Human Resource/Human Capital Management PDF

## Chapter 8: Human Resource/Human Capital Management ### 2. Human Resource Activities #### 2.1 Manpower/Human Resource Planning Manpower planning is an ongoing task. Even if there are no current vacancies, HR always needs to have a plan B in case of emergencies (e.g. an employee dies, or a high-...

## Chapter 8: Human Resource/Human Capital Management ### 2. Human Resource Activities #### 2.1 Manpower/Human Resource Planning Manpower planning is an ongoing task. Even if there are no current vacancies, HR always needs to have a plan B in case of emergencies (e.g. an employee dies, or a high-level employee resigns). Rapid growth in an enterprise also requires creative labor planning to keep up to date with the requirements. The purpose of manpower planning is to determine: - How many employees the business needs - What skills these employees must have - When these employees will be needed The following techniques should be applied in the process of manpower planning to answer these questions: #### 2.1.1 Work-load analysis A work-load analysis is done to determine how many people are needed in terms of the amount of work that must be done. For example: If a shoe factory must produce 1,000 shoes per week, and one person can produce 100 shoes per week, then 10 workers are needed. A supervisor is also needed. Therefore, management will have to employ 11 people. However, the type of skills needed for each of the employees is still unknown. This brings us to the **job analysis**, **job description**, and **job specification**. #### 2.1.2 Job analysis Job analysis is a systematic method of obtaining all the relevant information about the tasks related to a specific job, in order to make certain decisions. The job analysis requires that: - The job is completely and accurately identified - All the tasks in the job must be completely and accurately described - The demands the job makes on the worker must be analyzed Job analysis can be conducted through various methods, for example: - Interviewing the worker and his supervisor - Observing the worker at work (work study) - Through questionnaires These techniques can be used separately, or in support of each other. #### 2.2 Recruiting - Finding Employees Manpower planning identified any manpower shortages. Recruiting seeks to attract job applicants with the necessary skills and motivation to cover these shortages. There are two sources for new employees: - **Within the business**: Appointing people to new positions by means of transfer, upgrade, or promotion - **Outside the business**: Appointing people from other businesses, schools, colleges, and universities The recruitment planner must decide whether recruiting will be done from inside or outside the organization, or both. #### 2.2.1 In the event of internal recruiting - Techniques - **Job posting**: In this method, the employer notifies all present employees of the vacancies. - **Skills Inventories**: The organization searches its files for potentially qualified candidates by looking at skills inventories. - **Recommendations**: Recommendations of outsiders by present employees are a combination of an internal and partly external source. #### 2.2.2 External sources include: - Advertising in newspapers, trade journals, on the radio, window displays, and on notice boards. - Schools, colleges, universities, and other educational institutions. - Private and public employment agencies. #### 2.1.3 Manning table The results of the previous steps will enable the HR manager to construct a **Manning table**. This reflects the number of people required and the skills they must have. A **Manning table** is always part of a **Workplace Skills Analysis**. #### 2.1.4 Determining employee requirements The **Manning table** specifies the total number of employees needed. The **Recruiting Plan** is based on the difference between employees needed and current employees. For example: if a business is already employing one domestic worker and six manual laborers, then the number of people shown in the **Recruitment table** below must be appointed. ## 1. Definition, Importance and Aim of the HR Department ### 1.1 Definition Human Resources (HR) Management includes all the activities and decisions intended to improve the effectiveness of the human resources (employees) and of the enterprise as a whole. ### 1.2 Importance and Aim The HR policy recognizes the work performance of employees as one of the most important factors in a business. This means the aim of the HR department is to bridge the gap between management goals and the needs of the workforce. The task of the personnel function is to manage human resources in order to maximize their potential, thereby enabling the business to achieve its mission. The focus of the HR function should be on the following: - Interpretation of employer/employee needs. - Coordination of management and staff requirements. - Implementation of the various activities of personnel management such as: - Manpower planning - Recruitment - Selection - Employment contracts - Placement of staff - Remuneration and employment benefits. - Induction - Training of staff and skills development. - Evaluation and retention. ### 2.3 Selection Selection involves screening applicants and choosing the most suitable candidate. While Recruitment is a positive activity, Selection is negative. Selection aims at excluding unsuitable applicants whose skills and experience do not match the requirements laid down in the job specification. A good selection process will probably result in: - A lower turnover of staff - Lower production costs - Less training - Higher productivity #### Standard selection procedures Standard selection procedures often involve the following, which may vary with the seniority of the position in the business enterprise: - Receipt of application forms (external and internal) and/or Curriculum Vitae (CV). - Initial screening. - CV/job application evaluation (draw up a short list). - Check references and background of short list. - Interviewing of short list. - Different tests and examinations. - Medical examination (if applicable). - Letter of appointment. - Employment Contract ## 2.7 Induction of Staff Sometimes induction is also referred to as orientation, which should be distinguished from training. The purpose of induction is two-fold: - To let the new employee learn the ways in which the business does or does not do things, as well as the general rules that apply. This does not refer to specific job training. In other words, induction is the same for all employees, irrespective of the job they are being employed to do. - To enable the new employee to fit into the existing work group, including subordinates and superiors. This contains an element of socialization that helps the new employee to feel at home. New employees often experience a high level of anxiety that can be reduced through a carefully planned induction process. The induction program must be properly spaced over time and include topics such as the following: - Most relevant and immediate kinds of information and company policies. - Knowledge of what supervisors expect, how long it takes to meet expected work standards, and where to seek help and advice. - Introduction to fellow workers and people with whom they will work. - How the department fits into the business, and knowledge of products and services. This process is often expedited by the appointment of a mentor who will oversee the new employee's first few months in the business, as there will be many questions and problems that arise during that time that are not cover by the initial induction process. ## 2.8 Training of Staff and Skills Development Training, which is job-specific, is the systematic process that is aimed at helping the employee to improve his or her performance. Training is important, as it will help to increase the efficiency of the firm. Training can help to change or improve: - The knowledge, skills and productivity levels of employees. - The behaviour and the attitude of the employees. To address the serious shortage of skilled labour in the South African economy, the Skills Development Act and Skills Development Levies Acts were passed by Parliament at the end of 1998 and beginning of 1999. ## 2.9 Evaluation, Retention and Succession Planning ### 2.9.1 Evaluation In business, it is important to monitor the efficiency of aspects such as production systems and marketing strategies, but equally important to ensure that the human resources, i.e., the staff working in the organization, are operating to the best advantage of the business. To this end, the management must continually carry out efficiency evaluations or performance appraisals. This enables management to check to see whether training goals have been met and to assess workers' skills levels, as well as potential shortcomings. Appraisals may be done by management only; however, it has become common practice for appraisals to be done by peers, subordinates and the workers themselves. The appraisal gives management and the worker an opportunity to voice concerns or grievances and to develop action plans to improve areas of concern. #### Performance appraisals' main functions are, amongst others: - To give feedback to employees on past performances and to communicate future expectations. Management and the employee will contract (agree) on the interpretation of the job description and what the implication of good and or poor performance will be. - To pick up areas of strength and weakness and to put a strategy in place to use the strengths and improve on the weaknesses, e.g. training. - Discuss employment issues such as salary progression, bonuses, merits, perks etc. - Promotional opportunities and career growth will also be discussed. ## 2.5 Placement of Staff In some business enterprises, a large number of people are appointed at the same time. For example, Banks and insurance companies, take on a large number of clerical people, particularly at the beginning of the year. Once the selection decision has been taken as to whom to appoint, the placement decision must be made. This requires that the abilities of the individuals are compared with the requirements of the vacant positions. Each individual is then placed in the position where the best match is achieved between the individual's abilities and the requirements of the job. For example: - Two tellers have been appointed but only one is fluent in Xhosa. This individual would be placed in an area where Xhosa is spoken more often. - A second example: An educator is appointed to the IT position that was advertised, but the school's management realize that she is also a qualified Maths educator. The school is experiencing problems in the Maths department. The management may decide to move her to the Maths department where the need is greatest and by reshuffling the timetable, the Business Studies educator can then help with IT. It may also be true that a candidate applies for a specific position, but is placed in a different position where the business thinks their skills may be better utilized. ## 2.6 Remuneration and Employee Benefits Salaries and wages as addressed in the BCEA (Basic Conditions of Employment Act) represent one of the most important aspects of any business. They usually amount to a major share of the business's expenditure and are also the main reason and influencing factor why a worker chooses to work in a particular job or enterprise. Part of the HR function may be to handle the payroll of the business. Remuneration is one of the conditions of employment that keep trade unions very busy i.e. negotiating with employers for better remuneration and higher annual increases. #### Job Evaluation Job evaluation refers to the process where the relative importance of a job in the business is investigated in order to create a job hierarchy. The remuneration for the job is then determined by the job grade (the job's status) in the hierarchy. This will lead to equity in the organization because the remuneration range (scale) is linked directly to the contribution that job makes to the performance of the organization. Job grading or evaluation should not be confused with performance evaluation where the individual's performance in a particular job is evaluated and then linked to his annual increase. The exercise of job evaluation is to create a salary range or scale within which the individual's remuneration will be adjusted based on his performance. One of the most commonly used job evaluation methods in South Africa is Paterson, which looks at the decision-making responsibility associated with a particular job and then bases the remuneration range on this. Another method is the Hay job evaluation method, which considers factors such as level of knowledge required to do the job, accountability and problem-solving skills required in a particular job. There are numerous other methods that can be used, and one is not necessarily better than the next. Deciding which job evaluation method will be more appropriate will depend on the needs of the organization. #### Salaries Salaries are payments made to permanent employees who provide a professional, skilled or managerial function. Salaries are fixed amounts paid once a month on an agreed-upon date. #### Wages Wages are payments made to employees who provide a less skilled form of labor. Payment is usually made on a weekly basis, but may be made daily or monthly. Different methods such as time worked or output delivered (piece rate) may be used to calculate the wages. Alternatively, the worker can be paid a fixed wage. #### Overtime Employees may also receive overtime payment for working after normal working hours, i.e. extra hours over a weekend, public holiday etc. Workers in factories, security companies, hotels, etc. that operate 24 hours per day may be paid a shift rate. The BCEA states that workers working night shift (6 p.m. to 6 a.m.) must receive compensation in the form of an allowance, time off etc. #### Profit-sharing In some cases, a business may implement a profit-sharing scheme that may be seen as a bonus or part of the salary package. ## 2.4 Employment contracts The LRA (Labour Relations Act) now requires the employer and employee to agree, draw up and sign an employment contract. This contract is a legally binding document and must at least comply with the Basic Conditions of Employment Act (outlined later in this chapter). The employer may offer better conditions of employment but not less than those stated in this Act. The contract should include at least: - Employer details - full name and address. - Employee details - full name, identity number, address, contact details, taxation number etc. - Employment details - position held, outline of duties, appointment date, probation period, hours of work, permanent or contract appointment etc. - Salary issues - basic starting salary, overtime rate, incentives, deductions e.g. pension, medical aid, staff association, tax, as well as date of payment (and method), bonus, increases etc. - Leave details - number of days' normal leave per year, sick leave per cycle, leave for personal affairs, unpaid leave etc. - Termination of services - the notice period that must be given by each party on ending the employment contract as well as retirement age. - Any other issues deemed necessary by either party should be included in the contract. ## 2.9.2 Retention A high employee turnover is not good for productivity levels, public image and employee morale. It is important for a business to retain employees, especially highly skilled and managerial staff, as it is costly and time-consuming to recruit and train new employees. Changes in staff may lead to a slow-down in production, carrying out of strategic plans and a number of other problems. However, it is important to realize that there will always be some "natural attrition" whereby workers will leave for legitimate reasons such as a spouse being transferred, health reasons or other opportunities coming up. ## 2.9.3 Succession Planning A succession plan is necessary if a business is to effectively deal with changes in key positions within the enterprise. A succession plan is a process whereby key personnel are recruited, developed and trained to full key positions in the enterprise. Personnel are prepared for future advancement and promotion. Proactive succession planning ensures that the business is prepared for future expansion or the loss/ retirement of key personnel. Five generally accepted Succession Planning steps are: - Identify critical positions - Determine the skills, knowledge and competencies needed by the people in these positions. - Identify succession management strategies e.g. internal development, recruitment, headhunting. - Implement the chosen succession plan / compile an action plan. - Evaluate the effectiveness of the plan. ## 2.3.5 Interview of candidates on the short list The interview may be carried out by one person or by a panel, e.g., the Personnel Manager, Head of the relevant department and the supervisor of the section. It is important that the same person or panel interviews all the applicants to ensure consistency and fair labor practice. The purpose of the employment interview is two-fold: - To get more information from the applicant in order to assess his/her suitability for the job. - To give more information about the business, the job, and the conditions of employment to the applicant. ## 2.3.6 Tests and examinations There are different types of tests that can be used to disclose more information as to the applicant's suitability for the job. Depending on what type of requirement is to be measured, a careful selection must be made of what test to use. It is important to note that the Employment Equity Act (section 8) prohibits the use of tests if it discriminates against any person on the grounds of culture. The following types of tests are available: - Ability/trade tests indicate what tasks the applicant can currently perform and what tasks he might be able to perform in the future, given the opportunity through training. - Psychometric tests, which include personality and interest tests, measure the applicant's motivation and intelligence. - Work sample tests are literally samples of work to be found in a certain job and are designed to measure what the applicant can do and at what skill level. ## 2.3.7 Medical examination It is important to note that the Employment Equity Act (Section 7) states clearly that no medical examination may be required unless it is an inherent requirement of the job (e.g. eyetest for a pilot) or for the purpose of the distribution of employee benefits (e.g. joining a group benefit scheme such as life assurance). The employer will usually give the prospective employee a health-related questionnaire to complete. If there is any doubt regarding the medical status of the employee relating to the requirements of the job (e.g., bus driver), the employer may request a medical examination that may include drug and alcohol testing. ## 2.3.8 Letter of appointment Once all relevant information has been collected by means of the previous steps, the selection decision can be taken as to whom to appoint. In the case of only one appointment, the selectors will rank the applicants in order of suitability for the job, i.e. the best person, second best, etc. A written offer of employment will first be made to the best person, and if he or she accepts the offer (preferably in writing), the other candidates will be informed in writing that their applications were not successful. If the best person does not accept the offer, then an offer is made to the second-best candidate, and the process is repeated until an appointment is made. If no-one accepts the offer, the whole recruiting process must start again right from the beginning. ## 2.8.8 Evaluating Training Effectiveness The last step is to evaluate the training results. The performance of the person who received the training is now compared with the training objective (SMARTER goals), i.e. can the machinist now produce 20% more articles with a maximum of 5% rejection? Training is an extremely important element of the HR function, but unfortunately, experience has shown that as soon as the business is under financial pressure, training is sacrificed to save costs. ## Employee Earnings and Benefits #### Salary Scales Often an employee is offered a position in a business earning a particular salary scale, e.g., 180 000 x 24 000 + 228 000 x 36 000 + 336 000. this would mean a person would start on a salary of R180 000 p.a. with an increment of R24 000 p.a until the salary is R228 000, then an increment of R36 000 p.a until a ceiling of R336 000 is reached, after which the normal annual increases determined by the business will apply. #### Remuneration Structures: Basic plus benefits vs. Cost to Company Employers may structure remuneration as "basic plus benefits" or on a "cost to company" basis. The advantage of a cost to company structure for the employee is that the salary amount is earned even if a benefit is not taken, whereas, with basic plus benefits, an employee loses the benefit if it is not taken. E.g. * **Basic Plus Benefits:** * Basic of R180 000 p/a * Housing of R24 000 p/a * Pension of 10% of basic * Medical aid of R18 000 p.a. * Car allowance R24,000 p.a. * **Total possible package is R264,000**. - **Cost to Company:** * **Total package R250,000 p.a. **(Benefits are paid out of this amount) * **Total possible package is R250,000** An employee who chooses not to purchase a house and therefore is not eligible for a housing allowance will earn R240 000 (R264 000 minus the housing allowance) in the "Basic plus Benefits" structure and R250 000 in the "Cost to Company" structure. An employee taking advantage of all benefits would earn the total package of R264,000. Many wage earners are not recipients of these benefits. #### Working Conditions: The happy worker is a productive worker Many businesses have adopted the idea of "a happy worker is a productive worker". This means that working conditions play an important role in the productivity and efficiency of workers. Some businesses have introduced gyms, crèches, coffee shops, and entertainment areas to the workplace. Google (USA) was recently voted the best place on Earth to work with perks including all of the above, as well as free haircuts, car washes, lunches, and movies! #### Work-Life Balance: The new world of working Female staff (and many modern dads who now share childcare responsibilities) need to consider family responsibilities and work commitments that often mean doing a balancing act. The introduction of care facilities for young children have made mothers (and fathers) feel more relaxed knowing that their young ones are close by with the spin-off being less "sick leave" being taken by mothers. This type of benefit does not have a monetary advantage, but rather an improved quality of life benefit for the employee. ## 2.8 Methods of Training - **On-the-job training**: Takes place in the real work situation and takes a hands-on approach. - **Off-the-job training**: Usually takes the form of courses, offered by outsiders, e.g. at the university etc. - **Apprenticeship training**: A combination of on-the-job and off-the-job training, e.g. work for six months and attend lectures for six months. - **Workshops**: Promote interaction or update skills, including seminars or even webinars. - **Job rotation or multi-skilling**: Expands an employee's experience of the business. - **Self study**: Many businesses produce a manual that workers are required to work through at their own pace and refer back to when necessary. ## 2.8.8 The Skills Development Act - South Africa The aim of the Skills Development Act is to: - Ensure the workplace is also a place of learning. - Invest more in education and training programs. - Ensure that good quality training programs are offered. - Improve employment opportunities for disadvantaged people. - Encourage employees to get involved in training programs. Skills training is aimed at narrowing the gap that may exist between actual performance levels and the required performance levels. As training is an extremely costly operation, it is important to have a well-planned training process consisting of the following steps: - Firstly, the business operations must be analyzed to identify problems that may exist, as well as to determine what kind of skills will be needed in the future. - Secondly, the job analysis that has been done for the purpose of recruiting will give more information as to the skills that are required in specific jobs. - Thirdly, the person's job performance must be analyzed to see whether there are certain areas in which he or she needs training or even retraining (Performance Gap). - Training needs are then determined based on the above analyses. - The fifth step is to develop training objectives by clearly stating what the employee will be able to do after receiving training, e.g. the machine operator will be able to produce 20% more articles per day with a maximum of 5% being rejected due to faults. These should be SMARTER goals (as discussed in Chapter 6: Entrepreneurship) in order to be able to check back that they are achieved. - A training program is now developed. The program consists of the basic skills, knowledge, attitude, and behavioral requirements the employee must possess. The program may be in the form of lessons printed in a training manual, or short lectures and demonstrations by middle or top management, or even outsourced trainers. This could be a long-term process linked to career development. ## Employee Benefits Many job seekers are influenced in choosing a particular employer because of the benefits offered. These benefits may be made compulsory, e.g., pension or provident fund, medical aid, and UIF. In most cases the worker must belong to the pension fund and medical aid chosen by the employer. The worker contributes to these funds as salary deductions (taken from the basic salary by the payroll department) and the employer then contributes a further amount to the funds. Further benefits may include: - A housing allowance. - Company car or transport allowance. - Education or study allowances. - Meals. - Discounts on goods purchased. - Loans at reduced interest rates. - Clothing or uniform allowances. - 13th or bonus cheques. - Entertainment allowances or travel allowances, etc. These fringe benefits are deemed to be part of the salary package and as a result are taxable. The business is compelled to make income tax deductions from employees' salaries. This takes the form of: - Provisional tax is paid at the standard rates by individuals and organisations who do not have fixed incomes. ## 2.5.2 Types of Training Companies - **On-line Training Companies**: Companies such as Media Works supply on-line training courses for a variety of industries. - **Buddy system/mentorship**: Workers work together or superiors share their skills with more junior employees. - **Learnerships**: A student is given an opportunity to work within a business whilst studying (internship). This person will be offered a position in the business on completing his studies. Some business enterprises sponsor learners who are studying in certain fields, e.g. accounting, engineering, etc. The business may claim a portion of these expenses back from the Skills Development Levy that has been paid. The Government has also embarked on sponsoring learnerships through the Skills Development Fund in an effort to reduce unemployment.