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9TH EDITION

HUMAN RESOURCE
MANAGEMENT

Raymond J STONE
Human Resource
Management
9TH EDITION

Raymond J. Stone
Ninth edition published 2017 by
John Wiley & Sons Australia, Ltd
42 McDougall Street, Milton Qld 4064

© John Wiley & Sons, Ltd 2017

First edition published 1991

Typeset in 10/12pt Times LT Std

© Raymond J. Stone 1991, 1995, 1998, 2002, 2005, 2008, 2011, 2014

The moral rights of the author have been asserted.

National Library of Australia


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Creator: Stone, Raymond J., author.


Title: Human resource management / Raymond J Stone.
Edition: 9th edition.
ISBN: 978 0 730 32948 0 (ebook)
Subjects: Personnel management — Australia.
Personnel management — Textbooks.
Dewey Number: 658.300994

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10 9 8 7 6 5 4 3 2 1
To
Law King Han

To
Ho Wai Kwong
Counsellor and sage
CONTENTS
1.9 A strategic approach to HRM  37
Assessment of influences  38
Evaluating HRM objectives, policies and
practices 43
About the author  xiv 1.10 HRM outcomes and performance  43
Employee engagement  46
The HRM challenge  46
PART 1
Summary 48
Introducing HRM  1 Key terms  48
Activities 50
CHAPTER 1 Environmental influences  55
Ethical dilemma  55
Strategic human resource Case study  56
management 2 Online resources  58
Endnotes 59
1.1 What is human resource management?  3 Acknowledgements 70
1.2 HRM and management  6
Approaches to HRM  8 CHAPTER 2
1.3 The multiple roles of the HR manager  9
Strategic partner  12
Human resource planning  71
HR functional expert  13 2.1 Human resource planning and strategic
Employee advocate  13 HRM planning 72
Agent for change and cultural transformation  13 2.2 The importance of human resource
planning 72
Talent manager  14
The purpose of HR planning  73
Organisation ambassador  14
Scarcity of talent  73
Board and senior executive resource  14
Short-term versus long-term needs  75
Legal adviser  15
2.3 Environmental influences and
1.4 HRM activities  15
HR planning  76
1.5 HRM, productivity and organisation
Globalisation 76
performance 17
Multigenerational workforce  77
HRM and risk  19
Women in the workforce  78
1.6 Ethical issues and HRM  19
Academic standards  80
Corporate wrongdoing  20
Labour mobility  81
Corrupt practices  21
Other environmental influences  81
Corporate culture and corruption  22
2.4 Approaches to HR planning  82
Whistleblowing 22
The quantitative approach  83
1.7 What is strategy  24
The qualitative approach  83
E-HRM and strategy  24
2.5 Forecasting human resource availability  84
Big data, HRM and strategy  25
Forecasting the supply of internal human
Organisational stakeholders  25 resources 84
Strategic intent  27 Factors affecting the external supply of human
What is strategic management?  28 resources 90
Conflict, politics and strategic change  32 The ageing population  90
Types of strategies  33 2.6 Exit management  95
Choosing strategies  34 Exit management fairness  96
The need for HRM strategies  34 Exit management planning  96
The aims of HRM strategies  35 Exit interview  97
1.8 Strategic organisation and strategic 2.7 Requirements for effective HR planning  98
HRM objectives 35 Summary 99
Strategic HRM objectives and plans  36 Key terms  99
HRM policies and procedures  37 Activities 100
Environmental influences  101 Modern awards  151
Ethical dilemma  102 Common law  153
Case study  103 4.3 Employee recruitment and selection  154
Online resources  104 Discrimination 154
Endnotes 104 The job advertisement and legal
Acknowledgements 109 requirements 156
The job description and the law  156
CHAPTER 3
Application forms  157
Human resource information 4.4 Legal issues for HR professionals
systems 110 during employment 161
Workplace health and safety requirements  161
3.1 Strategic HRM and human resource
Discriminatory treatment of employees  162
information systems 111
Workplace bullying  162
Computerisation through the payroll  113
Statutory benefits  162
3.2 Use of HRIS  115
4.5 Terminating employees  163
The confidentiality of HRIS  117
Types of dismissal  163
Legal and management concerns  118
Procedures for dismissal  169
3.3 Computerising the HR department:
Procedures for termination  170
the decision-making process  119
The rights of the employee  171
Outsourcing 122
Summary 174
Relationship with the information technology
Key terms  174
department 122
Activities 175
Relationship with other departments  122
Environmental influences  176
Hardware issues  123 Ethical dilemma  177
3.4 HRM and the internet  124 Case study  178
E-HRM 125 Online resources  178
HRM and social networking sites  125 Endnotes 178
HRM and wearable computing devices  127 Acknowledgements 179
Cloud computing  127
Big data  128 PART 2
3.5 Evaluating the HRIS  129
Summary 130 Determining, attracting
Key terms  130 and selecting human
Activities 131
Environmental influences  133 resources 180
Ethical dilemmas  133 CHAPTER 5
Case studies  135
Online resources  136 Job analysis, job design and
Endnotes 137
Acknowledgements 140
quality of work life  181
5.1 Introduction  182
CHAPTER 4 5.2 Job analysis  182
Human resource management Components of job analysis  182
Approaches to job analysis  183
and the law  141 Job analysis and job design  183
4.1 HRM and the law  142 When to analyse a job  184
Employee or contractor  142 The uses of job analysis  184
4.2 Sources of legal obligations  143 Job descriptions  187
Contracts 143 5.3 Collection of job analysis information  194
Statutes 148 Common data collection methods  194
The National Employment Standards (NES)  149 Evaluation of traditional job analysis
Statutory agreements  150 approaches 199

CONTENTS 
v
5.4 Competency profiling  200 Online resources  266
Competency characteristics  200 Endnotes 266
The Behavioural Event Interview  202 Acknowledgements 273
Criticisms of competency profiling  202 CHAPTER 7
5.5 Job analysis and EEO  203
5.6 Practical problems with job Employee selection  274
analysis 203 7.1 Strategic selection  275
Theoretical criticisms of job 7.2 Selection policy  277
analysis 204 7.3 Validation of selection procedures  280
5.7 Job design  204 Validity 280
Methods of job design  205 Reliability 282
5.8 Quality of work life  211 7.4 Sample selection procedures  283
Summary 215 E-selection 283
Key terms  215
Reception of applicants  284
Activities 216
Preliminary interview  284
Environmental influences  218
Ethical dilemma  219 The application form  285
Case study  220 Tests 287
Online resources  221 Interview 291
Endnotes 222 Medical examination  301
Acknowledgements 226 Other selection techniques  303
The selection decision  307
CHAPTER 6
Evaluation of the selection process  307
Recruiting human Summary 309
resources 227 Key terms  309
Activities 311
6.1 Strategic recruitment  228
Environmental influences  316
Recruitment policy  230 Ethical dilemma  317
Recruitment activities  231 Case study  318
6.2 Recruitment methods  233 Online resources  319
Internal or external recruitment?  233 Endnotes 319
Internal recruitment methods  233 Acknowledgements 326
External recruitment methods  235
E-recruitment and HRM  244 PART 3
E-recruitment 245
Social networking sites  247
Developing human
6.3 EEO and recruitment  248 resources 327
Recruitment of women  249
CHAPTER 8
Recruitment of people with disability  252
Recruitment of older workers  254 Appraising and managing
Recruitment of migrants  255
performance 328
Recruitment of Aboriginal Australians and
8.1 Strategy, performance management
Torres Strait Islanders 255
and performance appraisal  329
Recruitment of lesbian, gay, bisexual, transgender
and intersex workers  257 8.2 Performance management  331
6.4 Evaluation of recruitment  257 8.3 Performance appraisal  333
Summary 259 Performance appraisal objectives  335
Key terms  259 Rater of employee performance  340
Activities 260 Sources of error in performance
Environmental influences  263 appraisal 345
Ethical dilemma  263 Major types of performance appraisal
Case study  264 systems 350

vi  CONTENTS
8.4 E-performance management and Orientation program content  415
e-performance appraisals  359 Formal orientation programs  417
E-performance management system — Informal orientation  417
off-the-shelf or in-house?  359 Orientation packages  417
Research and e-appraisals  360 Follow-up 418
Social media and performance appraisals  361 9.7 Psychological principles of
8.5 Static and dynamic performance learning 418
appraisals 362 Pre-conditions for learning  418
Characteristics of a dynamic performance Learner-centred learning  420
appraisal program 362
The learning curve  420
The importance of goal setting in performance
Summary 422
improvement 363
Key terms  422
8.6 The performance appraisal record  364 Activities 424
8.7 The performance review discussion  366 Environmental influences  425
The preparation required for the performance Ethical dilemma  426
review discussion 366 Case study  428
Conduct of the performance review Online resources  429
discussion 367 Endnotes 429
8.8 Performance appraisal and EEO  368 Acknowledgements 436
Summary 369
CHAPTER 10
Key terms  369
Activities 370 Career planning and
Environmental influences  374
Ethical dilemma  374 development 437
Case study  376 10.1 The importance of career planning
Online resources  378 and development 438
Endnotes 378 10.2 HR planning and career planning
Acknowledgements 385 and development 440
The employee’s responsibility  441
CHAPTER 9
The HR department’s responsibility  443
Human resource Factors in career development and career
success 443
development 386 Career plateauing  454
9.1 Introduction  387 Work–family conflict  458
9.2 The need for HRD  389
Outplacement 460
Business and economic changes  389
10.3 Careers in HRM  461
Technological changes  390
Job variety  461
Organisational changes  390
Remuneration 461
Social, legal and other changes  391
Working conditions  462
9.3 EEO and training and development  391
Career preparation  462
9.4 Strategic HRD  392
Accreditation 463
Trade unions and training  393
HRM as a profession  463
9.5 HRD methods and techniques  394
Professional associations  464
The scope of training programs  394
Summary 465
Training beyond immediate job requirements  396
Key terms  465
A systematic approach to training and Activities 466
development 396 Environmental influences  470
Social media, big data, e-learning and HRD and Ethical dilemma  470
HRM 412 Case studies  472
9.6 Orientation  415 Online resources  474
The benefits of employee orientation  415 Endnotes 474
The timing of orientation  415 Acknowledgements 482

CONTENTS 
v ii
PART 4 12.3 Pay surveys  525
Job evaluation and the pay survey  526
Rewarding human Pay structure  526
resources 483 The pay line or curve  526
12.4 Pay ranges  527
CHAPTER 11 The standard range  527
Broadbanding 527
Employee motivation  484 Market posture  528
11.1 Strategy and motivation  485 Selecting a policy pay line  529
The importance of motivation  485 12.5 Equitable remuneration  529
Management and motivation  486 Pay secrecy  529
11.2 Early theories of motivation  487 Pay compression  530
Scientific management  487 Pay dispersion  530
The human relations movement  487 Gender pay gap  530
Theory X and Theory Y  488 Senior executive remuneration  534
11.3 Content theories of motivation  488 Setting pay rates  536
Maslow’s needs hierarchy theory  488 12.6 Relating pay to performance  540
Herzberg’s two-factor theory  490 Compa ratio or salary index  540
Job characteristics theory  491 Performance index  540
McClelland’s achievement motivation The merit grid  541
theory  491 12.7 Pay increases  542
Limitations of content theories  492 Merit increases  542
11.4 Process theories of motivation  492 Promotional increases  543
Vroom’s expectancy theory  492 General adjustments  543
Equity theory  493 Automatic progression  544
Goal-setting theory  495 Blue and red circle pay rates  544
Reinforcement theory  495 Pay reviews  544
Organisational behaviour modification  495 12.8 Incentive remuneration  545
Culture and motivation theories  499 Summary 550
11.5 Money and motivation  499 Key terms  550
Pay and motivation  499 Activities 551
Summary 502 Environmental influences  553
Key terms  502 Ethical dilemma  553
Activities 503 Case study  554
Environmental influences  507 Online resources  555
Ethical dilemma  507 Endnotes 556
Case studies  508 Acknowledgements 560
Online resources  511
Endnotes 511 CHAPTER 13
Acknowledgements 513
Employee benefits  561
CHAPTER 12 13.1 Introduction  562
13.2 Employee benefits  563
Employee remuneration  514 Benefit plan objectives  563
12.1 Strategic remuneration  515 The growth of employee benefits  563
Remuneration philosophy  516 Fringe benefits tax  565
Remuneration program objectives  517 Flexible benefit plans  566
12.2 Job evaluation  518 Types of employee benefits  567
Job evaluation systems  518 Group life insurance  567
Which system should be used?  523 Healthcare insurance  567
Job description  524 Payment for time not worked  569

viii  CONTENTS
Workers compensation insurance  569 The pluralist approach  604
Term life insurance  569 The radical or Marxist approach  605
Total and permanent disability insurance  569 14.4 Parties in industrial relations  606
Childcare 569 Government and industrial tribunals  607
Paid parental leave  570 Employer associations  608
Elder-care 571 Trade unions  608
Employee assistance programs  571 Union membership  609
Preventive health (wellness) programs  571 14.5 Big data, social media and industrial
Flexible work schedules  572 relations 613
Miscellaneous benefits  573 Work and changing social attitudes  613
13.3 Retirement benefits  574 Technological know-how  613
The payment of benefits  575 Big data and employee profiling
The rationale for superannuation  575 and privacy  613
13.4 Types of retirement plans  576 Big data, decision making and customer (member)
Defined benefit plans  576 satisfaction 614
Defined contribution plans  577 Social media and industrial relations  614
Employer and employee contributions  577 The gig economy  615
13.5 Current issues in superannuation  577 Robotics and industrial relations  616
Retirement age and benefit access  577 14.6 Industrial relations processes  618
The size of benefits  577 The choice of IR process  618
Employer superannuation contributions  578 Advocacy 620
Early retirement  578 14.7 IR legislation  620
Industry superannuation funds  578 The Workplace Relations Act 1996  622
Superannuation fund choice  579 Workplace Relations Legislation
Women and superannuation  579 Amendment (More Jobs, Better Pay)
Bill 1999  622
Non-payment of employer superannuation and
benefits 580 The Workplace Relations Amendment
(Work Choices) Act 2005  623
13.6 Benefits, change and the future of work  581
The Fair Work Act 2009  623
Summary 583
Key terms  583 Fair Work Act review 2012  628
Activities 584 Fair Work Amendment Bill 2014  629
Environmental influences  587 The status of awards  629
Ethical dilemma  587 Fair Work System, Work Choices and
Case study  589 management 629
Online resources  590 14.8 Other current IR issues  630
Endnotes 590 Productivity Commission review of workplace
Acknowledgements 594 relations 630
Royal Commission on Trade Union Governance
PART 5 and Corruption   631
Skill and pay inequalities  632
Managing human Penalty rates  635
resources  595 Guest workers  638
Summary 640
CHAPTER 14 Key terms  640
Industrial relations  596 Activities 641
Environmental influences  644
14.1 Introduction  597 Ethical dilemma  644
14.2 HRM and industrial relations  601 Case study  646
Theory, HRM and IR  602 Online resources  648
14.3 Approaches to industrial relations  603 Endnotes 648
The unitarist approach  604 Acknowledgements 660

CONTENTS 
ix
CHAPTER 15 16.6 Practical aspects of union negotiations  712
Walk away position  712
Managing change  661 Quid pro quo bargaining  712
15.1 Introduction  662 Negotiators are representatives  713
The erosion of trust  663 Management’s log of claims  713
HRM and change  663 Leave money until last  713
Types of change  664 Listening for success  713
Planned versus unplanned change  664 Long-term objectives  714
15.2 Steps in the change process  664 Keep the package in mind  714
Determining the need for change  664 Time pressures  715
Determining obstacles to change  666 Check authority to deal  715
Introducing change  667 The negotiating game  715
Implementing change  667 Third parties  717
Evaluating change  668 Summary 718
15.3 Workplace change  668 Key terms  718
15.4 Resistance to change  669 Activities 719
Reducing resistance to change  670 Environmental influences  722
15.5 Managing learning and innovation  672 Ethical dilemma  723
Case study  724
15.6 Managing knowledge  672
Online resources  726
15.7 Total quality management  674
Endnotes 726
Managing quality  674
Acknowledgements 728
15.8 Acquisitions, mergers and divestitures  675
Restructuring and human resources  676
CHAPTER 17
15.9 Downsizing  677
15.10 The changing workplace  680 Employee health and
Summary 681
Key terms  681
safety 729
Activities 682 17.1 Introduction  730
Environmental influences  685 17.2 Government regulation of occupational
Ethical dilemma  685 health and safety  737
Case study  687 17.3 Managing workplace health and safety  738
Online resources  689 Elements of success  739
Endnotes 689 Evaluation of health and safety performance  740
Acknowledgements 694 17.4 E-OH&S  740
Big data and OH&S  740
CHAPTER 16 17.5 Current occupational health and safety
issues 742
Negotiation 695 Bullying in the workplace  742
16.1 Introduction  696 Dementia 743
16.2 Trust in negotiation  698 Depression 744
16.3 Ethics in negotiation  698 Domestic violence  744
16.4 The negotiation planning hierarchy  699 Fly-in, fly-out work  745
Objectives 699 Home-based workers  745
Strategy 700 Obesity 745
Tactics 701 Sexual harassment  747
16.5 The negotiation process  706 Smoking 748
Preparation 707 Stress in the workplace  749
Initial demands  708 Substance abuse  755
Negotiation 709 Terrorism 757
Deadlock 709 Violence in the workplace  758
Agreement 711 Work–life balance  759

x  CONTENTS
Summary 762 Online resources  819
Key terms  762 Endnotes 819
Activities 763 Acknowledgements 821
Environmental influences  764
Ethical dilemma  765 PART 6
Case study  767
Online resources  769 Human resources in a changing
Endnotes 770
Acknowledgements 780
world  822
CHAPTER 19
CHAPTER 18

Managing diversity  781 International human resource


18.1 Introduction  782 management 823
18.2 Diversity as a concept and legal 19.1 Introduction  824
requirements in Australia  782 International HRM policy  826
Diversity as a concept  783 Global view  828
The Australian context of workforce diversity  784 E-HRM 829
The legal requirements  785 19.2 Key cross-cultural issues  830
18.3 HRM approaches to diversity Communications 830
management 787 Ethics 831
The impact of diversity on HRM  788 Trust 832
Recruitment and selection approaches  788 Management style  833
Training and development  790 Equal employment opportunity (EEO)  834
Performance management  790 19.3 Major challenges faced in international
Career development  791 HRM 835
Three HRM roles  792 Performance appraisal  835
Goals of diversity management  792 Training and development  836
Productive diversity  792 Remuneration 836
Pros and cons of diversity management  793 Industrial relations  837
18.4 Levels of diversity management  794 19.4 Major characteristics of HRM in other
Management of individuals  794 countries 837
Management of groups  798 HRM in China  837
Management at an organisational level  799 HRM in India  841
18.5 Diversity-oriented leadership  801 HRM in Japan  845
Diversity leadership defined  801 Summary 850
18.6 Diversity and organisational culture  802 Key terms  850
Dimensions of organisational culture  803 Activities 851
Cultural assessment practices  803 Environmental influences  853
Creating a positive climate for diversity  803 Ethical dilemma  854
18.7 Inclusive workplace  804 Case study  855
18.8 Managing cross-cultural diversity  806 Online resources  857
18.9 Globalisation  809 Endnotes 857
Developing staff  809 Acknowledgements 863
18.10 Future of diversity management  811
CHAPTER 20
Assessing diversity management  811
Summary 814 Managing international
Key terms  814
Activities 814
assignments 864
Environmental influences  816 20.1 Introduction  865
Ethical dilemma  817 International recruitment  865
Case study  817 Expatriate selection  866

CONTENTS 
xi
Selection of female expatriates  867 21.3 Evaluating the HR climate  901
Willingness to accept an expatriate Employee turnover  901
assignment 868 Absenteeism 905
20.2 Expatriate failure  869 Health and safety records  907
The expatriate  870 Employee attitude surveys  908
The female partner  870 Transformational research  910
The male partner  871 Focus groups  911
Implication for HR managers  872 21.4 Benchmarking  911
20.3 Cross-cultural orientation  872 21.5 Measuring HR outcomes  912
Expatriate career planning and repatriation  874 The HR scorecard  914
Expatriate performance appraisal  875 Summary 916
20.4 Expatriate remuneration  876 Key terms  916
Program development  877 Activities 917
Expatriate packages  877 Environmental influences  918
Minimisation of potential problems  879 Ethical dilemma  918
20.5 Remuneration of third-country nationals Case study  920
(TCNs) 879 Online resources  921
Endnotes 921
Summary 881
Acknowledgements 924
Key terms  881
Activities 882
Environmental influences  884 PART 1 Case study 925
Ethical dilemma  884 PART 2 Case study 928
Case study  885 PART 3 Case study 932
Online resources  886 PART 4 Case study 935
Endnotes 887 PART 5 Case study 938
Acknowledgements 893 PART 6 Case study 941
PART 7 Case study 943

PART 7

Evaluating human resource


management  894
CHAPTER 21

Assessing HRM
effectiveness 895
21.1 Introduction  896
21.2 The HRM audit  897
Approaches to the HRM audit  898
Audit information  899
E-evaluation 899

xii  CONTENTS
ABOUT THE AUTHOR
Raymond J. Stone
Raymond J. Stone, BA, BCom, DipSocStud. (Melb), MA (Ottawa), PhD (Hong Kong), CMAHRI,
has more than 40 years’ experience in international HRM and has held senior positions in Australia,
Hong Kong, Japan and Korea. His work experience covers compensation and benefits, recruitment and
selection, psychological appraisal, industrial relations, HRM research, training and development, and
strategic human resource planning and policy development. He has taught at Australian, Japanese, Hong
Kong and British universities. His articles about negotiation and international HRM have been published
in leading academic and business journals in Australia, Hong Kong, Japan, New Zealand, Singapore, the
United Kingdom and the United States.

About the contributors


John Lunny
Chapter 4 in this edition has been updated by John Lunny. John is the Principal of Workplace Resolve Pty
Ltd, a Brisbane-based incorporated legal practice, specialising in workplace relations and employment
law. Prior to establishing Workplace Resolve, John was a partner at DLA Phillips Fox, Clayton Utz and
Dunhill Madden Butler. He was also the principal of his own successful niche practice in Melbourne.
John is a Queensland Law Society accredited specialist in workplace relations and employment law and
is an Adjunct Professor in the Business School of Griffith University. He is a Chartered Fellow of the
UK’s Institute of Personnel and Development and a Fellow and former State President of the Australian
Human Resources Institute (AHRI).
Dr Anne Cox
Chapter 18 in this edition has been updated by Anne Cox. Anne is Senior Lecturer at the School of
Management and Marketing, Faculty of Commerce, University of Wollongong. After completing her
studies at Newcastle, Australia, Anne started her doctoral study at Leicester Business School, De
Montfort University, United Kingdom. She wrote a thesis on the transfer of HR/IR policies and practices
across borders. She was awarded a doctoral degree in 2004. Anne now researches and publishes in four
main areas: multinational companies’ HRM/IR policies, the transformation of HRM/IR systems in
developing countries, psychological contracts of non-traditional employees, and gender equity.

ABOUT THE AUTHOR xiii


PART 1
Introducing HRM
Part 1 deals with the context of human resource management and includes
strategic HRM, HR planning, HR information systems, and HRM and the law.

1 Strategic human resource management

2 Human resource planning

3 Human resource information management systems

4 Human resource management and the law

CHAPTER 1 Strategic human resource management  1


CHAPTER 1

Strategic human
resource management
LEA RN IN G OBJE CTIVE S

After studying this chapter, you should be able to:


1.1 explain what is meant by human resource management
1.2 understand the relationship between human resource management and management, and describe
approaches to human resource management
1.3 describe the HR manager’s role
1.4 understand the human resource management activities performed in organisations
1.5 understand the role of human resources in organisational productivity and performance
1.6 discuss the ethical issues facing human resource management
1.7 explain the meaning of strategy
1.8 explain the meaning of strategic human resource management
1.9 describe a strategic approach to human resource management
1.10 understand human resource management outcomes and performance, and appreciate the strategic
challenges facing human resource management.

‘“Employees are our


greatest asset” is one
of the most worn out
clichés in the management
lexicon. It is also not true.
Some of them, as any
experienced leader would
know, are liabilities. And
unlike traditional assets
such as property and cars,
people have the liberty
to walk away from their
employer.’1
James Adonis, consultant and
business writer
1.1 What is human resource management?
LEARNING OBJECTIVE 1.1 Explain what is meant by human resource management.
The focus of human resource management (HRM) is on managing people within the employer–
employee relationship. Specifically, it involves the productive use of people in achieving the
organisation’s strategic business objectives and the satisfaction of individual employee needs. It adds
value by designing and implementing HR policies and practices that motivate employees to translate
their know-how into productive behaviour.2
Because HRM seeks to strategically integrate the interests of an organisation and its employees, it
is much more than a set of activities relating to the coordination of an organisation’s human resources.
HRM is a major contributor to the success of an enterprise because it is in a key position ‘to affect
customers, business results and ultimately shareholder value’.3 Says Gratton: ‘The new sources of
sustainable competitive advantage available to organizations have people at the centre — their creativity
and talent, their inspirations and hopes, their dreams and excitement. The companies that flourish in
this decade will do so because they are able to provide meaning and purpose, a context and frame that
encourages individual potential to flourish and grow.’4
HRM is either part of the problem or part of the solution in gaining the productive contribution of
people. Leading companies such as CSL, Cochlear, Google, General Electric, Johnson & Johnson and
Microsoft recognise that human capital is their most important resource and take action to maximise
it by: focusing on selecting, developing and rewarding top talent; encouraging open communication,
teamwork and collaboration; and refusing to tolerate poor performance or compromise their long-term
objectives for short-term gains (see figure  1.1). As the global business environment becomes more
competitive, human resources are becoming even more critical to organisation success.5
Pfeffer, after an exhaustive review of the research literature, identified seven dimensions of effective people
management that produce substantially enhanced economic performance: employment security; rigorous
selection; self-managed teams and decentralised decision making; comparatively high compensation
linked to individual and organisational performance; extensive training; reduced status distinctions; and
extensive sharing of financial and performance information throughout the organisation.6 Guest similarly
found that job design, employee participation and open communication, equal opportunities, family-
friendly practices and anti-harassment practices are associated with higher work and life satisfaction.7
High-performance HRM has a positive effect on organisation performance by increasing employee
knowledge, skills, abilities and other characteristics (KSAOs); empowering employees to act; and
motivating them to perform.8 There is a question mark, however, regarding the universal effectiveness
of high-performance HR for employees with low levels of intrinsic motivation (such employees may
require more structure, more supervisory assistance and more external regulation to perform well).9
­Performance-related pay systems, similarly, may face a hostile reception by public sector workers.10 Other
research suggests that high-performance HR has a dark side, with employees experiencing increased role
overload, burnout and increased pressure. These negative outcomes suggest that high-performance HR
is simply a means to exploit employees. However, when high-performance HR is employed using a
soft HR approach (using employee involvement, commitment and collaboration) employees are given
more autonomy and control over their work, experience less pressure and have an overall positive
assessment of high-performance HR.11 Finally, there is evidence to suggest that the value of high-
performance HR may be affected by a number of factors, such as national culture, strategic orientation
and the effectiveness of their administration.12 Recent research, for example, highlights the importance
of managers using clear and informative communications to ensure that employees understand all HR
policies and practices being implemented.13
Other evidence indicates that such high-performance HR management policies and practices generate
profitability gains, share price increases, higher company survival rates, increased sales, higher export
growth, increased organisational commitment and lower labour turnover.14 Reinforcing this, a study by
Edmans found that US firms with high levels of employee satisfaction (‘100 best companies to work for

CHAPTER 1 Strategic human resource management  3


in America’) generate higher superior shareholder returns through the use of more advanced approaches
to recruitment,  retention and motivation.15 Other research also indicates that the employment of high-
performance HR practices increases the value placed on HR by senior managers and positively influences
both human capital and social capital.16

Are able to
Treat people as Have strong Carefully select Encourage Have managers
adapt
important positive cultures new hires innovation who are trusted
to change

Provide flexible Recognise


work schedules performance

Encourage
frequent Have a credible
and open BEST EMPLOYERS and competent
communications HR function

Provide a
Demonstrate a
healthy and
commitment
safe work
to social
environment
responsibility

Have clear and


Emphasise Promote a Have a Provide
compelling Encourage
employee collaborative reputation for competitive
objectives and diversity
development culture integrity remuneration
strategies

FIGURE 1.1 Best employers

Research by Chang and Chen found that HR activities such as training and development, human
resource planning and performance appraisal had a significant effect on employee productivity.17 Other
recent research shows that training and development influences employee commitment and engagement
and has a positive effect on organisational performance.18 Collins and Smith established that HR
practices focused on employee commitment were linked to increased trust, cooperation and knowledge
sharing.19 Likewise, there is evidence to show that organisations that invest in high commitment HR
practices have a higher quality relationship with their employees and are likely to benefit via greater
levels of employee discretionary behaviour, better customer service and increased customer s­ atisfaction.20
Research by Sun, Aryee and Law also determined that HR practices were positively related to customer
service and employee willingness to help others.21 Another study similarly suggests that employee
helping behaviour (a contributor to organisational flexibility and performance) is influenced by the way in
which organisations manage their HR.22 Other findings also indicate that the strategic HR roles of change
agent, strategic partner, employee champion and administrative expert facilitate organisational learning
capabilities and psychological empowerment, which lead to higher employee commitment.23 Finally, a
study by Bjorkman and Fan showed a positive relationship between organisational performance and the

4  PART 1 Introducing HRM


extent to which the organisation used ‘high-performance’ HRM policies and practices and integrated its
HRM strategies with its business strategies.24 The managing director of FedEx Australia, says, ‘If we
take care of our people, they will take care of our customers. And if we have satisfied customers, they
will take care of our profits’.25 Consistent with this, other research shows that poor HRM practices are
linked to poor performance.26 The evidence is clear (if unappreciated) — high-performance HRM policies
and practices are associated with superior organisational performance.27 Furthermore, a Hay Group study
showed that the most admired companies in the United States are more focused on strategic issues and
more successful in creating a workforce that is competent, loyal and committed.28 In turn, it appears that
organisations employing high-performance HR managers are perceived more positively and as being more
skilled.29 Related to this, other research shows that job satisfaction, effective organisational commitment
and effective wellbeing at work are all related to the perceived image of the organisation30 (see figure 1.1).

FAST FACT

Research by Hay Group (based on data from more than seven million employees) shows that companies
with the highest engagement scores have a revenue stream 4.5 times greater on average than those com-
panies with the lowest engagement scores.31

The HR manager, as with any other functional manager in marketing, production or finance, is
responsible for performance. The position exists foremost to help achieve the strategic business objectives
of the organisation. If it does not, the position will become redundant. Yet the evidence suggests that
few HR managers have a good understanding of the businesses in which they work.32 This has led to
the biting criticism that HR managers are unable to describe their contribution to the organisation’s
success except in trendy and unquantifiable terms.33 Overuse of jargon such as ‘talent’, ‘attitude
repositioning’, ‘thought showers’, ‘best of breed’, ‘high-octane brainpower’, ‘relentless passion’; and
fluffy nonsense such as ‘managed for value’ (being fired), ‘value pool’ (employees), ‘investing in talent
additions’ (hiring), ‘deep-dive granular person’ (job requirement), ‘north-facing metrics’, ‘actualising
focused deliverables’, ‘intensely focused desire’, ‘building a talent war chest’ and ‘integrity is in our
DNA’ gain HR managers no credibility. Such ‘management speak’, however, shapes the organisation’s
culture, advertises management values, acts as a pressure for conformity, and has a corrosive effect on
the effectiveness of communications and the community’s perceptions of the organisation.34
Classic examples of HR waffle include the plea for organisations to ‘expand their talent management
agenda from a narrow and tactical focus on human resources activities around the employee life cycle,
to a broad and strategic focus on highly integrated systems of capabilities fundamental to business
strategies and operations’,35 and assertions that ‘our customer transformation program supports our
family of brands with a framework to measure success on how we delight our customers’.36
A survey by Fairfax Business Research shows that a significant proportion of managers believe
HRM’s major contribution is as a provider of information.37 According to Ulrich, HR people spend
60–80  per  cent of their time in administrative activities and less than 20  per  cent on the gutsy roles
of strategic partner, employee advocate and consultant on important HR issues.38 Research by Dainty
similarly suggests that many Australian HR managers remain marginalised from strategy formulation.39
A recent Australian study, similarly, found that key HR activities (such as recruitment, selection, training,
OH&S, employee benefits and industrial relations) were outsourced because of needs to improve quality
and ­efficiency, gain access to specialised knowledge, reduce costs, acquire up-to-date information and
to allow HR to focus on its strategic role.40 Companies such as AMP, ANZ, IBM and Westpac are
also embracing robot technology to automate routine administrative tasks in HR and other functions.41
Researchers at Latrobe University in conjunction with NEC Australia are similarly developing robots
that can eventually engage with people and be used to conduct employment interviews (the robots
are designed to develop an emotional and behavioural profile of a candidate and to benchmark this
against the organisation’s best employees).42 A HR Pulse survey showed that while senior managers

CHAPTER 1 Strategic human resource management  5


overwhelmingly thought HR was critical, less than half felt that HR was functioning effectively in their
­organisation.43 HR managers, nevertheless, consistently rate their contributions more favourably than do
other stakeholders.44
The HR function is recognised for contributing to the bottom line, not for being performed by
nice people with good human relations skills.45 Confusing people skills with people management is a
common mistake made by many HRM practitioners. The executive director of people and performance,
ING ­Australia, comments, ‘We spend a lot of time on metrics and that’s probably why we’ve got a seat
at the table; we’re not about coming in to give everyone a big hug and talking about the softer side
of HR .  .  . we gain more credibility by expressing ourselves in numbers’.46 HR managers will never
be accepted as strategic business partners until they fully understand the organisation’s business and
align high-performance HR strategies, policies and practices with business strategies (such as customer
satisfaction).47 According to Walker, managers ‘do not perceive people-related issues and initiatives to
be as important as financial, sales and other business concerns’.48 This is despite studies showing that
firms can benefit from having HR managers as part of their top management and that HR programs
have a positive effect on organisational performance.49 Australian research, for example, demonstrates
that better-performing companies have HR representation at board level.50 Consistent with this, Bartlett
and Ghoshal argue that to develop a sustainable competitive advantage, HR activities must be viewed
strategically with HR represented at top management level.51 Finally, a review of research studies by
Liu and others showed HRM added significant value via increased productivity, decreased employee
turnover and greater financial returns.52 Clearly, there is a need for HR managers to create a better
understanding among line managers of the valuable contribution to be made by HRM and to adopt
strategies to improve their relationships with line managers.53 Says Cascio, ‘It’s time for HR managers
to step up and be counted’.54 To do this, HR managers must have a vision for the organisation’s success,
make decisions based on hard data and accept responsibility for their decisions.55 Alas, according to one
critic, ‘HR is the corporate function with the greatest potential — the key driver, in theory of business
performance — and also the one that most consistently under delivers’.56

DOCTOR HR

Hi Dr HR
Do you think Australians are complacent when it comes to productivity improvement?

1.2 HRM and management


LEARNING OBJECTIVE 1.2 Understand the relationship between human resource management and
management, and describe approaches to human resource management.
HRM is management, but management is more than HRM. HRM is that part of management dealing
directly with people, whereas management includes marketing, management information systems,
production, research and development, and accounting and finance. Because the purpose of HRM
is to improve the productive contribution of people, it is intimately related to all other aspects of
­management. Managers manage people, and the management of an organisation’s human resources is
primarily a line or an operating management responsibility. The degree to which HRM activities are
divided between line or operating managers and the HR manager (and their departments) varies from
organisation to organisation. The precise balance between line and HR management is determined by
an organisation’s strategic business objectives, its culture and structure and the quality of its operating
and HR managers.57
A human resource specialist in one organisation, for example, may directly handle all negotiations
with unions, while in another organisation operating managers may take responsibility for all union
negotiations (the HR manager may have an advisory role or no involvement at all). Top management

6  PART 1 Introducing HRM


recognition of HRM’s effect on organisational performance and a belief that HR is too important to
be left to HR managers means that some line managers now compete with HRM specialists for HR
responsibilities.58 Recently, there has also been debate among HR experts regarding the shifting of
responsibility for some HR activities to other functions (for example, remuneration to the accounting
department).59 One survey, similarly, found that line managers have increased their role and responsibility
for HR matters (especially in occupational health and safety, recruitment and selection and human
resource development [HRD]) and that HR  managers have little or no influence over key decisions.60
Consistent with this, there is evidence indicating that line managers, rather than HR managers, have
become the organisation’s change agents and that HR managers are being marginalised.61 One CEO,
for example, sees himself as the primary architect of human resources, while at NAB line managers are
being trained as people managers.62
Research, however, suggests that the devolution of HR to line managers can lead to role ambiguity,
conflict, loss of credibility, reduced competence and execution difficulties. These problems,
furthermore, can be aggravated by HR managers resisting such changes because of fears of losing
their status and power.63 In contrast, another study suggests that the devolution of HR activities to line
managers improves the image of the HR department and sees HR less involved in administrative work
and more involved in strategic activities.64 Not surprisingly, the devolution of HR to line managers is a
controversial issue.
Adding to the debate is a recent trend for HR managers to incorporate other functions into their
portfolio of responsibilities; for example, corporate affairs, marketing, communications and business
strategy. Commonwealth Bank’s Group Executive Human Resources and Group Services, for
example, is responsible for HR, marketing and communications; QBE Insurance’s senior HR manager
is responsible for people and communications; and the Executive Corporate Resources, Bendigo and
Adelaide Bank’s responsibilities include people and performance, legal, technology, properties and
sourcing.65
Such expanded responsibilities have identified the HR manager as a core member of the management
team rather than an isolated professional specialist. Lawler, echoing this approach argues for an
integration of functions that drive organisational effectiveness and for HRM to assume a new identity.
The HRM function, according to Lawler, should become the organisational effectiveness function and
include HR social responsibility, communications, strategy, organisation design and sustainability.66
Unfortunately, HR too often fails to clearly articulate its purpose and value. For example, research
indicates that some companies have simply renamed their personnel function as ‘HR’ without any change
in its administrative focus or the adoption of a strategic role, and there is a significant gap between
rhetoric and reality.67 HRM practitioners who do not add value have quickly proved to be dispensable.
Organisations needing to trim overheads or reduce corporate flab cut HRM.68 Accountancy firm PKF, for
example, has shifted responsibility for HR back to its line managers and outsourced its administration. A
senior executive says, ‘it empowers people to deal with people-management issues directly without using
HR as a crutch’.69 Westpac, similarly, has commenced contracting out HR activities to outsourcing giant
Genpact.70 Job insecurity in times of economic downturn is a major source of stress for HR ­managers.71
Says Mercer: ‘Most human resource managers constantly feel the pressure that comes from being on a
company’s payroll without ever proving their worth in the company’s actual bread and butter business.
They do not thrive. For this reason, HR managers never ensure for themselves secure positions or career
progression’ and they remain absent from  the boardroom table.72 ‘Without being able to easily talk
about finance, marketing, customers, technology, competitors and business strategies’, says Ulrich, ‘HR
professionals will always be an afterthought.’73
In Japan, however, HR managers are generalists who have experience in other functions (such
as accounting and marketing). As a result, an appointment to HR is seen as a springboard to top
­management. This is in contrast to Australia and the United States where very few HR managers become
CEOs.74 Comments Ann Sherry, CEO of Carnival Australia: ‘My human resources experience makes me
a better boss. HR is a great training ground for business leaders.’75

CHAPTER 1 Strategic human resource management  7


Approaches to HRM
Two extreme theoretical approaches to HRM can be distinguished: instrumental HRM and humanistic
HRM.76 The instrumental (or hard) approach stresses the rational, quantitative and strategic aspects
of managing human resources. Performance improvement and improved competitive advantage are
­highlighted. It is supremely important to the hard approach to HRM to integrate HR policies and practices
with the organisation’s business strategy, with the emphasis being on human resource management.
In contrast, the humanistic (or soft) approach, while still emphasising the integration of HR policies
and practices with strategic business objectives, recognises that competitive advantage is achieved
by employees with superior know-how, commitment, job satisfaction, adaptability and motivation.
Employees are seen as proactive contributors to the organisation’s strategic business objectives rather
than as passive units to be allocated rationally along with any other factor of production. Consequently,
the soft approach emphasises employee development, collaboration, participation, trust and informed
choice. The aim is to generate resourceful employees through HRM.

NEWSBREAK

Keeping HR in top form BY JIM LEFEVER


I am going to go out on a limb and say that HR as a function within the corporate environment is
confused, fractured in its approach and often misunderstood by its clients and practitioners. This is at a
time when the opportunity to shine has never been brighter, yet it is at risk of failing to become all that it
should be. I believe that the only way for us to fix this is for HR to manage and treat itself as a business,
not just a corporate function.
Ever since David Ulrich posited the idea of the HR champion and challenged us to define the value
created by HR, and others subsequently expanded on those ideas, the profession has struggled to
create a model that will actualise the concepts. It constantly wavers backwards and forwards between
the three competing imperatives of commercial enablement, employee engagement and legislative/­
corporate compliance.
The reasons behind this are many but I believe they can be summed up in a simple analogy: we’re
trying to build the plane while flying, without any blueprints, while at the same time providing meal
service to multiple classes of passengers; all with different needs and who are continually changing
seats. Oh, and finally, every plane in the fleet is designed differently according to their task, route, flying
time and destination. Having acknowledged that, we have to stop the metaphorical hand-wringing and
navel gazing and start doing something about it.
If we look at HR as a business, certain elements become clear. A successful business with mul-
tiple complementary product and service lines needs to have a consultative sales and solution-delivery
approach to providing outcomes aligned to the customer’s strategy. It should undertake detailed and
regular reviews to identify customers and their needs, and it should regularly review its services and
solutions so that their ROIs can be demonstrated and improved upon.
Every business needs a brand and every tribe a totem. HR suffers from a toxic brand in its market.
How often are we called ‘Human Remains’ or ‘Parties and Cakes’? As a business, we need to define
who we are, what we stand for and how we will accomplish our mission. HR faces stiff competition from
outside vendors and if we don’t improve our brand image and reputation, we will increasingly lose busi-
ness to companies that understand what customer service and accountability are all about.
The ‘HR business’ I propose, follows a standard flow: define, design, build, deploy and run. This
begins with the identification and segmentation of customers along with definition and refinement of the
customer’s needs and desired outcomes. Next, we move to the design and build of solutions to meet
those outcomes. Having built the solutions, we focus on optimising the delivery while managing percep-
tions and expectations through strong customer-relationship management. Finally, using monitoring and
feedback, formal and informal, we continuously improve the solution portfolio.
On top of the business flow, we overlay a complementary structure comprising a core capability and
partner network. And we include the following:
• business partners aligning HR and business strategies

8  PART 1 Introducing HRM


• workforce planning/strategic resourcing, taking demand signals from the business and filling the
talent pipeline
• HR capabilities/lines of business by providing specialist support and programs
• solution delivery, targeting cross-functional project implementation
• employee relations, covering HR operations and IR
• the HR help desk, dealing with customer queries and case management.
In this business, there will always be a need to balance the tension between the strategic and the
transactional; the solution delivery with the day-to-day routine. We fulfil the first by ensuring that there
is a single point of contact for the delivery of each solution to the customer. That individual qualifies the
need with business partner and leadership and manages expectations and achievement of outcomes,
using all the HR functions for design and implementation of the solution. We manage the operational by
supporting a lean HR operations group with a tiered customer engagement model. Customers begin by
gaining access to the HR intranet/ HRIS for information, forms and workflow, before moving to the HR
help desk for query resolution, then case management for specialist advice and, lastly, into an esca-
lation process as appropriate.
Finally, we manage what we measure. So as a business, we have to be smart about what metrics we
choose and ensure that they are aligned to the corporate aims. To that end, the top HR metrics should
be a return on people employed; value added per person; cost of turnover; average cost per person;
and leave liability.
HR must become a business that adds value. Not because it is a ‘nice to have’ but because if we
do not, then HR will become further marginalised and that seat we want will be under, not at, the table.
Source: Lefever, J. (2013) ‘Keeping HR in top form’, HRMonthly, May, p. 10.

The hard approach clearly risks creating industrial conflict. Perhaps less obvious is that the soft
approach can also create union problems. Trade unions, for example, may have serious objections on
ideological and practical grounds to performance appraisal, pay-for-performance and incentive systems
that reflect an individualistic rather than a collectivist approach to the management of the workforce.
Furthermore, HRM’s stress on mutual interest, cooperation, communication and other soft aspects may
be seen as nothing more than cynical manipulation of workers and a means to weaken the power of the
union. Consequently, HRM and trade unions may be regarded as incompatible, with HRM viewed as
just ‘old wine in a new bottle’.77 In practice, it appears that HR managers are well able to reconcile both
roles.78 Tiffany Green, a HR Practitioner of the Year, for example, states ‘I have developed a reputation
for representing what I believe to be the right thing for the business, while exhibiting fairness for
employees, even if it means challenging those above me’.79

1.3 The multiple roles of the HR manager


LEARNING OBJECTIVE 1.3 Describe the HR manager’s role.
Personnel administration, with its focus on records maintenance and employee recreation activities
(‘picnics and payroll’), is generally regarded as a low-status cost centre, a repository for the organisation’s
‘dead wood’ and irrelevant to the success of the business. As a result, HR managers, whatever their
individual ability, too often suffer the stereotypical image of being ‘harmless people who spend their
time worshipping policy manuals, arranging social activities and generally accomplishing little of
fundamental importance’.80
Rapid change and increasing competitive pressures, however (see figure 1.2), have seen a more
complex and demanding HR role emerge (characterised by increased responsibilities, greater visibility
and direct business impact) (see figure 1.3).81 A vice-president of human resources, for example, says,
‘Successful HR leaders now must have a vision for their company’s success, make hard decisions based
on empirical evidence and accept responsibility for the results of those decisions’.82

CHAPTER 1 Strategic human resource management  9


Industrial Workforce
Globalisation Culture Remuneration Nature of work
relations demographics

• Reduced job security • Ongoing transfer of Ongoing push for a • More elderly workers • Increasing complexity • More casual and
• Demand for greater skilled and unskilled corporate culture in the workforce as programs required part-time work
labour flexibility work overseas which promotes: • Increasing numbers for domestic and • Reduced job security
• Search for foreign • Trust of highly skilled international
• Cost pressures • More independent
talent to work on female workers employees and
challenge the • Employee ‘free agent’ workers
projects in Australia permanent and
traditional work engagement • Increasing numbers • Technology continues
contingency workers
week, penalty rates • Increasing worker • Flexibility of low-skilled male to simultaneously
and wage relativities flows (in and out) of workers • Ongoing community
• Attraction and de-skill many jobs
Australia pressures regarding
• Increasing industrial retention of talent • More women in and eliminate many
senior executive
unrest as technology, • More diverse professional and mundane jobs
• Innovation remuneration
competitive pressures workforce managerial positions • Workers expected to
and global outsourcing • Performance • Focus on improving
• More knowledge be more flexible,
eliminate whole the connection
work outsourced • Collaboration independent and
categories of jobs between pay and
locally or overseas entrepreneurial
performance
• Pressure to adopt via the web • Workers expected to
2-tier pay systems relocate to where the
• Trade union push for jobs are
greater labour • Increasing numbers
market regulation of international/
• IR environment interstate/regional
dominated by conflict commuters
as employers and • Separation of
trade unions compete work–leisure time
for greater workplace becoming
control increasingly blurred
• Unionisation of
private sector workers
continues to decline
• Increasing evidence
of illegal and corrupt
practices
HR MANAGER

Technology

Activity-based • Robots replace


working human labour
• Increasing rates of
skill and job
• Pressure to reduce Productivity obsolesence
rental costs Displaced • Reduced need for
• Challenge to traditional workers Legal workers to be
physically located in
management style • Focus on HR activities an office or factory
• Workforce flexibility with the greatest • Creates almost
necessary • Personnel without strategic impact instant demand for
• Increasing workplace
skills and a strong • Pressure to improve new skills and ways
• Reliance on regulation
work ethic become a of working
sophisticated employee productivity
permanently • Demand for HR • Destroys more jobs
technology and flexibility
marginalised managers to have than it creates
• Requires a underclass legal expertise • Demand for HRM to
• Rise of big data
collaborative culture demonstrate it adds
• Political pressure for • Rise in unfair analytics to determine
value
• Performance organisations to dismissal and adverse
patterns of behaviour
assessment on assume greater action claims • Adoption of world
contribution and best practices and predict the
responsibility for • Increasing legal risks
output and not on likelihood of events
employee education associated with HR • Focus on creativity
presenteeism and training decisions and innovation • Emergence of e-HRM

FIGURE 1.2 HR changes and challenges

10  PART 1 Introducing HRM


Change and cultural
Talent manager Employee advocate
transformation catalyst

• Initiate and monitor • Attract, develop and retain • Understand employee


change and cultural core employees needs and point of view
transformation • Identify and track high • Act as employee voice
• Promote and audit performers not currently in management decision
employee engagement employed by the making
• Promote a high organisation • Use technology and social
performance culture • Manage data on local and media to access employee
• Promote a high international talent to be voice and promote employee
performance culture employed on project teams engagement
receptive to new technology • Act as talent spotter/scout
• Be the catalyst for • Use talent analytics to
introducing e-HRM manag data on local and
international personnel to be
employed on project teams
• Act as a tech savvy talent
spotter/scout

Organisation Board and senior executive


ambassador resource counsellor

• Represent organisation • Act as a confidant and coach


in a competent and • Act as an adviser on senior
HR MANAGER
professional manner
appointments, HR trends and
• Market HR to the rest
issues, introduction of e-HRM
of the organisation
and ethical issues

Strategic partner Legal adviser HR functional expert

• Contribute to strategy • Ensure legal • Speak and act with authority


development compliance re HR on HR issues, HR analytics,
• Participate in strategy activities ethical issues
execution • Monitor legal • Create value
• Exploit big data, the cloud hazard risk • Measure HR performance
and social media to • Raise ethical and re its efficiency and
enhance HR‘s strategic governance issues effectiveness
contribution and influence

FIGURE 1.3 The multiple roles of the HR manager

Today’s HR manager, as a result, is expected to understand the business as well as any line manager, and
to be their equal in contributing to the organisation’s competitive success.83 To do this, the HR manager
must be able to develop and implement HR strategies that support the organisation’s business objectives,
improve productivity and enhance employee wellbeing.84 This shift, however, has been criticised for
marginalising employee-focused HRM responsibilities and downgrading ethical considerations. It is
also argued that the change from a pluralist approach to people management in favour of the unitarist
approach of HRM has meant HR managers have become too management focused, to the detriment
of employees.85 According to critics, this shift has created role conflict, damaged HR creditability and
challenged HR’s role as an employee advocate (especially in times of economic stress). As a consequence,
it is asserted that the HR practitioner may face a personal ethical dilemma as HR policies and practices
reflect more and more ‘hard’ HRM — emphasising organisation as opposed to employee needs.86 There
is, however, considerable evidence to show that high-performance HR policies and practices enhance

CHAPTER 1 Strategic human resource management  11


both the image of HR and organisational performance, and have positive effects on employee capability
and motivation (which translate into a more competitive workforce and successful organisation).87
Finally, recent research shows that employee-centred and strategic roles are not necessarily opposed and
can be successfully managed by HR professionals.88
The changes in the HR manager’s role have also launched an expansion of the HRM portfolio  of
responsibilities to include other service activities (for example, public relations, communications and
corporate services) and/or line activities such as finance and marketing. It is worth noting that other
functional heads, such as chief financial officers, chief information officers and chief legal officers,
increasingly see HR as part of their natural remit.89 Some experts predict that people analytics may
become separate from HR as HR becomes more data driven (this is especially likely if HR personnel fail
to develop the necessary IT skills to fully exploit big data).90 Advances in technology also mean that HR
activities can now be more easily outsourced or undertaken by line managers.91
As HRM becomes more business oriented and strategically focused, a number of key roles can be
identified (see figure 1.3). The emergence of the chief human resource officer (CHRO) position, however,
has made the initiating and driving of strategy perhaps the most fundamental of HRM roles (see figure 1.4).92

HR manager as a key member of the management team


• Know the business — understand the organisation, its finances, its people, its products and
services, its customers and its business environment.
• Speak ‘bottom-line’ language — demonstrate how HRM improves business performance and
reduces costs.
• Add value — show how HRM can help line managers to better achieve their performance objectives.
• Embrace technology — show how e-HRM and big data analytics facilitate employee engagement,
organisation performance and strategy development.
• Ethical — be an exemplar of ethical behaviour.
• Focus — emphasise HR activities with the greatest strategic impact.
• Risk — understand and communicate HR risk.
• Measure performance — establish clear HRM objectives and measure their achievement.
• Provide professional advice — understand and articulate HRM know-how.
• Attain managerial skills — be a competent manager prepared to accept assignments outside of HRM.
• Make the line managers’ job easier — avoid administrative trivia and a bureaucratic ‘police’ role.
• Be professional — speak up on key issues with an independent voice.

FIGURE 1.4 Improving HRM’s status with line management

Strategic partner
‘HR professionals’, says Ulrich, ‘play a strategic partner role when they have the ability to translate
business strategy into action.93 This facilitating role allows the HR manager to become part of the
business team. To achieve this, the HR manager must be able to ask appropriate questions and contribute
to business decision making. Consequently, the HR manager must have business acumen, a customer
orientation and an awareness of the competition to be able to link business strategies to HR policies and
practices. Alas, it seems that HR managers do not always fulfil this role of strategic partner. Research
suggests, for example, that only a minority of CEOs involve their HR managers in formulating business
strategy and that many Australian HR managers remain on the periphery of strategy formulation.94
Australian firms also lag behind overseas firms in the adoption of sophisticated HRM policies and
­practices.95 This, despite clear evidence that inappropriate HR policies and practices lead to employee
alienation, reduced motivation and labour unrest.96
More positively, there is evidence to indicate that there is a growing awareness of the need for HR
managers to become actively involved at the strategic level and recognition that organisations that have
a CEO who appreciates the significance of HRM have a competitive advantage.97 The rise of the CHRO
role has also seen HR embedding itself more and more in the business operations of the organisation

12  PART 1 Introducing HRM


and becoming more strategic in its focus, but less aligned with the HR profession.98 As a result, some
tensions have arisen among the ranks of HR practitioners because of the perceived downgrading of
transactional HR work and the belief that a strategic emphasis sacrifices the interests of employees.99
Finally, the ‘low status, low pay’ traditionalists can regard ‘high pay, high status’ business-oriented and
strategically focused HR managers as competitors who are too closely identified with management.100

HR functional expert
To become functional experts, HR professionals must be able to re-engineer HR activities through
the use of technology, rethink and redesign work processes, seek the continuous improvement of all
organisational processes, see HR as creating value and measure HR results in terms of efficiency (cost)
and effectiveness (quality).101 The HR manager, therefore, is a champion of organisational performance
who contributes to strategy development, business innovation, customer service and the development of
the organisation’s leaders.102
The functional expert is aware of current HR and related research and specialist information sources
(including big data analytics), and implements best practice HR to improve decisions and deliver results.103
The HR manager should be able to demonstrate the connections between employee attitudes and behaviour,
and business issues and outcomes (for example, how employee engagement can drive performance, and
how training can lead to employee feelings of improvement, resulting in increased customer satisfaction).104
Research indicates that the competency levels of HR managers in high-performing firms are significantly
higher than those of HR managers in low-performing firms.105 Research also shows that the IT knowledge
of HR professionals is (at best) modest, which limits their ability and motivation to introduce and extract
the full HR benefits offered by e-HRM.106 The new focus on technology is reshaping HR expertise
requirements and is demanding that those entering the HR profession think about the skills they will need
in a business world dominated by the cloud, big data analytics and social media.

Employee advocate
The HR professional must be able to relate to and meet the needs of employees. This can be achieved,
says Ulrich, by being the employees’ voice in management discussions, by being fair and principled, by
assuring employees that their concerns are being heard and by helping employees to find new resources
that enable them to perform their jobs successfully (for example, learn how to set priorities, eliminate non
value-added work, clarify goals, simplify complex processes, become involved in decision making, increase
commitments, and share in economic gains).107 ‘These activities’, says Ulrich, ‘will help employees to
contribute more fully because they will have the competence to do a good job and the commitment to do
it right’.108 It is essential that HR be perceived as a safe place to go where a fair hearing for employees
is guaranteed.109 People with ‘small jobs and small voices’ must be able to count on HR to protect and
defend them when they are being inappropriately treated by management or their fellow employees.
The dual responsibility of strategic business partner and employee advocate, however, can create
tensions and the HR manager must learn how to balance the demands of both.110 It is incumbent on the
HR manager to consider employee responses to any HR initiatives designed to enhance organisational
performance (for example, not all employees desire participation in decision making, regarding it simply
as extra work for the same pay).111 Failure to do so will see HRM facing a loss of trust by losing sight of
the ‘needs, aspirations and interests of the workforce’.112 Ignoring employee-related outcomes may also
result in lower job satisfaction, lower commitment and reduced performance, which, in turn, negatively
affect organisational performance.113

Agent for change and cultural transformation


The HR manager needs to act as a change agent, serving as a catalyst for change within the ­organisation.
This can be achieved by leading change in the HR function and by developing problem-solving
communication and influence skills. In short, the HR manager must know how to manage change.114

CHAPTER 1 Strategic human resource management  13


The HR function must also change. It has to be transformed to deal creatively and pragmatically with
emerging challenges. By accomplishing new roles and acquiring new competencies, the HR function
will become more critical and strategic than ever before.115 Gloet, for example, argues that one way
for HRM to reinvent itself is via the development and maintenance of learning environments, where
knowledge creation, sharing and dissemination are valued.116
Although the CEO and top management are the ‘culture champions’, in practice, it is the HR
manager who is likely to spend most time monitoring and designing policies and practices to ensure
that the desired culture is established and maintained.117 The HR manager is the one who should initiate
­discussions with the CEO and top management about the need for cultural change (especially when the
‘real’ culture is straying from the ‘stated’ culture).

Talent manager
The recognition that people make a difference to organisation performance means that the effective
management of talent is vital to organisational competitiveness. The focus of the HR manager therefore
centres on identifying, hiring and developing the human resources critical to the organisation’s success.
The role calls for the HR manager to target and establish dossiers on potential candidates (similar to talent
scouts in football clubs) who possess the knowledge, skills and abilities required by the organisation (now
or in the future) to achieve its strategic objectives. This involves the HR manager being knowledgeable
about the organisation and its short- and long-term business objectives, labour markets, the characteristics
and locations of talented people and their current organisations. Once identified, the HR manager will
need to develop relationships with targeted individuals, university faculties, executive search firms and
recognised industry mentors. An internet presence (especially via social networking sites) can be used
to attract and track the progress of desirable candidates (and to promote the organisation as an employer
of choice).118
The HR manager’s development role centres on ‘wealth created through and by people in the
organization.’119 This is particularly important in the case of knowledge workers where the difference
in performance can be great. For example, differences of twenty- to fifty-to-one are common. Microsoft
claims that their top software developers are 10  000 times more productive than their average software
developers.120 The recognition that it is high-quality people who make the difference to business success is
forcing HR managers to pay more and more attention to employees who add value and to quickly remove
those who do not.121 By building skill levels the HR manager allows individual employees to benefit
from increased job satisfaction and improved job prospects while creating value for the organisation.122

Organisation ambassador
The HR manager is now expected to be a role model for everything the organisation stands for. The values,
culture, strategies and the nature of the business itself must be clearly understood and communicated.
It is essential that the HR manager is seen as a knowledgeable resource capable of representing the
organisation with employees, trade unions, government officials, customers, the media and the general
community. It is a given that HR managers must be capable of marketing the value of the HR function
within their organisations.123

Board and senior executive resource


Apart from financial acumen and knowledge of the business, the HR manager should be at the forefront
in contributing to the board of directors’ understanding of how HR policies and practices promote
business success and mitigate risk.124 The HR manager should be regarded as a valued adviser on trends
(for example, the ageing population) and issues (for example, executive pay, executive performance
and succession planning). The HR manager must also be prepared to tackle problems of corporate
governance and ethical issues, which risk being downplayed or ignored by the board and senior
management.125 Finally, the HR manager should be able to act as counsellor, confidant and coach to the

14  PART 1 Introducing HRM


senior executive team (including assistance in the resolution of interpersonal or political conflicts).126
Such a role obviously requires great discretion and is not without risk.

Legal adviser
The increasing legalisation of the workplace means that HR managers must be knowledgeable about the
law. The complexities and pitfalls associated with employment termination, EEO, OH&S and FWC are
such that ignorance of the law places the HR manager at risk of prosecution, professional embarrassment
and career meltdown.127 Such are the emerging legal hazards for HR practitioners that the Australian
Human Resources Institute (AHRI) has introduced a scheme of professional indemnity insurance for
its members.128 HR practitioners can now be prosecuted and held accountable for incompetence, wrong
advice and failure to comply with workplace laws. HR managers clearly have a legal duty to ensure
that there is organisational compliance to workplace laws.129 In response to the complex regulatory
environment (which is increasingly involving activities in the HRM portfolio) some organisations are
appointing legal professionals as HR managers.130 This suggests a re-examination of the education,
academic qualifications, knowledge, skills and abilities of HR practitioners may be required.

1.4 HRM activities


LEARNING OBJECTIVE 1.4 Understand the human resource management activities performed in
organisations.
HRM involves the acquisition, development, reward and motivation, maintenance and departure of an
organisation’s human resources. Certain key HRM activities must be undertaken to satisfy these aims:
each activity is interrelated and together they represent the core of HRM.
Job analysis defines a job in terms of specific tasks and responsibilities and identifies the KSAOs
and qualifications needed to perform it successfully. The products of job analysis are job descriptions
(describe the job) and job specifications (describe the type of person needed for the job). Job analysis
answers basic questions such as: Which tasks should be grouped together and considered a job? How
should a job be designed so that employee performance is enhanced? Job analysis is significant because
it represents a basic starting point for HR planning and other HR activities such as recruitment, selection,
and training and development. Job analysis, for example, facilitates the development of valid selection
systems, helps protect from legal challenge and enhances employee perceptions of fairness.131
Human resource planning, or employment planning, is the process by which an organisation
attempts to ensure that it has the right number of qualified people in the right jobs at the right time. It
does this by comparing the present supply of people with its projected demand for human resources.
This comparison produces decisions to add, reduce or reallocate employees internally. HR planning is
used to achieve:
•• more effective and efficient use of human resources
•• more satisfied and better developed employees
•• more effective equal opportunity planning.132
Recruitment is the process of seeking and attracting a pool of applicants from which qualified
candidates for job vacancies within an organisation can be selected. A job vacancy may be filled from
within or outside the organisation. Some of the different methods used to recruit employees include job
posting, newspaper advertising, social networking sites and executive search.
Selection involves choosing from the available candidates the individual predicted to be most likely
to perform successfully in a job. Steps in the selection process include computer screening, reviewing
applications, psychological testing, employment interviewing, reference checking and completing a
medical examination. Based on the information gathered, a selection decision is made.
Performance appraisal is concerned with determining how well employees are doing their jobs,
communicating that information to the employees and establishing a plan for performance improvement.
The information generated by the appraisal process is also used for linking rewards to performance,

CHAPTER 1 Strategic human resource management  15


identifying training and development needs, and making placement decisions. Research shows that
performance appraisal (when perceived as accurate and fair) is a practical tool for employee motivation
and development.133 Other research indicates that performance appraisal can have a significant effect
on job satisfaction, commitment, turnover intentions, trust, organisational citizenship and behaviour.134
Human resource development activities focus on the acquisition of the KSAOs required for
employees to learn how to perform their jobs, improve their performance, prepare themselves for more
senior positions and achieve their career goals. These activities substantially enhance employee (and
organisational) knowledge, skills competitiveness and capacity to adapt and change. They are also a
powerful communicator that the organisation is interested in the wellbeing of its employees.135
Career planning and development activities benefit both employees — by identifying employee
career goals, possible future job opportunities and personal improvement requirements — and the
organisation — by ensuring that qualified employees are available when needed.
Employee motivation is vital to the success of any organisation. Highly motivated employees tend to
be more productive and have lower rates of absenteeism, turnover and lateness.136 Employee motivation
is concerned with why people do things and why one employee works harder than another.
Change and cultural transformation are the inevitable results of globalisation, new technology and
competitive pressures forcing organisations and employees to become more innovative, more flexible,
more skilled and more productive. Cultural transformation is key to making things happen and changing
the way people work.137 Employees who ‘fit’ with the organisation’s culture are more likely to experience
confidence and satisfaction in their work. Employees who don’t ‘fit’ are more likely to withdraw,
suffer stress and experience little job satisfaction.138 How change and culture are managed clearly
affects organisation performance and employee quality of work life.139 Organisational cultures high on
adaptability and involvement, with strong core values and a clear strategic direction, for example, are
more likely to achieve positive measureable results from the introduction of the balanced scorecard (see
chapter 8 on managing performance).140 Likewise, corporate cultures supportive of work–life balance
produce less strain on employees, achieve improved job performance, and have reduced absenteeism and
labour turnover.141
Remuneration refers to the cash rewards, such as the base pay, bonuses, incentive payments and
allowances, which employees receive for working in an organisation. Controversy exists over the
precise motivational impact of cash rewards, but there is no doubt that they are an important mainspring
in motivating employees and reinforcing employee behaviours demanded by the organisation’s
business strategies. Research indicates a positive relationship between pay systems and organisational
performance.142
Benefits are sometimes referred to as indirect or non-cash remuneration. They include superannuation,
life insurance, disability insurance, medical and hospital insurance, long-term sickness and accident
disability insurance, annual leave, sick leave, maternity leave and tuition refund programs. By improving
the quality of work life, benefits reinforce the attractiveness of an organisation as a place to work and
emphasise that it cares about its employees.
Industrial relations (IR) (also called employee relations or employment relations) in this text deals
primarily with employee attitudes and behaviour and the relationships between an organisation and its
employees. If relationships are characterised by open communication, fair and equitable HR policies
and practices, and high work and life satisfaction, there will be trust, cooperation, commitment and high
performance. However, if they are characterised by poor communication, unfair and discriminatory HR
policies and practices, and low work and life satisfaction, there will be conflict, mistrust, low commitment
and poor performance.143 Industrial relations traditionally takes a broader perspective, involving
governments, industrial tribunals, employer associations, trade unions, industrial law, awards, terms and
conditions of work, grievance procedures, dispute settlement, advocacy and collective bargaining.144
Effective health and safety programs help guarantee the physical and mental wellbeing of employees.
Organisations are required to provide a safe work environment free from physical hazards and unhealthy
conditions.

16  PART 1 Introducing HRM


Learning to manage diversity and successfully integrate Australia’s multicultural population into
the workforce to maximise the contribution of all employees represents a special challenge to HR
managers. Australia is one of the most culturally diverse countries in the world, with almost 25 per cent
of its population coming from non-English-speaking backgrounds. There is growing recognition that
multicultural HR policies and practices provide significant benefits by lessening the time spent explaining
instructions and directions, reducing mistakes caused by misunderstanding, and reducing industrial
accidents and workplace tensions caused by poor communication. Some organisations, for example,
have reported productivity increases of up to 20  per  cent as a result of introducing English language
classes.145 Recent research suggests that Australian employers have embraced a ‘legalistic compliance
approach’ to diversity management and do not view it as a source of competitive advantage.146
Discrimination, for example, has been associated with reduced enthusiasm and engagement, decreased
job satisfaction, burnout, lower employee wellbeing, negative employee perceptions of organisational
justice and employee physical withdrawal (lateness, absenteeism and intent to quit).147

1.5 HRM, productivity and organisation performance


LEARNING OBJECTIVE 1.5 Understand the role of human resources in organisational productivity and
performance.
Leading organisations use a variety of performance measures (such as customer satisfaction, market
share, product quality and profitability) to evaluate their performance. HRM performance can be similarly
assessed (for example, by measuring absenteeism, labour turnover, job satisfaction and employee
engagement). A common indicator of organisation and HRM performance is productivity. Productivity
can be measured at the individual, group and organisation levels.148 In basic terms, productivity relates
to the output of goods and services divided by its input. Productivity can be improved by using the
same (or lower) level of inputs, to produce the same (or higher) level of outputs. Unfortunately, while
the concept is simple, the accurate measurement of productivity, in practice, is both more complex
and difficult.149 Two approaches can be employed  — total (or multi) factor productivity and single
factor productivity. Total factor productivity is the ratio of total outputs to total inputs (labour, capital,
materials, technology and energy).
Total factor productivity:
output
labour + capital + materials + technology + energy

Single factor productivity measures the ratio of outputs to a single category of inputs. Labour
productivity, for example, can be measured as follows:
Labour productivity:

output
labour costs
and
output
number of employees

While labour productivity can be easily measured, it may be influenced by changes in one or more
of the other factors (for example, new technology). Managers can therefore easily misinterpret the real
reasons for a productivity change.150
Productivity improvements are necessary for the economy and the organisation to be competitive
(see figure 1.5). Improving labour productivity clearly relates to HRM. Employee recruitment, selection
and retention determine the quality and availability of employees. HRD gives workers the know-how

CHAPTER 1 Strategic human resource management  17


and skills to perform. Remuneration programs motivate employees to perform. Employee engagement
programs foster job satisfaction, commitment, loyalty and effort. Organisations can improve labour
productivity by giving employees more knowledge, better skills, more resources and better designed jobs.

Productivity

Productivity increase Productivity decrease

+ Produce more at a lower cost in – Produce less at a higher cost in


less time more time
• Economy flourishes • Economy stagnates or declines
• Higher standards of living • Lower standards of living
• Organisations are competitive • Organisations are uncompetitive
• Higher pay • Lower pay
• Organisations are more profitable • Organisations are less profitable
• Higher government tax revenues • Lower government tax revenues
• More money available for education • Less money available for education
and research and development and research and development
• More expenditure on equipment • Less expenditure on equipment
and technology and technology
• More job opportunities • Fewer job opportunities
• Domestic investment focus • Overseas investment focus
• Less pressure to outsource • More pressure to outsource
• Lower labour unit costs • Higher labour unit costs

FIGURE 1.5 Productivity outcomes

Unfortunately, some organisations are unable to realise the full benefits of such HR actions because of
an IR climate dominated by conflict, red tape, a poor work ethic, deficient education and skills training,
and substandard management.151 Poor-quality management, alas, is often a prime reason for productivity
problems. Unions, in fact, regard the poor quality of Australian management as the missing link in
addressing Australia’s productivity challenge.152 One study, for example, found that, compared with the
rest of the world, most Australian managers (and workers) are not highly educated and are poor people
managers.153 Bad management according to the Australian Workers Union (AWU) leads to a lack of
innovation, underuse of workers’ skills and an inability to adapt to change.154
Improving labour productivity requires improving employee–management relationships. High-
performance HR work systems (HPWS) that make work more satisfying and rewarding lead to increases
in employee discretionary effort and productivity. Organisations that promote skills development,
employee participation, high relative pay and job security similarly achieve lower turnover rates and
higher sales growth.155 Critics of high-performance HRM, however, argue that increased employee
discretionary effort is not the product of higher job satisfaction and commitment but the result of work
intensification and management pressure (leading to increased worker stress and poorer work–life
balance).156 Other research shows that while enriched jobs are associated with employee wellbeing (as
measured by job satisfaction and contentment) and that employee voice is positively associated with job
satisfaction, HPWS are also related to increased worker anxiety (caused by greater management pressure
on employees to improve their performance).157
Macky and Boxhall also argue that high-performance work systems are associated with higher job
satisfaction, but when management pressures employees to work longer hours and they feel overloaded

18  PART 1 Introducing HRM


workers are likely to experience greater job dissatisfaction, higher stress, greater fatigue and poorer
work–life balance. Macky and Boxhall conclude that HPWS, if used to intensify work, may produce
organisation gains but have a negative effect on workers. In contrast, HPWS that promote and reward
employee involvement are likely to be beneficial to workers. Greater empowerment that allows employees
to work smarter but without undue pressure to work harder will enhance employee wellbeing.158
In summary, while research suggests strong links between HPWS and positive worker attitudes
and behaviour, some results remain contradictory. The precise relationship between productivity and
HPWS — which specific systems or combination of systems are the most significant (and for which
employees and for which organisations and in what situations) — remains unclear.159
Guest, as a result, says that it is impossible to assert with any great confidence exactly what is the
relationship between HRM and organisation performance.160 HR managers, therefore, while recognising
that high-performance HRM may bring employees many advantages (such as increased autonomy and
involvement) need to ensure that such benefits are not outweighed by disadvantages (such as work
intensification, insecurity and stress).161

HRM and risk


HR managers increasingly face pressure to focus more and more on risk management. Protection
of themselves, their organisations and employees from financial loss, 24-hour social media scrutiny,
negative publicity, physical attack, sabotage, security breaches and legal action are ever present. Dealing
with such risks means that HR managers must frequently take action without knowing (with complete
certainty) what the outcomes will be.
The danger is that HR managers, as a result, may become risk averse and fail to see opportunities and/
or take appropriate action. A balanced approach to risk taking is required if HR managers are to enhance
the organisation’s chances of gaining a competitive advantage.162 The HR manager should be able to
understand how and where things may go wrong and the extent of any negative effects. The probabilities
of something happening, therefore, need to be thoroughly assessed to minimise uncertainty. HR managers
also need to monitor the success of both their risk assessments and their subsequent actions. HR managers
(and organisations) that proactively manage risk are less crisis prone and are better placed to deal with a
crisis should it arise. Research also indicates that risk is best managed in organisations that have cultures
that emphasise flexibility and innovation and get their employees involved and committed.163
Some examples of HR risks are listed below.
•• Behaviour risk — are our managers ethical? Do they set a good example? Do our remuneration
systems reward behaviours our organisation wants to promote? What is the risk of employee bad
behaviour to our public image?
•• Reputational risk — are our human resource information systems (HRIS) secure? Are we able to
identify rogue employees? Does our culture promote good governance?
•• Security risk — do we have emergency plans in operation? Are we prepared for a terrorist attack? Are
our facilities secure?
•• Culture risk — are we too focused on political correctness? Is it shutting down freedom of expression?
Do we tolerate diversity of opinion? Is there the risk of ‘group think’?
•• Talent risk — are we at risk of losing our top performers? Are we investing sufficiently in our people?
Do our employees have the right skills? Are our people engaged? Do our selection systems minimise
the risk of making a wrong hire? Are we hiring the right people? A recent Lloyd’s of London risk
survey listed ‘talent and skill shortages’ as a major risk facing organisations.164

1.6 Ethical issues and HRM


LEARNING OBJECTIVE 1.6 Discuss the ethical issues facing human resource management.
HR managers today are increasingly faced with complex, ambiguous and conflicting issues involving
questions of morality and standards of behaviour. What is good or bad or right or wrong? At times, there

CHAPTER 1 Strategic human resource management  19


may be no clear-cut distinction between what is ethical or unethical. For example, is management’s
prime responsibility to shareholders (the owners of the business) or employees? Organisations must
change to survive yet this may result in employee terminations, job insecurity and stress. Is it ethical
for companies to require employees to use English at work? Should top managers receive performance
bonuses while employees lose their jobs? Should companies monitor employee email? In developing
economies, is the use of child labour acceptable?

DOCTOR HR

Hi Dr HR
What responsibility does an HR professional have for maintaining ethical standards within an organisation?

Factors that influence ethical behaviour include a person’s personality and national culture, the situation
and its importance to the individual, the corporate culture and the existence of clear, unambiguous
organisational policies and codes of conduct (see figure 1.6). Failed insurer HIH had a culture of fear
that led to cover-ups, tolerance of incompetence, misuse of company funds, misinformation, abrogation
of responsibility and corruption.165 Convicted former CEO Ray Williams gave out $10  000 gold watches
as gifts, installed a marble and gold bathroom in his office, and gave favoured staff $400  000 interest-
free home loans.166

Corporate Principles of Conduct


The Company has adopted Corporate Principles of Conduct which outlines ethical standards to be
followed by Directors and Senior Executives of the Company when carrying out their responsibilities
with a view to the Company achieving its aims. Under the Principles, Directors and Senior Executives
will:
• conduct business in good faith in the best interests of the Company with efficiency, honesty and
fairness;
• perform their duties with the utmost integrity and the standard of care and diligence expected of an
organisation of the highest calibre;
• treat others with dignity and respect; and
• not engage in conduct likely to have an adverse effect on the reputation of the Company.
Source: Mirrabooka Investments Ltd (2014) Annual report 2014, p. 20.

FIGURE 1.6 Mirrabooka Investments Ltd Corporate Principles of Conduct

Corporate wrongdoing
Corruption now poses a serious challenge for many societies and is present in Australian companies,
trade unions, political parties and public organisations.167 In 2014 (for the first time), Australia was not
listed in the top 10 cleanest countries by Transparency International. The lack of a Federal Independent
Commission against Corruption (ICAC), an absence of transparency in government contracting and
soft penalties are claimed to have contributed to Australia’s downwards slide.168 Australia compares
badly with Canada, the United Kingdom and the United States, which have tighter regulations and more
prosecutions. In Australia, while having anti-corruption provisions, the laws are seen as weak, as not
being aggressively enforced and carrying anaemic penalties. The Australian Securities and Investments
Commission (ASIC), for example, has been described as a toothless tiger, too slow to act, lacking
transparency and not interested in taking on vested interests.169 The Australian government’s zero
tolerance policy towards corruption has, likewise, been criticised for failing to recognise the reality of
doing business in some countries where shonky deals are regarded as standard business practice.170

20  PART 1 Introducing HRM


Compliance culture
Although the risks associated with corrupt and unethical behaviour are significant for both individuals
and organisations (and especially so when doing business internationally) a culture of compliance
(which promotes ethical behaviour and monitors ongoing business activities) appears to be absent in
many ­Australian organisations.171
A robust compliance program consists of clearly stated values, an explicit policy statement, and
unequivocal top management endorsement reinforced by ongoing training and periodic auditing.172 A
recent survey by top accounting firm Deloitte, however, shows that 40 per cent of Australian executives
working for organisations with international operations say that they don’t have (or they don’t know) if a
formal compliance program is in place in their organisation to manage corruption.173
Corruption in the Australian Customs and Border Control Service highlighted weaknesses in
management, negligence, links to crime figures and bikie gangs, employment of applicants with criminal
records, drug trafficking, money laundering and bribery. The Service’s anti-corruption system was
alleged to be ‘woeful’, and its CEO (at the time) Michael Carmody as failing to exercise appropriate
oversight and attempting to cover up the scandal.174
Woodside Petroleum, in contrast, has zero tolerance towards unethical behaviour. Employees undergo
annual mandatory training in Woodside’s code of conduct (which includes its policy on bribery and
­corruption). Employees have access to a confidential help line to report any incidents of concern. In 2014
Woodside investigated 71 reports of improper behaviour (43 were substantiated) and seven employees
were terminated for fraud related incidents.175
Santos is another leading company with an explicit code of conduct designed to deter unethical and
illegal behaviour. The code of conduct covers anti-corruption, gifts and benefits, conflicts of interest,
government engagement and political donations. Annual online training in the code is compulsory for all
employees and the code of conduct is referred to in all employment contracts. Santos also provides an
independent whistleblower hotline operated by major professional services firm Deloitte.176

Corrupt practices
The top three economic crimes affecting Australian firms are asset misappropriation, cybercrime and
procurement fraud. PwC found that economic crimes (including fraud, bribery and corruption) are on
the increase in Australia. Cybercrime, in particular, is seen as a major threat (it is estimated by security
specialist Symantec that cybercrime already costs Australians more than $1 billion a year).177
Not all corrupt practices involve money. A senior Singaporean public servant was found guilty of
corruption after receiving oral sex from a female executive of a defence supplier in return for business
favours.178 Likewise, it is not unusual for senior government officials in China to have at least one baoni
(contracted prostitute). Securency (a subsidiary of the Reserve Bank of Australia) provided prostitutes in
addition to paying millions of dollars in bribes to foreign officials.179
HR, whistleblowers and unethical behaviour
The HR manager as a guardian of corporate ethics needs to push for ethical behaviour and transparency at
all times and to ensure that the organisation’s most powerful weapon against fraud — the ­whistleblower
— is protected. The Association of Certified Fraud Examiners, for example, claims that three times as
many frauds are discovered by ‘tip offs’ than any other method.180 It was a whistleblower who filmed
himself handing over a $20  000 bribe to corrupt V/Line officials.181 It was also a whistleblower who
brought to light misconduct (involving forgery of customer’s signatures, alteration of files and repeat
compliance breaches) in NAB’s financial planning division.182
A PwC report shows that fraud is primarily committed by young, university educated, career oriented
male professionals (two thirds of frauds committed in Australia are by people in middle management).
Employees with drug addictions, gambling habits or personal issues are most prone. HR managers
and managers, thus, need to take an interest in the lives of their employees and be alert to changes in
behaviour and changes in spending habits.183

CHAPTER 1 Strategic human resource management  21


HR and corrupt behaviour
The many prominent cases of corporate wrong doing (for example, CBA, Coles, HSBC, IOOF, Toll)
raise questions regarding HR’s role as a champion of ethical behaviour.184 For example, could such
behaviour have been prevented or mitigated by knowledgeable HR practitioners?185 Parkes and Davis
suggest that the failure of many HR professionals to challenge unethical and/or corrupt practices may
be the result of HR’s lack of power and voice in organisations and the personal risk associated with
speaking out.186 Consumer advocacy group’s ‘Choice 2015 Shonky Award’ winners included leading
companies ­Samsung, IKEA, Coca-Cola, NAB and Kleenex.187

FAST FACT

A UMR Research survey shows that ANZ, CBA, NAB and Westpac offered inducements to employers
such as free tickets to sporting events, lower insurance premiums and cheaper internet rates on business
loans to switch their employee default super funds to a bank retail fund (between $6–$9 billion a year
flows into default super funds).188

Corporate culture and corruption


Finally, if the culture of an organisation (starting at the top) tolerates or encourages employees to
misbehave, it will not drive right outcomes.189 Banking cultures emphasising materialistic values and
status seeking, for example, encourage cheating, dishonesty and fraudulent behaviour.190
According to researcher Michael Marechal, bank employees are basically honest, but it’s the cultural
norms at the workplace that make them dishonest.191 Major banks, such as CBA (despite being
immersed in a financial planning scandal), however, fervently deny that a cultural problem exists.192
The Age’s finance writer, Michael Pascoe, nevertheless, claims CBA’s ‘senior management set a culture
of pushing product down punters’ throats, of flogging stuff first and foremost, and correspondingly
rewarded and punished people on that basis’.193 ANZ, NAB, Westpac, Macquarie Bank and AMP
similarly have faced allegations of misconduct, unethical behaviour, conflict of interest and repeated
compliance breaches.194
Interestingly, although banks globally have paid a fortune in penalties (estimated at US$260 ­billion
in 2015) for unethical and illegal behaviour, all retain lofty goals promoting ethical behaviour. ANZ
for example, aspires to be the ‘most respected bank across the Asia Pacific region’.195 CBA, in spite of
ongoing revelations about its unethical behaviour also seeks to be ‘a highly trusted financial institution’
in all its activities and ‘to operate at the highest levels of ethical behaviour’.196

Whistleblowing
People who expose the misdeeds of work colleagues to maintain ethical standards and protect against
wasteful, harmful or illegal acts (for example, fraud, corruption or maladministration) are called
­whistleblowers. Although some legal protection exists, whistleblowers risk retaliation via threats, abuse,
ridicule, social isolation, termination and career meltdown.197 Unfortunately, in too many organisations
the problem is swept under the carpet and the whistleblower is ignored or punished. Trade union
whistleblowers, for example, have been criticised, harassed, threatened with retribution and physically
assaulted rather than praised for standing up for their members.198
Any employee thinking of exposing an organisation’s wrongdoing should consider the matter very
carefully because the personal and professional costs can be extremely high (see figure 1.7). Australian
and US experience suggests that more than 90 per cent of whistleblowers suffer reprisals.199 It is little

22  PART 1 Introducing HRM


wonder then that whistleblowers are described as courageous people who take serious risks (generally
without the prospect of personal reward).200

What are the risks? What is the evidence? Will my claims be


Do I want to take Can others verify my investigated by an
them? claims? Is there hard impartial and
data or is it just trustworthy party?
hearsay? Will they
support me?

Will my claims be
What is my treated confidentially
motivation? (If it is a or be subject to media
personal interest, it is and/or public scrutiny?
much easier to be WHISTLEBLOWER Will I be guaranteed
challenged, vilified anonymity?
and discredited.)

Can I work here if


I do nothing? Will my
Who is involved? What is involved? conscience tolerate me
Who stands to Is it unethical? remaining silent? What
benefit? Who stands Is it illegal? will be the effects on my:
to lose? What vested How serious is it? • personal/family life?
interests are involved? • professional status?
Will they hurt or • reputation?
protect me? • career?

FIGURE 1.7 Questions the whistleblower should consider

DOCTOR HR

Hi Dr HR
Should whistleblowers be given a financial incentive to report corrupt or fraudulent behaviour?

HRM has a responsibility to ensure that compliance systems and the organisation’s culture promote
ethical behaviour, trust, open communications and accountability (highly ethical cultures clearly define
what is acceptable and unacceptable behaviour). Appropriate HR policies and practices that provide
employees with ‘safe’ options to inform management must be in place. Most people will be reluctant to
become whistleblowers unless they are guaranteed confidentiality and are not subject to media scrutiny.
Employees who act in good faith must know that they will be protected and given procedural fairness
(see figure 1.8).201 Research, for example, shows that whistleblowing disclosures are positively related
to the availability of anonymous reporting and organisational support.202 An associated problem for the
HR manager is the disgruntled employee who makes malicious allegations damaging the reputation
of both innocent employees and the organisation. The hurt to corporate and personal reputations, risk
of legal action and embarrassing media coverage because of whistleblowing activities should never be
underestimated.

CHAPTER 1 Strategic human resource management  23


Is the whistleblower
protected from
retaliation?

Are multiple
Are HR policies and
confidential reporting
practices supportive?
channels available?

HR

Is there clear provision Does the corporate


for independent culture communicate
assessment of the and reinforce ethical
whistleblower’s claims? behaviour?

FIGURE 1.8 HR and the whistleblower

1.7 What is strategy


LEARNING OBJECTIVE 1.7 Explain the meaning of strategy.
According to Schermerhorn, ‘Strategy defines the direction in which an organisation intends to move
and establishes the framework for action through which it intends to get there’.203 It involves a consistent
approach over time and reflects the organisation’s approach to achieving its objectives. The purpose
of strategy is to maintain a position of advantage by capitalising on an organisation’s strengths and
minimising its weaknesses. To do this, an organisation must identify and analyse the threats and
opportunities present in its external and internal environments — for example, external influences such
as the change from a pro-union to a pro-business government (or vice versa), the elimination of tariffs,
an increase in the rate of unemployment, an increase in interest rates and a decline in union membership
all have significance for an organisation. Thus, organisations need to develop strategies to deal with these
external influences if they are to avoid a reactive, short-term approach to management. Similarly, internal
influences such as the quality of an organisation’s human resources, its degree of management expertise
and its structure and culture can each be a source of strength or weakness. Strengths in HRM, for example,
will enable an organisation to better attract, retain and motivate quality employees. Consequently, HRM
strategies need to be developed as an integral part of an organisation’s overall strategy.204

E-HRM and strategy


The increasing sophistication and usage of IT in HRM presents organisations and HR managers
with many challenges and opportunities (see chapter 3). In particular, the emergence of e-HRM has
the potential to enhance the strategic contribution of HR.205 Unfortunately, this potential has not yet
been fully realised because many HR managers still remain relatively uninvolved in the development
of corporate strategy.206 In fact, there is evidence to suggest that e-HRM is an outcome of strategic
decision making by senior managers and not by HR managers.207 Partly, this is because HR managers
have focused on the automation of routine HR administrative processes and not on unlocking HR data
for the benefit of employees, managers and the organisation. As a result, the image and influence of HR

24  PART 1 Introducing HRM


has been reduced, and HR managers are not able to undertake more advanced strategic work.208 The risk
that HR activities may be outsourced by the organisation is also increased.209
The fact that HR data is crucial to corporate decision making and development have not been fully
exploited is also partly attributable to the lack of IT skills existing among many HR practitioners. Recent
research suggests that the higher the HR manager’s expertise, the more likely that e-HRM will have a
strategic orientation.210
Finally, other research indicates that where e-HRM is used to facilitate relationship opportunities
between the organisation and its employees via improved HR services, better transparency and the
direct empowering of employees (for example, via job postings, web-based recruitment, e-newsletters,
e-learning) the greater the trust in the HR department.211 Computer savvy generations expect information
on demand, feel comfortable with computerised communications and often prefer them to face to face
interactions.212 E-HRM thus has the capacity to allow HR to remain in constant contact with employees,
become the organisation’s ‘go to’ representative and signal the importance of its relations with
employees.213

Big data, HRM and strategy


Big data is a source of competitive advantage because it generates much valuable information for use in
HR strategic planning (see chapter 3). A study by MIT researchers shows that organisations that focus
on data-driven decision making have higher productivity levels and higher profiles.214 Big data analytics
makes possible increasingly accurate predictions about the world and its people, be they employees,
managers, customers or trade unionists.215 It allows the HR manager, for example, to make evidence-
based decisions on the likely rate of inflation, the probable demand for labour, the likely cultural fit of a
job applicant and the probability that an employee will have an accident or be a drug addict. According
to some experts, it is only by mining such data-based insights that HR can be sure that its activities are
helping the organisation move in the right direction.216 Organisations and HR, however, will need to
rethink how they collect, use and manage data that can touch on the most intimate and sensitive aspects
of people’s lives. For example, how much should they know about their employees? Who should have
access to the data? If servers are located outside of Australia can Australian privacy laws be enforced?
Questions such as these raise serious and complex ethical, legal and security issues.

DOCTOR HR

Hi Dr HR
Who ‘owns’ my personal data? Me? My employer? The government? Facebook? Google?

HR managers, nevertheless, need to generate solutions that are evidence based, have scientific validity
and provide a return on investment.217 A survey by Accenture of Australian CEOs, however, found that
a significant gap exists between the importance given to HR initiatives and the effectiveness of their
execution. The fundamental cause of this gap was poor use of data analytics.218 Unfortunately, HR
managers who do not know how to mine big data risk being buried in massive amounts of useless data.

Organisational stakeholders
A stakeholder is a person (for example, an employee or a shareholder) or group (for example, a company,
trade union or government) that has a vested interest in an organisation’s operations and performance
(see figure 1.9). Stakeholders try to influence the way an organisation operates by supporting or opposing
its strategies.219 For example, employees may go on strike or quit, customers may buy elsewhere,
shareholders may sell their shares and trade unions may create an industrial dispute.

CHAPTER 1 Strategic human resource management  25


Internal ORGANISATION External

• Directors • Customers
• Managers • Distributors
• Employees • Suppliers (goods, services, capital)
• Governments
Owners • Political parties
• Regulatory authorities
• Media
Shareholders: • Local communities
• individual • General public
• institutional • Special interest groups
• government • Trade unions

FIGURE 1.9 Organisational stakeholders

Stakeholders may have common or conflicting interests. For example, customers may seek low prices,
whereas suppliers may desire high prices for the goods and services they supply to the organisation.
Similarly, workers and trade unions may want increased wages and benefits, while management,
directors and shareholders favour lower costs, increased productivity and higher profits. Stakeholders
seeking lower costs may perceive this as desirable because it benefits the customer, makes suppliers
more efficient and enables the organisation to be more competitive. However, others may see such
interests as exploitative, unethical and socially irresponsible.
Not surprisingly, an organisation may often find it difficult to simultaneously satisfy all of its
stakeholders (particularly as their interests may be quite different and directly conflict with each other).
The HR manager, similarly, faces multiple stakeholders (employees, line managers, trade unions etc.)
who may compete to influence HR decision making. It is, therefore, essential that the HR manager
realise that different stakeholders have different expectations and appreciate what is important to each
stakeholder.220 Individual stakeholders also may find themselves in conflict situations. Employees may
want higher wages and improved benefits but as shareholders (via their superannuation fund) they may
desire higher profits and higher dividends to gain the maximum benefit at retirement (see figure 1.10).
When addressing multiple stakeholders’ interests, organisations need to prioritise. This involves trade-
offs and difficult choices because all stakeholders expect something from the organisation (as indeed
the organisation expects something from its stakeholders). Stakeholders that are recognised as the most
important will have their interests incorporated into the organisation’s objectives and strategies, while
others will have their interests downplayed or ignored. For an organisation to continue to survive and
prosper, its most important stakeholders are usually its customers, employees and shareholders.221
It should be noted, however, that stakeholder management does not necessarily have to be a zero sum
game where gain for one stakeholder means loss to another. Interest is now centred on an approach that
recognises the interdependence of stakeholders. This is because organisations that see their stakeholders
as partners gain a competitive advantage. For example, a positive relationship has been shown between
improved employee attitudes, customer satisfaction and financial performance.222 The Mirvac Group,
for example, has gone public with its green commitments by listing on the London Stock Exchange’s
sustainable and ethical index (the FTSE4 Good Global Index). Mirvac claims its environmental
leadership is a response to investor and community concerns. Mirvac has gained ‘green creditability’, a
marketing edge and investor support.223
Organisations increasingly are taking into account the interests of the wider community and acting
in a socially responsible way. This has led to organisations focusing on their environmental and social
performance as well as their financial performance (the so-called triple bottom line) (see figure 1.11). In
doing so, however, organisations must stress what they (and other stakeholders) are getting and giving up

26  PART 1 Introducing HRM


from socially responsible decisions.224 Organisations also face risks if social responsibility is primarily
used for public relations and image-building purposes.225

Governments Employees Special interest groups

• Competition • Pay and benefits • Environment


• Environment • Working conditions • Equal employment
• Health and safety • Job security • Ethical behaviour
• Regulation • Job satisfaction • Corporate governance
• Taxation • Opportunities for advancement • Human rights
• Equal employment • Fair treatment • Professional conduct
• Tariff protection
• Subsidies
Customers
Owners
• Quality
• Preservation of assets • Price
ORGANISATION
• Long-term growth • Convenience
• Profitability • Service
• Reputation • Safety
• Corporate governance • Reputation

General public Management Suppliers Trade unions

• Legal compliance • Profitability • Creditworthiness • Pay and benefits


• Environmental impact • Costs • Purchasing power • Working conditions
• Social responsibility • Reputation • Ethics • Membership coverage
• Ethics • Ethics • Reputation • Health and safety
• Competition • Promotion of
• Productivity unionism

FIGURE 1.10 Examples of stakeholder interests

Westpac has introduced a program to reduce its total paper consumption by 5 per cent and to make
its annual financial reporting ‘carbon neutral’ by investing in carbon credits.226 ANZ, similarly, has
a group-wide absolute greenhouse gas (GHG) reduction target of 3  per  cent for emissions for their
premises electricity use.227 The company also highlights its performance against more than 100 financial
and non-financial drivers of value, including the marketplace, the workplace, the community and the
environment, via a Stakeholder Impact Report.

Strategic intent
Hamel and Prahalad claim that companies that have achieved global leadership ‘invariably began with
ambitions that were out of all proportion to their resources and capabilities. But they created an obsession
with winning at all levels of the organization and then sustained that obsession over the 10–20 year
quest for global leadership.’228 Hamel and Prahalad call this obsession strategic intent.229 Audacious
ambitions can aid long-term success by focusing and applying organisational energies to a unifying and
compelling goal.230 Collins and Porras found that companies that experience enduring success such as
3M and Johnson & Johnson have core values and a core purpose that remain fixed ‘while their business
strategies and practices endlessly adapt to a changing world’.231 Wesfarmers, for example, uses the four
core values of integrity, openness, accountability and boldness to guide the delivery of its longstanding
objectives.232 Core values assist in decision making and are brought to life by the implementation of
policies and practices that reinforce them. They play a key role in the shaping of the organisation’s
culture.233 Recent evidence, however, suggests that many managers and employees are unaware of their

CHAPTER 1 Strategic human resource management  27


organisation’s core values and that companies without values outperform those that do (which raises
questions about the practical value of corporate values).234 This is especially the case when companies
list integrity as a core value but demonstrate little or no integrity in their business dealings. Poor cultures
and unethical conduct, for example, pervade the global banking industry.235 ANZ, CBA, Macquarie and
NAB, for example, have all been involved in financial scandals and suffered regular criticism for their
poor cultures, incompetence, conflicts of interests and bad behaviours.236

General Performance
Performance factor objectives measure Performance review

• Financial • Be profitable • Income Shows


What do we have • Expenses • how actual performance compares
to do to sustain • Assets with performance objectives
and improve our • Liabilities • how well the organisation improved
financial position? its financial position

• Social • Obey the law • Legal compliance Shows


What do we have • Do what is right • Equal opportunity • how actual performance compares
to do to operate • Contribute to • Employee wellbeing with performance objectives
in a socially society • Employee • how well the organisation
responsible way? development contributed to the welfare of
• Health and safety society
• Charitable activities
• Corporate
governance
• Work–family balance
• Public safety

• Environmental • Respect the • Pollution control Shows


What do we have environment • Waste management • how actual performance compares
to do to protect • Restoration with performance objectives
and improve • how well the organisation improved
the natural the quality of the environment
environment?

FIGURE 1.11 Triple bottom line considerations

Many organisations desperately need HRM strategic intent: ‘Improvements in the strategic management
of people also require a commitment to sustained long-term action.’237 In addition, HRM needs leaders
who can articulate direction and save their organisations from change via drift. Such managers, argues
Moss Kanter, ‘create a vision of a possible future that allows themselves and others to see more clearly
the steps to take’.238
Achieving this requires organisations to move from their traditional conscript mindset to a volunteer
mindset where the discretionary effort of motivated and well-trained employees produces a competitive
advantage.239 It should be noted that this transition would be regarded as nothing more than a sophisticated
form of exploitation by radical academics and some trade unionists.240

What is strategic management?


Thompson and Strickland define strategic management as ‘the process whereby managers establish an
organisation’s long-term direction, set specific performance objectives, develop strategies to achieve
these objectives in the light of all the relevant internal and external circumstances and undertake to
execute the chosen action plans.’241

28  PART 1 Introducing HRM


The aims of strategic management are to help the organisation to achieve a competitive ­advantage — the
special edge that permits an organisation to manage environmental influences better than its competitors
do — and to ensure long-term success for the organisation. Strategic management does this by giving
managers consistent guidelines for action and by allowing the anticipation of problems and opportunities.
BHP Billiton, for example, defines itself as an international company headquartered in Australia and
benchmarks itself against its global competitors. Just a few years ago, Wesfarmers was an agricultural
company; today, its primary business is retailing. Telstra (telecommunications), Coles and Woolworths
(retail) have both considered strategic moves into banking and financial services.242 Companies are
having to ask themselves: What is our core business? Westpac, for example, no longer sees itself as a
bank but as a technology-based service business whose future competition is likely to come from hi-tech
companies such as Apple and Google.243 Are we in the right business? Can we pick the changes affecting
our business? Car manufacturers, such as BMW, are now engaged in a battle with Apple and Google to
maintain ownership of the ‘brains’ that will power cars of the future.244 Apple, for example, has set a
2019 target date to produce an electric car.245 Who are our customers? What KSAOs must be in place?
What management systems are needed? Who are our competitors? US web retail giant Amazon, for
example, plans to sell groceries online in the UK making use of the latest robotics technology, which
poses a major competitive challenge to traditional supermarkets.246 What are their buying criteria? US
car buyers, for example, now care less about the size and price and more about whether or not their
mobile devices synchronise with their vehicle.247 How best do we satisfy our customer’s needs?248
Components of strategic management
Strategy formulation involves selecting an organisation’s mission, or purpose, and key objectives (What
is our business? What should it be?); analysing the organisation’s internal and external environments
(Who are our customers? Who should they be? Where are we heading? Is our market share growing or
declining? Do we need to diversify? What major competitive advantages do we enjoy? Do we emphasise
internal growth or growth through acquisition?); and selecting appropriate business strategies (Can we
realistically expect to achieve an objective given our talents, resources and limitations? Which of the
available alternatives is the best?).
Strategy implementation, in turn, involves designing an organisation’s structure and control systems
and evaluating the selected strategy in achieving the organisation’s key objectives (What remedial action
is needed to make the strategy work? What changes need to be made to the original strategy?).
Figure  1.12 shows the different stages in a strategic management model. This model integrates the
stages that occur in both strategy formulation and strategy implementation.
Organisational mission and objectives
The first steps in strategic management are to define the mission (or purpose) and the prime objectives
of the organisation. Jones and Kahaner claim that mission statements ‘are the operational, ethical and
financial guiding lights of companies. They are not simply mottoes or slogans; they articulate the goals,
dreams, behaviour, culture and strategies of companies’.249 The core purpose of 3M, for example, is ‘to
solve unsolved problems innovatively’; Walt Disney ‘to make people happy’; Nike ‘to experience the
emotion of competition, winning and crushing competitors’; and Mary Kay Cosmetics ‘to give unlimited
opportunity to women’.250
The organisation’s mission statement thus provides the context and direction for the formulation and
evaluation of HRM objectives, strategies and action plans. The mission statement identifies why the
organisation exists and what its focus is: What is the business of the organisation? What will it be? What
should it be? The key objectives identify what the organisation plans to achieve. They are the concrete
ends or goals that represent the ultimate purpose of the organisation (see figure 1.13). Strategies, in turn,
represent the means through which these objectives are pursued at any given point of time.
Environmental analysis
The objective of analysing the external environment is to identify any strategic opportunities and threats that
may be present. Changes in government legislation may pose a threat by restricting business opportunities

CHAPTER 1 Strategic human resource management  29


or by increasing competition. Mining companies, for example, are re-evaluating their investments in
Australia because of the risks and costs associated with tax reforms, infrastructure deficiencies, energy
and water security, industrial relations rigidities, and increasing government red tape.251

Establish a mission and key objectives.

Analyse the environment.

F
E
E
Analyse and select business strategies.
D
B
A
C Implement the strategies.
K

Monitor and evaluate performance.

FIGURE 1.12 Strategic management model

Internal environment

What are our strengths? What are our weaknesses?


• Skilled workforce • High labour costs
• Superior quality products • Poor industrial relations
• Financial strength • Reputation for poor customer service
• Excellent research and development • Management succession problems
• Lack of international marketing expertise

External environment

What are our opportunities? What are our threats?


• New markets in Asia • Increased government regulation
• Low inflation • High taxation
• Weak competition • Domestic shortages of skilled labour
• Decentralisation of industrial relations • Rising costs of imported raw materials

FIGURE 1.13 SWOT analysis

30  PART 1 Introducing HRM


Similarly, analysis of the internal environment aims to identify the organisation’s strengths and
weaknesses. The organisation may possess special technological advantages, but lack the marketing
expertise to successfully implement a strategy. To help determine what must be done to achieve the
mission and objectives, it is critical that management analyses both the external environment and the
organisation’s internal capabilities and resources. Only then can the internal strengths and weaknesses be
deployed to take advantage of external opportunities and to minimise external problems.252
Strategy selection
This step involves generating a series of strategic options based on the organisation’s objectives and a
comparison of its internal strengths and weaknesses and its external opportunities and threats (a SWOT
analysis). Alternative strategies generated by a SWOT analysis are evaluated to identify which one will
best achieve the organisation’s objectives. The aim is to select the strategy that gives the best alignment
or fit between the external and internal environments (see figure 1.14). Although popular with managers,
it should be noted that the SWOT technique has been criticised for generating too many factors, not
prioritising them and being more a decision aid than a focused analytical tool.253

High Global strategy Transnational strategy

• World is one homogeneous market • Blend of standardisation and local


• Products and services are responsiveness
standardised • Attempts to optimise costs amd
• Standard quality flexibility
• Advertising is standardised • Resources are located where most
• Emphasis is on cost reduction and beneficial
economies of scale • Knowledge transfer is promoted
• Situated in only a few locations • Cultural differences are recognised
• Resources are located in a limited • Geocentric view
number of locations
• Innovation and knowledge base are
centralised
• Cultural differences are not
considered important
• Control is centralised
• Ethnocentric view
Cost
pressures
Multidomestic strategy

• World is a series of local markets


• Products and services are adapted
to local needs
• Advertising is customised
• Resources are located in many
locations
• Control is decentralised
• Polycentric view
• Innovation and knowledge base are
diversified, making transfer of
learning difficult
• Innovation focuses on a specific
domestic market

Low Flexibility pressures High

FIGURE 1.14 International strategies

CHAPTER 1 Strategic human resource management  31


The selection of strategy thus involves managers being proactive (instead of reactive) to changes in
their organisation’s environment. The premise of strategic choice is that management can facilitate the
organisation’s successful adaptation to changing circumstances by shaping the organisation’s objectives
and policies. Thus, instead of permitting external influences to determine the future of the organisation,
management anticipates change and actively develops long-term strategies to cope with environmental
pressures. This also includes the development of a HR strategy to define ‘the organisation’s long-term
objective with regard to human resource issues’.254 Recognising the active role played by management
in shaping HRM means rejecting the traditional view of management as being reactive and responding to
trade union or other environmental influences. Finally, Debrah argues that the concept of strategic choice
highlights the necessity of linking organisational strategies with HR strategies ‘to achieve desirable
outcomes in the workplace’.255
Strategy implementation
It is critical for successful strategy implementation that employees accept the changes demanded by
the new or revised strategies. Similarly, an organisation’s structure must be designed to enhance the
implementation of a strategy. This involves arranging the organisation’s physical and human resources to
carry out the strategy. A strategy needs an appropriate structure if it is to work, and there are questions
that must be answered: Should the structure be flat or tall? How are task responsibilities to be allocated
(division of labour)? Is decision making to be centralised or decentralised (degree of delegation)?
To what extent should the organisation be divided into sub-units such as divisions and departments
(departmentalisation)? Other key issues include developing appropriate budgets, information systems,
HR systems (control based or commitment based?) and policies and procedures to enhance strategy
implementation. Wesfarmers, for example, rigorously applies target setting, performance measurement
and reward systems with a strong value-added and accountability focus.256
Performance evaluation
Management must decide how to monitor and measure performance so the effectiveness of a strategy
can be evaluated. One approach may involve setting performance objectives, measuring performance,
comparing actual performance with targeted performance and taking any corrective action required. This
management by objectives (MBO) approach has the advantage of integrating planning and c­ ontrol.
Alternatively, management may decide to establish detailed bureaucratic controls involving impersonal
rules and procedures and the standardisation of activities. For strategic planning to be successful, it is
important to achieve a fit between the organisation’s strategy, structure, culture and methods of control.

FAST FACT

BHP Billiton CEO Andrew Mackenzie had his 2014 pay cut by 40 per cent because of workforce deaths
and missed financial targets.257

Feedback
Strategic management is an ongoing process. The implementation of a strategy must be monitored
to determine the extent to which it is realising the organisation’s major strategic objectives. In short,
managers must ask whether the strategy is being implemented as planned, and whether it is achieving
the desired results. Thus, feedback systems are necessary for management to determine whether its
strategies are working as planned.

Conflict, politics and strategic change


Strategic management appears to be a process of rational decision making. This is not the case in reality.
Conflict and politics arise with strategic change. Individual functions and divisions have agendas that
may not be identical, so conflict over resources and the need for change may produce power struggles
within the organisation. Similarly, not all strategies are implemented in a logical way: they may be

32  PART 1 Introducing HRM


shaped, changed and developed by managers making small adjustments to existing strategies. That is,
managers make incremental changes (as opposed to revolutionary changes) in strategy based on their
experiences in managing the business.258 Managers often have to make decisions and plan in rapidly
changing environments (which frequently involve political and other pressures), so it is important that
they remain ‘focused on long-term objectives while still remaining flexible enough to master short-term
problems and opportunities as they occur’.259

Types of strategies
Although numerous approaches to classifying strategies have been developed, the key ones highlighted
in this text are as follows.

Growth
An organisation can expand either through internally generated growth (for example, McDonald’s and
Woolworths) or through acquisitions, mergers or joint ventures (for example, Westpac’s takeover of
St George Bank). Growth may be concentrated on building existing strengths (for example, food for
McDonald’s and financial services for NAB) or on moving into new or unrelated areas of business (for
example, the move from beer to wine for the brewer Lion Nathan and Pacific Brands from a manufacturer
to a retailer).

Retrenchment
The emphasis of retrenchment is on performance improvement by increasing productivity, cost-cutting,
downsizing, re-engineering and selling or shutting down business operations. BlueScope, Qantas and
Telstra are examples of companies employing this strategy in an effort to become more competitive.
Retrenchment strategies are common in today’s cutthroat environment.

Stability
This is a neutral strategy that attempts to maintain the status quo by pursuing established business
­objectives. A stability strategy is often used when an organisation is performing well in a low-risk
­environment or when an organisation needs to consolidate after a period of rapid growth or restructuring.

A combination of growth, retrenchment and stability


An organisation can pursue more than one strategy at the same time. A large organisation, for example,
may be expanding in some business or geographical areas and retrenching in others.

International strategies
Organisations face two important considerations when selecting an international strategy: cost efficiency
(via standardisation of products and services) and customisation (that is, tailoring a product or service
to meet the unique needs of a particular market) (see figure 1.14).260 Although the various strategies
discussed below appear clear-cut, in reality the distinctions are often blurred (reflecting a matter of
degree rather than an absolute difference).
A global strategy
Organisations such as Coca-Cola, Intel and Toyota, which seek cost efficiencies and treat the world as a
single market, typically prefer to operate in a few select locations offering low costs. (India and China,
with their cheap labour and low manufacturing costs, are classic examples.) A global strategy reflects an
ethnocentric orientation, plays down the importance of cultural differences, emphasises the similarities
between markets, involves centralised decision making (typically at the corporate headquarters) and
results in the grouping of major activities (for example, research and development, manufacturing and
marketing) in a limited number of key locations.
Such a strategy limits learning and the creation and transfer of knowledge because the focus is
restricted to a few key locations. As a result, the emphasis is on the exploitation of existing knowledge,

CHAPTER 1 Strategic human resource management  33


with learning centred on the parent company’s culture, markets and environment. The organisation
therefore may not be able to respond quickly or in appropriate ways to changes in a particular location.
Organisations adopting a global strategy are frequently found in industries such as pharmaceuticals,
semi-conductors and some consumer goods. Coca-Cola, Levi’s jeans, Colgate-Palmolive toothpaste,
Gillette razors, Harley-Davidson motorcycles, McDonald’s hamburgers and Starbucks coffee, for
­
example, are marketed in similar fashion around the world.261
A multidomestic strategy
Some organisations, however, may need to modify their products or services to satisfy local requirements
if they want to gain a competitive edge. KFC and McDonald’s, for example, create menus tailored to
local food and taste preferences, while Honda produces motorcycles specially designed to satisfy local
requirements (although using common technology). This strategy is often used by consumer goods
companies such as Bristol Myers, Procter & Gamble and Unilever, and is also common among music
and fashion companies.262
A multidomestic strategy reflects a more polycentric orientation. It is sensitive to cultural differences
but gives less attention to the similarities between markets. While a multidomestic approach is responsive
to local needs, it creates barriers to the transfer of knowledge across the various parts of the organisation
because of its decentralised decision making and diversified operations.
A transnational strategy
Some organisations attempt to satisfy pressures for both standardisation and diversity by adopting a
blend of global and multidomestic strategies. Products and services are standardised to a degree but
are also made somewhat unique to meet local needs. In other words, centralisation and decentralisation
strategies are employed simultaneously. People, capital and material resources are sought internationally.
These organisations operate in a true global fashion with manufacturing, research and development, and
other functions performed wherever they can be done best at the lowest cost.263
A transnational strategy reflects a geocentric view and values talent and diversity. Managers adopt a
global mindset with an emphasis on flexibility and openness. A key to the success of this approach is a
corporate culture that promotes learning and the transfer of knowledge and the employment of the best
people. Nestlé (the largest food company in the world) has 98 per cent of its sales and 96 per cent of its
employees outside of its home country, Switzerland. The CEO is Austrian and several of the company’s
senior management are non-Swiss.264

Choosing strategies
Different types of organisational strategies produce a need for particular HR strategies. Thus, it is
important that HR strategies accurately reflect an organisation’s master business strategy to ensure an
appropriate fit. This enables HR action plans to support the master strategy and the direction of the
organisation. Without this strategic alignment, confusion, frustration and inefficiencies result.265

The need for HRM strategies


Ever-increasing pressures have forced managers to critically rethink their approaches to HR management.
People and their current and potential contributions were often overlooked in the past. According to
Drucker, in the knowledge economy, employees are not labour, they are capital. Knowledge workers
are the major wealth creators. It is now the productivity of capital (not its cost) that is decisive in
determining organisational performance.266 Merging  business and HRM strategies is thus a critical
source of competitiveness for organisations.267
Managers consequently must adopt a strategic mindset or way of looking at and thinking  about the
management of people. HR managers, in turn, have a responsibility to ensure that HRM is strategically
aligned with the organisation’s overall business objectives. If an organisation makes a strategic decision
to expand, introduce new technology, reduce costs, improve quality or downsize, for example, HRM
must support this choice. The HR manager must ask, ‘Where are we now? Where do want to be? How

34  PART 1 Introducing HRM


are we going to get there? What do we do when we get there?’ A differentiator between the corporate
winners and losers in the twenty-first century clearly will be the quality of an organisation’s human
resources.268
The need for competitive advantage (and particularly sustained competitive advantage) has made the
strategic management of HRM critical to long-term business success.269

The aims of HRM strategies


HRM strategies outline the organisation’s people objectives and must be an integrated part of its
overall business strategy. HRM strategies, like marketing or manufacturing strategies, are functional
strategies — that is, they guide the actions to be taken within a specific function. HR activities such as
recruitment and selection, training and development, for example, should be guided by an organisation’s
HRM strategies.
The aim of a functional strategy is to support the organisation’s business strategies. As a result, HRM
strategies must focus on what line management sees as the main business issues. Only then can HRM
activities be clearly related to the direction of the business. ‘Asking the board to tack on HR’s pet
concerns to a business strategy’, says Price, ‘does not guarantee integration.’270
HRM strategies aim to enable the organisation to achieve its strategic objectives by:
•• ensuring that all business planning processes recognise from the outset that the ultimate source of
value is people
•• seeing that all concerned in strategic planning appreciate the HR implications of their proposals and
understand the potential HR constraints if action is not taken
•• achieving a close match between corporate business objectives and the objectives of the HR function
•• designing and managing the culture, climate and organisational processes of the business to ensure
that everyone can do their job better and that high-calibre people are found and kept
•• identifying the firm’s distinctive competencies and the types of people who will be needed to build
and maintain those competencies
•• ensuring that the resourcing activities of the organisation contribute to the development of competencies
in the short and long term
•• assessing the performance requirements needed to reach the organisation’s strategic business
objectives, and deciding how the requirements should be satisfied
•• reviewing the levels of commitment throughout the organisation and planning ways to improve them
where necessary.271
Overall, HRM strategic planning clarifies for employees and managers in an organisation and other
stakeholders such as shareholders and unions how HRM intends to contribute, what methods it will use
and what performance standards it is aiming for.

1.8 Strategic organisation and strategic


HRM objectives
LEARNING OBJECTIVE 1.8 Explain the meaning of strategic human resource management.
Because they define the main issues to be worked on and determine policies and priorities, strategic
HRM objectives must accurately reflect the strategic objectives and values of the organisation. Schuler,
Galante and Jackson show that organisations can improve their environment for success by making
choices about HR planning, staffing, appraisal, remuneration, training and development, and labour
relations that are consistent with and support the corporate strategy.272
Other recent research similarly demonstrates that the closer the fit between an organisation’s
business strategy and its HRM strategy, the more positive the effect on HRM effectiveness and
labour productivity.273 This means that HR objectives, policies and plans must be integrated with the

CHAPTER 1 Strategic human resource management  35


organisation’s strategic business objectives.274 When this happens, HRM becomes a true business
partner in boosting the organisation’s competitive advantage by helping achieve strategic objectives and
employee growth.
HR objectives, policies and plans must be judged by how well they help achieve the organisation’s
strategic business objectives. The HR manager must ask: Do they work? Are they easy to understand and
implement? Do they add value? Do they create a competitive advantage? Are they fair? Will they increase
employee job satisfaction, commitment and motivation? Do they build the capacity for change? Do
they promote a volunteer mindset? Do they reinforce the organisation’s culture? Do they promote trust?
Do they support the organisation’s long-term business strategy? These questions are critical because
research reveals that policies and practices are often inconsistent with strategy or are implemented in
a piecemeal fashion.275 Furthermore, other research shows that information on employee perceptions
and reactions to HR policies and practices is necessary to an improvement in HRM’s contribution to
organisational effectiveness.276
Without such a strategic view, HRM will remain a set of independent activities, lacking in central
purpose and coherent structure. It will be reactive rather than proactive in shaping a relationship between
the organisation and its employees. It will fail to optimise opportunities for the organisation’s survival
and growth.
HRM must shed its non-strategic bureaucratic baggage or fade away unmourned. In a fast-changing,
globally competitive world, it is human resources that provide the competitive edge. HR managers
have a significant role to play in developing and implementing corporate strategy, especially when it is
considered that the more effective HR becomes, the more competitive and differentiated the organisation
becomes.277

Strategic HRM objectives and plans


Just as strategic HRM objectives must be in harmony with the organisation’s overall aims, HRM activity
plans must support the achievement of strategic HRM objectives. An organisation that has set profit
improvement as a strategic business objective, for example, may need strategic HRM objectives that
produce reduced labour costs (for example, improved employee performance, reduced headcount). These
objectives, in turn, necessitate action plans for specific HR activities such as developing performance-
linked reward systems to promote employee motivation and productivity, appropriate training programs
to maintain and enhance employee competence, and an appraisal and exit program to accurately identify
and remove poor performers.
Strategic HRM objectives and plans can be linked to strategic organisational objectives such as:
•• cost containment — by focusing on cost reduction via reduced headcount, improved expense control,
improved productivity, reduced absenteeism and lower labour turnover
•• customer service — by focusing on achieving improved customer service through recruitment and
selection, employee training and development, and rewards and motivation
•• organisational effectiveness — by focusing on organisational structure, job design, employee
motivation, employee innovation, adaptability to change, flexible reward systems and employee
relations
•• social responsibility — by focusing on legal compliance and improvements in areas such as equal
opportunity, occupational health and safety, and minority opportunities and development
•• integrity — by focusing on the enhancement of the organisation’s reputation for ethical behaviour, fair
treatment of employees, honesty in communications and honouring of agreements.
All strategic HRM objectives and activities must be evaluated in terms of how they contribute to the
achievement of the organisation’s strategic business objectives. This means that they must:
•• be measurable
•• include deadline dates for accomplishment
•• identify and involve the key stakeholders and HR customers to ensure the necessary collaboration
•• nominate the individuals or parties responsible for implementation.

36  PART 1 Introducing HRM


HRM policies and procedures
HRM policies are general statements that serve to guide decision making. As such, they direct the
actions of the HRM function towards achieving its strategic objectives. HRM policies are generally put
in writing and communicated to all employees. They typically serve three major purposes:
1. to reassure employees that they will be treated fairly and objectively
2. to help managers to make quick and consistent decisions
3. to give managers the confidence to resolve problems and to defend their decisions.278
Subjects covered by HRM policies include recruitment and selection, transfers, promotions,
terminations and pay increases. The statement ‘It is the policy of this organisation whenever feasible
to promote from within’, for example, gives a clear guideline to managers and employees about how
promotional opportunities will be handled.
HRM procedures detail precisely what action is to be taken in a particular situation — for example,
the specific steps to be followed when giving a pay increase, terminating an employee or handling a
sexual harassment complaint. To promote trust in management and the organisation, it is extremely
important that HR policies and procedures be perceived as fair and equitable.279

1.9 A strategic approach to HRM


LEARNING OBJECTIVE 1.9 Describe a strategic approach to human resource management.
Many factors affect HRM. Whether from the organisation’s external or internal environment, the impact
of a particular influence must be identified and considered by the HR manager. A diagnostic model
thus provides the HR manager with an analytical framework to anticipate and prevent problems from
arising (see figure 1.15). HRM does not operate in a vacuum. It is influenced by, and in turn influences,
factors such as changes in technology, laws, social values and economic conditions that exist outside
the organisation, as well as internal factors such as the organisation’s culture, strategy, structure and
systems.280 All of these have a significant influence on the organisation’s HRM objectives, strategies and
action plans (see figure 1.15). Equal employment legislation, for example, has had a particular effect
on the way organisations acquire, develop and reward human resources. Similarly, research shows that
government intervention has had a significant effect on Australian industrial relations.281 An integral part
of strategic HRM therefore involves analysing environmental influences to identify those factors that
inhibit the organisation and those that help it to achieve its objectives. An analysis of the strengths and
weaknesses of the HRM function can also identify those positive and negative characteristics of HRM
that promote or handicap the achievement of strategic objectives. Such analysis includes the quantity and
quality of human resources available to the organisation.
If an organisation is to grow and remain competitive, its HR objectives and strategies must achieve
the best alignment or fit between external opportunities and threats and the internal strengths and
weaknesses of the organisation. The diagnostic model used in this book includes assessing internal and
external influences, setting objectives and evaluating performance. Evaluation of outcomes provides
feedback on HRM performance in the acquisition, development, reward and motivation, maintenance
and departure of the organisation’s human resources. It must be stressed that evaluation involves both
employee and organisation-related outcomes. HRM is concerned with overall organisational performance
and individual employee performance. Employee attitudes, behaviour and perceptions positively or
negatively influence performance. High-performance HRM therefore cannot ignore HR outcomes from
the employee’s perspective.282
This comprehensive strategic approach generates more informed and purposeful HR management.
Articulating the organisation’s mission or purpose (why it exists), its objectives (what it wants to achieve),
its strategies (how the objectives are to be achieved) and plans (the action steps required) helps direct the
setting of HRM objectives, strategies and plans. In turn, when applied to specific HRM activities such as
recruitment and selection, the HR manager can better appreciate which specific action plans are required

CHAPTER 1 Strategic human resource management  37


to support HRM and organisational strategic objectives. Organisations that adopt HRM strategies and
high-performance HR policies and practices consistent with the demands of their internal and external
environments outperform organisations that adopt less well-matched strategies and practices.283

Cultural Demographic
Technological Social

Environmental Business

ASSESS INTERNAL AND


Legal Industrial relations
EXTERNAL INFLUENCES
Political Economic

ORGANISATIONAL MISSION

ORGANISATIONAL OBJECTIVES

STRATEGY

STRUCTURE PEOPLE CULTURE

SYSTEMS

HRM OBJECTIVES
What is to be achieved

HRM AUDIT HRM STRATEGY


Evaluation of performance How it is to be achieved

HRM OUTCOMES HRM


Organisation Individual ACTIVITIES

• Adaptability • Adaptability • Acquisition


• Commitment • Commitment • Development
• Competence • Competence • Reward and motivation
• Congruence • Congruence • Maintenance
• Cost-effectiveness • Cost-effectiveness • Departure
• Job satisfaction • Job satisfaction
• Justice • Justice
• Motivation • Motivation
• Performance • Performance
• Trust • Trust

FIGURE 1.15 Strategic HRM diagnostic model

Assessment of influences
The diagnostic approach to HRM suggests that the HR manager must consider the nature of external
and internal environmental influences before electing a particular course of action. Big data analytics
allows the HR manager to access and analyse massive amounts of data on unemployment, health issues,

38  PART 1 Introducing HRM


wage movements, employee preferences, behaviour and political views. All aspects of life and society
can now be recorded and analysed.284 HR managers can use this business intelligence to improve their
decision making and enhance their strategic impact (they must, however, know how to extract greater
value from data by using big data analytics). This permits the HR manager to be proactive, rather than
simply reacting to something after it occurs. By taking a proactive approach, the HR manager is in a
much better position to appraise the context of a situation and to act accordingly.
An assessment of influences forces the HR manager to seek answers to basic questions. Examples of
the questions the HR manager might ask include the following.
•• Where are we now?
•• Where do we want to be in the future?
•• What path is best for us? What action steps do we need to take?
•• How and when can we undertake them?

External influences
The HR manager must identify those external influences that will affect the organisation and the
management of its human resources. Some of the major influences existing outside of the organisation
include the following.
•• Political. Political ideologies regarding human resources can range from an interventionist approach
— where government regulation of HRM is comprehensive — to one of minimal involvement.
Specifically, political attitudes towards business, unions, management rights, strikes, secondary boycotts
and enterprise bargaining can differ markedly — federally, from state to state and internationally.
Union relations with Coalition governments, for example, are less close than the business sector’s
relationship, whereas union–government relations are distinctly closer with Labor governments.
•• Legal. Laws and regulations regarding hours of work, holidays, equal employment ­opportunity (EEO),
affirmative action, sexual harassment, workers compensation, privacy, health and safety, fringe ben-
efits and terminations clearly affect HRM. EEO, for example, has seen the creation of new jobs such
as sex equity expert, gender bias officer and harassment facilitator. The Fair Work Commission (FWC)
has slowed the push towards a 24-hour, 7-day a week economy and created a complex and adminis-
tratively time-consuming industrial relations environment (forcing HR managers to increasingly use
costly legal advice).285
•• Environmental. Government and community concerns regarding environmental issues  — such as
energy conservation, workplace beautification and environmental pollution — directly or indirectly
affect job design, employee orientation and training, health and safety, industrial relations and the
image of an organisation as an employer. In the United Kingdom, government policy requires steel
producers to source a portion of their electricity from renewable technologies, which puts them at a
significant cost disadvantage to their European Union competitors (which has resulted in closures and
job losses).286
•• Technological. The level of technological advancement and the rate of technological change affect
job design, recruitment, selection, training, motivation, remuneration, health and safety, job security,
and industrial relations. The boom in mobile devices has changed the nature of some jobs. Sales
representatives using mobile devices now work from home and spend more time selling instead of
wasting time commuting to the office. Domino’s Pizza uses social media to let people design a pizza
and market it (and get a share of the profits) to increase its market penetration.287 Police officers
also employ smartphones and tablet computers to increase their productivity.288 Similarly, computer
networks have eroded traditional workplace hierarchies. Networks mean junior employees can join
immediate online discussions with senior executives (where they are judged more on what they say
than on where they sit on the corporate ladder). More and more the emphasis is on the application of
knowledge and not physical exertion. Many agricultural and industrial jobs, for example, have become
knowledge jobs. Factories and farms are operated using computer software instead of manual labour.
In the United States, two million clerical jobs have been lost since 2007 because of new computing

CHAPTER 1 Strategic human resource management  39


technologies. Pay rates in many of the fast growing occupations (for example, fast food) are also
lower than the jobs they are replacing (called technologically driven downwards mobility).289
The new economy is a knowledge economy calling for new skills, new ways of working and new
organisational structures. Organisations are shedding employees who are not core to their business
success and using online marketplaces (such as www.freelancer.com.au) to find people prepared to bid
for work. Workers, as a result, are becoming more like self-employed entrepreneurs.290 As traditional
jobs disappear (or become more insecure) being ‘connected’ via social networking sites (such as
LinkedIn) will be critical to career success.291 Social technologies, as a result, are now an essential
part of how people work and interact.292 According to the Future of Talent Institute’s Kevin Wheeler,
‘We are .  .  . rapidly moving into a society where most of us will work primarily for ourselves for the
majority of our careers’.293 Already 40 per cent of Australian workers are not permanently employed
but work on a casual, temporary or contract basis.294 One expert even predicts that the term ‘employee’
will simply drop from usage.295 Others, however, see a bleak future for those who can’t compete with
serious spillover effects for the rest of society.296
•• Cultural. Historical background, ideologies, values, norms and language all influence employee views
on the role and importance of HRM, EEO, job titles, HRD and other aspects of HRM such as job
design, remuneration, HRD, motivation, and employee communication. Australians, for example,
spend more on alcohol than on education.297 Research also indicates that the primary motivation for
Chinese and Indian workers is to make money, for Japanese it is a commitment to the organisation, and
for Taiwanese it is career progression and development.298 Chinese employees (unlike their Australian
counterparts) may find it difficult to openly discuss issues and mistakes and be uncomfortable with a
participative management style, preferring their managers to make decisions.299 Cross-cultural studies
also suggest that performance-based pay is a poor fit for some cultures.300
•• Demographic. The nature of the human resources available to the organisation in terms of the numbers,
geographical distribution, age, sex, literacy, skill and education levels of the population has an obvious
effect on HRM. Ageing populations and the increasing participation of women in the workforce, for
example, have spurred organisations to automate; change their remuneration practices; and introduce
more flexible work schedules. Japan’s ageing society, for example, has stimulated Japanese firms to
aggressively increase their expenditures on the development of robotics.301
•• Social. Changing values and attitudes towards issues such as dress, education, work, minorities,
unions, management, social mobility, status, rewards, health and safety, job security, quality of life,
employee privacy, sex roles and gay rights, and damage to the social fabric caused by widening wealth
inequalities affect every aspect of HRM. Changing values and attitudes typically create new challenges
for the HR manager — for example, how to handle dual career couples in an interstate or international
transfer, whether benefits coverage should be extended to the partners of gay employees, how to
satisfy gen Y’s strong desire for work flexibility, how to give employees a better work–life balance,
and how to deal with ‘downshifters’ (people who have decided on a lifestyle change involving less
work, income and consumption).302 Big data analytics provide a valuable tool for the HR manager to
analyse trends in community and employee attitudes and behaviour.303
•• Business. In response to globalisation, technological advances and increasing competition,
organisations are merging, downsizing, restructuring, outsourcing and eliminating costs, all of which
directly or indirectly affect HRM. Increased import competition, new technology and high labour
costs, for example, have caused Australian manufacturers to reduce their employee numbers. Old
industries are dying and new ones are emerging. Australia Post, for example, is experiencing financial
losses because of the terminal decline in letter posting, while some struggling Australian mining
companies are switching to growing medical marijuana.304 Ageing populations, increased leisure
time, changes in technology and food shortages all mean growth in industries related to sports,
entertainment, healthcare, information technology, travel, and farming (for example, insect farming).
•• Economic. Factors such as the level of economic activity, the unemployment rate, public versus
private ownership, the level of investment, the availability of credit, the degree of centralised

40  PART 1 Introducing HRM


economic planning, the amount of debt, and the level and type of taxes directly or indirectly
influence recruitment, selection, compensation and benefits, industrial relations, retrenchments and
labour turnover. China’s economic slowdown, the end of the minerals boom and the collapse of oil
prices all affect the Australian economy and labour market. Most of Australia’s top export markets
are now in Asia, generating demand for training in Asian languages, business cultures and cross-
cultural negotiation, and the employment of expatriates. In the USA, organisations have been buying
technology instead of hiring people. This has produced dramatic increases in productivity but led to
the ‘vaporising’ of jobs (from steel workers to travel agents).305
•• Industrial relations (or employee or employment relations). Factors relating to industrial relations —
such as the organisational climate, government policies, the degree of unionisation, the role of
industrial tribunals, employee attitudes, employee commitment, employee input and the quality of
work life — affect things such as job design, absenteeism, labour turn-over, industrial disputes,
employee communication and pay rates. Unions, for example, often influence HR practices,
particularly in the areas of remuneration, job security arrangements and working conditions.
WorkChoices (with its promotion of the individualisation of the employment relationship and the
marginalisation of trade unions) posed major challenges to trade unions and business organisations.306
Fair Work Commission (FWC), on the other hand, with its promotion of regulation and trade union
power, has seen an increase in collective work arrangements. Advances in technology also mean that
many traditional non-union and union jobs will disappear (for example, Rio Tinto has made its trains
in the Pilbara region driverless — saving more than $70 million a year) or be ‘deskilled’ to the point
where they can be performed by cheaper and less skilled workers, half a world away.307 Even in
low-cost wage countries robots pose a threat to employment. Fox Conn, the world’s largest contract
electronics manufacturer, for example, plans to have as many robots as workers in its China factories
within the next few years (while in India washermen face job losses as affluent Indians buy washing
machines).308 Highly skilled jobs are also under threat. Physicians and radiologists are predicted to be
replaced by computers within 30 years.309 Robots with customised accents (in various languages) and
high-resolution facial gestures that can deliver lectures, facilitate tutorials and interact with students
online and computers that can mark student essays are set to replace many academics.310

Internal influences
Internal environmental influences — such as the organisational mission or purpose, objectives and
strategies, culture, structure and systems — involve factors that are found within the organisation.
Organisational strategies
Strategies translate the organisation’s strategic business objectives into action plans. They set the
direction for the organisation and define how it plans to establish a sustainable competitive advantage.
Strategies impact every part of the organisation. For example, if an organisation has an objective to
become the fastest-growing, most profitable company in its industry, this influences the type of people
it requires (highly competent, achievement-oriented), the HR system (high-performance), the culture
(egalitarian, performance-oriented) and the structure (flat, non-hierarchical). A recent survey shows that
more than 90 per cent of investment analysts listed corporate culture as an important factor when making
investment decisions. Companies that do not have a culture that supports the company’s strategy, thus,
risk being shunned by professional investors.311
Organisational culture
An organisation’s psychological and social climate forms its culture. The culture represents the values,
beliefs, assumptions and symbols that define how the organisation conducts its business. Jerry Yang,
Yahoo! co-founder, says: ‘We have a killer culture. People work hard and play hard. They are here
because they want to change the world.’312 Organisational culture tells employees how things are
done, what is important and what kind of behaviour is rewarded. ANZ, for example, emphasises five
principles: integrity, collaboration, accountability, respect and excellence. The Australian Public Service

CHAPTER 1 Strategic human resource management  41


similarly has five key values — committed to service, ethical, respectful, accountable and impartial.
Public servants, however, describe their organisation as one that has a risk-averse culture characterised
by ineffective management of poor performers, a failure to encourage creativity and an inability to
reward the best performers.313 The Australian Taxation Office (ATO), for example, has been described
as being hamstrung by bureaucracy, risk aversion, characterised by internal empire building, lacking
in trust and respect, and having no accountability for performance.314 Perhaps not surprisingly, the
Australian Public Service has also been criticised for its poor productivity, high level of unscheduled
absenteeism and inability to deal with underperformers.315 Victoria’s public service, similarly, has been
described as lacking accountability, having conflicts of interest, displaying nepotism and favouritism, and
having a serious corruption problem.316 Culture thus impacts on employee expectations, behaviour and
productivity. Organisational culture, for example, is one of the most critical determinants of ethical and
safety performance.317 A recent study by Aon Hewitt found that organisations with cultures involving
high targets and reward driven performance experience more positive business outcomes.318 Telstra’s
past history of poor performance is in part attributed to a workplace culture drawn from a bureaucratic
and politicised public sector mentality.319
Wesfarmers’ CEO Richard Goyder has identified cultural change as a major issue for its acquisition,
Coles, given the group’s past corrupt and sycophantic culture was dominated by excess secrecy,
politicking, personal fiefdoms and an absence of accountability.320 Johnson & Johnson’s unique
decentralised culture, which fosters an entrepreneurial attitude, has kept the company intensely
competitive and very successful.321 Another example is Nike, where employees who do not like the
ferociously competitive culture do not last long.322 Apple similarly has a ruthless culture. It is described
as an unforgiving organisation ‘where accountability is strictly enforced, decisions are swift, and
communication is articulated clearly from the top’.323 Interestingly, labour turnover at Apple is extremely
low. High-performing Amazon also has a Darwinian culture. CEO Jeff Bezos says, ‘our culture is
friendly and intense, but if push comes to shove, we’ll settle for intense’.324 Finally, culture distinguishes
the organisation from other organisations. Although there is no one ‘best’ culture, there is a clear link
between an organisation’s culture and its effectiveness. Organisations with strong positive cultures have
a much better chance of success than have those with weak or negative cultures.325
Thus, it is important for management to foster a culture that promotes the achievement of the
organisation’s strategic business objectives.326 Macquarie Bank has focused on recruiting the best talent,
rewarding people well and allowing them free reign in seeking out business opportunities.327 Campbell’s
Soup’s strategic intent is to ‘beat the competition.  .  . winning is what we are all about’.328 This is
articulated by a former Campbell’s CEO: ‘If you don’t want to compete, if you don’t like stretching,
if you won’t confront change and competition, I really don’t think you are right for the company.’329
By employing like-minded people, Campbell’s is attempting to build its culture by strategic selection.
Companies such as IBM, Microsoft, Procter & Gamble and Westfield also assess job applicants more on
how they fit the culture than on their job-related skills. Leading firms also spend a great deal of effort on
selecting new employees (typically including both workers and managers in the screening process) and
utilise well-established performance management systems to quickly identify selection errors.330
Similarly, an increasing number of firms are shaping their organisation’s culture through employee
orientation and training programs. McDonald’s, for example, trains all of its new employees in the
dominant values of ‘quality, service, cleanliness and value’. Finally, organisations can use reward
systems to shape their cultures. Employees who better fit the organisation’s values can be rewarded
more than others. A danger in such approaches, however, is that the inculcation of culture may become
indoctrination, producing a lack of flexibility, a loss of individuality and unquestioning acquiescence.331
The link between organisational culture and HRM is important. Research shows that cultural
characteristics that promote job satisfaction (such as fairness, opportunities for personal growth and
good company reputation) make employees more willing to remain and build their careers within
the organisation.332 HRM activities contribute to the development of an organisation’s culture and
provide it with a competitive edge by stimulating and reinforcing the specific behaviours needed to

42  PART 1 Introducing HRM


achieve the organisation’s strategic objectives. This approach has been criticised by some academics as
pseudoscientific, manipulative and anti-union.333 Corporate culture programs in particular are seen as
social engineering designed to create a servile uniformity in employee beliefs and behaviour.334
Organisational structure
The effective implementation of an organisation’s strategy requires management to ensure that the
organisation’s design helps to achieve its strategic objectives. HRM is particularly concerned with
organisational structure because it can directly affect employee productivity and behaviour.335
Organisations with narrow spans of control that are hierarchical in structure, for example, tend to
be authoritarian, rigid, formal, intolerant of dissent, highly specialised and bureaucratic. In contrast,
organisations with wide spans of control that are flat in structure tend to be more flexible, adaptable,
informal, less specialised and more entrepreneurial. Thus, the structure of an organisation has a powerful
influence over how jobs are designed, how decisions are made, how things get done and what type of
employees are required for the organisation’s success.
Organisational systems
The systems the organisation employs to achieve its objectives must be compatible. An efficient HR
system that does not mesh with its functional counterparts will be ineffective. It is the HR manager’s job
to ensure that all HR systems are efficient and in harmony with accounting and financial, information
technology, purchasing, marketing, sales and distribution, and operations and service management
systems. For example, if HR’s reward system (which includes the subsystems of cash and non-cash
remuneration) does not promote marketing’s goal of improving the sales performance of its sales
representatives, then the overall performance of the organisation suffers. HR systems are influenced by
(and will influence) the organisation’s strategy, culture, structure and people. For example, an organisation
seeking a risk-averse culture is unlikely to use a reward system emphasising at-risk remuneration or to
hire aggressive risk-takers.

Evaluating HRM objectives, policies and practices


HRM policies and practice should be evaluated in terms of their contribution to achieving the
organisation’s strategic business objectives and satisfying employee needs. Research has shown positive
associations between HRM practices and perceptions of organisational performance and operational
performance when matched with quality manufacturing strategies.336 Similarly, there is evidence to
indicate that a HR reputation for being employee-centred has a positive effect on labour turnover, sales,
profitability and a company’s share price.337 Finally, an increasing number of studies highlight that it is
people who limit or enhance the strengths and weaknesses of an organisation and that, when done well,
HRM can improve organisational competitiveness, growth, adaptability and profitability.338

1.10 HRM outcomes and performance


LEARNING OBJECTIVE 1.10 Understand human resource management outcomes and performance, and
appreciate the strategic challenges facing human resource management.
HRM is concerned with both organisational performance and employee wellbeing. This means that
any evaluation of HR’s contribution must incorporate both perspectives — the organisation’s and the
employees’. HRM’s contribution to organisational performance involves aligning HR strategies with
organisational strategies, managing the corporate culture to win employee commitment and being
efficient in managing HR activities.
HRM’s contribution to individual wellbeing is demonstrated by employee attitudes and behaviour.
High-performance HRM, which places the employee centre stage, has benefits for  the organisation
because the way employees respond to HRM initiatives is linked to their on-the-job performance — and
ultimately to organisational performance.339

CHAPTER 1 Strategic human resource management  43


The outcomes that follow should be considered when evaluating HRM performance (also see
­ gures 1.12 and 1.15).
fi
•• Adaptability. To what extent do HRM strategies and policies foster organisational and employee
flexibility? What is the readiness for change? Does the organisation exploit change or does it react
to change? Are innovation and creativity encouraged or stifled? Is knowledge recognised as a critical
asset? Does the organisation utilise people with different backgrounds and value systems? Research
shows a positive relationship between organisational learning, innovation, strategic HRM and
sustainable competitive advantage.340
•• Commitment. To what extent do HRM strategies, policies and practices enhance or decrease employee
identification with and attachment to their job and the organisation? A high level of commitment
can result in more loyalty, increased teamwork and reduced labour turnover, along with a greater
sense of employee self-worth, dignity, psychological involvement and feeling of being integral to
the organisation. Research clearly shows that HRM practices such as an employee-friendly work
environment, career development, development-oriented appraisal systems and comprehensive training
are positively linked to increased commitment.341 In contrast, things such as age discrimination have
a negative effect on organisational commitment.342 Macquarie Bank encourages commitment via
profit sharing, share acquisition plans, flexible work arrangements, a flat management structure and
promotion based on merit.343
•• Competence. To what extent do HRM strategies and policies attract, retain, motivate and develop
employees with the KSAOs required to achieve the organisation’s business objectives?
•• Congruence. To what extent do HRM strategies and policies generate (or sustain) congruence
between management and employees, different employee groups, the organisation and the community,
employees and their families, and within the individual? In other words, do HRM strategies promote
the achievement of employee goals and, at the same time, satisfy the organisation’s strategic business
objectives? The lack of congruence can be costly to the organisation in terms of: time, money and
energy; the resulting low levels of trust and lack of common purpose; and the stress and other
psychological problems it can create.344 Research, for example, indicates that managers and employees
may differ in their perceptions of a HR practice causing substandard outcomes. HR managers need to
assess the congruence of HR practice to ensure that manager and employee perceptions are aligned
and that the practice is producing a strategically beneficial outcome.345
•• Cost-effectiveness. To what extent do HRM strategies and policies reduce personnel-related costs, help
to correctly size the organisation, eliminate unnecessary work, optimise remuneration expenditure,
reduce labour turnover and absenteeism, improve employee health and safety, improve employee
productivity and avoid costs from litigation and negative public relations?
•• Job satisfaction. To what extent do HRM strategies and policies produce employees with positive
attitudes and feelings about their work? Common job satisfaction components include pay, promotion
opportunities, fringe benefits, supervision, colleagues, job conditions, the nature of the work,
communication and job security.346 Recent research shows that enriched jobs are positively associated
with employee job satisfaction and contentment.347 Positive job satisfaction likewise promotes
desirable employee behaviours and helps organisations develop core competencies (and gain a
source of competitive advantage).348 Employees frustrated and bored with repetitive and standardised
work have low commitment.349 A satisfied employee tends to be absent less often, make positive
contributions, stay with the organisation and radiate positive feelings towards customers.350
•• Justice. An organisation (and its management) may be trusted by its employees, but may not necessarily
be seen as fair or just. This is because fairness is not an objective thing, but rather, like beauty, depends
on the eye of the beholder. As a result, what is perceived as fair or just may vary from person to
person. For example, employees may interpret what is fair in terms of equality (all people with the
same qualifications performing the same work should receive the same rate of pay and the same pay
increase — across-the-board pay increases, for example, are typically favoured by trade unions, but not
by management) or need (low-income workers should receive more pay because they need the extra

44  PART 1 Introducing HRM


income to maintain a decent standard of living). Managers, on the other hand, may regard competitive
equity (those that contribute the most are paid the most) and pay inequalities as being fair.
HR strategies, policies and practices are powerful communicators regarding management’s
trustworthiness, fairness and commitment to employees. Employee perceptions of fairness are important
to all HRM decisions, but particularly so to remuneration decisions such as those dealing with pay,
pay raises and benefits.351 If management is perceived favourably, employees reciprocate with increased
commitment to the organisation.352 However, downsizing, restructuring, job insecurity and increased
work pressures have made many employees cynical. As a result, HR managers increasingly must face
issues of trust and fairness, particularly in the areas of recruitment and selection, performance appraisals,
remuneration, promotions, demotions and terminations.
Three major perceptions of unfairness can be identified: distributive injustice, procedural injustice and
interactional injustice.
–– Distributive justice refers to whether scarce resources (such as the merit budget, superior performance
ratings, promotional opportunities and expatriate assignments) are perceived as being allocated fairly.
–– Procedural justice refers to how the HR process is administered. For example, is the company’s
selection process seen as fair or biased?
–– Interactional justice refers to how managers interact with employees. Are they warm and friendly,
open and respectful, or are they cold, arrogant, aloof and abusive?353
Given the diversity of fairness perceptions, it is unlikely that every employee (or manager) will be
happy with every HR policy, practice or decision. HR managers must constantly ask: Is it fair? Why?
Why not? Will it be seen as fair? Why? Why not? By ensuring that HR policies and practices are
perceived by employees as fair and equitable, HR managers can promote trust and a sense of fairness
within the organisation. In particular, HR managers need to ensure that:
–– communication exchanges are open, frequent and meaningful
–– employees feel they are valued by the organisation (in other words, the organisation cares about their
wellbeing)
–– managers behave with integrity
–– managers are competent
–– employees are encouraged to express their feelings.
All of these factors clearly promote trust and perceptions of fairness and are within HR’s ambit.354
•• Motivation. To what extent do HRM strategies and policies stimulate employees to achieve a
designated goal? Positive acts performed for the company (for example, creating customer satisfaction
through personalised service) should be reinforced. Likewise, employees will be more motivated when
they have clear goals to achieve.355 Highly motivated employees work hard, come to work early and
contribute more to the organisation’s strategic objectives. A US study suggests that only 30 per cent of
employees are truly loyal, committed and motivated; the rest are unhappy, prone to quit and less likely
to provide satisfactory customer service.356 Research also suggests that employees with low levels of
intrinsic motivation who lack the drive and engagement to work independently show decreased work
performance when empowered.357
•• Performance. To what extent do HRM strategies and policies contribute to employee on-the-job
performance and productivity and the organisation’s overall profitability, growth and success? Research
shows that organisations which adopt a high-involvement strategy tend to have better performance.358
•• Trust. To what extent do HR strategies, policies and practices promote trust between employees,
management and the organisation? How willing are employees to share information, genuinely cooperate
with one another and not take advantage of others? Is the corporate culture supportive of trusting
behaviour and cooperative relations? Is the HR function seen as an independent voice that will offer
an independent view on HR policies and practices? A trusting working environment has an economic
pay-off via reduced transaction costs (for example, less time spent playing politics and checking up on
others) and a more friendly, more predictable, more satisfying and less stressful work environment.359
Research also suggests that high trust organisations are better able to attract and retain employees

CHAPTER 1 Strategic human resource management  45


possessing scarce and valuable skills and to get their employees to make additional contributions beyond
the narrow confines of individual job descriptions.360 Managerial trustworthiness has also been shown
to be positively related to job performance, organisational commitment and perceived fair treatment
and organisational effectiveness.361 Finally, a recent study similarly indicates that by enhancing trust,
management can increase both employee motivation and performance.362 When trust is absent or
broken, employees exhibit low job satisfaction, poor performance and high labour turnover.363
One survey depressingly indicates that most Australian workers have lost faith in their employer
and almost half believe their company does not have their best interests at heart.364 Another survey
also found that 80  per  cent of Australian employees do not trust information given by their CEOs.365
Other research in the United States similarly shows that less than half of all employees believe that
management has a genuine interest in their wellbeing and barely half trust the information they receive
from management.366

Employee engagement
Employee engagement specifically implies an emotional and intellectual involvement with an
organisation. As such, it represents a variety of factors such as motivation, job satisfaction, commitment,
congruence and trust (see figure 1.15).367 Thus, employee engagement may be viewed (from a HR
practitioner’s perspective) as an umbrella measure (comprising a number of sub factors) that gives an
indication of the employee’s connection to the organisation and their passion for the job. Employees
who have jobs with high levels of autonomy, task variety, task significance and feedback, for example,
are more likely to be engaged.368 Questions that HR managers need to ask include, ‘How connected
are our employees to the organisation? Do they understand where it is going? Do they share its values?
Are they getting the feedback they need to be effective? Are they aware of what is happening? Do
they have a say in what is happening? Do our employees have the support to grow?’369 High employee
engagement scores suggest employee willingness to help others, to try and do something extra to
improve performance and to speak positively about the organisation.370 Interestingly, research indicates
that emotional commitment (feeling that the job is important, valuable and of benefit to others) is
more significant than rational commitment (feeling that the job benefits the employee’s own career and
financial interests) in improving performance.371 Employees with high commitment scores are likely to
be very loyal to the organisation.
Employee attitude surveys are typically used to measure employee engagement. The survey results
are regarded as business (and not just HR) data and are analysed to identify relationships between
engagement and business outcomes. To gain full value from employee attitude surveys the HR manager,
therefore, must search for patterns that demonstrate how employee attitudes and behaviour affect business
outcomes (such as reduced labour turnover, increased productivity and higher customer satisfaction).
The focus, therefore, is not simply on the overall engagement score but on the specific factors that
are driving performance (for example, when employees feel well trained and empowered customer
satisfaction increases).372 Research also suggests that profits increase when employee attitudes reflect
high job involvement and high organisational commitment.373 The director of the Centre for Work +
Life at the University of South Australia, Barbara Pocock, says ‘Unhappy workers have high levels
of absenteeism and leave jobs more frequently — both of which have bottom line impacts. Engaged
workers are more productive’.374 Recognising that companies with engaged employees outperform
others, major asset managers (such as BlackRock — the world’s largest) when evaluating potential stock
purchases look for key positive and negative words across a variety of social media to gauge the level of
employee engagement before making an investment.375

The HRM challenge


If HR managers are to be involved in strategic planning and decision making, they need to be — not just
wish they were — strategic contributors. They need to tie dollar-and-cents implications to HR issues;

46  PART 1 Introducing HRM


they need to show management how to increase profitability through improved employee productivity
by means of increased employee commitment, trust and perceptions of fairness; they need to be the
employees’ voice at the management table; and they need to demonstrate professional competence in
HR activities such as remuneration and managing change.
Management is developing high expectations of HRM. Productivity improvement, restructuring and
downsizing, IR issues, the identification and development of talent, performance appraisal and reward
systems, and change management increasingly occupy the attention of top management. Recognition
of the important role that HRM plays in all aspects of a business requires HR professionals to lift their
game. Organisations in today’s competitive environment cannot risk giving HR managers unchallenged
responsibility for HRM. It is up to HR managers to prove their worth by demonstrating the connection
between what they do and organisational performance and employee wellbeing.

CHAPTER 1 Strategic human resource management  47


SUMMARY
The present climate of economic turbulence, rapid technological change, savage competition and pressure
for increased productivity has led to a need for HR managers to adopt a strategic approach, be part
of the top management team, be involved in corporate planning, develop business know-how, become
bottom-line oriented and develop a vision for HRM. HRM activities such as job analysis, recruitment
and selection, and human resource development must be part of a coordinated effort to improve the
productive contribution of people in meeting the organisation’s strategic business objectives. Inability to
do so means that the organisation will ultimately stagnate and fail.
The shift from an industrial society to an information society also presents HRM with the major
challenge of creating a fair and just workplace. Organisations today must manage people differently
if they are to survive the erosion of trust caused by relentless restructuring, downsizing and work
pressures.
In a world where human resources are the competitive advantage, a revolution in management and
HRM thinking is needed if these challenges are to be met.

KEY TERMS
Bottom line  Refers to a final result, such as net profit after taxes.
Change agent  A person who acts as a catalyst for change.
Conscript mindset  Employees are externally motivated (that is, they are coerced by management) to
perform.
Corruption  Involves illegal practices to further personal and/or organisation interests. Includes fraud,
bribery, graft and the payment of secret commissions and kickbacks.
Discretionary effort  Effort that employees voluntarily make in excess of the minimum amount
required to satisfy the job requirements.
E-HRM  Emphasises usage by employees, managers and HR personnel. Focus is on strategic and
value-added activities. It incorporates HRIS.
Employee advocate  Requires the HR manager to be the employee’s voice in management decisions.
Employee engagement  Employee engagement measures the emotional and intellectual connection
employees have with the organisation and their job.
Employee relations  Deals primarily with employee attitudes and behaviour and the relationships
between an organisation and its employees. Sometimes regarded as being the same as industrial
relations (IR). However, ER focuses more on workplace relations than traditional IR.
Environmental influences  Existing (and potential) opportunities and threats present in the
organisation’s external and internal environments.
Equal employment opportunity (EEO)  Giving people a fair chance to succeed by avoiding
discrimination based on unrelated job factors such as age, race, sex or nationality.
Ethnocentric orientation  Considers one’s culture (or strategy) superior to others. Produces uniform
strategies across all business units.
Functional experts  Refers to the efficiency of HR managers and their effective management of HR
activities (such as selection) so that they create value.
Geocentric view  Produces global (or overarching) strategies on major corporate issues but permits
business units to develop local strategies on other issues.
High performance human resources management  A set of ‘best’ HRM policies and practices that
promote superior employee performance and give the organisation a competitive advantage.
Human capital  The knowledge, skills and abilities present in an organisation’s human resources. It is
the product of learning, education and training.

48  PART 1 Introducing HRM


Human resource information system (HRIS)  A computerised system used to gather, store, analyse
and retrieve data in order to provide timely and accurate reports on the management of people in
organisations.
Human resource management (HRM)  Involves the productive use of people in achieving the
organisation’s strategic objectives and the satisfaction of individual employee needs.
Humanistic HRM  Recognises the need for the integration of HR policies and practices with the
organisation’s strategic objectives, but places emphasis on employee development, collaboration,
participation, trust and informed choice.
Industrial relations (IR)  Traditionally takes a broader perspective, involving industrial tribunals, trade
unions, employer associations and governments and their roles in the making of rules governing the
employer–employee relationship.
Instrumental HRM  Stresses the rational, quantitative and strategic aspects of managing human
resources. Performance improvement and improved competitive advantage are highlighted.
Management  The art of getting things done through people.
Management by objectives (MBO)  Involves setting specific measurable goals with each employee
and then periodically reviewing the progress made.
Mission statements  The operational, ethical and financial reasons for an organisation’s existence.
Motivation  That which energises, directs and sustains human behaviour.
Objectives  Measurable targets to be achieved within a certain time frame.
Organisational culture  The values, beliefs, assumptions and symbols that define the way in which the
organisation conducts its business.
Organisational structure  Refers to the organisation’s framework or design.
Plan  Action step that shows how an objective or a goal is to be achieved.
Policies  General statements that serve to guide decision making.
Polycentric orientation  Produces a diverse mix of strategies because strategies are adapted to meet
the needs of each business unit.
Proactive  When managers anticipate problems and take corrective measures to minimise their effect.
Procedures  Specific statements that define the action to be taken in a particular situation.
Productivity  An organisation’s total output of goods and services divided by its total inputs (that is,
the relationship of inputs to outputs).
Reactive  When managers wait until a problem occurs before taking action.
Risk  Involves making a decision and taking action without definite knowledge of the probable outcome.
Single factor productivity  Measures the ratio of total outputs to a single category of inputs (such as labour).
Social capital  Describes the strength of personal relationships existing within an organisation. It
promotes knowledge sharing, employee motivation, teamwork, collaboration and willingness to get
things done.
Stakeholder  Any individual, group or organisation that is affected by or has a vested interest in an
organisation’s policies and decisions.
Strategic choice  Refers to managers being proactive (as opposed to reactive) in facilitating the
organisation’s successful adaptation to changes in its environment.
Strategic HRM  Focuses on the linking of all HR activities with the organisation’s strategic objectives.
Strategic partner  Refers to HR managers being an essential part of the management team running
an organisation and contributing to the achievement of the organisation’s objectives by translating
business strategy into action.
Strategic intent  Sustained obsession to achieve a challenging long-term objective.
Strategy  Defines the direction in which an organisation intends to move and establishes the framework
for action by which it intends to get there.
Strategy formulation  Involves selecting an organisation’s mission, key objectives and business strategies.
Strategy implementation  Involves designing an organisation’s structure and control systems and
evaluating the selected strategies in achieving the organisation’s key objectives.

CHAPTER 1 Strategic human resource management  49


SWOT analysis  Review of an organisation’s strengths and weaknesses and the opportunities and
threats in its environment.
Total (or multi) factor productivity  The ratio of total outputs to the total inputs from labour, capital,
materials, technology and energy.
Value-added  Activity that increases worth or utility.
Values  Broad preferences defining appropriate or desired courses of action or outcomes.
Volunteer mindset  Employees are internally motivated (that is, they are self-motivated) to perform.
Whistleblower  An employee who makes known an organisation’s illegal, unethical or improper
practices to a third party (for example, a newspaper or a community group).
Work intensification  The increase in effort that employees must make (that is, they must work
harder).

ACTIVITIES
REVIEW QUESTIONS
1 ‘One of the aims of HRM is to give an organisation a competitive edge.’ Do you agree or disagree
with this statement? Explain your reasoning.
2 ‘All managers are HR managers.’ Do you agree or disagree with this statement? Why?
3 ‘This decade, most organisations will be differentiated by talent, not technology.’ Do you agree or
disagree with this statement? Explain your reasoning.
4 What is a whistleblower? What role does HR have to play in protecting whistleblowers?
5 What is HRM? What is its importance to an organisation? To employees? To trade unions?
6 What do you see as the most important role of the HR manager? Why?
7 What is big data? What is its significance for HRM?
8 What is organisational culture? What is its relationship to corporate strategy? What is its
significance for HRM?
9 How would HR strategy differ if an organisation changed from (a) a global strategy to a
transnational strategy and (b) a growth strategy to a retrenchment strategy?
10 What do you think will be the two most significant challenges facing HR managers in the next five
years? Explain your answer.

WHAT IS YOUR VIEW?


1 HR managers claim that they belong to a profession but fail to speak out about corporate excesses
in their companies. Is this ethical?
2 Why should employees trust HR when it represents management?
3 Hiring people who care passionately about the organisation and its products or services means
having a conformist group of employees possessing identical values and attitudes. Is this right?
4 More and more workers are being replaced by robots? Is this fair?
5 Is it fair that religious organisations have exemption from anti-discrimination legislation?

CLASS DEBATE
Choose one of the following topics and debate it in class.
•• HR managers have failed to resist the culture of greed.
•• Robots are not here to improve productivity but to take our jobs.
•• HR has taken over from politics as the theatre of empty rhetoric.
•• In times of economic recession, managerial emphasis must be on profits, not people.
•• By calling itself human resources, HRM dehumanises people — turning them into assets.
•• Big data is technology’s Big Brother.

50  PART 1 Introducing HRM


FORUM
What do you think? Conduct a mini survey of class members, using the questionnaire. Critically discuss
the findings.
1 HRM today is too concerned with professional status. YES NO
2 The prime purpose of HRM is to look after employee welfare. YES NO
3 HR work is better done by women. YES NO
4 HRM is increasing in importance. YES NO
5 HR managers are trusted by employees. YES NO
6 HR managers who emphasise the ‘bottom-line’ impact are unprofessional. YES NO

HR MANAGER’S PITCH
Prepare a one-minute verbal presentation on one of the following.
•• High performance HR practices.
•• HRM and ethics.
•• The role of the HR manager.
•• HRM and productivity improvement.
•• Big data and HRM.
•• HRM and management.

HR BLOGGER
Form into groups of three to four. You are tasked with writing a 150-word blog on one of the following.
•• Whistleblowing — a career stopper?
•• Corporate wrongdoing — HRM the silent profession.
•• HRM and employee engagement.
•• HRM — the organisation’s champion of ethical behaviour?
•• HRM — soft or hard?

ONLINE EXERCISE
1 Choose two organisations with which you are familiar and which have web sites. Summarise the
mission, strategy and culture of the organisations. Which organisation impressed you the most and
the least? Why?
2 Conduct a web search on whistleblowers and write a 200-word blog on the experiences of the
whistleblower studied. Some key search words:
•• Toni Hoffman, Jayant Patel: Bundaberg Base Hospital
•• Simon Illingworth: Victoria Police
•• Dennis Genfiln: NAB
•• Craig Thomson, Kathy Jackson, Michael Williamson: Health Services Union.
3 Form into groups of four to six. Conduct a web search on corporate culture and organisational
effectiveness using one of the following organisations: Apple, Australian Public Service,
Blackmores, Goldman Sachs, Qantas or Westpac. Prepare a 150–200-word blog on your findings.
As a class, critically discuss the results.
4 Form into groups of four to six. Conduct a web search on one of the following subjects. Prepare
a two-minute presentation discussing the ethical questions raised and how you as an HR manager
would handle the situation.
•• Dow Chemical, Union Carbide, Bhopal, Warren Anderson, Andrew Liveris
•• Commonwealth Bank of Australia, financial planning scandal, Don Nguyen, Jeff Morris, Ian
Narev

CHAPTER 1 Strategic human resource management  51


•• Woolworths, Comancheros, Ultimate Crowd Control Pty Ltd, Australian Leisure and Hospitality
Group
•• Reserve Bank of Australia, Note Printing Australia, Danny Reid, Bob Rankin, Iraq
•• Boral, CFMEU, Brian Parker, John Setka, Trade Union Royal Commission, Mike Kane
5 Form into groups of four to six. Identify and consider the ethical and HR issues raised by
advanced technology (for example, robots in the workplace, big data analytics). Regroup as a class
and discuss your findings.
6 Form into groups of four to six. The NSW government has proposed that Sydney’s new north-west
rail link will use driverless trains. As part of the HR group you are tasked with:
(a) identifying the major stakeholders involved and their likely reactions
(b) identifying the major HR issues and how you plan to deal with them.
Source: Based on Whitbourn, M. (2013) ‘Driverless trains for NSW’s $8.5 bn line’, Australian Financial Review, 7 June,
p. 11.

7 Form into groups of four to six. Select one of the following organisations and conduct a web
search on their stated values and corporate culture. Prepare a 300-word blog or a three-minute
presentation on your findings.
•• Amazon
•• Apple
•• Australian Taxation Office
•• BHP Billiton
•• Commonwealth Bank Australia
•• Cotton On
•• Flight Centre
•• National Australia Bank
•• Woolworths

PRACTICAL EXERCISES
1 Form into groups of four to six. Identify which external influences shown in figure 1.12 affect the
industry in which you work, the company for which you work and the job in which you work.
What changes are these influences bringing about? Identify and discuss the implications for your
organisation’s HR management and for you personally.
2 Form into groups of four to six. Assume that you are the senior HR staff for an organisation that
aims to be the fastest-growing, most profitable bank/manufacturer/retailer (select one industry)
in the Asia–Pacific region. Identify and discuss the implications of this mission statement for the
following HR activities:
•• recruitment and selection
•• training and development
•• remuneration and benefits.
3 Form into groups of two or three. Research the stated ‘core purpose’ of two organisations
with which you are familiar. Regroup as a class. Discuss what each stated core purpose tells
you about the organisation and its culture. Is it credible? Is it reflected in the organisation’s
strategies, policies and practices? Identify which core purpose appeals to you the most and
explain why.
4 Form into groups of four to six. Perform a SWOT analysis on your university (or business school)
or an organisation you know well. Regroup and discuss your findings as a class.
5 Form into groups of four to six. Using the work sheet below, identify two or three trends for each
category of external influence. Regroup as a class and discuss the impact each trend may have on
stakeholders.

52  PART 1 Introducing HRM


IMPACT OF ENVIRONMENTAL TRENDS
Group
External influences
Employees Employers Trade unions HRM Shareholders Society
Business
Cultural
Demographic
Economic
Environmental
Industrial relations
Legal
Political
Social
Technological

6 Visit a web site of an organisation you are familiar with. Briefly describe what you think the
organisation would be like to work for and the type of person who would best ‘fit’ the culture.
7 Form into groups of four to six. Select an organisation of your choice and do a web search of its
name together with key words. Write a 300-word blog on your findings covering (as appropriate)
the management style, remuneration practices, HRM policies and practices, ethical behaviour and
corporate culture of the firm selected. Explain why you would like to work there or not.
8 Complete the ‘Ethics quiz’ below. As a class, score the results. Break into groups of 4–6 and
review the results. Regroup as a class and discuss your findings.

Ethics quiz
1. Watching porn using your work computer
1 2 3 4 5
Unethical Ethical
2. Taking a ‘sickie’ when not ill
1 2 3 4 5
Unethical Ethical
3. Web shopping during working hours
1 2 3 4 5
Unethical Ethical
4. Telling ‘white lies’ on your job application
1 2 3 4 5
Unethical Ethical
5. Disclosing confidential information about a colleague
1 2 3 4 5
Unethical Ethical
6. Sleeping with the boss to advance your career
1 2 3 4 5
Unethical Ethical
7. Accepting lavish gifts or entertainment from a customer
1 2 3 4 5
Unethical Ethical

CHAPTER 1 Strategic human resource management  53


8. ‘Padding’ your expense account
1 2 3 4 5
Unethical Ethical
9. Spreading ‘office gossip’
1 2 3 4 5
Unethical Ethical
10. Using work time to complete a university assignment
1 2 3 4 5
Unethical Ethical

9 Form into groups of four to six. Explain the meaning of the words and expressions listed below.
Regroup as a class and discuss your findings.
•• ‘We give you the chance to be YOU’
•• Has a high-energy service-focused vibe
•• Drives inclusion
•• ‘Let’s park that’
•• Gain traction
•• Actualising focused deliverables
•• Identify integration points
•• The touch points where we can resonate
•• A shared view of growing the value pool
•• Mission critical parameters
10 Form into groups of four to six. Write a 50–75-word jargon-filled summary on one HR activity of
your choice. Rewrite the summary using clear, precise English. Regroup as a class to review your
efforts.
11 Form into groups of four to six. You have five minutes to list as many jargon words and
expressions as you can. Regroup as a class and review your jargon lists.
12 Form into groups of four to six. Brainstorm the major changes you predict will occur over the next
10 years and their effects on:
(a) the Australian economy
(b) organisations
(c) trade unions
(d) HRM.
Regroup as a class and discuss your findings.
13 Form into groups of four to six. Brainstorm who will be the likely losers and winners of
globalisation and technological change. Identify any economic or social problems you foresee.
Regroup as a class and discuss your findings.
14 According to BRW and Great Place to Work Australia, the ten best places to work in 2015
included Atlassian, Mecca Brands, Optiver, Stryker, Nous Group, Adobe Systems, Summit Homes,
NetApp Australia, MEC and AbbVie Australia.376 Form into groups of four to six. Search the web
for one of the above companies and write a 150-word blog on why you think it is a great place to
work. Regroup as a class and discuss your findings.

54  PART 1 Introducing HRM


ENVIRONMENTAL INFLUENCES
Identify and discuss the key environmental influences from the model (see figure 1.16) that have
significance for HRM.

EXTERNAL ENVIRONMENT

Political Legal Environmental

INTERNAL ENVIRONMENT

Strategy Structure
Economic Technological

HUMAN
RESOURCES
MANAGEMENT

Industrial
Cultural
relations
Systems People Culture

Business Social Demographic

FIGURE 1.16 Environmental influences on human resource management

ETHICAL DILEMMA
A SWEET DEAL AT CONSOLIDATED INDUSTRIES
Financial analyst Eve Bauer, glass of white wine in hand, sits alone at the bar waiting for her friend
Jennifer Baker, a financial journalist. The Blue Moon Bar is quiet with the only other customers present
seated in a rear corner.
‘Eve, sorry I am late,’ Jennifer smiles, ‘but a few things have been happening at work.’
‘Like what?’ asks Eve as she signals to the bartender for a glass of wine.
‘You are never going to believe this,’ says Jennifer, ‘but James Redman is going.’
‘Not before time, that man has cost Consolidated Industries’ shareholders billions,’ Eve replies. ‘He
should have been fired years ago. As a CEO he is a walking disaster. I have lost a small fortune on my
Consolidated shares because of his incompetence.’
‘I know, I know. I’ve just completed a piece on him for tomorrow’s paper,’ answers Jennifer. ‘He was
clearly out of his depth. The job was simply too big for him — he couldn’t cope. He had no consistent
strategy and believed his own hubris. The culture of Consolidated Industries was one of appalling
­arrogance. All the talk about maximising shareholder value was just so much hot air.’
‘That’s the understatement of the year,’ says Eve. ‘As a shareholder I say good riddance — the man is
a total waste of space. I can’t believe the Consolidated Board took so long to act given that the company
has been a serial underperformer since Redman became CEO.’
Jennifer gives a short laugh. ‘The Consolidated Board is full of passengers — directors who don’t
understand the business. Their ignorance and arrogance are unbelievable. The board needs a cleanout.
Their strategy implementation has been dogged by one disaster after another.’

CHAPTER 1 Strategic human resource management  55


‘I agree,’ says Eve. ‘Redman’s focus has been short term. He has cut and cut and destroyed
Consolidated’s competitive advantage. Their customers are deserting them in droves because of their
poor service and high prices.’
‘Yes, but he does have more than 25 years of service with Consolidated and the Board is going to
recognise that,’ Jennifer responds.
‘What do you mean?’ asks Eve.
‘He’s not being sacked, but allowed to retire,’ Jennifer replies.
‘Retire? He can’t be anything like 65,’ says Eve.
‘Fifty four, to be exact,’ Jennifer replies with a wry smile. ‘The Board is allowing him to stay on as
CEO until he reaches 55.’
‘When is that?’ asks Eve.
‘In about eight months.’
‘What? You can’t be serious? Why would the Board do that?’ asks Eve.
Jennifer smiles, ‘If he were to leave today he would be eligible for a package worth about $2 million,
but if he stays until he reaches 55, he can then officially take early retirement and walk away with
$10 million plus.’
‘That is ridiculous! It makes a total mockery of Consolidated’s corporate governance,’ Eve says
with some shock. ‘That is just rewarding failure. What was the Board thinking? How could HR let it
happen?’
‘Beats me,’ says Jennifer. ‘Their Board and senior management are always going on about how
­Consolidated believes in performance and how executive remuneration is tied to the achievement of
corporate objectives.’
‘That’s just management spin for the peasants, not those at the top,’ Eve replies sarcastically.
‘I’ll drink to that,’ says Jennifer.
‘Yes, but I wonder if the shareholders who have seen their shares drop in price by 40 per cent and the
thousands of workers who have lost their jobs will?’ Eve sighs.
DISCUSSION QUESTIONS
1 Who are the stakeholders in this case? What do you think their views on Redman’s retirement
package may be?
2 What ethical and HR issues are raised in this case?
3 If you were the HR manager for Consolidated Industries, what would you have done? Consider
what competing pressures you may have faced in reaching your decision.

CASE STUDY
A CHANGE IN STRATEGY AT MEGAMINES INTERNATIONAL
Jake Andrews, president of mining giant Megamines International stands at the end of the highly
polished oak boardroom table. Tall, distinguished looking and blunt, Andrews is recognised as a tough
no-nonsense manager. ‘As you are well aware, the prices of our two core products, iron ore and coal are
at rock bottom. China, our major customer is not buying, and the price of our high-grade thermal coal is
at a 10-year low. The pressure is on. We must cut costs or we will go under. It is that simple. I am open
to suggestions.’
Megamines Australia CFO Michelle Vella is the first to speak. ‘The obvious choice is to close the
Kookaburra Mine. It is the highest cost mine in our portfolio. It is a constant source of industrial
problems and takes up far too much management time.’
‘I agree,’ says Mike Lee, general manager of operations — Australia. ‘The union runs that mine. It is
impossible to implement any changes that will increase productivity. We have been stuck in negotiations
with the Fair Work Commission for almost two years trying to reduce our headcount and introduce more
flexible work arrangements. To become viable in today’s market, we need to cut 500 jobs and reduce our

56  PART 1 Introducing HRM


wages bill by at least 25 per cent, but our hands are tied. We can’t manage the mine according to best
practice because we are at the mercy of the unions and the FWC.’
‘Mike is right, but there are some potentially serious social and political problems,’ Sasha Mena, CHRO
for Megamines Australia adds. ‘If we shut down the mine and put all 2000 employees out of work, the
effects on the local township and its people will be horrendous. Green Valley is a mining town, we are
the major employer — the economic and social consequences of a mine closure will be disastrous. Local
house prices have already dropped by ten per cent based on rumours of cutbacks in the mine workforce.’
‘If the workers and the unions don’t want to face reality, what else can we do?’ asks Mike. ‘Our cost
per tonne at the Kookaburra mine is $50 compared with $25 at our other operations.’

‘Why don’t we give them an option? Agree to our suggested changes, or face a complete shutdown —
500 jobs versus 2000. Surely the union and the FWC would have to give it serious consideration,’ says
Sasha.
‘What about the government?’ asks Brad Tyndall, chief mining engineer. ‘Green Valley is in a
marginal electorate. The government may come up with some tax breaks or some other form of financial
assistance. You know what politicians in marginal electorates are like — they will bend over backwards
to protect their seats.’
‘That may be true, Brad,’ says Michelle, ‘but what is going to save this company is not government
handouts, but becoming internationally competitive. It’s not just Kookaburra Mine jobs. If we don’t
reduce our costs and improve our productivity, there will be massive job cuts across the whole company.’
‘The mining boom is over,’ snaps Jake. ‘Don’t people in this country realise that we have the highest
minimum weekly wages in the world — our productivity is declining. We’re dogged by high taxes,
government red tape, rigid workplace rules, excessive labour costs, militant unions — why would any
international resource company invest here?’
‘I agree,’ says Michelle. ‘Disposable income is falling, standards of living are at risk — we are lagging
in rankings of international competitiveness. Yet, what happens? A state government declares a public
holiday because of a football game. No wonder resource companies are cutting their capital expenditure.
No one wants to face reality.’
Michelle’s outburst is interrupted by Adrian Bertram, vice-president of Megamines International. ‘What
about robotics? We have slashed costs at the Mirrabooka and Mandalay mines by introducing driverless
trucks and trains. I think technology is the key to our survival. One worker at a computer screen can now
monitor as many as 50 driverless trucks. Let’s get rid of the truck drivers at the Kookaburra Mine for

CHAPTER 1 Strategic human resource management  57


starters — no more meal breaks, stop work meetings, no penalty rates — the trucks work 24/7, 365 days
a year and have a great work ethic. Each truck can save more than 500 work hours a year. Staying ahead
of the technology curve is the only way to go. Mining is going to be radically different — why have
people work in an unpleasant and dangerous environment? Robots can cut costs and save lives.’
‘You are correct, Adrian, but what it means is that in mining and other industries, many people
are going to be economically valueless — what can our displaced workers do? Many of them will be
incapable of earning a living. They simply don’t have the skills,’ says Sasha.
‘Who knows,’ Mike responds, ‘but the amber lights are flashing. I read that robots performing routine
tasks cost about US$5–6 an hour over their lifetime including maintenance and energy costs — even
Chinese workers cost twice that.’
‘The question is where does that leave highly paid, unskilled Australian workers?’ asks Jake.
‘Labour no matter how inexpensive will decrease in importance — human replacement by robots is
the new game in town,’ says Adrian.
‘Surely this must involve serious economic, political and social risks,’ says a worried Sasha.
‘Only time will tell,’ says Adrian, ‘if robots will make our lives better or create a small group of
winners and a vast number of losers.’
DISCUSSION QUESTIONS
1 What ethical and HR issues are raised?
2 What economic, political and social issues are raised?
3 Identify the major stakeholders involved. Outline what you think their particular views would be.
What possible effects could automation have on their interests?
4 What major environmental influences are at play? (See figure 1.16). Which are the forces
stimulating change and which are the forces resisting change?
EXERCISES
1 Form into groups of four to six. Conduct a web search on robots in the workplace. Identify the jobs
most likely to be affected, the new types of jobs created, the challenges people may face in adapting
to automation and the likely effects on society. Regroup as a class and discuss your findings.
2 Form into groups of four to six. Undertake a SWOT analysis of the Australian economy. Pay
particular attention to the possible positive and negative effects on organisations, HRM, employees
and trade unions. Regroup as a class and discuss your findings.

ONLINE RESOURCES
• http://aom.org/AMR • www.hkihrm.org
• www.abs.gov.au • www.hrps.org
• www.ahri.com.au • www.industry.gov.au
• www.aitd.com.au • www.mckinsey.com
• www.amazon.com • www.psychology.org.au
• www.apa.org • www.sas.com
• www.atkearney.com • www.shri.org.sg
• www.blackboard.com • www.shrm.org
• www.bps.org.uk • www.sim.edu.sg
• www.catalyst.org • www.sloanreview.mit.edu
• www.cipd.co.uk • www.strategy-business.com
• www.conference-board.org • www.twitter.com/AHRItweets
• www.facebook.com/AHRIAustralia • www.twitter.com/HRnewsfeed
• www.freelancer.com.au • www.wfpma.com
• www.greatplacetowork.com.au • www.workforce.com
• www.hbr.org

58  PART 1 Introducing HRM


ENDNOTES
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4. Gratton, L. (2000) Living Strategy, London: Financial Times/Prentice Hall, p. 3.
5. Wright and McMahan, loc. cit.
6. Pfeffer, J. (1998) The Human Equation, Boston: Harvard Business School Press, ch. 3.
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HRM’, Journal of Industrial Relations, 44(3), p. 335.
8. Combs, J., Liu, Y., Hall, A. and Ketchen, D. (2006) ‘How much do high performance work practices matter? A meta analysis
of their effects on organizational performance’, Personnel Psychology, 59, pp. 501–28.
9. Kuvaas, B. and Dysvik, A. (2010) ‘Does best practice HRM only work for intrinsically motivated employees?’, International
Journal of Human Resource Management, 21(3), pp. 2339–57; and Kuvaas, B. (2006) ‘Performance appraisal satisfaction
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Management, 17 pp. 504–22.
10. Wright, A. (2010) ‘Culture and compensation — Unpicking the intricate relationship between reward and organizational
culture’, Thunderbird International Business Review, 52(3), pp. 189–202.
11. Jensen, J.M., Patel, P.C. and Messersmith, J.G. (2013) ‘High performance work systems and job control: Consequences for
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12. Kim, S., Wright, P.M. and Su, Z. (2010) ‘Human resource management and firm performance in China: A critical review’,
Asia Pacific Journal of Human Resources, 48(1), pp. 58–85; Briscoe, D., Schuler, R. and Tarique, I. (2012) International
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13. Den Hartog, D.N., Boon, C., Verburg, R.M. and Croon, M.A. (2013) ‘HRM, communication, satisfaction and perceived
performance: A cross-level test’, Journal of Management, 39(6), pp. 1637–65.
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19. Collins, C.J. and Smith, K.G. (2006) ‘Knowledge exchange and combination: The role of human resource practices in the
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20. McLean, E. and Collins, C.J. (2011) ‘High commitment HR practices, employee effort and firm performance: investigating
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21. Sun, L., Aryee, S. and Law, K.S. (2007) ‘High performance human resource practices, citizenship behaviour, and
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and psychological empowerment’, International Journal of Human Resource Management, 18(10), pp. 1782–1811.

CHAPTER 1 Strategic human resource management  59


24. Bjorkman, I. and Fan, X. (2002) ‘Human resource management and the performance of western firms in China’,
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60  PART 1 Introducing HRM


53. Walker, J.W., Reif, W.E., Gratton, L. and Swercz, P.M. (1999) ‘Human resource leaders: capability, strengths and gaps’,
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54. Wayne Cascio, Professor of Management at the University of Colorado quoted in Ross, E. (2009) ‘New Workplace
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Human Resource Management, 22(8), pp. 1611–17.
64. Kulik, C.T. and Perry, E.L. (2008) ‘When less is more: the effect of devolution on HR’s strategic role and construed image’,
Human Resource Management, 47(3), pp. 5410–548.
65. Commonwealth Bank (2010) Shareholder Review 2010, Sydney, p. 18; Liew, R., (2012) ‘QBE rejigs its executive line-up’,
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66. Lawler, E.E. (2011) ‘Celebrating 50 years: HR: Time for a reset?’, Human Resource Management, 50(2), pp. 171–3.
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70. Smith, P. (2014) ‘Westpac brings in HR outsourcer’, Australian Financial Review, 16 September, p. 23.
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72. Mercer, M.W. op. cit., p. 6.
73. Ulrich, D. quoted in Pickett, L. (2000) ‘Turning strategy into results’, HRMonthly, March, p. 13.
74. Sanford, J. (2004) The Embedded Corporation: Corporate Governance and Employment Relations in Japan and the United
States, Princeton, NJ: Princeton University Press.
75. Sherry, A. quoted in Collins, B. (2005) ‘Cause and effect’, HRMonthly, February, p. 44.
76. This section is based on material drawn from Goss, D. (1994) Principles of Human Resource Management, London:
Routledge, pp. 10–14; Storey, J. (1995) Human Resource Management: A Critical Text, London: Routledge, pp. 34–6;
and Storey, J. and Sisson, K. (1993) Managing Human Resources and Industrial Relations, Buckinghamshire, UK: Open
University Press, pp. 13–18.
77. For further discussion, see Bray, M., Deery, S., Walsh, J. and Waring, J. (2005) Industrial Relations, 3rd edn, Sydney:
McGraw Hill, Irwin, pp. 22–5; and Grant, D. and Shields, J. (2002) ‘In search of the subject: researching employee reactions
to human resource management’, Journal of Industrial Relations, 44(3), pp. 313–34.
78. Dainty, P. (2011) ‘The strategic HR role: Do Australian HR professionals have the required skills?’, Asia Pacific Journal of
Human Resources, 49(1), pp. 55–70; and Brown, M., Metz, I., Gregan, C. and Kulik, C.T. (2009) ‘Irreconcilable differences?
Strategic human resource management and employee well being’, Asia Pacific Journal of Human Resources, 47(3),
pp. 270–94.
79. Green, T. quoted in Millen, V. (2010–11) ‘Tiffany Green, Newcastle Permanent’, HRMonthly, December–January, p. 14.
80. Meyer, H.E. (1983) ‘Personnel directors are the new corporate heroes’, in Perlman, K., Schmidt, F.L. and Hammer, W.C.
(eds) Contemporary Problems in Personnel, 3rd edn, New York: John Wiley & Sons, p. 3; Pfeffer, J. (1996) ‘When it comes
to “best practices” why do smart organizations occasionally do dumb things?’, Organizational Dynamics, 25(1), p. 39; and
Paul, A.K. and Anantharaman, R.N. op. cit., pp. 28–9.
81. Wright, P.M., Boudreau, J.W., Pace, D.A., Sartain, E., McKinnin, P., and Antoine, R.L. (eds) (2011) The Chief HR Officer,
San Francisco: Jossey-Bass, pp. 4–7.

CHAPTER 1 Strategic human resource management  61


82. MacDonald, J.R. ‘Perform! Don’t run!’, in Wright, P.M. et al. (2011) The Chief HR Officer, San Francisco: Jossey-Bass, p. 15.
83. ibid, p. 19.
84. ibid, p. 26.
85. Van Buren III, H.J., Greenwood, M. and Sheehan, C. (2011) ‘Strategic human resource management and the decline of
employee focus’, Human Resource Management Review, 21, pp. 209–19.
86. ibid.
87. Edmans, loc. cit.; and Guthrie et al., loc. cit.
88. Brown, M., Metz, I., Cregan, C. and Kulik, C.T. (2009) ‘Irreconcilable differences? Strategic human resource management
and employee well being’, Asia Pacific Journal of Human Resources, 47(3), pp. 270–94; and Dainty, P. (2011) ‘The strategic
HR role: Do Australian HR professionals have the required skills?’, Asia Pacific Journal of Human Resources, 49(1),
pp. 55–70.
89. MacDonald, op. cit, p. 27.
90. Wallis, C. (2015) ‘Size matters’, HRMonthly, June, pp. 20–5; and Grant, D. and Newall, S. (2013) ‘Realizing the strategic
potential of e-HRM’, Journal of Strategic Information Systems, 22, pp. 187–92.
91. Parry, E. (2011) ‘An examination of e-HRM as a means to increase the value of the HR function’, International Journal of
Human Resource Management, 22(5), pp. 1146–62.
92. ibid, p. 26.
93. Ulrich, D. (1997) Human Resource Champions, Boston: Harvard University Press, p. 79.
94. Johnson, E.K. (2000) ‘The practice of human resource management in New Zealand: strategic and best practice?’, Asia
Pacific Journal of Human Resources, 38(2), pp. 69–83; and Dainty, P. (2011) loc. cit.
95. McGraw, P. and Harley, B. (2003) ‘Industrial relations and human resource management practices in Australian and overseas
owned workplaces: global or local?’, Journal of Industrial Relations, 45(1), pp. 1–22.
96. Jackson, T. (2002) ‘The management of people across cultures: valuing people differently’, Human Resource Management,
41(4), pp. 455–75.
97. Fisher, C. and Dowling, P. (1999) ‘Support for an HR approach in Australia: the perspective of senior HR managers’, Asia
Pacific Journal of Human Resources, 37(1), pp. 1–19; and Bartlett, C.A. and Ghoshal, S. op. cit., pp. 34–41.
98. Wright, C. (2008) ‘Reinventing human resource management: Business partners, internal consultants and the limits of
professionalization’, Human Relations, 61(8), pp. 1063–86.
99. Pritchard, K. (2010), ‘Becoming an HR strategic partner: Tales of transition’, Human Resource Management Journal, 20(2),
pp. 175–88.
100. Wright, loc. cit.
101. Ulrich, D. (1997) op. cit., p. 121; and Blackburn, R. and Rosen, B. (1995) ‘Does HRM walk the TQM talk?’, HR
Magazine, July, pp. 68–72.
102. Clegg, A. (2010) ‘The talent managers bringing new skills to work’, Financial Times, 5 October, p. 14.
103. Ulrich, D. and Brockbank, W. (2005) The HR Value Proposition, Boston: Harvard Business School Press, pp. 208–9.
104. Boudreau, J.W. and Jesuthasan, R. (2011) Transformative HR, San Francisco: Jossey Bass, pp. 122–4.
105. Yeung, A. (1998) Human Resource Competencies in Hong Kong: Research Findings and Applications Guide, Hong Kong:
HKIHRM/University of Michigan Business School, p. 4.
106. Eckhardt, A., Laumer, S., Maier, C. and Weitzel, T. (2014) ‘The transformation of people, processes and IT in e-recruiting’,
Employee Relations, 36(4), pp. 415–31; and Holm, A. (2014) ‘Institutional context and e-recruitment practices of Danish
organizations’, Employee Relations, 36(4), pp. 432–455.
107. Ulrich, D. (1997) op. cit., pp. 123–49; and Yeung, A., Brockbank, W. and Ulrich, D. (1994) ‘Lower cost higher value: human
resource function in transformation’, Human Resource Planning, 17(3), p. 15.
108. Ulrich, D. (1997) op. cit., p. 149.
109. MacDonald, op. cit, p. 27.
110. Ellig, B. (1996) ‘HR must balance demands of dual roles’, HR News, July, p. 9.
111. Allan, C. and Lovell, K. (2003) ‘The effects of high performance work systems on employees in aged care’, Labour and
Industry, 13(3), p. 14.
112. Kochan, T. quoted in Trinca, H. (2003) ‘HR needs to rebuild trust’, Australian Financial Review, 11 November, p. 59.
113. Guest, D. (2002) op. cit., p. 335.
114. Yeung, A., Brockbank, W. and Ulrich, D. (1994) op. cit., p. 15; Foot, M. and Hook, C. (1996) Introducing Human Resource
Management, London: Longman, p. 11; and Tanner, N. (1997) ‘I’m the HR consultant’, HRMonthly, May, pp. 19–20.
115. Yeung, A., Brockbank, W. and Ulrich, D. (1994) op. cit., p. 16.
116. Gloet, M. (2003) ‘The changing role of the HRM function in the knowledge economy: the links to quality knowledge
management’, paper presented at the 8th International Conference on ISO and TQM, Montreal, April, pp. 1–7.
117. Davis, M. L. ‘The CHRO as cultural champion’ in Wright, P.M. et al. (2011) pp. 93–8.
118. Ulrich and Brockbank (2005) op. cit., pp. 99–101.
119. ibid, p. 206.
120. Witzel, M. (2009) ‘Get the right people for the right job’, Financial Times, 12 March, p. 16.
121. Stern, S. (2008) ‘On Dec 31, wave goodbye to the era of complacency’, Financial Times, 30 December, p. 8.

62  PART 1 Introducing HRM


122. Ulrich and Brockbank (2005) op. cit., p. 207.
123. Groysberg, B., Kelly, L.K. and MacDonald, B. (2011) ‘The new path to the C-suite’, Harvard Business Review, March, pp. 60–7.
124. MacDonald, op. cit., pp. 25–8.
125. Stern, S. (2009) ‘Resources are limited and HR must raise its game’, Financial Times, 17 February, p. 10.
126. Wright, P.M. and Stewart, M. ‘Roles and challenges of the CHRO’, in Wright, P.M. et al. (2011), pp. 41, 46–8.
127. Sardo, S. (2011) ‘Protect yourself’, HRMonthly, November, p. 6.
128. ibid.
129. Wilson, N. (2011) ‘Court sends message to HR professionals’, HRMonthly, August, p. 12.
130. Groysberg, Kelly and MacDonald (2011) loc. cit.
131. Morgeson, F.P., Spitzmuller, M., Garza, A.S. and Campion, M.A. (2014) ‘Pay attention! The liabilities of respondent
experience and carelessness when making job analysis judgements’, Journal of Management, in press, pp. 1–30.
132. Ivancevich, J.M. (1995) Human Resource Management, 6th edn, Chicago: Irwin, p. 134.
133. Thurston, P.W. and McNall, L. (2010) ‘Justice perceptions of performance appraisal practices’, Journal of Managerial
Psychology, 25(3), pp. 201–3.
134. Sumelius, J., Björkman, Ehrnrooth, M., Mäkellä, K. and Smale, A. (2014) ‘What determines employee perceptions of HRM
process features? The case of performance appraisal in MNC subsidiaries’, Human Resource Management, in press, pp. 1–24.
135. Joyce, K.E. (2003) Lessons for employers from “Fortune’s 100 best”’, Business Horizons, 46(2), pp. 77–84.
136. Byars, L.L. and Rue, L.W. (2000) Human Resource Management, 6th edn, Boston: McGraw-Hill, p. 303.
137. Ulrich, D. and Filler, E. ‘Preparing CHROs to exceed CEO expectations’, in Wright P.M. et al. (2011) The Chief HR Officer,
San Francisco: Jossey Bass, p. 278.
138. Schermerhorn, J.R. Osborn, R.N., Uhl-Bien, M., and Hunt, J.G. (2012) Organizational Behaviour, 12th edn, New York: John
Wiley & Sons, p. 9.
139. ibid, p. 348.
140. Deem, J.W.Q., Barnes, B., Segal, S. and Preziosi, R. (2010) ‘The relationship of organizational culture to balanced scorecard
effectiveness’, S.A.M. Advanced Management Journal, 75(4), pp. 31–9.
141. Beauregard, T.A. (2011) ‘Direct and indirect links between organizational work-home culture and employee well being’,
British Journal of Management, 22, pp. 218–37.
142. Heneman, R.L. (1992) Merit Pay: Linking Pay Increases to Performance Ratings, Reading, Mass.: Addison-Wesley; and
Rynes, S.L., Colbert, A.E. and Brown, K.G. (2002) ‘HR professionals’ beliefs about effective human resource practices:
correspondence between research and practice’, Human Resource Management, 41(2), p. 157.
143. Guest, D. (2002) op. cit., pp. 335–58; and Albrecht, S. and Travaglione, A. (2003) ‘Trust in public sector senior
management’, International Journal of Human Resource Management, 14(1), pp. 76–92.
144. It should be noted that there is no one universally accepted definition of employee relations. The definition used here reflects
a unitarist perspective, which emphasises the mutual interests existing between employees and employers. In contrast, a
pluralist definition emphasises the role of institutions and the making of rules to regulate conflict in the workplace. For
further discussion, see Alexander, R. and Lewer, J. (2004) Understanding Australian Industrial Relations, Sydney: Thomson,
ch. 1.
145. See Office of Multicultural Affairs (undated), Multiculturalism at Work, Canberra, p. 4; and Tung, R.L. (1995) ‘Strategic
human resource challenge: managing diversity’, International Journal of Human Resource Management, 6(3), pp. 482–93.
146. D’Netto, B., Shen, J., Chelliah, J. and Monga, M. (2014) ‘Human resource diversity management practices in the Australian
manufacturing industry’, International Journal of Human Resource Management, 25(9), pp. 1243–66.
147. Wood, S., Braeken, J. and Niven, K. (2013) ‘Discrimination and well being in organizations: Testing the differential power
and organizational justice theories of workplace aggression’, Journal of Business Ethics, 115, pp. 617–34; and Volpone,
S.D. and Avery, D.R. (2013) ‘It’s self defence: How perceived discrimination promotes employee withdrawal’, Journal of
Occupational Health Psychology, 18(4), pp. 430–48.
148. Schermerhorn et al. (2011) op. cit., p. 12.
149. Balnave, N., Brown, J., Maconachie, G. and Stone, R.J. (2009) Employment Relations in Australia, Milton: John Wiley &
Sons, pp. 279–81; and Mitchell, A. (2010) ‘Quest for the key to productivity’, Australian Financial Review, 12 April, p. 23.
150. Daft, R.L. (2005) Management, 7th edn, Mason: Thomson South-Western, pp. 797–9.
151. Editorial (2012) ‘Nation cannot compete with this IR system’, Australian Financial Review, 2 February, p. 62; Drill, S. (2012)
‘Toyota sickies claim sparks fury among Aussies’, Herald Sun, 3 February, www.hearldsun.com.au; and Hepworth, A. (2012)
‘Manufacturers accuse industrial tribunal of adding to burden on sector’, Australian, 29 March, www.theaustralian.com.au.
152. Sibillin, A. (2011) ‘Managers fail productivity challenge’, BRW, 28 April–1 June, p. 17.
153. Study by researchers from Macquarie University, University of Technology, Sydney, and the Society of Knowledge
Economics, reported in Gollan, P. (2010) ‘Slip, sliding away’, HRMonthly, April, pp. 32–3.
154. Grattan, M. (2012) ‘Union heat on PM to save steel sector’, Age, 11 April, www.theage.com.au.
155. Batt, R. (2002) ‘Managing customer services: Human resource practices, quit rates and sales growth’, Academy of
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156. Bray, M., Deering, S., Walsh, J. and Waring, P. (2005) Industrial Relations, North Ryde: McGraw Hill Irwin, pp. 355–6.

CHAPTER 1 Strategic human resource management  63


157. Wood, S. and de Menezes, L.K.M. (2011) ‘High involvement management, high performance work systems and well being’,
International Journal of Human Resource Management, 22(7), pp. 1586–610.
158. Macky, K. and Boxall, P. (2008) ‘High involvement work processes, work intensification and employee well-being: A study
of New Zealand worker experiences’, Asia Pacific Journal of Human Resources, 46(1), pp. 38–55.
159. Guest, D.E. (2011) ‘Human Resource Management and performance: Still searching for some answers’, Human Resource
Management Journal, 21(1) pp. 3–13.
160. Guest (2011) loc. cit.
161. Ramsey, J.H., Scholarios, D. and Harley, B. (2000) ‘Employees and high-performance work systems: Testing inside the black
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162. Wilson, P. and Cascio, W. (2014) ‘Run a risk’, HRMonthly, July, pp. 14–9.
163. Thompson, J. and Martin, F. (2005) Strategic Management, 5th edn, Thomson, London, p. 768.
164. Dessler, G. (2015) Human Resource Management, 14th edn, Boston, Pearson, p. 161.
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(2003) ‘They spoke of money that was never there’, Australian Financial Review, 17–21 April, p. 16.
166. Agence France-Presse (2005) ‘Former HIH chief jailed for 4½ years’, South China Morning Post, 16 April, p. B5.
167. Winestock, G. (2014) ‘Liberals nightmare’, Australian Financial Review, 13 August, p. 44; Chenoweth, N. and Winestock
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168. Tiffen, N. (2014) ‘Australia’s slide into corruption must be stopped’, The Age, 5 December, www.theage.com.au.
169. Ferguson, A., Butler, B. and Williams, R. (2014) ‘We can rebuild it: the plan to transform toothless tiger ASIC’, The Age,
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170. Low, H. (2014) ‘Bribery controls vital to curb offshore risks’, Australian Financial Review, 11 April, p. 31.
171. Papadakis, M. (2015) ‘Weak laws get bribery blame’, Australian Financial Review, 27 March, p. 33; Durkin, P. (2013) ‘No
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172. Evans, T. (2014) ‘Are you at risk?’, HRMonthly, October, pp. 34–6.
173. Reported in McKenzie, N. and Baker, R. (2015) ‘Suspected graft going unreported’, Australian Financial Review, 26 March,
p. 1.2.
174. McKenzie, N. and Baker, R. (2012) ‘Corruption rife at Customs’, Australian Financial Review, 20  December, pp. 1, 9; and
McKenzie, N. and Baker, R. (2012) ‘Inquiry into agency scandal long overdue’, Australian Financial Review, 20 December, p. 9.
175. Macdonald-Smith, A. (2015) ‘Woodside sacked seven staff for fraud’, Australian Financial Review, 20 March, p. 16.
176. Evans, T. (2014) loc. cit.
177. Redrup, Y. (2014) ‘Young, keen, male and crooked’, Australian Financial Review, 6 June, p. 12.
178. Agence France Presse (2013) ‘Bureaucrat guilty of graft over oral sex’, South China Morning Post, p. A 8.
179. Beck, M. (2012) ‘Foreign Officials treated to sex’, The Age, 7 September, www.theage.com.au; and Huang, C. (2014)
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180. The Economist (2014) ‘Corporate fraud, risk rampant’, Australian Financial Review, 1–2 March, p. 19.
181. Rule, A. (2014) ‘Alleged $20,000 bribe to V/Line officials caught on tape by whistleblower’, Herald Sun, 12 November,
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182. ibid.
183. Redrup, Y. (2014) loc. cit.
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Age, 7 October, www.theage.com.au.

64  PART 1 Introducing HRM


188. Ferguson, A. (2015) ‘Banks under fire on super deals’, Australian Financial Review, 2 March, p. 48.
189. Medcraft, G. (2015) ‘Three Cs can tackle culture that lets bad apples thrive’, Australian Financial Review, 17 June, p. 47.
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191. Marechal, M. quoted in University of Zurich study reported in Bloomberg Reuters (2014) loc. cit.
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196. CBA (2015) Shareholder Review, Commonwealth Bank of Australia, Sydney, p. 3; Ferguson, A. and Dankert, S. (2015)
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208. Parry,E. (2011) loc.cit.
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219. Ireland, R.D., Hoskisson, R.E. and Hitt, M.A. (2006) Understanding Business Strategy, Mason, Ohio: Thomson South-
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241. Thompson, A.A. and Strickland, A.J. (1987) Strategic Management: Concepts and Cases, 4th edn, Plano, Tex.: Business
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242. James, D. (2006) ‘Banking’s new challenges’, BRW, 30 March–5 April, p. 83; and Greenblat, E. and Johnston, E. (2014)
‘Coles strengthens financial arm’, Australian Financial Review, 12 June, p. 15.
243. Boyd, T. (2015) ‘Chook roast’, Boss, March, pp. 12–3; and Eyers, J. (2015) ‘Banks at digital inflexion point’, Australian
Financial Review, 16 March, p. 32.
244. Sharman, A. (2015) ‘BMW’s x-ray specs will help you park as car makers seek edge on tech groups’, Financial Times,
7–8 February, p. 1.
245. O’Brien, M. (2015) ‘Apple wants electric car in four years’, Australian Financial Review, 23 September, p. 11.
246. Ford, J. (2015) ‘A supermarket war being fought on two fronts simultaneously’, Financial Times, 5 October, p. 16.
247. Wright, R. (2013), ‘Ford warns over clash of technology, Financial Times, 28 March, p. 16.
248. Parts of this section are based on Hill, C.W.L. and Jones, G.R. (1992) Strategic Management Theory, 2nd edn, Boston:
Houghton Mifflin, pp. 9–18; and Smith, G.D., Arnold, D.R. and Bizzell, B.G. (1991) Business Strategy and Policy, Boston:
Houghton Mifflin, pp. 2–16.
249. Jones, P. and Kahaner, L. (1995), quoted in Farnham, A. ‘Brushing up your vision thing’, Fortune, 1 May, p. 91.
250. Cited in Collins, J.C. and Porras, J.I. op. cit., p. 69.
251. Clarke, J. and Range, J. (2010) ‘African escape: Miners go offshore to flee red tape’ Australian Financial Review, 22 March,
pp. 1, 39; and Dodson, L. and Hall, D. (2012) ‘Red tape strangling resources, says BCA’, Australian Financial Review,
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252. Smith, G.D., Arnold, D.R. and Bizzell, B.G. op. cit., p. 3.
253. Grant, R., Butler, B., Hung, H. and Orr, S. (2011) Contemporary Strategic Management, Milton, Qld, Wiley, p. 131.
254. Debrah, Y. op. cit., p. 52.
255. Debrah, Y. op. cit., p. 54.

66  PART 1 Introducing HRM


256. Wesfarmers (1999), Annual Report, pp. 5–6; and Wesfarmers (2011), Annual Report, pp. 1–65.
257. Wilson, J. and Wells, P. (2015) ‘BHP Billiton chief’s pay cut after mine deaths’, Financial Times, 24 September, p. 14.
258. Hill, C.W.L., Jones, G.R. and Galvin, P. (2004) Strategic Management, Brisbane: John Wiley & Sons, pp. 20–3; and Picken,
J.C. and Dess, G.G. (1997) ‘Out of strategic control’, Organizational Dynamics, 26(1), pp. 35–48.
259. Schermerhorn et al. (2011) op. cit, p. 234.
260. This section is based on Dess, G.G., Lumpkin, G.T. and Eisner, A.B. (2006) Strategic Management: Text and Cases, New
York: McGraw-Hill, pp. 232–9; and Hill, C.W.L., Jones, G.R. and Galvin, P. op. cit., pp. 334–6.
261. Schermerhorn, J.R. (2005) Management, 8th edn, New York: John Wiley & Sons, p. 229.
262. Schermerhorn, J.R. (2005) op. cit., p. 229.
263. Schermerhorn, J.R. (2005) op. cit., p. 230.
264. Daft, R.L. (2005) Management, 7th edn, Mason, Ohio: Thomson South-Western, p. 121.
265. Cherrington, D.J. (1995) The Management of Human Resources, 4th edn, Englewood Cliffs, NJ: Prentice Hall, p. 47.
266. Drucker, P. (2002) ‘They’re not employees, they’re people’, Harvard Business Review, January–February, p. 76.
267. Ulrich, D. (1992) ‘Strategic and human resource planning: linking customers and employees’, Human Resource Planning,
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268. Taylor, S., Beechler, S. and Napier, N. (1996) ‘Toward an integrative model of strategic international human resource
management’, Academy of Management Review, 24(4), p. 959; and Zigarelli, M. (1996) ‘Human resources and the bottom
line’, Academy of Management Executive, 10(2), pp. 63–4.
269. Poole, M. and Jenkins, G. (1996) ‘Competitiveness and human resource management politics’, Journal of General
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270. Price, D. (1996) ‘How marketing can sell your personnel product’, People Management, 13 June, p. 21.
271. Armstrong, M. (1989) Personnel and the Bottom Line, London: IPM, pp. 91–2.
272. Schuler, R.S., Galante, S.P. and Jackson, S. (1987) ‘Matching effective HR practices with competitive strategy’, Personnel,
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273. Wang, D.S. and Shyu, C.L. (2008) ‘Will the strategic fit between business and HRM strategy influence HRM effectiveness
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274. CCH (1995) ‘Successful companies integrate HR practices with business goals and fully leverage employees’, Human
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275. Kramar, R. (1992) ‘Strategic human resource management: are the promises fulfilled’, Asia Pacific Journal of Human
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276. Boxhall, P. and Macky, K. (2007) ‘High performance work systems and organizational performance: Bridging theory and
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277. Rowden, R.W. (1999) ‘Potential roles of human resource management professionals in the strategic planning process’, SAM
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278. Cherrington, D.J. (1995) The Management of Human Resources, Englewood Cliffs, NJ: Prentice Hall, p. 10.
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280. Bramble, T. (1996) ‘Strategy in context: the impact of changing regulatory regimes on industrial relations management in the
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281. Bramble, T. op. cit., pp. 54–5.
282. Guest, D. (2002) op. cit., pp. 335–58.
283. Gelade, G.A. and Ivery, M. (2003) ‘The impact of human resource management and work climate on organizational
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285. Gittins, T. (2012) ‘Workers pay the penalty for one way flexibility’, Age, 4 April, www.theage.com.au; and Wilson, P. (2010)
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289. Harding, R. (2013) ‘Clerical staff bear brunt of US job crisis’, Financial Times, 2 April, p. 1; and Caldwell, C. (2013) ‘The
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290. Smith, F. (2012) ‘Design online: A global game-changer’, Australian Financial Review, 15 May, pp. 54–5.
291. Waters, R. (2012) ‘The strongest link’, Financial Times — Life & Arts, 17–18 March, p. 19.

CHAPTER 1 Strategic human resource management  67


292. Guinan, P.J., Parise, S. and Rollag, K. (2014) ‘Jumpstarting the use of social technologies in your organization’, Business
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293. K. Wheeler, quoted in Smith, F. (2012) ‘Free wheelers: This is your future’, Australian Financial Review, 15 May, p. 55.
294. Lucas, C. (2012) ‘Howe warns of dangers of casual revolution’, Age, 16 May, www.theage.com.au.
295. Ruthven, P. (2011) ‘Civics build idealists push for change’, BRW, 7–13 July, p. 19.
296. Latham, M. (2014) ‘The great divide on our streets’, Australian Financial Review, 16 January, p. 38; and the Guardian
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298. Guirdham, M.N. (2009) Culture + Business in Asia, Bassingstoke, Hampshire: Palgrave, Macmillan, p. 161.
299. Wong, A., Tjosvold, D. and Lu, J. (2010) ‘Leadership values and learning in China: The mediating role of psychological
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300. Merriman, K.K. (2010) ‘Lost in translation: cultural interpretations of performance pay’, Compensation & Benefits Review,
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301. Reuters (2015) ‘Robot nation in the making amid ageing society’, South China Morning Post, 6 July, p. B4.
302. Wilson, P. (2010) op. cit.
303. George, G., Haas, M.R. and Pentland, A. (2014) ‘Big Data and management’, Academy of Management Journal, 57(2),
pp. 321–26.
304. Wiggins, J. (2015) ‘Australia Post delivers a loss as letters in ‘terminal decline’, Australian Financial Review,
26–27 September, p. 8; and Smyth, J. (2015) ‘It is all going to pot for Australian miners’, Financial Times, 25 May, p. 16.
305. Lynch, D.J. (2012) ’Did that robot take my job?’, Bloomberg Businessweek, 9–15 January, p. 15–16.
306. Gollan, P. (2006) ‘WorkChoices calls for HR skills’, Australian Financial Review, 23 May, p. 63.
307. Ker, P. (2012) ‘Jobs boom, but tough luck for truckies’, Age, 6 April, www.theage.com.au; and Brady, D. and Welch, D.
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308. Hille, K. (2011) ‘Fox Conn looks to a robotic future’, Financial Times, 2 August, p. 1; and Agence France-Presse (2011)
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309. Smith, F. (2012) ‘Free wheelers: This is your future’, Australian Financial Review, 15 May, p. 55.
310. Gora, J. (2011) ‘Robot dons coming to a theatre near you’, Australian, 11 May, p. 33; and Mishkin, S. (2012) ‘Essay-
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311. Desloires, V. (2015) ‘Culture key motive for investors, analysts say’, Australian Financial Review, 18 June, p. 29.
312. Yang, J. quoted in Jackson, S.E. and Schuler, R.S. (2006) Managing Human Resources, Mason, Ohio: Thomson South-
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313. Burgess, V. (2010) ‘Public sector culture stifles new recruits’, Australian Financial Review, 6 January, p. 6.
314. Towell, N. and Butler, B. (2014) ‘ATO’s ‘rotten culture’ revealed’, Canberra Times, 22 July, www.canberratimes.com.au.
315. Burgess, V. (2015) ‘A new view of the public service’, Australian Financial Review, 12 February, p. 20; and Towell, N.
(2015) ‘APS “work cultures” in the spotlight’, Canberra Times, 23 January, www.canberratimes.com.au.
316. Willingham, R. (2014) ‘Victoria’s public service riddled with problems: Ombudsman George Brouner’, The Age, 12 March,
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warn’, The Age, 4 October, www.theage.com.au.
317. Ferraro, L. (2003) ‘The culture of safety’, HRMonthly, April, p. 38.
318. Aon Hewitt’s 2013 Best Employers Australia and New Zealand study reported in News in Brief (2013) ‘Engagement key to
improved revenue’, HRMonthly, August, p. 11.
319. Way, N. (2003) ‘Call still waiting’, Shares, May, p. 37.
320. Lloyd, S. (2006) ‘Outside the box’, BRW, 26 January–1 February, p. 58; Wesfarmers Limited (2008) Huntley’s your money
weekly, 31 January, pp. 6–7; and Bolt, C. (2008) ‘Coles needed clean out, says Goyder’, Australian Financial Review,
7 March, p. 65.
321. Barrett, A. (2003) ‘Staying on top’, Business Week, 5 May, pp. 42–7.
322. Collins, J.C. and Porras, J.I. op. cit., p. 72.
323. Lashinsky, A. (2011) ‘Inside Apple’, Fortune, 23 May, pp. 35–42.
324. Bezos, J. quoted in O’Connor, S. (2013) ‘Amazon unpacked’, Financial Times — Life & Arts, 9–10 February, pp. 1–2.
325. Kotter, J.P. and Heskett, J.L. (1993) ‘How corporate culture affects performance’, World Executive’s Digest, July, pp. 28–31;
and Collins, J.C. and Porras, J.I. op. cit., pp. 65–77.
326. Greene, R.J. (1995) ‘Culturally compatible HR strategies’, HR Magazine, June, pp. 115–23.
327. ‘Macquarie’s hidden jewel’, op. cit, p. 4.
328. Quoted in Sheehan, P. (1993) ‘All souped up’, ABM, January, p. 86.
329. Quoted in Sheehan, P. op. cit., p. 86.
330. Hubbard, G., Samuel, D., Heap, S. and Cocks, G. (2002) The First XI: Winning Organisations in Australia, Brisbane: John
Wiley & Sons, pp. 209–19.
331. Kamoche, K.N. (2001) Understanding Human Resource Management, Buckinghamshire, UK: Open University Press,
pp. 22–3.

68  PART 1 Introducing HRM


332. Bellou, V. (2010) ‘Organizational culture as a predictor of job satisfaction: The role of gender and age’, Career Development
International, 15(1), pp. 1–19.
333. Townley, B. (2001) ‘Selection and appraisal: reconstituting “social relations”’, in Storey, J. (ed.) New Perspectives on
Human Resource Management, London: Routledge, ch. 6; Ogbonna, E. (1992) ‘Organization culture and human resource
management: dilemmas and contradictions’, in Blyton, P. and Turnbull, P. (eds) Reassessing Human Resource Management,
London: Sage, ch. 5; and Kamoche, K. (1991) ‘Human resource management: a multi-paradigmatic analysis’, Personnel
Review, 20(4), p. 11.
334. Fox, C. (2003) ‘Workers by design’, Boss, August, p. 26.
335. Cascio, W.F. (1998) Managing Human Resources, 2nd edn, Singapore: McGraw-Hill, p. 46; Pfeffer, J. (1998) op. cit.,
pp. 74–9; and Gratton, L. op. cit., pp. 5–6.
336. Delaney, J.T. and Huselid, M. (1996) ‘The impact of human resource management practices on perceptions of organisational
performance’, Academy of Management Journal, 39(4), pp. 949–69; and Youndt, M.A., Snell, S.A., Dean, J.W. and Lepak,
D.P. (1996) ‘Human resource management, manufacturing strategy and firm performance’, Academy of Management Journal,
39(4), p. 858.
337. Hannon, J.M. and Milkovich, J.T. (1996) ‘The effect of human resource reputation signals on share prices: an event study’,
Human Resource Management, 35(3), pp. 405–24; and Ewing, M. and Caruana, A. (1999) ‘Strategic human resource
effectiveness, internal marketing and performance in the public sector’, International Employment Relations Review, 5(1),
pp. 15–27.
338. Ngo, H.Y., Lau, C.M. and Foley, S. (2008) ‘Strategic human resource management, firm performance and employee relations
climate in China’, Human Resource Management, 47(1), pp. 73–90; and Chow, I.H.S. and Liu, S.S. (2007) ‘Business
strategy, organizational culture and performance outcomes in China’s technology industry’, Human Resource Planning,
30(2), pp. 47–55.
339. Guest, D. (2002) op. cit., pp. 335–58.
340. Khandekar, A. and Sharma, A. (2005) ‘Organizational learning in Indian organizations: a strategic HRM perspective’,
Journal of Small Business and Enterprise Development, 12(2), pp. 211–26; and Wang, Z. and Zang, Z. (2005) ‘Strategic
human resources, innovation and entrepreneurship fit’, International Journal of Manpower, 26(6), pp. 544–59.
341. Paul, A.K. and Anantharaman, R.N. (2004) ‘Influence of HRM practices on organizational commitment: a study among
software professionals in India’, Human Resource Development Quarterly, 15(1), pp. 77–88; and Wright, P. and Keho, R.R.
(2008) ‘Human resource practices and organizational commitment: a deeper examination’, Asia Pacific Journal of Human
Resources, 46(1), pp. 6–20.
342. Rabl, T. and del Carmen Triana, M. (2013) ‘How German employees of different ages conserve resources: Perceived age
discrimination and effective organizational commitment’, International Journal of Human Resource Management, 24(19),
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343. Macquarie Bank (2003), Annual Report, Sydney, p. 15.
344. Adapted by the author from Beer, M., Spector, B., Lawrence, P.R., Mills, D.Q. and Walton, R.E. (1984) Managing Human
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345. Nishii, L.H., Lepak, D.P. and Schneider, B. (2008) ‘Employee attributions of the ‘why’ of HR practices: their effects on
employee attitudes and behaviors and customer satisfaction’, Personnel Psychology, 61(3), pp. 503–45.
346. Spector, P.E. (2000) Industrial and Organizational Psychology, 2nd edn, New York: John Wiley & Sons, p. 215.
347. Wood, S. and de Menezes, L.M. (2011) ‘High involvement management, high performance work systems and well being’,
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348. Scott-Cawiezell, J., Main, D.S., Vojir, C.P., Jones, K., Moore, L. Nutting, P.A., Kutner, J.S. and Pennington, K. (2005)
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349. Rose, E. (2002) ‘The labour process and union commitment within a banking services call centre’, Journal of Industrial
Relations, 44(1), p. 40.
350. McShane, S.L. and Von Glinow, M.A. (2000) Organizational Behavior, Boston: McGraw-Hill, p. 145; and Gelade, G.A. and
Ivery, M. op. cit., pp. 383–404.
351. Jawahar, I.M. and Stone, T.H. (2011) ‘Fairness perceptions and satisfaction with components of pay satisfaction’, Journal of
Managerial Psychology, 26(4), pp. 297–312.
352. Whitener, E.M. (2001) ‘Do “high commitment” human resource practices affect employee commitment? A cross level
analysis using hierarchical linear modeling’, Journal of Management, 27(5), p. 515.
353. Skarlicki, D.P. and Folger, R. (2003) ‘Editorial fairness and human resource management’, Human Resource Management
Review, 13(1), p. 1.
354. Albrecht, S. and Travaglione, A. (2002) ‘Trust in public sector senior management’, International Journal of Human
Resource Management, 14(1), pp. 76–92; and Holbrook Jr, R.L. (2002) ‘Contact points and flash points: conceptualising the
use of justice mechanisms in the performance appraisal interview’, Human Resource Management Review, 12(1), p. 104.
355. Robbins, S.P. (2001) Organizational Behavior, 9th edn, Upper Saddle River, NJ: Prentice Hall, p. 166.
356. Study by Walker Information, reported in Lewis, D.E. (2003) ‘Study of US workers finds that most feel “trapped” and lack
loyalty’, International Herald Tribune, 3 September, p. 18.

CHAPTER 1 Strategic human resource management  69


357. Kuvaas, B., and Dysvik, A. (2010) ’Does best practice HRM only work for intrinsically motivated employees?’, International
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358. Rose, R.C. and Kumar, N. (2006) ‘The influence of organizational and human resource management strategies on
performance’, Performance Improvement, 45(4), pp. 18–24.
359. Child, J. and Faulkiner, D. (1998) Strategies of Co-operation, Oxford, UK: Oxford University Press, pp. 46–7.
360. Zhang, A.Y., Tsui, A.S., Song, L.J.W., Li, C.P. and Jia, L.D. (2008) ‘How do I trust thee? The employee organization
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the employees watch the boss?’, Academy of Management Journal, 48(5), pp. 874–88.
361. Byrne, Z., Pitts, V., Chiaburu, D. and Steiner, Z. (2011) ‘Managerial trustworthiness and social exchange with the
organization’, Journal of Managerial Psychology, 26(2), pp. 108–22; Shockley-Zabback, Moreale, S.P. and Hackman, M.Z.
(2010) Building the High Trust Organization, San Francisco: Jossey-Bass, pp. 25–44; and Farndale, E. and Kelliher, C.
(2013) ‘Implementing performance appraisal: exploring the employee experience’, Human Resource Management, 52(6),
pp. 879–97.
362. Heavey, C., Halliday, S.V., Gilbert, D. and Murphy, E. (2011) ‘Enhancing performance: Bringing trust, commitment and
motivation together in organizations’, Journal of General Management, 36(3), pp. 1–8.
363. Zeffane, R. and Connell, J. (2003) ‘Trust and HRM in the new millennium’, International Journal of Human Resource
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364. Survey by Kelly Services, reported in Australian Associated Press (2003) ‘Workers distrust bosses’, Australian Financial
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365. Edelman Trust Barometer Survey reported in D’Angelo Fisher, L. (2009) ‘No trust in executives’, BRW, 19–25 February,
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366. Katcher, B.L. (2003) ‘Employees feel like slaves’, Human Resources, May, p. 6.
367. Lawler, E.E. (2008) Talent, San Francisco: Jossey Bass, p. 131.
368. Shantz, A., Alfes, K., Truss, C. and Soane, E. (2013) ‘The role of employee engagement in the relationship between job
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369. Wilson, P. (2012) ‘Getting engaged’, HRMonthly, October, pp. 14–16.
370. Schermerhorn et al. (2010), op. cit., p. 63.
371. ibid.
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373. Schermerhorn et al. (2010), op. cit., p. 63.
374. Barbara Pocock, quoted in Walters, K. (2010–11), ‘Trust staff, build a happy workplace’, BRW, 9 December–19 January,
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376. BRW (2015) ‘Best places to work’, September, pp. 1–30.

ACKNOWLEDGEMENTS
Photo: © michaeljung / Shutterstock.com.
Photo: © Adwo / Shutterstock.com.
Newsbreak: Keeping HR in top form: © HRMonthly.
Figure 1.6: © Mirabooka Investments Ltd.

70  PART 1 Introducing HRM


CHAPTER 2

Human resource
planning
LEA RNIN G OBJE CTIVE S

After studying this chapter, you should be able to:


2.1 explain the relationship between strategic HRM planning and operational HR planning
2.2 appreciate the importance of HR planning
2.3 identify the key environmental influences on HR planning
2.4 understand the basic approaches to HR planning
2.5 describe the ways of forecasting HR requirements
2.6 explain the basics of exit management
2.7 understand the requirements for effective HR planning.

‘Globalisation
and talent
management are
the continuing
number one
challenges for the
HR profession.’1
Peter Wilson, National
President, Australian
Human Resources
Institute
2.1 Human resource planning and strategic
HRM planning
LEARNING OBJECTIVE 2.1 Explain the relationship between strategic HRM planning and operational HR
planning.
Human resource planning and strategic HRM planning are often mixed up. To avoid such confusion,
human resource planning is better described as employment planning. This places HR planning at the
operational level where it is concerned with detailed forecasts of employee supply (internal and external)
and employee demand. Based on the HR forecasts, specific action can be taken to get the right numbers
and types of people doing the right work at the right time (that is, planning the flow of people into,
through and out of the organisation). In contrast, strategic HRM planning is concerned with defining
philosophy, objectives and strategy, and precedes HR planning. HR planning must be an integrated part
of the organisation’s overall strategic planning process (see figures 2.1 and 2.2).

Organisational strategy

Retrenchment strategy Stability strategy Growth strategy


F
E • Downsizing • Maintain status quo • Internally generated
E • Business sale growth
D • Shut down • Acquisitions, mergers
B or joint ventures
A
C
K (–) (0) (+)

HR planning

• Determine number and types of jobs to be filled.


• Match human resource availability with job openings.

FIGURE 2.1 Organisational strategy and HR planning

2.2 The importance of human resource planning


LEARNING OBJECTIVE 2.2 Appreciate the importance of HR planning.
The focus of human resource planning or employment planning is on labour demand (the number of people
needed by the organisation) and labour supply (the number of qualified people available to the organisation).
HR planning involves the entry of people into the organisation (acquisition), the development of people
skills (development), appraisal (performance measurement) and the exit of people from the organisation
(departure). Recently such a strategic and integrated approach to people management has been labelled
talent management. As a consequence, HR planning is the responsibility of all managers  — it  is not
just a HR department activity. Effective HR planning is critical to the organisation’s success because it
matches the organisation’s strategic objectives and its HR objectives with its people requirements (see
figure 2.2). Organisations with surplus employees will need to review their HR policies regarding permanent

72  PART 1 Introducing HRM


employment, outsourcing and retrenchments. Likewise, organisations with too many low-skilled and poorly
qualified employees may face obstacles when introducing new technology, total quality management
(TQM) and other change initiatives. Finally, organisations lacking a diverse employee mix may not meet
their EEO objectives (objectives designed to give people a fair chance to succeed without discrimination)
(see figure 2.2). Effective HR planning ensures that the available talent is correctly allocated, labour costs
are controlled, the employee headcount is appropriate, productivity is improved and talented employees are
retained. Unfortunately, HR planning receives scant attention from too many managers. As a result, many
organisations fail to introduce effective talent management policies and practices.2

HR planning

Strategic planning Analysis Action Outcome


Managers review the Managers decide The right people
Directors and senior organisation’s action plans to match • in the right place
managers determine objectives and people with jobs in • in the right jobs
the organisation’s strategies to terms of: • at the right time.
objectives and how determine what jobs • numbers
they are to be need to be done and • knowledge
achieved. by whom. • skills
• abilities
• qualifications.

Strategic HRM planning Impacts Impacts Impacts

HR and line managers • Organisational • Job design Organisation


focus on linking all HR structure • Job analysis • Productivity
activities with the • Employee • Recruitment • Costs
organisation’s strategic allocation • Selection • Profitability
objectives. • Performance Employee
appraisal • Motivation
• HRD • Job satisfaction
• EEO • Trust
• Remuneration • Performance
and benefits • Competence
• Industrial relations • Physical and
• Employee exit psychological
wellbeing

FIGURE 2.2 Strategic planning and HR planning

The purpose of HR planning


The purpose of HR planning is to ensure that a predetermined number of persons with the appropriate
knowledge, skills and abilities are available at a specified time in the future. HR planning, thus,
systematically identifies what must be done to guarantee the availability of the human resources required by
an organisation to meet its strategic business objectives. Managers must ask: What mix of knowledge, skills
and abilities do we require now? What mix will we require in the future? Do we have the right number of
qualified employees today? How will employee numbers change in the future? How do our labour costs
and productivity compare with those of our competitors? Where will we find the people we need?

Scarcity of talent
Increasingly, what concerns managers is the scarcity of talent. According to a former chairman of
Woolworths, one of the most significant factors contributing to the company’s outstanding performance is

CHAPTER 2 Human resource planning  73


the engagement and development of high quality people.3 Talent is now the prime source of competitive
advantage, not raw materials, capital or technology. Attracting talent and retaining talent has now become
a major driver of corporate strategy. Richard Goyder, the managing director of Wesfarmers (the biggest
private sector employer in Australia) says that ‘attracting, retaining and developing people is the number
one issue facing Wesfarmers over the next 10 years’.4
The major challenges confronting Sydney, Hong Kong, Kuala Lumpur, Shanghai and Singapore in
their quest to be the business hub of the Asia–Pacific region are their lack of skilled people and a talent
brain drain.5 Australia, for example, has a persistent shortage of medical, nursing, teaching, accounting,
engineering and technical employees and people with trade skills.6 In Hong Kong, a shrinking skilled
workforce is predicted to slow economic growth for the next several years.7

Skill Marketability

Low-level skills that can be replaced by computers Low- to non-existent demand for skill set
or machines, jobs do not require face-to-face contact (for example, assembly line workers, call centre
and work is easily outsourced (for example, jobs that operators, process workers). Unemployment threat
are repetitive and/or routine) high to very high (especially if they lack basic
literacy and numeracy skills and are not mobile).

Low-level skills that cannot be replaced by Moderate to high demand for skill set (for
computers or machines, and/or require face-to-face example, cooks, hairdressers, cleaners, taxi
contact and/or cannot be easily outsourced (for drivers). Unemployment threat lower (but they must
example, jobs that are not repetitive or routine and be mobile).
which need personal interaction)

Higher level skills that cannot be replaced by Very high demand for skill set (for example,
computers or machines and/or require face-to-face technicians, nurses, managers, physicians,
contact (for example, jobs that require planning, engineers). Unemployment threat low to very low
decision-making, problem-solving, creative and (especially if they are mobile).
innovative skills)

FIGURE 2.3 Worker demand

Although unemployment exists, employers claim that many workers lack the skills and motivation
they require (see figures 2.3 and 2.4). According to one study, 40 per cent of the Australian workforce is
below the minimum standards required in literacy and numeracy to function in a knowledge economy.8
The education system has failed to produce workers who are literate, numerate and flexible. A recent
survey, for example, shows that 40 per cent of maths teachers in Year 7–10 high school classes are not
qualified to be teaching mathematics.9 The results are lower standards and a mismatch between the skills
organisations need and the skills workers possess. According to Skills Australia, Australia will need
more than five million additional skilled workers by 2025.10 The current scarcity of qualified workers is a
major barrier to productivity improvement and economic growth.11 Trade unions claim that organisations
have failed to train sufficient workers, preferring to import labour to attack Australian workers’ pay and
conditions. Employers counter that they should not be responsible for teaching workers basic arithmetic
or forced to hire workers lacking in motivation and unable to successfully complete in-house training.12
Actions taken by employers to deal with the skills shortage include training, outsourcing, job redesign,
restricting production and recruiting overseas.13 Other needed steps include the promotion of more
women into skilled jobs and motivating older people to stay longer in work.14 The National Secretary of
the Australian Manufacturing Workers Union claims: ‘It is quite clear that many employers are using this
to drive down wages and conditions by importing cheaper workers.’15 This is because such employees
tend to be paid at award rates rather than higher market rates. The Labor Party and trade union movement

74  PART 1 Introducing HRM


claim this reduces the negotiating power of Australian employees and is a product of cost cutting and the
failure of employers to invest in training.16
According to the Organisation for Economic Co-operation and Development (OECD), at least
15  per  cent of adults in Australia, Britain, New Zealand and the United States have only rudimentary
literacy skills, making it difficult for them to cope with the rising skill demands of industry.17 A survey
by the Australian Industry Group found that more than 75 per cent of employers were disadvantaged by
the low levels of literacy and numeracy of their workers.18

Employee Employee
• Burnout • Rust-out
• Longer hours • Job insecurity
• Increased pressure • Decreased morale
• Reduced job performance • Reduced job performance
• Decreased morale • Talents not fully utilised
• Role overload • Loss of motivation
• Increased labour turnover • Restricted career opportunities
Labour Labour
shortage surplus
Organisation Organisation
• Inadequate supply of talent • Excessive payroll costs
• Increased overtime costs • Employees underutilised
• Production delays • Low productivity
• Reduced productivity • Loss of competitiveness
• Lost business opportunities • Retrenchment and downsizing
• Industrial relations problems costs
• Industrial relations problems
• Danger of losing top talent

FIGURE 2.4 HR planning failure and labour imbalances

Short-term versus long-term needs


A common mistake for HR managers is to concentrate on short-term replacement needs rather than on
the organisation’s long-range HR requirements. Such a non-strategic approach causes management to be
caught unawares by changes in employee availability and quality of labour, and creates a series of short-
term dilemmas. Ad hoc HR planning is inefficient because it is reactive and represents management-
by-crisis. If the right numbers of qualified and skilled employees are not available, an organisation may
not be able to meet its strategic business objectives. High-technology firms such as IBM and Motorola,
for example, have strategies for developing new products or entering new markets that depend on the
availability of appropriately qualified and skilled human resources personnel.19 Dow Chemical, likewise,
uses a custom modelling tool that predicts future headcount for each business unit and can alter its
predictions for economic, political and legal developments and various ‘what if’ scenarios.20 In contrast,
barely a quarter of Australian Public Service agencies have a workforce plan.21
Cooperation between the HR function and line management is necessary for success. Such a partnership
links HR planning with corporate strategic planning and ensures that HRM is proactive. It allows the HR
manager to anticipate and influence the organisation’s future HR requirements. Wesfarmers’ takeover
of retailer Coles created demands for personnel with new skills and different experiences.22 In contrast,
Ansell’s strategic decision to exit the food and medical technology industries meant that it no longer
required people with food and medical technology-related skills.23 HR planning can thus be seen as a
systematic process linking the management of human resources to the achievement of the organisation’s
strategic business objectives. It ensures a more effective and efficient use of human  resources, more
satisfied and better developed employees, more effective equal employment opportunity planning, and
reduced financial and legal costs (see figures 2.1, 2.2, 2.3 and 2.4).

CHAPTER 2 Human resource planning  75


2.3 Environmental influences and HR planning
LEARNING OBJECTIVE 2.3 Identify the key environmental influences on HR planning.
As part of the strategic planning process, HR planning considers both the internal and external
environmental influences on an organisation, its objectives, culture, structure, systems and HRM policies
and practices (see figure 1.15 of the strategic HRM diagnostic model in chapter 1).
This is because HR planning must reflect the environmental trends and issues that affect an
organisation’s management of its human resources, including:
•• economic factors (for example, high Australian taxes, expensive housing and costly school fees make
it difficult to attract professional and executive talent.24 Government subsidies to inefficient unionised
industries, such as the automotive and shipbuilding industries, lower productivity by diverting labour
away from efficient industries, such as mining.)25
•• social factors (for example, jobs shunned by Americans as being too hard, too dirty or too menial are
done by illegal workers. It is estimated that Mexicans comprise more than 70 per cent of American
crop workers, and many are illegal immigrants.26 The rapid increase in the number of rich Chinese
and Russians has created a 20 per cent jump in demand for their graduates, according to the Guild of
Professional English Butlers.)27
•• demographic factors (for example, by 2050 the number of Australians aged 65–84 will double, and
those over 85 will quadruple.)28
•• technological factors (for example, technology has made geographic location irrelevant, giving
organisations the power to transfer jobs from rich countries with expensive labour to poor countries
with cheap labour and to replace workers with robots. At Rio Tinto’s Pilbara mining operations, for
example, robots are now used instead of direct labour.)29
•• legal factors (for example, a crackdown on drink driving by China’s police has seen an upsurge in the
demand for chauffeurs for executives.)30
•• political factors (for example, the federal government has set a goal of getting the two million
unemployed or underemployed Australians back into the workforce via welfare reform. This includes
changes to disability pension eligibility requirements, tax changes and skill development programs.)31
•• industrial relations factors (for example, high minimum wage laws act as a discentive for employers
to hire young, elderly and low-skilled workers).32
All these factors affect the demand for and supply of labour.

Globalisation
‘Globalisation is allowing skilled labour to move like capital across the world to locations that offer the best
compensation and the best future.’33 Likewise, organisations are increasingly focusing on the global market
for their people requirements.34 The United States attracts more educated immigrants than the rest of the
world combined.35 Australia is losing more than 80  000 residents per year — the majority being academics,
managers and professionals — primarily to Britain, Hong Kong, Singapore and the United States. Australian
lawyers have gone global, creating a critical shortage of commercial lawyers, while the exodus of top
academics risks a ‘dumbing down’ of Australian universities.36 In Ireland, more than half of Irish doctors are
working abroad forcing the government to hire foreign doctors as replacements.37 Portugal, Spain and Italy,
similarly, are experiencing an exodus of skilled workers seeking better prospects.38 OECD research suggests
that emigration of skilled workers has a depressing effect (of up to six per cent) on the wages of the less
educated and less skilled workers who remain but leads to higher pay for host country workers.39
China, India and Japan are also suffering brain drains.40 Up to 50 per cent of India’s top engineering
and science graduates and 20  per  cent of its medical graduates leave each year for jobs overseas.41
It is estimated that more than 90  per  cent of all Chinese graduates and two-thirds of all foreign PhD
graduates in science and engineering remain in the United States.42 Aggravating this situation are the
concerted efforts of Japanese and European companies to capture Chinese and Indian talent.43 (In 2014,

76  PART 1 Introducing HRM


China produced almost seven million university graduates and by 2020 China’s graduate talent pool
is expected to reach 195 million).44 Japan also faces an alarming brain drain as its young and talented
employees escape from its rigid, bureaucratic and seniority-ridden organisations in search of employers
offering more flexibility, opportunity and rewards.45
An emerging trend is the global city. Cities such as London and New York are very attractive to
professional talent because of their cosmopolitan lifestyle, career advancement, high standard of living
and opportunities to work with the ‘best and brightest’ (for example, six in every ten people who live in
inner London are university graduates).46

Multigenerational workforce
A relatively new challenge for HR managers (and line managers) is how to deal with a multi-generational
workforce (see figure 2.5). Each generation — traditionalists, boomers, gen X and gen Y (also called
‘Millennials’) — has its own distinctive characteristics. Differences in values, attitudes and ways of
behaving are said to exist because of the unique life experiences each has encountered. As a result,
HR managers need to understand these differences to be able to identify the needs of each generation
and how to communicate with them. Interestingly, generational differences appear to apply across
cultures. A survey by the Hong Kong Federation of Youth Groups found employers perceived young
workers (15–24  years) as having poor attitudes regarding accountability, discipline and management
of their emotions. Managers particularly complained about poor manners, poor people skills and poor
understanding of what is required in the workplace.47 One senior manager, for example, bemoans that
gen Y workers are spoilt, lacking in ambition but with high expectations for a comfortable life.48 Others
gripe that they are constantly seeking feedback and immediate gratification.49 Such perceptions have
created the stereotype of gen Y as being spoilt slackers who are lazy, selfish, want everything given to
them and expect a reward simply for turning up.50 The traditionalists and baby boomers emphasise work
and career, while the younger generations emphasise work–life balance.51
Not surprisingly, inter-generational workplace relations are often frustrating and a source of conflict,
and have negative effects on productivity and employee satisfaction. Baby boomers, for example, are
regarded by gen X and gen Y as difficult to work with and a barrier to their promotional prospects.52
Boomers, because of the financial losses to their retirement savings (caused by the GFC) are reluctant
to retire and continue to occupy most senior management jobs. It is estimated, for example, that only
11 per cent of managers aged over 50 plan to retire at age 65 (and more workers are saying that they
never intend to retire).53 Younger workers thus see these older generation workers as a serious block to
their upward career movement.

DOCTOR HR

Hi Dr HR
As a manager what can I do to bridge the generation gap?

According to the Executive Chairman of Leadership Management Australasia, the ‘baby boomer
issue  .  .  .  threatens to undermine the stability of the workforce’.54 It is claimed that younger workers want
flexibility and a nurturing environment (as signalled by their constant need for praise and reassurance),
while older workers seek stability, security and a hands-off management style.55 Older workers may
also be upset at having a young person as a supervisor, being overlooked for a promotion or being
regarded as incapable. Some experts, however, claim that the problems of intergenerational friction have
been exaggerated (and oversimplified) and that they can be overcome by increased interaction between
the groups.56 Cross-mentoring programs where younger and older workers learn skills from each other
(for example, younger workers may teach computer skills, older workers interviewing skills) have
proved successful.57 Although academic research is limited, some findings do show differences between
boomers and gen X — boomers, for example, demonstrate higher job satisfaction and a lower willingness

CHAPTER 2 Human resource planning  77


to quit.58 Other research, however, indicates that commonalities are more evident than differences (for
example, job motivation, promotional opportunities and supervisor support are important for both baby
boomers and gen X workers).59 This suggests that managers should treat employees first as individuals
and next as members of a particular generational group.60

Percentage
Generation Born of population Stereotype

Traditionalists (also before 1945  2% Hardworking, value law and order, respect
called builders, veterans authority, dedicated, technically challenged
or pre boomers) (especially computer skills), focus on work
and career

Boomers (also called 1945–62 26% Optimistic, self-confident, loyal, difficult to


baby boomers) get along with, unable to accept change,
intolerant, judge others by their own
standards, perceived by gen X and gen Y as
‘too old’ and need to retire

Generation X (also 1963–80 26% Creative, dislike close


called gen X) supervision, dislike working with baby
boomers, strong desire to be promoted,
individualistic and self-reliant, seek personal
and job satisfaction (work–life balance
important), likely to quit if not satisfied, want
supportive colleagues

Generation Y (also 1981–95 32% Demanding, spoilt, selfish, difficult, lazy, tech
called gen Y or savvy, individualistic, fickle, sociable (but
Millennials) dislike working with baby boomers), job hop,
seek immediate gratification, unfocused,
expect a comfortable life

Generation Z 1996 or later  1% Focus on quality of life; want to eat well,
sleep well, and live well; don’t care about
job security; don’t want too much pressure
at work

FIGURE 2.5 The multigenerational workforce

Source: Based on Benson, J. and Brown, M. (2011) ‘Generations at work: Are there differences and do they matter?’,
International Journal of Human Resource Management, 22(9), pp. 1843–65; Charminde, B. (2005) ‘The workers divided’,
HRMonthly, October, p. 29; Akerman, P. (2011) ‘Gen Y finds working with Baby Boomers a chore’, Australian, 26 May, p. 7;
Australian Bureau of Statistics, cited in Sexton, G. (2011) ‘Talking about their generations’, HRMonthly, July, pp. 34–6; and
Tsang, D. (2011) ‘They’d rather sleep well than work’, South China Morning Post, 1 September, p. 31.

When developing HR policies and practices, generational groupings should be considered (along with
other workforce sub groupings such as those based on gender, ethnicity, the type of work performed
etc.).61 The HR manager should exercise caution, however, when creating generation-specific HR
policies and practices.

Women in the workforce


Although females perform better scholastically than males and more finish Year 12, this advantage does
not transfer to the workplace.62 Increased participation rates of women in the workforce depend on

78  PART 1 Introducing HRM


less discrimination, improved childcare facilities, the availability of part-time work, job security after an
absence for child-bearing, maternity leave, special parental leave and partners prepared to share home
duties.
A survey by the Australian Institute of Management found that the most important factors in retaining
women in the workforce were flexible working arrangements, workplace culture and childcare support.63
Women aged over 45 have increased their workforce participation from 47 per cent to 78 per cent over
the past 30 years. A Productivity Commission report attributed this growth to greater social acceptance,
diversity of household living arrangements, growth of flexible working arrangements (a problem is
that most part-time work is concentrated in low-paying and non-career development jobs64) and higher
education (40.5  per  cent of women aged 25–34 are graduates compared with 33.1  per  cent of young
men65).66 Although the numbers are small, the biggest percentage increase in workers is among women
older than 65.67 The desire for self-fulfillment and social relationships, as well as financial pressures
(caused by the GFC devastation of their already inadequate retirement savings) are prime reasons
for the increased workforce participation of these older women. Another emerging trend is for many
women to be more highly paid than their male partners (the proportion of dominant female bread winner
households is now approaching 25 per cent).68

FAST FACT

Research suggests that childless people are considerably happier than those with children.69

NEWSBREAK

Homework vs housework BY PETER WILSON


Women may be making advances in the workforce, but they are still doing more of the domestic
chores.
More and more adult workers are now working from home, given the enabling nature of the current
global digital business revolution. For many workers, it also makes sense to stay at home and complete
‘independent’ work there rather than consume two to three hours a day commuting.
The pressures on families make such decisions a no-brainer, especially if your employer is empathetic
and flexible. When it comes to ‘interdependent’ work, the office remains the primary and optimal loca-
tion for team, management, customer and stakeholder meetings.
While 80  per  cent of working age adult males from 20 to 74 years old participate in the workforce,
only 65 per cent of adult females do. That female participation rate is up nearly 20 per cent since the
1970s and shows no signs of abating.
More and more women are entering the workforce after completing tertiary studies, and it is now the
expectation that you should be able to balance work and home life fruitfully and effectively.
For employees with strong skills and multi-tasking expertise, working from home offers great advan-
tages and win-win solutions for themselves and their employers. Workplace research evidence confirms
this. So completing your business homework productively is an essential skill.
Furthermore, many women are becoming more highly paid than their male partners. The recently
published ‘Household, income and labour dynamics in Australia (HILDA)’ survey from the Melbourne
Institute reports that:
• the proportion of dominant female breadwinner households has grown to 24.5 per cent
• only one in three female breadwinner dependent households have children present, so there is more
flexibility offered for the other two in three female breadwinner households to pursue careers
• in 69 per cent of households, men have the bigger salary; due in many cases to the fact that women
have higher annualised rates, but work part-time
• women perform on average 16 hours of housework, more than double that done by men
• women also spend more time than men in running errands and caring for children
• the sharing of elder care, primarily ageing parents, is more equally shared between the sexes.

CHAPTER 2 Human resource planning  79


A long-term debate is that unpaid domestic chores are not valued in our GDP. Some groups, like The
Women’s Alliance, have estimated GDP would be 50–60 per cent higher if domestic unpaid work was
valued. But it isn’t and there is still a stigma in the minds of many males in doing their share of chores.
As one of the HILDA study authors, Professor Mark Wooden, commented: ‘Key planks of the nation’s
social and labour market practices were developed in the 20th century on the “male breadwinner”
model’. That’s true, but it’s a 20th century model that is continuously changing.
There is little doubt most males aspire to do the majority share of total paid work of the household,
which helps them avoid the majority of household chores. In many instances, women do the majority of
paid work in the household so they can keep up their majority share of the unpaid housework — even
when they are the breadwinner.
Many of these women now complain about this inequity. And rightly so.
With longer life expectancy, women will continue to pursue financially providing for themselves, inde-
pendently. The quiet gender revolution at work is confronting the old male breadwinner paradigm. Men
should get the message to do more housework, and share the load — as well as they do on elder care.
Source: Wilson, P. (2014) ‘Homework vs housework’, HRM Online, 30 July, www.hrmonline.com.au.

EXERCISE
Write a response to the article, and outline the steps you think HR managers can take in addressing this
issue.

Academic standards
The global proliferation of ever weaker and more diluted academic qualifications means that companies
can no longer assume that because a person has graduated they are also qualified.70 Educational
institutions, as a result, are criticised for failing to deliver a sufficient quantity and quality of trained
personnel.71 In the United States, 10 per cent of high school students cannot locate their home country
on a blank map of the world.72 In Australia, the increase in law degrees of varying quality has initiated
discussion regarding the need for an independent bar exam, while some universities (referred to as
‘PR factories’ because they produce degrees of ‘permanent residence’) have been accused of inflating
grades to accommodate overseas students.73 The emphasis, carps one commentator, is on migration,
not education.74 Entry standards, at other universities, have declined to the point that only minimal
Australian Tertiary Admission Rank (ATAR) scores are required.75 The University of Sydney now
accepts Year 12 students into a Bachelor of Engineering (arguably the most mathematical of all
engineering disciplines) who have not studied advanced maths in their matriculation year.76 According
to the Australian Mathematical Sciences Institute, 40 per cent of Year 7–10 students are taught maths
by unqualified maths teachers.77 Australian Council for Education and Research (ACER) data similarly
shows that 43 per cent of Year 11–12 physics classes and 33 per cent of chemistry classes are taught
by teachers not qualified in the subject.78 Adding to the problem is the trend for Australia’s brightest
students to shun teaching as a chosen career.79 A Victorian government report, not surprisingly, claims
that graduate teachers are sub-standard and not equipped with the specialist knowledge required in
literacy, maths and science.80 A Productivity Commission report similarly found that 40  per  cent of
TAFE teachers did not have appropriate academic qualifications.81 According to some critics, grade
inflation in Britain means that university degrees are now inferior to those of a decade ago. At one
British university, for example, the proportion of electrical engineering graduates awarded first or
upper second class honours degrees rose from 60  per  cent to 74  per  cent in five years.82 In Hong
Kong, employers are warned that it is up to them whether or not they recognise degrees obtained at
overseas universities in Hong Kong. Furthermore, the perceived decline in English standards of Hong
Kong graduates has forced employers to independently test graduate English skills and universities
to introduce an internationally recognised English language test.83 Many universities in Mainland

80  PART 1 Introducing HRM


China are affected by academic dishonesty, plagiarism and corruption. A Ministry of Science survey
of PhD candidates found that 60 per cent had paid to have work published or had plagiarised the work
of others.84 The inadequacy of India’s academic institutions is now a critical issue. A survey by the
National Association of Software and Services companies found 85 per cent of Indian graduates were
unemployable.85 A related problem centres on graduates in disciplines with little or no market value
such as society and culture, visual and performing arts and health courses that are generic or non-
clinically based, which in a shrinking graduate job market have become ‘degrees of unemployment’.
The University of Canberra Vice-Chancellor Stephen Parker claims that Australia risks becoming a
nation of degree holders who can’t find a job.86

DOCTOR HR

Hi Dr HR
My boss says jobs that required low-educational qualifications are now being competed for by applicants
with much higher academic qualifications. Is he correct?

Labour mobility
The lack of mobility of much of the Australian workforce is now a serious inhibitor to improved economic
performance. The high costs of moving house (for example, stamp duty, real estate agent’s fees) are
significant factors according to the Productivity Commission in discouraging workers from relocating
to areas offering higher wages and better job opportunities.87 Other factors deterring people from
moving include lack of infrastructure in regional towns and geographic and social isolation.88 In cities
such as Melbourne and Sydney, the high cost of housing (especially near the CBD) and poor transport
infrastructure restricts the pool of people available for employment.89 Research by the University of
Melbourne also confirms that Australia is a nation of ‘stay at homes’.90 Given rising unemployment
(especially among the young), it appears that Australians will need to become more willing to move
interstate and overseas if they are to find work.91 Internationalism of the labour market means (especially
for managers and professionals) that the ability to relocate is now becoming a key job requirement.92
Organisations, however, face the challenge that many graduates, while eager to transfer to the United
States or United Kingdom, are reluctant to move to developing countries.

Other environmental influences


Examples of other environmental influences that affect HR planning include: demographic factors (for
example, immigration, an ageing population, the number of women in the workforce); the casualisation
of the workforce; employee literacy levels; skill shortages (the bursting of the internet bubble saw
Australia go from a desperate shortage of computer science graduates to a surplus); acquisitions,
mergers and divestitures; deregulation; pay levels (low academic salaries in Australia have seen losses
to the United States); flexible work schedules; telecommuting; outsourcing; quality of life expectations
(for example, long hours and being tied to one employer are often rejected by gen Y employees93);
pollution (for example, Hong Kong is one of the world’s most polluted and densely populated cities
which is reducing its attractiveness as a place to work);94 government regulations (for example, the
former coalition government’s ban on therapeutic cloning in 2002 reportedly caused the best stem
cell scientists to seek work overseas); income tax levels (for example, the International Monetary
Fund has warned that Australia’s high marginal tax rates risk making the country uncompetitive
and causing the loss of skilled workers);95 union attitudes (for example, unions in Australia, Hong
Kong and the United States have opposed moves by companies to recruit overseas, seeing it as
‘unpatriotic’ and competition from cheap labour);96 a lack of national education standards (which
makes it difficult for organisations to transfer employees interstate); and changes in training uptake
and completion.97

CHAPTER 2 Human resource planning  81


2.4 Approaches to HR planning
LEARNING OBJECTIVE 2.4 Understand the basic approaches to HR planning.
The HR manager needs to be able to forecast the organisation’s future HR requirements and determine
from where they will be obtained. Three sets of forecasts are required:
•• a forecast of the demand for human resources within the organisation
•• a forecast of the supply of human resources available within the organisation (see figure 2.6)
•• a forecast of the supply of external human resources.

HR PLANNING

• Determine number and type of jobs to be filled.


• Match human resource availability with job openings.

Human resource Human resource


demand supply

Human resource requirements Human resource inventory

• Numbers • Numbers
• Skills • Skills
• Qualifications • Qualifications
• Occupation • Occupation
• Performance • Performance
• Experience • Experience
• Career goals • Career goals

Variances Nil

No action

If surplus If shortage

• Stop recruiting • Increase overtime


• Reduce casual and part-time employment • Increase casual and part-time employment
• Start early retirements • Postpone retirements
• Start retrenching • Start recruiting
• Reduce working hours • Accelerate training and development
• Use outsourcing

FIGURE 2.6 HR planning

82  PART 1 Introducing HRM


These forecasts are an attempt to predict changes in the organisation’s needs for human resources. They
will be influenced by the organisation’s strategic business objectives, the demand for its products and
services, projected labour turnover, the quality and type of employees required and available, technological
changes, financial resources and the general state of the economy. Although sophisticated techniques
have been developed, HR forecasting is not an exact science and organisations continue to use elementary
forecasting techniques such as the opinions of line managers and labour turnover statistics. Two approaches to
HR forecasting planning can be identified — quantitative and qualitative (see figure 2.7 later in this section).

The quantitative approach


Quantitative HR forecasting uses statistical and mathematical techniques. It is primarily used by
theoreticians and professional HR planners in large organisations.
The quantitative approach sees employees as numerical entities and groups them according to
age, sex, experience, skills, qualifications, job level, pay, performance rating or some other means of
classification. The focus is on forecasting HR shortages, surpluses and career blockages; its aim is to
reconcile the supply and demand for human resources given the organisation’s strategic objectives.
Quantitative forecasting includes trend projection, econometric modelling and multiple predictive
techniques. Such techniques often require specialised know-how, so the HR manager may have to rely
on staff experts or outside consultants.
Econometric modelling and multiple predictive techniques
Econometric modelling and multiple predictive techniques involve building complex computer models
to simulate future events based on probabilities and multiple assumptions. Predictions are based on
the statistical relationships discovered among the variables included in the models (for example, the
relationship of sales, discretionary income and gross domestic product to employment). HR forecasts
generally become more accurate when additional variables are considered. However, the cost of
simultaneously considering numerous variables may be prohibitive. Furthermore, because they tend to
rely heavily on past data, quantitative techniques may not be suitable in rapidly changing situations.
Finally, no matter how sophisticated the technique, forecasts of HR needs are only estimates. Thus, the
HR manager may be better advised to use simpler and more cost-effective approaches to HR forecasting,
unless the time, effort and expense of a quantitative approach can be clearly justified.
Trend projection
Trend projection, or time series analysis, makes predictions by projecting past and present trends into the
future. Sales or production levels, for example, can be related to the organisation’s demand for human
resources. This technique is based on the assumption that the future will be a continuation of the past.
Time series analysis is relatively simple and, provided historical data are available, can be performed
quickly and inexpensively.98

The qualitative approach


Qualitative HR forecasting uses expert opinion (usually a line manager) to predict the future (for
example, the marketing manager will be asked to estimate the future personnel requirements for the
marketing department). The focus is on evaluations of employee performance and promotability as well
as management and career development. Estimates based on expert opinion, although not as sophisticated
as the quantitative approach, are popular because they are simple, cheap and fast. The qualitative and
quantitative approaches are compared in figure 2.7.
The Delphi technique
A refinement on this basic approach is the Delphi technique. A panel of experts, such as key line
managers, make independent anonymous predictions in answer to questions relating to HR planning.
The responses are analysed by the HR department and the confidential results are fed back to the experts

CHAPTER 2 Human resource planning  83


along with another series of questions. The managers revise their original estimates in the light of this
new information. This process is repeated until a consensus forecast is obtained.

HR PLANNING

Forecasting internal demand for Forecasting internal supply of


human resources human resources

Qualitative methods Qualitative methods


• Expert opinion • Skills inventory
• Delphi technique • Replacement charts
• Nominal group technique • Succession planning
Quantitative methods Quantitative methods
• Trend projection • Turnover analysis
• Econometric modelling • Markov analysis

FIGURE 2.7 HR planning and HR forecasting relating to internal demand for and supply of human resources

The aim of the Delphi technique is to integrate the independent opinions of experts by eliminating
personal influence and discussion. The technique is particularly useful when dealing with unknown or
volatile situations where no precedents exist (for example, the collapse of the euro) or where experts
are physically dispersed or desire anonymity. The major disadvantages of the Delphi technique are it is
time-consuming and costly.
The nominal group technique
Another group-based forecasting method is the nominal group technique. After a problem has been
presented, each team member, without discussion, independently generates as many solutions as possible
and writes them down. Then, in turn, each member describes a solution to the group. No criticism or
debate is undertaken, but team members can seek clarification. After all solutions have been presented,
the group members silently and independently rank each proposed solution. The solution with the
highest total ranking becomes the final decision. The advantages of the nominal group technique are that
it allows group members to meet without restricting the independence of their thinking, it produces more
and better quality ideas than a traditional group, it is more effective than an individual in dealing with
complex problems and it counterbalances any attempt by an individual to dominate the decision-making
process.99

2.5 Forecasting human resource availability


LEARNING OBJECTIVE 2.5 Describe the ways of forecasting HR requirements.
Once the HR manager has estimated the HR needs of the organisation, the next challenge is to fill the
projected vacancies. Present employees who can be promoted, transferred, demoted or developed make up
the internal supply. The external supply consists of people who do not currently work for the organisation.
Note that constraints may apply on the use of both internal and external labour supplies (for example, a
‘promotion from within’ policy, union restrictions, management preference and government regulations).

Forecasting the supply of internal human resources


Techniques for forecasting the internal supply of personnel include skill inventory, replacement charts,
succession planning, turnover analysis and Markov analysis.

84  PART 1 Introducing HRM


Qualitative methods
Skills inventory
The skills inventory is another method used to evaluate the internal supply of labour. It consolidates
basic information on all employees within the organisation. The success requirements for a skills
inventory system are outlined in figure 2.8.

Success requirements for a skills inventory system


• Clearly defined objectives. If the skills inventory is not achieving the purposes for which it was designed,
it should be revamped or scrapped, or it will degenerate into a wasteful and time-consuming activity.
• Top management support. If top management ignores the system, it will become a cosmetic activity
that lacks credibility.
• Employee acceptance. Employees must perceive the system to benefit them through its ability to
open up job opportunities within the organisation.
• Current information. Out-of-date information quickly makes a nonsense of any skills inventory system.
Given the time and cost involved in updating, only essential data should be collected. Information
overload can make a system unworkable because it can encourage managers to specify too many
factors, with the result that many qualified employees are not considered because of out-of-date records.
• Assured confidentiality. Employees must be confident that all information in the system will be
treated confidentially and accessed by authorised personnel only.
• Accurate input. All information must be checked for accuracy. Inaccurate information will quickly
destroy the credibility of the system. Employees should be able to review their data files and have
any wrong information corrected or deleted.
• Use. If managers do not use the system, it will quickly become a clerical exercise without benefit to
the organisation or the individual employee. However, overuse by managers requesting information
simply because it would be ‘nice to know’ can make the program uneconomical and increase the
risk of loss of confidentiality.
• Regular monitoring. The performance of the system against its stated objectives must be regularly
monitored to ensure that it remains efficient and effective.

FIGURE 2.8 Success requirements for a skills inventory system

The skills inventory permits the HR manager to:


•• identify qualified employees for different jobs
•• determine which skills are present or lacking in the organisation
•• assess longer-term recruitment, selection, and training and development requirements.
An example of a skills inventory is shown in figure 2.9.
Information that can be listed in a skills inventory includes:
•• personal data — age, sex, race, marital status; provided it is job-related (for example, young male
Chinese actor)
•• qualifications — education, job experience, training, licences (for example, driver’s licence)
•• memberships — memberships of professional associations or trade unions
•• skills — computer literacy
•• languages — number, type and fluency
•• employment history — jobs held, pay record, performance ratings
•• test data — scores on psychological and employment tests (must be job-related)
•• medical — health information (must be job-related)
•• employee preferences — geographic location, management function (for example, marketing,
production), type of job.
Skills inventories can be quite simple and kept manually, or they may be detailed and maintained as
part of an integrated HR information system (HRIS). The method chosen depends on the HR objectives
established for the skills inventory and the resources available. For example, Sims Group has a global

CHAPTER 2 Human resource planning  85


database for its employees that enables management to identify employees with high potential and the
required skills and experience for a position, and to ensure that training and job exposure are tailored
to meet individual needs. Employees also benefit from skills inventories. First, inventories provide
a mechanism for filling positions by internal promotion, ensuring that existing employees are not
overlooked. Second, selection for a more challenging position gives employees an opportunity to better
fulfil their security, achievement, power and recognition needs.

Skills inventory

Employee name: John Pearson Date: 4 November 2015


Number: HR 17923 Department: Human resources
Division: Consumer durables Location: Sydney
Education Experience
Degree Major Date From To Description
1. MBA Marketing 2010 1. 2013 Present HR manager,
2. MA Psychology 2006 consumer
3. BA Japanese and Psychology 2005 durables
2. 2009 2012 Sales supervisor
3. 2007 2009 Sales representative

Short courses Professional associations


Course Date 1. Australian Human Resources Institute
1. Leadership 2013 2. Australian Psychological Society
2. Job evaluation 2009 3. Australian Institute of Management
3. Sales training 2007
4. HRIS — vendor training 2007
Special licences Computer skills Other
1. Registered Psychologist 1. Computer literate — CEO’s high-potential list
spreadsheets, SPSS Cash awards for
2. PowerPoint outstanding performance,
2008, 2009, 2010,
2011, 2013
Languages Function preference Location preference Job preference
1. Japanese 1. Marketing 1. Australia 1. Product manager,
2. HR a. Sydney consumer durables
3. Business b. Melbourne 2. Sales manager,
development c. Perth consumer durables
2. Overseas 3. HR manager,
a. Japan Japan
b. Hong Kong
c. USA
d. UK
Employee signature HR department

Date Date

FIGURE 2.9 Skills inventory

86  PART 1 Introducing HRM


Replacement charts
The replacement chart is less sophisticated than computerised skills inventories and is primarily used
with technical, professional and managerial employees. Skills inventories are the source of data used in
replacement charts. Typically, this information includes name, age, present position, performance rating,
experience and an indication of promotion potential (see figure 2.10).

Marketing Manager
A E P
? W. Tao 49 21 2

Sales Manager Sales Manager


International Australia
A E P A E P
* C. E. Huse 46 15 1 ? E. H. Smith 55 19 3

Sales Supervisor Sales Supervisor Sales Supervisor Sales Supervisor


North America Asia Northern Region Southern Region
A E P A E P A E P A E P
* J. C. Schuler 41 13 2 ? J. Kramer 52 15 2 * W. Jones 56 17 3 # I. D. Chandler 45 16 2

Sales Representatives Sales Representatives Sales Representatives Sales Representatives


A E P A E P A E P A E P
? J. J. Cho 33 7 3 ? Y. C. Cohen 32 5 2 # T. Brubaker 43 7 3 * J. Baker 41 13 2
? C. G. Katz 31 6 2 ? R. C. Honda 45 14 3 ? P. Ray 48 15 2 ? A. Camakaris 45 15 2
? J. C. Ritti 54 9 2 * R. G. Law 43 15 1 * H. M. Russo 45 10 2 ? C. L. Kim 39 13 3
? S. T. Tung 29 3 2 * E. Wong 38 14 1 ? R. McCarthy 47 15 2
* S. Preston 32 3 1

* Ready for promotion now A Age


# Needs more experience/training E Years of company experience
? Doubtful potential P Performance rating:
1 = Superior 2 = Acceptable
3 = Needs improvement

FIGURE 2.10 Determining human resource requirements

Replacement charts summarise this information in pictorial form for key managers so they can
easily identify both the present incumbents and potential replacements (or lack of) for given positions.
Appropriately designed and updated, replacement charts can give both the HR manager and line
managers a visual overview of the organisation’s human resources, helping identify potential problems
in succession planning. A major criticism of replacement charts is that they focus attention on the skills
and positions currently needed by the organisation and not those required for the future.100
Succession planning
Succession planning is concerned with the filling of key professional and management vacancies. It
stresses the development of high-potential employees and takes a long-term view of the organisation’s
HR needs. As such, it is a key driver for management commitment to HR development and performance
management. It makes use of replacement charts, but generally expands on these to include additional
information on current performance, promotability, developmental needs and long-term growth potential.
McDonald’s, for example, requires that its executives train at least two potential successors — one who

CHAPTER 2 Human resource planning  87


could do the job today (the ‘ready now’) and one who could be a future replacement (the ‘ready future’).
Top management each year also review the top 400 people in the company. The goal is for McDonald’s
executives to surround themselves with subordinates smarter than themselves.101
More sophisticated plans may include job profiles that identify the essential competencies required
for effective performance.102 Westfield Holdings uses succession planning and executive development
programs, Woolworths its culture of internal promotion and Wesfarmers its practice of hiring and
developing the best people to ensure they have a cadre of world-class managers competent in all aspects
of the business and ready to assume major responsibilities.103 An example of a succession planning chart
is provided in figure 2.11.

Succession planning chart

Name: Rosanne F. Shapiro Division: Australian Operation


Location: Perth
Age: 34 Marital status: Not married
Dependants: Nil
Date started 3 June 2009
Present position Human resource manager Australia
Promoted 2 August 2012
Current job size Grade 8
Previous position Compensation and benefits manager
Appointed 3 June 2009
Other experience 2 years general HRM with Australian Heavy Industries Ltd
2 years industrial relations experience with Widget Manufacturing Ltd
Qualifications BCom (Qld) 2002, majors in Accounting and Economics
MBA (Melb.) 2007, ranked 16th in class of 126 students
Professional associations Chartered Member, Australian Human Resources Institute
Current performance rating Superior
Previous performance rating Superior
Promotability At least 2 levels above present position
Experience required Needs international exposure and head office experience in the United States
Requires experience outside HR if to be considered for general management
Training and development Company sales and marketing course, international management program at
University of Michigan
Relocation Free to locate interstate or internationally
Comments Shapiro has general management potential. She has expressed interest in
marketing and in working overseas. Awarded special performance bonus in 2009,
2010, 2011 and 2013 for outstanding achievement
Action Transfer to the United States within 6 months. Arrange special 12-month
project assignment in marketing in San Francisco head office and enrolment in
international management program at University of Michigan. List as a candidate
for product marketing manager in Pacific area head office (Hong Kong) on transfer
of present incumbent. High-potential committee to review within 6 months of
being transferred to the United States
Executive responsible for K. H. Law, managing director Australia
implementation

FIGURE 2.11 Succession planning chart, All Star Industries

88  PART 1 Introducing HRM


Performance pressures and the resultant massive downsizings, however, have led many organisations
to deplete their managerial ranks and have made them less interested in formal succession planning and
more willing to recruit talent from outside. Some experts furthermore argue that rapid changes in business
and a mobile job market have made management development and succession superfluous. According to
a McKinsey & Co. partner: ‘Companies should think twice about spending a lot of time and money on
someone who may walk out the door anyway. A healthier attitude today may be to consider the world
as your bench.’104 Surveys, similarly, find many Australian companies do not have succession plans in
place for their CEO and senior executives.105
Traditionally, managers have developed their own replacements, but this approach is often found
wanting because of its ad hoc and subjective nature. Without a systematic approach, succession can
be determined more by how skilful employees are at flattering their superiors than by the employees’
objective qualifications.106 Signs that there is a need for a strategic approach to succession planning
include managers complaining that they have no suitable candidates when a vacancy occurs,
high-potential employees deserting the organisation, a lack of female and minority candidates, a
dependence on external searches to find suitable candidates, and ongoing complaints that promotion
decisions are ad hoc, expedient and biased.107 Effective development requires a systematic analysis of
the manager’s training and development needs; identifying appropriate learning experiences via job
assignments, special projects and formal training programs. Some organisations now use assessment
centres in conjunction with line management input to identify future senior managers and to assess
their development needs.

The HR manager’s role is to ensure that succession planning provides the organisation’s future
managers with the necessary preparation to successfully fill potential vacancies. This means having
an effective performance appraisal system, needs-oriented training and development programs, and
a corporate culture that fosters individual growth and promotion from within. Otherwise, succession
planning becomes an academic exercise, producing only static charts and unwanted paperwork and
causing line managers to complain that ‘once they submit succession plans they never hear any more
about them’.108 Figure 2.12 shows the changing face of succession planning.

STATIC HR PLAN DYNAMIC HR PLAN


(PRESENT ORIENTATION) (FUTURE ORIENTATION)

• What are the organisation’s strategic objectives and • What will be the organisation’s strategic
culture? objectives and culture in five years?
• What are the crucial positions in the organisation? • What will be the crucial positions in five years?
• What knowledge, skills, abilities and other • What KSAOs will be required in five years?
characteristics (KSAO) are required? • How many of the existing personnel:
• How many qualified personnel exist in the –– possess the necessary KSAOs?
organisation? –– fit with the new culture?
• How many qualified people does the organisation • What action steps need to be taken now for:
require? –– recruitment and selection?
• From where will they be recruited? –– training and development?
–– Internal sources? –– career planning?
–– External sources? –– performance management?
• Are necessary succession plans in place? –– exit management?

FIGURE 2.12 HR planning: today vs tomorrow

Quantitative methods
Turnover analysis
To accurately forecast the demand for labour, the HR manager must know how many people will leave
the organisation. Labour turnover in an organisation may result from employee retirement, death,

CHAPTER 2 Human resource planning  89


illness or disability, resignation, retrenchment or termination. The reasons why employees resign may
be avoidable (for example, unfair treatment, poor supervision, lack of challenge) or unavoidable (for
example, relocation to another state or overseas, return to university, serious illness). Employees may also
quit because of dissatisfaction with their working conditions, pay and benefits, training and development,
promotional opportunities, relationship with colleagues and so on. Consequently, a detailed turnover
analysis of why people leave the organisation is essential if meaningful information is to be obtained.
Exit interviews giving information on employee reasons for leaving and labour turnover rates from past
years are the best sources of information. Turnover for each job classification and department should also
be calculated because turnover can vary dramatically among various work activities and departments.
Markov analysis
Markov analysis is a mathematical technique used to forecast the availability of internal job candidates.
A matrix is developed to show the probability of an employee moving from one job to another or leaving
the organisation. The Army, for example, needs to be able to calculate the likely replacement needs of its
frontline infantry in battle conditions. The underlying assumption is that the departure or movement of
personnel among various job classifications can be predicted from past movements. Unfortunately, any
unexpected instability in the movements of employees or changes in job design reduce its usefulness.
Furthermore, because quantitative techniques demand specialist expertise, and because Markov
analysis requires at least 50 employees in any one job classification, its use is restricted to very large
organisations.109

Factors affecting the external supply of human resources


It is unrealistic to assume that every future vacancy can be filled from within an organisation. This is
particularly true for disciplines where there is a global market for talent and the competition is fierce.
Consequently, the organisation must tap into the external labour market (local, regional, interstate or
international). The HR manager thus needs to be alert to various trends.

The ageing population


The HR manager needs to consider demographic changes, such as an ageing population. The workforces
of Australia, China, Hong Kong, Japan, the United Kingdom and the United States are all ageing. Already
there are now three million Australians aged 65 and over, and the number will double by 2050.110 In
Hong Kong, 11 per cent of the population is 65 or older and this will increase to 25 per cent in less than
30 years.111 People aged 60 or over will make up 30 per cent of China’s population by 2050.112 Britain’s
office for National Statistics says the number of over 85s in the UK will more than double to 3.6 million
by 2035.113 Japan, with 20 per cent of its population aged 65 years or over, has become the world’s most
aged society, and this, combined with its extremely low birth rate (now 1.2, which is well below the rate
of 2.08 needed to replenish the population) means its population is projected to shrink by 20 per cent
over the next 50 years.114 Europe too faces similar demographic problems. By 2020 more than one in
three adults will be at least 60 years old.115

FAST FACT

An ageing population some experts claim will be the biggest crisis facing China, with Alzheimer’s disease
at the crux (China has 9 million people with Alzheimer’s disease and only 300 doctors qualified to treat
dementia).116

The ageing of the workforce, combined with a global shortage of skilled personnel, will force employers
to employ larger numbers of older workers (a trend already evident in Australia).117 Fortunately, the use
of technology will make work less physically demanding, permitting older people to work longer. ‘An
ageing workforce’, says one expert, ‘will compel companies to rethink virtually every aspect of how

90  PART 1 Introducing HRM


they organise business in order to tap into the knowledge and experience of their older workers while
keeping promotion opportunities open for younger employees.’118 This has led to calls for the provision
of lifelong learning opportunities, job-related training, the changing of traditional management attitudes
towards older workers (inflexible, dated, computer illiterate and expensive), and HR policies and practices
better geared to the needs of older workers (such as more flexible working arrangements and tailored
remuneration ).119 BASF’s reward system, for example, recognises mentoring to motivate older workers
to share their know-how with new hires.120 The Australian federal government, similarly, has introduced
‘Restart’ a program designed to offer financial incentives to organisations that employ a mature age
worker (50 years or over) who has been unemployed and on income support for six months or more.
The casualisation of the workforce
One dramatic trend is the casualisation of the workforce in industrialised economies. More than
twenty  million US workers now work part-time and it is estimated that 50  per  cent of the workforce
by 2020 will be independent workers.121 In Australia, around 30  per  cent of all employees are now
contingent workers (also called non-traditional workers). Similarly, one in five workers in France is on a
temporary or part-time contract, while in Britain, more than 30 per cent of the workforce is temporary or
part-time. Competitive and economic pressures, advances in technology, changes in consumer behaviour,
advances, the need for a more flexible workforce, the increased use of outsourcing and unfavourable
industrial relations legislation (which makes companies reluctant to hire full-time permanent employees)
have all contributed to the increase in alternative work arrangements. Critics argue that casualisation
has disadvantaged workers (particularly young people and women) by marginalising them in terms of
career paths, training and fringe benefits and removing them from the many protections associated with
traditional fulltime employment.122 Research also suggests that contingent workers dislike the constant
pressure of having to work to project deadlines; the lack of time for holidays, training or time off;
employment uncertainty; the absence of benefits and paid holidays, compelling contractors to work
unsociable hours or at short notice; and the lack of long-term career prospects. Such concerns have led
the Australian Council of Trade Unions (ACTU) to describe contingent workers as ‘insecure’ workers
and to push for restrictions on their use.123 Contingent workers do, however, like the higher pay, greater
autonomy, varied and interesting work, and the flexibility that allows them to better balance work–life
commitments.124 Professional freelancers (also called ‘supertemps’) are being used more and more by
organisations (especially start-ups and small businesses operating on tight budgets) seeking specialised
talent on a short-term basis. Dedicated websites allow companies to post a project online to generate a
list of recommended specialists vetted by the web marketplace (typically for a charge of 10–20 per cent
to the company).125 A related development is the growth of on-demand labour sites such as TaskRabbit,
Airtasker and Sidekicker that match the time poor to a vast army of micro entrepreneurs willing and able
to provide a range of specialised services (such as cleaning, furniture assembly, event organising). This
new flexible labour pool is called the distributed workforce and represents a radical transformation of
the way individuals and organisations get things done.126

FAST FACT

According to the ManpowerGroup, globally there are three billion people over the age of 15 who are
working or seeking work but there are only 1.2 billion jobs available.127

Guest workers and 457 visa reforms


A most controversial current issue is the use of 457 visas, which permit foreign skilled workers (guest
workers) to temporarily enter Australia. Opposed by some politicians, unions and members of the general
community, the scheme has aroused fears that foreign workers will be exploited as ‘wage slaves’, reduce
the pay and conditions of Australian workers, weaken the power of the trade unions and create social
problems.128

CHAPTER 2 Human resource planning  91


Proponents of 457 visas include employer associations (such as the Australian Chamber of Commerce
and Industry and the National Farmers’ Federation) that argue guest workers are needed to overcome
labour shortages.129 Farmers claim that migrant workers are essential to their survival because Australian
workers will not take rural jobs — preferring to remain in cities, work in high-paying mine jobs
or stay on welfare (there is a 20  per  cent annual increase in the number of Australians who appear
intractably unemployable, with almost 60  000 classified as long-term unemployed).130 Many Australian
workers (although claiming to be qualified) moreover, have sub-standard skills. Construction company
Bechtel, for example, was forced to import welders from overseas after more than half the Australian
applicants failed a specialist welding test.131 Many employers prefer to hire a foreign skilled worker
who is motivated rather than employ a work-shy, welfare-dependent, long-term unemployed person with
minimal skills.132 The CEO of a heavy engineering firm says of local applicants: ‘They come in here and
all they want to do is tick the box so they can go back and stay on the dole. They couldn’t care less.’133
The governments of a number of Asian and Pacific Island nations that seek to supply labour (to provide
employment and financial support for their economies) are also active advocates of 457 visas and their
expanded coverage to unskilled workers. A particularly sensitive issue is the use of Chinese labour by
Chinese firms bidding for infrastructure projects in the Pilbara region of Western Australia.134 Other
challenges relate to skill recognition, workplace and community integration and poor English skills.135
The Labor party, the Greens and trade unions generally see 457 visas as threatening Australian workers’
pay, conditions and future job security. The federal coalition government has decided to allow companies
(especially those in Darwin and other areas experiencing chronic skills shortages) to hire more foreign
skilled workers but with the imposition of labour market testing and other administrative requirements
(which have been criticised by employers as a sop to the unions and adding unnecessary costs and red
tape).136 The Construction, Forestry, Mining and Energy Union and the Transport Workers Union are
opposed to this and have campaigned hard against the 457 visa scheme, citing drawbacks including
abuses by unscrupulous employers, health and safety concerns, lack of English skills, worker exploitation
and the creation of unfair competition for employers who invest in the employment and training of local
workers. A CFMEU official argues that the federal government cannot expect worker support if it does
not protect Australian jobs.137 The ACTU also remains adamant in its opposition, preferring an increase
in permanent migration. However, some unions, such as the Australian Workers Union, have been more
sympathetic to the use of guest workers, seeing freer migration as inevitable.138 The Transport Workers
Union, similarly, has recruited overseas workers on 457 visas to fill vacant positions within the union.139
Employer criticisms of the 457 visa scheme include its cost, legal complexity, excessive red tape and
time taken in processing visa applications.140

Outsourcing
Allied with the casualisation of the workforce is the increasing use of strategic outsourcing. ‘By
strategically outsourcing and emphasising a company’s core competencies’, argue Quinn and Hilmer,
‘managers can leverage their firm’s skills and resources for increased competitiveness.’141 Outsourcing,
for example, frees up resources, increases workforce flexibility, facilitates use of specialist skills,
accesses additional capital resources and promotes the entry to new markets.
Outsourcing is becoming common in HRM, with some larger organisations actively outsourcing
all but the most strategic HR activities. This has created a trend towards a greater use of contractors
and a reduction in the number of permanent HR positions.142 It is argued that this process is saving
many HR professionals time and money, improving their efficiency and enabling them to focus on
competitive business issues.143 Examples of outsourced functions include recruitment, benefits plan
design, retirement services, occupational health and safety (OHS) and HR record-keeping services.144
Faced with the continuing high cost of payroll, payroll taxes, fringe benefit taxes, Medicare levies and
other expenses associated with full-time workers, organisations are under pressure to identify those
activities that can be more productively performed externally (especially as labour cost savings of up to
80 per cent are possible).145

92  PART 1 Introducing HRM


Australian employers have outsourced activities such as cleaning, catering, transport, maintenance,
customer service and routine accounting and legal work. International law firm Baker & McKenzie has
issued all its legal staff with digital dictaphones so that they can record documents and email them to a
document service centre in the Philippines where the graduate operators transcribe, copy type, prepare
PowerPoint presentations and edit documents, all at considerable cost savings.146 Other Australian-
based companies that have outsourced activities overseas (offshoring) include AXA, ANZ, CBA,
Computershare, Macquarie Bank, NAB, Qantas, QBE, Suncorp, Telstra and Westpac.
Increasingly, many firms are reducing costs by utilising India’s large pool of English-speaking, computer-
literate and relatively cheap university graduates. As a result, India is becoming the ‘back office’ to the
world.147 Citigroup, HSBC Holdings and AT Kearney all outsource much of their share market research
to India. The Philippines, similarly, has been found attractive to Australian organisations because of cost
savings and the quality of employees available.148 It is estimated that Australian financial services companies
save about $5 million per annum for every 100 jobs they outsource overseas.149 Although regarded as
necessary for competitive survival, outsourcing has faced union, public sector and political opposition
(especially when it involves the offshoring of services). Although trade unions are publicly critical of
outsourcing (for example, the Finance Sector Union is against all outsourcing and has pressured the federal
government to stop banks offshoring), several Australian trade unions themselves outsource various
activities.150 Australia, however, because of its English-speaking workforce, excellent telecommunications
and relatively low costs compared to Hong Kong, Japan and the United States, is favourably positioned to be
a net importer of services.151 Companies such as Hong Kong and Shanghai Bank, UBS and Cathay Pacific,
for example, have outsourced accounting and other back-room operations to Australia.152
The reasons for organisations choosing to outsource include:
•• an increased focus on the core business — organisations want to spend their discretionary management
time and energy on the key aspects of their business
•• cost and quality — organisations assume that an external expert can do it better and more cheaply
than they can do it internally
•• access to improved technology — organisations with less sophisticated automation capabilities
have greater tendencies to outsource than have organisations with better technology and automation
capabilities
•• elimination of union problems — outsourcing means that organisations may not have to worry about
unions, restrictive work practices, demarcation problems, work stoppages or intimidation
•• enhanced business flexibility — organisations can exploit time zone advantages to meet tight deadlines
and provide 24/7 service153
•• fast tracking of graduate trainees — outsourcing of low-level work facilitates the accelerated
development and advancement of graduate hires.154

FAST FACT

Members of India’s urban middle classes finding the costs of employing full-time domestic servants too
expensive now outsource their needs for cooks, house-cleaners, nannies and drivers to organisations
such as ‘Get My Peon’.155

Outsourcing, by eliminating tasks that can be done more economically elsewhere, and by making
organisations more cost-effective, appears to be the wave of the future. Nevertheless, outsourcing has
generated criticism regarding reduced service, privacy and data security, the poor quality of consultants,
worsening industrial relations (particularly as outsourced workers tend to earn less than direct hires in the
same job), production delays, the loss of essential personnel and excessive costs.156 Offshoring also has
the added risks of cultural and language differences, legal and political uncertainties and geographical
and time zone challenges.157 In India, for example, ethical concerns regarding corruption, OHS and the
environment must be dealt with.158

CHAPTER 2 Human resource planning  93


DOCTOR HR

Hi Dr HR
Companies are under extreme competitive pressures because of the high dollar, digital disruption and
changing consumer’s behaviour. What are the advantages and disadvantages of using permanent
employees versus contractors?

Skilled migration
Australia has been active in seeking highly educated people from overseas. This has resulted in
large inflows of skilled immigrants to Australia often from poorer or developing countries. Potential
immigrants are rated according to their age, education, work experience, English ability and occupation.
This has led to criticisms that Australia is producing a ‘brain drain’ and skilled labour shortages in
sending countries and creating added competition among skilled labour in Australia.159 There is also
some evidence to suggest that the exodus of highly skilled emigrants reduces job opportunities for the
less-skilled and less-educated workers in the sending countries (because of the loss of professional,
managerial and entrepreneurial talent).160

International employees
Another change is that companies are increasingly seeking employees outside their domestic labour
market. Shayne Elliott (New Zealand), the CEO at ANZ and Ahmed Fahour (Lebanon), the managing
director and group CEO of Australia Post are examples of foreign executives heading major Australian
corporations. Australian universities too are increasingly looking overseas to fill senior academic
positions.161 The depressed European economies are being targeted by the Australian government
through its ‘Skills Australia Needs Program’ (which provides job information and introductions to
businesses and state governments prepared to sponsor workers with needed skills).162 In contrast, labour
exports earn China more than US$3 billion per year. It sends engineers, nurses, cooks, construction
workers, garment makers, farmers and teachers to 150 countries including Germany, Japan, Singapore,
South Korea and the United States.

Fly in, fly out workers


The resources boom in Queensland and Western Australia together with the enormous demand for labour in
remote areas (the shortages are so severe that even unskilled workers earn in excess of $100  000 a year) have
created a new category of fly in, fly out workers.163 In addition to the high costs of operation, organisations
face worker problems associated with loneliness, isolation, broken relationships, alcoholism and drug
taking. Although employers
offer high pay and generous
benefits to compensate
(including R&R trips to
nearby cities, satellite phones
and counselling) fly in, fly
out remains controversial.164
Local residents and some
trade unions are opposed to
fly in, fly out labour, claiming
that it creates family and
social problems, mental
health issues, disrupts local
communities, and leads to a
dispersed (and less unionised)
workforce.165

94  PART 1 Introducing HRM


2.6 Exit management
LEARNING OBJECTIVE 2.6 Explain the basics of exit management.
Globalisation, cost pressures, competition, technology, the GFC — all have seen an increase in the
number of organisations attempting to gain a better balance between their current employee numbers and
their actual needs (see figure 2.13). Right sizing, downsizing re-engineering, restructuring, delayering
and other euphemistic terms are now part of the HR lexicon. Today employees are right sized, given a
new career opportunity or re-engineered — no-one is sacked, fired or terminated. Whatever the name, all
involve the exit or departure of people from the organisation.

Termination increase causes


GFC
• The global financial crisis has accentuated pressures on costs, the need for higher productivity, and
the threats of competition.
Reduction in corporate welfare
• The cessation of government subsidies in the automotive industry led to job losses.
Technology
• New technology has eliminated many traditional jobs (for example, train drivers replaced by
computers) and created new jobs requiring different skill sets (for example, cloud computing requires
senior IT executives to focus on consulting, integration and supplier management skills instead of
skills involving the management of large internal teams).
Organisation structure
• Organisations have adopted flatter organisation structures that require fewer managers and
supervisors (for example, many middle management positions have been eliminated and the use of
teams has been highlighted).
Mergers and acquisitions
• M&As have sought efficiencies through the elimination of duplicated activities (for example, one HR
department instead of two).
Outsourcing
• Organisations have sought efficiencies by the outsourcing of non-core activities to specialist external
organisations (for example, payroll).
New CEO
• It is not unusual for a newly appointed CEO to announce sweeping people changes (especially to
senior management ranks).

FIGURE 2.13 Termination increase causes

Employee numbers (or headcount) may be reduced by voluntary or involuntary termination (see
figure 2.14). Voluntary termination has the advantage that employees are given the opportunity to quit
on favourable financial terms. The big disadvantage is that the organisation may lose employees it would
prefer to keep (good performers with marketable skills can easily find new job opportunities) and be left
with the dead wood. Employees targeted for separation may be selected on the basis of:
•• groupings — such as divisions, departments, job classifications (for example, mechanical engineers,
accounts clerks)
•• performance — those with poor performance records (favoured by management)
•• seniority — those with the least service, ‘last on first off’ (favoured by trade unions)
•• rank — those at a particular level in the organisation (often those in middle management positions)
•• union membership — some union agreements prevent management making workers redundant in
effect, creating jobs for life.166

CHAPTER 2 Human resource planning  95


REDUCE HEADCOUNT

Involuntary termination Voluntary termination


Organisation decision Employee decision

FIGURE 2.14 Headcount reduction

Exit management fairness


Irrespective of how employees are selected for termination, it is critical that the exit process be ethical
and fair. Elements in a just termination process include:
•• procedural justice — the termination process must be perceived by management, employees and trade
unions as fair
•• distributive justice — the termination package must be perceived by all parties as fair and equitable
•• interactional justice — people involved in the termination process must be seen as treating the
terminated employee with dignity and respect.

Exit management planning


Terminations create uncertainty, fear and considerable stress among employees and managers. Ad hoc
approaches to termination risk aggravating these stresses and creating a negative and volatile industrial
relations climate (see figure 2.15). Some of the major factors to consider before commencing a
termination program include the following:
•• Objective — management needs to clearly define the purpose of the headcount reduction (what is to
be achieved and how it will be achieved).
•• Numbers — how many people are to be terminated? Across the board percentage cuts (for example,
10  per  cent reduction in headcount) are often called ‘dumbsizing’ because they result in essential
employees being terminated and non-essential employees being retained (for example, sales staff
numbers are cut when in actual fact more salespeople are required).
•• Selection — people who are to be terminated must be selected using a rationale which is perceived
as just. Selection criteria must promote the achievement of the organisation’s strategic objectives by
ensuring that people with the required knowledge, skills and abilities are retained. Unfortunately, as
Vickers and Parris point out, separations are not always made for rational reasons, but are determined
by political agendas, power struggles, senior executive whims or the uncritical implementation of
some management fad (see figure 2.15).167
•• Timing — experience suggests that headcount reductions are best done quickly and at one time.
Dragging out terminations by doing them in stages risks creating negative morale, insecurity and the
voluntary exit of good employees. Terminations on inappropriate dates, such as Christmas eve or just
prior to Chinese New Year, are likely to be perceived as unfair by employees and the community and
negatively affect the organisation’s image.
•• Cost — all costs need to be identified and accounted for (for example, the costs of the separation
packages, outplacement consulting services, administration etc.).
•• Audit — evaluation of the program in terms of its stated objectives is essential to determine its overall
success or failure and to identify any remedial steps that need to be taken.

DOCTOR HR

Hi Dr HR
What steps should I take to protect company confidential information before an employee is fired?

96  PART 1 Introducing HRM


Termination program
KSAO (knowledge, skills, abilities and other characteristics) identification
• What knowledge, skills and abilities does the organisation need to meet its strategic objectives?
Numbers
• How many people does the organisation require with the designated KSAOs?
Selection
• What selection criteria will be used to identify the employees to be terminated?
• Who will determine which employees best satisfy the exit selection criteria (for example, line
manager, HR manager or special panel)?
Administration
• What will the severance package be?
• Will outplacement services be made available?
• What job search assistance will be given (for example, introductions to other employers, assistance
with CV preparation etc.)?
• When will the terminations be conducted?
• Who will conduct the exit interview?
• How will the organisation handle exit security; IT cancellation; and return of company vehicles,
uniforms, keys, credit cards, equipment, tools etc.?
Communication
• Who will be responsible for internal and external communications?
• Who will prepare the termination letters?
• Who will be the media spokesperson?
Training
• Will training be provided to managers conducting the exit interviews (preferably conducted by an
experienced outplacement consultant)?
Industrial relations
• Will consultations be held with trade unions prior to or after the decision to reduce the headcount?
• Have all options been considered?
• Are there any precedents, restrictions or other factors to be considered?
Audit
• Will the program be checked for its legal compliance, fairness, cost effectiveness and achievement
of its stated objectives?

FIGURE 2.15 Termination program

Exit interview
The exit interview should be conducted in private at a neutral location by the employee’s immediate
supervisor. It is not the job of the HR manager to fire another manager’s direct report. Managers should
be coached in what to say (and what not to say) and how to handle the interview efficiently, legally and
with dignity. Managers should keep the meeting short and to the point. Employees should be given a
clear explanation of why they are being terminated and that the decision is final. The manager should be
supportive (but firm) and, if appropriate, introduce the outplacement consultant. The severance package
should be fair (and legal) and be given in writing. The manager should not bad-mouth or argue with the
employee, or demand that the separation package be immediately accepted and signed for. At all times,
the employee should be treated with dignity and respect.
Alas, this is an area where organisations need to give more consideration. According to Vickers and
Parris, many terminated employees are left feeling betrayed, deceived, patronised, humiliated, demeaned,

CHAPTER 2 Human resource planning  97


threatened and feeling as if they are some sort of criminal.168 By showing compassion and concern (even
in the most difficult of circumstances) the organisation can reinforce its image as an employer of choice
(where people are valued and treated fairly).

DOCTOR HR

Hi Dr HR
What should I tell my subordinates about a co-workers’ dismissal?

2.7 Requirements for effective HR planning


LEARNING OBJECTIVE 2.7 Understand the requirements for effective HR planning.
Given that the success of an organisation ultimately depends on how well its human resources are
managed, HR planning will continue to grow in importance because it represents a source of sustained
competitive advantage.169 However, there is a danger that it may become a fad, failing because it
cannot satisfy management’s unrealistic expectations. Such expectations may be fuelled by planning
theorists who advocate sophisticated analytical techniques. Mackay, for example, argues that ‘planners,
especially those trained in the quantitative approach, may be tempted to create esoteric systems that are
incompatible with the practical needs of line managers’.170
Successful HR planning requires HR managers to ensure that:
•• HR personnel understand the HR planning process (including the the causes and drivers of changes in
the demand for and supply of labour)171
•• top management is supportive
•• the organisation does not start with an overly complex system
•• the communications between HR personnel and line management are healthy
•• the HR plan is integrated with the organisation’s strategic business plan
•• that effective alliances exist between education providers and other stakeholders172
•• there is a balance between the quantitative and qualitative approaches to HR planning.173

98  PART 1 Introducing HRM


SUMMARY
HR planning is an important part of an organisation’s HR information system. This is because a HR
plan affects all HR activities and acts as the strategic link between organisational and HRM objectives.
An effective HR planning process is essential to optimising the utilisation of an organisation’s human
resources. The alternative is reactive decision making in a climate of increased risk and uncertainty,
with the HR department contributing less to the achievement of the organisation’s strategic business
objectives.
An effective HR planning system is essential for an organisation to be proactive, because such
information allows managers to make strategic decisions that ensure optimum performance. The HR
manager should not forget, however, that a HR plan that is overly complex and generates masses of
data is unproductive. A measure of the effectiveness of HR planning is whether or not the right people
are available at the right time. This can be achieved only when HR planning is fully integrated into the
organisation’s strategic business plan. Yet one HR academic says: ‘Given that human resource planning
is the cornerstone of all HRM activity, it is astounding how many organisations still perceive the activity
as little more than a headcount.’174 This suggests that HR managers have yet to demonstrate that HR
planning is relevant to both line managers and the successful achievement of the organisation’s strategic
objectives.

KEY TERMS
Ageing population  Occurs when the number of older people increases relative to the number of young
people in the population.
Contingent workers  Temporary or part-time employees.
Distributed workforce  On demand labour pool that is matched with potential employers via the
internet using specialist websites, such as TaskRabbit.
Fly in, fly out (FIFO) workers  Employees who reside in a regional centre or capital city and fly to a
remote work site where they live and work for a pre-arranged period of time.
Global city  A city where international airlines consider it essential to fly to, Fortune 500 companies
are present, international hotel groups have a five-star property and high value-adding knowledge
workers drive business growth.175
Human resource planning  The process of systematically reviewing HR requirements to ensure that
the required number of people, with the required knowledge, skills and abilities, are available when
needed.
Labour market  The geographical area from which employees are recruited for a particular job.
Markov analysis  A mathematical technique used to forecast the availability of internal job
candidates.
Offshoring  The transfer of a specific activity (for example, manufacturing) to an overseas company
which specialises in that activity.
Outsourcing  Subcontracting work to an outside company that specialises in and is more efficient at
doing that kind of work. International outsourcing is called offshoring.
Participation rate  Refers to the numbers of a particular group in the workforce. For example, the
increased participation rate of women in the workforce is one of the most significant demographic
changes to occur in recent times.
Qualitative HR forecasting  The use of the opinions of experts to predict future HR requirements.
Quantitative HR forecasting  The use of statistical and mathematical techniques to forecast the
demand for and supply of labour.
Replacement chart  A visual representation of which employee will replace the existing incumbent in
a designated position when it becomes vacant.

CHAPTER 2 Human resource planning  99


Skills inventory  A company-maintained record of employees’ knowledge, skills and abilities and
education.
Succession planning  A systematic, long-term career development activity that focuses on preparing
high-potential employees to fill key professional and management positions so that the organisation
can achieve its strategic objectives.
Talent management  A strategic and integrated approach to the identification, development, appraisal,
allocation and retention of high-performing and/or high-potential employees.
Turnover analysis  Involves an examination of why employees leave an organisation.

ACTIVITIES
REVIEW QUESTIONS
1 What effect is globalisation having on labour demand and supply?
2 What is outsourcing? Why is it so controversial?
3 Describe the HR planning process.
4 Explain what is meant by a multigenerational workforce. What are the implications for HR
management?
5 Which environmental factors will have the greatest effect on HR planning in the next five years?
6 How can HR planning help an organisation to achieve its strategic business objectives?
7 What is succession planning? Why is it important for an organisation to use succession
planning?
8 What major demographic changes are likely to affect organisations in the near future? How can
HR planning help organisations to successfully deal with these changes?
9 What can an organisation do when it is faced with (a) a surplus of human resources and (b) a
shortage of human resources?
10 What are the characteristics of an effective exit management program?

WHAT IS YOUR VIEW?


1 Is it unethical for developed countries to recruit professionals such as doctors, nurses and teachers
from developing countries?
2 Your overseas joint venture partner is an employer of child labour. The company argues that if it
did not employ the children, their families would starve. They argue that you are imposing your
moral values on them. Is the company acting unethically?
3 Is it unethical for Australian universities to favour fee-paying foreign students ahead of educating
Australian students?
4 Is it fair to expect everyone to work until they are 70?

CLASS DEBATE
Choose one of the following and debate it in class.
•• The 457 visa program is anti-labour and anti-union.
•• Australia needs more tradespeople, engineers, scientists and technologists, not more hairdressers and
social science graduates.
•• With an ageing population, euthanasia should be a human right.
•• An ageing population produces a growth-stifling culture dominated by risk aversion, little innovation
and few entrepreneurs.
•• Australian wages have to be marked to the global market and will have to decline if the economy is
to be competitive.
•• Gen Y is a spoilt generation that has lost the appetite for hard work.
•• People should be responsible for their own training and development.
•• The lack of literacy and numeracy skills in Australia is a product of a failed education system.

100  PART 1 Introducing HRM


FORUM
What do you think? Conduct a mini survey of class members, using the questionnaire below. Critically
discuss the findings.
1 Gen Y are high maintenance. YES NO
2 Offshoring destroys Australian jobs. YES NO
3 The use of child labour is appropriate in developing economies. YES NO
4 Baby boomers are difficult to work with. YES NO
5 The casualisation of the labour force discriminates against women. YES NO
6 High wages for low-skilled work reduces job opportunities. YES NO

ONLINE EXERCISE
Conduct an online search for information on one of the following topics: Australian generations, child
labour, older workers, outsourcing, casualisation of the workforce, female workers or ‘talent war’. Write
a 300-word report on your findings. Include the web addresses that you found useful.
HR MANAGER’S PITCH
Prepare a 30-second verbal presentation detailing why your organisation needs a succession plan.
HR BLOG
Form into groups of three to four. You are tasked with writing a 300-word blog on one of the following.
•• Are Australians work shy?
•• Is gen Y the worst generation ever?
•• Does Australian culture value education?

ENVIRONMENTAL INFLUENCES
Identify and discuss the key environmental influences from the model (see figure  2.16) that have
significance for HR planning.

EXTERNAL ENVIRONMENT

Political Legal Environmental

INTERNAL ENVIRONMENT

Strategy Structure
Economic Technological

HR
PLANNING

Industrial
Cultural
relations
Systems People Culture

Business Social Demographic

FIGURE 2.16 Environmental influences on HR planning

CHAPTER 2 Human resource planning  101


ETHICAL DILEMMA
INSECURE WORKERS
‘I don’t care what you say’, snaps Irene Massola, Oz International’s research and development manager.
The discussion at the conference room was getting heated. ‘The use of casuals and contractors is creating
a marginalised group of insecure, stressed out workers. These people are becoming Australia’s second
class citizens.’
‘Irene is right’, interjects Chris Papadopoulos, manager of talent. ‘We all know that these are the people
most likely to have trouble meeting their everyday living costs. Just paying the rent can be a problem.’
‘And try getting a car loan or a home loan from a bank when you’re not a full-time employee’, adds
Irene. ‘It’s hopeless.’
‘What you say may be true but casualisation of the workforce is a global trend — the day of permanent
full employment is gone. You two have to face facts. Change is occurring and workers have to adapt.
It’s like everything in life, adapt or die. Casualisation is here to stay, so get used to it’, Xavier O’Brien,
production manager says angrily.
‘That’s a brutal view of the world, Xavier’, Irene retorts.

‘Perhaps, but at least it’s realistic. In case you two haven’t noticed, the Australian economy is
struggling. We aren’t competitive, standards of living are falling and businesses are reluctant to invest.
We need to reduce costs, gain greater labour force flexibility and become more innovative if we are to
compete in the global marketplace. Using casual and temporary workers is a competitive necessity. It’s
not only companies that use casual and temporary workers — governments and trade unions do as well
— and why? Because it makes economic sense’, Xavier replies.
‘Life isn’t just about economics, it’s about people’, Irene says sharply.
‘So what are you going to do? Ban all casual and temporary work?’ asks Ahmed Hussein, manager
of accounting and finance. ‘My wife works as a casual and loves it. It allows her to keep up to date

102  PART 1 Introducing HRM


professionally, spend more time with our kids and her wages add to our family income. It’s a win-win
situation.’
‘That’s your case, Ahmed, but the facts are that most casual workers want permanent jobs. There is a
difference between being a casual worker by choice and being one because there is no alternative’, Chris
quickly replies. ‘People who are stuck in casual work are trapped. They can’t aspire to own a home or
better themselves.’
Xavier’s face reddens. ‘Maybe they should go back to school and get some skills that will secure them
a permanent job opportunity rather than sitting at home watching TV and complaining.’
‘Or relocate where there are permanent jobs available’, Ahmed adds.
‘I’m sorry, Xavier, but yours is a dog eat dog world. I can’t accept that casualisation of the workforce
is a good thing. A secure job should be the right of every Australian’, says Irene.
DISCUSSION QUESTIONS
1 Who do you agree with? Explain your reasons.
2 Will casualisation be the future for most of Australia’s workforce? Explain your answer.
3 What are the advantages and disadvantages of casualisation of work for both employers and
employees?

CASE STUDY
OUTSOURCING AT JET RED AIRLINES
Patricia Elliott, CFO, says: ‘Look, we are facing a loss of $300 million. If we outsource our maintenance
services, we can reduce our labour costs by at least one third. We have a moral responsibility to our
shareholders to operate as efficiently as possible.’
Ella Li, HR manager of Jet Red Airlines, glares at Patricia. ‘Yes, Patricia, and we have to be realistic.
Why should Australian jobs be shipped offshore? Our concern is with the welfare of our Australian
workers. Why should Australian money end up in the pockets of foreign workers?’
Patricia snaps back, ‘For the very good reasons that the work will be done at much lower cost and
with much better results! And you outsource so I don’t see why you find it so distasteful when it is done
by our company.’
‘What do you mean?’ Ella asks.
‘Come on Ella, think — who does your house cleaning? Who cooks your takeaway? Who mows your
lawn? Who does your hair? Who tutors your son? Who walks your dog? Who runs your kids’ parties?
Not you — it is all outsourced. Why? Because it is more convenient, more efficient and more cost
effective. Jet Red Airlines is no different.’
‘Yes’, smiles Grant Pirelli, operations manager. ‘I understand even high school and university students
outsource their assignments to India and Pakistan.’
‘Patricia, wake up’, Ella says sharply. ‘You know how politically sensitive the airline industry is.
Imagine what the government and the press will do to us when this becomes public knowledge.’
‘Yes’, interrupts Jason Clegg, manager of marketing. ‘Can you think how many politicians will be
prepared to stand up and publicly declare that they are in favour of exporting Australian jobs? Outsourcing
may be okay, where companies are not subject to the public and political pressures we are. Just imagine
the reaction of the unions when we announce that the airline is going to do away with 200 jobs? They
see outsourcing as sloppy management.’
‘What?’ questions Patricia.
Jason looks directly at Patricia and says, ‘The Australian Metal Workers Union and some WA
employers are putting pressure on the WA government to pass laws that would require companies to
source their labour requirements within Australia.’
‘Well I think that it is ridiculous’, replies Patricia. ‘How do they expect companies to compete? Don’t
they realise that we operate in a globalised marketplace? What is more, how can the unions complain
when they themselves outsource?’

CHAPTER 2 Human resource planning  103


‘What do you mean?’ asks Jason.
‘Unions such as the Communications Electrical and Plumbing Union and the Victorian branches of the
Australian Education Union and the Community and Public Sector union outsource their membership
recruiting to a private company.’
‘Well unions, like companies, use a range of professional services provided by people such as
accountants and lawyers — so what is the problem?’ asks Abe Cohen, manager business development.
‘Precisely, there is no problem — they do it for the same reasons that we outsource. Because it makes
economic sense’, answers Patricia.
‘Given the size of our losses, the increasing costs of fuel and labour, to say nothing of the cut-throat
competition, we really have to face up to the alternatives — cut services or increase fares or go out of
business. Sooner or later we are going to have to face the reality that no one owes us a living.’176
‘I don’t care, it’s still morally wrong. Everyone knows that outsourced workers earn less and have
fewer or no benefits’, Ella says.
‘Like it or not, Ella, outsourcing is the key to this company’s profitability’, snaps Abe.
‘Maybe’, replies Ella, ‘let’s see how keen you are on outsourcing when your job is the one designated
to go offshore.’
DISCUSSION QUESTIONS
1 Who do you agree with? Why?
2 What stakeholder interests are evident in this case? How would you resolve any conflict between the
various stakeholders’ interests?
3 Should governments ban the outsourcing of jobs to foreign countries? Explain your answer.

ONLINE RESOURCES
• http://cmr.berkeley.edu • www.hays-index.com
• http://hbr.harvardbusiness.org • www.hkihrm.org
• www.abs.gov.au • www.hrprosgateway.com
• www.afrboss.com.au • www.hrps.org
• www.ahri.com.au • www.ipd.co.uk
• www.aitd.com.au • www.mckinseyquarterly.com
• www.amazon.com • www.mit-smr.com
• www.aomonline.org • www.nytimes.com/world
• www.apa.org • www.psychology.org.au
• www.atkearney.com • www.shri.org.sg
• www.blackboard.com • www.shrm.org
• www.bls.gov • www.shrm.org/hrmagazine
• www.bps.org.uk • www.strategy-business.com
• www.conference-board.org • www.wfpma.com
• www.cultureandrecreation.gov.au • www.workforce.com
• www.elibrary.com • www.sim.edu.sg
• www.experiencepays.gov.au

ENDNOTES
1. Wilson, P. (2013), ‘Labour market mindbenders’, HRMonthly, May, p. 4.
2. Meyers, M.C. and van Woerkom, M. (2014), ‘The influence of underlying philosophies of talent management: Theory,
implications for practice, and research agenda’, Journal of World Business, 49, pp. 192–203.
3. Strong, J. (2008) Annual Report 2008, Woolworths, Melbourne, p. 2.
4. Goyder, R. quoted in Gerritsen, N. (2011) ‘Wesfarmers warns on staffing gap’, The Australian Financial Review,
7 November, p. 15.

104  PART 1 Introducing HRM


5. Symonds, A. (2008) ‘Skilful fix as arrivals offset record exodus’, The Australian Financial Review, 7 October, p. 10; and
Waldmeir, P. (2011) ‘Foreign talent sought for Chinese Detroit’, Financial Times, 5 July, p. 15.
6. Freebairn, P. (2011) ‘Two speeds, too, for jobs’, The Australian Financial Review, 20 May, p. 19.
7. Hang Seng Bank survey reported in Nip, A. (2014), ‘Labour woes will put brakes on growth’, South China Morning Post,
8 August, p. C1.
8. Australian Industry Group study reported in Lewis, R. (2013), ‘Literacy so bad bosses turn to pictures’, Australian,
4 November, p. 3
9. Australian Mathematical Sciences Institute survey reported in Dodd, T. (2014), ‘Maths teacher shortage set to worsen’, The
Australian Financial Review, 12 June, p. 7.
10. Reported in Dodson, L. (2011) ‘It’s a 2.4 million problem’, The Australian Financial Review, 14–15 May, p. 27.
11. Weitzman, H. and Harding, R. (2011) ‘Closing skills gap seen as essential for growth’, Financial Times, 14 December, p. 6.
12. ibid.
13. Australian Industry Group survey, reported in Smith, F. (2011) ‘Dry spell more like a drought for some employers’, The
Australian Financial Review, 13 September, pp. 58–9.
14. Peel, Q. (2013), ‘Germany eyes action on worker shortage’, Financial Times, 15 April, 4.
15. Cameron, D. quoted in Morris, S. (2006) ‘Trades added to skills list’, The Australian Financial Review, 3 April, p. 5; and
Scott, S. (2006) ‘NSW changes tack on skilled migrants’, The Australian Financial Review, 6 April, p. 11.
16. Morris, S. (2006) ‘Row flares over foreign workers’, The Australian Financial Review, 3 April, p. 60; and Mitchell, S.
(2013), ‘Search for skills leads retailers overseas’, The Australian Financial Review, 6 September, p. 19.
17. Agence France-Presse (2000) ‘Workers lack skills for hi-tech economies’, South China Morning Post, 15 June, p. 14.
18. Reported in Shreeve, R. (2011) ‘Workforce literacy’, Australian, 16 May, p. 17.
19. Ulrich, D. (1992) ‘Strategic and human resource planning: linking customers and employees’, Human Resource Planning,
15(2), p. 47.
20. Davenport, T.H., Harris, J. and Shapiro, J. (2010) ‘Competing on talent analytics’, Harvard Business Review, October,
pp. 52–8.
21. ‘State of the Service’ figures reported in Burgess, V. (2011) ‘Public Service takes the pain’, The Australian Financial Review,
2 December, p. 58.
22. Ralph, J.T. and Kunkel, E.T. (1996) ‘Directors’ report’, Annual Report 1996, Foster’s Brewing Group Ltd, Melbourne,
pp. 7–8.
23. Gough, J. (1996) ‘Chairman’s report’, Annual Report 1996, Pacific Dunlop Ltd, Melbourne, pp. 2–3.
24. Walsh, K. (2011) ‘Loss of tax perks will deter foreign staff: firms’, The Australian Financial Review, 5 December, p. 47; and
Freebairn, P. (2011) ‘The siren song of Asia’, The Australian Financial Review, 15 June, p. 64.
25. Editorial (2011) ‘Handbrake on productivity’, The Australian Financial Review, 28 January, p. 66.
26. Shamboro, J. (2010) ‘Harvest time’, Fortune, November 1, p. 13.
27. Reported in Winn, H. (2011) ‘English butlers find a new lease of life with super rich Chinese’, South China Morning Post,
16 December, p. B12.
28. Statistics quoted by P. Wong, Minister for Finance, in Clitheroe, P. (2011) ‘Could Australia become another Greece?’,
Money, December, p. 14.
29. Williams, P. Forrestal, L. and Barrett, S. (2010) ‘The rise of the robot miner’, The Australian Financial Review, 9 September,
p. 6.
30. Ying, T. and Lin, L. (2011) ‘Chinese partying drives demand for chauffeurs’, Bloomberg Businessweek, 25–31 July, pp. 22–3.
31. Tingle, L. and Dunckley, M. (2011) ‘PM’s challenge: 2m back to work’, The Australian Financial Review, 2 February, pp. 1,
10; Freebairn, P. (2011) ‘Left at a disadvantage’, The Australian Financial Review, 4 February, p. 8; and Anderson, F. (2011)
‘Disability pensions under scrutiny’, The Australian Financial Review, 3 February, p. 8.
32. Hanke, S. (2013), ‘How jobs get killed’, South China Morning Post, 1 April, p. B10.
33. Macken, D. (1999) ‘A postcard from Australia’s intellectual elite’, The Australian Financial Review, 28 September, p. 16.
34. Ariss, A.A., Cascio, W.F. and Paauwe, J. (2014), ‘Talent management: Current theories and future research directions’,
Journal of World Business, 49, pp. 173–79.
35. Johnson, P. (2003) ‘The US, not the UN, speaks for humanity’, Forbes Global, 9 June, p. 14.
36. Andrews, B. (2003) ‘America calls’, BRW, 26 June–2 July, p. 77; Wynhausen, E. (2000) ‘Brain drain dumbs universities’,
Weekend Australian, 22–23 July, p. 3; and Towers, K. (2000) ‘Who’s gobbling up our legal talents?’, The Australian
Financial Review — Special Report, 12 July, p. 15.
37. Smyth, J. (2013), ‘Emigration takes shine off Irish recovery’, Financial Times, 10 December, p. 3.
38. Wise, P. (2013), ‘Portugal suffers exodus of skilled workers seeking better prospects’, Financial Times, 10 September, p. 6.
39. Reported in Robinson, D. (2014), ‘Immigration lifts native pay while emigration hits wages’, Financial Times, 30 September,
p. 2.
40. Sender, H. (2000) ‘India is combating brain drain with hefty pay, other perks’, Asian Wall Street Journal, 18–20 August,
pp. 1, 4; Warner, M. (2000) ‘The Indians of Silicon Valley’, Fortune, 29 May, pp. 57–65; and Chanda, N. (2000) ‘The tug of
war for Asia’s brains’, Far Eastern Economic Review, 9 November, pp. 38–44.
41. Abdi, S.N.M. (2003) ‘Indians weigh up the future, and leave’, South China Morning Post, 17 January, p. 10.

CHAPTER 2 Human resource planning  105


42. Knight Ridder, (2000) ‘Luring back brainpower no easy task’, South China Morning Post, 4 May, p. 31; and Arrist, C. (2003)
‘How the war on terror is damaging the brain pool’, Business Week, 19 May, p. 68.
43. Ryall, J. (2011) ‘Japanese firms turn to Chinese talent’, South China Morning Post, 11 February, p. B1.
44. Bloomberg (2014), ‘China’s workforce deepens US threat’, South China Morning Post, 18 April, p. B2.
45. Cornell, A. (2001) ‘Finance houses pay for being out of touch’, The Australian Financial Review, 26 March, p. 9.
46. O’Connor, S. (2013), ‘Little room for graduates of the crisis as London rents accelerate’, Financial Times, 20 November,
p. 6.
47. Reported in Lam, K. (2011) ‘Young workers think they’re great but bosses say otherwise, poll finds’, South China Morning
Post, 6 July, p. C4.
48. Lai, D. (2011) ‘Gen Y staff coaxed to aim higher’, South China Morning Post — Classified Post, 18 June, p. 12.
49. Ellin, A. (2014), ‘How to speak Millennial’, The Australian Financial Review, 29–30 March, pp. 41–43.
50. Hely, S. (2011) ‘Why it ain’t necessarily so’, Money, April, p. 48; and Hong, Z. (2014), ‘Airing the dirty laundry of a
pampered generation’, Sunday Morning Post, 16 March, p. 16.
51. Moore, K. (2010) ‘Making performance appraisals work’, Human Resources, November, pp. 6–9.
52. Sexton, G. (2011) ‘Talking about their generations’, HRMonthly, July pp. 34–6.
53. Survey by Senioragency Australia, reported in Macken, D. (2011) ‘The lost generation  .  .  .  fifty, fit and fearful’, The Australian
Financial Review, 26 July, pp. 59, 64; and Wright, J. (2011) ‘Older workers hold on longer’, The Age, 14 December,
www.theage.com.au.
54. Sexton, G. quoted in Akerman, P. (2011) ‘Gen Y finds working with baby boomers a chore’, Australian, 26 May, p. 7.
55. Moore, E. (2011) ‘A battleground for the generations’, Financial Times — Age and the Workplace, 7 September, p. 1; and
Smith, F. (2011) ‘Gen Y’s search for praise’, The Australian Financial Review, 21 June, pp. 1, 54.
56. Moore loc. cit.
57. ibid.
58. Benson, J. and Brown, M. (2011) ‘Generations at work: are there differences and do they matter?’, International Journal of
Human Resource Management, 22(9), pp. 1843–65.
59. ibid.
60. Yi, X., Ribbens, B. and Morgan, C.N. (2010) ‘Generational differences in China: career implications’, Career
Development International, 15(6) pp. 601–20.
61. Benson and Brown loc. cit.
62. Morton, R. (2013), ‘Women trailing at work: COAG’, Australian, 20 November, www.theaustralian.com.au.
63. Cited in D’Angelo Fisher, L. (2011) ‘What it takes to keep women at work’, BRW, 31 March–6 April, p. 43.
64. Connell, J. and Stanton, P. (2014), ‘Skills and the role of HRM: Towards a research agenda for the Asia Pacific region’, Asia
Pacific Journal of Human Resources, 52, pp. 4–22.
65. ABS figures reported in Olsen, A. (2013), ‘Gender imbalance will not right itself’, The Australian Financial Review,
9 September, p. 30.
66. Reported in Needham, K. (2011) ‘Older women go back to work’, The Age, 18 January, www.theage.com.au.
67. Fallick, K. (2010) ‘Why baby boomers won’t quit’, The Australian Financial Review, 31 July–1 August, pp. 21–2.
68. HILDA survey cited in Wilson, P. (2014), ‘Homework vs. Housework’, HRMonthly, July, p. 6.
69. National Institutes of Health study reported in Kenny, C. (2013), ‘The reproductive recession’, Bloomberg Businessweek,
11–17 February, pp. 4–5.
70. Yeung, L. (2002) ‘City U sets lowest teacher hurdle’, South China Morning Post — Education, 21 September, p. 3.
71. Connell and Stanton loc. cit.
72. Schmid, J. (2003) ‘Low world education ranking leaves Germans stunned’, International Herald Tribune, 7 February, p. 5.
73. Merritt, C. (2003) ‘Hearsay’, The Australian Financial Review, 9 May, p. 58; and Maslen, G. (2006) ‘High expectations fuel
student longings’, The Australian Financial Review, 3 April, p. 33.
74. Slattery, L. (2006) ‘Degrees of permanent residence’, The Australian Financial Review, 3 April, p. 33.
75. Pearson, C. (2010) “Banish Mickey Mouse from the republic of learning’, Australian, 11 December, www.theaustralian.com.au.
76. Dodd, T. (2014), ‘Declining maths equates to drop in university standards’, The Australian Financial Review, 16 June, p. 13.
77. Mather, J. (2014), ‘Math teachers not qualified’, The Australian Financial Review, 10 June, p. 7.
78. Dodd, T. and Parker, S. (2014), ‘Shortage of qualified ICT teachers’, The Australian Financial Review, 16 June, p. 13.
79. Australian Institute of Teaching and School Leadership study reported in Ferrari, J. (2014), ‘Brightest students dismiss
teaching: Report’, Australian, 23 June, www.theaustralian.com.au.
80. Cited in Topsfield, J. (2014), ‘Graduate teachers not up to scratch: Victorian Government’, The Age, 9 July,
www.theage.com.au.
81. Reported in Freebairn, P. (2011) ‘Teachers fail skills test’, The Australian Financial Review, 6 May, p. 10.
82. Research by the Higher Education Funding Council reported in Sharma, Y. (2003) ‘Dumbing down a matter of degree’,
South China Morning Post, 26 July, p. E2.
83. Cheung, G. (2002) ‘HK English students two grades below peers’, South China Morning Post, 7 October, p. 1; Editorial
(2005) ‘English test not enough’, South China Morning Post, 30 July, p. 15 and Morris, S. (2005) ‘Poor English makes
skilled migrants unemployable’, The Australian Financial Review, 14 October, p. 24.

106  PART 1 Introducing HRM


84. South China Morning Post (2006) ‘Professional dishonesty rife among university elite’, 24 April, p. A6.
85. Reported in Hodge, A. (2011) ‘Indian skills solution hits snag’, Australian, 24 May, p. 2.
86. Dodd, T. (2014), ‘More graduates but fewer jobs’, The Australian Financial Review, 31 March, p. 5; Dodd, T and Tadros, E.
(2014), ‘The degrees of unemployment’, The Australian Financial Review, 18 August, p. 15 and Dodd, T. (2014), ‘Uni boss
wants scholar cuts’, The Australian Financial Review, 8 August, p. 3.
87. Heath, J. (2013), ‘Tax ‘deters’ job migration’, The Australian Financial Review, 3 December, p. 9.
88. Research by S. Bahn of Edith Cowan University reported in Gerritsen, N. (2012), ‘WA-another country’, The Australian
Financial Review, 8 November, p. 8.
89. Thistleton, R. (2013), ‘Cities’ design curbs economy’, The Australian Financial Review, 6 May, p. 41.
90. Research by J. Borland cited in Gittins, R. (2014), ‘We are a nation of stay at homes’, The Age, 16 June, www.theage.com.au.
91. Durkin, P. (2014), ‘Workers need to go where the jobs are’, The Australian Financial Review, 28 July, p. 3.
92. Bleby, M. and Desloires, V. (2014), ‘Rise of the executive nomads’, The Australian Financial Review, 8 September, p. 6.
93. Connell and Stanton loc. cit.
94. Gilley, B. and Dolven, B. (2000) ‘Crunch time ahead’, Far Eastern Economic Review, 9 March, pp. 22–6; and Rabitaille, S.
(2000) ‘Hong Kong’s competitiveness clouded by air pollution’, Asian Wall Street Journal, 4 January, p. 6.
95. Hardy, Q. (2000) ‘Hello brain, goodbye rules’, Forbes Global, 16 October, pp. 110–11; Pleasant, B. (2003) ‘Cloning ban
driving top scientists overseas’, The Australian Financial Review, 8 April, p. 9; and Mellish, M. (2003) ‘Cut taxes or lose
skilled workers: IMF’, The Australian Financial Review, 20 September, p. 1.
96. Skulley, M., Parkinson, E. and Kitney, G. (2011) ‘Labor backs pay rises for apprentices’, The Australian Financial Review,
17 May, pp. 1, 8.
97. Connell and Stanton loc. cit.
98. For a practical example in the hotel industry, see Gomez-Meija, L.R., Balkin, D.B. and Cardy, R.L. (2001) Managing Human
Resources, 3rd edn, Englewood Cliffs, NJ: Prentice Hall, pp. 161–2.
99. McShane, S.L. and Von Glinow, M.A. (2000) Organizational Behavior, Boston: McGraw-Hill, pp. 358–9; Robbins, S.P.
(2001) Organizational Behavior, 9th edn, Upper Saddle River, NJ: Prentice Hall, p. 245; and Ivancevich, J.M. (2001) Human
Resource Management, 8th edn, Boston: McGraw-Hill, pp. 135–6.
100. Gore, N. (2000) ‘Managing talent replaces static charts in a new era of succession planning’, Canadian HR Reporter,
11 September, p. 17.
101. Kowitt, B. (2011) ‘Why McDonald’s wins in any economy’, Fortune, 5 September, pp. 47–53.
102. Nowack, K.M. (1994) ‘The secrets of succession’, Training and Development, 48(11), p. 50.
103. Westfield Holdings Ltd (2002), Annual Report 2002, p. 4; Speedy, B. (2010) ‘Woolies execs move up the chain of
command’, Australian, 2 March, p. 21; and Forrestal, L. (2010) ‘Emeco CEO dyed in Wesfarmers wool’, The Australian
Financial Review, 27–28 February, p. 15.
104. Felton, R. quoted in Byrne, J.A., Reingold, J. and Melcher, R.A. (1997) ‘Wanted: a few good CEOs’, Business Week,
11 August, p. 41.
105. Korn Ferry International Survey of Boards of Directors reported in Main, A. (1997) ‘Lack of chiefs in waiting’, The
Australian Financial Review, 27 June, p. 87; and Chandler and Macleod consulting survey reported in Lynch, D. (2007)
‘Succession planning is weak point’, The Australian Financial Review, 7 December, p. 64.
106. Judge, T.A. and Ferris, G.R. (1992) ‘The elusive criterion of fit in human resource staffing decisions’, Human Resource
Planning, 15(4), pp. 47–67.
107. Rothwell, W.J. (2002) ‘Putting success into your succession planning’, Journal of Business Strategy, 23(3), p. 33.
108. Getty, C. (1993) ‘Planning successfully for succession planning’, Training and Development, November, p. 32.
109. Atwater, D.M. (1995) ‘Workforce forecasting’, Human Resource Planning, 18(4), pp. 50–3; and Mathis, R.L. and Jackson,
J.H. (2004) Human Resource Management, 10th edn, Mason, Chio: Thomson/South-Western, pp. 66–7.
110. Intergenerational Report figures, cited in Patten, S. (2010) ‘Coming of age’, BRW, 7–13 October, pp. 30–1.
111. Segal, P. (2003) ‘Hong Kong Solutions’, Far Eastern Economic Review, 20 March, p. 14.
112. Chan, R. (2013), ‘Ageing wealth gap pose threat to China’, South China Morning Post, 15 November, p. B3.
113. Reported in Crabtree, J. (2011) ‘Older. But wiser?’, Financial Times – Life and Arts, 23–24 July, pp. 1–2.
114. Associated Press (2006) ‘One in five 65 or older in Japan’s ageing population’, South China Morning Post, 2 June, p. A10;
and Soble, J. (2008) ‘Japan is running low on employee power’, Financial Times, 29 May, p. 19.
115. Koretz, G. (2000) ‘Europe faces a retiree crisis’, Business Week, 15 May, p. 18.
116. Khan, N. and Loo, D. (2014), ‘Dementia casts its shadow over China’, Bloomberg Businessweek, 10–16 February, pp. 17–18,
117. Bassanese, D. (2013), ‘Ageing only one part of labour story’, The Australian Financial Review, 14 October, pp. 28, 36.
118. Farrell, C. (1994) ‘The economics of aging’, Business Week, 19 September, p. 50; and ‘90-year life span may be the norm by
2030’ (2001) South China Morning Post, 10 February, p. 16.
119. Tikkanen, T. (2011) ‘From managing a problem to capitalising on talent and experience of older workers’, International
Journal of Human Resource Management, 22(6), pp. 1217–20.
120. Kimes, M. (2009) ‘Keeping your senior staffers’, Fortune, 20 July, p. 86.
121. Zlomek, E. (2013), ‘Why hire an MBA when you can rent one?’, Bloomberg Businessweek, 28 October – 3 November,
pp. 60–62.

CHAPTER 2 Human resource planning  107


122. Burgess, J. (1996) ‘Workforce casualisation in Australia’, International Employment Relations Review, 2(1), pp. 33–53; and
McKeown, T. and Hanley, G. (2009) ‘Challenge and changes in the contractor workforce’, Asia Pacific Journal of Human
Resources, 47(3), pp. 295–317.
123. Editorial (2014), ‘Zero hours abuses must be stopped’, Financial Times, 21 May, p. 14; and Patty, A. (2014), ‘ACTU push for
casual workers to become permanent’, The Age, 7 October, www.theage.com.au.
124. Redpath, L., Hirst, D. and Devine, K. (2007) ’Contingent knowledge worker challenges’, Human Resource Planning, 30(3),
pp. 33–8; and Keen, L. (2014), ‘Supertemps are on the way up’, The Australian Financial Review, 14 July, p. 6.
125. Zlomek loc. cit.
126. Botsman, R. (2013), ‘Up to the task’, AFRBoss, May, pp. 46–47.
127. Reported in Wilson, P. (2013), ‘Labour market mindbenders’, HRMonthly, May, p. 4.
128. Parkinson, E. (2011) ‘High intake squanders boom’, The Australian Financial Review, 18 July, p. 6; and Hall, B. (2013),
‘ACTU to fight 457 visa slavery’, The Age, 12 March, www.theage.com.au.
129. D’Angelo-Fisher, L. (2011) ‘Migration mix changes’, BRW, 30 June–6 July, p. 14.
130. ABS figures, cited in Editorial (2011) ‘Make the most of “lost” workers’, The Australian Financial Review, 10 February,
p. 62.
131. Macdonald-Smith, A. (2014), ‘UK welders to save LNG plants’, The Australian Financial Review, 28 April, p. 1.
132. ABS figures loc. cit.; and Scott, S. (2009) ‘Workforce fails the test’, The Australian Financial Review, 6 November, p. 9; and
Bita, N. (2014), ‘Willing workers from abroad take up the slack’, Australian, 31 May, www.theaustralian.com.au.
133. Davey, T. quoted in Bita, N. (2014), ‘Willing workers from abroad take up the slack’, Australian, 31 May,
www.theaustralian.com.au.
134. Sainsbury, M. (2011) ‘Labour a hot issue at talks’, Australian, 27 April, 4; and Wroe, D. and Whyte, S. (2014), ‘Free trade
agreement push to import Chinese workers criticized’, The Age, 16 April, www.theage.com.au.
135. Bahn, S. (2014), ‘Migrant workers on temporary 457 visas working in Australia: Implications for human resource
management’, Asia Pacific Journal of Human Resources, 52, pp. 77–92.
136. Editorial (2013), ‘Visa changes just a sop to the unions’, The Australian Financial Review, 26 February, p. 45; and Mather,
J. (2013), ‘Labor’s local workers legislation dodges Coalition axe’, The Australian Financial Review, 23–24 November, p. 11.
137. Noonan, D. reported in Skulley, M. (2011) ‘Union to fight use of foreign workers’, The Australian Financial Review,
14 September, p. 11.
138. Kerin, J. and Symonds A. (2008) ‘Push to open gates for guest workers’, The Australian Financial Review, 23 April, p. 10.
139. Massola, J. and Heath, J. (2013), ‘More TWU conflict over visas’, The Australian Financial Review, 4–5 May, p. 2.
140. Kerin and Symonds loc. cit.; and Mitchell, A. (2011) ‘Gillard faces labour crisis’, The Australian Financial Review,
5–6 February, p. 44.
141. Quinn, J.B. and Hilmer, F.G. (1994) ‘Strategic outsourcing’, Sloan Management Review, 35(4), p. 43.
142. Arnato, J. (2002) ‘Contracting demand’, HRMonthly, June, p. 46.
143. Spee, J.C. (1995) ‘Addition by subtraction’, HR Magazine, March, p. 38.
144. Susomrith, P. and Brown, A. (2013), ‘Motivations for HR outsourcing in Australia’, International Journal of Human
Resource Management, 24(4), pp. 704–20.
145. Conners, E. (2003) ‘Protests fail to stem outsourcing’, The Australian Financial Review, 5 May, p. 49.
146. Eyers, J. (2003) ‘Long arm of the law spread word aboard’, The Australian Financial Review, 10 April, p. 3.
147. Woodhead, B. (2008) ‘ANZ steps up shift of jobs offshore’, The Australian Financial Review, 24 October, p. 61.
148. Owens, A.R. (2014), ‘Exploring the benefits of contact centre offshoring: A study of trends and practices for the Australian
business sector’, International Journal of Human Resource Management, 25(4), pp. 571–87.
149. Liondis, G. (2013), ‘CBA tipped to bank record full-year profit’, The Australian Financial Review, 12 August, p. 17.
150. Hannan, E. (2010) ‘Unions employ ultimate in outsourcing’, Australian, 10 March, pp. 1,5; Kehoe, J. (2011) ‘Westpac’s
offshore plan angers union’, The Australian Financial Review, 22 June, p. 51; Smith, P. (2011) ‘Suncorp outsource study
provokes union’, The Australian Financial Review, 12 September, p. 45; and Scott, S. (2008), ‘Union attacks offshore trend’,
The Australian Financial Review, 2 May, p. 20.
151. Scott, S. (2008) ‘Unions battle offshoring’, The Australian Financial Review, 28 May, p. 6.
152. Stewart, R. (2003) ‘JP Morgan moves staff to Asia to cut costs’, International Herald Tribune, 9 April, p. 81; and Grigg, A.
(2003) ‘Sydney to become help centre of UBS universe’, The Australian Financial Review, 25 July, p. 54.
153. Owens loc. cit.
154. King, A. (2013), ‘PWC grads on fast track to top’, The Australian Financial Review, 8 May. p. 40.
155. Agence France-Presse (2014), ‘Indians outsource servant chores’, South China Morning Post, 24 July, p. A7.
156. Mace, J. (2001) ‘Anyone home?’, HRMonthly, February, pp. 20–6; and Glassman, M. (2013), ‘One job, two wages’,
Bloomberg Businessweek, 2–8 December, p. 20; and King, A. (2014), ‘Wealthfarm offers offshoring service’, The Australian
Financial Review, 16 April, p. 40.
157. Owens loc. cit.
158. Kesavan, R., Mascarenhas, O.A.J. and Bernacchi, M.D. (2013), ‘Outsourcing services to India: A review and new evidences’,
International Management Review, 9(2), pp. 36–44.
159. Carrington, W. (2013), ‘Brain drain revisited’, Harvard International Review, Summer, pp. 31–35.

108  PART 1 Introducing HRM


160. ibid.
161. Lebihan, R. (2010) ‘Unis look offshore for academics’, The Australian Financial Review, 27 September, pp. 1, 36.
162. Dunckley, M. and Kerr, P. (2011) ‘Europe raided for skilled workers’, The Australian Financial Review, 28 September, p. 3.
163. Murphy, J. (2011) ‘Cairns on track as fly-in fly-out hub’, The Australian Financial Review, 29 November, p. 11.
164. Whitely, A. (2011) ‘Loneliness dogs the well paid Aussie miner’, BloombergBusinessweek, 29 August–4 September, p. 17.
165. Freed, J. (2011) ‘Kloppers slams Fair Work Act’, The Australian Financial Review, 8 December, pp. 1, 20; Anderson, F.
(2011) ‘Rio argues for fly-in, fly-out flexibility’, The Australian Financial Review, 25 November, p. 14; and Macdonald-
Smith, A. (2014), ‘FIFO rosters emerge as fresh labour risk at Gorgon LNG’, The Australian Financial Review, 8 September,
p. 15.
166. Stevens, M. (2014), ‘Aurizon head’s risky manoeuvre’, The Australian Financial Review, 13 May, p. 32.
167. Vickers, M.H. and Parris, M.A. (2010) ‘Layoffs: Australian executives speak of being disposed of’, Organizational
Dynamics, 39(1), pp. 57–63.
168. ibid.
169. Meyers loc. cit.
170. Mackay, C.B. (1981) ‘Human resource planning: a four phased approach’, Management Review, 70(5), p. 19.
171. Connell and Stanton loc. cit.
172. Connell and Stanton loc. cit.
173. Walker, J. (1972) ‘Forecasting manpower needs’, in Burack, E.H. and Walker, J.W. (eds) Manpower Planning and
Programming, Boston: Allyn & Bacon, p. 94.
174. Fish, A. (January 2003) personal discussion with the author.
175. Knight Frank report cited in Ji, D. (2014), ‘Rise of global cities offers opportunities’, South China Morning Post, 8 October,
p. P2.
176. Gardner, N. and Kalia, J. (2010) ‘Students outsource their homework’, Herald Sun, 14 November, www.heraldsun.com.
au; Hannan, E. (2010) ‘Unions employ ultimate in outsourcing’, Australian, 10 March, pp. 1, 2; and AAP (2011) ‘Unions
pressure government on local content laws’, Australian, 11 February, www.theaustralian.com.au; and Freed, J. (2014),
‘Qantas sends heavy engineering maintenance work offshore’, The Age, 21 January, www.theage.com.au.

ACKNOWLEDGEMENTS
Photo: © Konstantin Chagin / Shutterstock.com.
Photo: © Andrea Slatter / Shutterstock.com.
Photo: © Alex Brylov / Shutterstock.com.
Newsbreak: Homework vs housework: © HRM Online.

CHAPTER 2 Human resource planning  109


CHAPTER 3

Human resource
information systems
LEA RNIN G OBJE CTIVE S

After studying this chapter, you should be able to:


3.1 describe the relationship between strategic HRM and human resource information systems (HRIS)
3.2 explain the use of HRIS in contemporary HR functions
3.3 understand the decision-making process that needs to be followed when introducing HRIS
3.4 discuss HRM and the internet and explain ‘cloud computing’
3.5 understand the key issues that will determine the success or failure of a HRIS.

‘Human
resources is
an industry in
transition, with
a new focus on
technology that
is reshaping
recruiting and
the future of the
workforce’.1
Tara Gravel, ‘In pursuit of
talent’
3.1 Strategic HRM and human resource
information systems
LEARNING OBJECTIVE 3.1 Describe the relationship between strategic HRM and human resource
information systems (HRIS).
HR managers are under increasing pressure to become strategic business partners, to help the organisation
better respond to the challenges of restructuring, productivity improvement and global competition by
providing value-added contributions to the success of the business. HRM must work faster, be more
accurate and be more productive. A human resource information system (HRIS) has thus become a
critical tool for integrating HR information into the organisation’s business strategy and for demonstrating
the positive contribution that HR can make to the bottom line through the more effective and efficient
management of the organisation’s human resources. Networks, PCs and mobile devices, for example,
can give employees direct access to HR information and services, freeing HR personnel to focus on
strategic value-added work and to make more informed decisions.2
An antiquated HRIS is a hindrance to both HRM and organisational performance. Slow, inflexible
and retaining questionable data, such systems are no longer viable in a world of global competition
where competitive advantage is built on productive human resources.3 Unfortunately, according to one
expert: ‘Payroll is the only thing being used universally. The nexus between data and decisions has not
been made.’4 Boudreau, for example, argues that when HR managers think about HRIS, they tend to ask
‘How can we solve the most pressing administrative problems, cut our immediate costs, or deliver the
report requested by our most vocal constituent?’ The result is usually a system heavy on administrative
efficiency and reports, but potentially light on strategic capability.5 Research shows that HR departments
with an administrative orientation are more likely to set transactional objectives for their HRIS compared
with those with a strategic orientation, which are more likely to set transformational objectives (see
figure 3.1).6 It appears also, that many Asian and European organisations implement HRIS primarily to
improve employee welfare (via increased services and better communication) as opposed to United States
organisations where the emphasis is much more on strategic outcomes. One way to make HRIS strategic
is to ask ‘What applications or systems will make people our most powerful organisational asset?’7
Clearly, HR managers need to reposition their role from that of an information source to that of
a strategic resource.8 The critical priority for a successful HRIS is to ensure that it is aligned with
the organisation’s strategic business and HRM objectives. According to Mayfield et al., HRIS ‘are
often misunderstood and misapplied because of incomplete conceptualizations that do not focus on
strategic vision as the central force’.9 A contributing factor to the disastrous (estimated original cost
$6.19 million, final cost $1.2 billion) of the Queensland State Government’s health payroll system was
the failure of the Labor government to clearly articulate its requirements to the vendor (IBM).10 Thus,
developing clear and precise corporate and HRM objectives is essential before any HRIS technology
is introduced. ‘The important issue to remember is not to automate for the sake of automating’, says
Blair, ‘but to strategically analyse all HR business practices and develop a technology plan that truly
integrates with the business.’11 Other critical success elements include capable leadership, thorough
planning, effective change management, adequate communication, appropriate training and sufficient
stakeholder involvement.12 Failure is especially likely if stakeholder concerns are ignored and/or line
managers resent a greater involvement in HR activities.13 HRIS, if used correctly, can provide a powerful
competitive edge, and can enhance perceptions of HR as efficient, effective, strategic and trustworthy
(by creating relationship opportunities and empowering employees) (see figure 3.2).14 As HR managers
further assume the role of business partners with their line counterparts, the need to improve HRM
productivity, planning and decision support services increases. The ability to analyse, estimate costs,
savings or benefits, and determine and examine trends becomes vital if HRM is to become a value-
adding function. Clearly the focus of HRIS must be on the organisation’s strategic business objectives
and not just on the HR department’s administrative concerns.

CHAPTER 3 Human resource information systems  111


HRM activities

Transactional Relational Transformational

Concerned with: Concerned with: Concerned with:


• efficiency • empowering employees • adding value.
• cost reduction • building trust
• service delivery • improving HR services
• data accuracy. • employee communications.

Focus on Focus on Focus on


administration relationships strategy

Information system that records Information system that Information system that
and processes daily routine promotes trust and improved facilitates planning and decision
transactions to achieve the relationships with employees to making to achieve the
organisation’s strategic achieve the organisation’s organisation’s strategic
objectives strategic objectives objectives

Improves perception of the efficiency and effectiveness of HRM by:


• automating routine HR work
• simplifying processes and enhancing procedural justice
• improving accuracy of the HR data
• facilitating access to HR services
• promoting HRM as a business partner
• boosting HRM’s strategic role
• enhancing employee trust
• generating HR metrics to measure performance
• improving talent management (via e-selection, e-performance
management etc.).

FIGURE 3.1 Maximising HRM capabilities

Thus, a HRIS is much more than a computerised record of employee information. It is an integrated
approach to acquiring, storing, analysing and controlling the flow of HR information throughout an
organisation.15 It provides the necessary data for planning activities such as forecasting, succession
planning, and career planning and development (see figure  3.2). The major benefit of a HRIS is the
accurate and timely access to diverse data that it provides to the HR manager and top management. In
conducting HR planning, it is valuable (and simple) to examine various ‘what-if’ scenarios or simulations
to test out different strategic alternatives. ‘This is particularly important’, say Hall and Goodale, ‘in
large, decentralized organisations, where manual data collection would be almost impossible.’16 Once
again, it must be emphasised that if the HRIS is not related to the organisation’s strategic business and

112  PART 1 Introducing HRM


HR objectives, there will be little or no return.17 However, by applying HRIS technology appropriately,
HRM can facilitate its transition from a reactive administrative role to that of a proactive strategic
business partner.

Human resource Career planning Remuneration Expatriate


development and development administration management

Benefits
HR planning
administration

Performance Industrial
appraisal relations

HRIS Health and


Selection INTEGRATED DATABASE safety

Recruitment Job analysis

Payroll EEO

Routine reports Exception reports On-demand reports Forecasts


HR data issued on a HR data issued to HR data issued in HR data issued to
scheduled basis highlight serious response to a specific provide predictive
• Monthly variations request information for
employment report • Labour turnover • How many specific situations
exception report employees are • How many chemical
• Labour cost qualified engineers will need
exception report accountants? to be employed in
• How many 2017?
employees speak • What will average
Japanese? labour costs be
in 2018?

FIGURE 3.2 A HRIS model

Computerisation through the payroll


The issue of HR versus payroll systems is an ongoing controversy.18 One school of thought is that
they should be integrated to create and maintain a ‘complete’ system and to prevent unnecessary
duplication of effort (because much of the information kept in a HRIS is replicated in payroll systems).19
Improvements in computer technology, HR software and the  increased use of mobile devices makes
system integration highly desirable. The commonality of information, argues Benson, means there is
much to be gained by streamlining data-entry procedures.20 The input of new hire details into a HRIS,
for example, would automatically update both the superannuation scheme and the payroll, eliminating
wasteful re-keying and potential discrepancies. Similarly, details of employee exits and the like can
be communicated to payroll. This, says Benson, promotes ‘increased operational efficiency and data
consolidation’.21 ‘Furthermore, it is likely that the accuracy of shared information will be enhanced
because payroll normally contains the most accurate and up to date information in any organization’, for
the simple reason that it is audited each pay period by every single employee.22

CHAPTER 3 Human resource information systems  113


The second viewpoint is that payroll and HR are separate activities and should be treated as such. A
payroll system is seen as essentially an accounting function that processes a large number of transactions,
while a HRIS is used for HR planning and decision making. Payroll and HRIS also have other significant
differences. For example: HRM transactions are variable and dynamic, whereas payroll transactions
are run in batches and are mainly routine; HRM is event driven, whereas payroll is cyclical; HRM
has historical records, whereas payroll usually maintains details only for the current year; online query
capabilities are needed for HR personnel to do their work, whereas payroll updates records according to
the pay cycle; HRM needs frequent ad hoc reports that range from simple to complex, whereas payroll
reports are usually routine.23 Finally, a HRIS is specifically used for processing, manipulating and
reporting HR information (see figure 3.3).
The driving mechanism of HRIS is database management. This involves the input, storage,
manipulation and output of information. Generally, database management is to HRM what the spreadsheet
has been to the accounting profession. Database management has opened up opportunities unavailable to
the HR manager 20 years ago, facilitating dramatic improvements in things such as the recruitment and
tracking of job applicants, the processing of HR transactions (for example, pay increases), HR planning
and knowledge management.

Example of HRIS data items

Address (work) Garnishments Performance increase (%)

Address (home) Grievance (filing date) Performance rating

Annual leave (available) Grievance (outcome) Phone number (home)

Annual leave (used) Grievance (type) Phone number (mobile)

Awards Health plan coverage Phone number (work)

Birth date Health plan (# dependants) Prior service (hire date)

Birth place Income tax number Prior service (termination date)

Bonus Injury (date) Professional associations

Child-support deductions Injury (type) Professional/technical licence (date)

Citizenship Job location Professional/technical licence (type)

Date on current job Job position number Schools attended

Department Job preference Sex

Disability status Job title Share plan membership

Discipline (appeal date) Languages Sick leave (available)

Discipline (appeal outcome) Leave of absence (end date) Sick leave (used)

Discipline (date of charge) Leave of absence (start date) Skill function (type)

Discipline (hearing date) Leave of absence (type) Skill subfunction (type)

Discipline (outcome) Medical exam (blood type) Skill (number of years)

Discipline (type of charge) Medical exam (date) Skill (proficiency level)

Division Medical exam (restrictions) Skill (date last used)

114  PART 1 Introducing HRM


Driver’s licence (expiry date) Medical exam (outcome) Skill (location)

Driver’s licence (number) Military service (branch) Skill (supervisory)

Driver’s licence (state) Military service (date) Start date

Driver’s licence (type) Military service (discharge date) Superannuation

Education in progress (date) Military service (discharge type) Supervisor’s email address

Education in progress (type) Military service (ending rank) Supervisor’s mobile phone

Education degree (date) Miscellaneous deductions Supervisor’s title

Education degree (type) Name Supervisor’s work address

Education level attained Organisation property Supervisor’s work phone

Education major Pay Termination (date)

Education minor Pay compa ratio Termination (reason)

Email address Pay (previous) Training (attended)

Emergency contact (address) Pay (change date) Training (date)

Emergency contact (name) Pay (change reason) Training (held)

Emergency contact (phone) Pay (change type) Training (completed)

Employee code Pay (points) Transfer date

Employee number Pay (range) Transfer reason

Employee status Pay status (exempt/non exempt) Union deductions

Full-time/part-time/casual Performance increase ($) Union membership

Union name

FIGURE 3.3 Example of HRIS items

3.2 Use of HRIS


LEARNING OBJECTIVE 3.2 Explain the use of HRIS in contemporary HR functions
An organisation’s culture and HR philosophies and practices will influence the choice and design of
its HRIS and its ease of introduction. For example, the Lend Lease culture of ‘There must be a better
way’ allowed the immediate introduction of a HR intranet.24 In companies with a high-tech culture,
technology is seen as the key to a quantitative leap in the quality of HR services.25 Such an approach
facilitates the decentralisation of time-consuming and expensive HR transactions. Managers and
employees become empowered. As a result, decision making is better informed and faster, and obsolete
HR systems and programs can be quickly identified and dropped.26
In contrast, organisations with a more bureaucratic culture are likely to prefer a HRIS based on
centralised data input and reporting via the accounting (payroll) and HR departments. However,
competitive pressures, technological advances the expanding use of mobile devices to access the internet
and social media (according to research by Microsoft, 67 per cent of employees whether authorised or
not, use a personal device for work)27 are forcing the increased use of more decentralised systems. HR

CHAPTER 3 Human resource information systems  115


intranets, which are user-friendly, provide an efficient, cost-effective information hub for the organisation
(see figure 3.4). Information on HR policies, recruitment, performance appraisal, training, remuneration,
benefits and so on, and news on company financials and performance, are readily accessible. ANZ’s
intranet, for example, provides online leave forms, a global contact list, daily news, share price updates
and business unit homepages (it receives more than three million hits per month).28

Employment EEO manager HR planning Remuneration


manager • How many women manager manager
• How many are employed • How many chemical • What is the year-to-
applications have in management engineers are date expenditure on
been received? positions? currently employed? health insurance?
• How many have • What was the • How many chemical • How much was
MBAs? labour turnover rate engineers will be spent on cash
• How many are for married women required in 2017? awards versus
women? last year? • What was the budget in 2015?
• How many have • What is the number labour turnover of
been interviewed? of Indigenous chemical engineers
Australians for 2015?
employed?

HRD manager Health and safety


• How many manager
employees have • How many lost-
enrolled in MBA time injuries were
programs? there in 2012, 2013,
• What is the year- 2014, and 2015?
to-date expenditure HRIS INTEGRATED DATABASE
on apprenticeship
training?
• What were the
evaluations of
the new graduate
orientation program?

HR manager Industrial relations Line manager Employee


• What are the manager • What is the average • How much annual
compensation and • How many working age of employees in leave do I have?
benefits expenses days were lost from my department? • How much is my
as a percentage strike action in • When did Mary superannuation
of total operating 2015? Brown receive her plan worth?
expenses? • What is the cost last pay increase? • Is my home
• What are the sales of granting an address correct?
per employee? additional day’s
• What is the net bereavement leave?
profit per employee?

FIGURE 3.4 HRIS questions and answers

In addition, a HR intranet facilitates more efficient management of low value-added HR and payroll
activities (such as address changes and leave requests), because employees can access and update their
personal information without going through the HR or accounting department. This means that low
value-adding positions can be abolished.29 The Insurance Commission of Western Australia estimates
that three-quarters of the 4000 paper forms that its HR department received annually were eliminated in

116  PART 1 Introducing HRM


this way.30 ‘The result’, according to the Commission’s HR manager, ‘has been a decrease in the ratio
of HR processing to HR management employees, and a move towards a more strategically oriented HR
service.’31 Optus too has experienced similar benefits, including the removal of unnecessary layers of
bureaucracy, improved data integrity and streamlined work flows.32

The confidentiality of HRIS


HR data are typically confidential and sensitive. Consequently, a key concern with HRIS is the potential
for the invasion (and abuse) of employee privacy by both authorised and unauthorised personnel.33
To ensure employee and management confidence in a HRIS, it is important to thoroughly explore
questions about user access (both to a computer and computer rooms and to data files), data accuracy,
data disclosure, employee rights of inspection and HRIS security. Risks to data security are created by
employees knowingly ignoring policies designed to prevent data breaches, increased employee use of
mobile devices (making it more difficult to secure data as it passes beyond the organisation’s firewall) and
employee loss of a mobile device.34 Failure to do so may result in ethical, legal and industrial relations
problems of a magnitude that could destroy the credibility of the system.35 Finally, HR managers of global
organisations must ensure that their HRIS satisfies international data privacy laws. Non-compliance with
the Hong Kong ordinance, for example, is a criminal offence.36 An example of a HR security checklist is
shown in figure 3.5. ‘Establishing security and end user privileges’, says O’Connell, ‘calls for a balance
of incorporating HR policy, system knowledge and day to day operations.’37 Weighing organisational
needs for information and prevention of cyber-attack against employees’ rights and wellbeing is a major
challenge for designers of HRIS.38

HR security checklist
• Review all PC- and mobile-based HR applications.
• Verify that all users are properly trained in the secure use and handling of equipment, data and
software.
• Ensure that all users sign off (log off) before they leave the PC or mobile device unattended,
regardless of how long they intend to be away.
• Caution users not to give their password to or share their password with anyone. Each user should
be accountable for everything done with their ID and password.
• Recommend a change of password on a monthly or quarterly basis.
• Caution users against duplicating not only copyrighted programs purchased from vendors but also
programs and data that are proprietary to the company. Copies should be made only to provide
necessary back-up.
• Ensure that all software acquired from sources other than vendors is run through a virus detection
program prior to installing on a user’s system.
• Consider the feasibility of separating the duties of the users (i.e. assigning the tasks of inputting
data, balancing control totals etc. to different people) to achieve and maintain confidentiality. Keep in
mind the separation of some duties may cause users to lose the continuity of the entire task. Look
at the whole function and how it relates to others in the department before separating duties.
• Review who will use the PCs and mobile devices and where their equipment will be located.
• Ensure that current and back-up copies, data files, software and printouts are properly controlled so
that only authorised users can obtain them.
• Conduct reviews, scheduled and unscheduled, to ensure that an effective level of security is being
maintained by PC and mobile device users. Employees who use PCs and mobile devices in their
work must be responsible for ensuring that practices and administrative procedures adhere to
security.
Source: Adapted by the author from Adams, L.E. (1992) ‘Securing your HRIS in a microcomputer environment’,
HR Magazine, February, p. 56.

FIGURE 3.5 HR security checklist

CHAPTER 3 Human resource information systems  117


FAST FACT

More than 2 million people are employed in China to monitor the internet.39

Legal and management concerns


Organisations today must be alert to the risk of litigation and abuse resulting from employee use
of email and the internet.40 In Australia, for example, 35  per  cent of employees use the internet for
personal reasons, 96 per cent use chat rooms and email, 37 per cent browse sexual sites and 32 per cent
visit violence or crime sites.41 Similarly, in the United States, it is estimated that up to 70  per  cent
of traffic on pornographic sites takes place during working hours. One US Environmental Protection
Agency employee earning US$120  000 p.a. admitted watching pornographic sites for two to six
hours every work day for the past several years.42 Employees need to be aware that when equipment
is supplied by the organisation it has the right to dictate how it is used — accessing pornographic
material on a government laptop at home led to the dismissal of a senior public servant.43 Online
shopping in the United States is also on the increase because of its convenience and time saving
(especially as job pressures mount), and it is estimated that more than half of all internet purchases
are made at work.44 Employee abuse of the internet, social networking sites and email is called
cyberloafing. A Cisco senior executive, for example, says ‘I would ban email. The biggest productivity
killer I’ve ever seen. It’s just abused and misused.’45 Other related problem areas include employees
sending messages that disclose confidential information, breach intellectual property rights or attract
defamation or harassment claims.46 To combat such situations, nearly three-quarters of all major US
companies now record and review employee communications (including telephone calls, email and
internet connections).47 Others use special software to bar access to unwanted shopping, gambling
and pornographic sites. Companies such as Merrill Lynch, Morgan Stanley and Goldman Sachs ban
the use of personal email accounts.48 Another challenge centres on the use of social networking sites.
Suncorp and Citigroup have policies banning sites such as  Facebook and Myspace, while KMPG,
Seek and Siemens encourage their use.

FAST FACT

According to a study by Joseph Ugrin from Kansas State University, the average US worker spends
60–80 per cent of their time on the internet doing things unrelated to their work.49

Carefully worded policies governing use of email and the internet are essential.50 One lawyer
recommends that companies have a written policy advising their employees that their email and
social media communications are not private and can be read by their managers, that the technology
they use at work belongs to the company and that the company reserves the right to monitor
employee computer usage. All employees should sign the policy, acknowledging that they have read
it and understand it.51 Companies also need to regularly remind employees of the policy and their
obligations. It is essential that policies be written in plain English and be easily accessible (for
example, via the log-in screen).52
The challenge for HR managers is to find the right balance between permissiveness and surveillance.
It should be noted that in some jurisdictions, privacy protection laws may prohibit the examination
of employee emails. In Spain, for example, three Deutsche Bank executives faced prison for reading
employee emails (something that is routinely done elsewhere).53 This makes employee training in
the appropriate use of email essential.54 Highlighting the problem, surveys have found ignorance,
disagreement and confusion among Australian managers and employees in both the private and public
sectors regarding the use of technology in the workplace.55 One technology expert claims that often
company policies on internet use are either inadequate or not properly communicated to employees. As

118  PART 1 Introducing HRM


a result, many employees remain unaware of the dangers of receiving unofficial communications such
as joke emails that may contain viruses and illegal, obscene or offensive material.56 Online material
typically blocked by companies includes cricket, football, social networks, music, video and gambling
sites. The runaway leader of blocked material is adult content. The responsible use of technology is now
a major HR and management issue.57

DOCTOR HR

Hi Dr HR
Is it appropriate to monitor employee use of emails, social media and the internet?

3.3 Computerising the HR department: the


decision-making process
LEARNING OBJECTIVE 3.3 Understand the decision-making process that needs to be followed when
introducing HRIS.
The easiest way to justify the set-up costs of a HRIS is to highlight the dollar savings resulting  from
more effective management of HR records and remuneration and benefits administration. Thus, it is
natural that most systems commence with transferring these functions to the database.
Increasing legislative demands have added another batch of tasks to this ‘grassroots’ category. The
requirements of affirmative action (AA), EEO, occupational health and safety (OH&S) and workers
compensation legislation can be very effectively handled within the HRIS. Once it is known who is
on the payroll, that they are being paid correctly and that all legal requirements are being met, more
complex issues can be tackled.
Different HRIS users will have different requirements from the system. Operational users need to
process routine transactions (for example, payroll) and to answer general enquiries relating to basic
personnel records. Middle managers need to generate regular and ad hoc reports (for example, EEO
compliance) for day-to-day planning, decision making and control. Finally, senior management needs an
interactive capability to answer ‘what-if’ questions dealing with strategic planning, policy formulation
and decision making (for example, in developing HR projections).
Three options exist when an organisation commits to introducing a HRIS.
•• Design an in-house system using either internal or external resources, or a combination of both.
•• Buy a system ‘off-the-shelf’ and commence operation.
•• Buy a system ‘off-the-shelf’, but work with the vendor to modify it to better satisfy the organisation’s
requirements.
Each option has certain advantages and disadvantages. It is important to critically examine all of them
to ensure that the organisation’s choice best suits its needs and expectations.
The issues involved are related to some degree. Generally, the greatest concern relates to cost. Most
management questions centre on purchase price and anticipated development costs, but these initial costs
are the tip of the iceberg. Costs such as training, ongoing development and maintenance are typically
underestimated or ignored.
Developing a customised system is not for organisations that are unwilling to invest significant upfront
money. HR managers who have undertaken this task recount much frustration with cost overruns,
programming errors and an inability to complete the project within a reasonable time frame. HRIS
design is considered in figure 3.6.
In contrast, off-the-shelf systems (for example, SAP, Oracle or PeopleSoft) offer users some comfort
because set-up costs are known. An off-the-shelf product has the advantage of immediate availability. This
approach clearly limits flexibility but there is no doubt that it is faster to get someone else to define the
need, spend a lot of time developing a system and run tests to provide some certainty that it will work.

CHAPTER 3 Human resource information systems  119


Accurate
Information must be:
• correct
• reliable.
Timely
Comprehensive
Information must be:
Information must be:
• up to date
• complete
• available when
• sufficient.
needed.

Relevant Legal
HRIS
Information must be: Information must:
DESIGN
• appropriate for • satisfy all legal
CRITERIA
the task. requirements.

Understandable
Ethical
Information must be:
Information must:
• concise
• respect employee
• properly
privacy.
presented.
Secure
Information must be:
• accessible only
to authorised
personnel.

FIGURE 3.6 HRIS design

An off-the-shelf system often has a large user base, so the vendor is motivated to provide ongoing
maintenance and, even more importantly, future development. Obviously, there is limited value in having
a workable system now if it cannot cope with future changes in user requirements. Using a variety of
off-the-shelf systems risks creating problems integrating and consolidating data sources into an effective
strategic platform.58 The information services manager for Optus, says: ‘I think because Optus grew so
fast, they went out and bought one of whatever was available, just to get the work done. This was fine at
the time but it’s ended up a bit of a shambles with lots of different systems.’59
Related to these issues is the question of the resources that are available in the HR department and
the rest of the organisation. According to one expert, many systems fall down in their implementation
because of the lack of resources to get them up and running.60 The HR manager must ask questions
such as: Are there sufficient computer-literate employees who understand operating systems and their

120  PART 1 Introducing HRM


minor difficulties? To what extent will the HR department need to depend on the information technology
department? (Any dependency can prove unsatisfactory.)
Documentation and user training also affect all systems. Who will write the documentation? Can it be
understood? Who will be assigned to update it? Similarly, who will undertake user training? How can
the HR manager ensure that there will be enough people in the organisation who can competently use
the system?
Unfortunately, the perfect program has not yet been invented. There is no such software that works as
it was intended and continues to do so even when minor modifications are made. In developing a system,
the HR manager must be aware that another programming issue will arise just as one is resolved.
Legal advisers now oversee the development and consummation of contracts for the supply of a
HRIS. Expert opinion is necessary because users and vendors can face a multitude of contractual
problems and warranty issues. The HR manager must be prepared for this situation and the frustrations
it involves.
Despite strong arguments in favour of off-the-shelf products, there is one issue that is quite critical.
Such a product is generally one person’s view of what a HRIS should look like. Thus, the HR manager
is saddled with the vendor’s preferences for managing data, designing the screens, constructing reports
and so on. Flexibility is rarely present in such generic systems. It is critical, therefore, that HR managers
ensure that the product does what they want it to do and supports their HRIS strategy. For example,
after the Commonwealth Bank of Australia abolished employee pay slips, the bank asked employees to
access their pay information on the internet and make a printout if required. However, the US-designed
PeopleSoft software was unable to cope with Australian taxes and payment cycles and produced wrong
pay amounts, and missed mortgage and debt repayments, resulting in employee and union anger and
frustration.61 The Commonwealth’s CEO complained: ‘I think you are entitled to expect that companies
who represent that they can do things and deal with local complexities will do it.’62 This is a reasonable
comment, but as many HR managers involved with HRIS will attest, it is not necessarily realistic.
The buy-and-modify option is an attempt to get the best of both worlds. The vendor and/or specialist
consultants take care of the painful and costly development work and modify the end product to suit the
organisation’s particular needs. However, once modifications commence, it is easy to reach a situation
where the system is being rebuilt from the ground up (with the associated time and cost problems).
There is no best approach. Clearly the selection of a system reflects the organisation’s specific needs
and budget. The pragmatic option for the HR manager is to find a system that satisfies most of the
organisation’s needs. The proliferation of vendors means most organisations should be able to find
something that satisfies their major needs. Finding a HRIS that satisfies 100 per cent is a task that shows
a limited return for a large expenditure.63
Extracting data and reports
Before purchasing and implementing a HRIS, the HR manager should work out how they want to extract
reports and data. Report writing and data functionality should be determined against the organisation’s
requirements. Information must be reliable, readable, prompt and relevant to the needs of the user. If
a manager requires a summary report, it is useless if all that can be generated is a 10-page detailed
report.64 Will the HRIS support decentralised access? Will the production of printed reports from HR
suffice? Also, the matter of who will have access to HRIS-related data must be finalised — for example,
does the organisation require fully decentralised access and data-entry capability for all HRIS matters, or
does it require limited access by managers to data relating to only their own subordinates?65
Knowing when to call for help
It is rare for a HR manager to have experienced as many HRIS implementations as a software vendor
or HRIS consultant. Consequently, asking for help from someone with HRIS experience and expertise
makes good sense and helps ensure a successful HRIS implementation.66 However, the HR manager
should exercise care in selecting an adviser because surveys indicate considerable client dissatisfaction
with external software consultants.67

CHAPTER 3 Human resource information systems  121


Outsourcing
Outsourcing involves a company contracting out some (or all) of its HRIS activities to an information
technology specialist.68 Companies are attracted to outsourcing HRIS given the apparent lower costs,
simplicity and convenience. Successful outsourcing also allows HR managers to concentrate on their
core responsibilities rather than spending time struggling with complex (and peripheral) computing
activities. However, some managers outsource HRIS because they do not understand HR information
technology or because they have had problems with a HRIS in the past.
Outsourcing challenges the HR manager to define their core business — that is, what do they want to do?
Similarly, the HR manager must clearly define what the HRIS should be achieving, what it is costing and
what parts the company is prepared to outsource. Outsourcing HRIS poses risks for the HR manager —
for example, the outsourcing consultancy may lack the flexibility and security of an in-house HRIS, or it
may prove to be more expensive and less time sensitive. In addition, a fine line exists between delegation
of the HRIS and loss of control (and ownership) of data. A HRIS has an interface with the organisation’s
strategic planning process because it can influence or be influenced by the organisation’s business strategy.
(For example, does the organisation have sufficient qualified people to support a possible acquisition or
entry into a new business area? If not, the organisation may have to alter or postpone the implementation
of its strategy or recruit additional personnel.) Outsourcing thus poses risks that the organisation may lose
control of confidential data, experience a security breach and reduction in its competitive advantage.69

Relationship with the information technology department


The relationship between HR and the IT (information technology) department is also an area that
requires some comment. The HR manager is fortunate if the IT department shares the same commitment
to implementing a system, because IT specialists generally have considerable knowledge and expertise
on computer systems, hardware and vendors.70 However, if the IT department is entirely committed to
running the accounting system on the mainframe, the HR manager may receive little assistance (and
possibly face considerable hindrance).
It is understandable that some business functions have to be undertaken on a regular basis and that these
may take priority. Unfortunately, the IT department (as custodian of the organisation’s data) is sometimes
reluctant to release its responsibility for some business functions because it is more concerned with
‘empire building’. In such cases, the HR manager may find that HRM efforts to access data are blocked.
Even worse, the HR system may be used to help justify a significant cost injection into the organisation’s
mainframe; instead of a small, self-contained system, the HRIS becomes an integral part of the mainframe.
This is an arrangement that may be difficult to justify later. But independence from the IT department can
mean some difficulties for HR managers uninitiated in computer systems. However, with abundant and
affordable new technology, user-friendly software and lower costs, microcomputers and mobile devices
have given considerable independence to end users such as HR managers. Ideally, however, IT specialists
and HR professionals should cooperate to achieve the organisation’s strategic business objectives.

Relationship with other departments


Implementing an effective HRIS requires a strong partnership not only with the IT department but also
with other departments (for example, the HR department depends on the accounting department to
record labour expenditure and leave liabilities in the organisation’s general ledger). Consequently, the
HR department must be outwardly (not just inwardly) focused if it is to receive the support it needs.
This means that the HRIS should generate reports that help line managers to do their job. A HRIS must
be aligned with the organisation’s strategic business objectives. It must help increase sales and reduce
costs — that is, help the organisation to generate profit — instead of servicing only narrow HR interests.
A HRIS can be a vehicle for the HR department to become a strategic business partner (with HRIS at the
core of strategic planning).71

122  PART 1 Introducing HRM


Hardware issues
Technological advancements mean it is now increasingly difficult to distinguish the different
characteristics of mainframes, minicomputers and microcomputers.
Mainframes are the biggest, fastest and most expensive class of computers and possess massive data-
handling capacities and typically serve as the information systems hub in large organisations.
Minicomputers are more powerful than microcomputers, but less powerful than mainframes. They
can handle networks and other simultaneous arrangements at a relatively low cost. Local area networks
(LANS) — where many computer stations share the same minicomputer software and peripherals (for
example, printer, scanner and disk drives) — are common in many organisations. LANS can also be
driven by mainframes or minicomputers and file servers or by PCs as ‘peer-to-peer’ systems, depending
on the applications needed.72
Microcomputer is another name for a personal computer (PC). It is the smallest and least expensive class
of computer. PCs are fully operational computers that use microprocessors as their central processing
unit (CPU). The introduction of PCs and mobile devices has decentralised control of information systems,
moving them out from the IT department to departments and individuals throughout the organisation.
Further developments in mobile device (smartphone, iPad) technology mean that even the PC is under
threat. Mobile devices today have enormous processing power, and — together with the proliferation
of work-related and user-friendly applications (apps) such as Omni Graffle, Keynote and Documents
to Go — have become a powerful tool for getting HR work done.73 Such advances, however, have met
with criticism that they permit work to encroach too much into employees’ personal time. According
to one survey, US professional workers spend an average of 50 minutes a day sending emails after
work.74 Australians, likewise, are addicted with almost 90 per cent admitting to working on their mobile
device after normal working hours (more than 30  per  cent check their smart phones at 10 pm or later
while 35 per cent check their phones in bed).75 This, in turn, raises legal and ethical questions regarding
entitlements for overtime pay, disciplinary action for ignoring a work request outside of normal working
hours, and disruption of the employee’s work–life balance.76 One commentator claims that the challenge
is no longer about work–life balance but about work–life integration — how to do both at the same
time.77 A different approach, however, is being taken by some leading companies. Daimler, the German
automotive firm, for example, now permits its employees to have all their incoming emails automatically
deleted when they are on holiday. Volkswagen and Deutsche Telekom, similarly do not send emails to
employees at night, on weekends or holidays. Critics, however, argue that the use of an out-of-office
reply is a tool of the work-shy.78

DOCTOR HR

Hi Dr HR
Do you think it is okay to check work emails when on holiday?

The ongoing advances in technology and the continuing development of more and more HR-oriented
apps suggest that the use of mobile devices is in its infancy. Uber, for example, uses its app to get
customers to rate their drivers and to remove those who receive poor ratings.79 Other examples include
‘Workable’ (employee procurement) and ‘Quit your job’ (creates a text message advising your supervisor
that you are quitting). LinkedIn and SAP, similarly, are now bringing HR applications to mobile
devices.80 Employees, furthermore, now expect to use their own mobile devices and to interact with
social media at work. Such trends create enormous opportunities but also challenges for organisations
regarding privacy, employee productivity, data security, litigation threats and reputational damage.81
‘Textual harassment’ — the sending of offensive, discriminatory or inappropriate text messages to work-
colleagues, for example, is an increasing problem.82 Yet, a recent US survey indicates that 75 per cent
of employers offer no employee training on how to effectively use social media in the workplace.83 A

CHAPTER 3 Human resource information systems  123


clear and well-communicated ‘Acceptable use policy’ and a learning culture (that fosters the sharing of
information together with ongoing employee education are essential if the new technologies and the new
approaches to working they promote are to be successfully embraced (see figure 3.7).84

Acceptable use policy (AUP)


• Clearly outline the types of behaviour expected of employees and the types of behaviour that will
result in disciplinary action (for example, accessing pornographic sites, using racist, abusive or
discriminatory language in emails or blogs).
• Emphasise that the systems are for work and that any personal use must not interfere with the
employee’s productivity or the overall efficiency of the system.
• Explain that employee use of the internet will be monitored and disciplinary action taken if the AUP
is abused (for example, accessing pornographic or gambling sites).
• Clearly outline any policy provisions which are organisation specific and identify any special areas of
risk (for example, remind employees that any contribution they make is permanent and can be used
in legal proceedings — even when made from home).
• Ensure that employees understand that the AUP applies whenever (or wherever) the organisation’s
equipment (such as laptops and mobile devices) is used (for example, out of hours and/or at home).
• Ensure that the AUP is in harmony with the organisation’s culture and strategic business objectives.
Illegal activity should not be allowed under any circumstances (regardless of the organisation’s
culture and attitudes towards internet use).
• Establish clear guidelines regarding access to and use of confidential information (for example, use
of passwords, saving of information on flash drives).

FIGURE 3.7 Acceptable use policy

Source: Adapted by the author from Mendenca, N. (2011) ‘Building a stronger Internet Acceptable Use Policy’, Human
Resources, March, pp. 30–1; and Tydd, J. (2011) ‘Warning on social media’, BRW, 14–20 April, p. 47.

Finally, the growth of decentralised organisational structures and an increasingly mobile workforce
(which is able to perform work at any time, from anywhere) have created the need for more individual-
oriented information services. Consequently, mainframes and traditional IT departments often reflect the
organisational set-up of the past, while mobile devices and cloud computing are associated with today’s
flat, flexible, empowered and connected organisations.85

3.4 HRM and the internet


LEARNING OBJECTIVE 3.4 Discuss HRM and the internet and explain ‘cloud computing’.
Increasingly, HR managers are going online with the internet to recruit and select personnel, administer
remuneration and benefits, conduct research, access electronic databases, send email, network, advertise
and undertake corporate promotion.86 LinkedIn, with its ambition to generate global digital maps of
workers, skills and jobs, is said to be where big data meets human resources.87 Some proactive HR
managers use the internet (and intranets) to post HR-oriented information such as company mission
statements, company history, the company as an employer, HR policies (for example, EEO policies) and
job openings, and to deliver online learning, career assessment programs and manage knowledge and
productivity.88 It is estimated, for example, that more than 90 per cent of US companies now use social
media for recruitment.89
The internet is an interconnection of millions of computers around the world, so files, documents,
images and other forms of information can be exchanged quickly and relatively easily. By eliminating a
lot of logistic activity, the internet can free up the HR manager for strategic work and allow organisations
to share valuable people resources.90 In addition, the potential cost savings from the effective use of
technology and the internet in HR activities are compelling. IBM Corporation, for example, generated
more than US$100 million in cost savings through training online.91

124  PART 1 Introducing HRM


E-HRM
Technological advances, increasingly sophisticated software and the ubiquitous use of mobile devices
have seen HRIS rebadged by some writers as e-HRM. Ruël, Bondarouk and Louise, for example,
describe e-HRM as ‘a way of implementing HR strategies, policies and practices in organizations
through a conscious directed support of and/or with the full use of web-technology-based channels’.92 In
other words, e-HRM (electronic HRM) involves the comprehensive application of internet technologies
to HRM activities.93 E-HRM’s prime purpose (as with HRIS) is to promote the achievement of the
organisation’s strategic objectives by improving HRM efficiency, service delivery, organisational image
and by fostering employee and management communications and empowerment.94

HRM and social networking sites


Social networking sites, such as Facebook and LinkedIn, are used increasingly by organisations to
promote themselves as an employer of choice, to identify and attract talent, to enhance communications
and to build employee relationships (see also chapter 6 on recruitment).95
National Australia Bank (NAB) uses an internal social network (available only to NAB employees)
to encourage its employees to connect with each other. Employees post their profiles (including photo,
personal interests, work experiences and projects they are working on) to develop their personal brand
and connect with other NAB employees. Groups of employees at organisations such as Qantas, Telstra
and Westpac, similarly, have established informal groups on Facebook to discuss work-related matters.96
There is growing evidence to indicate that promoting employee access to social media leads to increased
collaboration among co-workers, enhanced customer interaction, higher productivity and to making the
organisation more attractive to savvy IT talent.97
Many organisations, however, block access to social networking sites, fearing that too much employee
time will be spent on networking rather than actually working.98

FAST FACT

Almost 80  per  cent of full-time workers in the US say they use social media (mainly Facebook and
LinkedIn) to communicate with colleagues. More than 60  per  cent say that use of social media has
resulted in new or better relationships.99

Finally, the widespread use of social media has blurred the distinction between business and personal
interactions (particularly in organisations where employees are expected to befriend colleagues).
Organisations, for example, may find themselves legally liable if a work relationship sours and social
media are used for harassing, defamatory, discriminatory bullying or retaliatory behaviour.100 Employees
may similarly find that they are at risk of having intimate personal details (such as sexual orientation,
relationship status, drug use habits, travel history, religion and political views) exposed to their employer
(by computer programs designed to analyse Facebook data).101 Other potential risks include the
disclosure of confidential and/or proprietary information, and the posting of information damaging to
the reputation of an individual or organisation. As a result, it is essential that organisations have a well-
documented and communicated policy that clearly states what constitutes acceptable and unacceptable
employee use of social media.102

DOCTOR HR

Hi Dr HR
My friend says that because social media blurs the line between personal and work contacts, it is
impossible to clearly separate harassment from romance in the workplace. What do you think?

CHAPTER 3 Human resource information systems  125


NEWSBREAK

You are what you Facebook ‘like’ BY AFP


Those Facebook ‘likes’ can reveal a lot more than you think. Research published today in the Proceedings
of the National Academy of Sciences  shows patterns from these Facebook preferences can provide
surprisingly accurate estimates of your race, age, IQ, sexuality and other personal information.
The researchers developed an algorithm which uses Facebook likes — which are publicly available
unless a user chooses stronger privacy settings — to create personality profiles, potentially revealing a
user’s intimate details. These mathematical models proved 88 per cent accurate for differentiating males
from females and 95  per  cent accurate distinguishing African-Americans from whites. The algorithms
were also able to extrapolate information such as sexual orientation, whether the user was a substance
abuser, or even whether their parents had separated.
This data can be used for advertising and marketing, but it also could make users cringe because of
the amount of personal data revealed, the researchers said. ‘It’s very easy to click the “like” button, it’s
seductive,’ said David Stillwell, a psychometrics researcher and co-author of the study with colleagues
from the  University of Cambridge and Microsoft Research. ‘But you don’t realise that years later all
those likes are building up against you.’ Stillwell says that while Facebook data was used in this study,
similar profiles could be produced using other digital data including web searches, emails and mobile
phone activity. ‘You can come to the same conclusions with many forms of these digital data,’ he says.
The study examined 8000 US Facebook users who volunteered their likes, demographic profiles and
psychometric testing results. While some of the patterns appeared obvious — Democrats like the White
House while Republicans liked George W. Bush — others were less direct. Extroverts liked actress and
singer Jennifer Lopez, while introverts gravitated toward the film The Dark Knight. Those determined to
be ‘liberal and artistic’ liked singer Leonard Cohen and writer Oscar Wilde, while conservatives preferred
Nascar racing and the film Monster-in-Law.
The predictions relied to a large degree on inference, by aggregating huge amounts of data: those
predicted to be homosexual were tagged as such not because they clicked on sites about gay marriage,
but because of their preferences in music and TV shows, for example. Christians and Muslims were
correctly classified in 82 per cent of cases, and good prediction accuracy was achieved for relationship
status and substance abuse, between 65 and 73  per  cent. People with high IQs more frequently
liked The Colbert Report television show and films including The Godfather and To Kill a Mockingbird.
Those with lower IQs preferred Harley Davidsons and Bret Michaels of the rock band Poison.

126  PART 1 Introducing HRM


The report comes amid intense debate about online privacy and whether users are aware how much
data is being collected about them. Another recent study showed Facebook users began sharing more
private data after the social network giant revamped its policies and interface.
The Cambridge researchers say data on ‘likes’ can be useful for psychological and personality
assessments, but also shows how personal details can be made public without their knowledge. ‘Similar
predictions could be made from all manner of digital data, with this kind of secondary “inference”
made with remarkable accuracy — statistically predicting sensitive information people might not want
revealed,’ says Cambridge researcher Michal Kosinski.
Kosinski says he is ‘a great fan and active user of new amazing technologies, including Facebook’
but that the study highlights potential threats to privacy. ‘I can imagine situations in which the same
data and technology is used to predict political views or sexual orientation, posing threats to freedom
or even life,’ he says.
For a lighter view of the research, the scientists created a Facebook app,  You Are What You Like,
which provides a user’s personality assessment.
Source: AFP (2013) ‘You are what you Facebook “like” ’, ABC Science, 12 March.

EXERCISE
As a class, discuss the article and its implications for HRM, employers and you personally.

HRM and wearable computing devices


Technological advances and changes in fashion mean that wearable computing devices (for example,
Google glasses, smart watches, rings, ear buds and smart badges) are now entering the workplace. Such
devices can be used to monitor heart rates, capture voice and location information and track employee
movement and performance.103 Research by the University of London, for example, found that people
wearing devices such as brain activity sensors, motion monitors and posture advisers, demonstrated
greater productivity and improved job satisfaction.104
This creates major questions for organisations and HR. What is being monitored? Where is the
data stored? Who has access to the information? Is the information personal? What privacy issues are
created? What wearable computing devices in the workplace are deemed acceptable/unacceptable by
management? By employees? By trade unions? Does the use of wearable computing devices fit with
the organisation’s culture? What are employee and trade union attitudes to wearable computing devices?
(If the devices are used to ‘spy’ on, or monitor employee behaviour, they are likely to be resisted by
both employees and trade unions.) Will the use of wearable computing devices create risks for the
organisation’s data security? Confidentiality? Sabotage?

Cloud computing
Cloud computing has been described as treating computer hardware and software like electricity.
Organisations access software via the internet, but don’t own it or the hardware it runs on.105 Emails in a
Gmail inbox, for example, are not stored in a PC but on a server in a Google data centre.106
Cloud computing has the big advantage that it permits access to a data source via a range of devices,
including personal computers, laptops, and mobile devices such as smartphones and iPads. It is expected
to grow by 10 to 15 per cent a year globally.107 Organisations are attracted to cloud computing because
of its lower costs (much of their existing hardware and software can be disposed of), greater flexibility,
and accessibility to a much larger group of people and information resources (see figure 3.8).108 Major
cloud providers include Amazon, Google, Microsoft and Telstra.

CHAPTER 3 Human resource information systems  127


Cloud computing

Potential advantages Potential disadvantages

• Accessibility — access to business data • Data security concerns


anywhere and anytime • Costs and inconvenience of incompatible platforms
• *Lower costs — email, HRMs and other • Escalating costs as providers seek to protect profit
applications are moved from PCs into data margins and lock in customers
centres (the cloud) • Uncertainty regarding legal situation where data is
• Convenience — available 24/7 stored outside Australia (for example, overseas service
• Increased efficiency provider may not meet Australian legal requirements
• Greater flexibility regarding data security and privacy)
• Energy saving • Danger of loss of access to data if service provider
• Reduced on site hardware and software becomes bankrupt or is taken over
• Permits use of mobile devices • Risk of hacker attack
• Improved support for a mobile workforce • No guarantee data will be stored in Australian
• Increased computing power cyberspace
• Increased storage capacity • May not necessarily work as fast as a conventional
system
• Security concerns re lost laptops, smartphones and
USB sticks
• Uncertainty over who owns the data stored in the
cloud (Google and Facebook, for example, have used
personal data to target advertising at users of their
servers)109

FIGURE 3.8 Cloud computing

While promising much, cloud computing requires careful planning and detailed consideration of what
data will be placed on the cloud. Complex questions, for example, have to be resolved regarding the
quality of the cloud service provider and its services, data security, need for insurance protection and
legal requirements (especially where the data is stored offshore).110 The combination of cloud computing
and social networks has created a powerful tool for HR managers. HR applications cover employee
communications, performance management, 360-degree appraisals, online interviews, identification
of employee expertise, e-learning (via Cisco Webex), recruitment, career management and talent
identification.111

Big data
The advent of cloud computing has made cost effective the collection, storage and analysis of massive
amounts of data, known as big data. As a result, organisations can now mine data about employees from
traditional sources (such as employee records, payroll information, attitude surveys etc.) and new data
sources including social media, browser logs, text analytics and sensor data.
General Motors, for example, is introducing technology that will identify drivers who check their
email or do their make-up at the traffic lights. The eye and head technology can tell whether drivers
are distracted.112 Such technological advances raise major ethical and legal concerns relating to
data security and employee privacy, (although according to one commentator much of this angst is
questionable given the amount of personal information people willingly make available via social
media sites such as Facebook), who should collect and have access to such information and how such
information should be used.113 In the United States, for example, data can be bought from specialist
organisations that harvest information from sources such as public records, store loyalty programs and
credit card purchases.114

128  PART 1 Introducing HRM


Clearly, the HR manager who can successfully collect, refine and analyse big data to better understand
employee attitudes, behaviour and needs will have a competitive advantage.
One US catering firm, for example, offers food and beverages targeted at the specific tastes and
preferences of fans attending a particular sports stadium. The company, using big data, can determine
precisely how much and which types of food and drink will be sold at each individual outlet thus
enabling it to ascertain the correct number and type of personnel required.115
Oracle, similarly, uses big data to analyse the call centre attrition rates of its client Xerox. By being
able to identify early warning signs that an employee is vulnerable to quitting, Xerox can assess the
situation and take appropriate action.116
Some Australian universities, likewise, use big data to identify those students at risk of dropping
out.117
Although the use of big data analytics has the potential to be of enormous assistance to the
HR function, it remains underutilised. Critics say this is because HR managers (unlike marketing
managers) generally lack the analytical and statistical skills required to design and execute big data
programs.118
Clearly, major challenges facing HR manages relate to how to extract value from the massive quantities
of data available from multiple data sources and how to ensure that their organisations develop and/or
identify the necessary specialists with data science skills.119
Many organisations, because of such problems, use on demand data base services provided by specialist
firms (such as Amazon, IBM, Google, Microsoft, Oracle and SPP) that employ cloud technology and
sophisticated big data analytics to manage and analyse enormous amounts of information on behalf of
client organisations.120

FAST FACT

A survey of Asia–Pacific executives by the Economist Intelligence Unit found that more than 40 per cent
are unsure if their organisations has a big data strategy. Only six per cent considered their organisations
well advanced in the adoption of a big data strategy.121

3.5 Evaluating the HRIS


LEARNING OBJECTIVE 3.5 Understand the key issues that will determine the success or failure of a
HRIS.
Data generated by the HRIS should help the HR manager and line managers to make better decisions.
The HRIS should add value. Otherwise, its costs cannot be justified. Basic evaluation questions that the
HR manager should ask include the following.
•• Is the time spent on entering data justified by the accuracy, timeliness and value of the information
generated?
•• Is the HRIS response time appropriate?
•• Is the HRIS integrated with the payroll system?
•• Is the HRIS able to generate answers to specific HR questions?
•• Is the HRIS able to generate ad hoc, on-request reports as well as regular detailed reports?
•• Is the cost of the HRIS outweighed by its benefits?
•• Is the HRIS enhancing the perception of HR as efficient, effective and strategic?
•• Is the HRIS a value-adding contributor to the achievement of the organisation’s strategic objectives?
•• Is the HRIS at the end of its life cycle and in need of upgrade or replacement?
Considering such questions should tell the HR manager whether or not the HRIS is value-adding,
is being used appropriately and is helping managers to make better decisions or if it is past its use-by
date.122

CHAPTER 3 Human resource information systems  129


SUMMARY
The primary purpose of a HRIS is to assist both the HR manager and line managers in decision making.
Thus, a HRIS must generate information that is accurate, timely and related to the achievement of the
organisation’s strategic business objectives. Technology has created opportunities for HR to eliminate
administrative overheads and become a strategic business partner.
The importance of analysing HRM needs must be stressed because each organisation will want
to use its data in different ways. Some uses of HRIS include the management of personnel records,
HR planning, recruitment and selection, performance appraisal, human resource development, career
planning and development, remuneration and benefits, health and safety, and industrial relations.
The importance of flexibility in system design and use cannot be ignored. As the HRM function
continues to change, so will the needs of the supporting systems. Because a computerised system must
reflect these changes, the HR manager must ensure that it can adapt to the organisation’s evolving needs.
The process of introducing HRIS applications into an organisation is critical. A basic question is whether
the organisation should design its own system, buy an off-the-shelf product or modify a bought system
to suit its own needs. Further issues for the HR manager include ensuring the competence of vendors
and their products and determining the role of the IT department in HRIS development. Finally, the
widespread use of mobile devices and the popularity of social media have seen organisations use social
networking sites (such as Facebook) for the promotion of their image as an employer, for promoting
their image as an employer, facilitating work-place learning, building of relationships, improving
communications and for the gleaning of information on job applicants.

KEY TERMS
Access  Concerned with who will have the right to enter, change or retrieve data via the HRIS. For
example, will there be decentralised access capability (line managers and employees) or will access
be centralised and tightly controlled (HR only)?
Affirmative action (AA)  Programs that require firms to make special efforts to recruit, hire and
promote women and/or members of minority groups.
Big data  The collection, organisation and utilisation of the massive quantities of data stored by or
accessible to organisations.
Central processing unit (CPU)  This is the computer’s brain. It controls the interpretation and
execution of instructions. It causes data to be read, stored, manipulated and printed.123
Cloud computing  Allows access to software applications via the internet without the organisation
having to purchase and maintain servers and data centres. Server capacity (which can reside
anywhere) is sourced through a third-party provider (for example, Microsoft).
Cyberloafing  Employee use of the internet, social networking sites and email for non-job-related
activities during working hours.
Data  Unprocessed facts and figures (sometimes called raw data). Processed data are organised into
information that is ready for analysis.
Data centre  A centralised secure facility linked to the internet and equipped with large-capacity server
computers, running software and data storage systems. Accessed by cloud users employing a variety
of devices such as PCs and smartphones.
Database management  Involves the input, storage, manipulation and output of data.
HRIS security  Concerned with the protection of HRIS data from invasion and abuse by unauthorised
parties.
Human resource information system (HRIS)  A computerised system used to gather, store, analyse
and retrieve data, in order to provide timely and accurate reports on the management of people in
organisations.124

130  PART 1 Introducing HRM


Intranet  A network of computers that enables employees within an organisation to communicate with
each other.
Knowledge management  Deals with an organisation’s ability to collect, store, share and apply
knowledge in order to enhance its survival and success.
Mainframes  The biggest, fastest and most expensive class of computer.
Microcomputer  The smallest and least expensive class of computer. Generally called a personal
computer (PC).
Microprocessor  The logic, mathematical and central functions contained in a computer chip.
Minicomputers  Computers that are more powerful than microcomputers but less powerful than
mainframes.
Mobile device  A portable device such as a smartphone or tablet that can be used for tasks usually
completed on a PC.
Off-the-shelf  Commercially available HRIS software.
Social media  A group of internet-based applications that allow the creation and exchange of user-
generated content. Examples include Facebook, blogs, instant messaging, Twitter and LinkedIn.
Social networking sites  Internet-based applications that allow users to connect by creating personal
histories, inviting friends and colleagues to access these biographies, and sending emails and instant
messages. Photos, audio files, blogs and video clips are all used.

ACTIVITIES
REVIEW QUESTIONS
1 What are the benefits of a HRIS to (a) the organisation, (b) the HR department and (c) the
individual employee?
2 What should be the minimum capabilities of a HRIS?
3 Why have many HR managers faced serious problems when introducing or upgrading their HRIS?
4 What should be done to maintain the security of an organisation’s HRIS?
5 How would you evaluate an organisation’s HRIS?
6 What is cloud computing? What is big data? What implications do they have for HRM?
7 What is the difference between the internet and an intranet?
8 How does a HRIS help HR managers to make better decisions?
9 What are the basic steps to consider in developing and implementing a HRIS?
10 What types of employee information should/should not be stored in an organisation’s HRIS?

WHAT IS YOUR VIEW?


1 Why shouldn’t employees be able to surf the net at work if they do work at home or elsewhere?
2 You find email evidence that your boss is having an affair with a graduate trainee. What do you
do?
3 Management encourages employee use of social networking sites, but it results in the posting of
embarrassing and critical comments of the company and its personnel. What can management do?

CLASS DEBATE
Choose one of the following topics and debate it in class.
•• The best way to recruit is via the use of social media.
•• Social media is killing work-place productivity.
•• Employer demands for round-the-clock communications are too stressful and too invasive of employee
personal time.
•• Mobile devices are leading to employee enslavement rather than employee empowerment.
•• The internet has spawned a generation of employees with dull brains and no social skills.
•• People have outsourced their memories to the internet.

CHAPTER 3 Human resource information systems  131


FORUM
What do you think? Conduct a mini survey of class members, using the questionnaire. Critically discuss
the findings.
1 Managers should be allowed to monitor an employee’s email. YES NO
2 Employees should be allowed to use social media without restriction. YES NO
3 Employees who visit pornographic sites during working hours should be subject to instant YES NO
dismissal.
4 A company should be legally responsible for any sexist or racist emails sent by its employees. YES NO
5 Personal web shopping during working hours is a necessary employee convenience. YES NO
6 Any employee information entered into a HRIS should automatically become company property. YES NO

ONLINE EXERCISE
Conduct an online search for information on commercially available HRIS programs. Prepare a ­500-word
executive briefing paper describing one system, the vendor and purchasing details, provide examples of
companies using the system and give your evaluation of the system. Include the web addresses you have
accessed in your report.
HR MANAGER’S PITCH
Prepare a 30-second verbal presentation detailing why your organisation needs a HRIS.
HR BLOG
Form into groups of three to four. You are tasked with writing a 300-word blog on one of the following.
•• Big data — Big Brother in the workplace?
•• Mobile devices — the end of work–life balance?
•• Facebook — the job applicant’s nightmare but the recruiter’s dream?
•• Social media — the end of privacy?

PRACTICAL EXERCISES
1 Break into groups of four to six. Imagine you are a committee charged with introducing a HRIS
to your organisation. Discuss the steps you would take, who you would involve, what information
you would require and how you would access this information. Regroup as a class and discuss your
recommendations.
2 Break into groups of four to six. Imagine you are a committee charged with developing company
policies relating to HRIS security and employee privacy. List the major points that you think should
be covered. Regroup as a class and discuss your findings.
3 Break into groups of four to six. Imagine you are a committee charged with developing a company’s
policy on employee use of the internet. Specifically, you are asked to cover:
(a) internet shopping
(b) playing computer games
(c) accessing pornographic sites
(d) personal email
(e) downloading music
(f ) use of social networking sites.
Prepare a short policy statement on each of these issues. Regroup as a class and discuss your policy
statements.
4 Break into groups of six to eight, then break into two subgroups representing the HR and IT
departments. Discuss the arguments for and against having the HRIS linked to the company’s
mainframe. Regroup as a class and discuss your recommendations.
5 Individually or as a group contact the HR manager of an organisation you are familiar with.
Obtain information about the organisation’s HRIS regarding its purpose, applications, security and

132  PART 1 Introducing HRM


effectiveness. Also ask how user-friendly the HRIS is, what major problems have been experienced and
what recommendations the HR manager would make to an organisation seeking to introduce an HRIS.
Prepare a 500-word report summarising your research. Regroup as a class and discuss your findings.
6 Individually or as a group contact a HRIS vendor (for example, SAP, Oracle or PeopleSoft)
and obtain details about its system. Write a 500-word report highlighting the advantages and
disadvantages of the system. Regroup as a class and discuss your findings.
7 Break into groups of four to six. Imagine you are a committee charged with examining the transfer of all
HRIS to a cloud computing site. Write a 500-word management report justifying your recommendation.
8 Break into groups of four to six. Critically discuss the use of big data in HRM.

ENVIRONMENTAL INFLUENCES
Identify and discuss the key environmental influences from the model (see figure 3.9) that have
significance for HRIS.

EXTERNAL ENVIRONMENT

Political Legal Environmental

INTERNAL ENVIRONMENT

Strategy Structure
Economic Technological

HRIS

Industrial
Cultural
relations
Systems People Culture

Business Social Demographic

FIGURE 3.9 Environmental influences on HRIS

ETHICAL DILEMMAS
THE CHEATING MARKETING MANAGER
‘Well, Penny, as the HR expert, what do you recommend we do?’ asks Harry Bentham, CEO of Oz
Electronics.
Penny Dale, HR manager, shakes her head and sighs. ‘It’s a very sensitive issue. We need to tread very
carefully.’
‘I agree, but what to do? We can’t ignore the situation.’
‘Agreed, you know Angelo better than me — do you think there is any truth in his wife’s claims that
he is cheating on her?’
‘Possibly, but I don’t really know — but does it matter? She has accessed his email account and sent
emails to every senior manager in this company saying that he is a liar, a cheat, a serial adulterer who

CHAPTER 3 Human resource information systems  133


has had sex with Connie O’Brien and Teresa Wong of this office and Sophia Engholm the purchasing
manager of our biggest customer — does this woman realise what a nightmare she has created? Does
she know that Connie O’Brien and Sophia Engholm are married?’ exclaims Harry with great frustration.
‘Surely that is the whole point — to embarrass and shame her husband’, replies Penny.
‘But what about the other people involved? What do we do about them?’ asks Harry.
‘To say nothing of the public relations disaster this will be for Oz Electronics .  .  .’ sighs Penny.
DISCUSSION QUESTIONS
1 What ethical, legal and HRM issues are raised in this case?
2 If you were Penny Dale, HR manager, what recommendations would you make to your CEO on
how best to deal with the situation?
3 Identify all the major stakeholders involved in this case and, as a class, discuss their likely reactions
and how you would deal with them.
OK TO GOOGLE GLASS IN THE OFFICE?
May Donovan smiles at the eager curiosity expressed on the faces of her work colleagues. ‘You see’,
she says proudly, ‘these glasses give you eyewear plus a mobile computer — you can surf the internet,
access your email, record stuff and use them as spectacles.’
‘Fantastic’, says Tony Angelli, ‘can you record me now?’ he asks enthusiastically.
‘Sure’, replies May.
‘Here, have a look at yourself Tony’.
‘Wow, that’s incredible!’ Tony laughs.
‘You could have a lot of fun with these — record people without them knowing.’
‘Or watch a movie while the boss thinks you’re working’, interjects Indira Singh.
‘My goodness, I hope you don’t wear that in the toilet or the change rooms at the gym — it could be
embarrassing’, says Ellie Taylor.
‘It’s a great invention, but as Ellie says, it really could be a massive invasion of privacy.’
‘I agree, especially if you go around videoing people when they are unaware’, snaps Bobby Ng. ‘I
think these things smell of “Big Brother” and ought to be banned in the workplace. They are very creepy.’
‘Oh, come on Bobby, you are overreacting — Google glasses are the way of the future, you need to
get with it.’

134  PART 1 Introducing HRM


DISCUSSION QUESTIONS
1 As a class discuss the pros and cons of using Google glasses in:
(a) the workplace
(b) social situations.
2 What are the HR implications of employees wearing Google glasses?

EXERCISE
Form into groups of four to six. Imagine you have been asked by the HR manager to draft a policy
regarding Google glasses, for consideration by the Board of Directors.
TOO HOT TO HANDLE
Brendon Smith and Dustin James are stars of the Oz Bank trading floor. Both are major profit generators
for Oz Bank. As a result, their sometimes over-the-top behaviour is ignored or attracts only a mild
rebuke from management. Popular with their co-workers, the two are extremely hardworking and highly
capable (if somewhat over exuberant).
Brendon and Dustin, unbeknown to their colleagues (and management), have devised a rating system
that classifies all the female members on the trading floor. Each female trader is graded according to
several factors including facial attractiveness, sex appeal and given an overall ‘hotness’ rating.
A technical glitch, however, causes the ‘ratings file’ to be sent to Cheryl Li, also a top trader who like
Brendon and Dustin is a major profit generator for Oz Bank.
Cheryl, an assertive and very independent person, smiles as she presses the send button, forwarding
copies of her hotness ratings to everyone on the trading floor.
Oz Bank prides itself as an equal opportunity employer and its progressive policies regarding the
employment of women. Kim Donovan, vice-president of HR looks aghast at the ‘Hotness Ratings’ email
communications. Leslie Schultz, the manager responsible for the trading floor snaps, ‘What on earth are
we going to do about this?’
DISCUSSION QUESTION
Is this just a case of harmless fun in the workplace or does it represent something more serious? If you
were the HR manager, how would you handle the situation?

EXERCISES
1 In small groups of four to six, discuss the HR, legal and public relations issues relevant to this
case.
2 Prepare an action plan outlying the steps to be taken to deal with the situation.

CASE STUDIES
MISTAKEN COMMUNICATION
Jake Maloney sits staring at his screen, his face white with shock. He cannot believe it. There before him
is a confidential draft letter from the HR manager Colleen Albright to his boss Angelina Wyatt with a
copy to the CEO Oscar Treyvaud outlining the reasons for his termination together with recommended
severance package. Jake starts to shake.

DISCUSSION QUESTIONS
1 What would you do if you were:
(a) Jake
(b) CEO Oscar Treyvaud
(c) Jake’s boss Angelia Wyatt
(d) HR manager Colleen Albright?
2 What ethical HR and legal issues does this case raise?

CHAPTER 3 Human resource information systems  135


SOCIAL MEDIA 101
Maria Spinelli, general manager of HR, Ace International picks up her ringing telephone. ‘Maria Spinelli
speaking.’
‘Maria, it’s CK.’
‘Hi, CK! What’s new?’
CK ignores the social pleasantries and says, ‘I’ve just sent you an email regarding a job application
we have received from one of your employees — read it and call me back.’
‘You sound serious CK — what is it?’
‘It concerns you.’
‘What? How?’
‘You are well aware it is our standard practice to scan the social media sites of all job applicants?’
‘Yes, and you know CK that I think it is unethical.’
‘I know, I know, but now is not the time to get on your high horse’, says CK sharply.
‘What is wrong?’ asks Maria, somewhat bewildered by CK’s tone.
‘Look, it concerns you. Read it, then call me back. Okay? Maria, I am doing this as a friend not as a
professional colleague. I rely on your discretion.’
‘Sure if that’s what you want. I’ll call you back in a few minutes.’
Without further comment, CK hangs up. Curious and somewhat anxious, Maria opens her email
account. There it is; a message from CK Wong, vice-president of HR, Oz Consolidated Ltd.
Maria opens the attachment and is immediately horrified. Bold capital letters headline the text ‘Why
Ace International sucks’. Reading on, Maria becomes even more angry and disturbed. Posted by Britney
Lee, a graduate trainee in the Treasury department, the text is a diatribe of criticism and caustic abuse.
Ace International is described as having a culture of greed, backbiting and incompetence.
Britney’s comments regarding her colleagues are very personal and cruel. Patrick O’Brien, Britney’s
current boss is described as a smelly fat slob who cheats on his expense accounts; the CEO Catherine
Moore is portrayed as a hypocritical bitch who is having an affair with James Cody the company’s
external legal counsel and a married man. Maria herself is depicted as an ugly, mean faced cow.
Maria is crushed. She pushes her chair back, closes her eyes, ‘how could anyone be so hurtful? So
stupid?’ Maria feels herself trembling. Perspiration streams from her brow. She wants to throw up. ‘My
God! What am I going to do?’
DISCUSSION QUESTIONS
1 What ethical, legal and HRM considerations are raised in this case?
2 Is it reasonable for organisations to access an applicant’s (or an employee’s) social media sites?
3 If you were CK Wong, would you have informed Maria Spinelli of your findings? Explain your
answer.
4 If you were Maria Spinelli, what would you do now? Justify your proposed actions.

ONLINE RESOURCES
• http://oracle.com/hcm • www.payglobal.com
• www.actnet.com • www.shrm.org/hrmagazine
• www.adppayroll.com.au • www.workforce.com
• www.ahrm.org • www.sagemicropay.com.au
• www.employeeconnect.com.au • www.fujitsu.com.au/cloud
• www.frontiersoftware.com.au • www.microsoft.com.au/cloud
• www.iplresearch.com • www.amcom.com.au/cloud
• www.lir.msu.edu/ • www.infoplex.com.au
• www.mrchr.com • www.google.com.au/gonegoogle
• www.neller.com.au • www.salesforce.com

136  PART 1 Introducing HRM


ENDNOTES
1. Gravel, T. (2014) ‘In pursuit of talent’, Bloomberg Businessweek, 5–11 May, pp. 8–10.
2. Wines, G. and Lowenstein, N. (1996) ‘Technology assumes HR’s administrative role’, HRMonthly, August, p. 22; Boudreau,
J. (1995) ‘HRIS exploiting its real potential’, HRMonthly, August, pp. 8–13; and Greenard, S. (2000) ‘Technology finally
advances HR’, Workforce, 79(1), pp. 38–41.
3. Hannon, J., Jelf, G. and Brandes, D. (1996) ‘Human resource information systems: operational issues and strategic
considerations in a global environment’, International Journal of Human Resource Management, 7(1), p. 245; and
Liff, S. (1997) ‘Constructing HR information systems’, Human Resource Management Journal, 7(2), pp. 18–31.
4. Proud, D. (1997) ‘Little quality data squeezed from HR systems, seminar told’, HRMonthly, March, p. 28.
5. Boudreau, J. op. cit., p. 13.
6. Marler, J. (2009), ‘Making human resources strategic by going to the net: Reality or myth?’, International Journal of Human
Resource Management, 20(3), pp. 515–27.
7. Boudreau, J. op. cit., p. 13.
8. Smith, G. (1999) ‘Use systems to build high performance teams for knowledge age’, HRMonthly, March, pp. 30–1.
9. Mayfield, M., Mayfield, J. and Lunce, S. (2003) ‘Human resource information systems: a review and model development’,
Advances in Competitiveness Research, 11(1), p. 148; and Bissola, R. and Imperatori, B. (2014) ‘The unexpected side of
relational e-HRM — developing trust in the HR department’, Employee Relations, 36(4), pp. 376–97.
10. Ludlow, M. and Smith, P. (2013) ‘Newman puts IBM on contract blacklist’, The Australian Financial Review, 8 August,
p. 15.
11. Blair, J. (1992) ‘Leveraging technology in HR: the added edge’, HR News, November, p. A15.
12. Stone, R.A. (2012) ‘Change management: implementation, integration and maintenance of the HRIS’, in Kavanagh, M.J.,
Thite, M. and Johnson, R.D. (Eds), Human Resource Information Systems: Basics, Applications and Future Directions,
2nd edn, Sage, Thousand Oaks, CA, pp. 236–76.
13. Burbach, R. and Royle, T. (2014) ‘Institutional determinants of e-HRM diffusion success’, Employee Relations, 36(4),
pp. 354–75; and Bondarouk, T. and Ruël, H. (2013) ‘The strategic value of e-HRM: results from an exploratory study in a
government organization’, International Journal of Human Resource Management, 24(2), pp. 391–414.
14. Haines III, V.Y. and Lafleur, G. (2008) ‘Information technology usage and human resource roles and effectiveness’,
Human Resource Management, 47(3), pp. 525–40; and Ruël, H.J.M., Bondarouk, T.V. and Vander Velde, M. (2007) ‘The
contributions of e-HRM to HRM effectiveness’, Employee Relations, 29(3), pp. 280–91.
15. Kavanagh, M.J., Gueutal, H.G. and Tannenbaum, S.O. (1990) Human Resource Information Systems: Development and
Application, Boston: PWS-Kent, p. 29.
16. Hall, D.T. and Goodale, J.G. (1986) Human Resource Management, Glenview, Ill.: Scott Foresman, p. 56.
17. Sherman, S. (1992) ‘The new computer revolution’, Fortune, 14 June, p. 30.
18. For example, see Bernhardt, S. (2000) ‘Integrated systems fail’, HRMonthly, March, pp. 40–1; Chapman, S. (2000)
‘Realizing the tactical advantages of HRMS’, HRMonthly, April, p. 44; and ‘Letters to the editor’ (2000), HRMonthly, May,
pp. 8–9.
19. O’Connell, S. (1995) ‘Can you say “it’s only payroll”?’, HR Magazine, January, p. 33.
20. Benson, J. (1993) ‘Linking the 3Ps’, Multinational Employer, March, pp. 16–17.
21. Benson, J. op. cit., pp. 16–17.
22. Benson, J. op. cit., pp. 16–17.
23. O’Connell, S. op. cit., p. 34.
24. Casey, S. (2000) ‘Benefits online’, HRMonthly, April, pp. 40–1.
25. Romm, C.T., Pliskin, N. and Weber, Y. (1995) ‘The relevance of organizational culture to the implementation of human
resource information systems’, Asia Pacific Journal of Human Resources, 33(2), pp. 63–80.
26. Sharp, R. (1999) ‘New technology pushes HR information out into the business’, HRMonthly, March, p. 40.
27. Reported in Nuttall, C. (2012) ‘Increase in handsets raises risks’, Financial Times, Connected Business Supplement,
26 September, p. 1.
28. ANZ (2000) Annual Report, p. 17.
29. Howes, P. (1998) ‘Technological innovation driving demise of the HR departments’, HRMonthly, August, p. 52.
30. Speight, G., Edmunds, G. and Lovell, R. (2000) ‘Access all areas’, HRMonthly, September, p. 27.
31. Speight, G. quoted in Speight, G., Edmunds, G. and Lovell, R. op. cit., p. 27.
32. Reported in ‘The latest and the greatest in employee self-service’ (2002), Human Resources, July, p. 19.
33. Lenihan, W. (1995) ‘Essentials of tight computer security’, Bottom Line Business, 1 June, 24(11), pp. 11–12; and Ivancevich,
J.M. (2001) Human Resource Management, 8th edn, Boston: McGraw-Hill, pp. 144–5.
34. McCarthy, B. (2013) ‘Firewalls fortify as criminals target employee devices’, Financial Times, 16 April, p. 17; and
McCarthy, B. (2013) ‘Bring your own device can be an enemy within the gates’, Financial Times, 7 June, p. 4.
35. Weiss, B.D. (1995) ‘Working in cyberspace’, HR Focus, September, pp. 15–16; and Steggall, V. (2000) ‘For whose eyes
only?’, HRMonthly, June, pp. 16–20.

CHAPTER 3 Human resource information systems  137


36. Macy, J. (1998) ‘International data privacy laws place new strains on local HR systems’, HRMonthly, February, p. 48.
37. O’Connell, S.E. (1994) ‘Security for HR records’, HR Magazine, September, p. 41.
38. DeNisi, A.S. and Griffin, R.W. (2005) Human Resource Management, 2nd edn, Boston: Houghton Mifflin, p. 570; and
Joye, C. (2013) ‘ASIO espionage warnings’, The Australian Financial Review, 2–4 January, p. 2.
39. ‘Beijing News’ report cited in Chen, S. (2013) ‘Government overlooks best snooping devices’, South China Morning Post,
7 December, p. A3.
40. Steggall, V. op. cit., pp. 16–20; and Hubbard, J.C., Forcht, K.A. and Thomas, D.S. (1998) ‘Human resource information
systems: an overview of current ethical and legal issues’, Journal of Business Ethics, 17(12), pp. 1319–23.
41. Zampetakis, H. (2000) ‘Clean up wave could end surfers’ paradise at work’, The Australian Financial Review,
26–27 February, p. 19.
42. Suddath, C. (2014) ‘Work is pleasure’, Bloomberg Businessweek, 13–19 October, p. 82.
43. Smith, F. (2011) ‘No safe place for porn’, The Australian Financial Review, 8 February, p. 59; and Louw, C (2011) ‘Worker
sacked for downloading porn at home’, HRMonthly, April, p. 8.
44. Wingfield, N. (2002) ‘Bosses battle web shopping’, Asian Wall Street Journal, 30 September, p. A10.
45. Peter Hughes, Cisco Director of Collaboration quoted in Keen, L. (2014) ‘Email killing productivity, says Cisco director’,
The Australian Financial Review, 10 April, p. 13.
46. Hepworth, A. (1999) ‘Firms grappling with email anarchy’, The Australian Financial Review, 30 March, p. 25. Also see
Jackson, R. and Wheelahan, P. (2001) ‘The pop-porn culture’, HRMonthly, April, pp. 40–1; Neiger, D. (2001) ‘Protection from
“netnasties”‘, HRMonthly, April, pp. 41–2; and Ross, E. (2001) ‘The war against cyber-bludging’, BRW, 20 April, pp. 68–9.
47. Adapted from Corvin, M. (2000) ‘Workers, surf at your own risk’, Business Week, 12 June, pp. 78–9. See also McCarthy,
M.J. (2000) ‘Company’s virtual voyeur keeps employees’ use of internet in line’, Asian Wall Street Journal, 11 January, p. 8;
and Bryan, M. (2001) ‘NSW may ban e-mail monitoring’, The Australian Financial Review, 9 April, p. 3.
48. Bryan, M. and Crowe, D. (2003) ‘Personal emails are wiped off screen’, The Australian Financial Review, 15 August, p. 5.
49. Reported in Kellaway, L. (2013) ‘I feel ashamed but I can’t stop my cyber loafing’, Financial Times, 25 February, p. 12.
50. Williams, D. (2000) ‘Check your email policy’, HRMonthly, May, p. 35; Temperton, E. (2001) ‘How to monitor
e-communication’, People Today, April, pp. 24–7; and Henderson, D. (2003) ‘See no evil’, HRMonthly, September, p. 28.
51. Nusbaum, M.A. (2003) ‘Stepped up snooping arrives at the office’, International Herald Tribune, 15 July, p. 14.
52. Tandukar, A. (2005) ‘Cyber traps’, BRW, 20–26 October, p. 62.
53. Varchaver, N. (2003) ‘The perils of e-mail’, Fortune, 17 February, p. 63.
54. Varchaver, N. op. cit., p. 58.
55. Bryan, M. (2000) ‘Workers and managers are still worlds apart on email’, The Australian Financial Review, 24 March, p. 3.
56. Strutt, S. (2003) ‘Fun on the net .  .  . at the boss’s expense’, The Australian Financial Review, 18 July, p. 5.
57. Manktelow, N. (1999) ‘Dark side of the net’, Weekend Australian, 22–23 May, p. 52.
58. ‘The latest and the greatest in employee self-service’ (2002) Human Resources, July, p. 19.
59. Chapman, G. (2002) quoted in ‘The latest and the greatest in employee self-service’, op. cit., p. 19.
60. Ogier, J. (2003) ‘Are you a tech wreck?’, HRMonthly, September, p. 23.
61. Boyd, T. (2003) ‘Murray pays out on PeopleSoft’s failings’, The Australian Financial Review, 3 February, p. 50; Whyte, J.
(2003) ‘CBA promises end to payroll problems’, The Australian Financial Review, 16 July, p. 48; and Woodhead, B. (2005)
‘Help wanted for Defence’s HR system’, The Australian Financial Review, 13 July, p. 51.
62. Murray, D. quoted in Boyd, T. op. cit., p. 50.
63. Shelds, T. and Sale, J. (1994) ‘How to avoid the system from hell!’, HRMonthly, March, pp. 17–19; and O’Connell, S.E.
(1996) ‘An alternative to the RFP’, HR Magazine, September, pp. 36–44.
64. Based on anonymous reviewer comments, November 2003.
65. Based on anonymous reviewer comments, July 1997.
66. Schultz, J. (1997) ‘Avoid the DDTs of HRIS implementation’, HR Magazine, May, p. 42.
67. Survey by Executive Connection (national network of chief executives) reported in James, D. (1995) ‘Outsourcing fills the
gaps created by recession’, BRW, 16 October, p. 75.
68. This section is based on material drawn from Banaghan, M. (1996) ‘Calling in the expert’, BRW, 16 September, pp. 72–5;
Langford, R. (1997) ‘Can a business core be outside?’, BRW, 8 September, pp. 92–3; and Kavanagh, M.J., Gueutal, H.G. and
Tannenbaum, S.O. op. cit., p. 32.
69. Cezar, A., Cavusoglu, H. and Raghunathan, S. (2014) ‘Outsourcing information security: contracting issues and security
implications’, Management Science, 60(3), pp. 638–57.
70. Carrell, M.R., Elbert, N.F. and Hatfield, R.D. (1995) Human Resource Management, 5th edn, Englewood Cliffs, NJ: Prentice
Hall, p. 747; and Roberts, B. (1999) ‘Who’s in charge of HRIS?’, HR Magazine, June, pp. 130–40.
71. This section is based on anonymous reviewer comments, July 1997; and Beautell, N.J. and Waler, A. J. (1991) ‘HR
information systems’, in Schuler, R.S. (ed.) Managing HR in the Information Age, Washington: Bureau of National Affairs,
pp. 6-197–6-198.
72. Carrell, M.R., Elbert, N.F. and Hatfield, R.D. op. cit., p. 738.
73. Lev-Ram M. (2011) ‘The best apps for business’, Fortune, 13 June, p. 28.
74. Cohesive Knowledge Solutions survey, cited Boyd, C. (2009) ‘Hooked on technology’, HRMonthly, September, pp. 25–8.

138  PART 1 Introducing HRM


75. Survey reported in Mather, J. (2013) ‘How to switch off for success’, The Australian Financial Review, 15 May, p. 41.
76. Cohesive Knowledge Solutions survey loc. cit.
77. Walker, R. (2013) ‘The cult of Evernote’, Bloomberg Businessweek, 28 February, pp. 61–5.
78. Bryant, C. (2014) ‘Daimler jams digital traffic as it offers staff a holiday email break’, Financial Times, 14 August, p. 1.
79. Jopson, B. and Harding, R. (2014) ‘Passenger safety at threat from taxi-hailing apps, says US union’, Financial Times,
3 July, p. 1.
80. Howarth, B (2010) ‘Can HR find a use for the iPad?, HRMonthly, October, pp. 15–17.
81. Mendonca, N. (2010) ‘Is social networking really bad for business?’, Human Resources, October, pp. 18–21.
82. Mainiero, L.A. and Jones, K.J. (2013) ‘Sexual harassment versus workplace romance: social media spill over and textual
harassment in the workplace’, The Academy of Management Perspectives, 27(3), 187–203.
83. Survey by ‘VitalSmarts’ reported in Fisher, A. (2014) ‘How Facebook employees use Facebook at work’, Fortune.com,
27 June.
84. Thomas, K.J. and Akdere, M. (2013) ‘Social Media as collaborative media in workplace learning, ‘Human Resource
Development Review’, 12(3), pp. 329–44.
85. Gravel, T. (2014) ‘Empowering the mobile workforce’, Bloomberg Businessweek, 11–24 August, pp. 51–5.
86. This section is based on material drawn from Holden, C. ‘Internet set to capture HR management’, (1996) HRMonthly,
August, p. 28; Greenard, S. (1995) ‘Catch the wave as HR goes online’, Personnel Journal, July, p. 59; Greenard, S. (1996)
‘Home, home on the web’, Personnel Journal, March, pp. 26–33; Bureau of National Affairs (1997) ‘Special survey report:
employers on the internet’, Bulletin to Management, 2 January, pp. 1–20; and Byars, L.L. and Rue, L.W. (2000) Human
Resource Management, 6th edn, Boston: McGraw-Hill, ch. 2.
87. Halzack, S. (2013) ‘Tapping into global talent pool’, The Australian Financial Review, 11 September, p. 41.
88. Thomas, K.J. and Akdere, M. loc. cit.
89. Gravel, T. (2014) ‘In pursuit of talent’, Bloomberg Businessweek, 5–11 May, pp. 8–10.
90. Holden, C. (1996) ‘internet set to capture HR management’, HRMonthly, August 1996, p. 28.
91. Ensher, E. A., Nielson, T. R. and Grant-Vallone, E. (2002) ‘Tales from the hiring line: effects of the internet and technology
on HR processes’, Organizational Dynamics, 31(3), pp. 224–5.
92. Ruël, H., Bondarouk, T. and Louise, J. (2004) ‘E-HRM: Innovation or irritation. An explorative empirical study in five large
companies on web-based HRM’, Management Revue, 15(3), pp. 364–81.
93. Strichmeier, S. (2007) ‘Research in e-HRM: Review and implications’, Human Resource Management Review, 17(1),
pp. 19–37.
94. Parry, E. and Tyson, S. (2011) ‘Desired goals and actual outcomes of e-HRM’, Human Resource Management Journal,
21(3), pp. 335–54.
95. Smith, W.P and Kidder, D.L (2010) ‘You’ve been tagged! (Then again, maybe not): Employers and Facebook’, Business
Horizons, 53, pp. 491–9.
96. LeMay, R (2008) ‘Offices face up to networking craze’, The Australian Financial Review, 18 January, pp. 1, 57.
97. Warner, B. (2013) ‘When social media at work don’t create productivity distractions’, Businessweek.com, 4 January.
98. Kaplan, A.M. and Haenlein, M.(2010) ‘Users of the world unite! The challenges and opportunities of social media’, Business
Horizons, 53, pp. 59–68.
99. Survey by ‘VitalSmarts’ reported in Fisher, A. (2014) ‘How Facebook employees use Facebook at work’, Fortune.com,
27 June.
100. Hamer, S. (2013) ‘Creating an effective workplace social media policy’, HR Focus, October, pp. 51–4.
101. McCarthy, B. and Cookson, R. (2013) ‘Sex, drugs and politics — Facebook reveals secrets you haven’t shared’, Financial
Times, 12 March, p. 13; and Vasaar, J. (2014) ‘Google runs foul of German law’, Financial Times, 1 October, p. 15.
102. Hamer, S. (2013) ‘Creating an effective workplace social media policy’, HR Focus, October, pp. 51–4.
103. Clarke, T. (2014) ‘Work wearables: policies needed’, The Age, 16 June, www.theage.com.au.
104. Reported in Clarke, T. (2014) ‘Work wearables: Policies needed’, The Age, 16 June, www.theage.com.au.
105. King, A. (2011) ‘Cloud-pleasing the clients’, The Australian Financial Review, 5 September, p. 44.
106. Palmer, M. (2011) ‘Storm of publicity for cloud computing’, Financial Times, 7 June, p. 15.
107. Lau, B. (2011) ‘Listed firms in pole position’, The Australian Financial Review — Special Report, 21 June, p. 53.
108. Delves Broughton, P. (2010) ‘Clouds are no longer blue-sky thinking’, Financial Times, 7 December, p. 14; and Hardy, Q.
(2014) ‘Cloud control’, The Australian Financial Review, 21–22 June, pp. 42–4.
109. Palmer loc. cit.
110. Corner, S. (2013) ‘Demand for cloud insurance tipped to surge’, The Age, 1 August, www.theage.com.au.
111. Howarth, B. (2010) ‘Send in the cloud’, HRMonthly, August, pp. 20–4.
112. Davies, S. (2014) ‘GM seeks head start on safety with gadget that eyes distracted drivers’, Financial Times, 1 September,
p. 1.
113. Hewett, J. (2014) ‘Cheques checked out long ago’, The Australian Financial Review, 26 August, p. 2.
114. Pettypiece, S. and Robertson, J. (2014) ‘Your hospital knows your secrets’, Bloomberg Businessweek, 7–13 July, pp. 21–2.
115. Connor, T. (2014) ‘How big data is changing a day at the ballpark’, Bloomberg Businessweek, 25–31 August, p. 10.
116. Howarth, B. (2013) ‘Big data is watching’, HRMonthly, September, pp. 36–37.

CHAPTER 3 Human resource information systems  139


117. ibid.
118. ibid.; and Mitchell, S. (2014) ‘Dymocks targets the right sort of lovers’, The Australian Financial Review, 10 September,
p. 17.
119. Evgeniou, T. and Niessing, J. (2014) ‘Big data move brings big business opportunities’, South China Morning Post,
2 August, p. B4.
120. Kharif, O. (2014) ‘ A short cut to cure Big Data headaches’, Bloomberg Businessweek, 2–10 August, pp. 30–1.
121. Evgeniou, T. and Niessing, J. loc. cit..
122. Based on material drawn from Byars, L.L. and Rue, L.W. op. cit., p. 35; Diers, C.D. (1990) ‘Personnel computing: make the
HRIS more effective’, Personnel Journal, May, pp. 92–4; and Miller, M. (1998) ‘Great expectations: is your HRIS meeting
them?’, HR Focus, April, pp. 12–20.
123. Based on Carrell, M.R., Elbert, N.F. and Hatfield, R.D. op. cit., p. 737.
124. Definition provided by anonymous reviewer, November 2003.

ACKNOWLEDGEMENTS
Photo: © Konstantin Chagin / Shutterstock.com.
Photo: © dolphfyn / Shutterstock.com.
Photo: © Giuseppe Costantino / Shutterstock.com.
Newsbreak: You are what you Facebook ‘like’: © ABC.

140  PART 1 Introducing HRM


CHAPTER 4

Human resource
management and the law
LEA RNIN G OBJE CTIVE S

After studying this chapter, you should be able to:


4.1 understand the importance of the law as it relates to HRM and distinguish between an employee and
an independent contractor
4.2 identify the sources of legal obligations in employment law, understand the importance of the contract
of employment and its essential terms, and recognise the amendments to the federal legislation by
the Fair Work Act 2009 (Cwlth) (Fair Work Act)
4.3 identify the legal requirements at various stages of employee recruitment and selection
4.4 understand the legal issues for HR professionals during employment
4.5 discuss the procedures for terminating employees and understand an employee’s rights of review
upon dismissal.

This chapter was written by John Lunny, who is the principal of an incorporated human resources legal
practice — Workplace Resolve Pty Ltd. John is a former Councillor and Queensland State President of
the Australian Human Resources Institute. He is an Adjunct Professor in Griffith University’s Department of
Employment Relations and Human Resources.

‘In January 2012, the Australian


Human Resources Institute
conducted a research survey
of all its members, the majority
of whom are practising HR
professionals. In response to
the question of how the Fair
Work Act 2009 had impacted
upon their job, 64.7 per cent of
respondents confirmed that it
had made it “more difficult”.’
‘The Fair Work Act: Its Impact Within
Australian Workplaces’, AHRI Research
Report, January 2012.
4.1 HRM and the law
LEARNING OBJECTIVE 4.1 Understand the importance of the law as it relates to HRM and distinguish
between an employee and an independent contractor.
Successful HR managers must be familiar with the numerous legal issues that govern the employer/
employee relationship. At its broadest level, the HR profession needs to be familiar with what is termed
‘labour law’. Labour law incorporates the law of employment, which governs the individual contract that
all employees have with their employer. It also includes industrial law, which regulates the manner in
which employees, as a collective group, relate with employers, or groups of employers. While it is beyond
the scope of this chapter to provide an exhaustive analysis of labour law, what follows is an attempt to
address the impact of legislation and the important legal issues that are faced daily by HR practitioners.

Employee or contractor
A critical determination is whether the provider of services in the form of work acts as an employee or
as an independent contractor. An independent contractor is a person who contracts their labour to another
entity for a specified purpose, but does not become an employee or agent of that entity. The hiring entity,
referred to as the ‘principal’, is not responsible for the actions of the independent contractor, nor does it
owe that independent contractor the same legal duties owed by an employer to an employee under labour
law. Independent contractors do not enjoy employee rights under the Fair Work Act 2009 (Fair Work
Act) (see the chapter on industrial relations), such as the right to make an application for relief for unfair
termination. Industries that rely heavily on such workers include the transport and construction industries.
However, the Independent Contractors Act 2006 (Cwlth), which came into effect on 1 March 2007,
and remains in force, will ensure that the rights, entitlements, obligations and liabilities of parties to
services contracts are governed by the terms of the contract, subject to the rules of common law, equity
and relevant employment law statutes.
The provisions of the Fair Work Act further create the offence of ‘sham contracting’ where an
employer masquerading as a ‘principal’ insists that the person it seeks to engage to perform work is an
independent contractor despite all the evidence otherwise to the contrary. Pursuant to those provisions,
for example, a Tasmanian holiday resort was fined almost $300  000 in a prosecution brought by the
Fair Work Ombudsman, when it was held to have moved or tried to move nine employees onto sham
arrangements, including a receptionist.1 Justice Shane Marshall observed that ‘Rights are a mere shell
unless they are respected. Employers need to understand that they cannot with impunity treat their
employees the way Maclean Bay treated theirs.’2
At common law, ‘employees’ are defined as workers employed under a contract of service, while
independent contractors are defined as workers engaged under a contract for services. This seemingly
simple distinction has been the subject of significant judicial consideration, with various legal tests
being adopted over time, but with no ‘golden formula’ established pursuant to which practitioners can
determine whether a person is an employee or an independent contractor (as we will see later in the
chapter).
The High Court case of Sweeney v Boylan Nominees Pty Limited highlights and applies the existing
common law distinguishing features of an employer/employee relationship and a principal/contractor
relationship.3 The factors that tend towards a relationship being classified as that of a principal/­contractor
are whether the service provider:
1. is not an employee of the principal
2. is providing skilled labour, which may require special qualifications
3. has control over the manner of performing their own work
4. provides their own tools and equipment to perform the work
5. is not presented to the public as an emanation of the principal.
These principles have to be taken into account in a holistic manner and weighed up against each other,
almost intuitively, in order to classify the relationship as that of principal/contractor. The distinction

142  PART 1 Introducing HRM


between employer/employee and principal/contractor may be important for issues such as vicarious
liability, where the employer is held to be liable for the actions of the employee.
In Fair Work Ombudsman v Quest South Perth (2015) HCA 45, the High Court of Australia confirmed
that even where a principal engages former employees through a novel labour-hire triangle, the
arrangement can still be declared an unlawful ‘sham’.

4.2 Sources of legal obligations


LEARNING OBJECTIVE 4.2 Identify the sources of legal obligations in employment law, understand the
importance of the contract of employment and its essential terms, and recognise the amendments to the
federal legislation by the Fair Work Act 2009 (Cwlth) (Fair Work Act).
There are several sources of legal obligations that interact to form the law of employment: contracts
(which may or may not incorporate workplace policies), statutes, statutory agreements, awards and the
common law.

Contracts
An employment contract will exist between the employer and the employee in all relationships of
employment. It is a myth that contracts of employment need to be written. Contracts of employment can
be either:
1. a written document signed by both parties
2. or a wholly or partly oral agreement (usually courts will infer the existence of a contract from when
work commences).
In drafting contracts, employers often fail to consider terms other than remuneration and hours of
work. This means that other important terms, such as probationary periods, termination notice periods,
redundancy payments and non-competition clauses, are absent from the contract. In the interests of
certainty, and in order to avoid the potential for costly and time-consuming litigation in the future, HR
managers are advised to include all material terms of employment in the contract itself.
Types of employment contract
Broadly, contracts of employment may take one of two forms: contracts of indefinite duration and
contracts of a fixed term. Contracts of indefinite duration are the most common type of employment
contract and provide that the employee will remain employed until either the employer or the employee
gives notice that they wish to terminate the employment. The requisite notice period is determined by
statute, statutory agreements or the contract of employment itself.
A fixed-term contract is one that is determinable at an expressly defined date or upon the completion
of a specific task. For example, an employee may be employed for a period of 12 months — the contract
will come to an end after that period. Or, they may be employed for the duration of a particular project,
and when that project ends, so does their employment relationship.
A contract will be for a fixed term only where the parties do not have the right to terminate the
contract before the specified time or the completion of the specific task. Where a party to a truly fixed-
term contract seeks to terminate prior to the expiry date, they could face a claim for damages with
respect to the unexpired balance. A contract that provides for 12 months service and provides that the
employment may come to an end upon the giving of notice will not be construed to be a true fixed-term
contract. This increasingly common style of contract has been described by the courts as an ‘outer limit
contract’ — that is, it will have the capacity to terminate with notice, but if that right is not exercised, it
will still expire at the end of its term.
A series of fixed-term contracts may indicate that a true construction of the relationship is one of
continuing employment rather than one of a fixed term.
Before the introduction of the Fair Work Act, employees retained under a contract for a fixed term
or a specified period of time were excluded from bringing a claim for unfair dismissal, whether their

CHAPTER 4 Human resource management and the law  143


termination occurred at the expiry of the term or before. The exclusion now operates only in cases in
which the termination was at the end of the specified period.

The advantages of a written contract


There are many advantages to having a written contract of employment. In particular, it removes any
doubts that the new employee may have about their rights and obligations. Surprisingly, parameters of
the job are a major area of dispute between the parties in an employment relationship. Employees often
comment, ‘I did not think that that was part of my job description’. Drafting a written contract has the
added benefit of forcing the parties to consider which terms they require in the contract. This means that
the parties select the terms that govern their relationship rather than allowing the common law to imply
terms that the parties may not desire.
Employment contracts need not be overly complex. They are inexpensive to draft and can ultimately
save employers time and money. However, conflict may arise if the terms of a contract are uncertain.
Ensuring attention to detail at the outset of contractual formation is likely to minimise trouble caused
by disgruntled ex-employees, both in terms of public relations and potential litigation. The more astute
HR manager, ever concerned with the prospects of unnecessary litigation, should take the initiative by
having all employees, and especially senior executives, enter into written contracts of employment. A
well-planned, well-drafted contract of employment ensures that the employment relationship commences
on the appropriate footing.
Figure  4.1 illustrates how a written contract provides for the essential aspects of the employment
relationship.

Hours

Supervision Work location

Promotion policy
Duties
and procedures
FACTORS FOR
Confidential CONSIDERATION Discipline policy
information IN EMPLOYMENT and procedures
RELATIONSHIPS

Leave Bonuses

Pay/wages Overtime

Benefits Superannuation

FIGURE 4.1 Essential terms of employment contracts

DOCTOR HR

Hi Dr HR
When I was interviewed for my current role, the recruitment agency made it clear that I was being offered
a long-term position. This was reinforced by the main company representatives. At the age of 58 I
had envisaged working here through to a retirement age of 65. When I received my written contract of
employment, it provided that employment could be terminated with one month’s notice or payment in
lieu. It was also expressed to be the ‘entire agreement’ between us. How much job security do I have?

144  PART 1 Introducing HRM


Workplace policy
A further advantage of having a written contract of employment is that the parties can confidently know
whether or not the contract, which provides for legally binding rights and obligations, incorporates a
workplace policy. A workplace policy may take the form of a document that declares itself to be The
Workplace Policy or it may take the form of guidelines or general directions to employees. What is
important, however, is that the workplace policy is of general application to employees, either as a whole
or in defined groups. It does not, like the contract, require any agreement as such.
A workplace policy can regulate virtually all aspects of employment, including recruitment, termination
(including redundancy), disciplinary procedures, confidentiality, occupational health and safety,
discrimination and equal employment opportunity. The following is a sample of an equal employment
opportunity (EEO) policy: ‘[Company X] is an equal opportunity employer. This company is committed
to providing equal employment opportunity preventing discriminatory practices and behaviour.’
Equal opportunity means that everyone’s success is determined by their talents and abilities. Employees
are judged on their ability to do the job based on their skills, qualifications and experience. A company
committed to equal opportunity should ensure that all performance reviews consider only factors relating
to an employee’s performance of their duties and responsibilities.
It is everyone’s responsibility to ensure that equal opportunity in the workplace is observed. All
employees have a right to be treated equally, and companies should expect all employees to treat their
fellow employees with the same standard of treatment.
In the case of Riverwood International Australia Pty Ltd v McCormick,4 a case decided by the Full
Bench of the Federal Court of Australia, a phrase in a contract that said ‘you agree to abide by all
company policies’ was held to incorporate all the terms of the workplace policy in the legally binding
contract. The incorporation of the policy in the contract permitted the employee to successfully sue the
employer for the very favourable redundancy benefits that were contemplated by the policy.
The Riverwood decision was applied in the leading case of Nikolich v Goldman Sachs J B Were
Services Pty Ltd,5 where it was held that workplace policy documents can potentially constitute a part
of an employee’s contract of employment. This would have the effect of contractually binding not only
employees, but also employers to adhere to their contents. The policies are likely to form part of the
binding contract of employment where they impose mutual obligations on the employer and employee
and are supplied to employees along with their contract of employment or letter containing an offer of
employment. Importantly, it appears to be the case that even if the contents of policies are altered over
time, they will remain contractually binding on employers and employees so long as mutual obligations
continue to exist and both parties are aware of those obligations.
HR managers must view obligations imposed upon them by workplace policies very seriously, whether
they be in relation to grievance procedures, general provisions for ensuring employee health and safety,
provisions for the prevention of workplace harassment or any other policy imposing similar obligations.
A failure to adhere to such policies will not merely create the likelihood of claims being brought
and damages being awarded against the employer in relation to the particular conduct (for example,
fines in the case of occupational health and safety prosecutions or pecuniary damages in the case of
discrimination claims), but will amount directly to a breach of the employee’s contract of employment.
This has now led to a more cautious form of drafting which expressly provides that policies do not create
any contractual obligation for an employer.

FAST FACT

In March 2012, the Federal Court upheld a post-employment restraint of two years’ duration preventing
a senior ex-employee and co-founder of the HR outsourcing business from joining a competitor. He was
said to be the ‘human face’ of his former employer and capable of ‘sprinkling fairy dust’ on prospective
clients. Notably, he was to receive a salary for 21 months of the 24-month restraint.6

CHAPTER 4 Human resource management and the law  145


Restraint of trade
In the current climate of increasing competition and mobile employment, contracts of employment play
an important role in minimising the losses incurred from employee turnover. They do so by attempting
to limit an employee’s ability to be engaged in a similar business to that in which the employee was
formerly employed, for a specific period after the termination. Contracts can also prevent ex-employees
from divulging confidential information and/or customer connections. Historically, courts have not been
inclined to uphold such clauses. The position at common law is that a restraint of trade is prima facie
void as against public policy. In order to rebut the presumption, the person seeking to enforce a restraint
must establish that the restriction is no wider than is reasonably necessary to protect a legitimate interest.
The employer will have to show that the former employee’s knowledge of and relationship with
customers, together with their acquaintance with the employer’s trade secrets, would, if competition were
allowed, enable the former employee to take advantage of the employer’s connections or confidential
information. The courts have made it clear that even if the employer can prove that a restrictive covenant
was intended to protect a legitimate interest, it will not be valid unless its scope is reasonable.
Reasonableness is assessed in terms of three factors that the covenant possesses, namely:
1. the nature and extent of the activities that the former employee is restricted from performing
2. the geographic area in which those activities cannot occur
3. the duration of the restraint.
The restraint must also be reasonable in the public interest. Reasonableness will be determined with
reference to the actual or foreseeable circumstances at the time that the contract was entered into, rather
than at the time when the employer sought to enforce it. Therefore, to be effective and act as a deterrent,
trade restraint clauses need to be carefully drafted.

Confidentiality agreements
A related and equally important issue in employment contracts is making provisions for employee
confidentiality during and after the course of employment. Although employer/employee common law
duties are mentioned later in this chapter, a well-drafted confidentiality agreement will assist in clarifying
the duties and obligations of an employee. Furthermore, it is easier to frame legal action against a former
employee for breach of a contractual clause as opposed to an implied duty.

Whistleblowers
Legislation has been enacted in most states and territories to offer some protection to what are
commonly called whistleblowers. The term applies to an individual, particularly in the public sector,
who becomes aware of some dishonest, corrupt or unethical dealings and seeks to properly disclose it in
the public interest. Without protective legislation, such public-spirited individuals could face legal action
for exposing what might otherwise be seen as confidential internal information. They could also face
retribution by way of reprisal or victimisation.
Typical of the legislative protection is the Whistleblowers Protection Act 1994 (Qld), the principal
object of which is to: ‘promote the public interest by protecting persons who disclose:
•• unlawful, negligent or improper conduct affecting the public sector
•• danger to public health and safety
•• danger to the environment.’7
Clearly, the emphasis is on the public interest, not the interest of a particular individual. It is not a
mechanism for pursuing private grievances or personal vendettas. Disclosure should also be made to
the appropriate entity, which may be the organisation itself or a parliamentarian. This latter route was
adopted by a nurse, Toni Hoffman, in the notorious ‘Dr Death’ scandal at Bundaberg Hospital, when
she felt that the internal complaint mechanisms of Queensland Health had completely failed her. On the
basis that a disclosure is in the public interest and is revealed to an appropriate entity (which does not
include the media), the whistleblower is excused from liability — that is, they cannot be held liable for
it, civilly or criminally, or under an administrative process.

146  PART 1 Introducing HRM


Any action by way of reprisal — causing detriment to the whistleblower — is an indictable offence,
which, in Queensland, could lead to up to two years imprisonment, as well as a claim for damages.
At the federal level, similar protection is given in the Corporations Act 2001 (Cwlth) to those officers
or employees of a corporation who feel driven in good faith to report a breach of the Corporations Act
or other illegal activity. This can be via an internal mechanism, or, more likely, by way of a disclosure to
the Australian Securities and Investments Commission.
Workplace intellectual property
An invention created by an employee in the course of their employment will usually belong to the
employer, not the employee. Having made a discovery or an invention in the course of such work,
the employee becomes a trustee for the employer of that invention or discovery, so that as a trustee the
employee is bound to give the benefit of any such discovery or invention to the employer.
However, this depends on the consideration of all the circumstances in each case and an interpretation
of the terms of employment. In the absence of a contractual obligation on the matter, express or implied,
the employer will have no legal claim to an invention. In such cases, it is open to a court to take a
restrictive approach to the employment relationship and hold that an invention was not made in the
course of the employee’s employment. The case review that follows, however, indicates that when the
facts do indicate a breach of contract, a court will be prepared to restrain employees.

An intellectual property case


Two senior academics in the field of international trade at Victoria University of Technology (VUT),
Prof. Wilson and Dr Feaver, were approached by a former student who sought university support for
the promotion of his company — World Trade On-Line Holdings Limited (WTO) — and its product
development plans. A key product was to be an electronic international trade exchange with a parallel
online education component. The approach was greeted with enthusiasm and the academics then
worked long and hard in developing the system and the software required. With another ex-student,
they formed a corporate entity to exclusively own the emergent intellectual property, and their
initiatives became independent of the initial WTO connection. Wearing the hats of both academics and
entrepreneurs, with a sophisticated web site in place, they took their product out to the open market.
Both believed that all of this was personal work alongside the scope of their employment with the
university, and they took out a personal patent application in their company’s name accordingly. In the
second half of 2002, their web site was accessed by a fellow academic at VUT, Dr Morris, who then
posed the question of how, consistent with their duties to the university, his colleagues could have found
the time to engage in this commercial activity. An investigation followed, as did a legal proceeding.

Contending claims
For the university, it was claimed, firstly, that its policy on intellectual property had been massively
breached and that the intellectual property concerned had been created in the course of employment.
Secondly, it was claimed that Wilson and Feaver had been unjustly enriched by diverting to themselves
a golden business opportunity for the university. Finally, it was asserted that they both owed high-level
duties of loyalty and good faith-fiduciary duties to the university, whereby they should not have taken
an advantage to themselves that should have fallen to the university. On that basis, it was argued the
invention and the software should be seen as held in trust by them for the benefit of the university.
The defendants’ position rejected the suggestion that there was any breach of their employment
terms, with the invention of the software not having been created in the course of their employment, but
rather in their own time, with no material contribution being made by the university.

Supreme Court decision


The Court held that it had never been contemplated that as part of Wilson and Feavers’ academic
employment, they would be expected to invent internet-based e-commerce systems. At least in the
latter stages, the work they carried out on the project was done on their own account. However, they
did stand in breach of their fiduciary duties of loyalty and good faith not to profit from their position at
the expense of the employer and to avoid conflicts of interest. The university could have done the work

CHAPTER 4 Human resource management and the law  147


and should not have been deprived of the option of doing so. The academics were required to surrender
their shares in the company and their interest in the intellectual property to the university. In determining
the balance of payments to be made, they would be entitled to compensation for any out-of-hours work
and expenses they could provide evidence for. VUT should not be unjustly enriched either.

Implications
An invention made during the term of a person’s employment will not automatically belong to the
employer, unless the invention was made in the course of employment as part of the employee’s relevant
duties. For employers to have a legal claim over an employee’s invention, it is advisable that they make
it clear in the employee’s contract of employment that all inventions made by them in the course of their
employment will be the property of the employer.
See Victoria University of Technology v Wilson [2004] VSC 33.

Moral rights
Additionally, although an invention or discovery made by an employee in the course of their employment
will generally belong to the employer, the employee may still have a number of moral rights. Since the
enactment of the Copyright Amendment (Moral Rights) Act 2000 (Cwlth), rights such as attribution of
authorship, a right against false attribution of authorship and a right to maintain the integrity of a work
may apply to an employee’s creative endeavour.
These moral rights cannot be assigned, transferred or waived. This means that, irrespective of where
the economic rights lie — that is, the copyright — the moral rights will remain with the author of the
work. This may represent a serious impediment to the interests of the copyright owner in commercially
exploiting the work. However, the Act does contain provisions whereby the author can consent to acts
or omissions that would otherwise constitute an infringement of moral rights. However, such consent
cannot be unconditional and limitations will apply.

Statutes
In any democratic society with a parliamentary system, an act of parliament notionally represents the
will of the people. As such, subject to the Constitution, its legal status is paramount. In the last few
decades, there has been massive statutory change to Australian workplace relations law, culminating in
the Fair Work Act.
The Fair Work Act aims for a unified system of industrial law in Australia, in one of its similarities
with the previous WorkChoices legislation. If an employee is employed by a national system employer,
generally a private sector entity or the Commonwealth, and is bound by the Fair Work Act, state industrial
relations (IR) Acts such as the Industrial Relations Act 1996 (NSW) will no longer apply. The Fair Work
Act also excludes other state and territory statutes that apply to employment and whose main purpose is
to regulate workplace relations.
However, non-industrial state and territory laws that deal with the prevention of discrimination, the
promotion of equal employment opportunity, superannuation, workers compensation, occupational health
and safety, and certain other non-excluded matters are still applicable to employees. These laws may
prescribe minimum conditions of employment that apply despite any express provision in the ­contract.
For example, equal opportunity statutes prohibit discrimination on the basis of such characteristics
as race, colour, sex, transgender, sexual preference, age, physical or mental disability, marital status,
family responsibility, pregnancy, religion, political opinion, national extraction or social origin, in areas
such as hiring, remuneration, promotion and termination — for example, see Human Rights and Equal
Opportunity Commission Act 1986 (Cwlth), Racial Discrimination Act 1975 (Cwlth), Sex Discrimination
Act 1984 (Cwlth) and Disability Discrimination Act 1992 (Cwlth).

148  PART 1 Introducing HRM


The scope of the employment relationship that statutes cover is broad and includes provisions to the
effect that:
•• employers must not dismiss an employee in a manner which is ‘harsh, unjust or unreasonable’ — Fair
Work Act
•• parties to the employment relationship and, indeed, their workplace responsibilities must not take
adverse action in response to the exercise of a workplace right under the ‘General Protections’
provisions of the Fair Work Act
•• employers must allow their employees to take the minimum amount prescribed of annual leave and
long service leave — for example, see Fair Work Act, Annual Holidays Act 1944 (NSW), Long
Service Leave Act 1955 (NSW), Long Service Leave Act 1992 (Vic.) and Long Service Leave Act
1958 (WA)
•• employers must pay superannuation to their employees — see Superannuation Guarantee (Adminis-
tration) Act 1992 (Cwlth). (This is a complex area that usually requires professional advice.)
•• employers must obtain insurance against workers compensation claims — for example, see Safety,
Rehabilitation and Compensation Act 1988 (Cwlth), Workers Compensation Act 1987 (NSW),
Accident Compensation Act 1985 (Vic.) and Workers Compensation Act 1990 (Qld)
•• an employer must ensure the health and safety of all employees and others in the working
environment  — for example, see Occupational Health and Safety Act 2000 (NSW), Occupational
Health and Safety Act 1985 (Vic.), Workplace Health and Safety Act 1995 (Qld), Occupational Safety
and Health Act 1984 (WA), Occupational Health, Safety and Welfare Act 1986 (SA) and Occupational
Health and Safety Act 1989 (ACT).

The National Employment Standards (NES)


The Fair Work Act stipulates ten minimum employment standards that apply to all national system
employees, regardless of income level and applicable from 1  January  2010. These entitlements are
­collectively referred to as the National Employment Standards (NES). They will provide the foundation
upon which modern awards and enterprise agreements will be created. Leaving the contract of
­employment to one side, the industrial rights of an employee can then be sourced from three main
streams  — NES, a modern award and an enterprise agreement — if the latter two operate in the
workplace or trade.
The standards are, in summary form, as follows.
•• Maximum weekly hours. Thirty-eight hours plus reasonable additional hours. The NES also sets out a
list of factors to be taken into account when deciding if additional hours are reasonable. These factors
include the employee’s personal circumstances, such as family responsibilities.
•• A right to request flexible working arrangements. Allows for employees who are parents, carers,
disabled, over 55 or subject to domestic violence to seek altered work arrangements.
•• Unpaid parental leave. Provides for 12 months with an eligibility requirement of 12 months service.
A separate paid parental scheme also operates.
•• Annual leave. Four weeks, or if the employee is a shift worker as defined by an award, 5 weeks.
•• Personal/carer’s leave. Ten days per year.
•• Community service leave. This provides an entitlement for employees to take a paid absence from
work for jury service or voluntary emergency management activities.
•• Long service leave. The NES will preserve long service leave entitlements, which are currently
provided for in a workplace agreement or where there is no such agreement, as contained in State or
Territory Laws.
•• Public holidays. The usual holidays are provided for, plus an entitlement to be absent from work on a
public holiday unless the employer reasonably requires the employee to work. Again, an employee’s
personal circumstances, including family responsibilities, are one of the factors to be taken into
account when assessing ‘reasonableness’.

CHAPTER 4 Human resource management and the law  149


•• Notice of termination and redundancy pay. The scale of minimum notice requirements based on
length of service are the same, but the notion of a statutory minimum redundancy payment has been
introduced for the first time.
•• Fair Work Information Statement. Employers are required to provide employees with a copy of the
Fair Work Information Statement.
Finally, we should note that the Fair Work Act sets out the statutory conditions that must be met for
any industrial action to be ‘protected’ (that is, immune from any legal challenge). A strike or ban on
behalf of employees, or a lockout on behalf of employers, will normally equate to a breach of contract.
Where the protected-status requirements have been met (for example, a secret ballot in the event of a
strike or ban), there will be little in the way of remedy.

Statutory agreements
The Fair Work Act radically remodelled the statutory agreement, changing processes which went
before it. Gone is the capacity for an employer and an employee to enter into an Australian Workplace
Agreement, which was a type of statutory individual contract. Also no longer available is the option of
an employer-only greenfields agreement for new start-up projects. Key elements of the new agreement-
making regime include the following.
1. Collective bargaining leading to collective enterprise agreements will be the ruling ethos. An employer
will no longer have the right to decline the invitation to collectively bargain if the majority of its
employees expressly desire it.
2. An enterprise agreement is made between an employer and its workforce. Unions can seek to be
covered by the agreement and, hence, have a legitimate say in its future operation, but they are no
longer parties principal to it.
3. All employees are entitled to appoint a bargaining representative in the course of negotiation for
an enterprise agreement. This bargaining representative could be a union, a third party or even
themselves.
4. The agreement is made when a majority of those employees who cast a valid vote approve it.
5. The enterprise agreement comes into effect when it is approved by the Fair Work Commission, the
body replacing the former Fair Work Australia and the Australian Industrial Relations Commission.
6. Approval will be subject to the enterprise agreement passing what is known as the ‘better off overall’
test, compared to the terms of a modern award which would apply.
The agreement must also contain the mandatory terms and not contain any terms which are beyond
those permitted or which are unlawful. The long list of prohibited content contained under the former
WorkChoices regime has largely been scrapped. Mandatory terms include the following.
1. A flexibility term which enables the employer and employees to enter into ‘individual flexibility
arrangements’ having the effect of the agreement to their mutual benefit. That arrangement itself must
satisfy the ‘better off overall’ test.
2. A consultation term which obliges the employer to engage in consultation with the workforce in the
event of any major workplace changes.
Unlawful terms include those which are discriminatory or objectionable in effect, seeking to either
grant additional rights inconsistent with the legislation or to remove rights similarly inconsistent with
the legislation. No provision can represent, for example, diminution of any of the NES entitlements. In
particular, the expectation is that only matters pertaining to the relationship between an employer and its
employees will be permitted.
Finally, with respect to the creation of enterprise agreements, we should note the important statutory
requirements that all parties bargain in good faith. The Fair Work Act sets out what it considers to be the
hallmarks of good faith bargaining. They include:
•• attending and participating in meetings at reasonable times
•• discussing relevant (non-confidential) information
•• responding to proposals in a timely manner

150  PART 1 Introducing HRM


•• giving genuine consideration to any proposals put forward and explaining any response to them
•• an absence of capricious or unfair conduct
•• recognising and engaging with other bargaining representatives.
Note that most of these requirements are procedural and not substantive. Good faith bargaining does
not require the making of any concession, nor does it require that any agreement is ultimately reached.
Nevertheless, Fair Work Commission has been given enlarged powers to consider powerful orders when
bargaining parties are not acting in good faith. The importance of positive employee engagement as a
precursor to a healthy working relationship is discussed in the next feature.

DOCTOR HR

Hi Dr HR
I’ve been told by my future boss that I’m not entitled to have a bargaining representative present when
I negotiate an enterprise agreement. Is this legal, or am I entitled to have a third party, such as a union
representative, attend the negotiations?

Modern awards
An award is a piece of delegated legislation determined by an industrial tribunal. They were originally
made in settlement of industrial disputes. Previously, awards were the primary source of employment
obligations for most Australian employees and employers. The Workplace Relations Act 1996 (Cwlth),
through the introduction of WorkChoices in 2005, sought to lessen the importance of awards through
its award rationalisation and simplification provisions and its encouragement of individual bargaining of
terms between employers and employees. The Fair Work Act significantly reverses that trend (see the
chapter on industrial relations).
Under the new regime, awards are not to be rationalised and simplified and left to ‘wither on the
vine’ as was the goal of the previous legislation. Awards are now modernised, which involved a massive
program of consolidation of state and federal instruments with a goal of reducing the thousands down
to some 122 or so operating on, generally, either an industry base or a trade or occupation base. A
strong or reinvigorated award system is one of the key components, along with the NES and enterprise
agreements, of the Fair Work Act’s security and safety net structure. So, modernised awards sit alongside
the foundational NES, which will apply to all national system employees and will be supplemented, as
required, by the contents of enterprise agreements (as discussed previously).
The task of award modernisation fell to the Australian Industrial Relations Commission in one of its
last major projects before it was absorbed into the successor body, now the Fair Work Commission. It
is important to recognise that while certain employees may be ‘covered’ by the modern award, it may
not apply to them. It is envisaged that modern awards will not cover or apply to employees who have
been historically ‘award-free’. Those who have a written guarantee of an income of $136  700 per annum
or more will be excluded. A modern award will not apply where there is an enterprise agreement in
­operation. Furthermore, a modern award must contain the capacity for individual flexible arrangements
in similar terms to the provisions discussed with respect to statutory agreements.
Accordingly, it is still necessary for HR managers to understand what an award is, and be aware of
all awards relevant to their organisation. Awards specify minimum terms and conditions of employment.
They are the creatures of state and federal industrial tribunals and have the effect of being legally binding
on those to whom they apply. That application will depend on whether the award is industry- or trade-
based. Any employer, for example, who employs clerical and administrative staff will be required to
observe the minimum entitlements of the modernised clerks award.
HR managers and employees should be aware of which award applies to an employee’s work and
where they can inspect a copy. Copies of awards and information on them can be obtained from state
and federal IR departments.

CHAPTER 4 Human resource management and the law  151


NEWSBREAK

Pizza Hut delivery drivers claim they


are significantly underpaid BY TESS BRUNTON
A number of delivery drivers for the Pizza Hut chain in New South Wales, South Australia and Victoria
have told the ABC’s PM program they are being underpaid and are struggling to pay for bills and petrol.
The drivers said they are paid significantly less than the minimum wage, but said when they went to the
Fair Work Ombudsman their complaints fell on deaf ears. It mirrors the scandal over low wages paid for
employees at 7-Eleven outlets that was uncovered earlier this year.
Lachlan Forsberg delivered pizzas for Pizza Hut for three years. ‘It was $5 a delivery, but we were
guaranteed two deliveries an hour,’ he said. He said he drove his own car and Pizza Hut provided no
insurance or money for petrol. ‘If we did
have a crash then we wouldn’t be able to
work and it wasn’t our own car anyway, or
if we were say short $10 after the week is
gone and we had a shift and we didn’t have
any money, we couldn’t work, because we
couldn’t buy petrol.’
Mr Forsberg and his colleague, who
wants to be known as Tony, discovered
their employment agreement meant
they were being paid below the national
minimum award. ‘I was like, “oh that’s a
little bit messed up”,’ Tony said. ‘I was
under the impression that from that
document, we should have been paid a
different rate.’
The pair approached the Fair Work
Ombudsman last year about their work
conditions. ‘I was talking to Fair Work,
and Fair Work had basically said “Look,
you can’t do anything about it other than
going and requesting that the agreement
be remade because it’s out of date,”’ Tony said. ‘“It’s like five years old, things have changed”. “Push to
get the document redone with better rates” and everything like that.’
In a statement, the Fair World Ombudsman said it is ‘not currently investigating requests for assistance
relating to Pizza Hut delivery drivers’. ‘Pizza Hut has several different enterprise agreements that apply
nationally to delivery drivers,’ it continued. ‘All agreements will be underpinned by the minimum hourly
base rates in the Fast Food Award.’
Under the Fast Food Industry Award, employees who deliver meals should be paid $18.98 per hour.
In addition, drivers who use their own car should be paid an allowance of 41 cents per kilometre.
Tony said for most of his three-year career with Pizza Hut he was paid under $10 per hour. That was
increased last year to a minimum of $12 an hour but that is still well below the award rate. ‘Really, if I
want to look at it, I’ve probably run a huge loss this entire time because you use your own petrol in the
car and you’re not getting covered for any of it and there’s nothing in any of these agreements saying
that they should be paying your petrol,’ Tony said.
Gerard Dwyer is the national secretary of the Shop, Distributive and Allied Employees Association
(SDA), which is the union for fast food workers. ‘If people are getting paid $12 per hour as a result of
delivering pizzas, it’s simply not legal,’ he said. ‘The SDA’s standards is that we completely reject that as
a proper compensation for the work performed.’
When approached for comment, Pizza Hut said in a statement it is ‘not aware of the specific contract
described’. ‘This contract, if authentic, is inconsistent with Pizza Hut’s enterprise agreement which
is in place for Pizza Hut franchisees,’ it continued. ‘Pizza Hut with its franchisees have negotiated a
national enterprise agreement with the Shop, Distributive and Allied Employees Association under which
includes rates of pay for drivers and team members.’

152  PART 1 Introducing HRM


Professor Andrew Stewart from the University of Adelaide alleges the SDA has negotiated poor deals
in some agreements. ‘The role of the SDA here is an interesting one,’ he said. ‘It’s not unusual for the SDA
to negotiate enterprise agreements, which when they’re scrutinised by the Fair Work Commission are
found to be below award standards, and it’s quite common for the commission to ask for undertakings
from the relevant employer that the agreement be improved in certain respects in order to ensure that it
passes the better off overall test.’
Mr Dwyer said he does not accept that. ‘The agreement that’s in place at the moment was registered
before the Fair Work Commission and our attempts to get a new enterprise agreement in place would
again be scrutinised by the Fair Work Commission, and that’s as it should be,’ he said.
The union is now trying to negotiate a new enterprise agreement.
‘There are processes in place now to try and arrive at a new agreement to register in 2016,’ Mr Dwyer
said.
Source: Brunton, Tess (2015) ‘Pizza Hut delivery drivers claim they are significantly underpaid’, ABC News, www.abc.
net.au, 20 November.

EXERCISE
As a class, discuss the article and its implications for HRM. How would you advise Pizza Hut to handle this
situation?

Common law
The common law is ‘case law’ that has developed in the court system. On one level, the body of previous
judgements that comprise the common law guides how we should interpret the other sources of law such
as statutes. Furthermore, the common law is itself a source of legal rights and obligations. The doctrine
of precedent holds that the courts must decide like cases alike. On this basis, we can predict how courts
will decide cases before them and define the law on that basis. The general duties of the parties to an
employment relationship are prescribed by the common law.

Employers’ and employees’ common law duties


At common law, employers have clear obligations to their employees. These include the employers’
duties to:
•• pay employees’ wages, as well as reasonable expenses incurred in the course of employment
•• give employees reasonable notice of the termination of employment
•• take reasonable care for the health and safety of employees
•• indemnify an employee for losses incurred by the employee during the course of employment
•• provide work for employees who are paid on commission or on a piece rate, or who need to maintain
their public profile (such as actors) or highly specialised skills.
However, employers are under no common law duty to:
•• provide work for employees other than those described; although the employer will remain bound by
the implied duty to pay wages notwithstanding that no work is required
•• provide a reference for former or current employees
•• provide medical care to employees while they are at work (although an employer must obtain medical
care if there is an accident)
•• provide accommodation to employees.
Note, the controversy over whether an employer owed an implied duty of mutual trust and confidence
has been settled by the decision of the High Court of Australia in CBA v Barker (2014) HAS 32. There
it was found that such a term was not part of the common law of Australia.
It must be noted that the employer may have duties such as those listed if such duties are expressly
provided for in the contract.

CHAPTER 4 Human resource management and the law  153


Similarly, employees’ owe common law duties to their employers. These include the employees’
duties of:
•• obedience — employer’s directions/orders that are lawful and reasonable must be followed
•• good conduct — employees owe their employer a duty to not engage in misconduct in the course of
their employment; misconduct includes theft, being under the influence of intoxicating substances and
violence in the workplace
•• working in a skilful manner, where the employee made a representation that they possessed such skills
•• indemnifying their employer for losses incurred by the employer while performing duties under the
contract of employment (this duty has been overturned by statute in New South Wales, South Australia
and the Northern Territory — see, for example, s. 3 of the Employees Liability Act 1991 (NSW)
•• cooperating with their employer
•• fidelity and good faith — the employee owes their employer a duty to:
–– not accept bribes or secret commissions/profits for work that is done in the course of employment
–– hold on trust for the employer the benefit of any inventions that they make during the course of
employment
–– not disclose or otherwise use the employer’s confidential information in a manner inconsistent with
the wishes of the employer.
Employees are under no common law duty to:
•• volunteer information about their past or present misconduct
•• conduct work that is demonstrably different from that which they contracted to perform.

4.3 Employee recruitment and selection


LEARNING OBJECTIVE 4.3 Identify the legal requirements at various stages of employee recruitment
and selection.
A myriad of laws govern arrangements for selecting and engaging employees. These laws are
well established and need to be considered by HR managers. The following areas require particular
consideration in the pre-employment phase:
•• the job advertisement
•• the job description
•• the application form
•• the interview.
Before discussing these areas, it is necessary to provide an overview of the anti-discrimination laws.

Discrimination
Unfair discrimination is a central concern for HR managers as it pervades all stages of the pre-­
employment process. As noted earlier, employers must not unfairly discriminate against employees on
the basis of race, colour, sex, transgender, sexual preference, age, physical or mental disability, marital
status, family responsibility, pregnancy, religion, political opinion, national extraction or social origin,
in areas such as hiring, remuneration, promotion and termination — for example, see Australian Human
Rights Commission Act 1986 (Cwlth), Racial Discrimination Act 1975 (Cwlth), Sex Discrimination Act
1984 (Cwlth), Disability Discrimination Act 1992 (Cwlth) and the Fair Work Act.8
It should be noted, however, that discrimination on some grounds such as age will not be unlawful
if there is a genuine occupational requirement and/or inherent requirement of the job that would render
certain individuals unsuitable for the position. Indeed, some discrimination is specifically required by
legislation. For example, because each Australian state provides that liquor may be sold only by persons
above the age of 18 years, it is lawful for a seller of alcoholic beverages to refuse to employ a person
under the age of 18 years.
In other cases, differing treatment of classes of persons on the basis of gender, for example, is
permitted, if not encouraged, under statute. For example, at the federal level, the Workplace Gender

154  PART 1 Introducing HRM


Equality Act 2012 (Cwlth) requires private companies with more than 100 employees to develop an equal
opportunity in the workplace program. These employers must lodge an annual report on the assessment
of the program with the Workplace Gender Equality Agency. An equal opportunity program need not be
limited to gender equality. The introduction of special measures such as flexibility in uniforms to cater
for differing cultural/religious requirements is a simple provision that may assist in demonstrating that a
previously disadvantaged group is better represented in the workforce.
Unfair discrimination can be direct or indirect (see table 4.1). Direct discrimination is the most easily
identifiable form, and occurs where a person or group is treated less favourably than another person or
group would be treated in similar circumstances. Indirect discrimination involves practices that appear to
be inoffensive, but result in a person or group being unreasonably disadvantaged.

TABLE 4.1 Direct discrimination versus indirect discrimination

Direct discrimination Indirect discrimination

Definition Treating a person or group less A practice that appears inoffensive, but that
favourably than another person or results in a person or group being unreasonably
group in similar circumstances. disadvantaged.

Example An employer dismisses a woman purely A company makes promotion dependent upon
on the basis of her gender. five years continuous service. This disadvantages
women who may be more likely to take time off
to have children.

Remedy Damages — pecuniary loss, hurt, loss Damages — pecuniary loss, hurt, loss of career
of career prospects, stress, humiliation. prospects, stress, humiliation.

The following is an example of a decision concerning discrimination in the pre-employment phase.

Discrimination at Virgin Blue


When Virgin Blue commenced its flight operations in Australia in mid 2000, it had two major competitors,
Qantas and Ansett. Virgin Blue’s terms and conditions of employment, as a so-called low-budget airline,
were considerably inferior to the established carriers, so very few applications for employment were
made to it from Qantas or Ansett employees.
This changed with the demise of Ansett’s operations in September 2001, when its redundant
workforce, including flight attendants, were driven to seek alternative employment, including with Virgin
Blue. When eight ex-Ansett flight attendants’ applications were rejected, they brought a case claiming
unfair discrimination on the grounds of age. They were all over 35 years of age. Virgin Blue’s recruitment
processes involved a critical assessment stage where 60 or so applicants spent time with one Virgin
Blue assessor for each ten people. What was being assessed was ‘behavioural competencies’ —
assertiveness; teamwork and communication — and more controversially, a quality described as ‘Virgin
Flair’, which was ‘a desire to create a memorable, positive experience for customers. The ability to have
fun, making it fun for the customer’.
Despite finding that the cabin-crew competencies sought were relevant, the Commission was
inevitably troubled by the statistical evidence. It was shown that from over 750 applications from
candidates over 35  years of age, only one person was employed, leading to the inference that some
sort of ­ discrimination, whether intentional or unintentional, was operating. These were not ‘age
neutral’ results as intended — something was going wrong. The young assessors were found to be
unconsciously discriminating on the basis of age in favour of their contemporaries, with whom they
more closely identified on a biased ‘similar-to-me’ basis.
A finding was made of direct discrimination on the basis of age and the complainants received
damages for professional and economic loss and costs accordingly.
See Hopper & Ors v Virgin Blue Airlines [2005] QADT 28.

CHAPTER 4 Human resource management and the law  155


This case serves as a practical example to HR professionals that unlawful discrimination is taken very
seriously by the law and can result in expensive litigation when things go wrong. More specifically, this
case indicates that employers need to closely monitor their recruitment and selection outcomes to ensure
that there is no unlawful and unconscious bias affecting those outcomes.

The job advertisement and legal requirements


HR managers must be careful when publicising a job vacancy that the advertisement does not indicate,
or could not reasonably be understood to indicate, an intention to act in a manner that is discriminatory
under any of the legislation. The Acts make it clear that an employer need not actually do anything
discriminatory. The legislation is specifically concerned with an indication, or terminology within an
advertisement that could reasonably be understood as an indication, of an intention to contravene the
provisions. An advertisement that includes such phrases as ‘cleaning lady wanted’ or ‘seeking an office
boy’, for example, would offend the provisions. Single gender references such as ‘waiter required’ or
‘cameraman needed’ should also be avoided in favour of gender-neutral references such as ‘waiter/
waitress required’ or ‘camera operator needed’.
Two groups of people may be liable — the employer who provides the advertisement for publishing,
and the publisher. The fine imposed may not be great, but HR specialists should be careful to operate
within the legislative requirements. Aside from the bad public relations, any hint of discrimination at
the recruitment stage may be used later by a disgruntled employee alleging discrimination in an unfair
dismissal action. The following case concerned discriminatory language in a job advertisement.

‘Young team’ is discrimination


Peter Gardener, a 46-year-old chef, spotted a newspaper advertisement that read ‘Chef Req for day
work, classy restaurant/café, young team’ which closed with a telephone number that he then called.
It was answered by the proprietor, Bronwyn; one of whose first questions was ‘How old are you?’
He replied, ‘I am over 21’. At his suggestion, he dropped off a copy of his resume at the café, where he
then had a face-to-face discussion with Bronwyn. Upon being asked again, he revealed his age to
be 46, to which she replied, ‘We only have a young team’. She said she would call him next week, but
he never heard anything further.
The café denied that using the words ‘young team’ in the advertisement indicated a preference
for younger applicants. The tribunal held that the use of the term ‘young team’ in the newspaper
advertisement ‘clearly evidences a fundamental interest by the first respondent in the applicant’s
age in the process of deciding who should be offered the work that was on offer’ equating to direct
discrimination in contravention of the legislation.
See Gardener v Norcott [2004] QADT 39; Human Rights Commission v Eric Sides Motor Company Limited (1984) EOC
para 92–006.

The job description and the law


To ameliorate the danger of later accusations of discrimination, or complaints that an employee’s duties
are not part of their role, it is important to prepare a concise and accurate description of the position
to be filled. The preparation of an unambiguous job description is also a prudent manner in which HR
managers can ensure that a prospective employee is not misled in any way about the nature of the job
(see chapter 5). Misleading or deceptive information given to applicants in the pre-employment process
may breach section 31 of the Australian Consumer Law — to be found at Schedule 2 of the Competition
and Consumer Act 2010 — (a repeat in substance of section 53B of the former Trade Practices Act
1974), which specifically prohibits conduct liable to mislead persons seeking employment. The job
description should generally be made available at the interview, if not before.
A HR manager preparing a job description should not re-use old versions of job descriptions (which
may be out of date) or reproduce sample job descriptions from other organisations (which may be

156  PART 1 Introducing HRM


i­nappropriate). Instead, the HR manager should consider the employer’s present and future expectations
of the employee performing the particular job being described. In doing this, the HR manager should
allow for sufficient flexibility in the job description for the job to evolve. However, the basic elements of
all job descriptions are:
•• the title of the position
•• the qualifications required
•• the level of experience required
•• the level of responsibility that the position holds
•• the person to whom the employee must report.

Application forms
While there are no direct legal requirements in Australia regarding application forms, there are certain
enquiries that are prohibited by relevant equal opportunity and anti-discrimination legislation.
The application form should be concise and include enquiries that are relevant only to deciding
whether an applicant should be interviewed for the particular position. Other relevant but non-essential
issues should be covered at the interview.
It may be appropriate for a company to utilise more than one type of application form. The information
required may vary depending on the position to be filled. For example, the information required from
a person applying for a wage-based position may be different from that sought from a person applying
for a salaried position. It is suggested that HR managers develop application forms tailored for different
positions within the company,
which will allow them to obtain
the necessary information from the
potential employee so as to assess
whether they should proceed with
the interview process.
An application form should
contain no discriminatory
language and must not mislead
or deceive prospective applicants
with respect to any facet of the job
(see chapter 7).
Enquiries as to the applicant’s
age, religion, gender, country
of birth, nationality and marital
status (unless it is specifically
relevant to a genuine occupational
requirement) should not be included. Enquiries should focus on the inherent requirements that are
relevant to the applicant’s capacity to perform the requisite functions of the job. Otherwise, prospective
employees may have grounds for raising a discrimination claim against the employer, on the basis that
they were denied employment because of prohibited discriminatory reasons.

Freedom of (and from) association


Section 346 of the Fair Work Act, part of the ‘General Protections’ regime, which now outlaws a wide
range of discriminatory conduct, seeks to ensure that, in accordance with the Australian democratic
tradition of freedom of association, employees are free to join or not to join organisations such as trade
unions. A prospective employer must not refuse to employ a person or take adverse action against
any person on the basis that they are, or are not, a member of an employee organisation such as a
trade union. In the case of Jones v Britax Rainsford Pty Ltd,9 Commissioner Larkin was critical of an
application form that asked the question: ‘Are you a member of a union or staff association? If yes,

CHAPTER 4 Human resource management and the law  157


name the organisation.’ The Commissioner commented that this question was not relevant to the job
and that an employee found to have answered the question dishonestly could not be terminated on this
ground. At appeal, the Full Bench of the Commission did not vary this conclusion.10 HR managers are
recommended to refrain from asking such questions in their application forms or during the interview
stage.

Age
Application forms often ask job applicants to disclose their age. However, as discrimination on the
grounds of age is unlawful, employers should avoid questions pertaining to age wherever possible.
An exception to the general prohibition against pre-employment enquiries concerning age relates to
the employment of juniors. Employers are permitted to advertise for and employ juniors under the age
of 21 and pay them junior rates. Questions aimed at identifying an applicant’s age for this purpose are
not discriminatory. Employers may also need to question juniors as to their age in order to determine
whether they are legally permitted to work. Generally, it is an offence for employers to employ a child
unless the child has attained the age of 15. This is also pertinent to where the employer is involved in the
business of selling alcohol and the employee must have a minimum age of 18.

Sex
Commonwealth, state and territory anti-discrimination legislation makes it clear that discrimination in
employment on the basis of sex, marital status, pregnancy or family responsibilities is prohibited. At
the Commonwealth level, the Sex Discrimination Act 1984 (Cwlth) provides that only where there is a
genuine occupational qualification to be of a certain sex is such discrimination permitted. For example, s.
30 of the Act provides that where the employment is for a dramatic performance and for the purposes of
‘authenticity, aesthetics or tradition’ the role is required to be performed by a member of a particular sex,
discrimination on that basis is not unlawful. Questions on application forms should therefore not enquire
about a person’s sex, marital status, state of pregnancy or otherwise, or family responsibilities. However,
if the position requires a great deal of travel, time away from home or other permitting circumstances,
it is entirely lawful to ask applicants whether or not they are willing to meet such requirements of the
position.

Physical and mental capacity


Questions regarding physical and mental capacity are proscribed by most state legislation. Generally,
such questions are unnecessary unless it can be demonstrated that a particular physical or mental attribute
is required. In this case, questions should be carefully worded so as to avoid contravening the legislation
(and offending the person applying for the job!). The wording should tie the question to the applicant’s
ability to perform the required duties — for example, ‘Can you work under certain conditions, such as
wet or humid environments?’ or ‘Can you distinguish between different colours and accurately identify,
for instance, whether a particular electric wire is red or green?’
If the selection criteria include the ability to perform tasks that clearly require certain physical
attributes, the applicant may be required to undergo a medical examination or produce a recent medical
certificate. Such physical requirements should be described in the job advertisement.
Criminal convictions
It is quite common for application forms to contain questions regarding criminal convictions. Although
it is generally permissible to ask questions relating to past criminal convictions (although not to previous
arrests), it is necessary to be aware of the ‘spent convictions’ — legislation that exists in many states
and is being considered in others. Nuances of this area of the law will depend entirely upon the relevant
jurisdiction. In New South Wales, the relevant legislation is the Criminal Records Act 1991 (NSW).
Part  II of this Act provides that a conviction, except one in which a prison sentence of six months or
more was imposed or a conviction for a sexual offence, becomes ‘spent’ after a 10-year crime-free
period. A person with a spent conviction is not required to disclose that spent conviction to any other

158  PART 1 Introducing HRM


person, unless that disclosure relates to certain proscribed appointments or employment, such as a judge,
magistrate, justice of the peace, police officer, prison officer, teacher, teacher’s aide or a provider of
childcare services. Further exclusions are provided for in the Criminal Records Regulation 1999 (NSW).
A decision of the Anti-Discrimination Commission of the Northern Territory indicates that a
requirement that applicants submit to a criminal background check may be inappropriate in certain cases.
In the case of Hosking v Fraser t/a Central Recruiting,11 an application form produced by a company
that required applicants for the position of nurse in an isolated Aboriginal community to submit to a
criminal background check without any reference to the relevance of the check, the relevance of any
criminal record and to such matters as ‘spent convictions’ was found to be unreasonable.
Employers need to be aware of the ‘spent convictions’ legislation in their state when preparing job
application questions concerning criminal convictions.

FAST FACT

In a review of 2700 UK job applications across a range of sectors, researchers found that 56 per cent of
applications were found to contain lies or omissions; this figure rose to 70 per cent for IT contractors.12

References and previous employment


The application form will usually provide for the applicant to nominate referees. The HR manager
should seek the applicant’s permission to contact any person not nominated as a referee. The HR
manager should also consult the applicant before contacting previous employers or checking academic
qualifications. Later in the interview the applicant may be asked why they left a previous position of
employment (see chapter 7).
In making an application for employment, a prospective employee has no obligation or duty to reveal
information such as past faults or misconduct if it is not asked of them. In the famous English case of
Bell v Lever Bros,13 Lord Atkin stated the position of the common law regarding the rejection of any
imposition on employees to voluntarily disclose past acts: ‘the [employee] owes a duty not to steal, but,
having stolen, is there superadded a duty to confess that he has stolen? I am satisfied that to imply such
a duty .  .  . would be to create obligations entirely outside the normal contemplation of the parties.’
In the case of Concut Pty Ltd v Worrell and Another,14 the High Court of Australia considered
this position of the law. However, it is lamented that the court missed an opportunity to make a clear
authoritative statement regarding disclosure of past acts in employment. As such, the law remains that
unless an applicant is directly asked to disclose relevant past misconduct, there is no obligation to
volunteer such information.
An example of the absence of any duty to voluntarily disclose past conduct is found in the case of
Hollingsworth v Commissioner of Police (No. 2).15 The case involved a student police officer who did
not volunteer in her application for the NSW Police Force that she had been a stripper and prostitute
in the past. When this information was revealed, her contract of employment was terminated on the
basis of her non-disclosure. The Full Bench of the Industrial Relations Commission of NSW held that
a prospective employee has a duty to disclose all ‘relevant’ information only if asked by the employer
in the pre-employment process, and not afterwards. The Full Bench commented that a prospective
employee does not have to be frank about matters that may disqualify them from appointment, except
to honestly answer the questions asked. Additionally, a prospective employee is not obliged to answer
incriminating questions. However, there is no restriction on the inferences an employer may draw from
a refusal to answer on that ground.
Testing employees
A growing issue for HR managers in Australia is the use of pre-employment testing of applicants.
Traditionally, medical testing has been used in industries that require employees to have a certain level
of physical fitness in order to carry out the inherent requirements of the position. In order to avoid

CHAPTER 4 Human resource management and the law  159


indirect discrimination, HR managers considering medical tests should ensure that the tests are carried
out by a qualified medical practitioner, are relevant to the inherent requirements of the position and that
the results of the tests are not disclosed to third parties without the consent of the applicant.
More recently, HR practitioners are beginning to rely on psychological and psychometric testing to
assess the suitability of applicants for a position (see chapter 7). Psychometric assessment is a way of
assessing a person’s ability, behaviour or personality under controlled conditions. There are two opposite
views that exist in relation to the effectiveness and purpose of psychometric tests. One is that they are
a valuable indicator of the potential employee’s ability to perform tasks and fit into the workplace. The
other perspective is that they are ‘intrusive and evil’. There is no doubt that such testing can assist in
reducing the costs associated with making poor recruitment decisions. However, such testing must, for
legal as well as practical reasons, be relevant to the requirements of the position.
In the case of Hail Creek Coal Pty Ltd v CFMEU, relating to the effectiveness of psychometric
testing, the Full Bench found that test results ‘do not in themselves enable assessments to be made
about a candidate’s capacity to actually do the job’.16 ‘Below average performance on a test does not
necessarily predict below average performance on the job or inability to do the job.’ The result, it said,
‘does not provide a direct measure of a candidate’s capacity to actually do the job’. The Full Bench
of the AIRC found that psychometric testing results were of little relevance in establishing workers’
suitability for the job.
Another cutting-edge issue for HR managers and the law in Australia is the use of genetic testing in
the pre-employment process (see chapter 7). In May 2003, the Australian Law Reform Commission’s
report entitled Essentially Yours: The Protection of Human Genetic Information in Australia was tabled
in the Commonwealth Parliament. The report found that although there are few examples of the use
of genetic testing of applicants in Australia, more numerous examples exist in other countries. There
is currently no prohibition on employers using an applicant’s genetic information in pre-employment,
where that applicant has consented to the process.
Having said that, however, the report noted that discriminatory treatment on the basis that a person’s
genetic information indicates that they have some form of disability will be lawful only if the genetic
information indicates that the applicant will not be capable of fulfilling the ‘inherent requirements’ of
the position. Among the report’s 144 recommendations are the recommendations that anti-discrimination
legislation should be amended to prohibit discrimination based on a person’s real or perceived genetic
status and that employers should not be permitted to collect or use genetic information except in rare
circumstances where such testing is required to maintain occupational health and safety standards.
There is no doubt that this issue will become increasingly important for Australia’s legislatures and HR
managers in the future.

The interview
An interviewer should not conduct an employment interview without careful planning and forethought.
Failure to be aware of discrimination legislation in particular could lead to court and tribunal intervention.
Where possible, interviews should be held in an accessible venue. Reasonable alternative arrangements
should be made to accommodate a candidate who is unable to access a venue because of a disability. In
W v P Pty Ltd,17 the Human Rights and Equal Opportunity Commission held that the arrangement of an
interview in an inaccessible building that had 16 steps, despite the applicant informing the prospective
employer that she had a mobility problem, was unlawfully discriminatory.
It is also necessary to consider whether the interview should be conducted on a one-to-one basis.
Apart from a second interviewer affording the organisation the benefit of an additional contributor
to the selection process, they may represent an important back-up if an applicant later accuses the
employer of discrimination or of making false statements that misled or deceived the applicant. Section
31 of the Australian Consumer Law, referred to earlier, prohibits the making of statements that are
liable to mislead an applicant as to the availability of employment or the terms and conditions of that
employment. A prudent HR manager should therefore conduct the interview with another person from

160  PART 1 Introducing HRM


the organisation. In all cases, comprehensive notes should be made of the interview so there is an up-to-
date record available in the event of any legal challenge. A useful approach is to comment on a printed
sheet containing space for each selection criterion (see chapter 7).

4.4 Legal issues for HR professionals


during employment
LEARNING OBJECTIVE 4.4 Understand the legal issues for HR professionals during employment.
The legal issues that HR professionals face are by no means limited to hiring and firing. During the
life of the contract of employment between an employer and their employees, HR professionals must
manage a myriad of legal issues ranging from compliance with relevant occupational health and safety
legislation to managing the statutory entitlements of employees.

DOCTOR HR

Hi Dr HR
Our HR manager is having an affair with the chief executive officer of our company. Everyone in the office
is aware of the situation. As a member of senior management, I feel I should do something. Friends tell
me it is a private matter and I should ignore it. What do you think?

Workplace health and safety requirements


Governments at the state and federal level have introduced legislation obliging employers to be
responsible for workplace health and safety.18 Up to December 2015, considerable steps have been taken
toward the harmonisation of workplace health and safety laws across the Commonwealth. With only
seven state and territory jurisdictions out of nine passing uniform laws (Victoria and Western Australia
remain outside), this has to be seen as a ‘work in progress’. The purpose of the legislation is to balance
the inevitable health and safety risks associated with industry against social justice issues. Employees
should not be exposed to unacceptable levels of hazard at work, and those who are injured at work
should be fairly and sufficiently compensated.19 Essentially, an employer must provide and maintain, so
far as is practical, a working environment that is safe and without risks to the employee’s health. Safety
standards set out in the regulations to the workplace health and safety statutes aim at preventing injuries.
The legislation also deals with compensation schemes for injured workers.
Importantly, case law suggests that labour hire agencies may be deemed to be the employer of staff
they hire out and may therefore attract occupational health and safety obligations, which they cannot
simply delegate to clients.20 There is thus an obligation on employers that hire out their employees to
ensure that the working conditions of their employees are safe, notwithstanding that another organisation
is directing their actual work. Similarly, where employees are permitted to work from home, their home
becomes an extension of the workplace and there should be a safety audit of its potential risks.
When hiring employees, HR managers must provide all the necessary information, instruction, training
and supervision for the employees to perform their work. The duty of the employer also extends to:
•• providing and maintaining plant and systems of work that are safe and without risks to health
•• making arrangements for safety in connection with the use, handling, storage and transport of plant
equipment and substances
•• maintaining the workplace in a condition that is safe and without risks to health
•• providing adequate facilities for the welfare of employees at the workplace.
Employees should be aware that where, during normal hours, they deviate from their duties and
engage in activities outside the scope of their employment, their employer is not required to compensate
them for any injury suffered. Employee health and safety is discussed in greater detail in the chapter on
employee health and safety.

CHAPTER 4 Human resource management and the law  161


Discriminatory treatment of employees
It is often the responsibility of the HR manager to ensure that individual employees, or groups of
employees, are not unfairly discriminated against in employment. Where an employee is unfairly
discriminated against and subsequently resigns, the law may find that the action of discrimination,
perpetrated by the employer, constitutes a ‘constructive dismissal’, which means that the dismissal is
at the initiative of the employer, not the employee. The significance of this is that the ‘constructively
dismissed’ employee will be able to seek a remedy such as reinstatement, re-employment or compensation
in lieu of reinstatement in the relevant state or federal industrial tribunal.
An example of unfair discrimination in the workplace is found in the case of Daghlian v Australia
Postal Corporation.21 In this case, the Federal Court of Australia held that a middle-aged woman who had
a physical disability was unfairly discriminated against in contravention of the Disability Discrimination
Act 1992 (Cwlth). The woman in question had served the employer for over 11  years in a customer
service capacity. The woman suffered from osteoarthritis of the lower back, spondylitis, bilateral varicose
veins and bilateral spurs of the heels, which rendered her, according to medical evidence heard at trial,
unable to stand for extended periods. This condition made it impossible for her to comply with a new
company policy that forbade sitting while serving customers. Justice Conti held that the application of
this policy unfairly discriminated against the woman who, but for the discrimination, was capable of
performing the inherent requirements of her job.
A special species of sex discrimination is found in the concept of sexual harassment, which is
generally associated with evidence of unwelcome and unsolicited conduct of a sexual nature. This
was brought into startling focus in the 2010 Fraser-Kirk v David Jones dispute where the company, its
directors and the CEO (who was the alleged perpetrator) were sued for a sum in excess of $30 million.
The dispute was settled ‘out of court’ for a reported figure of $850  000.
A trend toward markedly higher compensation levels for ‘pain and suffering’ arising from sexual
harassment can be noted from the Federal Court decision in Richardson v Oracle (2014) FCAFC 82.
The damages originally awarded of $18  000 were increased in that case to $130  000, registering the
community’s increasing intolerance of such conduct.

FAST FACT

A recent survey shows that more than 25 per cent of Australians aged over 50 have experienced some
form of workplace discrimination in the last two years.22

Workplace bullying
Repeated offensive conduct likely to present a risk to health — physical or psychological — has
long been recognised as a species of workplace health and safety risk, to be deterred and eliminated
accordingly. The Fair Work Act now contains specific avenues for redress by way of orders from the Fair
Work Commission that can be issued on application by an aggrieved member of the workforce. Such
orders do not, however, go to monetary compensation.

Statutory benefits
Employee entitlements are primarily governed by the terms and conditions of the contract of ­employment.
However, the states and territories have for many years enacted legislation setting standard minimum
employee entitlements that HR professionals need to be familiar with. With the introduction of the Fair
Work Act we now have the NES operating at the federal level. The entitlements they contain must be
observed as a minimum for all employees.
•• The payment of wages. Because the most fundamental benefit employees receive from their work is
the payment of wages, the states have legislated to provide that wages must be paid in money (rather
than by way of the provision of goods or services) and at reasonable intervals.23

162  PART 1 Introducing HRM


•• The provision of leave. The various states and territories have also enacted legislation to provide
employees with minimum leave entitlements. Relevant legislation is too numerous to list, but New
South Wales is a typical example, providing for four weeks annual leave per annum.24

DOCTOR HR

Hi Dr HR
I have found myself being required to work excessive amounts of overtime since our staff turnover soared
in recent months. The company doesn’t pay me for this or provide for time in lieu, although I think the
modern award says it should. Where can I go to seek advice and assistance on this issue?

4.5 Terminating employees


LEARNING OBJECTIVE 4.5 Discuss the procedures for terminating employees and understand an
employee’s rights of review upon dismissal.

Types of dismissal
Dismissals invariably fall into one of four broad categories.
1. Dismissal based on an employee’s serious (‘repudiatory’) breach of the contract demonstrating an
intention that the employee no longer wishes to be bound by its terms — this is known as summary
dismissal. Summary dismissal has been described as the ‘ultimate sanction’ for employee misconduct.
An example of conduct displaying an intention to no longer be bound by the contract is an employee
stealing from the employer. Summary dismissal effectively means dismissal without giving notice of
dismissal.
2. Dismissal pursuant to the express or implied terms of the employment contract whereby either the
employer or the employee terminates the contract by giving the other party notice of the termination
or payment in lieu of notice — this is known as dismissal ‘on notice’. The requisite notice period
that must be given will be determined by relevant legislation, an industrial instrument such as an
award, the contract of employment or the court. Where such instruments are silent with respect to
notice, the common law implies that reasonable notice must be given. What is ‘reasonable’ will
depend on the circumstances of the case. However, factors such as the seniority of the position, the
employee’s age and the prospect of obtaining alternative employment will be relevant considerations.
According to common law principles, and subject to anything which might appear in the written
contract, a dismissal on notice can be for any reason, not limited to performance or conduct. More
stringent requirements are placed on employers by the statutory unfair dismissal legislation at state
and federal level.
3. Dismissal based on the employer’s commercial or economic decisions regarding the management of
the business — this is called redundancy. In a redundancy, the position previously occupied by the
dismissed employee must be eliminated from the company.
4. Where an employer acts in a manner that indicates they no longer wish to be bound by the terms and
conditions of the contract of employment, the affected employee will, if they resign, be considered
to have been dismissed by the employer. This is known as constructive dismissal. Constructive
dismissal occurs when an employee is effectively forced to resign. If, for example, the employer
says to an employee ‘resign or you will be fired’, the law will determine that the employee, if they
resign, will have been dismissed by the employer and not at their own initiative. The importance of
this is that an employee cannot bring an action for unfair dismissal unless they have been dismissed
by their employer. Other examples of constructive dismissal exist where an employee resigns because
they do not accept the employer’s unilateral variation of the terms of the contract of employment (for
example, changes to the work location, duties or remuneration).

CHAPTER 4 Human resource management and the law  163


DOCTOR HR

Hi Dr HR
I am the newly appointed HR Director of a small marketing company. The Managing Director wants ‘to
get rid of’ a senior employee who is ‘always complaining’ and earns too much to gain access to the unfair
dismissal regime. I have promised to provide him with a memo on the exposure to an ‘adverse action’
claim. What are the main points I should make?

Summary dismissal
The right of an employer to terminate summarily (that is, without notice) is only enlivened when the
employee acts in a manner inconsistent with the continuation of the contract of employment. It is a
powerful tool that may have a drastic effect on the livelihoods of those who are dismissed. Therefore,
the common law restricts the employer’s right to summarily dismiss an employee to occasions where
the employee’s conduct is in direct and serious breach of the employee’s obligations. As stated in the
much-quoted speech of Lord Evershed MR in Laws v London Chronicle (Indicator Newspapers) Ltd: ‘if
summary dismissal is claimed to be justifiable, the question must be whether the conduct complained
of is such as to show the [employee] to have disregarded the essential conditions of the contract [of
employment].’ And then: ‘I .  .  . think .  .  . that one act of disobedience or misconduct can justify dismissal
only if it is of a nature which goes to show (in effect) that the [employee] is repudiating the contract.’25
Summary dismissal is often based on substantive grounds including:
•• serious misconduct
•• physical/verbal abuse
•• disobedience of an employer’s lawful and reasonable directions
•• drunkenness at work
•• incompetence in cases where the employee has presented themselves as competent to perform the job
•• neglect of duties
•• dishonesty/bribery
•• criminal behaviour in connection with employment
•• unexplained absenteeism.
Notice of dismissal
Except for a valid summary dismissal (where no notice is required), employers may not terminate
employment unless they have given the employee sufficient notice of impending termination. Otherwise,
compensation (payment in lieu of notice) must be paid. The worker should be notified in writing of the
decision to terminate employment and is entitled to receive a statement of reasons for the termination.
This is to ensure clarity and avoid confusion. If employers do not abide by these regulations, the
termination may be deemed unfair. How much notice is given depends on the contract of employment.
The Fair Work Act sets a statutory minimum NES notice period under s. 117(3), as shown in table 4.2.

TABLE 4.2 NES period of notice required

Employee’s period of continuous service Minimum period of notice

Not more than 1 year 1 week

More than 1 year but not more than 3 years 2 weeks

More than 3 years but not more than 5 years 3 weeks

More than 5 years 4 weeks

The period of notice is increased by 1 week if the employee is over 45 years old and has completed at least
2 years continuous service.

164  PART 1 Introducing HRM


This legislative minimum notwithstanding, the contract of employment may stipulate a longer, not
a shorter, period of notice. Where the contract of employment is silent with respect to the length of
notice, the common law implies that the employer must give the employee reasonable notice. What
is ‘reasonable’ will depend entirely on the circumstances of the individual case. While there are no
prescriptive rules regarding the calculation of reasonable notice, industrial tribunals have considered a
variety of factors, including the following:
•• the grade of the position — generally, the higher the grade, the longer the period of notice required
(see Hill v CA Parsons Ltd26)
•• the importance of the position — the more important or senior the position, the longer the period of
notice required (see Adams v Union Cinemas Ltd27 and Quinn v Jack Chia (Aust) Pty Ltd28)
•• the age of the employee — the older the employee, the longer the period of notice required (see
Thorpe v SA Football League29 and Quinn v Jack Chia (Aust) Pty Ltd30)
•• the length of service of the employee — the longer the period of service, the longer the period of
notice required (see Hill v CA Parsons Ltd31)
•• the size of the salary — the larger the salary, the longer the period of notice required (see Orman v
Saville Sportsware Ltd 32 and Quinn v Jack Chia (Aust) Pty Ltd33)
•• the nature of the employment
•• the professional standing of the employee — the higher the standing, the longer the period of notice
required (see Hill v CA Parsons Ltd34)
•• the employee’s qualification and experience — the more highly qualified and experienced, the longer
the period of notice required (see Thorpe v SA Football League35)
•• the employee’s degree of mobility — the more difficult it is for an employee to obtain another job, the
longer the period of notice required (see Thorpe v SA Football League36)
•• the expected period of time it would probably take the employee to find alternative employment
•• the likely period the employee could have reasonably expected to continue in the employment (see
Quinn v Jack Chia (Aust) Pty Ltd37)
•• the employee’s prospective pension or other rights — for example, if the employee was due to retire
and receive benefits from the employer, the notice period will be longer (see Hill v CA Parsons
Ltd38)
•• what the employee gave up to come to the employer — for example, if an employee gave up a long-
standing job or the security of their own business in order to come to an employer just months before
being dismissed, a longer period of notice may be implied (see Thorpe v SA Football League 39 and
Quinn v Jack Chia (Aust) Pty Ltd40 respectively)
•• relevant industry practice or custom (see Fisher v Dick & Co.41).
Quite often, the period of reasonable notice can be considerably in excess of what is required under
any applicable award or the statute.

Redundancy
Redundancy means dismissal that is based on operational reasons, taking into account commercial and
economic considerations. It occurs when an employee is dismissed not for any ‘consideration peculiar
to the employee’, such as a personal act or default, but because the employer no longer needs the role
previously performed by the employee. Redundancy therefore refers to the termination of a position
and not an individual employee. Dismissal may arise for a number of reasons, including technological
change, a downturn or seasonality in business, and restructuring of the enterprise. Because the employer
no longer needs the job to be filled, the dismissal is through no fault of the employee.
The respective rights of employers and employees in relation to redundancy are now almost
exclusively governed by awards and legislation. The Termination, Change and Redundancy Case
198442 (which concerned an application by the Australian Council of Trade Unions to amend the Metal
Industry Award) is still of importance to the law on redundancy. This was a test case. In its decision,
the then Conciliation and Arbitration Commission (the predecessor of the current Australian Industrial

CHAPTER 4 Human resource management and the law  165


Relations Commission) discussed the general principles to be included in a redundancy provision in an
award. The Commission laid down recommendations in relation to consultation, information, notice,
transmission of business, time off during the redundancy period, an employee leaving during the
notice period, the transfer of an employee to other duties, employee entitlements such as severance
pay, ordinary and customary turnover of labour, superannuation, incapacity to pay, and provision of
alternative employment where possible.
The decision in the Redundancy Test Case 200443 most importantly increased the levels of severance
pay entitlements for federal award employees and partially removed the exemptions for small businesses
(with fewer than 15 employees) in relation to making severance payments to employees. The appropriate
levels of severance payments are determined by the contract of employment, statutory agreements,
awards and legislation. The Redundancy Test Case 2004 provided for a scale of minimum severance
payments for employees covered under federal awards. That scale, now contained in s. 119 of the
Fair Work Act, has now been adopted by the NES, giving all national system employees a statutory
redundancy entitlement from 1 January 2010. Note that the NES does not require payments to be made
by ‘small business employers’ (that is, employers with fewer than 15 employees). The NES scale is set
out in table 4.3.

TABLE 4.3 NES redundancy requirements

Employee’s period of continuous service Severance pay

Less than 1 year Nil

1–2 years 4 weeks pay

2–3 years 6 weeks pay

3–4 years 7 weeks pay

4–5 years 8 weeks pay

5–6 years 10 weeks pay

6–7 years 11 weeks pay

7–8 years 13 weeks pay

8–9 years 14 weeks pay

9–10 years 16 weeks pay

More than 10 years 12 weeks pay*

*The amount is decreased to account for the fact that employees with this length of service are entitled to long service leave
payments and thus will not suffer the same extent of losses from non-transferable credits.

The rationale behind redundancy pay (severance) is not the same as that for notice of termination.
While notice of termination is required to give the employee a reasonable opportunity to adjust to the end
of the employment relationship, severance pay is compensatory. Severance pay attempts to compensate
employees whose positions have been made redundant for the loss of non-transferable entitlements such
as sick leave.
The requirements of awards and statutes will frequently require employers to hold discussions with
employees and unions once a definite decision has been made that may lead to redundancies. Furthermore,
alternative positions in the company must be considered by those affected by the redundancy.
The leading High Court case of Amcor Limited v Construction, Forestry, Mining and Energy Union;
Minister for Employment dealt with the alleged liability of an employer to make severance payments in
respect of purported redundancies under a transmission of business.44 Amcor commenced a restructure

166  PART 1 Introducing HRM


of its operations, which resulted in the sale of its paper manufacturing business to a wholly owned
subsidiary, Paper Australia Pty Ltd. Amcor wrote to all of its employees who worked at its paper
mills, informing them that their employment was terminated. Enclosed with the letter of termination
was an offer of employment from Paper Australia, outlining that the employee would be employed
pursuant to ‘the same terms and conditions as [they] currently enjoy’ and that ‘all [their] benefits will
be preserved, including continuity of service for all employment-related purposes’. The Construction,
Forestry, Mining and Energy Union (CFMEU) claimed that the employees had been made redundant
pursuant to the Certified Agreement that governed the employment conditions between Amcor
and its employees. The union argued that, as a consequence, employees were entitled to severance
payments pursuant to clause 55.1.1 of the Certified Agreement, which set out that ‘should a position
become redundant and an employee subsequently be retrenched, the employee shall be entitled to [a
redundancy payment]’.
Controversy still surrounds the issue of whether redundancy refers to instances where a ‘position with
a particular employer’ has been terminated or whether the redundancy pertains to a ‘position within
a particular business’. In Amcor, the High Court placed primacy upon an employee’s ‘position in a
business’ as opposed to an employee’s ‘position in the employment’ of an employer. The High Court
held that a position does not become redundant when the person filling it continues to fill it, albeit
with a different employer, and continues to do exactly the same work, at the same place for the same
remuneration during the same hours of work. This decision was in line with the Termination, Change
and Redundancy Case 1984, where the then Conciliation and Arbitration Commission explicitly stated
that it did not envisage severance payments being made in cases where there had been a transmission of
business.
HR managers should be aware that the Amcor decision does not provide a blanket exemption from
severance liabilities for employers in situations where its employees have been able to obtain post-­
termination employment. The case was decided upon the peculiar construction of the relevant Certified
Agreement. The scope of the Amcor decision has yet to be determined. In the present case, the employees
were engaged on the same conditions, with all their benefits preserved. If, however, there were changes
in the employees’ terms or conditions or the tasks they were required to perform, there may have been a
question about whether their ‘position(s)’ with the successor were sufficiently altered as to give rise to a
redundancy on the basis that the position ‘within the business’ was no longer required.
It is important to be aware that under s. 385(d) of the Fair Work Act, an employee cannot make an
unfair termination claim if the employee’s employment is terminated on the basis of genuine redundancy,
but can where it can be shown that there was a failure to honour any obligation to consult or that there
was a capacity for a reasonable redeployment.

Constructive dismissal
In a decision of the Industrial Relations Commission of NSW, Colosimo and Banana Traders of
­Australia Pty Ltd t/a PW Chew & Co.,45 an employee was found to have been constructively dismissed
by the employer. Mr Colosimo was employed as a banana trader when, due to an alleged downturn in
business, the employer asked him to take his accrued annual leave entitlements before saying words to
the effect that he should work for wages provided for by the relevant award until the financial difficulties
affecting the industry improved. Mr Colosimo was being paid about $58  800 per annum, so working
under award wages would have constituted a reduction in remuneration of 65 per cent. Mr Colosimo
submitted to the Commission that such a reduction in wages by the employer was a unilateral imposition
of less favourable terms, constituting a constructive dismissal. The Commission found that a 65  per
cent reduction in wages ‘could not be viewed as acceptable’. As a result, the Commission found the
dismissal to be ‘harsh and unjust’. Mr Colosimo was awarded $13  575.70 (the equivalent of 12 weeks
pay) by way of compensation in lieu of reinstatement. Colosimo’s case is an important reminder to
employers and HR managers that, notwithstanding an industry downturn, attempting to unilaterally
reduce the terms or conditions of employees may be likely to result in a finding of unfair dismissal.

CHAPTER 4 Human resource management and the law  167


In such circumstances, employers may choose to make a position redundant. However, in doing so, it
is recommended that employers should be mindful of the following with respect to a ‘best practice’
redundancy process:
•• give reasonable notice to employees and/or their unions of the expected redundancy
•• adequately consult with employees and/or their unions on the impact of the proposed changes
•• explore genuine alternative options for redundancy, such as redeployment or relocation
•• ensure such options are fairly offered to the affected employees
•• provide reasonable standards of redundancy benefits
•• provide appropriate ancillary services, such as time off to seek alternative work, retraining
opportunities, outplacement services or financial planning
•• ensure employees nominated for redundancy are fairly selected on an objective and unbiased basis.46

FAST FACT

From 2011, the Australian government introduced 18 weeks of paid parental leave, at the federal minimum
wage, for families in which the primary carer (usually the mother) earns less than $150  000 per year. The
government payment is in addition to any parental leave payment the person may receive from their
employer.47

Recent cases have also found that demotion may be construed as constructive dismissal in certain
circumstances. A demotion may represent a repudiation of the employment contract where the contract
does not include express provisions allowing the employer to reclassify a position at will. In the case of
constructive dismissal, the employee has the same rights as if they had been dismissed.
The following discussion is an example of a decision in which a species of demotion has been found
to not constitute constructive dismissal.

A claim for constructive dismissal


Lindy Howe was a customer service manager on Qantas long-haul flights. Then she fell pregnant. Under
the relevant enterprise bargaining agreement and the airline’s policies, as the pregnancy advanced and
her condition precluded her from continuing to fly, she had to take unpaid maternity leave or seek a
position on the ground. A ground job was offered to her but with a major cut in salary. Her request to,
instead, access accumulated sick leave before the birth in March 2002 was turned down. She claimed
this was less favourable treatment and represented unlawful discrimination.
On seeking to return to work in May 2002, she requested alternative employment arrangements to
enable her to better manage her responsibilities as a mother. The only way this could be secured was
by her accepting a reduced role as a basic flight attendant (that is, by accepting a demotion). She was
driven to do this. She claimed that this equated to a ‘constructive dismissal’ on Qantas’ part.
The Federal Magistrate found that the refusal to allow access to accumulated sick leave was unlawful
discrimination. A non-pregnant hypothetical comparator would have had the option of performing lower
paid ground duties or taking sick leave in the same circumstances (that is, if they could no longer
fly). The assertion that Howe was forced to accept the demotion on return and that this constituted
‘constructive dismissal’ was rejected. The court found there was no insistence by Qantas that she be
‘demoted’. She wanted more flexible arrangements to better care for her baby. By accepting the flight
attendant position, she achieved that outcome. Nothing that Qantas did, or did not do, brought the
employment relationship to an end. Even if it did, her confirmation in the reduced role, at one point in
time, indicated a subsequent forgiveness or acquiescence on her part.
See Howe v Qantas Airways Ltd [2004] FMCA 242.

168  PART 1 Introducing HRM


FAST FACT

Applications to Fair Work Commission in relation to termination of employment (14  624) decreased in


2014. The data include applications under the general protections provisions in the Fair Work Act, as well
as applications for an unfair dismissal remedy.48

HR managers should be wary of the potential consequences when demoting employees and consider
any company policies that may prevent the demotion. They should also consider s. 386(2)(c) of the Fair
Work Act, which provides that a demotion will not be considered a termination of employment if the
demotion does not result in a significant reduction in remuneration or duties and the employee remains
employed with the employer.

Procedures for dismissal


Under the Fair Work Act, a regime of substantive and procedural fairness is imposed on employers
(who are subject to the legislation) with respect to dismissing an employee. The protection is against
the generic term ‘unfair dismissal’ although a more comprehensive definition is a dismissal which was
‘harsh, unfair or unreasonable’. The concept of substantive fairness requires that there is a ‘valid reason’
for the dismissal (for example, fraud), while the concept of procedural fairness, or due process, requires
that the employee accused of certain conduct (such as fraud) is afforded an opportunity to respond to
the allegation and have that response considered before any final decision regarding dismissal is made.
Therefore, when an employer wishes to dismiss an employee, both substantive and procedural fairness
must be considered.

Valid reason — substantive fairness


As noted, under the Fair Work Act, it is almost certain to be proven ‘harsh, unjust or unreasonable’
to dismiss an employee without a ‘valid reason’. This is the case regardless of which of the before
mentioned four forms of dismissal it takes. Section 387(a) of the Fair Work Act states that in determining
whether a dismissal is unfair, Fair Work Commission is to have regard to, among other things, whether
there is a valid reason for a termination relating to the capacity or conduct of the employee. Therefore,
a dismissal cannot be for an arbitrary reason. Rather, there must be a substantive reason for a dismissal.
General protections
Division 5 of Chapter 3 of the Fair Work Act sets out a range of workplace rights that should not
be impugned by any adverse action taken by an employer, particularly in the event of Freedom of
Association; for example, the right to belong or not to belong to a trade union. This is now seen as a
growing area of work-related litigation. The 2014/2015 year saw in increase of 17.5 per cent in such
claims. There is no salary cap or qualifying period, and employers face a reverse onus of proof (i.e. to
an extent, they will be guilty unless they can prove their innocence). This is opposite to the usual legal
presumption.
General protection cases have now been considered by the High Court of Australia on two occasions.
Those decisions have highlighted the criticality of the employment decision maker’s reason(s) for taking
any adverse action. The expectation is that the reasoning will be evidenced generally by the direct
testimony of the decision maker. This, if otherwise credible, will be difficult to assail.
Other protections
The Fair Work Act further provides that certain reasons cannot be ‘valid reasons’. Pursuant to s. 351 and
s. 352, employers are prohibited from taking adverse action against an employee, including terminating
an employee’s employment for reasons of:
•• race, colour, sex, sexual preference, age, physical or mental disability, marital status, family responsi-
bilities, pregnancy, religion, political opinion, national extraction or social origin

CHAPTER 4 Human resource management and the law  169


•• temporary absence from work because of illness or injury within the meaning of the regulations.
Where an employee is absent from work because they are ill or injured, it will be regarded as
temporary absence if:
•• the employee has complied with the requirements set out in the regulations and obtained a medical
certificate of absence stating the illness and the duration of absence from work as temporary
•• the employee has complied with the terms of an award or agreement to notify the employer of the
absence and to give a reason.
Employers can raise a defence to an otherwise discriminatory termination if the termination was
based upon the inherent requirements of a particular position. Under s. 351(2) of the Fair Work Act, the
‘inherent requirements’ defence to unlawful termination claims can apply to terminations based upon
race, colour, sex, sexual preference, age, disability, family responsibilities, pregnancy, religion, political
opinion, national extraction or social origin.
The inherent requirements defence was applied by the High Court of Australia in the case Qantas
Airways Ltd v Christie.49 The employment of Christie, a pilot with Qantas, was terminated when
he reached the age of 60. Under the Convention on International Civil Aviation, parties (of which
Australia is one) may exclude from their airspace any aircraft flown by a pilot who is over 60  years
of age. This meant that Christie’s capacity to fly internationally was severely restricted and he could,
therefore, not match the requirements of the standard rostering system. Although the rules do not apply
in Australia, Qantas is an international airline, and, as such, its retirement policy states that pilots
should not continue in employment beyond the age of 60. On his termination, Christie commenced
proceedings based on the grounds of age discrimination. The High Court adopted a broad interpretation
of the then s. 170CK(3) (equivalent to the current s. 351(2)) and found that the capacity to comply with
the standard roster was an inherent requirement of Christie’s position. Consequently, the termination
was not discriminatory.

The employer’s right to ‘hire and fire’


Prohibited reasons for dismissal aside, it is the basic right of management (often called a ‘managerial
prerogative’) to choose which employees it wishes to have working for the company. In determining
whether or not an employer had a ‘valid reason’ to dismiss an employee, the courts and industrial
tribunals, such as the Fair Work Commission, do not assume to be expert business managers. The focus
of termination of employment proceedings is to ensure that the parties receive ‘a fair go all round’. In
considering a reinstatement order, the tribunals will look to factors such as the effect of the order on
the viability of the employer’s business, the length of the employee’s service with the employer and the
efforts of the employee to mitigate their own loss.
An example where the New South Wales Industrial Relations Commission refused to intervene
concerned the termination and suspension of a man’s employment with Blayney Abattoir.50 The man was
employed as a labourer on the mutton slaughter floor. The employer argued before the Commission that
the labourer had left the abattoir without permission even after several warnings. The Australasian Meat
Industry Employees’ Union, New South Wales branch, contended that the labourer had not been given a
‘fair go’ and that he had been treated in a cruel, harsh and unjust manner by the company. After finishing
work, the employee had looked for his supervisor, but, unable to find him, had gone home without
permission. The Commission found that the company had been very easy on the employee, especially
considering his record of walking off the job, fighting, being lazy, abusing fellow employees and incurring
‘a string of reprimands a mile long’, including a previous suspension. Considering all the circumstances,
it was determined that the labourer had been treated fairly and was dismissed for a valid reason.

Procedures for termination


However, having a valid reason for dismissing an employee is not of itself sufficient to effect that
dismissal fairly, in compliance with the statutory regime. Although an employee may have acted in an

170  PART 1 Introducing HRM


entirely reprehensible manner (such as stealing from the employer), the employee remains entitled to be
dealt with in a procedurally fair manner. That is, the employee is entitled to:
1. be furnished with reasons for the impending dismissal (for example, the employer has reason to
believe that the employee stole from the employer)
2. a fair hearing, so that the employee is afforded a right to respond to those reasons (for instance, to
explain that they honestly believed they were permitted to take the item)
3. an unbiased decision-making process that takes the employee’s response into account before any
final decision is made. Furthermore, alternatives to dismissal such as a mere warning should be
considered.
The importance of procedural fairness is displayed in the case of Morgan v Bindaree Beef.51 The
employee in this case was employed as a boner/trainee foreman at Bindaree Beef. The employee brought
an action for unfair dismissal (under the then equivalent of s. 385 of the Fair Work Act) for being
summarily dismissed for what the employer described as a ‘breach of contract’ and ‘gross misconduct’
arising out of two separate incidents.
First, the employee was accused of directing fellow employees to defraud the employer by entering a
‘sign-off’ time on their time sheets that was at least one hour later than the time at which they actually
finished work. Second, the employer alleged that the employee fraudulently reported that the weight
of meat processed by himself and other employees was greater than it actually was. The purpose of
this fraudulent activity was to mitigate a financial loss sustained by the employees during a three-hour
stoppage in work that occurred earlier in the day. Upon the discovery by the employer of this activity, the
employer conducted an investigation that consisted of a series of interviews with employees including
the applicant.
During the applicant’s first interview he denied any involvement and was ‘stood down’ without
pay. The following day the applicant was interviewed for a second time. The employer’s HR manager
gave evidence that the company had decided prior to this second interview that the applicant would be
dismissed regardless of what transpired at the interview. The only question remaining for the employer
was whether to contact the police in relation to the alleged fraudulent conduct. During the interview,
the applicant was informed that he was dismissed. After determining that the applicant’s dismissal was
substantially unfair because the Australian Industrial Relations Commission could not determine on the
test of the balance of probabilities that the applicant was actually guilty of the alleged misconduct,
Commissioner Cargill held that the dismissal was also procedurally unfair.
The applicant was not afforded procedural fairness because:
1. the applicant was not told of the reasons for the dismissal prior to the decision being made
2. the reasons given by the employer after dismissal (‘breach of contract’ and ‘gross misconduct’) were
neither put in sufficiently plain and comprehensible language nor were they sufficiently detailed and
3. the applicant was not afforded the opportunity to respond to the allegations.
Due to substantive as well as procedural unfairness, the Commission awarded the employee
compensation to be determined between the parties in lieu of reinstatement. Note that for small business
employers, a statutory code on termination will apply. Evidence that they have complied with the code’s
obligations will be very compelling proof that there has been no element of unfairness.

The rights of the employee


A dismissed employee has various means of appeal. The most important ones are:
•• a statutory action including that for unfair dismissal, unlawful termination or adverse action
•• a common law action for wrongful dismissal in breach of contract.
Unfair dismissal
As touched upon, the Fair Work Act provides that an employee can challenge the fairness of their
dismissal in an industrial tribunal. The availability, jurisdiction and remedies for an action for unfair
dismissal are restricted to a certain category of employees. The legislation provides that Fair Work

CHAPTER 4 Human resource management and the law  171


Commission has jurisdiction to remedy the dismissal of employees who are in the category of employees
for whom an action is available in cases in which their dismissal is ‘harsh, unjust or unreasonable’.
Eligibility under the Act
Eligibility to bring an unfair dismissal proceeding under the Fair Work Act is limited, for constitutional
reasons, to employees employed by:
•• a national system employer (basically any private sector employer)
•• the Commonwealth
•• a Commonwealth authority.
Furthermore, the Fair Work Act provides for four main exceptions in relation to an unfair dismissal
claim by an employee:
1. the salary cap exemption
2. genuine redundancies
3. service short of the minimum employment period
4. seasonal employees.
Those employees who earn in excess of a regularly indexed amount — $136  700 per annum at the
time of writing — will be denied access to this jurisdiction unless their wages are determined by an
award or statutory agreement.
In cases of a genuine redundancy, where there was no capacity for redeployment, and a duty to consult
was observed, no challenge to the fairness of the termination can be made.
The legislation provides that an employee cannot make an unfair dismissal claim unless they have served
the minimum employment period, which for most employers will be six months. An exception is for those
small business employers (less than 15 employees) where the minimum employment period is 12 months.
Lastly, employees who are employed on a temporary basis are also excluded from bringing an unfair
dismissal claim. This category includes employees engaged on a casual or on a seasonal basis. An
exception with casuals is where they can demonstrate a regular relationship of 12 months or more with
an expectation that it would continue. The exclusion for seasonal employees would apply where the
parties understood that the employment contract was short term or temporary in nature, and that it would
run until the end of the particular season.
Remedies for unfair dismissal
Eligible employees are able to seek redress for unfair dismissal from Fair Work Commission. If an
employee experiences a harsh, unjust or unreasonable termination of employment by the employee, they
may pursue a claim for compensation and/or reinstatement.
If amicable settlement cannot be achieved between the parties, Fair Work Commission may make
orders for the employee to be returned to the same position as if the employment had not been terminated.
Such orders may include:
•• declaring the termination to have contravened the provisions of the Act
•• requiring the employer to reinstate the employee
•• ordering compensation.
If a compensation order is made, the maximum amount that can be awarded for an employee who is
employed under award conditions is the equivalent of six months remuneration. For an employee not
covered by an award, the maximum amount that can be awarded is the lesser of six months remuneration
or the index-listed figure set out, from time to time, in the regulations.
Note that a dismissed employee may also consider the alternative remedy based on a claim of ‘adverse
action’. To succeed in that course, however, they would be required to show that the reason, or a reason,
for the dismissal was because they sought to exercise a workplace right.
Wrongful dismissal
An employee may make a wrongful dismissal claim when an employer breaches the terms of the
contract of employment. Termination on insufficient notice, for example, constitutes a wrongful
dismissal. Usually, the dismissed employee can claim damages for wages lost as a result of the short

172  PART 1 Introducing HRM


dismissal period. An employee has a duty to mitigate the loss by taking reasonable steps to find
alternative employment. Wrongful dismissal actions are heard in common law courts, and are expensive
to run and defend. Thus, actions for wrongful dismissal in the common law courts are rare and tend to
be reserved for those ineligible to bring an action under the relevant unfair termination jurisdiction of
industrial tribunals and the exceptions provided for in the Act. Table 4.4 compares wrongful dismissal
and unfair dismissal.

TABLE 4.4 Comparison of wrongful dismissal and unfair dismissal

Trigger Action Remedy

Wrongful dismissal Fundamental breach of Common law Damages


employment contract by employer

Unfair dismissal Dismissal is harsh, unjust or Statute Reinstatement, re-employment or


unreasonable compensation

DOCTOR HR

Hi Dr HR
Following an after-hours work-sponsored function, a number of our staff retired to a hotel room where
one of them openly engaged in sexual activity. After initial denials, they conceded they had done so. My
manager wants to sack them, but I’m not so sure. Could they sue us for unfair dismissal?

CHAPTER 4 Human resource management and the law  173


SUMMARY
The relationship between an employer and an employee is governed by the law. These legal obligations
arise from employment contracts, legislation, statutory agreements, awards and the common law. HR
managers need to understand and comply with the legislation, engage in careful drafting and have an
awareness of legal obligations owed by employers and employees in order to minimise an organisation’s
exposure to dispute and litigation. The same level of care should be administered at all stages of the
employment relationship, from hiring an employee to terminating the employment relationship. Good
HR managers balance all these skills and add value to their organisations by minimising workplace
disruptions caused by unfavourable employment practices.

KEY TERMS
Adverse action  A broad term embracing any workplace conduct prejudicial to another, such as
dismissal.
Common law  ‘Case law’ developed in the court system. As opposed to statute law, it includes the
laws or legal principles that have been established by courts over the years. It may be codified into a
statute or overruled by a statute passed by the government.
Constructive dismissal  Dismissal by the employer where the employer acts in a manner suggesting
that they no longer wish to be bound by the terms of the contract.
Contracts of a fixed term  Contracts of employment that provide that the employment will end on a
specified date or upon the completion of a specific task.
Contracts of indefinite duration  Continuing employment that ends only after one party gives the
other party notice that they wish to terminate the contract.
Employees’ duties  Those duties and obligations defined at law that an employee must fulfil.
Employers’ duties  Those duties and obligations defined at law that an employer must fulfil.
Employment contract  An informal (oral) or formal (written) legally binding agreement between an
employer and an employee specifying the legal rights and obligations of each party.
National system employer  A constitutional corporation — international, trading or financial — is a
national system employer and is automatically within the jurisdiction of the federal Fair Work Act.
Notice  Notice of termination is required if one party to a contract of employment wishes to bring the
contract to an end.
Outer limit contract  A contract which has an expiry date like a fixed-term contract, but can be
terminated with notice before that date is reached.
Payment in lieu of notice  Payment of all wages that would have been receivable if the employee was
required to work during the notice period.
Reasonable notice  The amount of notice to be given in individual circumstances where no period is
contemplated in the contract.
Redundancy  Termination of the employment contract by the employer due to the permanent
elimination of the position.
Sexual harassment  Behaviour involving sexually suggestive remarks, unwanted touching and
sexual advances, requests for sexual favours, or other verbal or physical conduct of a sexual nature
that is unwanted and that adversely affects a person’s employment and/or creates a hostile work
environment.
Small business employer  An employer with less than 15 employees who is not obliged to provide
statutory redundancy payments and has a 12-month minimum period of employment for the
purposes of unfair termination applications.
Statutes  In the context of employment, statutes legislate the minimum conditions of employment and
behavioural obligations that must apply in any employer/employee relationship or workplace.

174  PART 1 Introducing HRM


Summary dismissal  Dismissal based on an employee’s serious (‘repudiatory’) breach of the
employment contract. Effectively, dismissal occurs without giving notice.
Unfair discrimination  Any practice that makes distinctions between different groups based on
characteristics such as sex, race, age, religion and so on, which results in particular individuals or
groups being advantaged and others disadvantaged in an unreasonable or unjust manner.
Unfair dismissal  Occurs where a dismissal is harsh, unjust or unreasonable, but need not involve a
fundamental breach of the employment relationship.
Whistleblower  An employee who makes known an organisation’s illegal, unethical or improper
practices to a third party (for example, a newspaper or a community group).
Workplace policy  A document of general application that is prepared by the employer and is designed
to govern (either with or without contractual force) any and all aspects of the conduct, rights and
obligations of the parties to a contract of employment.
Workplace right  A broad term including the right to make a complaint (e.g. of bullying and
harassment or discrimination but excluding claims under contract alone).
Wrongful dismissal  Occurs when an employee’s employment is terminated by an employer for
reasons that are in breach of the employment contract.

ACTIVITIES
REVIEW QUESTIONS
1 Explain the difference between an employee and an independent contractor.
2 What are the sources of legal obligations in employment law?
3 Describe the contents and role of the NES.
4 Explain the concept of good faith bargaining.
5 What is a workplace policy, and does it constitute a term of the employment contract?
6 List five common law duties of (a) employers and (b) employees.
7 Explain the difference between direct discrimination and indirect discrimination.
8 How useful are psychometric tests in assessing a potential employee?
9 What is meant by the term redundancy? What did the Amcor High Court case have to say about
the issue of redundancy?
10 Explain the concepts of adverse action and workplace rights.
11 Explain the difference between summary dismissal and dismissal on notice, and between unfair
dismissal and wrongful dismissal.
12 What are the exceptions to bringing an unfair dismissal claim?

WHAT IS YOUR VIEW?


1 The ‘Holy Grail’ of a good workplace relations and employment system is that it should be readily
understood by men and women of standard intelligence in the workforce. What needs to be done
for us to get there?
2 There is no such recognised concept as ‘unfair resignation’. An employee can choose to ‘pull the
plug’ on the employment relationship at any time by giving the appropriate notice, without being
forced to show it was fair to do so. Should Australian employers have the same freedom as they do
in the United States, where employment is said to be ‘at will’?
3 Sexual harassment can be constituted by just a single incident of unwelcome conduct of a sexual
nature. Is it reasonable to argue that no-one could sensibly determine whether their conduct was
unwelcome until they had engaged in it at least once?
4 The concept of the modern award is an oxymoron. Their ‘one-size-fits-all’ operation is antiquated
and anti-productive.

CHAPTER 4 Human resource management and the law  175


CLASS DEBATE
Choose one of the following topics and debate it in class.
•• The implementation of the Fair Work Act has had a detrimental impact on employers and shifts the
balance of power strongly towards employees.
•• More employers should be prepared to take a leaf from Qantas’ book and ‘fight fire with fire’ when
under union assault.
FORUM
What do you think? Conduct a mini survey of class members, using the questionnaire that follows.
Critically discuss the findings.
1 Employers should have the right to read and screen employees’ emails. YES NO
2 Drug addiction is a disability. YES NO
3 There is a major distinction between employees and independent contractors. YES NO
4 The limitations for pursuing an unfair termination claim are themselves harsh, unjust and YES NO
unreasonable.
5 An employee who creates an invention in the course of their employment should still be YES NO
entitled to the economic right of registering a patent.
6 An HR manager today is more a lawyer than a people manager. YES NO

ONLINE EXERCISE
Conduct an online search for information on the legal aspects of one of the following: contracts of
employment, discrimination in employment, psychometric testing, workplace policies, genetic testing of
employees, sexual harassment, adverse action, post-employment restraints or termination of employment.
Summarise your findings in a report of 500 words. Include the web addresses that you found useful.

ENVIRONMENTAL INFLUENCES
Identify and discuss the key environmental influences from the model (see figure  4.2) that have
significance for the legal aspects of HRM.
EXTERNAL ENVIRONMENT

Political Legal Environmental

INTERNAL ENVIRONMENT

Strategy Structure
Economic Technological

LEGAL
ASPECTS

Industrial
Cultural
relations
Systems People Culture

Business Social Demographic

FIGURE 4.2 Environmental influences on legal aspects of HRM

176  PART 1 Introducing HRM


ETHICAL DILEMMA
ON CONFIDENTIAL INFORMATION
Willie Grant is the Sales Director of Down Under Drams — an importer of high-quality whiskies from
around the world. It is a niche supplier (so far exclusive in Australia but not elsewhere in the world) of
a unique drop known as ‘Hebridean Gold’, which is sourced from a little-known distillery on the remote
Scottish island of Wee Toddy. This fact is not well known in the general marketplace, and Down Under
Drams’ MD and owner, Johnnie Williams, has repeatedly emphasised to all his senior staff that the Wee
Toddy source is confidential information and must be treated as such.
Willie sees an opportunity in the industry, leaves ‘Down Under Drams’ and sets up his own whiskey-
importing business — Magic Malts. Shortly thereafter, having travelled to Wee Toddy, he starts flooding
the Australian market with a new expression — ‘Islanders Joy’, which he has sourced from the Wee
Toddy distillery. It tastes just like ‘Hebridean Gold’ but it retails for considerably less.

Johnnie Williams is outraged and desperate to sue Willie, whom he believes is in breach of both his
implied common law contract term of confidentiality (there is no written confidentiality covenant) and
s. 183 of the Corporations Act 2001. That section provides, in summary, that a person who obtains
information because they are, or have been, a director or other officer or employee of a corporation must
not improperly use the information to either gain an advantage for themselves or someone else or cause
detriment to the corporation.
DISCUSSION QUESTIONS
1 What will Johnnie be required to show before his threatened actions can succeed?
2 What difference might a written confidentiality covenant have made?
3 Could Down Under Drams have imposed a post-employment restraint preventing Willie competing
with it anyway?

CHAPTER 4 Human resource management and the law  177


CASE STUDY
THE HAIRDRESSING ROSTER
You manage a group of five hairdressing salons in the inner suburbs, operating from 10.00  am until
7.00  pm (9.00  pm on Fridays) on a six-day roster — Monday to Saturday. The highest demand for
appointments is in the early evenings and all day Saturday.
One of your stylists, Louise, has written to you seeking to be relieved of the need to work after
5.00 pm and any time on Saturday as she has increasing obligations to her three-year old twins and her
elderly and infirm parents. She has confirmed that the request is made pursuant to her rights under the
NES. You know of at least two other salon staff who might have similar domestic tensions, and neither
of them has yet indicated that they are seeking a similar new flexible arrangement — but all the staff are
pretty close and they would know of Louise’s request. You are apprehensive that conceding to Louise’s
request will prove to be a ‘thin edge of the wedge’ and precipitate similar claims from the others in a
similar position to her.
DISCUSSION QUESTIONS
1 What ‘reasonable business grounds’ might you identify to refuse such a request?
2 What relief could Louise seek if she wished to challenge a refusal on your part?

ONLINE RESOURCES
• www.actu.org.au • www.fwc.gov.au
• www.ahri.com.au • www.ilo.org
• www.business.gov.au • www.shrm.org/hrnews
• www.employment.gov.au • www.workforce.com

ENDNOTES
1. FWO v Maclean Bay Pty Ltd (No. 2) [2012] FCA 337.
2. ibid.
3. [2006] HCA 19 (16 May 2006).
4. (2000) 177 ALR 193.
5. [2006] FCA 784 (23 June 2006).
6. HRX Holdings Pty Ltd v Pearson [2012] FCA 16.
7. Section 3 of the Whistleblowers Protection Act 1994 (Qld).
8. See also Anti-Discrimination Act 1977 (NSW), Equal Opportunity Act 1984 (Vic.), Anti-Discrimination Act 1991
(Qld), Equal Opportunity Act 1984 (SA), Equal Opportunity Act 1984 (WA), Discrimination Act 1991 (ACT) and
­Anti-Discrimination Act 1992 (NT). The grounds of discrimination that are prohibited vary from state to state.
9. Unreported, AIRC, PR903204, 12 April 2001.
10. See Britax Rainsford Pty Ltd v Jones (2001) 109 IR 381.
11. (1996) EOC 92–859.
12. Swinton, A. (2003) ‘Most IT contractors ‘distort’ job applications’, ZDNet Australia, 28 April.
13. [1932] AC 161.
14. (2000) 176 ALR 693; (2000) 75 ALJR 312.
15. (1999) 47 NSWLR 151; 88 IR 252.
16. [PR948938] (12 July 2004).
17. [1997] HREOCA 24 (26 May 1997).
18. Occupational Health and Safety (Commonwealth Employment) Act 1991 (Cwlth), Occupational Health and Safety Act
2000 (NSW), Workplace Health and Safety Act 1995 (Qld), Occupational Health, Safety and Welfare Act 1986 (SA),
Occupational Safety and Health Act 1984 (WA), Workplace Health and Safety Act 1995 (Tas), Work Health Act 1986 (NT)
and Occupational Health and Safety Act 1989 (ACT).
19. Each state, as well as the federal government, has legislated to provide for minimum workers compensation rights.
See Seafarers Rehabilitation and Compensation Act 1992 (Cwlth), Safety Rehabilitation and Compensation Act 1988

178  PART 1 Introducing HRM


(Cwlth), Workers’ Compensation Act 1987 (NSW), Accident Compensation Act 1985 (Vic.), Workers’ Compensation and
Rehabilitation Act 2003 (Qld), Workers’ Rehabilitation and Compensation Act 1986 (SA), Workcover Corporation Act 1994
(SA), Workers’ Rehabilitation and Compensation Act 1988 (Tas), Workers’ Compensation and Rehabilitation Act 1981 (WA),
Work Health Act 1986 (NT) and Workers’ Compensation Act 1951 (ACT).
20. Swift Placements Pty Ltd v Work Cover Authority of NSW (Inspector May) (2000) 96 IR 69; and Inspector Guillarte v
Integrated Group Ltd [2003] NSWIRComm 98.
21. [2003] FCA 759 (29 July 2003).
22. Australian Human Rights Commission (2015) ‘National prevalence survey of age discrimination in the workplace’, p. 2.
23. See Industrial Relations Act 1996 (NSW), ss. 117–121; Industrial Relations Act 1999 (Qld), ss. 370, 391–394; Industrial and
Employment Relations Act 1994 (SA), s. 68; Minimum Conditions of Employment Act 1993 (WA), Part 3A; and Industrial
Relations Act 1984 (Tas), ss. 47, 51.
24. Annual leave (Annual Holidays Act 1944 (NSW), s. 3(1)), long service leave (Long Service Leave Act 1955 (NSW)), parental
leave (Industrial Relations Act 1996 (NSW), s. 55) and sick leave (Industrial Relations Act 1996 (NSW), s. 26).
25. [1959] 2 A11 ER 285 at 287 and 288.
26. [1971] 3 WLR 995.
27. [1939] 3 All ER 136.
28. [1992] 1 VR 567.
29. (1974) 10 SASR 17.
30. [1992] 1 VR 567.
31. [1971] 3 WLR 995.
32. [1960] 1 WLR 1055.
33. [1992] 1 VR 567.
34. [1971] 3 WLR 995.
35. (1974) 10 SASR 17.
36. (1974) 10 SASR 17.
37. [1992] 1 VR 567.
38. [1971] 3 WLR 995.
39. (1974) 10 SASR 17.
40. [1992] 1 VR 567.
41. [1938] 4 All ER 467.
42. (1983–84) 8 IR 34.
43. AIRC PR032004, 26 March 2004.
44. [2005] HCA 10.
45. [2003] NSWIRComm 72.
46. Colosimo and Banana Traders of Australia Pty Ltd t/as PW Chew & Co. [2003] NSWIRComm 72 at [125].
47. Karvelas, P. (2009) ‘Wait on for paid maternity leave’, The Australian, 11 May, www.theaustralian.com.au.
48. Fair Work Commission (2015), Annual Report 2014–15.
49. (1998) 152 ALR 365.
50. Dorsett v Blayney Abattoir Pty Ltd (unreported, IRC, NSW, 2237/92, 9 November 1992).
51. (Unreported, AIRC, PR 913415, 18 January 2002.)

ACKNOWLEDGEMENTS
Photo: © Goodluz / Shutterstock.com.
Photo: © James R. Martin / Shutterstock.com.
Photo: © Rawpixel.com / Shutterstock.com.
Photo: © dedek / Shutterstock.com.
Newsbreak: Pizza Hut delivery drivers claim they are significantly underpaid: © ABC News.

CHAPTER 4 Human resource management and the law  179


PART 2
Determining,
attracting and
selecting human
resources
Part 2 emphasises the importance of meeting the organisation’s people requirements through
job analysis, job design and the quality of work life, employee recruitment and selection.

5 Job analysis, job design and quality of work life

6 Recruiting human resources

7 Employee selection

180  PART 2 Determining, attracting and selecting human resources


CHAPTER 5

Job analysis, job design


and quality of work life
LEA RNIN G OBJE CTIVE S

After studying this chapter, you should be able to:


5.1 explain what is meant by job analysis and job design
5.2 understand the uses of job analysis and describe the content and format of a job description and a
job specification
5.3 discuss the collection of job analysis data and explain the major job analysis techniques
5.4 discuss competency profiling
5.5 comply with EEO requirements
5.6 understand the practical and theoretical problems of job analysis
5.7 understand the major methods of job design
5.8 discuss quality of work life.

‘Flexible working has


been the worst deal for
professional workers —
the best for their
employers — that there
has ever been. Productivity
soars, not because
everyone is happy to be
given freedom but because
they find they never stop
working.’1
Lucy Kellaway, business journalist and
company director
5.1 Introduction
LEARNING OBJECTIVE 5.1 Explain what is meant by job analysis and job design.
Organisations today are depending more on their human resources. Revolutionary changes, complex
technologies and global competition mean increasing vulnerability. Organisations that fail to have
the right people in the right place at the right time are at risk. A proper match between work and
employee capabilities is now an economic necessity. Moreover, work itself is in a state of constant flux
as organisations downsize, outsource, restructure and re-engineer their work processes, and introduce
self-directed work teams and independent contractors to gain a competitive advantage. Such workplace
changes dramatically affect the work lives of employees. Organisations that change their existing
strategies, or develop new business strategies, for example, need to reassess their structures. If there
is a poor fit between the chosen strategy and the organisation’s structure, the structure will need to be
redesigned. This means that the arrangement of the organisation’s parts and the allocation of work will
change. The move from a tall, hierarchical structure to a flat structure involves eliminating layers of
management. This will produce wider spans of control, more delegation of responsibilities, increased
empowerment, decentralised decision making and new skill sets.
Thus, changes in strategy affect not only how work is performed, but also the knowledge, skills, abilities
and attitudes required by workers. Job restructuring, for example, may highlight gaps in the current skill
levels of employees, calling for new recruitment, training and development, coaching, redeployment and
outsourcing programs. This means that HR managers need a good understanding of work and how it is
organised to ensure that the organisation’s strategic business objectives are being supported and employee
needs are being met. Job analysis and job design provide the foundations for this knowledge.

5.2 Job analysis


LEARNING OBJECTIVE 5.2 Understand the uses of job analysis and describe the content and format of
a job description and a job specification.
Job analysis is a basic HR activity (and a high performance work practice) because it focuses attention
on the job content, the job requirements and the job context.2 It identifies what employees are expected
to do. Knowledge about jobs and their requirements is collected through job analysis, which may be
defined as the process by which jobs are divided to determine what tasks, duties and responsibilities
they include, their relationships to other jobs, the conditions under which work is performed, and the
personal capabilities and characteristics required for satisfactory performance. Job analysis is used by
organisations to translate strategic business objectives into specific work requirements (thus allowing the
strategic alignment of individual jobs with organisational objectives).3 Larger organisations may have
HR specialists called job analysts who undertake this systematic collection, evaluation and organisation
of job information. Smaller organisations usually make the task part of the HR manager’s job portfolio.

Components of job analysis


Job analysis provides information about three basic aspects of a job.
1. Job content describes the duties and responsibilities of the job in a manner that can range from global
statements to very detailed descriptions of tasks and procedural steps.
2. Job requirements identify the formal qualifications, knowledge, skills, abilities and personal
characteristics that employees need to perform the job in a particular situation or context.
3. Job context refers to situational and supporting information regarding the particular job: its purpose;
where it fits within the organisation; scope data (such as the magnitude of financial, human or material
resources managed); the availability of guidelines; the potential consequences of error; the amount and
closeness of supervision received or provided; and the work setting (for example, outdoors, remote
areas), cultural context (for example, working in multicultural teams), physical demands (for example,

182  PART 2 Determining, attracting and selecting human resources


exposure to hazards such as fumes and diseases) and working conditions (for example, ability to work
under pressure, to travel overseas, to work alone or to work as a team member).4

Approaches to job analysis


There are two basic approaches to job analysis:
1. a job-oriented (or task) approach
2. an employee-oriented (or behaviour) approach.
The job-oriented approach is concerned with what gets done — that is, the tasks, duties and
responsibilities of the job (job content) (see figure  5.1). The employee-oriented approach focuses on
how the job is done — that is, the human behaviour required to perform the job (job requirements). Job
requirements (formal qualifications, knowledge, skills, and abilities and personal characteristics) can be
determined from a description of the job content, but not the other way around.

Tasks, duties and responsibilities


Every job is composed of tasks, duties and responsibilities. A job differs from a position, which is a
collection of tasks, duties and responsibilities performed by one person. A job may include more than one
position. For example, if a HR department has two training officers, there are two positions (one for each
person), but just the one job of training officer. A job is an organisational unit of work. Responsibilities
are obligations to perform accepted tasks and duties. A task is a distinct, identifiable work activity — for
example, asking questions of a job candidate. A duty is composed of a number of tasks and constitutes a
larger segment of work — for example, interviewing a job candidate. It should be noted that because tasks
and duties both describe activities, it is not always easy (or necessary) to make a distinction between them.

FIGURE 5.1 The job-oriented approach to job analysis

Job analysis and job design


Job information is gathered, analysed and recorded as the job exists, not as the job should exist.
Industrial engineers, methods analysts or technical specialists initially structure work to achieve the
organisation’s strategic business objectives. Job analysis is normally conducted after the job has been
designed, the worker has been trained and the work has been performed.5 The organisation can then use
the information generated via the written job descriptions (what the job entails) and job specifications
(what kind of people to hire for the job) in the design or redesign of jobs (see figure 5.2).

Job
Wo
design rk er
k is
b ac tr a
ed in
Fe e
d

Job analysis
Job
• Job description performance
• Job specification

Job job
anal he
yst ob er doing t
serves work

FIGURE 5.2 The relationship between job analysis and job design

CHAPTER 5 Job analysis, job design and quality of work life  183
When to analyse a job
Job analysis must keep up with job changes, but it is not possible to identify precisely how often a job
should be reviewed. Cherrington identifies three occasions when job analysis is generally undertaken:
1. when the organisation commences and the job analysis program is started
2. when a new job is created
3. when a job is changed significantly as a result of new methods, new procedures or new technology6
(for example, flight attendants on former low-cost US airline Song were expected, in addition to their
standard duties, to be able to crack jokes, sing, dance and generally entertain passengers7).
Indicators that a job analysis may be needed include:
•• no evidence of any job analysis ever having been done
•• a considerable period having passed since the last job analysis was undertaken
•• increasing employee grievances regarding job content and/or working conditions
•• disagreement between a supervisor and a job holder on the work to be performed
•• reorganisation, restructuring or downsizing that involves job changes or the creation of new jobs
•• changes in technology whereby new processes, machinery or equipment are introduced — hotel
concierges, bellhops and housekeepers, for example, are now required to understand the basics of
broadband and wireless internet access, while hotel managers are expected to have additional IT
troubleshooting skills8
•• the replacement of long-serving employees who may have modified a job to meet their personal needs
and abilities
•• the use of new sources of recruitment, leading to new employees who may have different expectations
from those of people hired in the past9
•• the necessity for legal defensibility of a HR system (for example, employee selection, performance
appraisal, termination etc.)10
•• the traditional content and parameters of a job are subject to economic, political and social pressure
to change. Pharmacists and nurses, for example, are seeking to expand their range of duties and
responsibilities into areas historically monopolised by doctors (pharmacists want to be responsible for
immunisation, nurses want to be nurse practitioners responsible for basic primary healthcare).11
Figure 5.3 outlines the job analysis process.

The uses of job analysis


The information produced by job analysis is used extensively in HRM. ‘It is in fact’, says Ivancevich,
‘difficult to imagine how an organisation could effectively hire, train, appraise, compensate or use its
human resources without the kinds of information derived from job analysis.’12
A job description defines what a job is by identifying its content, requirements and context. Providing
a written summary of the duties and responsibilities of the job, job descriptions help managers and
current and prospective employees to understand what the job is and how it is to be performed.
•• Job specifications focus on the knowledge, skills, abilities, personal characteristics and formal
qualifications that an employee must possess to perform the job successfully.
•• Job design identifies what work must be performed, how it will be performed, where it is to be
performed and who will perform it. Job analysis information is invaluable in determining which tasks
should be grouped together to form a job, and for structuring jobs so that employee satisfaction and
performance can be enhanced.
Job analysis information can help identify and clarify the organisational structure and design. By clarifying
job requirements and the interrelationships among jobs, job content, tasks, duties and responsibilities can
be specified at all levels, thus promoting efficiency by minimising overlap or duplication.13
HR planning involves having the right number of qualified people in the right jobs at the right time.
Job analysis information is essential for HR planning because it helps to accurately determine the
number and types of employees to be recruited or exited from the organisation.

184  PART 2 Determining, attracting and selecting human resources


Job analysis objective

The purpose of the job analysis


is to collect information for:
• job description
• job specification
• job design.
• HR activities such as:
• recruitment
• selection.

Type of information
to be collected

• What is performed?
• Where is it performed?
• How is it performed?
• Why is it performed?
• When is it performed?

Sources of data Methods of data collection

• Job incumbent • Observation


• Supervisor • Interviews
• Job analyst • Questionnaires
• Experts • Diaries/logs
• Records/files/manuals • Critical incident reports
• Plans and blueprints • Web based
• e-HRM system • Combination

Form of data analysis

• Qualitative
• Quantitative

FIGURE 5.3 The job analysis process

Job analysis information aids the recruitment process by identifying the job requirements and enabling
HR managers to target their recruiting efforts and attract superior candidates. In addition, job analysis
identifies irrelevant and/or inaccurate job information, thus facilitating more realistic job previews
(ensuring that job applicants receive pertinent positive and negative information about the job and that
the organisation thus obtains a better matching of people and jobs).
Job analysis information assists the selection process by identifying what formal qualifications,
knowledge, skills, abilities and personal characteristics are required for satisfactory performance. This
promotes the development of job-related selection criteria, or predictors. The use of suitable selection
techniques ensures that EEO requirements are met and increases the likelihood of a proper matching of
an applicant with the job (see figure 5.4).

CHAPTER 5 Job analysis, job design and quality of work life  185
Collection of information about
Job description
what an employee does and what
(work-related activities)
constitutes satisfactory performance

Identification of job-related knowledge,


Job specification
skills, abilities, personal characteristics
(human attributes)
and formal qualifications

Development of job-related application Selection techniques


forms, interviews, employment tests, (predictors)
intelligence tests etc.

Use of performance appraisals and


other job-related measures of Performance measures
performance to measure the validity (validity)
of selection techniques

FIGURE 5.4 Job analysis and selection

Effective job orientation requires a clear understanding of the work to be performed, which is exactly
what job analysis provides. A new employee cannot be taught how to do a job properly if job duties and
responsibilities and performance standards are not clearly defined.
Job analysis information is essential to the establishment of a performance assessment system because
it provides a thorough understanding of what the employee is supposed to do. Without this information,
acceptable levels of performance cannot be determined and accurate measures of actual performance
cannot be developed.
Job analysis information is used to design and implement training and development programs. The
job specification defines the knowledge, skills and abilities required for successful job performance. This
allows the HR manager to establish training and development objectives, design programs and determine
whether a current or potential employee requires training.
HR managers are better placed to offer career planning and development guidance when they have a
good understanding of the types of jobs existing in an organisation. Similarly, by identifying jobs and
job requirements, employees become aware of their career options and what constitutes a realistic career
objective for them in the organisation.
The job description is the foundation of job evaluation. It summarises the nature and requirements of
the job and permits its evaluation (or sizing) relative to other jobs. Once the relative worth of a job has
been determined, an appropriate level of pay and benefits can be established.
Job analysis information helps create a healthy and safe working environment. Jobs with hazardous
conditions, work methods or procedures can be identified, and the work can be redesigned to eliminate
or reduce exposure to health and safety hazards.
Misunderstandings and disagreement among managers, employees and unions over job content is a
major source of grievance and demarcation disputes. Job analysis information promotes good industrial
relations by providing a clear description of tasks, duties and responsibilities, and by identifying the
formal qualifications, knowledge, skills, abilities and personal characteristics required to perform the job
successfully.
Increasingly, HR managers face legal requirements prohibiting discriminatory HR practices,
particularly in employment. Given that systematic job analysis can identify the critical elements of a
job (that is, the duties and responsibilities that must be performed) and the necessary knowledge, skills,

186  PART 2 Determining, attracting and selecting human resources


abilities and other personal characteristics required for successful job performance, it provides insurance
that an organisation’s HR policies and practices are legally defensible and that job-related selection
criteria will be employed (see figure 5.5).

Job analysis and legal compliance


Identifies if a job is award
Justifies pay rates and Demonstrates that EEO
protected or award free
pay differences requirements are being met

Ensures accurate and up-to-date


Justifies job classification JOB ANALYSIS job information is given in the
employment interview

Justifies the use of employment


Identifies performance
tests and selection techniques
expectations
• Job analysts should be trained
• Job analysis methods must be
• Logical
• Understandable
• Fully explained
• Perceived as fair
• Job data must be collected
• Systematically using a structured approach
• From more than one source
• Job analysis must clearly detail
• Job title
• Work actually performed
• Equipment used
• Working environment
• Performance requirements
• Knowledge skills and abilities required
• Formal qualifications and/or special licences required
• Reporting and supervisory relationships

FIGURE 5.5 Job analysis and legal compliance

Finally, job analysis is invaluable in establishing whether a person should be classified as an employee
or as an independent contractor. This is critical because independent contractors have no statutory rights
regarding termination pay and benefits, and annual or long service leave. Trade unions, in particular, will
need to be convinced that the use of contract labour is appropriate and not just an exploitative technique
designed to reduce employment costs and union involvement. Job analysis can highlight the distinction
between an employee and a contractor by stating in the job description that the person is not part of the
employer’s organisation but has been hired to perform a specific task or to produce a particular result.
Furthermore, it can show that the person will be expected to provide their own tools and equipment,
can delegate or subcontract work to others, can determine their own hours of work, can work for other
employers, and will be compensated by a charge or fee and not provided with a salary or benefits such
as annual leave.

Job descriptions
A job description, or position description, is a written statement explaining why a job exists, what the
job holder actually does, how they do it and under what conditions the job is performed (see the example
in figure 5.6).

CHAPTER 5 Job analysis, job design and quality of work life  187
Job description
Position: Vice-President, Human Resources, Asia–Pacific
Location: Hong Kong
Division: Asia–Pacific
Incumbent: Y. Tanaka
Department: Human Resources
Job status: Exempt
Job code: CAP-HRM-001
Reports to: President, Asia–Pacific (Administrative), and Vice-President, Human Resources —
Corporate (Functional)
Written by: Monica Lim, Job Analyst Date: 2 April 2015
Approved by: J. A. Wong, President, Asia–Pacific (Administrative Superior), W. J. Smith, Vice-President,
Human Resources — Corporate (Functional Superior)

Job objective
Under the administrative direction of the president, Asia–Pacific, and the functional guidance of the
vice-president, human resources — corporate, develop, recommend and implement approved HRM
strategies, policies and practices that will facilitate the achievement of the company’s stated business
and HRM objectives.
Duties and responsibilities
• Develop and recommend HRM strategies, policies and practices that promote employee
commitment, competence, motivation and performance, and that facilitate the achievement of the
Asia–Pacific region’s business objectives.
• Provide policy guidance to senior management regarding the acquisition, development, reward,
maintenance and exit of the division’s human resources so as to promote the status of the company
as an ethical and preferred employer of choice.
• Identify, analyse and interpret for Asia–Pacific regional senior management and corporate
HR management those influences and changes in the division’s internal and external environment
and their impact on HRM and divisional business objectives, strategies, policies and practices.
• Actively contribute as a member of the Asia–Pacific board of directors to the development,
implementation and achievement of the Asia–Pacific region’s overall business objectives, strategies
and plans.
Relationships
Internally, relate with senior line and functional managers within the Asia–Pacific region and corporate
headquarters in New York. Externally, successfully relate with senior academic, business, government
and trade union personnel. Directly supervise the following positions: manager, remuneration and
benefits, Asia–Pacific; manager, human resources development, Asia–Pacific; manager, industrial
relations, Asia–Pacific; and manager, recruitment and selection, Asia–Pacific. Functionally supervise the
HR managers in 13 geographic locations within the Asia–Pacific region.
Knowledge
University degree is required (MBA desirable), along with seven to 10 years broad-based HRM experience
in a competitive and international (preferably Asian) business environment. A proven track record in
managing change is necessary. Fluency in English is essential. Some competency in Chinese or Japanese
is desirable. Excellent human relations, communication and negotiating skills are critical. Previous
experience in a line management role in marketing, finance or manufacturing is preferable. Computer
literacy and experience with e-HRM are essential. Must be able to positively represent the company at the
most senior levels and to actively contribute as a director of the Asia–Pacific regional board.
Problem solving
Diverse cultures and varying stages of economic development within the Asia–Pacific region create a
unique and demanding business environment. The incumbent will often face complex HR and business
problems demanding solutions that need to be creative, ethical and, at the same time, sensitive to local
and company requirements.

188  PART 2 Determining, attracting and selecting human resources


Authority
This position has the authority to:
• approve expenditures on budgeted capital items up to a total value of US$250  000 in any one
financial year
• hire and fire subordinate personnel in accord with company policies and procedures
• approve expense accounts for subordinate personnel in accord with company policies and procedures
• authorise all non-capital item expenditures within the approved budgetary limit
• exercise line authority over all direct reporting positions.
Accountability
Employees: 3000. HR personnel: 82 (Asia–Pacific region). Sales: US$4 billion. Direct budget responsi-
bility: US$4.7 million. Assets controlled: US$1.8 million. Locations: Australia, China, Hong Kong, India,
Indonesia, Japan, South Korea, Malaysia, New Zealand, the Philippines, Singapore, Taiwan, Thailand.
Special circumstances
Successful performance requires the incumbent to work long hours, to travel extensively (50–60 per cent
of the time), to quickly adapt to different cultures and business conditions, to successfully handle high-
stress situations and to constantly work under pressure in a complex and very competitive business
environment.
Other
It is important that the incumbent has the potential (and flexibility) to move to a senior line management
position in either Europe or the United States on the successful completion of this assignment.
Performance indicators
Performance indicators will include both quantitative and qualitative measures as agreed by the
president, Asia–Pacific division, the vice-president, human resources — corporate and the incumbent.
Indicators may be market based (for example, share price improvement), business based (for example,
division profitability, budget control, days lost through industrial unrest, positive changes in employee
commitment, job satisfaction and motivation) and individual based (for example, performance as a
leader and manager as assessed by superiors, peers and subordinates). Performance expectations and
performance indicators generally will be defined  and agreed on an annual basis. A formal 360-degree
performance appraisal will be conducted once a year.

FIGURE 5.6 Global Chemicals Ltd job description for Vice-President, Human Resources, Asia–Pacific region

There is no standard format used for preparing a job description; the format, in fact, depends on
managerial preference and how the job description will be used. Most job descriptions, however, contain
information on:
•• job identification •• authority
•• job objective •• accountability
•• duties and responsibilities •• special circumstances
•• relationships •• performance standards
•• knowledge •• trade union membership
•• problem solving •• other requirements.14

Components of job descriptions


1. Job identification
The job identification section locates the job in the organisational structure. It includes information on
the employee’s job title, department and reporting relationships. The job title should be descriptive,
meaningful and consistent with comparable positions in the organisation. A title that accurately identifies
a job is valuable for:
•• providing employee information and fostering self-esteem
•• identifying job relationships
•• comparing the position with similar jobs in other organisations.15

CHAPTER 5 Job analysis, job design and quality of work life  189
Additional information can include the job code, the job status (exempt/non-exempt, full-time/part-
time/casual), the job grade or points, the pay range, the date written, the name of whoever wrote the job
description, and the name and position of the person approving the description.
2. Job objective
The job objective describes in a nutshell why the job exists — that is, the primary purpose or objective
of the position. Ideally, it should describe the essence of the job in 25 words or less.
3. Duties and responsibilities
This section includes a listing of the major job duties and responsibilities. It is the heart of the job
description and should indicate clearly and specifically what the employee must do. Given rapid change,
the need for improved performance, greater flexibility and multiskilling, and use of teams, duties and
responsibilities are increasingly being expressed as performance standards (or key results or desired
outcomes) derived from the organisation’s strategic business objectives.
Six to eight statements of key duties and responsibilities are more than enough to describe most
jobs. A common mistake in this section is to list every task, duty and responsibility regardless of
importance. A task or duty that is performed frequently is not necessarily significant in achieving the
job’s objectives. A major duty and responsibility is one of such importance that non-performance or
substandard performance will significantly affect the required results and demand remedial action by
management.16 Job holders, in particular, are especially prone to padding job descriptions when they
know they are being used for job evaluation purposes. Thus, it is essential that these statements be clear
and concise and give an accurate word picture of the major duties and responsibilities encompassed
by the job. They are best expressed as a list of results that the job is designed to achieve so that job
performance can be measured objectively.
4. Relationships
This section identifies the relationships with other positions (within and external to the organisation)
that are necessary for satisfactory job performance — for example, what positions report directly to this
job? What are the job’s most frequent contacts within the organisation? What are the job’s most frequent
and important contacts outside the organisation? For example, a HR manager may have interactions
with trade union officials, employer association representatives, university academics, management
consultants and government officials.
5. Knowledge
The knowledge section is concerned with the minimum levels of knowledge, skills, abilities, experience
and formal qualifications required to do the job — for example, what are the minimum academic
qualifications required? What computer skills are essential? How much and what type of experience is
needed to perform the job successfully? What language skills are necessary?
6. Problem solving
This section identifies the amount of original thinking required in decision making and the environment
in which problem solving takes place — for example, does the job require simple, routine and repetitive
solutions or complex, varied and creative solutions? Is the decision-making environment stable or
dynamic? For example, is business competition nonexistent or cutthroat? Are there clear policies and
guidelines to follow? Do decisions have to be made under pressure and with insufficient information?
7. Authority
This identifies the specific rights and limitations that apply to the position’s decision-making authority.
In other words, the freedom to act — for example, what decisions can be made without reference to a
superior? What decisions must be referred to a superior? Does the position have the right to hire and
fire? Give a pay increase? What specific dollar limits exist on decision-making authority? For example,
can the incumbent spend up to $500 without reference to a superior?
8. Accountability
Accountability details the financial impact of the job by identifying the quantity and value of assets,
budgets, sales, payroll and personnel (both number and type, for example, professional, managerial,

190  PART 2 Determining, attracting and selecting human resources


semiskilled and so on) for which the job is accountable. It measures the answerability for actions taken
on the job.
9. Special circumstances
This section is concerned with what is special, unusual or hazardous about the position and/or the
environment in which the job is performed (for example, dirty, dusty, dangerous, high pressure, long
and/or irregular hours).
10. Performance standards
This section identifies (a) the standards required for effective performance and (b) the measures for
evaluating performance. It identifies what is expected to be achieved, how the job holder is expected
to behave (for example, to be ethical, to be a team player) and how performance will be measured
(for example, by results — sales volume, production output, profitability; by behaviour — team player,
customer service orientation; and/or by personal characteristics — communication and interpersonal
skills, creativity, aggressiveness, loyalty and so on).
11. Trade union/professional associations
This section identifies any professional association or trade union membership required.
12. Licences
This section highlights any special licences, permits or registrations required (for example, a licence to
practise psychology or medicine, or to repair electrical equipment).
Job description guidelines
Although the style and format of job descriptions are largely determined by their use and organisational
preference, there are some standard guidelines for writing effective job descriptions, as follows.
•• List duties and responsibilities in a logical sequence.
•• State separate duties and responsibilities clearly, simply and concisely.
•• Begin each sentence with an action verb (e.g. supervise, inspect, organise, analyse).
•• Use quantitative terms where possible to achieve greater objectivity and clarity.
•• Use specific rather than vague terms.
•• Use standardised terminology.
•• Answer the questions of how, what, when and why. This will help produce a complete job description.
•• Clearly identify the end results or standards on which performance will be evaluated.
Clarity and simplicity of expression are prerequisites for job descriptions and specifications. If job
descriptions are to be read, understood and accepted by all levels of employees, they must be concise
and written in plain and simple English. Finally, the job description must reflect the reality of the job
and not management’s wishful thinking (for example, requiring a university degree when a high school
certificate will do).17

DOCTOR HR

Hi Dr HR
My company does not have formal job descriptions. Is this a problem?

Job specifications
The job specification, or person specification, is derived from the job description. It identifies the
experience, education, knowledge, skills, abilities, personal characteristics and special requirements
needed to perform the job successfully. The job specification is an essential part of the employment
process because it identifies in job-related terms what kind of candidates need to be recruited and how
they should be assessed. It should be noted that some job specifications identify not only the essential
criteria required to perform a job successfully, but also those criteria deemed as desirable. In this case,
care must be exercised to ensure that preconceived attitudes or prejudices do not lead to the inclusion of

CHAPTER 5 Job analysis, job design and quality of work life  191
discriminatory criteria which are not job related. The job specification may be incorporated into the job
description form or documented separately. A sample job specification is shown in figure 5.7.

Job specification
Position:
Location:
Job status:
Job code:
Department/section:
Division/unit:
Date:
Key selection criteria
Experience
What type of, and how much, experience is required to successfully perform this job?
Qualifications
What are the minimum formal educational qualifications required to successfully perform this job? Are
any special qualifications legally required to perform this job?
Knowledge, skills and abilities
What knowledge, skills and abilities are required to successfully perform this job?
Personal characteristics
What personal characteristics are required to perform this successfully job? (For example, 20/20 vision,
pleasant personality, high achievement motivation.)
Special requirements
What special requirements must be satisfied to perform this successfully job? (For example, ability to
work shift work, to travel interstate/overseas, to be away from home for extended periods, to work long/
irregular hours.)
Ideal industry background
What industries/organisations would provide an ideal background for doing this job?
Ideal current organisation
What would be the ideal organisation for the candidate to be employed in at this moment?
Ideal current position
What would be the ideal position for the candidate to be employed in at this moment?
Route up
What would be the ideal career path for the candidate to have followed as preparation for this position?
Remuneration
What pay and benefits should the candidate be currently receiving to make this position financially
attractive?

FIGURE 5.7 Global Chemicals Ltd job specification questionnaire

Job descriptions, job specifications and trade unions


The language used in writing job descriptions and job specifications is extremely important. It is
particularly important when a job description is to become part of an award or a negotiated agreement
involving a union. Badly written job descriptions and job specifications restrict management’s freedom
to change job tasks, duties and responsibilities and to assign work to employees. To avoid disputes, it is
critical that job descriptions and job specifications be clear, concise and understandable. This is particularly
so with jobs that have hierarchical skill and responsibility classifications (for example, machinist grade
A or grade 1, highest level; machinist grade B or grade 2, next level down and so on). Such jobs must

192  PART 2 Determining, attracting and selecting human resources


be carefully distinguished by job title and clearly involve different job content and job requirements. If
ABC-type classifications have developed because