Canadian Human Resource Management PDF

Part 1 The Strategic Human Resource Management Model As a strategic business partner, the human resource function helps organizations and their employees attain their goals. This section explores some of the pressures and opportunities faced by organizations and outlines how strategic human resourc...

Part 1 The Strategic Human Resource Management Model As a strategic business partner, the human resource function helps organizations and their employees attain their goals. This section explores some of the pressures and opportunities faced by organizations and outlines how strategic human resource management provides a framework from which success can be built and sets the frame for the rest of this book. Page 1 Chapter 1 Strategic Human Resource Management The only vital value an enterprise has is the experience, skills, innovativeness, and insights of its people. LEIF EDVINSSON1 Page 2 LEARNING OBJECTIVES After studying this chapter, you should be able to: 1. LO1 Discuss the objectives of human resource management. 1. LO2 Identify the steps in the strategic management of human resources. 1. LO3 Explain how human resource departments are organized and how they function. 1. LO4 Discuss the role of human resource professionals in today’s organization. Consider for a moment the impact that organizations have on your daily life. From the products you consume, to the services you use, to the post- secondary institution you are attending, the vast majority of your time is spent interacting with organizations and their products or services. One element ties all of these organizations together: people. People are at the core of all social organizations—from the sole proprietor who owns and operates a small coffee shop to an organization like Shopify with a market capitalization value of over $100 billion.2 It is individuals and teams that create the goals, the innovations, and the accomplishments for which organizations are praised. They create work environments that win awards, such as Deloitte’s award for “Canada’s Best Managed Companies.” From the organization’s perspective, people are resources. They are not inanimate resources, such as land and capital; instead, they are human resources. Without them, organizations would not exist. At the beginning of the 1960s, the National Aeronautics and Space Administration (NASA) was trying to figure out how to build a spacecraft that would allow humans to return safely to Earth.3 At the time, an aeronautical engineer named Charles Yost developed what was called “slow spring back foam.” This product was later adapted and is now referred to as “memory foam” and is found in football helmets, airline seats, and pillows. Although NASA’s balance sheet did not list its human “assets,” these resources were at work. Before the foam discovery, a casual observer would have considered NASA’s tangible infrastructure as the company’s most important asset. With each discovery and innovation necessary to enable space travel, NASA’s assets continued to grow. A keen observer would note that neither the tangible assets nor the innovation would be of great value without capable people to manage them. Amazingly, today NASA faces similar challenges; however, rather than returning from the moon safely, a major innovation challenge is how to return humans safely from Mars4 and simultaneously partnering with private organizations like SpaceX for human space flight.5 Page 3 Organizational success depends upon careful attention to human resources. An organization’s strategies are dependent on the people brought together to create them. In turn, the success of an organization relative to these strategies is dependent upon the practices used to organize and lead human resources. Some of the best managed and most successful Canadian organizations are those that effectively make employees meet societal challenges creatively. LO1 What Is Human Resource Management? To understand what human resource management is, we need to first consider why people come together to form organizations. In short, organizations bring people together in a coordinated manner to accomplish goals or objectives that could not be accomplished by a single individual. The goals that organizations set may be as varied as the organizations themselves. Many organizational goals, however, may be categorized into economic (e.g., profit, shareholder value), social (e.g., ethical practices), and environmental (e.g., reduction of carbon footprint) goals. For an organization to achieve its goals, employees must engage in actions and behaviours that move the organization toward accomplishing them. If employees do not contribute to an organization’s goals—or worse, they engage in behaviours or actions that move the organization away from its goals—the organization will stagnate and potentially fail. This principle applies to all forms of organizations—including for-profit, not-for-profit, social, governmental, and non-governmental organizations (NGOs), to name a few. At its core, human resource management is the leadership and management of people within an organization using systems, methods, processes, and procedures that identify, select, motivate, and enable employees to achieve outcomes individually and collectively that enhance their positive contribution to the organization’s goals. Thus, human resource management is not an end in itself; it is a means of structuring the organization to facilitate and enable the organization to achieve its objectives. The role of human resource management is therefore critical to the success—indeed, even the very survival—of the organization. The Difference Between Human Resource Management and a Human Resource Department Before moving on, it is important to differentiate between the field of human resource management and a human resource department. Although human resource management is central to all organizations, not all organizations will have a dedicated human resource department. The field of human resource management thus focuses on what leaders and managers should do regarding organizing human resource systems, policies, and procedures. These systems, in turn, create value by facilitating and enabling employees to achieve individual goals that in turn contribute to corporate or organization goals.6 A human resource department, on the other hand, is a specialized group with the primary focus of ensuring the most effective use of human resource systems across an organization to enhance employee performance and accomplish organizational goals. The contribution of a human resource department should be kept at a level appropriate to the organization’s needs and resources. In a new venture or micro-business, for example, human resource management may be performed by the entrepreneur or one individual who has numerous other duties within the organization. As the organization grows, it may decide to hire a professional human resource manager or human resource specialist. Within large- scale organizations, it is not uncommon to have numerous people dedicated to organizing human resource practices. However, resources are wasted when the human resource group is more or less sophisticated than the organization demands. A 2015 study conducted by Bloomberg BMA found that HR teams tend to comprise approximately 1.6 human resource staff for every 100 employees in organizations smaller than 250 employees. That number changes to about 0.6 human resource staff per 100 employees in organizations over 2,500 employees.7 See LO3 later in this chapter for further details on the structure of human resource departments. Page 4 Regardless of the size of an organization and whether or not the organization has a human resource department, the responsibility for the day-to-day management of human resources most often rests with individual managers throughout the organization. As a result, all leaders and managers must be familiar with the fundamentals of human resources. Human resource management as a specialist function evolved from very humble beginnings. Inseparable from key organizational goals, product-market plans, technology and innovation, and an organization’s strategy, the field of human resource management comprises numerous activities—many of them discussed in depth throughout this textbook. Although each topic within human resources is addressed individually, it is important to recognize that the activities within human resource management are all interconnected. Figure 1-1 highlights some of this interconnectedness. When a change is made to one activity or system, it often has an impact on another activity. For example, if an organization acts to engage long-term employees in order to prevent them from leaving, it may spend fewer dollars recruiting and hiring new employees.8 In order for human resource management systems, practices, and activities to be effective, leaders must consider how changes may affect the system overall. FIGURE 1-1 The Interconnectivit y of Human Resource Management Activities Table Summary: Summary LO2 Making Human Resource Management Strategic Human resource management must operate within the framework of an organization. Like other activities, human resource management activities must contribute to the organization’s goals and performance.9 In response to a growing call for accountability, recent decades have witnessed increased attention to strategic human resource management. Strategic human resource management seeks to recognize that the choice and integration of human resource tools will depend on what the organization is trying to achieve. As a strategic business tool, the human resource management activities must anticipate, align with, and contribute to the organization’s strategies. Similar to any other investment made by an organization, financial, technological, and infrastructure investments made in human resource systems, processes, and tools need to create a return on that investment that exceeds the investment itself. An organization’s strategy is similar to a game plan: It involves large-scale, future-oriented, integrated ideas and initiatives to achieve organizational goals and respond to uncertain and competitive environments facing the organization. In part, a strategy identifies how the organization will change and create long- term sustainable value given the environment the organization is in.10 Strategies can vary significantly, even within the same market. Walmart uses the slogan “Save money. Live better.”11 As a result, Walmart tends to follow a low-cost strategy. Target’s slogan, on the other hand, is “Expect more. Pay less.”12 As a result, Target tends to follow a value-based strategy. Page 5 In some cases, strategies may even differ within a company. For instance, Toyota uses the slogan “Let’s go places,” which is focused on innovation. Lexus, Toyota’s luxury vehicle division, focuses on quality, as indicated by its slogan, “The relentless pursuit of perfection.”13 Strategic human resource management is the process of vertically integrating the strategic direction of an organization into the organization’s choice of human resource management systems and practices to support the organization’s overall mission, vision, strategies, and performance. Simultaneously, strategic human resource management is a value-driven, proactive focus on how best to deploy and horizontally integrate the various sub-fields of human resource management to enable an organization of any size to achieve its strategic goals. We start with a discussion of strategic human resource management because it lays a foundation from which the topics discussed throughout this textbook can be integrated into a human resource (HR) system. At the core, HR strategies and tactics must be mutually consistent and must reflect the larger organizational mission and strategy. Even the best-conceived strategies may fail if they are not accompanied by sound human resource programs and procedures. Costco Wholesalers has a strategy based partly on high volume and value- based sales. To support this strategy, it has few people on the retail floor to help shoppers and instead employs a large number of cashiers to process orders more quickly. This could be compared to Holt Renfrew, which has a strategy based partly on high quality and high-value products. As such, Holt Renfrew employs proportionately more sales associates, to assist shoppers in product choice, and fewer cashiers. By integrating corporate strategies with the choice of HR practices, HR managers can remain proactive and anticipate challenges or problems both inside and outside the organization, and make adjustments before they impact the organization or its people. The challenge facing HR leaders is that often the human resource strategy needs to be put in place before the corporate strategy can be successful. That is, the HR strategy needs to be implemented so that the right people are in the right place at the right time to initiate the corporate strategy. Marriot Hotels & Resorts uses gamification to recruit potential Millennial employees. Alternatively, Zappos offers successful job candidates $3,000 to leave the recruitment process. The aim is to invite candidates who are not going to stay long term to exit the company early. Those who do not take the exit offer (which is 97 percent of candidates) have a better understanding of the corporate culture.14 The strategy of attracting talent through gamification is an example of how proactive strategies can meet the needs of organizations. Recent trends demonstrate the increased use of artificial (or augmented) intelligence and machine learning (AI/ML) in areas such as recruitment to ensure that job postings and resumé reviews are devoid of unconscious bias.15 Understanding the forces that may impact organizations and their strategies is critical in strategic human resource management and will be discussed later in this chapter. Just as each member of an organization is expected to generate positive contributions to accomplishing an organization’s goals, so too is every HR system. That is, each and every HR system, practice, process, or tactic should generate value for the organization. The challenge for HR managers is to understand that, within a system of people, a decision to change one thing will often have an impact on other HR practices or activities. Moreover, these decisions are often influenced by the organization and its environment. To this end, HR managers need to be able to integrate and synthesize information about an organization, its environment, its culture, and its strategies to make the most effective HR decisions for the organization: A number of organizations are installing workout facilities within their physical space. At first glance, this may appear to be simply a cost centre for an organization with respect to the installation and ongoing maintenance and operation of the facility. A closer consideration, however, may reveal increased employee morale, decreased expenses associated with sick days and health benefits, and a time savings for employees, who no longer need to leave the office early to drive to a gym. Page 6 Although HR managers must be consistently strategic in their mindset, HR issues are also dominating corporate strategic priorities. Consider first that employee salaries may account for more than 50 percent of the operating expenses in some organizations.16 Complicating matters are findings such as those in a 2013 study in the United States suggesting that actively disengaged employees cost the U.S. economy $450–550 billion a year.17 As a result, the expectations for HR groups are regularly on the rise: KPMG’s 2020 CEO outlook was completed in two waves because of the COVID-19 health crisis. When asked about their outlook in summer 2020, CEOs ranked talent risk as the primary threat to organizational growth,  citing the need to keep employees engaged, connected, and feeling safe; 73 percent of CEOs also noted that remote work has widened their talent pool.18 To meet these demands, HR teams and senior leaders in HR need to be strategic business partners who are able to make evidence-informed recommendations and decisions that enable individuals and teams to create more value for the organization. The gradual shift to strategic HR is evidenced by the 62 percent of senior HR leaders now reporting to the CEO or president of the organization.19 Understanding the Strategic Human Resource Management Process To be effective, an organization’s human resources strategy and associated system of processes and practices should be formulated after careful consideration of an organization’s environment, mission and objectives, strategies, internal strengths and weaknesses, and culture. For purposes of discussion, the human resource strategy formulation and implementation process will be broken down into five major steps, as outlined in Figure 1-2. Alternative sources may provide different stages and descriptions. Regardless, the logic remains consistent: Know what you are aligning to, understand your external and internal environment, make decisions, and evaluate the decisions. FIGURE 1-2 A Model of Strategic Human Resource Managemen t Table Summary: Summary Step 1: Organizational Mission, Vision, and Strategy Analysis The way in which an organization defines its mission often significantly influences human resource strategies. A mission statement specifies what activities the organization intends to pursue and what course is charted for the future. It is a concise statement of “who we are, and what we do” and gives an organization its own special identity, culture, and path of development. Page 7  Two similar pork producers may have varying missions. One may define the mission as “to be a sustainable pork producer,” whereas the other may define it as “to be a leading pork producer.” The associated strategies are likely to show significant differences. Apart from finding efficient ways to raise hogs, the first producer may also seek ways to improve the effectiveness and safety of manure recycling or seek strategies to raise antibiotic-free hogs, while the focus of the second producer may be expansion and profitability. Each will have an impact on HR practices such as talent acquisition. As defined earlier, an organization’s goals outline what specifically an organization seeks to achieve in a specific time period. Similar to a mission, an organization’s goals will also have a dramatic impact on human resource practices. The emergence of environmental, social, and governance (ESG) standards used by socially conscious investors20 is paired with organizations’ identifying unique goals related to environmental standards such as company waste and social standards such as ethical supply chains. Building on the example above of the sustainability focused pork producer, one might consider a social goal to be an inclusive organization. This goal would impact internal processes related to workplace equity, diversity, and inclusion, which are often led by HR specialists. Finally, a thorough analysis of an organization’s strategies is also critical in deciding on the appropriate array of HR practices. Energy companies who have identified strategies to enter the hydrogen market to curb emissions21 would need to work with their HR teams to identify the knowledge, skills, and abilities to carry out these strategies and determine whether internal or external talent is needed to achieve them. Many organizations are also now including specific strategies that directly consider their employees. For example, many organizations have set as a strategy to become one of Canada’s “Best Managed Companies.”22 The setting of corporate strategies directly related to HR is a growing trend as HR professionals continue to demonstrate their strategic value. Regardless of an organization’s strategic direction, human resources are required to formulate and fulfill the organization’s strategies. In all cases, the HR strategies should be chosen for their ability to enable the successful completion of the organization’s strategies. In some cases, a single HR strategy may be used to accomplish different corporate strategies. Consistent with the setting of corporate mission, goals, and strategies, HR managers must consider how the external environment will influence their decisions. This is the focus of the second step. Step 2: Environmental Scan Through careful and continuous monitoring of economic, social, and labour market trends, and by noting changes in governmental policies, legislation, and public policy statements, effective human resource management will be able to identify environmental threats and opportunities that in turn serve as a foundation for new actions. Some of these environmental forces facing Canadian organizations today are listed in Figure 1-3. For discussion purposes, the forces facing a Canadian organization (especially those affecting human resource management) can be grouped under five headings: economic (e.g., recession), technological (e.g., automation), demographic (e.g., workforce composition), sociocultural (e.g., ethnic diversity), and legal (e.g., changing laws). The first four forces will be discussed in this chapter. The critical importance of legal compliance for the HR function warrants a more elaborate review of the subject matter. Hence, this topic is discussed in detail in Chapter 4. FIGURE 1-3 Major Forces Facing Canadian Organization s Table Summary: Summary Page 8 Economic Forces Economic Force: Economic Cycles The first of four critical economic forces is economic cycles. Economies go through boom and bust business cycles. The Canadian economy is no exception. In today’s globally connected world, strengths and misfortunes originating in one economy are soon passed on to others. HR professionals must consider economic cycles when designing practices, policies, and the broader HR system. For instance, HR managers face special challenges during a recessionary period, as they often have to carry out the unpleasant task of planning, communicating, and implementing employee layoffs or terminations. Often, wage concessions have to be sought from labour for the sheer survival of the firm. Workforce morale, by and large, is low during a recessionary period; supplementary employee counselling may become necessary. At times, the entire organization may assume a crisis management posture, which creates new challenges for the HR manager with respect to policy formulation, communication, and implementation. The challenges are equally daunting coming out of a recession, as HR managers consider how best to grow the organization’s talent base. During growth cycles, organizations may be faced with the opportunity to recruit employees with a different skill set than those who may have been let go during the recessionary cycle. By the middle of 2020, Canada’s economy was shrinking at an unprecedented pace. According to the Ministry of Finance, the economy was contracting at over 5.8 percent per annum, a far cry from the 3.5 percent growth in 2017 and the 1.6 percent growth in 2019.23 Note that boom and bust cycles may not be the same across the country. For instance, the manufacturing sector in Southern Ontario often cycles based on the value of the Canadian dollar against the American dollar. The energy sector in Alberta, on the other hand, tends to vary based on the price of crude oil on the world market. This results in localized challenges for finding or shedding talent. Thus, HR managers need to consider economic forces at the local, national, and international level—which are discussed next. The COVID-19 pandemic further complicated the numerous challenges associated with adapting to traditional economic cycles. For much of 2020 and 2021, HR leaders needed to also adapt to the rapid closing and reopening cycles of businesses to account for national, provincial, and civic states of emergency, health orders, and community expectations. By April 2020, 3 million Canadians had lost their jobs and an additional 2.5 million had experienced COVID-19 related absences from work. Within nine months, the overall number had fallen to 1.1 million Canadians being out of work due to economic shutdowns.24 Despite a more positive outlook into 2022, the speed of the economic recovery in Canada as a result of the COVID-19 pandemic remains quite fluid. The Department of Finance projects that the estimated growth of 4.8 percent in 2021 may be tempered to 2.9 percent if health restrictions escalate. Far less volatility is expected in 2022.25 Economic Force: Global Trade International trade has always been critical to Canada’s prosperity and growth. Canada ranks high among exporting nations: on a per capita basis, we export much more than either the United States or China.26 The combination of a relatively small population, a large natural resource base, and a positive currency gives Canada an international trade advantage. Although our ability to compete in the international marketplace has been generally strong, Canada’s competitiveness has fallen. In 2011, Canada was the twelfth most competitive nation in the world; in 2019, we were ranked fourteenth (Figure 1-4).27 FIGURE 1- 4 How Competitiv e Is Canada Compared to Other Nations? Table Summary: Summary  SOURCE: Based on data from The Global Competitiveness Report 2019, Klaus Schwab, World Economic Forum. The ever-growing shift toward the global marketplace forces organizations to consider how they manage their employees. The emergence of open borders has presented newer opportunities to Canadian firms and professionals—resulting in both an increase in Canadians working abroad and an increase in economic immigration to Canada. Canada currently accepts over 341,000 immigrants per year; of these, approximately 58 percent are economic immigrants.28 Progressive HR practices and new government policies may be critical to meeting these growing realities. Indeed, the Canadian government is looking to increase immigration to Canada in an attempt to boost the economy as our population ages, with a focus on economic immigration as compared to family- or refugee- based immigration.29 As of 2020, permanent and non-permanent immigration accounted for over 80 percent of Canada’s population growth.30 Page 9 Economic Forces: Productivity and Innovation Improvement Productivity refers to the ratio of an organization’s outputs (e.g., goods and services) to its inputs (e.g., people, capital, materials, and energy). Productivity increases as an organization finds new ways to use fewer resources to produce its output. For example: A restaurant may seek to improve productivity by using fewer ingredients in recipes (reduction in raw materials) or by asking a server to also clear, clean, and reset tables (increase in responsibility and associated reduction in the need for additional staff). Alternatively, the restaurant may seek to increase the number of outputs by having more people come to the restaurant. The latter, however, may require increased marketing efforts, which would result in an increase in inputs. In a business environment, productivity optimization is essential for long-run success. Through gains in productivity, managers can reduce costs, save scarce resources, and enhance returns. In turn, improved returns enable an organization to provide better pay, benefits, and working conditions. The result can be a higher quality of work life for employees, who may then be more likely to be motivated toward further improvements in productivity. HR professionals contribute to improved productivity directly by finding better, more efficient ways to meet their objectives and, indirectly, by improving the quality of work life for employees. Unfortunately, optimizing productivity is not simply a matter of increasing outputs or decreasing inputs. In either case, the employees must adapt how work is done. As a result, a major challenge facing Canadian leaders is optimizing productivity while maintaining a high quality of engaged work life for the employees. Moreover, strategic human resource management seeks to address more than just financial productivity.31 Some of the strategies to address productivity will be discussed in Chapter 3. What is worrisome today is the gap between the productivity levels of Canada and its biggest trade partner, the United States.32 For over a decade, U.S. productivity has been consistently outpacing ours. Canada is steadily losing its ability to innovate and create wealth compared with other countries. According to the Conference Board of Canada, Canada is ranked ninth of 16 peer countries of the Organisation for Economic Co-operation and Development.33 Even more troubling is that, without enhanced management skills, something enabled through HR, the future is not likely to shift. If Canada is to improve—even maintain—its competitiveness, innovation on two fronts, namely people management and technology, is a must. Page 10 Among peer nations, Canada receives a poor rating for the number of patents filed per capita. Indeed, we are 15 of 16. Japan and Switzerland are ranked number 1 and 2.34 Without innovation, productivity differences tend to increase. As such, without innovation, Canadian employers and their HR professionals will be faced with the challenge of creating additional productivity improvements. As a progressive HR strategy, numerous organizations are starting to recruit or develop innovative staff to create a culture of innovation within the organization. Economic Force: Knowledge Workers Over the last 20 years, employment in primary and extractive industries (such as mining and fishing) has remained relatively constant or even dropped, whereas service, technical, and professional jobs have increased. The relative contribution to Canada’s employment in various industries is shown in Figure 1-5. Service industries such as education, health care, tourism, trade, and public administration make significant contributions to our national wealth today. FIGURE 1- 5 Employmen t by Industry in Canada Table Summary: Summary  SOURCE: Adapted from Statistics Canada, “Labour Force Characteristics by Industry, Annual, (×1000)” 2020, Table 14-10-0023- 01. https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1410002301 The move away from extractive industries increases the need for innovation. In part, it creates an environment that requires not only knowledge workers, but individuals who bring innovative thinking to their organization. Knowledge workers form the basis of a knowledge-based economy grounded in the production, distribution, and use of knowledge and information. Indeed, modern economies are becoming dependent on knowledge, information, and highly skilled individuals.35 A 2018 study by the Business Development Bank of Canada noted that 39 percent of small and medium-sized business were having difficulty finding new workers, and that these pressures would be present for at least a decade. Interestingly, the same study found that companies with strong HR policies had less difficulty.36 Page 11 The ability of organizations to find, keep, and continually retrain these workers might spell success in the coming years. This is not only a trend in North America. China has taken great strides toward moving from a production-based to a knowledge-based economy.37 Moreover, some have even signalled that the term knowledge workers needs to be changed to learning workers.38 With an increased reliance on knowledge workers, organizations also start to face challenges associated with employees hiding and withholding knowledge.39 A further challenge facing HR professionals in a growing knowledge-based economy is that educational attainment is not keeping pace. For instance, UNESCO found that governments are having difficulty keeping up with the pace of growth in higher education.40 Technological Forces Technological Force: Connectivity and Work Design Connectivity influences organizations and the way people work. Canada has witnessed the rapid growth of connectivity and access to high-speed information transmission systems affecting almost all walks of life. In December 2016, the Canadian Radio- television and Telecommunications Commission declared that access to high- speed Internet should be a base service for all Canadians.41 An unprecedented degree of connectivity has changed the way we work, play, study, and even entertain ourselves. Access to information has affected the way several organizations conduct their business. Nevertheless, Canada lags behind a number of developed nations in technology development and use. Approximately 91 percent of Canada’s population has access to the Internet.42 A key challenge, however, is that only 37 percent of rural households and 24 percent of Indigenous community households have access to Internet that is considered “high speed” compared to 97 percent of urban homes.43 Connectivity brings considerable flexibility into when and where work is carried out in that it enables remote work arrangements. In 2016, more than 19 percent of Canada’s working population worked from a nontraditional workplace, such as their home.44 That percentage jumped to nearly 40 percent of employees in April 2020 because of pandemic restrictions.45 Pre-pandemic, TELUS had arranged for half of its 30,000 employees to be able to work from home if they chose. In its teleworking pilot test, TELUS found that having 170 employees working from home saved 114 tonnes of greenhouse gases and 14,000 hours of traffic time. In the same pilot, TELUS found that morale as well as productivity increased as a result of telecommuting.46 Remote work is not without its HR challenges, however. For instance, a challenge related to remote work is how an organization can best ensure that the employee’s home workstation is safe. Inequality among job types and sectors also becomes a significant challenge in that not all jobs can be accomplished remotely, thereby creating further inequalities between individuals.47 Not all jobs lend themselves to less traditional workspaces; but with the advances in technology, virtually any job—or any part of a job—that involves work that is independent of other people and special equipment could be performed away from the workplace. Careful planning, training, and piloting may be required before remote work arrangements are rolled out in an organization, as managing from a distance is simply different from managing in person.48 As a platform for communication and interaction, the Internet has had a profound impact on human resource management activities. Social networking sites, video- sharing sites, wikis, blogs, and other interactive opportunities allow users to own and control data as well as add value to the applications they use. This has resulted in rapid adoption of social media for HR purposes and simultaneously created the need for policies about the limitations of social networking within organizations. See the Spotlight on Ethics for an example. Connectivity has also created a greater focus on cybersecurity.49 With employees working distally, the probability of data breaches is climbing. From a strategic human resource perspective, many organizations have taken to hiring cybersecurity experts to not only protect their sensitive data but also make attempts to breach their security systems in an effort to better protect their data. Technological Force: Automation Automation continues to be a technological force and opportunity that has affected Canadian organizations and their human resource management practices. Organizations tend to mechanize or automate for speed, reliability, or flexibility. Competition from other countries has made it imperative that we improve the speed of our manufacturing practices if we want to stay competitive. Page 12 By moving to a mechanized process, better service may be provided to the customer through increased predictability and reliability in operations and higher standards of quality in production. Machines, software, and algorithms do not go on strike, nor do they ask for raises. Mechanization allows for flexibility in operations. In several automated production facilities, even small production batches become economically viable since the time, cost, and effort involved in changing setups are minimal. The ability to produce small batches, in turn, enables a firm to focus on the needs of different customers and market segments and speed up delivery schedules. Shapeways is an organization that specializes in rapid prototyping and small- batch production through three-dimensional printing in materials such as plastic and metal. Mechanization and automation are not without HR challenges. Negative union attitudes toward mechanization are a barrier to the introduction of technology in the workplace. Automation may result in a smaller workforce together with fewer opportunities for socialization on the job. To use expensive technology effectively (during automation), more and more manufacturing facilities may find it necessary to schedule two or three shifts a day. In addition, the technologies used in industries such as additive manufacturing may require highly skilled designers, operators, and technicians. Improvements in technology and automation have helped the British Columbia lumber industry. Interestingly, while automation has led to job losses in some roles, British Columbia’s forest industry is facing a talent shortage due to retirements and technology advances. Thus, automation has created an environment in which there are too many employees and too few employees simultaneously, just for different segments of the industry.50 In some cases, however, mechanization is seen as a solution to labour shortages. The farming industry in the United States, as an example, is experiencing a labour shortage. As a result, companies are turning to mechanization as a solution.51  Courtesy of NeuroArm, University of Calgary. Robots are increasingly being used in places not yet seen before. The neuroArm developed at the University of Calgary is a surgical robotic system that is controlled by a surgeon working at a computer and guided by continuous magnetic resonance images. The technology employed by different firms shows considerable variation. In organizations such as a large steel factory or lumber mill, the production processes are fairly routine. In these organizations, improving the predictability of operations assumes great importance. This often requires HR managers to focus more on the predictability of employee performance (e.g., by providing explicit job descriptions and job-specific training, and by focusing on performance monitoring). In contrast, in firms with nonroutine production processes (such as advertising firms and software developers), flexible HR practices that foster creativity, innovation, and entrepreneurship may add more value. Technological force: data and analytics Related to both connectivity and automation is the growing impact of data and analytics in the workplace. Due to AI/ML and rapidly increasing computing power, companies are facing a significant shift in the role that data and analytics play in the workplace. HR professionals, in turn, must be able to support the organization’s data and analytics talent needs and also embrace the role of analytics to support the HR function. A 2017 report suggested that 71 percent of companies consider people analytics to be a high priority.52 Ultimate Software is producing an artificial intelligence based technology to assess employee engagement in real time. More effective knowledge management—the process of capturing organizational knowledge and making it available for sharing and building new knowledge—has been another outcome of digital information systems. It has given rise to potentially boundless information.53 Intranets and integrated information systems help store and access information quickly and accurately. Information management systems capture an incredible amount of digital information about an employee, giving rise to human resource data analytics.54 For instance, such systems can store what the employee learns during various training programs (or over a time period) and give evidence of performance improvement. When the annual performance interview is conducted, managers can identify the on-the-job competencies of an employee. Page 13 Even the field of HR is being shaped by big data trends. For instance, metaBUS is a technology-based research hub that is seeking to bring together and synthesize every correlation within the field of human resources over a 25-year period to enable HR practitioners to make better data- informed decisions about their practices and systems.55 Demographic Forces The demographics of the labour force describe the composition of the workforce: the education levels, the age levels, the percentage of the population participating in the workforce, and other population characteristics. While demographic changes occur slowly and can be predicted in most instances, they still exert considerable influence on organizational decisions. Each demographic change will have a different impact on the choice of human resource practices and activities, but may also have an additive effect. As a result, HR managers must consider demographic shifts both in isolation and as an integrated system. Demographic Force: Gender Balance While the figures that follow refer to gender, one must recognize from an inclusiveness lens the importance of differentiating biological gender (or sex at birth) from gender identity and gender expression. An understanding of demographic forces in sex at birth, gender identity, and gender expression will serve human resource professionals in their pursuit to create inclusive workplaces. For example, a recent job fair in Toronto focused on the transgender community.56 As of 2020, Canada’s labour force consisted of almost 19.9 million people aged 15 years or older, up from 15.8 million in 2000.57 In 2020, 47 percent of the workforce had been assigned female at birth.58 Moreover, the participation rate of biologically female in health care and professional, scientific, and technical services also continues to grow (see Figure 1-6). More women than men tend to work part-time (see Figure 1-7). FIGURE 1- 6 Distributio n of Biological Gender in the Workforce by Industry Table Summary: Summary SOURCE: Adapted from Statistics Canada, “Labour Force Characteristics by Industry, Annual,” 2020, Table: 14-10-0023-01. FIGURE 1-7 Labour Force Employed Full-Time and Part- Time by Biologica l Gender  Table Summary : Summary SOURCE: Adapted from Statistics Canada, “Labour Force Characteristics by Sex and Detailed Age Group, Annual,” Table 14-10- 0327-01. Page 14 Demographic Force: Educational Attainment A look at the educational attainment of Canadian workers presents an intriguing picture. The educational attainment of Canadians has increased dramatically over the past several years and is expected to maintain its upward trend (see Figure 1-8). FIGURE 1- 8 Number of People in the Canadian  Workforce by Their Highest Level of Educationa l Attainment Table Summary: Summary SOURCE: Adapted from Statistics Canada, “Unemployment Rate, Participation Rate and Employment Rate by Educational Attainment, Annual,” Table 14-10-0020-01. Population on y-axis in thousands. According to one study, 65 percent of jobs will require higher education.59 More specifically, 35 percent will require a degree, whereas 30 percent will require a diploma. In 2016, 54 percent of Canadians aged 25–44 years were post-secondary graduates.60 Over 28 percent of Canadians aged 25 or above hold a university degree or better (the corresponding figure in 2002 was less than 10 percent).61 Educational attainment is not equal across demographics, however. For instance, 23 percent of Indigenous peoples living off reserve aged 25–64 have a diploma and 10.9 percent have a degree. Degree attainment among Indigenous peoples living on reserve is 5.4 percent.62 While degree attainment for women who are married or living in a common-law relationship is 39 percent, the percentage is only 20.4 percent for single mothers with a degree.63 Because someone has achieved some level of higher education also does not imply that they will participate in the labour force. Approximately 80 percent of individuals with a degree and 76 percent of individuals with a certificate actively participate in the labour market.64 Consequently, HR professionals actively seeking to create diverse, equitable, and inclusive work environments may face growing challenges in the sourcing of future talent if educational attainment is used as a primary recruitment hurdle. Primary and secondary education systems play a key role in generating the new supply of skills needed by our post-industrial society. By and large, Canadian schools appear to be ready for this task. In one study, approximately 30,000 students from more than 1,000 Canadian schools were compared on their mathematical and scientific literacy with students in 31 other countries. Canadian students performed well compared to others, ranking second in reading, seventh in science, and eighth in mathematics. In a majority of provinces, students’ performance in reading, science, and mathematics placed these provinces among the top-ranked countries.65 The disturbing news, however, is that 48 percent of Canadians aged 16 or over fall below adequate levels of literacy.66 Not only do such low literacy rates reduce the overall productivity levels in our industries, but they may also be a major contributor to safety violations and accidents. Moreover, as the nature of work shifts to that of knowledge-based industries, the demand for individuals with post-secondary education will outpace the rate at which people attain a post- secondary education. About 17 percent of women and 19 percent of men drop out of school before they graduate high school.67 It is estimated that currently more than 5.2 million Canadians lack a basic school certificate or diploma.68 Page 15 Some of the more progressive employers have recognized workplace literacy as a serious issue and have taken proactive action to minimize its adverse consequences. For instance, HR professionals are encouraged to use accessible and plain language in communications.69 Faced with this disheartening prospect, the Corporate Council on Education identified a set of “employability skills” consisting of basic academic skills (e.g., communication, thinking, learning), personal management skills (e.g., positive attitudes and behaviours, ability to accept responsibility, adaptability to new challenges), and teamwork skills (e.g., ability to work with others, ability to lead a team). These skills were considered to be the foundation skills for employability in the future.70 Demographic Force: Aging Population One of the issues for human resource managers is what Maclean’s termed our old age crisis.71 In 1996, about 28 percent of the population (or almost 7.6 million Canadians) were more than 50 years old. The proportion of the population in the age group 65 and over is now expanding rapidly, reinforced by a low birth rate and longer life expectancy. In 2020, people aged 65 and over (those likely leaving the workforce) formed 18 percent of the population. By 2060, this proportion will increase to 25.7 percent. Conversely, the age category between 15 and 30 years old (those entering the workforce) will decrease from 18.9 percent in 2020 to 17.36 percent of the population over the same time frame.72 In short, human resource professionals will face an ever-increasing trend of more people leaving the workforce than entering it. This is because the average age of the Canadian population has been steadily increasing (see Figure 1-9). Like economic cycles, the impact of population aging is different depending on your location. In 2020, the provinces with the highest proportion of the labour force aged 65 and over were Quebec, New Brunswick, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador, all between 19.7 and 22.3 percent compared to 18 percent for Canada as a whole.73 At the other end of the scale, Nunavut had only 4 percent of its population over the age of 65 in 2020. FIGURE 1-9 Projected Populatio n of Canada by  Age Category Table Summary: Summary SOURCE: Adapted from Statistics Canada. “Projected Population, by Projection Scenario, Age and Sex,” as of July 1, Table 17-10-0057-01, (×1,000) Population on y-axis in thousands. The exact consequences of this trend for the human resource management function are hard to predict. An increasingly hectic scramble for jobs (especially in the traditional sectors) may be one consequence. This is because the fear of post-retirement poverty (fuelled by uncertainty about government-sponsored pension plans and the recent volatility in the stock market) may motivate employees to hold on to their current jobs. This may create unprecedented bottlenecks in professional and unionized industries. That said, older workers may face ageism in technology jobs.74 Page 16 According to Statistics Canada, the age of retirement has been on the rise since the 2000s. The average age for retirement in 2000 was 61.6, whereas the same number in 2020 was 64.5.75 Pressures for expanded retirement benefits, variable work schedules, coordination of government benefits (e.g., Canada/Quebec Pension Plan benefits) with company benefits, and retraining programs are just a few of the challenges that await HR specialists in the future. This effect is compounded by recent changes to the Old Age Security (OAS) pension program. Phased in by 2029, workers will have to wait until they are 67 to claim OAS benefits. One major challenge facing Canadian organizations is retaining older, more experienced, and skilled employees whose expertise is in demand in the labour market. The past view of people as expendable cogs who are responsible for managing their own careers has encouraged employees to leave their employers as soon as a better opportunity emerges elsewhere. To retain older workers, employers have to show respect and appreciation, facilitate career growth within the organization, offer flexible work and opportunities to telecommute, and recognize their skills and experience.76 It is important to keep in mind that, while Canadians often look to retire, there is no mandatory retirement age. An aging population affects many HR functions, especially recruitment and selection, job design, training, appraisal, and compensation and benefits administration. The availability of retirees provides an opportunity to employers who are looking for experienced part-time employees. The reduction in the supply of young workers (a staple source of recruits by many fast-food restaurants and grocery chains) may be compensated by the availability of older workers willing to work part-time. Experienced and highly motivated retirees may be a welcome source of recruits for employers and nonprofit/voluntary agencies searching for persons who can accept supervisory responsibilities. The age crisis is not limited to older generations. A declining youth population— those under age 25—entering the workforce has implications for Canada on a global scale. While Canada’s youth population is falling in relation to the population overall, developing economies, such as India, are experiencing an increase in the youth population relative to the population overall. Page 17 Demographic Force: Generational Shift In today’s workplace, leaders may interact with up to five generations—Generation Z, Generation Y (Millennials), Generation X, baby boomers, and traditionalists.77 With birth years starting in 2010, Generation Alpha is not far away from the workplace.78 This generational diversity creates an interpersonal dynamic for all leaders regardless of age in that they must be aware of the different motivators for each of the generations and be able to tailor activities to different age demographics. Generation X employees, for example, who are born between 1966 and 1980, are not averse to hard work, place a premium on work–life balance, and like to be active participants in decision making.79 They are likely to show disdain for a “command and control” culture and are likely to have more loyalty to their profession and competency building than to their employers. Some writers claim that Gen Xers think of work as a job while boomers view it as a career. Xers are unfazed by power and authority; boomers are impressed and attracted by it. Xers mistrust most business practices; boomers instituted many of them. Xers are self-reliant; boomers are team- oriented.80 Quickly becoming the dominant generations in the labour market are Generation Y and Generation Next (or Gen Z), and they are qualitatively different from Gen X: Generation Y may not respond well to traditional management practices. While it is risky to overgeneralize about any group, significant numbers of Gen Ys seek continuous learning, ongoing feedback, teamwork, up-to-date technology, security, respect, and work–life balance. Their biggest fear is boredom. Gen Z, on the other hand, will have characteristics of fiscal conservatism and greater transparency expectations.81 Generational shifts in North America are also having complex implications for HR managers that are somewhat outside their control. For example, certain industries will be facing an impending skilled trades shortage in part because of the increasing average age of the skilled trade worker and in part because of challenges attracting young people to the skilled trades in post-secondary education. Sociocultural Forces SocioCultural Force: Diversity and Social justice As cultural values change, HR departments discover new challenges. Several sociocultural forces face Canadian managers. In the section that follows, we will briefly highlight the role of diversity, equity, and inclusion in Canadian workplaces as an important consideration in the formulation of HR strategy. We recognize, however, that we cannot provide a full account of the domain in this context. Ethnicity is a significant dimension of diversity in the workplace. In 1971, Canada became the first country to declare multiculturalism as a state policy.82 By 2016, the Canadian population was made up of over 250 ethnic origins.83 The coexistence of numerous national, racial, and ethnic groups, each with its unique cultural and social background, makes Canadian society a cultural mosaic.84 Economic immigrants have often acted as engines of economic growth in Canada, while shifts in the country of origin of immigrants have added to this country’s cultural diversity and richness. © Shutterstock/Rawpixel.com Canada’s workplaces become more and more diverse as visible minorities are encouraged to maintain their unique cultural heritage. What potential conflicts can develop because of this “encouragement”? Unlike the American notion of the “melting pot,” Canada has encouraged each ethnic minority to maintain its unique cultural heritage to form part of the Canadian cultural mosaic. Canada is no longer a two-language nation; millions of Canadians have neither English nor French as their mother tongue.  Today, over 3.6 million Canadians are referred to as allophones, which literally means “other speaking.” For example, today, more Canadians speak Mandarin than Italian, and it is the most common nonofficial language.85 Page 18 For the practising manager, this cultural diversity simultaneously brings additional opportunities and challenges. Often, it is HR’s responsibility to maximize the beneficial outcomes and minimize the challenges posed by an ethnically diverse workforce. A large focus of current HR practices is to create inclusive work environments in which differences are embraced and leveraged for the betterment of the organization. As Canadian society turned the corner into the 2020s, several social justice movements drew increased attention to the role of systemic racism in the workplace. The continued inequalities articulated by social justice advocates for Indigenous, Black, and other racialized people of colour attributed to systemic bias (both unconscious and conscious) have become central to numerous equity, diversity, and inclusion initiatives in the workplace.86 Adding complexity to the importance of diverse, equitable, and inclusive workplaces human resource professionals need to consider numerous potential impacted groups including, but not limited to, sex at birth, gender and gender identity, sexual orientation, age, physical ability, language, mental wellness, language, religion, and socioeconomic status. A number of these will be discussed in Chapter 4. socioCultural Force: Ethics There is a great demand today for more ethical conduct of business. The unethical practices of several large companies— including Bre-X, Enron, and WorldCom—underscored the social costs of unethical and fraudulent business practices. Businesses, especially big corporations, have been accused of acting totally out of self-interest and furthering the interest of a few members of top management. In recent years, a variety of unethical practices have been reported, including creative accounting, insider trading, securities fraud, excessive payments made to top management not reflective of their contributions, bribery, and kickbacks. Indeed, greed and short- term orientation accompanied by creative accounting played no small role in the stock market meltdown and the acceleration of personal bankruptcies in 2008.  A global survey indicated that nearly 75 percent of respondents had felt pressure to compromise their standards at work.87 The most important ethical issues confronting Canadian firms today would seem to relate to sexual harassment, cyber espionage, avoiding conflicts of interest and maintaining honest governance, employee and client privacy, environmental protection, and security of information.88 This has resulted in many Canadian firms instituting a code of ethics or code of conduct for their employees. Over 70 percent of the responding firms in a survey89 had also instituted a program to promote ethical values and practices. Needless to say, the HR department will be a key player in this important activity. Page 19 Spotlight on ETHICS What Is a “Right” Behaviour? Ethics are moral principles that guide human behaviours and are often based on a society’s cultural values, norms, customs, and beliefs, which means that different cultures and even individuals within the same society have widely varying standards of behaviour. How are we to differentiate “right” from “wrong” or “good” from “bad”? There are no simple answers. Many adopt one of the following postures in dealing with such ambiguous situations: 1. Universalist approach: Persons who embrace this view assert that some moral standards are universally applicable. In other words, regardless of society or place, a wrong act (such as killing, stealing, or lying) is wrong. There are no exceptions to moral “rights” and “wrongs.” 2. Situational approach: What is right or wrong depends essentially on the situation or culture surrounding the actor. While telling the truth is desirable, there may be situations in which lying is acceptable or even necessary, or other cultures may not value truth to the same extent. Similarly, while killing is bad, there may be situations in which this act is justified. It all depends on the situation. While high morals are to be followed, an individual may have to make exceptions when the context justifies them. 3. Subjectivist approach: In this approach, the individual decision-maker facing a situation determines what is right and wrong after considering all aspects of the situation. Moral decisions are based on personal values and  preferences. Needless to say, the standards imposed by individuals are vastly different depending on their upbringing, current circumstances, values, and beliefs. Another useful model by which to understand and guide ethical behaviour is offered by Lawrence Kohlberg, an American psychologist. Kohlberg posits six stages that form an invariant and universal sequence in individual development; thus, everyone is supposed to go through the same stages in the same sequence. It is possible, however, for a person to be “stuck” at one of the following stages and not proceed to the next level. The six stages of moral development identified by Kohlberg90 are as follows: Stage 1: Obedience and Punishment Stage: The only reason for a person to perform the “right” act at this stage is obedience to others who have the power to punish. Stage 2: Reciprocity Stage: Here, the individual enters into reciprocal agreements with others in order to receive the greatest good or reward. The focus is on achieving one’s own objectives and on self-interest; for this, the individual concerned is willing to take actions that others want them to take. Stage 3: Interpersonal Conformity Stage: What is “right” is determined by expectations of others who are close to the individual. Close relatives, friends, and other “reference groups” help the individual identify the “right” action in any setting. Stage 4: Law and Order Stage: Doing one’s duty and obeying society’s rules is considered the “right” behaviour at this stage. Stage 5: The Social Contract Stage: Here, the individual goes beyond the minimal standards established by laws and rules. “The greatest good of the greatest number” in the society is the maxim that guides the individual’s behaviour at this stage. Stage 6: Universal Ethical Principles Stage: At this stage, the individual is guided by high moral principles. People are to be treated as ends in themselves, not just as means to one’s ends or even to the ends of a whole group or society. People are considered as inherently valuable and to be treated in the “right” way. Very few individuals reach this level. The field of human resource management is full of situations that involve hard choices between good and bad, right and wrong, desirable and undesirable. The Spotlight on Ethics feature in this book will introduce you to one or more ethical challenges associated with the topic discussed in each chapter. Once you have identified your responses, compare your answers to those of your friends or family members. Find out why each person chose differently. Try to categorize the responses under the three categories and six stages of moral development listed above. Which approach seems to be used by most of your friends and acquaintances? At what stage of moral development are you and your friends? Why? What are the implications for you and for your employer? What prevents you and your friends from moving to the next stage? Instructions: Consider the following situation. Make a note of your answer and compare it with those of your friends and acquaintances. “Blind” review versus social media Your organization has taken to using “blind” reviews of applicant information to diminish the potential for unconscious bias in recruiting efforts. In a bid to appeal to Generation Z applicants, your organization has decided to hire an individual to serve as a social media “influencer” on behalf of your organization. One member of the search committee has indicated that they would like to review the social media presence of all candidates. Another member of the committee has reminded the group about the importance of “blind” review. The discussion has become somewhat heated among the group with no obvious conclusion in sight. As a member of the search committee, what would you offer as a path forward? Step 3: Analysis of Organizational Character and Culture In addition to external scans, HR strategies should be formed only after careful consideration of the internal environment and elements such as character and culture. Similarities between organizations can be found among their parts, but each whole organization has a unique character. A key element of organizational character is its structure. Organization structure is the product of all of an organization’s features and how they are arranged: its employees, its objectives, its technology, its size, and its policies, to name a few.91 Organization structure reflects the past and shapes the future. HR specialists should be familiar with and adjust to the organization’s structure. For example, sometimes objectives can be achieved in several acceptable ways. This idea, often overlooked, is called equifinality, which means there are usually many paths to any given objective. The key to success is choosing the path that best fits the organization’s character. Take, for example, how several key managerial decisions are made and their impact on HR practices. In some organizations, an autocratic decision-making style is used along with a strong organizational hierarchy. In contrast, other organizations consciously make an effort to create an egalitarian, participative, and entrepreneurial work climate. HR practices such as seniority- and rank-based pay and top-down communication channels are likely to work best in the former situation, while results-oriented (and competency-based) pay and organic communication channels are likely to work best in the latter. Page 20 The managerial philosophy also influences the type of organizational structure and the HR department’s role within the firm. For instance, in a highly formal bureaucracy that is structured along functional lines (e.g., marketing, finance, production, etc.), HR’s role is often to preserve the existing division of work by providing clear job descriptions, hiring specialists for each division, and introducing training systems that foster functional expertise. In contrast, in organizations that have flexible structures, the socialization of employees to create an organization-wide perspective and the creation of broad job classes may assume greater importance. Finally, an organizational culture, the core beliefs and assumptions that are widely shared by all organizational members, shapes work- related and other attitudes and significantly influences overall job commitment and performance. Clearly, human resource management has a role in shaping this; however, even here, the culture has to be consistent with the overall mission and strategy of the organization concerned. Step 4: Choice and Implementation of Human Resource Strategies Giving consideration to both the internal and external environments provides the opportunity for the human resource professional to begin evaluating potential human resource practices and activities and whether each is viable. Unsuitable strategic options must be dropped from consideration. The ones that appear viable should be scrutinized in detail for their advantages and weaknesses before being accepted for implementation. Strategic choice and implementation involve identifying, securing, organizing, and directing the use of resources both within and outside the organization. Ultimately, there should be a clear line of sight between the HR strategy and the corporate goals (see Figure 1-10). Similarly, the strategic human resource plan needs to integrate with other plans in the organization. FIGURE 1-10 Line of Sight in Human Resource Strategy Table Summary : Summary As the above example shows, the HR strategy must reflect every change in the organizational strategy and support it. Simply stating that “we are strategic in our focus” does not, in fact, result in a contribution to organizational strategy. A survey of 1,030 HR and non-HR business leaders revealed that 60 percent of HR teams spend more time performing administrative tasks than strategic ones. Interestingly, 85 percent of HR professionals believe that strategic HR is important, while only 67 percent of non-HR leaders believe the same.92 In another study, 73 percent of the respondents believe that the word strategic is overused in human resources.93 Page 21 Creating an organization’s HR strategy is often a complex task. Because of the dynamic nature of both the internal and external environments, it is not uncommon to see a difference between an organization’s stated HR strategy and its “emergent” HR strategy.94 Although in any given organization there tends to be a dominant HR strategy, multiple bundles of HR practices are likely to develop to cater to the unique needs of organizations in a subgroup or industry.95 Mere use of the term strategic without clear actions that support it simply reduces the credibility of the HR profession and its members. In formulating strategies, HR professionals must continuously focus on the following activities: 1. Identifying opportunities, risks, and challenges Strategic human resources necessitates a constant vigilance on foreseen and emergent opportunities, risks, and challenges that can be addressed through either people or the processes and systems by which we organize people in organizations. For instance, human resource planning as covered in Chapter 3 enables the determination of the demand and the supply of various types of human resources within the firm. Proactive human resource professionals, however, also ensure that there are regular systematic reviews of the current state of HR practices in an organization and the identification of needed HR processes, tools, and activities. The results of human resource planning shape the overall human resource strategies in the short and long run and identify any gaps in people or processes that need to be fulfilled. 2. Making data-informed decisions aligned to strategy A second element of the strategic process is the eventual choice of appropriate human resources or the practices that will fill the gaps identified in the first stage. Many of the details of this choice environment will be discussed in the chapters that follow. Regardless of the decision environment, a key focus must remain on utilizing data to support decisions and confirmation of whether those decisions are consistent with the strategy. 3. Optimizing for high performance With the right talent in the right place along with the right processes and practices, attention must turn to optimizing both the employee’s time and the activities and processes that guide human resources in a company. For example, once hired, new employees need to be oriented to the organization’s policies and procedures and placed in their new job positions. Since new workers seldom fit the organization’s needs exactly, they must be trained to perform effectively. They must also be prepared for future responsibilities through systematic career planning and development. The human resource strategy should ensure that the productive contribution from every member is at the maximum possible level. In today’s work setting, internal work procedures and organizational policies must be continuously monitored to ensure that they meet the needs of a diverse workforce and ensure safety for every individual. To be effective, a strategy should also have clearly defined action plans with target achievement dates. Otherwise, it will simply end up being an exercise on paper. Step 5: Review, Evaluation, and Audit of Human Resource Strategies Human resource strategies, however effective they prove to be, must be examined regularly. An organization’s contextual factors, such as technology, environments, government policies, and so on, change continuously; so too do several of its internal factors, such as membership characteristics, role definitions, and internal procedures. All these changes necessitate regular strategy evaluation to ensure their continued appropriateness. Hewlett-Packard has carried out formal research to identify links between employee experience and the firm’s operational performance. The company  grouped employees based on their function, recognizing that certain functions have more direct impact on operational outcomes. Results from the study indicate that “effective collaboration” combined with “empowerment to make decisions” tends to be related to customer attitudes.96 Results of program evaluation such as the above produce valuable feedback, which is information to help evaluate success or failure. Such information, in turn, helps the firm to fine-tune its practices or even abandon some actions that do not seem to have performance potential. Alternatively, additional resources can be allocated to successful projects to reap full benefits. A holistic review of the HR strategies in an organization with the intention of identifying and correcting deficiencies is referred to as a human resource audit. The audit may include one division or an entire company. Page 22 The benefits of a human resource audit are many and include the following: The audit helps align the HR department’s goals with larger organizational strategies. It almost invariably uncovers better ways for the department to contribute to societal, organizational, and employee objectives. This, in turn, clarifies the human resource department’s duties and responsibilities. It ensures timely compliance with legal requirements. It discloses how well managers are meeting their human resource duties. It uncovers critical human resource problems and possible solutions. It reduces human resource costs through more effective procedures. It provides specific, verifiable data on the human resource department’s contributions. It stimulates uniformity of human resource policies and practices. It helps review and improve the human resource department’s information system.  It enhances the professional image of the department among various stakeholders. Human resource research grows more important with each passing year, for several reasons. First, human resource work carries with it many legal implications for the employer. Failure to comply with equal employment or safety laws, for example, subjects the organization to potential lawsuits. Second, “people costs” are significant. Pay and benefits are often major operating expenses for most employers. Improper compensation plans can be costly, even fatal, to the company’s survival. Third, the department’s activities help shape an organization’s productivity and its employees’ quality of work life. Fourth, the critical resource in many organizations today is not capital but, rather, information and knowledge. This means that an audit of the calibre of a critical resource—namely, human resources—is necessary for the success of the organization. Human resource audits provide the information needed by human resource managers to validate the alignment (or misalignment) of human resource strategies with those of the organization as well as the organization’s key performance indicators. Human resource audits will typically focus on compliance, best practices, strategic elements, and function-specific areas.97 Finally, the growing complexity of human resource work makes research necessary. Today, more than ever before, human resource activities aimed at productivity improvement, succession planning, and cultural change are critical to competitive survival. More and more executives expect the department to make strategic contributions and place the function at a higher level in the organizational hierarchy. Over 50 percent of organizations surveyed in one study were found to have human resource departments report to the CEO or the president/owner of the organization.98 Moreover, HR departments are being reviewed for their effectiveness. One study, conducted by Aon, found that 68 percent of HR’s time continues to be spent on administrative functions. The same study found that 35 percent of typical HR functions could be automated.99 Today, organizations are participating in human resource metric benchmarking. Through this process, organizations contribute information about human resource practices and associated metrics. In return, the participating organizations have access to aggregated data about other organizations so that they may benchmark their own practices and performance.100 The metrics established through an audit also result in the initiation of new programs, such as literacy training, and better responses to employees with disabilities, which can significantly improve employee productivity and morale. The major areas covered in such an audit are described in Figure 1-11. FIGURE 1-11 Major Areas Covered in a Human Resource Audit Table Summary: Summary Human Resource Management Information Human resource plans Human rights legislation and Supply and demand estimates employment legislation Skills inventories Information on compliance Replacement charts and summaries Job analysis information Compensation administration Job standards Wage and salary levels Job descriptions Benefit package Job specifications Employee value proposition Staffing and Development Selection Recruiting Selection ratios Source of recruits Selection procedures Availability of recruits Human rights legislation Employment applications compliance  Human Resource Management Information Training and orientation Career development Orientation program Internal placement success Training objectives and Career planning program procedures Human resource development Learning rate effort Performance appraisals Labour–management relations Standards and measures of performance Legal compliance Performance appraisal Management rights techniques Dispute resolution problems Evaluation interviews Human resource controls Human resource audits Employee communications Human resource function Discipline procedures Operating managers Change and development Employee feedback on human procedures resource department Page 23 Preparing for the Future Evaluations and audits are necessary, but they are backward-looking. They uncover only the results of past decisions. Although past performance should be evaluated, human resource departments also should look to the future to be proactive. A proactive approach requires HR managers and their staff to develop a future orientation. They must constantly scan their professional and social environment for clues about the future. New developments may mean new challenges. LO3 The Organization of Human Resource Management The responsibility for human resource management activities rests with each manager. If a manager does not accept this responsibility, then human resource activities may be done only partially or not at all. This is not to suggest that every manager needs to be a human resources professional, but even when an HR team is created, the manager continues to have a key role in enabling, following, and administering HR practices. Page 24 As noted earlier, a separate HR department or HR group usually emerges only when human resource activities need to be coordinated in a manner that cannot be done organically or when the expected benefits of a human resource usually exceed its costs. Until then, managers handle HR activities themselves or may delegate them to subordinates. When a human resource department emerges, it is typically small and reports to a middle-level manager. Figure 1-12 illustrates a common placement of a human resource department at the time it is first formed. The activities of such a department are usually limited to maintaining employee records and helping managers find new recruits. Whether the department performs other activities depends upon the needs of other managers in the firm. FIGURE 1- 12 The Human Resource Department in a Small Organizatio n Table Summary: Summary As demands on the department grow, it increases in importance and complexity. Figure 1-13 demonstrates the increased importance by showing the head of human resources reporting directly to the chief operating officer, who is the company president in this figure. The greater importance of the head of human resources may be signified by a change in title to vice-president. In practice, increased complexity also results as the organization grows and new demands are placed on the department or as jobs in the department become more specialized. As the department expands and specializes, it may become organized into highly specialized subdepartments. FIGURE 1- 13 A Large Human Resource Departmen t  Table Summary: Summary The Service Role of the Human Resource Department Although they are organizational strategic partners, human resource departments continue to be service and support departments. They exist to assist employees, managers, and the organization. Their managers do not have the authority to order other managers in other departments to accept their ideas. Instead, the department has only staff authority, which is the authority to advise, not direct, managers in other departments. Page 25 In contrast to staff authority, line authority, possessed by managers of operating departments, allows these managers to make decisions about production, performance, and people. It is the operating managers who normally are responsible for promotions, job assignments, and other people-related decisions. HR specialists advise line managers, who alone are ultimately responsible for employee performance. For something like recruitment and retention, the line manager may provide details of performance standards and job success, interview job candidates, and utilize the information provided by human resources to make a final decision. The HR professional, on the other hand, will ensure compliance with human rights laws and organizational policies regarding equity in addition to planning and organizing all of the activities related to recruiting, interviewing, hiring, and communicating about a new employee. In the case of employee and labour relations, the line manager is likely to communicate with employees, implement motivational structures, coach employees, provide conflict resolution, and promote teamwork. The HR professional is then left to focus on establishing grievance handling procedures, negotiating with the bargaining unit, and planning and initiating change initiatives. In short, HR departments tend to provide technical expertise while line managers use this expertise to effectively manage their subordinates. In highly technical or extremely routine situations, the HR department may be given functional authority. Functional authority gives the department the right to make decisions usually made by line managers or top management. For example, decisions about fringe benefits are technically complex, so the top manager may give the HR department the functional authority to decide the type of benefits offered to employees. If each department manager were to make separate decisions about benefits, there might be excessive costs and inequities. To provide control, uniformity, and the use of expertise, functional authority allows HR specialists to make crucial decisions effectively. LO4 Today’s Human Resource Management Professional In the last 50 years, there has been a surge in the number of HR managers. In 1971, there were only 4,055 human resource managers in this country.101 In 2018, the corresponding number was more than 50,000.102 However, historically, the status of HR professionals within organizations has not been high. Despite its enormous growth, human resource management was slow to evolve into a full-fledged profession. Since the actual capability of practising HR experts varied widely, however, it became increasingly evident that professionalism of the human resource management field was needed. In a recent study, a majority of CEOs reported that HR professionals need to further develop business acumen and a deeper connection to the business in order to enrich the value of HR.103 Furthermore, HR professionals need to be well versed in data-driven decision making and financial operations.104 To achieve these goals, accreditation and/or certification of the HR professional was considered imperative. The Chartered Professionals in Human Resources Canada is a collaborative effort of human resource associations across Canada (except Ontario) that currently represents the interests of most HR practitioners in this country and coordinates the nationally recognized designation in HR called the Chartered Professional in Human Resources (CPHR), based on a series of national standards. Although the CPHR is granted by each provincial HR association, it is recognized and transferable across Canada—except in Ontario. Based on extensive national and regional consultations with employers, HR professionals, and researchers, CPHR Canada has identified a set of competencies referred to as the “Chartered Professional in Human Resources Competency Framework” in key HR areas, such as strategy; engagement; labour and employee relations; learning and development; human resource metrics, reporting, and financial management; professional practice, workforce planning, and talent management; health, wellness, and safe workplaces; and total rewards. These standards are regularly being reviewed and updated. For a summary of the requirements for the CPHR designation, see CPHR Canada. Page 26 Ontario Human Resource Professionals are accredited through the Human Resource Professional Association (HRPA). In Ontario, a series of HR designations are available, including the Certified Human Resources Professional (CHRP), Certified Human Resources Leader (CHRL), and Certified Human Resources Executive (CHRE). Similar to the CPHR, the designations available through the HRPA are based on a set of competencies. A third credentialing body for human resource professionals is the International Personnel Management Association. Certification or designation alone does not make human resource management a profession or improve its status in the eyes of organizations. One approach to improving the HR manager’s status within the organization may be to strengthen the position’s contribution to the enhancement of organizational performance and effectiveness. This is already beginning to take place. The higher status given to HR experts in job ads and organizational charts indicates that the importance of human resource management activity is being recognized. The roles and responsibilities of today’s HR professionals are quite varied. In some cases, individuals serve as a “generalist,” helping organizations in all aspects of their human resource needs. In other situations, professionals end up specializing in a particular domain of human resources such as compensation and benefits, job evaluation, recruitment, or labour relations. In yet other contexts, HR professionals are taking on more executive roles, leading major portfolios of organizations. In short, the professional opportunities for HR specialists are quite varied. The Framework Used in This Book This textbook is divided into six parts. PART 1: THE STRATEGIC HUMAN RESOURCE MANAGEMENT MODEL offers a strategic model of managing human resources in Chapter 1. The key objectives of the human resource function are outlined here along with the steps for implementing a strategic HR approach in practice. PART 2: PLANNING HUMAN RESOURCES is contained in two chapters. Chapter 2 deals with the important topic of job analysis—detailing the various methods of collecting data about jobs and the steps involved in writing job descriptions and job specifications and setting performance standards. Chapter 3 discusses the various factors that need to be considered when planning the supply of and demand for human resources in organizations. PART 3: ATTRACTING HUMAN RESOURCES deals with the various steps in acquiring human resources. Chapter 4 details key provisions of human rights legislation and the Canadian Constitution along with their implications for hiring employees; it also discusses the issue of diversity. Chapter 5 (Recruitment) and Chapter 6 (Selection) deal with the various tools, options, and strategies open to the human resource manager in attracting and selecting qualified applicants for the job. PART 4: PLACING, DEVELOPING, AND EVALUATING HUMAN RESOURCES deals with all key activities involved in orienting, training, developing, and evaluating employees. Chapter 7 outlines the key steps involved in the orientation and training of employees; it also focuses on the development of employees to take on greater responsibilities in the future, including career counselling to staff. Chapter 8 deals with various appraisal techniques that help an organization to monitor and improve employee performance. PART 5: MOTIVATING AND REWARDING HUMAN RESOURCES discusses the critical tasks of motivating and rewarding employees. Chapter 9 deals with direct compensation, including methods of evaluating the worth of each job and the incentive schemes currently available. Chapter 10 discusses how careful planning enables an organization to make the most of its benefits package. It also deals with various work options and other arrangements that have implications for employee motivation. PART 6: MAINTAINING HIGH PERFORMANCE focuses on the various human resource actions to ensure high performance. Chapter 11 details the methods of improving communication and enforcing discipline when employees violate organizational policies. Chapter 12 discusses two types of security offered by modern human resource departments: financial and physical. Chapter 13 discusses strategies for dealing with unions and outlines the human resource manager’s role during negotiations with unions. Page 27 Spotlight on HRM Human Capital: A Key to Canada’s Competitiveness What makes an economy accelerate or stagnate? In answering this question, many will point to key economic indicators such as real gross domestic product (GDP), consumer price index (CPI), and consumer confidence. Others may point to effective policy or the flow of goods and services among the numerous individuals and companies in an economy. Regardless of the micro- or macro-economic drivers, the shape of an economy is highly influenced by people. It is people who set policy and regulations. It is people who lead the many micro, small, medium, and large organizations that make up our economy. It is people who purchase or use the goods and services within an economy. With people at the core of an economy, the importance of human resources or human capital cannot be overstated. Part of the human capital equation is productivity, that is, how much output an individual can create in relation to the inputs. According to the Conference Board of Canada, Canada scores a B for productivity and growth.a At points in history, organizations have turned to technology as the basis for improving productivity. Today, however, this approach is insufficient for Canada to keep pace or to catch up with the productivity improvements in other developed countries. The Conference Board of Canada has pointed to the importance of innovation in strengthening Canada’s productivity.b Similar to productivity, human ideas and ambitions rest at the core of innovation. As a result, an increased focus is being placed on the role of human capital in creating long-term and sustainable productivity improvements. The role of human talent in creating long-term sustainable economic and social benefits to organizations and communities through productivity necessitates a collaborative and long-term approach among organizations, governments, communities, and numerous other support structures. Among the key elements to creating innovation and, in turn, productivity is education.c Because knowledge is a necessary precursor to realizing the full potential of human capital in creating productivity improvements, governments, communities, and education systems must come together in developing and enhancing citizens’ overall knowledge base. Canadian communities must also understand the importance of life-long learning. Because of the time required for learners to progress through education systems, a long-term approach to planning in relation to the development of human talent must be taken. More recently, we have seen growing examples of how productivity enhancements are often found through new innovations. Similar to developing a learning city, significant lead time and planning is needed to create a community in which innovation thrives. Examples abound of communities that have come together to create ecosystems in which innovation and entrepreneurism are strong (e.g., Silicon Valley). Page 28 SUMMARY The central challenge for organizations today is to thrive in a highly complex and continuously changing world. To do this, most organizations find it necessary to maintain high productivity and effectiveness levels and to have a global focus. Strategic management of organizations is one approach to adapting to a continually changing global context. Human resource management aims to optimize the contribution of employees to the organization’s goals. The field of human resource management thus focuses on what managers and human resource specialists do and what they should do. This chapter pointed out that human resource management is the responsibility of every manager. The HR department provides a service to other departments in the organization. In the final analysis, however, the performance and well-being of each worker is the dual responsibility of that worker’s immediate supervisor and the HR department. Strategic human resource management is systematically linked to the strategic needs of an organization and aims to provide the organization with an effective workforce while meeting the needs of its members and other stakeholders. It is important that human resource strategies and tactics are mutually consistent and provide direct support to the organization’s mission, goals, and strategies. Even the best-conceived strategies may fail if they are not accompanied by sound programs and procedures and aligned with organizational strategies. Strategic human resource management necessitates an exhaustive evaluation of an organization’s internal and external environments. This chapter discussed factors that should be reviewed before formulating human resource strategies. These include economic, technological, demographic, and sociocultural challenges. As well, the chapter pointed out that continuous evaluation of strategy and proactive management are critical to ensuring the successful management of human resources. This section of the text has emphasized a strategic approach to human resource management. This is because, increasingly, HR managers are expected to contribute to the organization’s strategic thinking and be strategic business partners to other executives in organizations. Marketing, production, and financial strategies depend upon the abilities of the firm’s human resources to execute these plans. The status of the HR function within an organization is likely to be determined by its contribution to the organization’s overall success. Strategic management of human resources may be one key to this success. To assist with the “people side” of implementation, HR professionals will be forced to uncover, through audits and research, the causes of and solutions to people-related problems. Their diagnostic abilities to assess present and potential human resource issues will be needed as they and their staff increasingly serve as internal consultants to others who are facing HR–related challenges. They then will be called on to facilitate changes in the organization that maximize the human contribution. In short, the traditional administrative skills associated with human resource management must grow to accommodate diagnostic, assessment, consulting, and facilitation skills. TERMS FOR REVIEW automation Chartered Professional in Human Resources (CPHR) cultural mosaic demographic changes economic forces educational attainment functional authority gamification human resource audit human resource management knowledge workers line authority mission statement organization structure organizational culture organizational goals productivity sociocultural forces staff authority strategic human resource management REVIEW AND DISCUSSION QUESTIONS 1. What are the goals of a human resource department? Choose an organization that you are familiar with and indicate which of these goals will be more important in this organization and discuss why. 2. Draw a diagram of a human resource department in a firm that employs over 5,000 persons and name the likely components of such a department. Which of these func