Managing People in a Contemporary Context

Emma Parry, Shaun Tyson

• Publisher: Routledge
• Year: 2013
• eBook ISBN: 9781134621200
• Topic: Business
• Subtopic: Human Resource Management
• Index: Business

The worldwide financial crash and the ensuing recession have coincided with other significant long term changes for the Western Economies of Europe and the USA, especially the growing strength of newly developed economies, demographic and technological change, institutional crises and political uncertainty. The interconnected nature of businesses and societies mean the competitive landscape is being transformed, and new economic pressures and opportunities are producing new business models, a rebalancing of economies, and a new HRM.

The application of new technology to the processes and systems of people management is spreading, in a world where competitive advantage is increasingly about how smart the management processes are, and how well people are managed. This text is the first book to analyse the way these contextual pressures are producing a game change in the human resource function of management.

For anyone who has an HR role or is a line manager, or a student of management, and for those who teach, research or consult in the field, this book encapsulates these critically important trends and what they mean for managing people in the 21st Century.

1 Introduction

Managing people in a contemporary context

Across the globe all nations are facing unprecedented economic challenges. In developed and developing economies, the recession which began in the West in 2008 has had an impact which is far reaching. The people who work in organizations and those who manage them have borne the brunt of the changes which have ensued. At the same time, new technologies and changes to society which were already occurring have been creating a new context in which organizations of all sizes and in all sectors have sought to operate successfully. This backdrop raises questions about how those responsible for managing human resources can overcome the new challenges, in order that their organizations can prosper into the future. That is the subject of this book.

The emerging context

The economic and social changes already facing organizations were sufficiently taxing without the sudden banking failures and the subsequent events in financial markets and economies of Western nations. Demographic shifts towards an ageing population together with generational differences presented difficulties for pension schemes, health and social welfare budgets, as well as problems in workforce planning, lifestyle changes, elder care, promotion policies, talent management, and rewards. New technology enabled whole new generations of products, and new ways of doing business through faster communications of all kinds, and vast amounts of data made available to all. Such developments were exciting and brought new business opportunities, but new technology is also a great leveller, and the costs of entry to a new business, or even a new geographical area, were suddenly diminished, encouraging greater competition. The emergence as major players of the BRIC countries (Brazil, Russia, India, and China) was part of a massive expansion of trade. Western economies were not able easily to compete on a basis of costs/prices, and nor eventually on quality. It is our contention that even if there had been no recession, the UK’s economy was becoming uncompetitive, and that the economic policies prior to the recession were unsustainable. This is also true of many of the countries in the European Union (EU), where economic performance was sometimes based on false assumptions, about demand and property prices, for example.

However, these issues have become more critical as a result of the recession. Up until the financial crash, there was a widely held belief that recessions were cyclical over a short time period, a temporary halt on the march towards better living standards. Now, it is clear there are institutional changes required and that the return to long term competitiveness may take decades for many countries in Europe. The changes we see because of this confluence of circumstances lead us to believe that the effects will produce fundamental changes to people management, which are now becoming apparent. The scale of change required has been expressed by the leaders of all the major economies.

In the USA, still the largest economy in the world, President Obama, in his first inaugural address on 20 January 2009, set out the challenges when he said: ‘Our economy is badly weakened, a consequence of greed and the irresponsibility of some, but also our collective failure to make hard choices and prepare the nation for a new age. Homes have been lost, jobs shed, businesses shuttered …’ (extract from the President’s speech released by the White House). The US economy has moved back into modest growth since that time, and unemployment in the USA has reduced. However, public spending has been massive. In the fiscal year to 2012, the US budget deficit reached $1.6 trillion, and the debt totalled $16 trillion, making tax reform efforts to reduce the deficit a priority. The absence of a bi-partisan agreement triggered ‘sequestration’, which resulted in budget cuts of $1.2 trillion being imposed over ten years. This was expected to lead to the loss of thousands of jobs (SHRM 2013). At his second inaugural address, on 21 January 2013, President Obama spoke of the need to change with the times: ‘Our country cannot succeed when a shrinking few do well, and a growing many barely make it’ (extract from the President’s speech released by the White House).

The EU faces similar major problems, where in 2012 there was an unemployment rate of 12 per cent, as well as a rumbling political and currency crisis in the Eurozone countries. Angela Merkel, the German Chancellor, in her New Year television address to the nation on 31 December 2012, commented, on looking forward: ‘In fact, the economic situation will not be easier, but more difficult’ (CET Euronews 2012). The UK economy has been almost flatlining, stagnating with some employment growth, but little economic growth, and no real improvement to the indebtedness of the state. In early 2013, the UK lost its triple A credit rating, as the economic problems began to build. One of the major engines for growth in the Far East, China, downgraded its growth forecast for 2013, from 8 per cent to 7.5 per cent, and India, which originally forecast 7.6 per cent for 2013, reduced this forecast to 5 per cent. In addition, India has a large fiscal and current account deficit to tackle.

One aspect of the recession which may be affecting management thinking is to bring the interconnectivity of the world’s economies into the foreground. These interconnections between nations and trading blocs, between international businesses and the major powers, influenced by geo-political trends, all have an impact on opportunities and competitiveness. Institutional and political uncertainty feed through into trading conditions, exports, jobs, and the pressure on costs, especially labour costs and productivity. The global aspects of trading provide important foundations for strategically important commodities such as oil and gas, grain, and raw materials, with consequences for energy and food prices, and hence for inflation. There is institutional uncertainty; for example, the Euro crisis, the reforms of the EU, and the political fallout of the austerity measures in Greece, Italy, Portugal, and Spain. There are wider problems of uncertainty, such as the problems affecting religious institutions, the difficulties arising from the revolutions initiated in ‘the Arab Spring’, and uncertainty about local political situations, such as the UK’s relations with the EU, the threats from North Korea, and the ongoing threats from terrorists in Africa, and in Afghanistan and Pakistan. The list of potential political flashpoints around the world at any one time seems to be growing. These issues can delay investments, or tip the balance in decisions on where to make an investment. They disrupt trade and aid, and result in tensions reflected in stock market performance, and share price volatility. The atmosphere of change and uncertainty brings opportunities as well as problems. In our account of the impact of the recent changes on people management, we are conscious of the underlying economic and social issues and perspectives, which inform management strategies, and therefore the management of people.

Our view is that the political, social, and economic context nationally, and increasingly internationally, establishes the choices and the opportunities companies and governments can make, and that business or organizational strategy is influenced by these choices. This position is consistent with contingency theory (Lawrence and Lorsch 1967), but does not take a deterministic stance. Our position is also in tune with the view that we are moving from what is seen as the modernist conception of the world into a postmodern world, at different rates of development, where the individual is simultaneously attached to the local community and to global trends, exposed to products, ideas, and opinions from around the world, as well as the institutions of the economic and state structures which seek to mediate them. Giddens (1991) argued that we are living more in a world of ‘radicalized modernity’ than of postmodernity. Radicalized modernity takes a more positive view of the trends and institutional forces shaping our lives than is found in postmodernism. There would seem to be elements of both in our analysis, but we do find it possible ‘to identify the institutional developments which create a sense of fragmentation and dispersal’ (p. 50) and we are able to see ‘day to day life as an active complex of reactions to abstract systems, involving appropriation as well as loss’ (p. 50) which Giddens saw as two of the eight features which identify radicalized modernism. However, we also ‘theorize powerlessness which individuals feel in the face of globalising tendencies’ (p. 50) which he defined as one of the characteristics of postmodernity.

The effects of contextual change on managing people

The initial context for the firm is the industry sector which affects how influential these wider trends are for managers in their analysis of factors when making strategies, policies, and decisions, as seen, for example, in how industries develop and change (MacGahan 2000). There is a long-established theoretical and empirical tradition of research on organizations, and on people management policies and practices in particular, which acknowledges the significance of the environmental context. Early studies of human resource (HR) policies and practices followed the contingency approach found in the work of Burns and Stalker (1961) and Emery and Trist (1965), which showed how ways of organizing work are contingent upon the degree of change, the complexity, and the type of technology in the organization, and that as a consequence different types of environment produce different organization structures and working systems. Similarly, early studies of HR policies by Ackermann (1986), Schuler and Jackson (1987), and Delery and Doty (1996) showed that organization size and industry sector were, among other causes, the reasons for differences in HR policies and practices. There is also empirical research which seeks to relate data in human resource management (HRM) research to the institutional context, for example by acknowledging the effects of trade union membership on HRM and performance (Arthur 1992).

The point of departure for this book is the impact of the various contextual factors on people management in organizations. We take the HR function of management to be the whole range of activities under the control of management which are intended to affect the management of people in an organization. This definition therefore covers first-level supervisors, line managers, and directors, as well as the specialists in the HR Department, all of whom have some part of the responsibility for managing people at work. The context of the changes experienced in organizations since the financial crash we see as the social, economic, and institutional forces and influences which have shaped the responses of organizations to the threats and opportunities they face. Some of these threats are part of a long term trend, such as the demographic shift to an ageing population, while some, such as the austerity packages adopted or wished upon governments, have suddenly been deemed necessary for survival, and were unexpected, with immediate effects such as redundancy on the employees concerned.

The economic context and the social context are experienced by employees through economic and social institutions. Of the institutions of the market place, those of the labour market have a major impact on the life chances of employees. If we take Dunlop’s old (1970) notion of the industrial relations system, there are three main actors: employers’ associations, trade unions, and the government. These institutions have been subject to long term changes. Employers’ associations in the UK and elsewhere have seen bargaining and dispute resolution in the case of most associations move to the company level. In the East of Europe, employers’ associations in those countries that were once dominated by the Soviet Union had to make rapid changes after the fall of the Berlin Wall, from being organs of the Communist Party to becoming more focused on trade and on the representation of employers’ interests (Croucher et al. 2006). In the West also, employers’ associations have shifted their emphasis to providing services more for their members and (as employer representatives) to acting as lobbyists and in a public relations role. Trade unions in the UK have retained their role in bargaining, but membership has been subject to steady decline, from a peak of 13.2 million members in 1979, to 7.2 million in 2012 (Certification Officer Report 2012). Public sector unions have become more prominent and there has been a decline of manufacturing employment where there were traditions of membership because of the nature of working conditions. Other reasons for the reduction in trade union membership include the effects of the rise of small businesses (there has been a rise in the number of self-employed to 367,000 people in the four years to 2012), increases in unemployment, and the legislation of the Conservative government in the 1980s. The state’s direct influence on industrial relations is mostly through employment law, which covers a massive range of topics, such as redundancy procedures, bargaining rights, health and safety, and individual aspects of employment contracts, such as unfair dismissal, discrimination, and employees’ rights. Indirectly, of course, the state influences the employment relationship through economic policies giving rise to unemployment or increases in demand, changes to inflation, and interest rates.

These changes to laws show how there has been an evolution of industrial relations. Nevertheless, the shift from the collective to individual relationships charts a movement which is found in society generally. The individualization of employment relations and the changes in social behaviour with more single parents, more single households, and demographic changes, goes alongside changing social norms, such as falling church attendance, more alcoholism, drug abuse, and increases in mental health problems, especially depression and anxiety. Perhaps coincidentally, there is now more individual entertainment (computer games and television, with more television and radio channels and internet entertainment, as well as more take-up of individual games such as tennis, golf, squash rather than team sports). All these factors paint a picture of a changing society.

Paradoxically, new developments in information systems have enabled mass electronic relationships to form via social media such as Facebook and Twitter, emails, and the possibilities of the Internet. There is more overseas travel, more intercultural understanding through immigration and 24/7 TV news, all trends which encourage a more global mindset. The Canadian pop star Justin Bieber, perhaps the first internet pop idol, has created an image and a massive following across the globe due to his appeal to teenagers everywhere, with millions of fans following his blogs and music around the world in 2013. His prodigious number of tweets and blogs have excited the interest of corporations which have, as they have with other pop stars, seen the possibilities of gaining access to millions of teenagers and their families through sponsorship deals, giving opportunities for sales and perhaps chances to use add-ons on websites as part of their marketing and merchandising strategies (IEG 2013). New technology has proved to be a game changing development. Offering instant communications and access to masses of data on every topic, due to the interactive nature of the Internet, its transparency, and wide availability, the Internet can now be seen as a new societal institution.

New technology has also revolutionized work. Robots now build our cars, computers help us to drive, and keep our railways and airports safe, and our traffic moving. There are no jobs however menial where computers are not at some point involved, whether it is in the scheduling of work or the operation of complex systems in laboratories, nuclear power stations, and in schools, concert halls, hotels, offices, shops, government buildings, tax systems, banks and money transfer, in air-conditioning systems, water supply, and in the logistics which deliver food to supermarkets and other outlets. A small failure, such as has occurred in bank cash machines (ATMs), can affect millions. So pervasive are the effects of new technology that we do not always realize that our lives now depend on these systems working.

The effects of the developments in new technology such as the dramatic impact of social media on recruitment we will examine in detail in Chapter 6, but here we should note that there are significant effects on employment relationships from the use, for example, of online surveys intended to inform frequent evaluations of HR policies and strategies, and the growing extensive use of e-learning. These kinds of changes show how new technology is making the HR function different – more driven by an employee’s own needs and views, encouraging greater transparency and employee involvement.

The changes to HRM brought about by the financial crash and the following recession are aspects of the economic context which are central to this book’s purpose. While acknowledging the long term trends which are impacting economies, such as in the UK, where there were pre-existing structural problems of an un-balanced economy, with an overconcentration on the service sector rather than the manufacturing industries, and the north-south divide of investment and industries, the impact of the recession has brought about a sea change, a shift in the tectonic plates of the economy. This requires a transformation in the way we think about our future, and the kind of life we will be able to live. There is a gradual realization that, as President Obama said, there is the coming of a new age especially for the Western economies in Europe and the USA, where we all have to come to accept that our standard of living may not continue to rise, that we cannot afford to live as we used to, and that survival depends upon us finding a new mission, a new vision for the future, in which there is a return to long term competitiveness.

The economic context has a multiplier effect on all the other trends, social, institutional, and technological, and interactive effects on the various aspects of the economy. The effects of the sudden downturn can be seen in pay, redundancies, workforce restructuring, and changes to business models.

These changes affect recruitment, retention, reward, and development at the policy and individual employee level. There are also issues about the climate of employment relations which the economic downturn has created. In the public sector this has been one of hostility to the cuts, and in the UK and in other European countries, such as Greece, Italy, Spain, and Portugal, large scale demonstrations, where public sector and other workers express their anger at the reduction in their life chances which austerity has brought. The recession has therefore acted as a catalyst, bringing together long-run failures which had not been addressed, with the immediate problems of unsustainable levels of debt.

Some of the failures are social and political, as much as commercial. There is a widespread belief in the UK that the educational and training systems have not delivered on their promise. This is one reason for major problems with the economy, and why many British employers fill vacancies with migrant workers, especially from Eastern Europe, because in addition to their skills, migrants often possess a strong work ethic, and flexibility. The LSE Growth Commission (2013) in its report, drawing on secondary data sources, pointed to the failures in UK schools to teach to a sufficiently high standard. The report argues that intermediate skills and the transition from school to workplace are said to be poor in the UK. However, employers in the UK have also too often failed to provide apprenticeships of sufficient length and quality, compared to our European rivals. The UK government has now made a number of interventions to increase the number of apprenticeships.

The recession may well have resulted in reductions in training spend by many employers, who are aggressively seeking value for money in their search for solutions to the problems of balancing needs against a shrinking training budget. The changes that have been occurring are also opportunities for organization development, and there are now many variations in approach that can be taken, using models of action learning such as collaborative enquiry. The management of change is made more difficult when the circumstances of impending closure of the business are apparent. It is too late at this stage. As with many HR interventions, the time for major development initiatives is usually when there is a consensus among the board that there needs to be a change in direction, in order to grow the business more, or to restructure in advance of change.

Themes in the contemporary context of people management and the book’s structure

Our book focuses on the new and emerging trends and activities in HRM, and there is a strong emphasis on the wa...

Table of contents

• Cover Page
• Half Title page
• Title Page
• Copyright Page
• Contents
• Figures
• Tables
• Acknowledgements
• 1 Introduction Managing people in a contemporary context
• Part I The new context
• Part II Changing HR roles and technology
• Part II The impact of context on HRM
• References
• Index