. This is still a very inexact science, but one that seems likely to be an increasing source of work for management consultants.5
The role of the personnel/HR department
Personnel and human resource departments have come under increasing pressure to prove their own added value to the organization: they are expensive overhead costs. So there has grown up a specialized form of consultancy aimed at assisting these departments to clarify their objectives, their ways of working and their outputs (as opposed to the obvious inputs of resources). This can involve benchmarking other organizations and can raise some hard issues if, for example, the HR department seems to be significantly larger than that of a relevant competitor. The important point for the consultants to focus on is the measurement of outputs: what is it that the department is adding to the organization? Is it worth the costs involved? It is often the case that there is a substantial gap between the administrative and system-controlling role that the department performs and the strategic, knowledge management role that the department would like to undertake. Identifying this and helping the specialists to develop action plans to bridge the gap is a growing role for HR consultancies.
Human resource information systems
A relevant aspect of the assessment of the HR function concerns the degree of sophistication of the information and communication systems used: the human resource information systems. The technology is now available for every line manager to be able to access, in real time, the complete records of every member of their staff, including all details of their competencies, skills and training. With this kind of information availability many of the other aspects of HR work (training and development, assessment systems, human resource planning, careers and succession planning, etc.) become both easier and more powerful. Few HR departments take full advantage of such systems and many are still caught in the vice of administration and paper-shifting. There is now an extensive range of consultancy work to help HR departments select the most appropriate and cost-effective system.
Unfortunately, work is often done by IT consultants, who may sell the organization a system that is, perhaps, more sophisticated, and usually more expensive, than is needed. Since it is rarely possible to spend another large sum of money to replace such a system, the organization becomes stuck with a computerized facility that may be almost unused. It is generally better to obtain
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advice from specialist HR consultants able to ensure that the key questions of what the organization wants to use the system for, and how much use will be made of it, are asked first, and that the system selected has maximum credibility and use rather than being the “latest thing”.
Subcontracting (outsourcing) of HRM
The focus on the role of the HR department and the growth of HR information systems has led some consultancies to offer to undertake all, or key elements of, the HR task on behalf of clients. They can often provide expertise and depth of knowledge that is lacking in the organization. Some elements of HRM (compensation, insurance) have traditionally been outsourced in some countries. In many cases individual issues, such as training, have been outsourced to experienced training consultants or to the education system, but the notion of taking over the whole task, or key elements of it, is new. There have been some highly visible decisions by some well-known companies to outsource all aspects of their HR systems, but whether this will become a trend or turn out to be just a fad is still a matter of debate. There are cost and efficiency advantages, and loss of expertise and strategic control disadvantages. Consultants are already helping organizations compare the two sides of the coin so that they can reach sensible decisions.
The logic of subcontracting or outsourcing the administration of the HR system is clear, even if it goes against the modern tendency to view the implicit knowledge that resides in an organization’s people as a key competitive asset. A more widespread phenomenon, and one that often has a different purpose, is the outsourcing of the human resources themselves: moving the work from people employed within the organization to others working elsewhere – sometimes even in different countries. The purpose of such outsourcing is usually cost reduction: work can be allocated to people who are paid significantly less or, where the work is undertaken in another country, where social protection is poorer.
There are arguments that such developments are inevitable, given the nature of global capitalism, and even that they have a benefit in spreading at least some kinds of work to poorer countries. There is also, however, a developing backlash whereby NGOs and other social groups are highlighting bad practices in the subcontractors and creating significant difficulties for the outsourcing organization. Consultants who are asked to advise on such matters should do so cautiously, emphasizing both the advantages and the disadvantages of various arrangements, and the long-term financial benefits of ethical behaviour.6
1 E. Poutsma, A. Pendleton, J. van Omerren and C. Brewster: Financial participation in Europe, Report to the European Foundation for the Improvement of Living and Working Conditions (Dublin, January 2000).
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2W. F. Glueck: Personnel: A diagnostic approach (Plano, TX, Business Publications, 1982), p. 296.
3See also selected guides to management and human resource development in Appendix 3.
4See e.g. M. Pedler, J. Burgoyne and T. Boydell: The learning company: A strategy for sustainable development (Maidenhead, Berkshire, UK, McGraw-Hill, 1997).
5See e.g. U. Johanson and H. H. Larsen: “Human resource costing and accounting”, in C. J. Brewster and H. H. Larsen (eds): Human resource management in Northern Europe (Oxford, Blackwell, 2000).
6See also P. Drucker: “They’re not employees, they’re people”, in Harvard Business Review, Feb. 2002, pp. 70–77.
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