Strategic Human Resource ManagementCoursework 1

Taylor Markham5/02/2011

Markham

To what extent is human resources a distinctive discipline?

Human resources, like so many other fields of study, has been created piecemeal over the

past couple of centuries. In order to understand its current place in the corporate structure,

it is necessary to at least briefly evaluate some of the major historical progressions of the

industry. We can begin in 1824, when a young Quaker named John Cadbury began

selling chocolate, coffee, and tea in a small shop in Birmingham, England. Some years

later, his sons looked to expand the business operations and opened up a new factory for

chocolate manufacture in nearby Bournville. Drawing upon their Quaker upbringing, the

Cadburys believed that everyone should be treated equally and fairly. They created a

revolutionary business plan based on the idea that employees should be treated with a

greater level of care. In an effort to look after their employees, the Cadburys provided

inexpensive, high-quality homes with parks and recreational areas in the factory-town.

They paid above average wages to their employees, hired a full time medical staff and

created pension plans (BBC 2009). This is considered by many to be among the first

steps towards employee welfare and the future of human resources.

Some years later on a different continent, Henry Ford created a revolution in the way

employees were treated at his large, auto manufacturing plants. On January 5, 1914, Ford

announced to three reporters and to his 9,200 employees his new $5-a-day plan.

Employees, no matter their position in the company, would automatically receive the

company minimum wage of $5 for one day of labour. This declaration turned the whole

industry upside down, especially considering the average daily wage at that time was

$2.34. Within a week, Ford received over 14,000 job applications; major newspapers

were quoted saying it was “the most generous stroke of policy between captain of

industry and worker that the country has ever seen.” Another printed, “The world’s

economic history has nothing equal to Ford’s plan.” Because of the wide spread fame of

Ford’s extraordinary wages, they spent almost nothing on advertising that year. The

increased wages were soon followed by sick leave, medical care, and extended lunch

break benefits (Gibson 2006). Twelve years later in 1926, Henry Ford set the trend again

2

Markham

by adopting the ‘five days a week’ work schedule. At this time, Ford employed 400,000

people (nearly half of the nation’s employees working five days a week) (Whaples 2010).

Human resource practices developed rapidly during the First World War. During that

time, the Workers Welfare Association, or WWA, was created. This unionized group

contributed to the working efforts of the war and later produced many ‘labour officers’

that helped companies navigate through the complex legislation regarding employment

law (Daniels 2011).

The Second World War also saw an increase in demand for skilled human resource

managers. Immediately following the war, many university professors and ex-military

officers were hired to help with recruiting, training, and management-development

techniques for large companies (Frank 1988).

Coincidentally, new legislation regarding employment law was being introduced shortly

after the end of the Second World War. Since that time, there has been a constant stream

of legislation introduced to improve the relationship between employers and employees.

A few examples of the most important laws passed within the UK include the Factories

Act of 1961, the Disability Discrimination Act of 1995, and the Minimum Wage act of

1998, among others (Cheatle 2001).

One illustration of human resource legislation being implemented is given in the example

of Gary Brown and Abbey National. In 1993, Gary Brown worked in the marketing

department at Abbey National and was assigned the task of hiring an ‘idea agency’ for

contractual work. A senior member of staff approached Mr. Brown, urging him to choose

a particular idea agency that he had friendly ties with. Mr. Brown hired the agency and

was unsatisfied with their work. He tried to “sack them several times”, but later realized

they had not been dismissed, and instead were awarded a ‘100% pay raise’ (2003). Mr.

Brown reported the incident to senior level executives. Upon questioning the suspected

manager, he vehemently denied any wrongdoing and no disciplinary action was taken.

Several more months passed and Mr. Brown created a “one inch thick dossier”

3

Markham

highlighting the illegal activity of the senior manager (2003). The following year in May

1994 he went to the news with his story and two weeks later the manager was suspended.

However, the workplace environment became so hostile that he was forced to leave the

firm. The case went to trial and in 1997, the manager was sent to prison for eight years

for embezzling £2m in company funds. Mr. Brown was given a compensation of £25,000

and returned to his position at Abbey National. According to Gary Brown, “If companies

don’t have a policy on whistleblowing, they’re asking to be ripped off.”(BBC 2003). This

case and others went on to create the Public Interest Disclosure Act 1998. This act now

provides legal protections for employees who blow the whistle on fraudulent behavior in

the workplace. It also led to the creation of the Public Concern at Work (PCaW) charity,

which presses for legislation regarding whistleblowing and offers professional support to

employees (PCaW No Date).

Throughout the past two centuries, the concept of human resources has been constantly

evolving and adding in new responsibilities. Given the previous examples along with

other incidents, it is evident that human resources cover a wide range of topics. Today,

the discipline of human resources can be generally defined as the maximization of value

of an organization through equitable and fair treatment of employee/employer

relationships (Cheatle 2001). Essentially, human resources act as the medium by which

employees and employers come together to communicate each other’s needs. Some of the

most common requirements of an HR department in today’s workplace are the following:

recruiting, compensation/rewards planning, company culture, conflict resolution, training,

and illegal activity monitoring (i.e. whistle blowing). This is obviously a long list with a

wide range of responsibilities, which demonstrates the need for an independent

department. But how are these requirements practiced in our modern work environment?

We will now evaluate the effectiveness of human resource practices, and search for the

solutions to the following questions-

To what extent is human resources required of all managers? How does human resources

add value to a company?

4

Markham

The HR needs of a business largely depend on the different characteristics of the

company, these being: the size, location(s), culture/tradition, and nature of the business.

The first priority of any company will be having a knowledgeable manager who can

navigate through the complex employment law legislation and set clear guidelines for the

recruitment, discipline, and training of its employees. By having a manager to oversee

this area, a company meets its ‘policing and welfare needs.’ Perhaps this is all that is

necessary for a small, simple organization. As the company increases in size and

complexity, its human resources department needs to increase its responsibilities as well.

For example, a company with a larger workforce, such as a manufacturing plant will also

require a manager who oversees the operational HR needs of a company. These are

primarily assuring that an organization keeps up with employee turnover and has an

adequate workforce to cover the demands of the business. Finally, a company with more

complex human resource requirement, which exceed the policing/welfare, or operational

necessities, would require a strategic HR department (Cheatle 2001). We will spend the

balance of our time evaluating how managers can strategically implement human

resources to add value to the organization.

For the past decade, Google has made headlines through its innovative products and

incredible growth. Google has gained the reputation of providing a dynamic workplace,

which attracts top-level college graduates. However, recent years have shown a rising

battle in Silicon Valley over the recruitment of talented employees. Popular tech

companies like Twitter, and Facebook have increased hiring by 203% and 70% in the last

year, respectively. Google has had to increasingly compete with companies such as

Facebook, Zynga and smaller tech startups for talented, young, computer engineers. At

least 137 of Facebook’s employees defected from Google. This past year, Google

announced a 10% salary increase for all of its 23,000 employees (Efrati 2010). Google’s

CEO Eric Schmidt announced, "We want to continue to attract the best people to Google"

(2010). These actions give us a clear example of how important it is for human resources

managers to retain their companies’ employees. Sometimes even increased salary wages

are not sufficient. In the competitive world of tech companies, managers have become

increasingly creative in the perks and benefits they offer their employees.

5

Markham

Zynga exemplifies this creativity in the workplace. They have transformed their offices to

include meals prepared by professional chefs, masseuses, reflexologists, and a hair salon

(Guynn 2010). Employees can be awarded with a number of far-fetched rewards such as

getting the keys to a $200,000 Lamborghini for a weekend. Other Silicon Valley

companies have go-cart races, zip lines, hot tubs, and ball pits all in their offices. For

these companies, ‘no perk is too small’ (2010). Many companies have followed Google’s

example by encouraging their employees to use up to 20% of their work time for

pursuing personal ideas. Motivational experts have applauded these non-traditional

management techniques. They create a company mindset that encourages creativity and

innovation. Asana CEO Rosentstein said the following "Employees should pretty much

get whatever will help them be more productive, since their energy and time are

invaluable, and small expenditures can go a big way in making people happier and more

effective” (2010). This is a far cry from traditional management techniques.

Additionally, HR managers must create a company culture that is suitable for their

employees. Lets return to the Google example, which hires mainly highly educated and

ambitious engineers. Google’s employees needs differ very much from perhaps a coal

miner or a retail clerk. Cedric Beust recently left Google for LinkedIn and said the

following concerning the switch, “I was ready for something different and more

challenging” (2010). HR managers must be sensitive to the different needs of their

employees and structure their company accordingly to meet those needs. By doing so,

they can maximize their employees productivity which directly benefits the company’s

bottom line.

Hewlett-Packard is known as one of the first companies to spoil its employees with

extraordinary gifts, and is coined with creating the “H-P Way”. However, human

resources requires more than simply being able to keep a company’s employees happy. In

the late summer of 2010, H-P CEO Mark Hurd was dismissed following charges of

sexual harassment and inaccurate expense reports. According to the Wall Street Journal

and H-P, temporary employee Gloria Allred accused Mark Hurd of sexual harassment,

but the H-P Board found that he ‘didn't violate H-P's sexual harassment policy’ (Worthen

6

Markham

2010). However, further investigation found that Mr. Hurd had submitted incorrect

expense reports equaling up to $20,000, which he had volunteered to pay back. Experts

have said, “Corporate expense offenses can be regarded as relatively minor and can

typically be settled if an executive pays back the amount” (2010). In any case, in order to

avoid publicity regarding the lawsuit, the H-P Board asked for Mr. Hurd’s resignation.

Following the termination, Gloria Allred admitted that ‘she and Mr. Hurd didn't have a

sexual relationship’ (2010). Within a month, Oracle hired Mark Hurd as president and

board member to the company. In reference to Hurd, Oracle CEO Larry Ellison said,

“The HP board just made the worst personnel decision since the idiots on the Apple

board fired Steve Jobs many years ago” (2010). The day that Oracle announced hiring

Hurd, stocks jumped 6.8%, or increased the company value by $7.8billion. In effect, H-P

terminated a man considered to be worth $7.8billion over a questionable sexual

harassment charge and $20,000 in inaccurate expenses (Ricadela 2010). While a

company’s reputation is always very important and fraudulent behaviour must be dealt

with very seriously, human resource managers should exercise great care when

disciplining employees and look to resolve problems in the most appropriate manner. HR

managers have to be sensitive to every issue and sometimes think laterally when deciding

how to reprimand its employees. We can look to the U.S. airline company, Southwest

Airlines for an example of how this can be done effectively.

In 1991, Southwest Airlines rolled out an advertising campaign with the catch-slogan,

‘just plane smart.’ The problem was that another aviation company, Stevens Aviation,

had already been using the same slogan for their business. A quarrel soon broke out and

appeared to be heading to a tribunal; a situation that both companies wanted to avoid.

These managers decided to be creative and a little unorthodox. Stevens Aviation

Chairman Kurt Herwald wrote a letter to Southwest Chairman Herb Kelleher challenging

him to an arm-wrestling competition. Whoever won the match won the rights to the

slogan. Kelleher jumped at the idea and soon a huge event cleverly named the ‘Malice in

Dallas’ was organized (Ramstad 1992). An auditorium was rented, cheerleaders were

hired, and tickets were sold, with all of the profits benefitting local charities. The event

was a smashing success as employees filled the auditorium and boisterously cheered the

7

Markham

outrageous antics of their bosses. Herwald, ‘who is much younger and lifts weights’,

easily outmuscled Kelleher (1992). Afterwards, Kelleher joked, “If it hadn't been for my

hairline wrist fracture, my cold and my athlete's feet, I would have won” (1992). Because

of the friendly relations created during the event, they both agreed to share the slogan. By

using human resource skills creatively, both companies ‘saved a court battle that would

have taken years and cost several hundred thousand dollars’ (1992). They added value to

their companies by not only avoiding costly lawsuits, but also ‘gaining tons of free

publicity’, and creating an exciting company culture (1992). Perhaps this helps explain

how Southwest has managed to be the only American airline company to consistently

stay profitable for the past 17 years. Preceding the recession in 2008, Southwest had set

the incredible record of reporting a profit for 70 straight quarters (Reed 2008). As both

chairmen agreed following the arm-wrestling match, ‘there’s a better way to do business’

(Ramstad 1992).

Creating a positive company culture is important, but can other industries use this model

and still be profitable? Lets take the supermarket industry as an example. The grocery

business is one dominated by large corporations such as Wal-Mart, Woolworths, and

Tesco, where companies battle it out on the basis of lowest costs. The common stigma for

grocery store employees is one of ‘low pay, long hours and high turnover’ (Ezzeden et al

2006). Certainly these grocery store giants aren’t commonly recognized for their charity

towards their employees. However, in the Eastern United States there is a mid-size

grocery store chain called Wegman’s, which was awarded the #1 spot on Fortune’s ‘Best

Companies to Work for’ list in 2005. Many were shocked that a grocery store could be

recognized as the best place in the U.S. for people to seek employment. Amidst the

doubt, Wegman’s managers pointed to their company slogan, ‘Employees first,

Customers second’ as an explanation to their remarkable work environment (2006).

Further investigation unveils some key strategies that Wegman’s implements to be so

successful. Wegman’s managers stress importance on selective hiring, employment

security, competitive compensation or a ‘living wage’, employee benefits (including

educational scholarships), and perhaps most importantly, continual training (2006).

Employees are put through an extensive training process that results in them being

8

Markham

experts in an incredibly wide range of foods and cuisines, which absolutely ‘delights

customers’ (2006). Information sharing and empowerment are encouraged at Wegman’s,

which has revealed two major benefits. First, it has ‘effectively eliminated the need for

supervision, and second, it has ‘contributed to Wegman’s reputation of knowledgeable

service where employees can shine, unburdened by hierarchies’ (2006). Wegman’s

example has proved that ‘strategic human resource management can help organizations

reconcile the often cited conflict between profits and principle’ (Ezzeden et al 2006)

After analyzing these examples it is clear that in order for an organization to be

successful, it must incorporate human resource techniques into its overall strategy.

Managers who carelessly ignore the value of a skilled human resource department risk

themselves and their company to costly errors. These could involve issues with

employment law, but can also lead to underachieving employees and decreased

competitiveness. Certainly managers will find it difficult to motivate their workforce

without listening to the needs and demands of the people they employ. This not only

hurts the employees, but lets down the shareholders of the company as well. On the other

hand, corporate leaders who actively exercise strategic human resources can add value to

their company by creating a positive culture; hiring, training, and retaining valuable

employees; and avoiding costly lawsuits. Given the dynamic workforce in today’s ultra-

competitive, fast paced environment, it is more important than ever for managers to

collaborate closely with their human resources department. The companies that do this

have repeatedly shown the benefits in profitability, and in their ability to compete in our

global marketplace.

9

Markham

Works Cited

BBC News. (2003). Why I Blew the Whistle. Available:

http://news.bbc.co.uk/1/hi/business/3188024.stm. (accessed 02/02/2011)

BBC News. (2009). Cadbury: The Legacy in Birmingham. Available:

http://news.bbc.co.uk/local/birmingham/hi/people_and_places/history/

newsid_8412000/8412655.stm. (accessed 29/01/2011)

Cheatle, K. (2001). Mastering Human Resource Management. Hampshire: Palgrave

Publishers LTD.

10

Markham

Daniels, K . (2011). History of HR and the CIPD. Available:

http://www.cipd.co.uk/about/howcipdrun/_historyfactsheet.htm. (accessed 28/01/2011)

Efrati, A. and Tam, P. (2010). Google Battles to Keep Talent. Available:

http://online.wsj.com/article/SB10001424052748704804504575606871487743724.html?

KEYWORDS=facebook+recruits+at+google. (accessed 28/01/2011)

Ezzeden, S.; Hyde, C.; Laurin, K.. (2006). Is Strategic Human Resource Management

Socially Responsible? The Case of Wegmans Food Markets, Inc.. Available:

http://search.proquest.com.ezproxy1.lib.asu.edu/docview/219439818. (accessed

04/02/2011).

Frank, E. (1988). ‘HRD Around the World’, Journal of European Industrial Training,

Vol. 12 issue 5: pp. 3-66.

Gibson, C. (2006). Henry Ford's Revolution for the Worker. Available:

http://www.americanheritage.com/articles/web/20060105-henry-ford-five-dollar-day-

model-t-ford-motor-company-assembly-line-james-couzens-highland-park-detroit-

automobiles.shtml. (accessed 05/02/2011)

Guynn, J. (2010). Tech Firms Try to Outperk One Another. Available:

http://blog.zynga.com/2010/04/los-angeles-times-tech-firms-try-to-outperk-one-

another.html. (accessed 28/01/2011)

PCaW. (No Date). Making Whistleblowing Work. Available: http://www.pcaw.co.uk/.

(accessed 02/02/2011)

Ramstad, E. (1992). Aviation Bosses Arm Wrestle for Slogan. Available:

http://www.lexisnexis.com.ezproxy1.lib.asu.edu/hottopics/lnacademic/?

shr=t&csi=235910&sr=HLEAD(AVIATION+BOSSES+ARM+WRESTLE+FOR+SLO

GAN)+and+date+is+March,%201992. (accessed 02/02/2011)

11

Markham

Reed, D. (2008). Southwest's Profit Outlook Uneasy. Available:

http://www.lexisnexis.com.ezproxy1.lib.asu.edu/hottopics/lnacademic/?

shr=t&csi=8213&sr=HLEAD(Southwest+profit+outlook+uneasy)+and+date+is+July,

%202008. (accessed 02/02/2011).

Ricadela, A. (2010). Oracles Hires Ex-HP CEO Hurd as President at Phillips Departs.

Available: http://www.bloomberg.com/news/2010-09-07/mark-hurd-joins-oracle-as-

president-after-leaving-hp-as-phillips-resigns.html. (accessed 30/01/2011)

Whaples, R. (2010). Hours of Work in U.S. History. Available:

http://eh.net/encyclopedia/article/whaples.work.hours.us. (accessed 05/02/2011)

Worthen, B. and Lublin, J. (2010). Hurd Neglected to Follow H-P Code. Available:

http://online.wsj.com/article/SB10001424052748704268004575417800832885086.html.

(accessed 30/01/2011)

12