Importance of HR planning & selection procedures

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Why is HR planning important and how does it support Company XXX’s business objectives?

 

Before we can talk about the importance of HR planning for Company XXX’s to help make the business objectives come true, it is essential to make clear the concept of planning and HR planning. Planning is the process that involves the determination of the true course of action which takes place at two levels: strategic level and action level (Deb 2006, p.76). In the strategic level, planning entails the setting of mission, goals and objectives which draw the outline and broad direction of the business activities in the long term; and in contrast in the action level, planning involves the setting of the short term based objectives which need to be specific, achievable and measurable for the companies. In the area of human resource management, planning has more particular contents. Human resource planning may be defined as a strategy for the acquisition (recruitment/selection), utilization (deployment), improvement (training and development) and preservation (pay and rewards) of an organization’s human resource (Gennard 2004). For the internet website, Company XXX, our company will aim at expanding our business from the current focus in only Kuala Lumpur area to at least five other major cities in Malaysia, the HR planning is of great importance to the realization of the business objective with the below merits and benefits.

 

·         Determine the number of personnel with skills and qualifications needed in the future

 

One key purposes of HR planning is to determine the number of personnel with appropriate knowledge, skills and qualifications needed for the future (Kleynhans 2006, p.69) which is a key issue that Company XXX need to settle when it is moving forward to an enlarging and fast growing business. There are several techniques that the HR could apply to forecast the future demand of the human resource such as trend analysis, managerial estimates and Delphi technique. Similarly there are also ways such as skills profiles and job classifications to forecast the internal supply of the relative human resource in the future (Grobler & Warnich 2006, p.107). By balancing the supply and demand of the labor in the future, the HR planning assists to avoid the three possible key problems that could become obstacles on Company XXX’s way to achieve the business objective to enlarge the business.

 

The first possible problem that can be avoided is the shortage of labor forces. Because of the strategic expansion, in the future sudden surge in the need for additional staffs could happen without giving the company enough of time to recruit and train the new employees before they could serve in the particular positions. And also the scarcity of the talents in the market could prolong such shortage.

 

The second problem can be avoided is the short term surplus of labor supply. Despite the fact that the there is an anticipated fast growth of the labor demand in the future with the carrying out of the company’s business strategy, if the new employees recruited and well trained come into the positions much faster than generation of the new labor demand, a short term labor surplus would happen and cause a waste of labor and further increase the business cost because the new employees could not have the opportunities to contribute to the work. So it is necessary to apply the HR planning to ensure that new candidates are attracted in time and go to the work place at a good timing.

 

The third problem can be avoided is the mismatch of labor force in term of skills and qualifications which also results in operation ineffectiveness though the number of labor forced is right. And the company needs to avoid such mismatches by adopting HR planning to matches the organization and the HR objectives with its people requirements (skills, qualifications and other techniques). In a word, through this way HR planning systematically identifies what must be done to guarantee the availability of the human resources required by an organization to meet the company’s strategic business objectives (Stone 2011, p.51). Besides, by optimum utilization of the available human resource, HR planning also helps in achieving cost effectiveness by optimizing the utilization of human resource which is the most precious asset for the company because the lack of human resource planning often results in under-utilization of human resource and thus pushing up the labor cost (Durai 2010, p.109).

 

·         Cross-departmental sharing of information gathered through HR planning

 

Another contribution from HR planning to the achieving of the company objective is the information gathered through the planning which according to Kleynhans (2006, p.69) can be used for other HR management functions though a cross sharing among different functional departments. The information needed in the HR planning process could include:

  • Redundancy or recruitment cost
  • Current employee motivation and job satisfaction
  • Availability of skilled staff within the company
  • Availability of suitable people in the job market
  • Time limits
  • Development and training needs or schedules
  • Management requirement

 

This forms part of the information needed by other functional departments and the company as a whole (Price 2007, p.309). For example, as our company is going to penetrate into the five other cities in Malaysia, marketing activities such as promotion will be restrained by the number of sale staffs. But if the marketing department knows about the information of the new training schedule of the sale position employees indicating when the marketing department could expect to have more head count, then the promotional activities could be arranged timely. Also to the company as a whole, the information gathered through the HR planning could update the managerial personnel with the changes in the internal (e.g. existing labor competencies and skills) and external environment (e.g. labor market changes) and the information update would greatly help with the decision making and management development program.

 

Strategic recruitment is of utmost importance if Company XXX were to achieve its business objectives. Critically discuss and elaborate on this.

Figure 1. Framework of traditional recruitment and selection

Source: Kleynhans 2006, p.55

 

Recruitment is the process of searching for prospective employees and stimulating them to apply for the positions available in the organizations (Pattanayak 2005, p.55). A traditional recruitment process involves the separate recruiting activities such as making advertisement followed by the selection process as the figure shows. In contrast, according to Stone (2011, p.196) strategic recruitment links the recruiting activities to the organization’s strategic business objectives and culture. In the concept of strategic recruitment recruiting activities should aim at resolving system-wide staff shortages by attracting external candidates with appropriate skills and values, accessing the internal pool of candidates and also controlling the recruitment cost through resource sharing among the operating units (Shi 2006, p.134). To Company XXX, it is important for the company to reply on the strategic recruitment to help achieve its business objectives to increase the business and market share in the domestic market. Such help could be in the following areas.

 

·         Support the corporate culture

 

According to Sahaf (2008, p.45), since the culture of an organization represents a complex pattern of beliefs and expectations shared by its members which tends to persist once established and can be a major strength if it is in consistency with the company’s organization strategy, and this makes the reinforcement in different methods of the organization’s culture of great important to the success of the company’s business strategy. And one of the most effective methods of such reinforcement is to set the criteria for recruitment, selection, promotion of the employees in such a way that it ensures the attracted and promoted employees are more favorable to the company culture. Assume that our company, Company XXX, has a company culture featured by competition, individual initiate, hard work and creativity at work, it is important to attract those candidates who are self motivated with passion for work and can work under pressure and constraints of deadlines in an environment of high degree of uncertainties. This is exactly what Franke (2004, p.45) describes as “culture fit” in the book HR networking: performance management by saying that “if we are looking at a handful of people who have similar skills and capabilities, we will look for the one who is going to fit into our culture because a culture shock for someone who’s not used to this type of environment. This is also one of the key reasons why strategic recruitment is important to the reinforcement of the corporate culture which can be a major strength to support the organizational strategies. Besides the support that provided by the effective strategic recruitment to the reinforcement of the corporate culture, strategic recruitment also support company’s strategies and also the strategic changes if they are necessary.

 

·         Support the company’s strategies and strategic changes

 

Assume that Company XXX with its expected rapid growth in its business has planned to build up a more diversified labor force that embraces different ethnic, educational, cultural, age, and gender groups, this strategic change is also in consistency with the government’s long term political direction stressing on the “1Malaysia concept” which also materialize in term of requirements in the business sector to request the companies and institutional organizations to set targets to embrace a more diversified labor force in the work place (1malaysia.com.my 2011). Let us get back to the topic again, if the company really determine to adhere to the urge of the government to promote a more diversified labor force in the company, it has to start with attracting the minorities to apply for the available positions in the recruiting activities. For example, in developing the appropriate recruitment advertisements and literature, words like “female candidates are encouraged to apply”, “aged candidates/fresh graduates are also welcome to apply for this position” would be helpful to attract the minorities to become interested in the job opportunities offered by Company XXX.

 

In another case, if the company decides to change its core business from the current group purchases featured by coupons selling which is participated by individual customers and small and local retailers to focus more on the large chain stores such as Wal-Mart and Giant while at the same time keep enlarging its member numbers, this strategic change could only be effective and successful while it is supported by appropriate strategic recruitment. For example, with the carrying out of this strategic change there will be a need to recruit some good key account managers to be in charge of the key local retailers in the market. The labor demand of the good key account managers would require the company develop a program for training the employees (especially the sale staffs) to become key account managers and recruit the key account managers internally from the suitable candidates due to it has been found out that the majority of key account managers (about 84 percent) are recruited internally (Wotruba & Castleberry 1993). What is more, some key account managers may need to be recruited externally, then the company need to find suitable candidates by referrals and word-of-mouth sources because it is believed intelligent talents tend to know each other and also they could be found by recruitment consultants and headhunters (McDonald, Rogers & Woodburn 2000, p.234) because these key talents are usually not available in the open labor market.

 

·         Help monitor the internal and external environments

 

By carrying out a strategic recruitment, the HR of the company needs to closely monitor the trends in the external and internal environments that will likely affect the recruitment functions. To achieve this there are questions to be answered regularly: To what extent will economic conditions make it easier to recruit certain kinds of talent in the future? And to what extent will technological changes influence the kinds of talents needed? And what are the appropriate sources to look for these talents needed? What labor skills and qualifications that we currently have in the existing staffs? (Erasmus, Swanepoel, Wyk & Schenk 2003, p.278) and also other questions related to the strategic recruitment functions. The regular reflection and update of the internal and external environments to answer these questions will keep the management of the company aware of the internal and external trends based on which innovative changes and critical decisions could be made.

 

 

 

What selection procedures would you use for Company XXX? Justify your answer.

 

After having attracted enough job applicants using a strategic recruitment method, employment specialists begin the selection process. Selection is the process of determining which people in the applicant pool possess the qualifications necessary to be successful on the job (Gitman & McDaniel 2008, p.209). In this stage, strategic selection should also be used which builds up links between the selections activities to the company’s strategic business objectives and culture to produce a positive contribution to the organizational performance. In determining the selection procedures, according to Donald L. Caruth, Gail D. Caruth and Stephanie S. Pane (2009, p.160) selection procedures vary from company to company, and even from job to job, depending upon such circumstances as size of firm, industry, geographic location, labor contract provisions, and technical level of jobs to be filled. Assume that Company XXX does decide to change its core business from the current group purchases featured by coupons selling which is participated by individual customers and small and local retailers to focus more on the large chain stores such as Wal-Mart and Giant, then two types of positions in which more headcount will be needed: key account managers and sale staffs. Now let us see the two different selection procedures for the two position candidates.

 

For selecting the key account managers, the following selection procedures would be used for our company. Please take note that because as mentioned above according to the common recruitment practices for the position of key account manager the majority of the key account managers would be from internal recruitment and only a small proportion of them will be obtained from external recruitment. So the recruitment procedures for the key account managers will be different between internal recruitment and external recruitment.

 

The internal recruitment of the key account managers will use the following selection procedures:

1. Reception of the internal applications

2. Preliminary interview

3. Interest tests and personality tests

4. Review of the candidate profile

5. Reference check with the direct managers of the candidates

6. Preliminary screening by the HR department

7. Inform the shortlisted candidates for employment interview

8. Interview by departmental head

9. Final selection by CEO

10. Placement on the job

 

The external recruitment of the key account managers will use the following selection procedures:

1. Reception of the external applications

2. Preliminary interview

3. Application form

4. Interest tests and personality tests

5. Reference check and background check

6. Preliminary screening by the HR department

7. Inform the shortlisted candidates for employment interview

8. Interview by departmental head

9. Interview by vice president

10. Final selection by CEO

11. Medical examination

12. Placement on the job

 

Though in general the selection procedures for internal recruitment and external recruitment of the key account managers are similar, the selection procedures for the internal recruitment are simpler: firstly, the HR department could extract the internal candidates profiles which make it unnecessary to have the stage of “The application form” which is used collect the basic information of the candidates; secondly, because it is easy to get the evaluation of the internal candidates from their direct managers, such reference check could be done before the interviews begin; thirdly, it takes more interviews by different levels of management to access the external candidates before final decision can be made than the internal candidates who are better known  to the company; fourthly, medical examination is also unnecessary for shortlisted internal candidates who are already the employees of the company.

 

The recruitment of the sale staffs would mostly from external source due to the large demand in these positions. The external recruitment of the sale positions will use the following selection procedures:

1. Reception of the external applications

2. Preliminary interview

3. Application form

4. Interest tests and personality tests

5. Reference check and background check

6. Preliminary screening by the HR department

7. Inform the shortlisted candidates for employment interview

8. Group interview by the line manager

9. One on one interview and final decision by the line manager

10. Medical examination

11. Placement on the job

 

Highlights in the above selection procedures in include: Preliminary screening will be done by the HR department and qualified candidates will be send to meet the line manager who will make the final decision without referring to the higher management because sale position staffs are many and the employment decision will be made directly by the line manager to save cost and increase the recruitment efficiency.

How would you set pay rates for Company XXX? Would you adopt pay for performance or skill-based pay?

 

According to Hyer and Wemmerlöv (2002, p.442) pay is the sum of the regular pay and the bonus pay, regular pay is determined by pay rates that are known at the beginning of a pay period which are usually determined by the nature of the job and particular personal characteristics and bonus pay is independent of regular pay and is reevaluated every bonus period in term of profit sharing and individual bonuses and other bonus pay forms as the table exhibits. While bonus pay is usually applied in the senior management positions, in following we will focus on the setting of regular pay rates of the two largest groups of employees, marketing department employees and R&D (research and development) department employees. Two types of pay rate setting methods are involved: pay for performance and skill-based pay.

 

Table 1. Regular pay and bonus pay

Source: Hyer & Wemmerlöv 2002, p.44

 

In setting the pay rates for the  R&D (research and development) department employees who have the opportunities to gain and apply a multiple level of skills in helping the technical team performance, it is advisable to apply the skill-based or competency-based pay to rewards the individual team members rather than the entire team (Brounstein 2009). Skills-based pay is a person-based compensation system that is based on the variety of jobs an employee can perform and the pay (regular pay) increases generally are associated with the addition or improvement of the skills of the individual employee as opposed to better performance or seniority within the system (Singer & Francisco 2009, p.189). The benefits to adopt the method of competency pay in setting the pay rates for the R&D department employees are that it focuses acquisition of skills on supporting the business strategies. The acquisition of the key technologies, skills, theories and knowledge which are known to be helpful to improve the business efficiency and effectiveness is critical for companies such as Company XXX whose growth of the business are driven by technological innovation and leadership in the industry. Also the acquisition of the skills will help increase the workforce flexibility. Because this pay rate setting method encourages the R&D department employees to learn more relative skills, the employees can become multi-skills and can do more relative works which makes it easier to change the shift between different employees in the same departments. So the skills-based pay will lead to greater flexibility and productivity in the R&D department of Company XXX. Another benefit of using the skills-based pay is the provision of job enrichment. By the acquisition of the new skills, the R&D department employees will have wider choices to focus on the jobs that they are interested at though the changes of job content will be subjected to the approval from the management, the greater flexibility and wider range of choices will lead to greater job enrichment and employee motivation. And employee motivation (i.e. intrinsic motivation) is demonstrated to be closely tied to creativity (Amabile, 1996) which is important to the R&D positions.

 

In setting the pay rates for the marketing department employees, we will use the pay for performance method. Pay for performance involves providing monetary rewards through carefully designed compensation systems that base pay on the performance measured within the control of the management (Locke 2004, p.150). We will use the pay for performance method in both an individual level and a team level. In the individual level, we will use the piece-rate plans for those sale staffs who are focusing on persuading the individual customers to join the membership to reward them based on the number new membership; and we will use the sales commissions to reward those employees who are focusing on persuading the retailers to join the partnership program, and the reason why we do not reward these sale staffs based on the number of new retailers becoming the partners is because retailers are varied in the scale of business. And big retailers with more business are more favorable to the company because these large partners will help the company to expand the coupon business in a fast speed. In the team level, we will encourage competitions between the small teams in the marketing department. Assume that Company XXX has five teams in charge of the five new markets in the five cities, in the end of every month we will gather the five team managers and give the best performing team with some monetary reward and also request the least performing team manager to explain for the low performance. The use of the team based pay would provide incentives for the team mangers to keep close monitoring on the daily performance of their respective team. By using both individual and team level pay for performance methods, with the discussion we have above it is expected that all levels of the staffs in the marketing department including the team managers and sale staffs will all be motivated by both monetary incentives and competition pressure.

 

 

Reference

 

Amabile, T. M. 1996. Creativity in context. Boulder: Westview Press.

 

Brounstein, M. 2009, Managing Teams For Dummies. Indianapolis, Indiana: Wiley Publishing, Inc.

 

Caruth, D. L., Caruth, G. D. & Pane, S. S. 2009, Staffing the Contemporary Organization: A Guide to Planning, Recruiting, and Selecting for Human Resource Professionals, 3rd ed, Westport, CT: Greenwood Publishing Group, Inc, p.160

 

Deb, T. 2006. Strategic Approach to Human Resource Management, New Delhi: Atlantic Publishers and Distributors, p.76

 

Durai, P. 2010, Human Resource Management. New Delhi: Dorling Kindersley (India) Pvt. Ltd. p.109

 

Erasmus, B., Swanepoel, B., Wyk, M. V. & Schenk, H. 2003, South African Human Resource Management: Theory & Practice. Cape Town: Juta & Co Ltd, p.278

 

Franke, L. R. 2004, HR networking: performance management. Chicago, IL: CCH Incorporated, p.45

 

Gennard, G. 2004. Globalizing HR Management, London: CIPD Enterprises Limited

 

Gitman, L. & McDaniel, C. 2008, The Future of Business: The Essentials. 4th ed, Mason: South-Western Cengage Learning. p.209

 

Grobler, P. A. & Warnich, S. 2006, Human Resource Management in South Africa. 3rd ed, London: Thomson Learning, p.107

 

Hyer, N. L. & Wemmerlöv, U. 2002, Reorganizing the factory: competing through cellular manufacturing. Portland, Oregon: Productivity Press. p.442

 

Kleynhans, R. 2006, Human resource management. Cape Town: Pearson Education South Africa (Pty) Ltd. p.69

 

Locke, E. A. 2004, The Blackwell handbook of principles of organizational behavior. Malden, MA: Blackwell Publishing Ltd. p.150

 

McDonald, M., Rogers, B. & Woodburn, D. 2000, Key customers: how to manage them profitably. Oxford: Butterworth-Heinemann, p.234

 

Pattanayak, B. 2005, Human Resource Management. 3rd ed, New Delhi: Prentice-Hall of India Private Limited. p.55

 

Price, A. 2007, Human Resource Management in a Business Context. London: Thomson Learning. p.309

 

Sahaf, M. A. 2008, Strategic Marketing: Making Decisions For Strategic Advantage. New Delhi: Prentice-Hall of India Private Limited. p.45

 

Shi, L. 2006, Managing human resources in health care organizations. Sudbury: Jones and Bartlett Publishers, Inc.p.134

 

Singer, P. M. & Francisco, L. L. 2009, Developing a compensation plan for your library. 2nd ed, United States: American Library Association. p.189

 

Stone, R. 2011, Human Resource Management, 7th ed, Milton Old: John Wiley & Sons Austraila, Ltd, p.51

 

Wotruba, T. R. & Castleberry, S. B. 1993. Job analysis and hiring practices for national account management positions. Personal selling sales manage. 13(3), 49-65

 

1malaysia.com.my 2011, Malaysian Govt Understands Needs Of Ethnic Indians: Najib. [online]: http://www.1malaysia.com.my/news/malaysian-govt-understands-needs-of-ethnic-indians-najib

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