the development of hr management: current trends, issues
TRANSCRIPT
The Development of HR Management:
Current Trends, Issues, and Challenges
Thesis
By
Vanda Kabrtova
Submitted in Partial Fulfillment
of the Requirements for the Degree of
Bachelor of Arts
In
Communication and Mass Media
State University of New York
Empire State College
2018
Reader: Todd Nesbitt
The Development of HR Management:
Current Trends, Issues, and Challenges
Thesis
By
Vanda Kabrtova
State University of New York
Empire State College
2018
Reader: Todd Nesbitt
Statutory Declaration / Čestné prohlášení
I, Vanda Kabrtova, declare that the paper entitled:
The Development of HR Management: Current Trends, Issues, and Challenges
was written by myself independently, using the sources and information listed in the list of
references. I am aware that my work will be published in accordance with § 47b of Act No.
111/1998 Coll., On Higher Education Institutions, as amended, and in accordance with the valid
publication guidelines for university graduate theses.
Prohlašuji, že jsem tuto práci vypracoval/a samostatně s použitím uvedené literatury a zdrojů
informací. Jsem vědom/a, že moje práce bude zveřejněna v souladu s § 47b zákona č. 111/1998
Sb., o vysokých školách ve znění pozdějších předpisů, a v souladu s platnou Směrnicí o
zveřejňování vysokoškolských závěrečných prací.
In Prague, 2.11.2018 Vanda Kabrtova
Acknowledgments
I wish to express my sincere thanks to Dr. Todd Nesbitt, Dean of School of Communication and
Media at UNYP and my mentor, for his vital support, assistance, and for the continuous
encouragement.
I am also grateful to Ing. Dana Hague, the lecturer of Human Resource Management, for sharing
her expertise, experience, and sincere and valuable inspiration with me.
I would like to take this opportunity to express gratitude to all of the Department faculty members
for their help and support. I also thank my parents for the unceasing encouragement. I am grateful
to my partner and my friends who supported me throughout this venture.
Table of Contents
1 Introduction ........................................................................................................ 1
2 The Evolution of Human Resource Management ........................................... 5
2.1 The Main Stages of HRM ...................................................................................... 7
2.1.1 The Welfare Stage ...................................................................................................... 7
2.1.2 The Welfare and Administration Stage ...................................................................... 8
2.1.3 The HRM and SHRM Stage ....................................................................................... 9
2.1.4 The Present & Future HRM Stage ........................................................................... 11
2.2 The History of HRM ............................................................................................ 13
2.3 The History of HRM in the US ............................................................................ 14
2.3.1 Origins of HRM ....................................................................................................... 14
2.3.2 The Era of World War I ........................................................................................... 16
2.3.3 The Era of the 1920s - 1950s ................................................................................... 17
2.3.4 The Era of the 1960s - 1970s ................................................................................... 19
2.3.5 The Human Resource Management Era ................................................................... 21
2.3.6 The American Workforce ......................................................................................... 22
2.4 The History of HRM in the UK ........................................................................... 23
2.4.1 The Industrial Era ..................................................................................................... 23
2.4.2 The Era of the 1920s - 1970s ................................................................................... 24
2.4.3 The Era of the 21st Century ...................................................................................... 25
2.5 Comparing and Contrasting Approaches in the US & in the UK ........................ 26
3 Current Trends, Issues & Challenges ............................................................ 29
3.1 Learning & Development - Learning Organization ............................................. 33
3.1.1 Knowledge Advantage ............................................................................................. 33
3.1.2 The Learning Organization ...................................................................................... 34
3.1.3 Attractive Learning Environment ............................................................................. 36
3.1.4 Learning Trends ....................................................................................................... 37
3.1.5 Return on Investment ............................................................................................... 39
3.2 Recruitment & Selection - Diversity and Inclusion ............................................. 41
3.2.1 Recruitment and Selection Methods ........................................................................ 41
3.2.2 Diversity in Recruitment .......................................................................................... 43
3.2.3 Talent Shortages ....................................................................................................... 45
3.2.4 Recruitment Errors ................................................................................................... 47
3.2.5 Diversity Programs ................................................................................................... 48
3.2.6 Financial Costs and Benefits of Diversity ................................................................ 50
3.3 Talent Management - Employee Engagement ..................................................... 53
3.3.1 The Importance of Talent Management Practices .................................................... 53
3.3.2 Employee Engagement ............................................................................................. 55
3.3.3 The Level of Engagement ........................................................................................ 57
3.3.4 Defining Engagement ............................................................................................... 58
3.3.5 Outcomes of Engagement ........................................................................................ 59
3.3.6 Enabling Engagement in a Workplace ..................................................................... 61
3.3.7 Measuring Employee Engagement ........................................................................... 63
4 Conclusion ......................................................................................................... 65
Abstract
This paper aims to assess what trends, issues, and challenges human resource departments face
today, and which have the greatest impact on the traditional role of HR. To properly analyze these
challenges, this thesis firstly describes the evolution of human resource management (HRM) and
the history of HRM in the US and the UK – the two markets which most influence the current state
of HRM. Next, the thesis analyzes the main trends, issues, and challenges of 21st century HR areas
such as learning & development, recruitment & selection, and talent management. In terms of
learning and development—namely the creation of a learning organization and an attractive
learning environment—are examined. The main challenge of the recruitment and selection
processes—the employment of a diverse workforce—is also discussed. The main challenge of
talent management activities—the improvement of employee engagement and satisfaction—is
explained. Finally, the thesis compares and contrasts the traditional and current roles of human
resource departments.
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1 Introduction
According to Cecile Schultz (2015), a professor at the Tshwane University of Technology and
Hugo van der Walt, a researcher at the University of South Africa, a successful business consists
of three key components: having the right strategy, having the right operations to perform the
strategy, and having the right people to perform the operations. A perfect match between the
business strategy and the HR strategy adds real value to an organization. Therefore, it can be said
that successful and unsuccessful organizations are differentiated by one significant factor: Human
Resource Management (HRM) practices and approaches which bring economic and strategic
advantages.
Any organization starting a business needs a competent workforce (Mujahid, Sameen, Naz, Nazir
& Manzoor, 2014). To that end, HR departments have moved from an administrative support role
to a business decision-making role, no longer performing back-office functions but acting as
business partners and advisers to CEOs and their teams. Successful HRM practices and policies
have aligned with business strategies and also persuade, connect, and motivate people to be a part
of strategic objectives, processes, and goals. Nowadays, companies looking for HR specialists
require “leadership abilities and strategy implementation skills” because HR specialists no longer
act in a mere supporting capacity (Filler & Ulrich, 2014). Experienced CHROs (Chief Human
Resources Officer) greatly assist CEOs in driving a business strategy by attracting the right talent,
creating the right organizational structure, and building the right culture.
Paul Michael Sotkiewicz and Edward Jensen, human resource scientists and researchers, say:
The new mission for HR executives is not to transform from the inside out, but the outside
in. Figure out what the business needs and then configurate yourself to that. Then, HR
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transformation can really take off because it can make an immediate impact. (cited in
Schultz & Van der Walt, 2015, p.13).
In other words, it is suggested for HR specialists to have or acquire experience in their associated
business field so that they can have the necessary competencies and business acumen to fulfill their
obligations to the company.
Adding further nuance to the role of HRM, Professors of Human Resource Management, Peter
Boxall, John Purcell, and Patrick Wright (2007), suggest that HRM does not have one clear
function but consists of three major subfields: Micro HRM, Strategic HRM, and International
HRM. Micro HRM includes policies and practices of HR specialists with a focus on managing
individual and small group selection as well as recruitment, training, and development. Strategic
HRM includes development, business strategy compliance, and performance measurements to gain
a competitive advantage. International HRM concentrates on the operation of international
companies with a focus on their adaptation, selection, and extra-financial remuneration (e.g.
rewards and benefits programs). This means that human resource management processes and
practices are more complex now than ever before.
To achieve the highest functionality, a human resource department may align its practices with its
business management objectives. Cathy Benko, Udo Bohdal-Spiegelhoff, Jason Geller & Hugo
Walkinshaw (2014) believe that having analytical skills, understanding current workforce´s needs,
and being a performance advisor, are three main factors that help HR professionals to become
effective business partners. However, there are significant differences between HR specialists and
business executives and their perceptions of readiness to current global human capital trends.
Business executives believe that companies are less able to handle five primary requirements:
leadership, reskilling HR, global HR, talent management retention and engagement, and talent and
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HR analytics. By contrast, HR professionals not only believe in the ability of companies to engage
with these five requirements but actively empower them to do so. Because active cooperation
between business executives and HR specialists leads to successful business strategies, it may be
necessary for both parties to realize that a cooperative relationship is fundamental and crucial to a
company´s success (Benko, Bohdal-Spiegelhoff, Geller & Walkinshaw, 2014).
Professionals HR competencies such as values, knowledge, and abilities have changed enormously
due to the evolving business conditions of the last 20 years. HR specialists considered successful
and competent in the1990s would arguably not be effective or efficient today. Hence, in keeping
with the shifting demands of the business world, HR specialists have changed as well. The
percentage of women working within HR has doubled, most HR specialists are college educated
and increasingly business-oriented. More and more, HR specialists deal not only with people but
also with business issues. They are expected serve the organization´s employees and communicate
with care and compassion while ensuring that the company´s strategies are designed and delivered
properly. The balance of both is necessary to avoid failure (Ulrich, Brockbank, Johnson, &
Younger., 2007).
The HR Competency Model, developed by Dave Ulrich, Wayne Brockbank, Dani Johnson and Jon
Younger, includes six main HR competencies: Credible Activist, Culture and Change Steward,
Talent Manager/Organizational Designer, Strategy Architect, Operational Executor, and Business
Ally. It is recommended to HR professionals to be credible, active, and to perform their job with a
proper attitude. They should help shape the company´s culture and turn what is known into what
is done. They should handle the theory and practice of both talent management and organizational
design. They should have a vision of the organization's future and play an active role in fulfilling
that vision. Finally, they should create and adopt policies and procedures effectively. To
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summarize, HR specialists are expected set goals and objectives that respond to current internal
and external weaknesses and threats to organizations (Ulrich, Brockbank, Johnson, & Younger.,
2007).
An effective human resources department creates tangible value for companies and organizations.
By recommending and instituting strategies for employers and employees, HR has traditionally
been crucial for organizations in the implementation of organizational strategic goals, the
management of organizational culture, talent management, strategic compensation plans,
recruitment, employee benefits, and the development of effective working relationships.
The transformation of organizations resulting from new information and communications
technologies, as well as ever-increasing globalization, has in many ways impacted these key roles
significantly. This paper aims to assess what trends, issues, and challenges HR faces today, and
which are having the largest impact on the traditional role of HR. To do this, the evolution of HRM
is traced and differences between the US and the UK experience are compared and contrasted.
Subsequently, major trends, issues, and challenges that HR professionals try to achieve and
overcome are connected to creating a learning organization, hiring a diverse workforce, and
increasing employee engagement.
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2 The Evolution of Human Resource Management
As far back as 5000 years ago, slaves, farmers, soldiers, engineers, and many other workers needed
managing. Therefore, how to manage people is a longstanding, challenging issue. However,
Human Resource Management has experienced the most change within the last 200 years,
especially in regard to workers who have gone from being replaceable, expendable resources to
being the greatest, most valuable assets an organization has. This chapter traces the recent evolution
of the main HR stages in order to understand the basis for contemporary HR practices.
The evolution of today’s HRM started with a concept of manpower planning used in ancient eras.
Over time, the concept was transformed into people management in the1700s and personnel
management in the 1900s as a response to changing issues and challenges such as the Industrial
Revolution, WWII, and later, newer technological developments such as the World Wide Web
(Mujahid, Sameen, Naz, Nazir, Manzoor, 2014). In the 1900s, personnel management was greatly
focused on employee welfare and administrative activities managed by senior management, but
this slowly shifted to a more business-oriented and strategy-focused approach used in the 1980s
and 1990s (Rotich, 2015).
At the beginning of the 20th century, personnel management was defined as transactional work
which mainly focused on salary administration and industrial relations. These activities were
performed by personnel managers, but there was little to no relationship between them and
organizational objectives/ goals. Over time, personnel management developed into human resource
management by adopting management theories, especially strategic management, which assisted
HR managers in the transformation of practices into organizational needs and wants. Personnel
management models are different compared to HRM in their principles and applications. HRM can
be described as a unification of three factors—people, resources, and management—which allowed
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people to grow knowledge, skills, and capabilities (Rotich, 2015). This approach is described in
the following sections.
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2.1 The Main Stages of HRM
HRM was developed through the following general four stages: the welfare stage, the welfare and
administration stage, HRM and SHRM, and the present/future HRM stage (Rotich, 2015). These
stages mainly reflect the development of HRM in the US, UK, and Australia, but can be applied to
the rest of the world as well.
2.1.1 The Welfare Stage
The first stage, or welfare stage, started in the 1900s and lasted through the 1940s. During the era
of the First World War and the later Great Depression, personnel functions were performed by
supervisors and line managers as a part of their management responsibilities which mainly included
wage administration, minor disciplinary procedures, and welfare activities. Prior to WWII,
personnel functions started to become more specific and performed by personnel specialists like
recruiters, trainers, and welfare officers whose responsibilities mainly included recruitment,
selection, and placement of employees (Rotich, 2015).
There were several milestones of HRM development in this era. In 1900, the B.F. Goodrich
Company, an American tire manufacturer, established the first HR department, followed by
National Cash Register which established an HR department to handle employee issues in 1902.
In 1911, a mechanical engineer whose aim was to improve industrial efficiency came up with the
Scientific Management Theory and defined a differential pay system to motivate employees. Two
years later, the U.S. Department of Labor was established to promote the welfare of employees.
The Social Security Act of 1935 created the right to a pension and insurance against unemployment
for those of retirement age. The Fair Labor Standards Act of 1938 created a right to a minimum
wage, overtime pay, and limited child labor (Aslam, H.D., Aslam, M., Ali, Habib, Jabeen, 2013).
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2.1.2 The Welfare and Administration Stage
The second stage occurred in between the 1940s and the 1970s. During WWII, there was a
heightened need for a specialized workforce in gastro and military industries. Women were
increasingly employed across all industries to replace men lost to military service. After the end of
the war, returning soldiers with no other skills flooded the market. For this reason, personnel
managers needed to focus on a wide range of personnel functions, not only on recruitment and
selection but also on training, welfare activities, working conditions, employee motivation, and
relations (Rotich, 2015). Managers also recognized the importance of employee productivity and
its impact on the organization. Consequently, employees started to be motivated by non-monetary
benefits. Managers were using psychological motivation, employees were receiving gratitude for
work and appreciation for exceptional achievements (Mujahid, Sameen, Naz, Nazir & Manzoor,
2014).
According to Thomas A. Mahoney and John R. Deckop (1986), professors and researchers from
Vanderbilt University:
Personnel administration of the 1950s can be characterized as administration of a collection
of activities such as recruiting, selection, training, and compensation, each designed to
accomplish some objective and often related to a disciplinary theoretical model, but lacking
the cohesion of objective and theory (p.225).
Thus, personnel management activities remained separate from organizational goals. Nevertheless,
the personnel managers moved from specialization to a more general approach. Researchers from
The Human Resource Institute of New Zeeland (2014) believe that generalists are expected to have
a deeper understanding of an HR delivery, but are less experienced in specialized subjects.
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Specialists work with employees individually and separately, whereas generalists are able to
analyze, plan, and design specific strategies for the organization, not for a specific workforce.
During the 1960s, the main responsibility of personnel managers shifted again from the design and
administration of activities managing the workforce to activities fulfilling organizational goals.
Until then, employee morale and job satisfaction were viewed as desirable ends, however, in the
mid-1960s employees were viewed as organizational resources through which the organization
could be improved and enhanced (Mahoney & Deckop, 1986). The role of HR specialists´ activities
moved from managing the administration to managing the organization.
The period from the 1960s to the 1980s was characterized by an extreme increase in the amount of
influential labor legislation in the USA. Four major acts focusing on employee discrimination and
safety were passed, and personnel managers were required to fall in line with these employee
protection laws. The Equal Pay Act of 1963 mandated equal pay for equal work to end gender
inequality. The Civil Rights Act of 1964 prohibited discrimination based on race, gender, religion,
and color in several fields including employment. In 1970, The Safety Act was passed to assure
safe and healthful working conditions for working men and women. Eight years later this was
followed by The Pregnancy Discrimination Act which prohibited sex discrimination based on
pregnancy, childbirth, or related medical conditions (Aslam, H.D., Aslam, M., Ali, Habib, Jabeen,
2013). It was during this era that human resource management was born.
2.1.3 The HRM and SHRM Stage
This third stage occurred in the period between the 1970s and the late 1990s. As labor unions
negotiated for better employment conditions and labor costs grew significantly, HR specialists had
to evaluate the workforce precisely and individually. Concurrently, union negotiations were being
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replaced with single-negotiations. The Management Theory, developed by Thomas Peters and
Robert Waterman in the 1980s, largely influenced the management of employees as well. This
theory suggested that a strong organizational culture created a strong company. An organizational
culture is developed from values, beliefs, and assumptions shared by the employees. If employees
are treated decently and motivated do their best, the organization can work not only efficiently but
also effectively (Peters & Waterman, 1984.)
Personnel management turned into human resource management with a focus on personnel
functions incorporated into overall organizational effectiveness. Employees were viewed as
“human resources” which need to be integrated into complementary management strategies to
achieve organizational goals and strategies. The transformation to human resource management
signified an important transformation in the thinking of HR specialists who could create and
develop approaches and strategies suitable for the organization under constantly changing
conditions (Rotich, 2015). HR specialists were focused on employee progress and participation
instead of employee supervision. Nevertheless, the organizational management started to require a
defense from HR departments regarding their services and costs (Mujahid, Sameen, Naz, Nazir &
Manzoor, 2014).
A “macro” human resource approach including strategies and policies was built upon a “micro”
human resource approach consisting of activities, functions, and processes. In this way, strategic
human resource management (SHRM) was created (Rotich, 2015). HR specialists were focused on
rightsizing employee numbers, creating independent work teams, and reducing layers of
management and outsourcing. The strategic side of human resource management was concentrated
on attracting, preserving, and holding talented employees. HR department became a strategic
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partner, brought a competitive advantage, and improved organizational performance (Mujahid,
Sameen, Naz, Nazir & Manzoor, 2014).
To sum up, personnel management within the time and planning perspective can be defined as
short-term, reactive, ad hoc, and marginal when compared to human resource management which
is long-term, proactive, strategic, and integrated. Within employee relations, the personnel
management approach can be defined as pluralist and collective, in contrast to human resource
management approach which is unitarist and individual. The structural system of the personnel
management is bureaucratic and centralized, with defined roles, in comparison to human resource
management which is more organic, decentralized, and flexible (Rotich, 2015).
2.1.4 The Present & Future HRM Stage
The fourth stage of HRM began in 2000. Even though it is difficult to predict what the future of
HRM will look like, it is reasonable to assume that it will continue to transform as a result of
technological developments and advancements, globalization, and changes in the nature of work
begun during this time (i.e. the 2000s). A proactive attitude towards current trends such as business
ethics, corporate governance, and the management of an employee´s work life balance will be a
must. New HRM approaches are constantly being developed as a response to communication and
information technologies. An HR department must be a crucial part of the business decision-
making process (Rotich, 2015). According to Lawler (2012), the HR function in many corporations
looks much the same as it did in the 1990s. The biggest changes are visible on how “HR function
is organized, where HR activities and information are located, and HR´s role in employee advocacy
and shaping labor market strategy” (p. 152).
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However, Lawler (2012) suggests that HR functions in many organizations fail to shape and
develop a business strategy and thus fails to fulfil effective HR skills like outsourcing, planning,
and employee assistance. He recommends to HR specialists to be highly involved in current trends,
open to new practices, and be willing to learn and adapt to a rapidly changing working environment.
Furthermore, he notes that HR specialists need to focus mainly on talent management, the use of
metrics and analytics, and the realization that people are their greatest assets
In conclusion, HRM is a continuingly and rapidly changing field not only in practice but also in
academia. Until now, HRM was developed through four general stages such are the welfare stage,
the welfare and administration stage, HRM and SHRM, and the present/future HRM stage. The
HR function may need to look at reinventing itself to work in the future. Lawler (2012) believes
that HR managers need to understand business operations to be able to create and develop
approaches that fit the organization´s competitive situation. He claims that HR specialists must
learn how to attract and retain the right people, have the right talent, and use it to do the right job.
In order to recognize current HR trends, issues, and challenges, it is necessary to understand the
historical development of HRM with an emphasis on organizations and the practice of HRM in
different industries and countries. The following historical section explains specific development
features in major geographic areas such as the US and the UK. The aim is to analyze the historical
evolution of HRM in those developed countries to see what effects it might have on current
situations all around the world.
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2.2 The History of HRM
The historical development of HRM is tightly connected to major technological developments and
changes within societies. The modern concern with managing workers stems from the Industrial
Revolution which caused a massive shift in the workforce from farming and cottage-industries to
industrial work and factories. The industrial transition in some geographic areas happened more
than 200 years ago while in others industrialization might be taking place right now. The nature of
work transformed from self-management, flexible working hours, and working at home in small
groups to supervision, long shifts, and commuting to large, noisy factories. Gradually, employers
came to the realization that workers might have different needs and wants and therefore require a
different approach. Employees today are viewed as an investment and a key part of the
organization. The evolution of HRM is not just an evolution of practices but also an evolution of
ideas and thinking.
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2.3 The History of HRM in the US
This chapter describes some of the main issues HRM was facing in the US from the 19th century
up to the 21st century. The aim of this chapter is to understand the birth of personnel activities, the
unions importance, and what worldwide events influenced the development of HRM in the US the
most. Furthermore, the chapter discusses the transformation of HRM from mostly practical
approaches to academic programs.
2.3.1 Origins of HRM
Job and workforce instability at the end of 19th century in the US was characterized by low wages,
long working hours, unsafe working conditions, and unstable employment combined with a
developing economic and labor system composed of increasing workforce specialization, job
mechanization, immigration, and urbanization (Licht, 1988). The need for change and development
in US HRM practices from the 1870s to the 1880s was a result of two events: industrialization and
the Labor Problems. The Labor Problems spanned 1870 to 1915 and were seen as the nation´s
greatest domestic threat to peace and stability at that time. Two major strikes started a labor war:
The Homestead Strikes in 1892 and the Pullman Strikes in 1893. Employers in both
aforementioned strikes demanded wage cuts and misemployment offering in return only terrible
working conditions (Kaufman, 2014). These two major strikes were followed by more than 1,500
strikes in which more than 300,000 workers were involved every year for the next three decades
(Licht, 1988).
A management function did not appear until the 1880s when only a few companies started basic
recruitment functions in the 1900s and a slight increase after 1910 when centralized employment
functions focusing on hiring, welfare activities, and safety started to be developed. Because
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railroads, steel mills, and factories mainly required unskilled workers, employers perceived the
investment into employee management and improved working conditions as useless and
unprofitable (Kaufman, 2014).
Nevertheless, the United States Steel Corporation, founded in 1902, employed more than 150, 000
workers. The corporation urgently needed someone who would select, train, hire, coordinate, and
replace the workforce. The work was usually done by line managers and, until 1915, many
corporations relied on a short-run demand and supply system. Companies were hiring and firing
daily. Managers were using threats and abuse as motivation. And the management supported
preferential pay and treatment to relatives, friends, and favored groups (Kaufman, 2014).
Generally, companies tried to pay as little as possible and made their employees work as much as
they could.
Despite this, the development of trade unions positively affected the workplace. Although unions
were not that powerful, they were seen as a threat to employers. At the beginning of the 20th century,
only two percent of workers joined unions compared to 20 percent before WWI (Bernstein, 1960).
The Bureau of Statistics of Labor was established in 1869 in Massachusetts to collect data about
working and living conditions of the state´s working men and women. After proving to be
successful at a state level, an equivalent federal agency was established in 1884 under the name
The U.S. Bureau of Labor which was a first step toward the establishment of The Department of
Labor in 1913 to handle the American workplace crisis. In 1868, The National Labor Union,
together with The American Federation of Labor, demanded the establishment of a federal
organization supporting the workforce. They were the main lobbying forces behind the creation of
The Department of Labor which many unionists saw as an influential organization for affecting
action and changing legislation (Licht, 1988).
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Employers, psychologists, and social reformers were experimenting with various forms of people
management in the1910s and adapted many strategies to handle the workforce crisis. New thinking
and practices in the pre-WWI era greatly influenced the development of HRM. Some of these
strategies were the Systematic Management movement, the Industrial Welfare movement, the
Industrial Safety movement, and the Employee Management movement. The Systematic
Management movement focused on aligned wage payment. The Industrial Welfare movement
fought for improved working conditions and employee treatment. The Industrial Safety movement
concentrated on eliminating workforce accidents and deaths. The Employment Management
movement, established in 1912, advocated the creation of centralized personnel departments in
companies (Kaufman, 2014).
2.3.2 The Era of World War I
The First World War resulted in a fully employed labor market causing the traditional model of
HRM to break down, the result of which was the creation of a new model focused on employer-
employee relationships. In 1918, the Standard Oil Company created an industrial relations
department in its New Jersey headquarters. The HRM manager reported directly to the company
president and the board of directors. The industrial relations department was responsible for
recruitment and selection, training, benefits, safety, medicine, and employee services. It used new
practices like employee handbooks, promotions from within, employee evaluations, and insurance/
pension plans (Kaufman, 2014).
Professional associations and publications played an important role in the evolution of HRM as
well. The Employment Managers Association, established in Boston in 1912, was overhauled into
the nation-wide Industrial Relations Association of America in 1919. The association published a
monthly magazine titled Personnel (Kaufman, 2008). Three terms for HRM were used: personnel
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management, industrial relations, and labor relations. By the late 1920s, one-third of all large
organizations consisting of 250+ employees had an HRM department which offered new forms of
compensation and benefits in the form of employee stock ownership and pensions. Companies such
as Ford, General Electric, Goodyear, and Standard Oil offered stabilized employment, promotion
from within, above average pay, and fair treatment to all employees. Companies´ calculations
showed that personnel departments increased employee productivity and innovation. Yet, only 15-
20 percent of companies adapted new HRM processes and practices (Kaufman, 2014). During the
1920s, of all industrialized countries, the US had the least protective labor laws in terms of overtime
pay and minimum wage. It also had the smallest union movements (Rodgers, 1998).
Since the 1920s, HRM has been taught in American universities, yet the most influential writers
did not come from academic fields but from real-world practice. Some of these real-world
practitioners were Henry Dennison, Mary Follett, and Chester Barnard: business-oriented people
CEOs, company founders, managers, or business consultants who were experimenting with
management theories and organizational behavior (Bruce, 1999).
2.3.3 The Era of the 1920s - 1950s
Human resource management reached its developmental peak in the 1920s, however, in 1929 the
American economy suffered the Great Depression until 1933 and HRM followed suit. Employers
began to adopt negative policies and attitudes towards employees. Benefits were eliminated, and
wages were cut. Employment became uncertain, unfair, and full of discrimination. More than 25
percent of the American workforce was unemployed, so employers no longer needed to spend
money on recruitment, training, or pensions when qualified workers were available immediately.
With the fall of the steel industry in 1931, the most influential companies announced a ten percent
cut in wages. The US was facing Labor Problems again. These labor problems were mitigated by
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two legislative acts: the National Labor Relations Act of 1935 which guaranteed basic rights to
employees and encouraged them to join unions and the Fair Labor Standards Act which created a
nation-wide minimum wage (Kaufman, 2014). As a result, millions of workers were primarily
employed in top industries such as steel, automobile manufacture, electrical utilities, and railroads.
These industries joined the unions in the 1930s as a strategy for collective bargaining (Cohen,
1990). The workplace underwent massive change and most employers slowly accepted unions as
a negotiating tool with regards to work ethics, salaries and benefits, and morale. Nevertheless, the
unions were beneficial for employers as well. Many of the unions requested continued work-
specialized education and improved qualifications from their members. Personnel managers
followed the unions and introduced new practices and programs like job evaluations, pensions, and
grievance systems (Kaufman, 2014).
After World War II, HRM studies and practices experienced a boom that reached its peak in the
1960s. Both American employers and unions had little experience in collective bargaining
something also true of the government which should have overseen and regulated it. Nonetheless,
unions forced companies to stabilize employment and put focus on seniority in training and
promotion. This made it possible for the biggest American companies—General Motors, IBM, and
Sears—to offer stable careers, well-defined promotion systems, developed wages and bonuses, and
extensive training programs (Jacoby, 1997). Between 1945 and 1960 American universities opened
more than 20 business programs focused on collective bargaining, human relations, labor
legislation, social security, personnel management, and industrial education. The widest program
range was offered at The New York State School of Industrial and Labor Relations at Cornell
University. The programs were taught on a multi-disciplinary basis and were inspired by the
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academic disciplines of anthropology, psychology, economics, sociology, and law (Kaufman,
2014).
2.3.4 The Era of the 1960s - 1970s
Industrial relations (IR) and personnel management/human relations (HR) started to drift apart in
the 1960s. Industrial relations were oriented around the external disciplines of economics, law,
history, and macro-sociology. IR had a narrower focus on labor problems/labor relations compared
to personnel management/HR which focused on employment within organizations. The main
function of PR/HR moved from social sciences and economics and positioned itself as a
management function (Wren & Bedeian, 2009). Companies such as Delta Air Lines, IBM, and
Procter & Gamble invested in personnel as a strategic position from which to handle employee
relations. They provided wages, benefits, fair treatment, and job security that was well above union
requirements (Jacoby, 1997). This notwithstanding, many companies put much less emphasis on
HRM. They still viewed personnel function as an administrative position which closely aligned
with line management. Consequently, unions lost members after the 1950s. However, the federal
government and many state governments passed laws protecting employees in terms of equal pay
for men and women; equal opportunity regardless sex, race, and religion; pension reforms; and
workplace accommodation for people with disabilities. Government employees were allowed to
collectively bargain. Subsequently, union density in this sector increased to 40 percent of the entire
workforce (Kaufman, 2014).
In the late 1970s, industrial relations and personnel management became the most studied programs
in business schools. Two major events, the creation of new business field organization behavior
and the development of strategic management, accelerated the evolution of IR/PM into human
resource management in the mid-1980s (Kaufman, 2014).
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Since the 1910s, psychologists had been active in the IR/PM fields, but up until the1970s, they
were only studying personnel techniques as hiring tests or job placements. From then on, they
started to focus on the human dimension of management. Their main research moved to diversity,
leadership, motivation, group dynamics, and workplace conflicts (Wren & Bedeian, 2009).
Nevertheless, there was a lack of integration of IR/PM with other management theories and fields,
especially organizational design. In the mid-1960s, organizational behavior (OB) was created and
it had a positive effect on personnel management. Organizational behavior is concerned with
people´s behavior within an organization with a focus on the structure and operations of
organizations (O’Reilly, 1991). Even though OB and IR/PM are related fields, OB focuses on
general theories and principles of human behavior in a workplace while PM/IR focuses on the
application of these theories to a specific workplace and staff. Organizational behavior defines not
only theoretical but also practical principles and tools which can be applied in any organization
that utilizes personnel management (Kaufman, 2014).
Until the 1970s, universities offered a business program, Policy, which lacked well developed
theoretical and practical principles that could be applied to organizations. The new business
program strategic management (SM) was developed in the 1980s and its principles were
immediately integrated into people management. According to Richard E. Walton (1985), a
professor of Business Administration at the Harvard Business School, the traditional system of
people management relied on rewards and punishments that suppressed employee initiative and
creativity. Compare this to the commitment approach which increases employees´ performance in
productivity, customer service, and innovation. The commitment approach positively influences
personnel practices that focus on work culture, learning organization, and positive organizational
behavior. By the late 1970s, Walton notes that a great number of companies uses the commitment
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approach and HR specialists return for good work performance practices (e.g. flexible job
assignments, extensive training, or job security).
2.3.5 The Human Resource Management Era
The term human resource management was first used in the mid-1950s by IR scholar E. Wight
Bakke and for the next decade, the term HR was used with increasing frequency. In the late 1970s,
HRM was perceived not only as a new terminology but as a new modern and strategic approach to
people management (Kaufman, 2014). Strategic human resource management (SHRM) can be
classified as a subfield of HRM in that it provides a macro perspective and concerns with different
employment systems whereas HRM can be classified as a micro perspective with a focus on a
particular employment system (Wright & Boswell, 2002). Strategic human resource specialists
must identify a vertical fit which means aligning HRM systems with an organizational business
model, as well as a horizontal fit, finding and matching diverse practices in a way that maximizes
organizational productivity (Kaufman, 2014).
According to the Mark A. Huselid (1995), a professor at Rutgers University, a higher use of HRM
practices leads to higher organizational performance and increased use of advanced HRM practices
leads to 10 to 20 percent increases in an organization´s market value. However, less than 5 percent
of American employers use High-Performance Work Systems (HPWS) such as gain-sharing pay
or cross-training. Due to global competition, stronger pressure from financial markets, and greater
short-term profits, many corporations are cutting HRM budgets and compressing HR departments.
For this reason, HRM in the US cannot be described for, or applied to, all corporations. Some are
world-class leaders utilizing HRM to maximum effect whereas others still have line managers who
handle a personnel function (Kaufman, 2014).
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2.3.6 The American Workforce
Furthermore, the composition of the American workforce and the location of the work has changed
radically as well. There were visible shifts between the workforce at the beginning of the 20th
century and the 1980s when agricultural workers presented less than five percent of all workers
compared to 33 percent in 1913. The proportion of the workers in the service and manufacturing
industry increased slightly, compared to the significantly greater growth among white-collar
workers, rising from 20 percent to above 60 percent of the total. Child labor was reduced by
compulsory school attendance and factory inspection acts. Despite this, children between the ages
of 10 to 15 still represented six percent of the total workforce. More than two-thirds of all elderly
men over 65 were employed compared to 20 percent in the 1980s. At the beginning of the 20th
century, less than 20 percent of the workforce was represented by women and only 3 percent of
married women were employed in the job market. In 1910, more than one million immigrants
entered US borders and very soon made up 20 percent of the American workforce. Nevertheless,
immigration was hampered by restrictions in 1921 and 1924, and the numbers of working
immigrants decreased. From the 1960s, the American workforce resumed strengthening the job
market with an influx of immigrants from Latin America and Asia (Licht, 1988).
In short, working conditions and standards have changed dramatically throughout the 20th century
in the USA, from declining working days per week and declining working hours per day to safety
improvements, regular employment, paid vacation/sick leave, and workplace injury benefits as well
as life, medical, and pension insurance. As soon as the major issues were solved, the HR
professionals started to focus on current needs and challenges, which will be discussed further.
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2.4 The History of HRM in the UK
The aim of this chapter is to understand the development of HRM in the UK in three areas - work
relations, employment relations, and industrial relations throughout the 19th century up to the end
of the 21st century. The importance is given to the development over time between following stages:
the industrial era, the 1920s - 1970s, and the 21st century era.
2.4.1 The Industrial Era
During the Industrial Revolution, the UK had the world´s largest textile industry. Classic problems
related to workplace relations, employment relations, and industrial relations emerged. Employees
needed to find out how to organize production and labor division; how to attract, retain, and
motivate employees; and how to manage the relationship between line managers and workers
(Allen, 2006).
With the development of technology, markets and factories started to expand and install new
machinery. Regardless of this, employers offered unstable employment; employees were paid by
the hour under unsafe working conditions. By the end of the 19th century, textile workers —as well
as engineering workers and coal miners—joined unions and established regional and national
collective bargaining. Unions of male textile workers became the largest in the UK (McIvor &
Wright, 2005).
From the 1950s, railway companies grew massively and were faced with other industry including
recruitment, staff regulation, workforce schedules, transport safety, and the geographical division
of labor. Railways were the first industry to present an official system of employment focused on
systematic recruitment, job promotion, and fixed pay that offered welfare benefits: housing, sick
care, and pensions (Howlett, 2001). Railway companies were using a unitarist management model
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in which managers had the undeniable power and right to give orders and workers could only obey
them. Within the railway industry, neither trade unions or collective bargaining were popular until
WWI. Other publicly or privately-owned industries trading with gas, electricity, or water joined
unions and engaged in collective bargaining after WWII. The Railway industry was the first
industry to use a hierarchical management system and employ white-collar workers who, based
upon their, seniority and experience received employment benefits and the prospect of upward
mobility. They were offered training courses for which educational books and magazines were
provided. In contrast to this, constructors and maintainers were not part of the system. However,
in workshops owned by railway companies, employees were offered high wages and joined unions
(Gospel, 2014).
With new production processes, the development of the assembly line, and the widescale
implementation of mass production from the early 20th century on, steel, chemical, and other
assembly line industries (e.g. motor vehicles and electrical products) used personnel management
practices. Nonetheless, employment was often short-term with only simple benefits systems.
Gradually, employees recognized the need to organize the work systematically and gain
information about employee effort and motivation. Employers slowly began to focus on a scientific
management system in which work was observed by experts, reorganized with a greater
subdivision of jobs, and incentivized by bonus systems based upon workplace performance
(Gospel, 2014).
2.4.2 The Era of the 1920s - 1970s
Employers and the state were dependent on worker productivity during WWI and though this
strengthened trade unions, collective bargaining was still underdeveloped. Furthermore, the Great
Depression in 1929 decreased union presence and popularity. In the mid-1930s, unions started
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getting stronger and employers needed to deal with them usually through a third-party employer
organization. During WWII, unions were stable and functional, and collective bargaining gained a
strong position as well. Nevertheless, third-party negotiation brought issues to bear that rendered
unions unable to control workplace flow to employee satisfaction. The automotive industry after
WWII was the second strongest in the world so it could afford to offer secure employment with
above average pay conditions. The industry had issues with the weak managerial control which
resulted in strikes which in turn resulted in employment conditions moving toward single-person
employment bargaining and intra-company agreements. This led to much need improvements
within personnel management. From the 1960s to the1970s, governments created income policies,
passed new protective employment laws, and reformed collective labor laws (Dickens, 2008).
2.4.3 The Era of the 21st Century
The era of the late 20th century and early 21st century has been characterized by significant changes
due to both technological advancements and increased market competition. When industry focus
shifted from manufacturing to financial and business services, foreign ownership increased while
union popularity decreased as members began to realize that they could negotiate better contracts
on an individual level than the through collective union bargaining. (Brown, Bryson, Forth &
Whitfield, 2009). Currently, only 20 percent employees of the UK´s largest company, Unilever,
participate in union negotiations compared to Tesco or Barclays in which union membership
comprises approximately 60 percent of the workforce. Employers trained their managers to treat
employees in a way that maximized productivity and participation. They also provided employees
with opportunities to upskill their abilities thereby improving their prospects for promotion.
Employers offered stable employment, fixed-term and part-time contracts, and experimented with
different types of pay systems: performance pay, profit-based pay, and share ownership. Employers
26
move from defined pension systems to defined contribution systems, which are less costly and
require less administration (Gospel, 2014).
2.5 Comparing and Contrasting Approaches in the US & in the UK
The appearance of the industrial revolution, the creation of labor unions, and the formation of
professional associations and institutions are seemingly minor differences in the development of
HRM in leading industrial countries such as the US and the UK, yet they are extremely important
for current human management practices and approaches.
During the late 18th and the early 19th century, Britain experienced extreme changes as a result of
the Industrial Revolution. While the industrialization of Western Europe started in the late 1700s
and the early 1800s, the American Industrial Revolution started later as a result of the War of 1812
when demand for domestic cloth skyrocketed due to the Embargo Act of 1807. Up until that time,
the US had been heavily dependent on the British Empire for trade and resources, but the new trade
conditions in which the US found itself necessitated industrialization, move which was, from an
economic perspective, extremely lucrative to the economy and private industry. However, even
though the Industrial Revolution increased overall wealth, mass production created miserable
working conditions for many, if not most, workers. The nearly identical employment situations in
the US and the UK during the mid-19th century can be characterized by unstable/unsafe working
conditions, long shifts, and low wages as well as the employment of women, children, and the
elderly.
The development of unions had a positive effect on these respective workplace environments. In
the UK, during the 18th century, workers started to defend their rights, a difficult proposition since
any form of striking was punishable under The Combination Acts of 1799. Eventually though
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(more than 70 years later in fact) unions were recognized as legal entities entitled to protection
under The Trade Union Act of 1871 (Encyclopaedia Britannica, 2018). The origin of Labor Unions
in the US dates back to 1791 when the first successful strike demanding a ten-hour workday took
place in Philadelphia. The National Labor Union was established in 1866 and lobbied for the
establishment of an eight-hour workday, a measure which, at the time, only benefited federal
employees; the private sector remained impervious to the lobby (Cussen, 2018).
Professional associations and publications played an important role in the evolution of HRM. In
the US, the Employment Managers Association was established in 1912 in the city of Boston and
was then retooled and expanded into the nation-wide Industrial Relations Association of America
in 1919. The School of Industrial and Labor Relations formed at Cornell University in 1945 was
the world's first institution of higher education focused on workplace management and personnel
development. In the UK, the Welfare Workers' Association was established in 1913 and has
published the magazine Labor Management since the 1920s. The creation and development of
these associations and publications helped to unite business leaders and individuals interested in
personnel activities and approaches, who further shared their knowledge between and with others
as well, and help to expand HR communities.
To handle workforce crisis and labor problems in the US, the first people management strategies
were developed and adopted in the 1910s. Concurrently, the effects of the scientific management
theory and the usage of personnel management practices were also present in early 20th century
UK. Similar workforce situations in the US and the UK during WWI created a fully employed
labor market in the majority of involved countries due to a shortage of available male labor.
Following the war, all labor markets began to improve and eventually peak, until the Great
Depression hit the US market in 1929 and quickly spread to the rest of the world. Compared to the
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US, the UK had not experienced a comparable boom in the 1920s so the consequences of the Great
Depression were not as extreme in the UK as in the US; they were, nonetheless, catastrophic. Due
to the Great Depression, union membership decreased. During WWII, women and children all
around the world were used for as substitutes for a traditionally male workforce, particularly in
military factories. Since the 1940s, the labor market has experienced rapid increases in the numbers
of female workers making up the workforce.
The first human resource management practices shifted from employee administration to employee
development and involvement. They were first adopted by the US labor market, a market in which
HRM has been seen as a modern and strategic approach since the late 1970s. Likewise, HRM in
the UK has been viewed as an innovative management approach since the 1980s.
In summary, there are more similarities than differences in the development of human resource
management in the US and the UK. These small differences were almost eliminated in the present
21st century, a time when globalization is characterized by the expansion of multinational
corporations throughout the world. Even though these small differences were eliminated in
majority of developed countries by now, underdeveloped or developing countries still stay behind.
Nevertheless, multinational corporations present all over the world provide job creation, lowered
costs, increased local wealth, and a greater variety of consumer options while also yielding the
disadvantages of market domination, elimination of traditions, higher pollution, and trade
dependence. That said, it should be noted that human resource practices are only improving.
The following chapter explains what trends, issues, and challenges HR faces today as a result of
HRM development in the last 400 years.
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3 Current Trends, Issues & Challenges
In the previous chapters, the general evolution of HRM was discussed, along with the evolution of
HRM in the US and in the UK, in order to trace the development of HRM from its inception.
Globalization has had a major impact and served to standardize many approaches. This chapter
helps to understand three major sets of challenges that call for an action and change the way
businesses lead, motivate, organize, manage, and engage the 21st century workforce.
Business productivity, at its lowest rate since the 1970s excluding the 2008 recession, is no longer
dependent on traditional technological advancements but rather relies on human resource strategies
and tactics. To increase business productivity, HR professionals are having to adapt their mind-
sets, attitudes, and accept new ways of thinking about their businesses, employees, and
organizational roles in the global world. Currently, organizations are challenged to focus heavily
on learning & development, recruitment & selection, and talent management to create individual
and organizational satisfaction. (Bersin, Pelster, Schwartz & van der Vyver, 2017).
In the 21st century, organizations and businesses are facing the beginning of the Fourth Industrial
Revolution, a set of new technological and socio-economic advancements interacting with and
intensifying each other to result in the generation of new job categories and occupations.
Surprisingly, the most in-demand current occupations did not exist in many businesses and
countries five or ten years ago.
According to Till Leopold, Saadia Zahidi, and Vesselina Ratcheva (2016)—researchers from the
World Economic Forum—concerns about ethics and privacy, longevity/ ageing societies, women´s
rising economic power, rapid urbanization, changing working environments/flexible working
arrangements, the rise of the middle class in emerging markets, and climate changes are the most
30
essential socio-economic shifts in the 21st century. As a result, the world´s economic centers are
moving to emerging markets in Asia and Africa, and businesses increasingly employ part-time
workers and external consultants. Furthermore, as a part of Corporate Social Responsibility,
organizations help to mitigate the effects of climate changes, reduce carbon footprint, responsibly
utilize natural sources, and facilitate a greener global economy.
Additionally, businesses are involved not only in social changes, but are also in new technological
advancements to include genetics, nanotechnology, artificial intelligence, robotics, 3D printing,
and biotechnology. Such technological improvements have created workplace innovations like
remote working, co-working spaces, and teleconferencing. Both technological and socio-economic
advancements highly impact organizational structure and business development (Leopold, Zahidi
& Ratcheva, 2016).
As a result of socio-economic changes, businesses are no longer evaluated based solely on their
profits and the quality of products and services, but rather on their relationship with their
employees, clients, and communities. According to Anne-Marie Malley (2018), the UK Human
Capital Leader form the Deloitte University Press, businesses should function as “social
enterprises” and be aware of the impact they might have on society as a whole. It is crucially
important for attracting and retaining employees, building and maintaining reputation, and forming
a loyal customer base. In the past, most organizations were designed to work effectively and
efficiently, but this is no longer enough. Businesses are required to work fast, to be adaptable and
agile to be able to compete and succeed. The structure of businesses is changing from hierarchical
with and individualistic to flexible and team-centric. Teams and responsibilities are clearly defined
and transparent, roles and job titles change with need; teams are project-based with a focus on
products, services, and customers (Bersin, McDowell, Rahnema & van Durme, 2017).
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Due to economic, demographic, and social changes, organizations are experiencing radical shifts
in workforce, workplace, and work environment(s). The current workforce is digital, global,
diverse, automation-savvy, and social media proficient (Walsh & Volini, 2017). This rapidly
evolving working environment has changed the rules in most organizations creating huge
opportunity for all types of businesses, governments, and individuals. Leopold, Saadia Zahidi, and
Vesselina Ratcheva (2016), researchers from the World Economic Forum, suggest that by 2020,
data analysts, sales representatives, human resource and development specialists, engineering
specialists, regulatory/ government relations specialists, geospatial information experts, and
commercial/ industrial designers will be critically important jobs in their fields.
Job requirements and skill profiles are changing rapidly as well. To benefit from this changing
working environment, businesses need to focus primarily on talent development and future
workforce strategy. Technological, demographic, and socio-economic changes have had a
significant impact on skill requirements in all industries, creating a wide range of opportunities and
challenges. The half-life of learned functional skills has reduced dramatically from around 30 years
to 5 years which means that half of the skills and abilities employees learned five years ago are
irrelevant or obsolete today (Malley, 2018). Businesses, governments, and individuals are now
required to find and predict skills that meet the business needs, are applicable today, and will be
applicable in the future. One of the most valuable skills in the future will be an ability to work with
data and make a data-based decision. However, social skills like emotional intelligence, persuasion,
training, and teaching others will be even more important for employers than narrow technical
skills. Core skills requirements will contain content skills such as active learning and ICT literacy,
cognitive abilities such as creativity and logical reasoning, and process skills such as critical
thinking and self-monitoring (Leopold, Zahidi & Ratcheva, 2016). For the majority of businesses,
32
agility and collaboration are essential to their success and leaders in such teams require the skills
of negotiation, resilience, and systematic thinking (Bersin, McDowell, Rahnema & van Durme,
2017).
To conclude, several technological developments and socio-economic changes have helped to
develop the current state of the contemporary workplace. As a result, the nature of work (job
requirements, and personal skills) has changed dramatically as well. The following chapter
examines the major challenges facing organizations. It explains contemporary learning needs and
challenges, what advantages knowledge offers, and what might be the most effective learning and
development model for modern organizations.
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3.1 Learning & Development - Learning Organization
Globalization, in conjunction with economic, demographic, and social changes, has resulted in a
demand for new approaches within learning and development. Nowadays, the goal of organizations
is to train and educate employees who can master knowledge, skills, and abilities in line with
development programs and apply them to day-to-day activities. In the 1970s, Leonard Nadler, a
professor at George Washington University, defined human resource development (HRD) as a
model composed of three factors: training, education, and development. Since then many different
definitions of HRD have been used. Nevertheless, the majority of these definitions include
individual development, career development, organizational development, training/ adaptation of
new employees, professional development, and/or re-skilling. The main purpose of development
is to achieve the best possible results for the organization, fulfilling its objectives and goals
(Kumpikaite, 2008).
3.1.1 Knowledge Advantage
Organizational productivity and profitability is driven by knowledge which is increasingly
becoming the most significant differentiator in business. Globally, knowledge is identified as a
crucial factor for success in business, followed by product development and short-term profits.
Nevertheless, according to Jeff Green (2014), EY global knowledge leader, businesses all over the
world view the importance of the knowledge differently. The US, UK, and Germany view
knowledge as the most important factor for a successful business, compared to India and China,
both of which see product development as the most important factor. One of the advantages of
knowledge is that it stimulates product and service innovation, increases customer satisfaction, and
elevates financial performance. Knowledge is viewed as a critical factor across the majority of
34
industries - pharmaceutical and health care, banking and finance, and oil and gas - while industries
focused on consumer products or automotive manufacture prefer product development over
knowledge. However, business leaders all over world, whether product or service-oriented, view
knowledge as a major source of innovation (Green, 2014).
3.1.2 The Learning Organization
Learning is a crucial tool which helps organizations attract and retain high-quality talent, engage
current employees, and develop a long-term partnership between employers and employees. With
technological advancements, increasing competition, and changing mindsets, a new concept of
learning is being adapted by many organizations. This new concept of learning organization
replaces the traditional concept (designed to quickly adapt to new challenges and issues), which
was directed at top management positions rather than smaller departments and individuals. The
concept of learning organization is fairly new, firstly used in the 1990s by Peter Senge, a professor
at the MIT Sloan School of Management (Garvin, Edmondson & Gino, 2008). The current concept
of learning organization focuses on continual creation, acquisition, and the transfer of knowledge.
A learning organization helps employees build skills, improve abilities, and grow on their own, an
approach which frequently results in business advantages. According to David A. Garvin, Amy C.
Edmondson, and Francesca Gino (2008), professors at Harvard Business School, a learning
organization should not be mainly focused on training, but self-development of individuals, groups
as well as of the organization
David A. Garvin, Amy C. Edmondson, and Francesca Gino (2008), professors at Harvard Business
School, suggest that three major factors are necessary for building a learning organization: a
supportive working environment, specific learning processes, and management that supports
change. To facilitate these criteria a working environment must, firstly, provide psychological
35
safety, appreciate employee diversity, maintain an open idea, and provide adequate time to review
organizational processes. Secondly, knowledge must be shared in a systematic way in order to
create concrete functional learning practices. Organizations must focus on developing specific
employee skills; keep track of competitors, customers, and technological trends; and experiment
with new approaches. Organizational knowledge can be shared either internally via management
actions or externally via forums and lectures with experts. Lastly, organizational learning will not
function without supportive management and leaders who actively listen and are willing to
approach employees when needed. A two-way dialogue encourages employees to learn,
demonstrate personal knowledge, support colleagues, and share new ideas and opinions.
According to Vilmante Kumpikaite (2008), a professor at Kaunas University of Technology, a
learning organization should promote the following ideas: Employees should coach each other and
apply their knowledge on daily basis. Training and development programs are designed to support
creative ideas and approaches and employees are encouraged to try and innovate them. Employees
should be encouraged to think differently and be flattered for their creativity. Self-development
should be awarded and supported by managers. The learning and development of each employee
needs to be a priority.
During this digital age, when learning technologies are rapidly changing, companies are forced to
manage careers and offer updated learning and development opportunities. The average career can
now span up to 60 years which means that employees no longer obtain skills for a career but need
perceive careers as a continuous process of learning and development. Organizations are expected
to revive employee careers and offer several upwardly mobile positions and roles over time. To be
attractive, many organizations are shifting to flexible career models rather than static career
improvements as nowadays employees tend to stay within one job position for only 4 years.
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Millennials, a new generation of employees, require advanced learning and development programs,
however only 30% believe that organizations are using their skills and abilities well, and over 40%
would leave because they are not learning fast enough and are losing the potential for improvement
(Pelster, Johnson, Stempel & van der Vyver, 2017).
Nevertheless, organizations can offer a high-quality, free, or low-cost access to online sources and
thereby achieve continuous learning. The biggest investments in HR technology currently go to the
creation of internal learning systems because learning is taken as a highly strategic business
approach. HR and learning experts need to think of future career possibilities as well as support
overall business growth. The importance of career mobility is rapidly increasing, and learning
programs should encourage employees to move across positions and roles (Pelster, Johnson,
Stempel & van der Vyver, 2017).
3.1.3 Attractive Learning Environment
Successful employee development programs cannot exist without learning. Organizations now feel
an urgent need to constantly upgrade skills and groom well-informed leaders to secure a
competitive advantage. A new part of learning organization methodology is an innovative approach
in which employees are given access to content from several internal and external sources to
achieve individual needs and learning outcomes. Mobile devices enable access to learning
anywhere and everywhere. So, organizations are now creating knowledge-sharing programs, easy-
to-use portals, and video-sharing systems for the benefit of their employees. The system of learning
and development has changed significantly. Organizations now try to deliver modern, attractive,
and interactive learning experiences; however, many organizations find it difficult to adapt to such
a system and integrate external platforms and sources as a part of their own learning and
development programs. Organizations are mainly focused on mobile learning applications which
37
enable individual access to lectures, courses, or workshops to satisfy the specific educational needs
of all their employees (Pelster, Haims, Stempel & van der Vyver, 2016).
Corporate learning specialists, usually HR specialists, are responsible for creating attractive and
dynamic learning experiences and are responsible for showing employees how to learn and what
they can learn. HR specialists are expected to develop programs which will be part of an employee's
daily life and working experience rather than randomly selected, impersonal lectures and courses
that all employees are required to complete. A functional learning organization created by HR
leaders may recommend ways for employees to acquire knowledge and skills on their own, with
the help of internal and external sources (Pelster, Haims, Stempel & van der Vyver, 2016).
3.1.4 Learning Trends
Designing specific learning methods brings many challenges, especially within employee
segmentation. It is difficult more than ever to successfully approach all age generations with one
learning method. Organizations should focus on personal solutions and provide access to articles,
videos, open on-line courses, podcasts, or webinars which will help to achieve individually desired
career goals. This is a major shift from a content-centric push approach with traditional courses
and programs pushed to employees by management vs. a learner-centric approach which requires
employee-driven activities leading to personal solutions. According to Pelster, Haims, Stempel &
van der Vyver (2016), HR specialists should align learning outcomes with desired business goals,
nevertheless employees should be encouraged to add and suggest content. Learning should no
longer be the same for all employees but should shift towards individualized programs and
approaches based on career plans and performance goals.
38
Despite the rapid growth of online learning, only about 10% of organizations believe that they are
efficiently managing learning and development operations. Although companies understand the
need to transition from traditional training to individual learning, they may not be ready to act and
keep pace with current technological advancements (e.g. gaming, photo-sharing, blogs, wikis,
virtual world, simulations, and video trainings). Some companies still practice a push model in
which content is pushed to employees during classroom training sessions rather than a pull model
in which learning and personal development is considered a continuous process. Corporations are
spending millions of dollars on training and development programs, but often do not see where the
money goes and what results they deliver. There is a lack of structure in training programs and a
lack of discipline in leaders and managers who very often do not even prepare written learning and
development business plans for their employees (Bersin, Haims, Pelster & van der Vyver, 2014).
According to Josh Bersin, Josh Haims, Bill Pelster, and Bernard van der Vyver (2014), researchers
from the Deloitte University Press, employees tend to become more capable and loyal to
organizations which offer assignments and responsibilities which improve employees´ skills and
provide new sets of experiences. Such employees are not only more efficient, but also more
engaged and motivated. However, the readiness to current learning and development trends and
issues is diverse throughout the world. Countries such as China, Brazil, Canada, the UK, and
Australia can be characterized by a fundamental lack of readiness in addressing these current
issues, but they do them as an important factor for improvement. By contrast, countries such as
Ireland, Spain, and Luxembourg are much more prepared to address these issues and see them as
an important factor for business success as well. The awareness of the importance of advanced
learning programs is crucial to employees satisfaction. This means that it may be important to
redesign training roles and create content facilitators, standardize, simplify, and integrate available
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learning technology to empower employees and drive their performance, engagement, and career
development.
3.1.5 Return on Investment
To justify investing in learning and development programs, Keri Bennington and Tony Laffoley
(2012), researchers from UNC Executive Development, suggest that HR specialists demonstrate
the value of them based on metrics like customer satisfaction, employee engagement survey scores,
turnover rate, percentage of promotions, productivity rate, and retention rate. Nevertheless,
calculating the return on investment (ROI) of learning and development programs is only common
for 8% of organizations. Learning and development programs provide long-term value to
organizations rather than immediately visible short-term results. Therefore, a proper evaluation is
necessary to defend the attendant costs. Although learning opportunities and development
possibilities increase organizational performance, demonstrable financial evidence still remains a
challenge.
Furthermore, Bennington and Laffoley (2012) recommend that HR specialists closely cooperate
with senior managers to identify and create ROI measures connected to organizational objectives
and goals; the current participant feedback forms and smiley sheets are inadequate for a proper
evaluation. Donald Kirkpatrick, a professor at the University of Wisconsin and former president of
the American Society for Training and Development, created a four-level model of evaluation
consisting of the following stages: reaction, learning, behavior, and results. Firstly, he suggests that
it is crucial for HR specialists to monitor employee satisfaction regarding programs and
development actions. Secondly, HR specialists must track improvement within specific skillsets
and capabilities. Thirdly, it is necessary to observe changes in employee behavior and working
attitude. Lastly, HR specialists must evaluate all three previous stages and conclude how the entire
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organization benefits from them. Kirkpatrick believes that the conclusion should not necessarily
be tied to ROI in dollars, rather than to return on expectations (ROE) in which HR professionals
would analyze desired learning outcomes (Bennington & Laffoley, 2012).
Learning outcomes usually include soft skills such as improved collaboration, decision-making,
communication, strategic thinking, adaptability, or innovation. These are intangible benefits and
thus difficult to measure. According to Scott Saslow, a researcher from the Institute of Executive
Development, a successful evaluation should start before the learning program begins, while the
organization is searching for needed skills and abilities, before implanting the acquisition of said
skills. It is also beneficial to reassess employees three and six months after the learning and
development program has implemented to see how well employees have utilized the newly learned
information. If possible, HR specialists should request the same feedback from colleagues, middle
managers, and supervisors. It might be effective to include business challenges in projects to see
how effectively employees use new skillsets and knowledge in real-life situations as well
(Bennington & Laffoley, 2012).
In conclusion, to win a competitive advantage in the future, organizations need to learn how to
adapt to learning needs and challenges now. Such an adaptation might not possible without
education, knowledge, training, and employee satisfaction. Individual development, innovation,
initiative, flexibility, and continuous education is a must in the 21st century for organizational
success. A learning organization should be the main objective of successful organizational culture
for the creation of a working environment suitable for all employees, a working environment that
empowers learning processes.
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3.2 Recruitment & Selection - Diversity and Inclusion
Recruitment is a process of “attracting individuals on a timely basis, in sufficient numbers, and
with appropriate qualifications, to apply for jobs with an organization” (p.3), according to Myrna
Gusdorf (2008), a business professor at Linn-Benton Community College. It is important to
understand that sometimes the best method for obtaining additional labor is not recruitment. In
many cases, it might be more beneficial to consider outsourcing, contingent workforces, part-time
employees, or overtime of existing employees if the issue is temporary fluctuation in work volume.
If the organization expects and predicts a long-term need for an additional workforce, then hiring
new employees is likely the right choice.
3.2.1 Recruitment and Selection Methods
The nature of work in the 21st century presents many challenges for recruitment and selection,
creating several possibilities for both how to recruit and who to recruit. There are two primary ways
how to fulfill new or newly available positions. Firstly, as a motivation tool and reward many
organizations use promotion within the company. The advantage of promotion from within is that
the promoted employee is already familiar with company policies and procedures and therefore
requires less training. On the other hand, the newly promoted employee leaves a staffing void in
their former position. Nevertheless, it is generally easier to fill lower-end positions as these
generally require less skill and experience. Secondly, companies might choose to hire externally.
Depending on the economy and the labor market, organizations usually face two alternatives: if
there is a low unemployment due to a strong economy, organizations need to compete: if there is a
high unemployment due to a soft economy, organizations must manage a huge number of
applications to judiciously find and recruit the best talents (Gusdorf, 2008).
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In the digital world, internal recruitment usually consists of electronic job posts through
organizational intranets or e-mails about the job vacancy. To ensure that all minority workers and
disadvantaged groups are aware of new opportunities, the job offers must be available and be
visible to all employees. Some companies believe that the most effective method to find the best
talent is through employee referrals. It seems like a win-win situation for all: the organization, a
current employee awarded a bonus, and a job for the newly hired employee. However, such
recruitment may create homogenous applicant pools, and these practices might be perceived as
discriminatory in organizations that do not manage a diverse workforce. If organizations choose to
recruit externally, applicant pools can be generated by either private agencies, which can save time
for organizations but are costly, or by in-house recruiters (Gusdorf, 2008).
The most significant change within the recruitment process is the rise of online recruiting. In the
past, organizations advertised open position in newspapers, trade journals, radio, or television. Now
however, organizations prefer to post job opportunities on their websites or on other specialized
online sites. Organizations started to use the Internet as a recruiting method as soon as it became
popular. To achieve successful online recruiting, organizational websites need to include following
features: an attractive form including diverse and vivid pictures, appealing content consisting of
organizational culture information, compensation information, or organizational objectives and
goals, and an engaging function containing interactive features or the possibility of online
application (Ployhart, 2006). Online recruiting compared to traditional methods is cost-effective,
easy, and fast, generating greater quantities of diverse applicants. That said, HR specialists must
still spend a lot of time filtering and sorting appropriate applications. However, organizations that
recognize the benefits of a diverse workforce must ensure that recruiting methods and processes
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generate a wide scope of applications, so for such organizations, online recruiting might be the
most ideal method (Gusdorf, 2008).
3.2.2 Diversity in Recruitment
Several shifts in culture and business (diminishing racism, increasing workplace equality, and the
growing empowerment of women) have increased the importance of diversity in the modern
workplace. Although the current political environment—to include changes in immigration
policies, rising nationalism, and the growing fear of terrorism—suppresses diversity, this concept
translates to fairness, human rights, and social justice. It is therefore a must for leading
organizations.
Organizations which define themselves as global corporations often make ethnic, gender, age, or
other types of diversity a priority. Nevertheless, it is crucial for organizations to go beyond
traditional geographic and social definitions of diversity by including employees with different
thoughts and ideas as well. Statistically, diverse teams generate up to 30 percent higher revenues
per employee, a benefit most organizations would like to maximize (Bourke, Sherman Garr, van
Berkel & Wong, 2017). Furthermore, several organizations have received negative attention
regarding gender and pay inequity; this attention resulted in the destruction of their reputations.
Therefore, proactively diverse organizations gain a competitive advantage over companies which
do not emphasize diversity. Moreover, the nature of careers are changing due to increasingly later
retirement ages which create a wider generational range in the workforce - a natural phenomenon
difficult to overcome.
As the working population ages, challenges related to the management of older workforces have
emerged. In 2015, average life expectancy rose to 72 years, and it is expected to grow by 1.5 years
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per decade. By 2020, one-fifth of the population in the US, the UK, Japan, Germany, and France
are expected to be older than 65 (Abbatiello, Agarwal, Bersin, Lahiri, Schwartz & Volini, 2018).
Age bias has become a major issue in the last decade. This has resulted in age discrimination among
many worldwide leaders and managers; for more than 80 percent of organizations, age is not
viewed as a business advantage. Furthermore, almost half of the organizations are not ready to deal
with an ageing workforce and, consequently, have not developed any new careers models, nor do
they offer other benefits like flexible schedules or part-time positions for older employees. To avoid
falling behind, leading organizations now try to focus on age diverse talent pools which can bring
valuable training and mentoring skills. Proactive organizations try to extend their career models,
create innovative development paths, and invent suitable job positions for workers in their 60s and
70s. To stay competitive, organizations should adopt new strategies to attract and retain older
talents (Abbatiello, Agarwal, Bersin, Lahiri, Schwartz & Volini, 2018).
There is a general misunderstanding about precisely whose responsibility it is to implement
diversity as a business strategy, some organizations believe that senior management is responsible,
others believe it is the responsibility of the human resource department. It is true that one of the
main HR duties is to develop diverse recruitment activities which attract and connect candidates
from different backgrounds. Research done by Robert Walters (2017), a worldwide recruitment
agency offering recruitment consultancy, suggests that about a third of all organizations promote
themselves at university job fairs, but only a fifth actively promote themselves at non-university
job fairs. Additionally, more than 75% of businesses recruit via the online platform, LinkedIn, and
about one-fifth advertise available roles on Twitter. Nevertheless, other social media platforms
(e.g. Instagram and Facebook) are less widely used. This might prevent organizations from
reaching the most diverse range of candidates. To help organizations reach a wide range of potential
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employees, recruiters may need to start using new recruitment tools, like proofing tools to identify
biased language, web crawler software to gather data on jobseekers and find a perfect match for
employers, gamification techniques to encourage non-traditional candidates, and websites
accessible to candidates with disabilities (Robert Walters, 2017).
Businesses can access a wide variety of viewpoints and perspectives by recruiting professionals
from diverse backgrounds and varying levels of seniority. Unique staff acquisitions result in diverse
workplaces which naturally encourage creativity and innovative thinking and resulting in
competitive business advantages. Yet more than 50 percent of managers are not interested in
listening to or considering ideas from minorities. Some organizations believe that an ethical
business must include a diverse workforce, indeed that such diversity if critical to their continued
success. An inclusive recruitment approach includes an appeal to a broad range of candidates.
However, less than half of organizations have any strategy for attracting a wide range of candidates.
To reach a broader talent pools, employers may need to partner up with non-profit organizations
focused on the improvement of diversity in the workplace and therefore qualified to advise the best
workforce diversity strategies. It is crucial to include all candidates across the business to
successfully implement diversity as a business strategy (Robert Walters, 2017).
3.2.3 Talent Shortages
Due to globalization and the creation of multinational organizations, the workforce is becoming
increasingly diverse, yet more than forty percent of organizations still have difficulties finding and
recruiting the right talent - the best or prospective best employees (Ployhart, 2006). Although
recruitment should be one of the most important strategic approaches to achieve a competitive
advantage, most organizations do not recognize its value and do not use recruitment efficiently.
Now, organizations have greater issues with recruitment than with selection as they struggle to
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attract a diverse workforce. An organization's image and reputation are both factors that most
influence recruitment outcomes. The number of applicants and applicant behavior heavily depends
on organizational reputation. According to Robert E. Ployhart (2006), a professor at the Moore
School of Business, University of South Carolina, the majority of applicants would accept a seven
percent lower salary if working for a highly reputable organization. A reputation can be improved
by well-managed publicity (e.g. word-of-mouth and advertising) as well as the sponsorship of non-
profits, schools, charities, and local communities. Organizational brand image is a way for
companies to differentiate themselves to applicants if they cannot offer applicants superior salaries
or locations.
Talent is the most valuable commodity in emerging as well as developed markets, but the current
employment market is not meeting the demand for this talent. As competition for talent intensifies,
diversity management is quickly becoming of the best ways to prevent talent shortages.
Organizational diversity can open doors for a wide range of talent, gain a competitive workforce
advantage, and improve reputation. Given that minority groups are underrepresented, diversity
policies can greatly improve the chances of finding desirable talent. Furthermore, the general
population is composed of diversity groups, groups which usually make final purchasing decisions.
Therefore, organizational diversity improves the understanding of customer needs and satisfaction.
Organizations' employees should reflect the people they assist, work for, and serve. Moreover,
minority workers are more satisfied in a working environment which contains at least a 15 percent
diversity of workforce. This diversity improves minority employee confidence and morale. Non-
discriminatory policies are useless until all employees create a supportive working culture which
challenges employees, improves the quality and quantity of innovative ideas, and enhances
problem solving (Hunt, Layton, & Prince).
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3.2.4 Recruitment Errors
There are different opinions about what makes a good recruiter, however, there is a general
consensus as to what makes a bad recruiter. For recruiters, it is important to keep the available job
position in mind to prevent hiring errors. The most common hiring errors include personal biases,
surface impressions, and a failure to note potential discrimination, or favoritism.
Depending on the country´s laws and legislation, some information on gender, race, origin,
education, and disabilities may be considered inappropriate to ask for. During a personal interview
it is also important for an interviewer to prevent personal bias, for that reason a current recruitment
trend is to have a team of interviewers from various positions or departments within the
organization make a collective final decision (Gusdorf, 2008). For recruitment to be effective, it is
crucial for organizations to provide truthful information about the available position and about the
organization itself, select and train recruiters accurately, treat applicants with respect, and openly
explain the selection process (Ployhart, 2006).
Unconscious bias can greatly impact recruitment decisions and might result in overlooking top
talents. Organizations must implement techniques which overcome and reduce personal bias (e.g.
anti-bias trainings for managers, a range of stakeholders assessing CVs, and the removal of
personal information from CVs). Anti-bias trainings might show managers what their personal
biases are and how to overcome them. Having CVs evaluated by a wide range of employees coming
from the same positions as the applicant all the way up to top managerial positions might provide
different perspectives and prevent personal biases. If employers do not want to focus solely on the
applicant´s qualification or experience, it might be useful to remove certain information - name,
gender, or schools and universities - from CVs. Organizations believe that overcoming bias and
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finding the right candidates for junior positions is easier than finding diverse candidates for senior
positions. This may result in the general belief held by more than 60% of employers that there is a
lack of diversity in leadership positions (Robert Walters, 2017).
Only one-fifth of organizations believe they provide excellent training against unconscious bias,
however more than 60 percent monitor and measure diversity and inclusion recruitment practices.
It is necessary for organizations to fully eliminate bias from talent processes such as recruitment,
promotion, performance management, leadership development, and compensation (Bourke,
Sherman Garr, van Berkel & Wong, 2017). Vivian Hunt, Dennis Layton, and Sara Prince (2015),
researchers from the McKinsey&Company, suggest that there are three primary ways to overcome
bias: training and education, changing organizational processes, and incorporating behavioral
principles. They believe that it is crucial for employees to experience bias personally, to remind
them of their own bias(es), and to organize sessions where employees try to advocate for minority
groups. There are two ways to minimize personal bias during the recruitment process: defining
scoring criteria for each candidate processed via an algorithm or by challenging particular
assumptions and decisions. Furthermore, training materials available on e-learning modules have
also been shown to have a positive impact on the acceptance of a diverse working environment
(Bourke, Sherman Garr, van Berkel & Wong, 2017).
3.2.5 Diversity Programs
Corporate diversity programs are becoming more important than ever before. Companies are
implementing diverse hiring practices concurrent with trainings and programs for current
employees. The main aim of diversity programs is to increase diversity in the workplace; however,
the adaptation of diversity programs is not always successful.
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Vivian Hunt, Dennis Layton, and Sara Prince (2015), researchers from McKinsey&Company,
suggest that although 85% of employees view diversity as a priority and perceive it as an important
business strategy, less than a half of them have programs for developing, implementing, and
promoting diversity in the workplace. Diversity adaption is a slow process which requires specific
steps to achieve a diverse organization. Yet, it is important for organizations to realize that more
than 70 percent of diversity programs fail due to it improper adaptation - when employees and
management do not accept diversity a priority or believe in its beneficial effects. An innovative,
creative approach to diversity and inclusion was taken by Lloyd´s Banking Group in the UK.
Lloyd´s Banking Group set a clear goal stating that, by 2020, 40 percent of senior roles must be
occupied by women, and if not, a convincing explanation for their absence must be provided.
Similarly, a new compensation system linked to diversity and inclusion was introduced by Procter
& Gamble in which an executive team was evaluated based on achievements in diversity goals to
which was given a weight of 10 percent for final financial compensation (Bourke, Sherman Garr,
van Berkel & Wong, 2017).
Hunt, Layton, and Prince (2015) believe that successful diversity programs should include the
following steps: creating a clear value proposition, setting an understandable target, knowing the
situations and mindsets of employees, creating targeted initiatives, defining strategies for each
initiative, launching visible diversity-oriented projects, addressing attitudinal barriers, and
monitoring changes within the organization. Such diversity adaptation can create resistance and
tension between employees when it is not properly communicated and explained. To overcome
such barriers, they must firstly be identified and secondly understood. Moreover, when diversity
messages come from trusted leaders and peers, they are more likely to be accepted. The reward of
well-adapted diversity programs is a creative, innovative, and engaged team. According to Bourke,
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Sherman Garr, van Berkel & Wong (2017), researchers from Deloitte University Press, millennials
believe that inclusion is a requisite part of corporate culture and successful inclusion results in
positively connected team members who feel heard and respected. Employees who feel included
will proactively engage and fully contribute.
Mauricio Velásquez (2006), a CEO of The Diversity Training Group, believes that diversity
programs should promote the following ideas: Diversity should not be treated as a problem but
rather as an opportunity to stand out amongst the competition. Diversity issues should not be
handled by only HR department or senior management; diversity is the responsibility of all
employees. Diversity goes beyond race and gender and should include individuals of different
cultural backgrounds, religions, personalities, social statuses, ages, educations, ethnicities,
mindsets, and sexual orientations. Diversity approaches should be proactive, focusing on external
and internal issues, but mainly these programs should be company driven and voluntary.
3.2.6 Financial Costs and Benefits of Diversity
There is a statistically strong relationship between diverse team leaders and greater financial
performance. Gender diverse companies are likely to have 15% higher financial returns.
Furthermore racially/ethnically diverse companies are likely to have 35% higher financial returns
than their non-diverse competitors (Hunt, Layton, & Prince, 2015). Nevertheless, the perception of
diversity may vary in different countries. In the US, there is a strong relationship between
ethnic/racial diversity and better financial performance, compared to the UK, where there is a
strong relationship between gender diverse management and higher performance. It is crucial for
organizations to determine what type of diversity fits them the most to achieve a better
performance. Diversity is a competitive differentiator when used well. The Herfindahl-Hirschman
index can be used to measure the relationship between leadership diversity and financial
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performance, but gender and ethnic diversity does not automatically equate to profit. Rather it
indicates that diverse companies are more successful. Overall, there is a significantly strong
relationship between financial performance and gender diversity when women constitute at least
22 percent among executive teams and boards of directors. Nevertheless, the relationship between
gender diversity or racial diversity and performance is much more powerful and apparent in the
UK than in the US (Hunt, Layton, & Prince, 2015).
According to the European Commission (2003), there are four main types of additional costs
associated with the implementation of diversity programs; these costs are legal compliance, the
cash costs of diversity, the opportunity costs of diversity, and the business risks of diversity. Firstly,
potential costs include record-keeping systems, communication/acceptance of new policies, and
training staff (HR specialists, managers, and every-day workers). Secondly, the principal cash costs
of diversity consist of providing facilities and support, offering special working conditions and
benefits, and monitoring and reporting changes. Thirdly, diversion of management's time and
diversion of functional management's time falls under opportunity costs of diversity. Lastly,
unsuccessful diversity programs which fail completely may generate significant financial losses,
so this is also a factor to be considered before implementation.
To conclude, to balance all elements of a diverse organization, it is crucial not only to hire people
of a different race, religion, gender, or ethnicity, but also to employ people of a wide age range.
Diversity puts together people with different levels of experience and education who can bring
innovative ideas, creativity, and original approaches to the organization. In the past, there was a
minimal focus on workplace diversity; the majority of decisions were made by white males.
Nonetheless, cultural and business changes such as diminishing racism, the empowerment of
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women, and increasing workplace equality have helped to achieve the current average level of
workplace diversity.
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3.3 Talent Management - Employee Engagement
Finding and recruiting the right people has become important more than ever. Organizations no
longer use traditional recruiting tools but are moving towards digital technologies which help them
to find people in non-traditional ways and attract them through intangible benefits, respectful and
safe workplaces, or above-average financial rewards. Those tools help organizations to conclude
who will fit the best within the job, team, and company. Once successful recruitment processes are
finished, organizations are then faced with talent management challenges. This chapter seeks to
examine current talent management trends and employee engagement processes.
Talent management is an important business strategy which focuses on recruitment, selection,
training, retention, management, and development of the best quality employees. Talent
management processes differ from recruitment and selection methods, training, and coaching to
ongoing employee development, career planning and pathing, promotions, and transfers. The
majority of those processes are in hands of HR managers and specialists, but not all of them. Middle
managers, who supervise the majority of employees, have the chief responsibility for overall
employee engagement, employee satisfaction, and organizational performance. Middle managers
function as a bridge between the top management and team members, translate business strategies
into action, and are required to be trusted and effective communicators. For this reason, middle
management is more important for employee engagement and satisfaction than top management
(Caye, Rainer, Orlander, Kilmann, Espinosa, Francoeur & Haen, 2010).
3.3.1 The Importance of Talent Management Practices
According to researchers from Deloitte Development, Jason Flynn, Yon-Loon Chen, Jorge Ponga,
and Jaime Valenzuela (2014), talent is a top global challenge. Organizations are facing significant
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challenges connected to the shortage of talent and the retention of qualified talent. Currently,
employers have real challenges filling technical positions with skilled workers. Furthermore, the
second biggest challenge connected to talent management is the rising cost and value of total
rewards. Total rewards packages might be the biggest differentiator between competitors when a
pay raise is not possible. Currently, the focus of such programs goes to health and well-being
initiatives which go hand-in-hand with a business´s strategy. Some organizations are re-defining
their total rewards packages to focus purely on wellness and disease management as they believe
that a relaxed and healthy working environment greatly increases productivity and job satisfaction.
Some employers believe that changes within total rewards packages must be designed exclusively
according to the interests of their employees, while others believe that the packages should be
designed to improve employee communication skills and enhance education. The total rewards
packages might include diverse pay structures as well, some employers think that performance-
based pay increases competition and motivation. When designing total rewards packages, it is
extremely important to consider how the programs will be delivered and presented to employees,
so they can understand their actual value.
Jean-Michel Caye, Rainer Strack, Paul Orlander, Julie Kilmann, Ernesto G. Espinosa, Florent
Francoeur, and Pieter Haen (2010), managing directors at The Boston Consulting Group and
presidents of the World Federation of People Management Associations, suggest that the categories
that influence talent management the most and call for action are performance management,
recognition, and management capabilities/interactions. Worldwide, employees are most
dissatisfied with structured career management and compensation systems; they prefer personal
recognition and recognition programs beyond financial compensation (e.g. having managers acting
as coaches and mentors as well educational trainings for management and other team members.
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Talent management practices may include the creation of untraditional roles, the empowerment of
all workers, the potential of upward mobility for employees, and the offer of leadership skills
training and tools for middle managers to work more effectively and help realize the business´
vision and mission. The main talent management´s aim is to help employees become the
organization´s ambassadors and increase their personal engagement.
3.3.2 Employee Engagement
Employee engagement continues to be a challenge for businesses due to a highly diverse population
and workforce. Some businesses must manage up to five generations of a workforce as well as a
mix of genders, races, cultures, religions, and sexual orientations, part-time workers, or external
consultants (each of these having different demands and attitudes, requiring flexibility, creativity,
and purpose). Businesses are forced to engage in an arms race of greater benefits and inspiring
corporate cultures to produce higher levels of engagement. Employees are no longer dependent on
organizations. On the contrary, organizations need to perceive employees as volunteers who must
receive the best care to stay. Engagement and corporate culture practices are highly dependent on
each other. Potential candidates care both about how things are done and how happy and satisfied
employees are with the way things are done. Organizations try to be as open and transparent as
possible, which helps candidates to consider all the pluses and minuses even before the recruiting
process begins. According to David Brown, Josh Bersin, Will Gosling, and Nathan Sloan (2016),
researchers from the Deloitte University Press, “Engagement, in many ways, is the temperature
gauge of a company´s ability to proactively address all these issues on behalf of the workforce”
(p.49). Undoubtedly, employee engagement is higher when workers feel empowered and
supported.
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It is believed by many business professionals and HR managers that employee engagement equals
employee satisfaction and happiness. However, employee engagement means more than that; it is
a physical and mental investment in each individual employee. The Hewitt Engagement Model
defines employees engagement with three categories: engagement drivers, engagement outcomes,
and business outcomes. Engagement drivers include factors like brand reputation, corporate social
responsibility, senior leadership attitudes/ behaviors, career opportunities, learning/development
choices, rewards and recognition programs, work collaboration, employee
empowerment/autonomy, safety, job security, and work-life balance as well as company practices
such as communication, diversity/inclusion, and a customer-focused approach. Engagement
outcomes are split into three categories: say, stay, strive. Engaged employees usually speak
positively about their job and company around their coworkers, family, or friends. This also means
that they associate their future with the company's and plan to stay, develop, and go the extra mile.
Engagement outcomes result in business outcomes like the high retention of top talent, low
absenteeism, high employee satisfaction and wellbeing, increased employee productivity and
safety, enhanced customer satisfaction and retention, which all result in sales growth and total
shareholder return (MacPherson & Oehler, 2017).
Due to the competition for talent, organizations are facing significant changes within their
businesses. Expectations of employees and employers diverge from the past more than ever and
employee engagement might be the most important factor influencing business success,
sustainability, and drive. Employers require innovative ideas, extra effort, and trade for an above-
standard working environment and business culture. Highly engaging businesses attract and retain
the best available talents and financially benefit from highly active and effective employees. This
engagement not only affects business performance, turnover rates, employees’ attitudes, but also
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affects individual and group performance and productivity. Organizations having the largest
amount of highly engaged employees benefit from a 20 percent higher operating income and 30
percent higher earnings compared to those organizations having the large percentages of highly
dis-engaged employees (Robertson-Smith & Markwick, 2009).
3.3.3 The Level of Engagement
Gemma Robertson-Smith and Carl Markwick (2009), researchers from the Institute for
Employment Studies, claim that a typical organization contains three types of employees: engaged,
not engaged, and actively disengaged. Engaged employees, about 20 percent, work with passion
and feel personally connected to the organization. They are innovators, gamechangers, and
groundbreakers. Not engaged employees, about 60 percent, put in their time at work but no energy
or extra activity. They are easily influenced by either engaged or actively disengaged groups,
therefore they frequently change their attitudes to work. Actively disengaged employees, about 20
percent, are extremely unhappy at work and are not afraid to show it. They act out their
dissatisfaction and anxiety and spread misery on a daily basis.
Naturally, some people are more likely to be engaged than others. It is observed by Robertson-
Smith & Markwick (2009) that the level of engagement might vary upon seniority, the nature of
work, or by the length of the employment. They believe that managers and employees in senior
positions are usually the most engaged compared to supporting positions. However, they assume
that younger employees in senior positions are less engaged than older colleagues. They have also
discovered that the level of engagement decreases with the length of the employment. Statistically,
women seem to be more engaged than men; the engagement level is the highest among those under
20 and above 60. Ethnic minorities report higher engagement scores as do disabled employees.
Interestingly, at least 25 percent of employees coming from Generation Y are disengaged; they
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look for an exciting job they love and seek work-life balance, but are not willing to live for the
work. Engagement level also depends on personality; neurotic employees are more likely to burn
out compared to adaptable and flexible employees who are more likely to be engaged and satisfied.
It is important to note that the level of engagement also depends on the working hours, wage, and
position within the organization. Still, the engagement level does not greatly vary between public
and private organizations (Robertson-Smith & Markwick, 2009).
3.3.4 Defining Engagement
Interestingly, there is no agreed upon definition of engagement. However, Flynn, Chen, Ponga, and
Valenzuela (2014) suggest that the definition of engagement “needs to be expanded to include five
key elements that drive engagement: meaningful work, hands-on management, a positive work
environment, opportunities for growth, and trust in organizational leadership” (p.10). A definition
of engagement might include psychological factors like commitment and involvement as well as
performance factors like effort and attitude. Without any doubt, engaged employees feel attached
to the organization and invest lot of time and energy not only in their job, but also in the
organization. The definition of engagement might be different upon what is being measured in the
company.
Robertson-Smith and Markwick offer two definitions of engagement approaches: a company
approach and an academic approach (2009). They suggest that the majority of companies view
engagement as an outcome of employees: how connected they are, how much time and effort they
are willing to offer, and how committed they are to the organization. Employers view engaged
employees as an organization´s advocates and ambassadors. However, some might see employees’
engagement as something what should come purely from their side without offering anything
return. In contrast to this, an academic definition of engagement focuses more on the psychological
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state of employees´ minds, vis-à-vis how focused employees are, how they absorb given
information, or how do they affect a company's energy. Academics view engagement as an
employee outcome as well, nevertheless, they believe that the outcome is a final product of a two-
way relationship between employers and employees.
Furthermore, according Haid and Sims (2009), employee engagement is a business success
differentiator of the 21st century. They believe that engaged employees should be committed to the
organization, that they should be proud of having a specific position and working for the
organization, that they should be willing to defend and promote rewards and benefits, and that they
should be satisfied with their job and with the organization. Organizations, such as Dell, see
employee engagement as a commitment to stay within an organization even when a comparable
position is offered elsewhere. Towers Perrin believe that engaged employees should go above and
beyond the job description and minimal expectations (Vance, 2006).
3.3.5 Outcomes of Engagement
According to Gemma Robertson-Smith and Carl Markwick (2009), researchers from the Institute
for Employment Studies, engagement outcomes might be divided into two categories:
organizational outcomes and employee outcomes. Organizational outcomes include the
subcategories of customer loyalty, employee retention, employee productivity, advocacy for the
organization, managerial self-efficacy, organizational performance, profit, and successful
organizational change. Employee outcomes include the subcategories of clear expectations and
health and well-being. Michael Haid, a global leader for Right Management´s Talent Management
practice and Jamie Sims (2009), a psychologist and assessment specialist, suggest that employee
engagement is closely linked to business success factors like employee performance, productivity,
60
safety, attendance and retention, customer service and satisfaction, and profitability. They believe
that when businesses must work with less and do more, engaged employees are the only option.
Engaged employees naturally understand the company´s customers better, their needs and wants,
and therefore are more likely to create a stable customer base. Customers served and assisted by
engaged employees are two times more likely to repeat purchases and recommend the company to
friends and family. Research done by the Institute for Employment Studies shows that more than
80 percent of satisfied and happy employees feel connected and plan to stay within the company
and even more than 40 percent of engaged employees would stay within the company which
experiencing business troubles and struggling to survive. Obviously, employee engagement highly
affects employee performance and drive. The most engaged employees do at least 20 percent better
than their colleagues and are twice as likely to be top performers. Engaged employees pass along
their positive attitudes to friends, colleagues, and families when compared to actively disengaged
employees who discourage others (potential employees as well as customers) from interacting with
the company. Those highly engaged employees bring more profit to the organization with increased
sales, higher retention rates, and increased productivity compared to organizations or teams
consisting of not engaged or actively disengaged employees where profit is lower by more than 30
percent (Robertson-Smith & Markwick, 2009).
Naturally, engaged employees and managers have a positive relationship. They bidirectionally
support each other and trust each other which leads to more effective business processes and a
pleasant organizational culture. Furthermore, engaged employees are more likely to understand
their rewards and benefits which increases their loyalty and commitment. Engagement also has a
positive effect on the health and wellbeing of employees. They feel less tense and pressured. Talent
management processes help employees to relax, switch off when needed, take some time apart,
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manage their working hours and days, or allow employees to organize their work as they wish.
Nevertheless, there are significant differences in engagement levels in various countries. Many
Asian countries like South Korea, Japan, and China experience the lowest levels of engagement,
levels lower than 30 percent compared to countries like India, New Zealand, or the US which
experience the highest number of engaged employees, close to 50 percent (Haid & Sims, 2009).
3.3.6 Enabling Engagement in a Workplace
Employees´ engagement might be influenced by several factors. Gemma Robertson-Smith and Carl
Markwick (2009) offer the main engagement drivers such as job satisfaction, feeling valued and
involved, equality of opportunity, health and safety, length of service, ethnicity, communication,
and cooperation. The management style, leadership, quality of communication, level of trust, and
relationships among employees in a workplace may affect the organizational culture the most. A
positive culture keeps employees motivated. Furthermore, the majority of engagement drivers are
related to management approaches and processes. Engagement comes from having the autonomy
to make decisions, from appreciation and pride, and from a positive relationship with management.
Employees need to know the purpose of work, need to feel valuable and important, need to have
the freedom to act and decide, and require managers who listen, are open to ideas, respect others,
and treat employees fairly in order to be engaged and satisfied. Additionally, more than 85 percent
of employees satisfied with their organization´s commitment are engaged and have a positive view
of the organization. Also, employees need to have the possibility to grow, educate, train, and
develop in order to believe in the company and be involved. Haid and Sims (2009) believe that
when a pay raise is not possible, employees value flexible working hours, job security, and social
events resulting in a satisfying work-life balance.
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Moreover, other engagement drivers can be offered. Employee engagement might be increased
when employees believe in the products they create or sell, when their opinions are valued and
counted, when they understand what is expected from them and know how they can contribute.
Employees also need to feel that rewards are split fairly and equally and that there is there is a
possibility of career growth and personal development for exceptional work. Employees tend to
believe more in organizations which invest in learning and development programs, promote health
and well-being, offer a balance between work and family life, or attract and retain high quality
talents. Employees who are treated respectfully, valued, and encouraged by management are more
likely to be highly driven at work (Haid & Sims, 2009).
Robert J. Vance (2006) notes that there are several ways how to increase employee engagement
and to encourage employees to do their best. Job enrichment inspires employees, enhances their
innovativeness and creativity, and encourages their problem-solving abilities. For active employees
a job needs to be meaningful and diverse, they need to feel independent yet supported by co-
workers. Employers might also offer training programs available 24/7 to all employees via online
platforms or training portals. Such training can increase performance, personal satisfaction, or self-
efficacy. Increasing knowledge, skills, experience, and expertise increases self-esteem and
employee commitment. In addition to this, it is suggested that, when creating financial
compensation, to consider employee sensitivity to equality. Wrongly designed compensation
programs can create highly disengaged employees and destroy a positive organizational culture.
Companies will benefit if they allow their employees to experience success over time and feel
valued and appreciated.
Generally, employees are more likely to be engaged if the nature of work is exciting and
challenging, if employees know the purpose of the work and feel its importance, if companies offer
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equal opportunities to all, if employees receive gratitude and recognition in a timely manner, if
employees´ relationships are positive, if employees understand organization´s values and goals,
and if managers and leaders are inspiring and motivating. Nevertheless, several factors can limit
engagement. Employees are the least engaged when they are overloaded with work and companies
applies bureaucratic principles. Furthermore, employees are less engaged if they fear job loss, if
they perceive their working environment as unfair, if the nature of work is repetitive and highly
stressful, if management is bullying and demotivating, and if employees work for a long period
without a break (Robertson-Smith & Markwick, 2009).
3.3.7 Measuring Employee Engagement
According to Brown, Bersin, Gosling, and Sloan (2016), measuring engagement an extremely
important step to achieve its successful implementation. Almost 20 percent of organizations do not
measure employee engagement at all, and only 8 percent of organizations measure employee
engagement on a monthly basis or more. When measuring employee engagement, it is crucial to
choose specific factors in advance to know what the target is. Some organizations are more focused
on the willingness to go the extra mile while others might focus on being a team player.
There are several established measurement surveys like the Gallup Workplace Audit which
measures employee engagement. Employees answer twelve questions by choosing scores on a
scale 1 to 5. The survey includes questions like “Do you know what is expected of you at work?”
or “In the last seven days, have you received recognition or praise for doing good work?”. The
survey is focused on recognition, encouragement, employee relations, and an understanding of the
work. NetPromoter surveys divide employees into three categories (promoters, passives, and
detractors) by asking a question “How likely is it that you would recommend the company to a
friend or colleague?”. This survey does not show factors influencing employees either way - by
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being engaged or actively disengaged – rather it shows the exact level of engagement. There any
many more engagement surveys to choose from, nevertheless, it is extremely important to consider
how results will be translated into action. Employees must be informed about the initiative to
measure their engagement as well as about results and follow-ups (Robertson-Smith & Markwick,
2009).
Vance (2006) discovered that when measuring employee engagement, organizations mainly focus
on ten major themes. Such surveys are targeted on job satisfaction, employees satisfaction, new
challenges and opportunities for employees, feedback and recognition, employee effort and
willingness, understanding the job and the organization´s mission and vision, and the desire to stay.
In conclusion, talent management practices play an important role in creating business strategies
and fulfilling business objectives and goals via a business' most important assets: employees. In
the past, especially at the end of the 19th century, talent management practices were not common
as employees were hired and fired on a daily or weekly basis. In the 20th century, the rise of
individualism created better conditions for current talent management practices. Nowadays,
employee engagement is a crucial tool used to decrease turnover rates, improve productivity and
efficiency, and increase profits.
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4 Conclusion
To summarize, the most visible changes within HR departments, their functions and practices
appeared during the last 200 years. This thesis aimed to assess how the past stages of human
resource management led to the present state and what the current trends, issues, and challenges
are as a result of this evolution.
Without a doubt, the position of workers has changed enormously, from being replaceable to being
the most valuable organizational assets. This is an effect of several factors including the Industrial
Revolution, WWI, WWII, increasing competition, globalization, the development of electronic
computers, the creation of the Internet, and the mass usage of social media. Furthermore, not only
the position of workers is different, but the nature of the work of HR specialists has changed as
well.
HR practices have been in use since ancient times, however, the current stage of HRM has mostly
evolved from the practices of welfare officers and labor managers developed in the 19th century.
The main personnel activities (welfare and employee care, worker safety, compensation,
recruitment, and labor unions relations) were handled by senior management. In the mid-20th
century, the work was performed by personnel management specialists and their main tasks started
to include activities such as managing employee relations and compliance, designing action plans,
developing benefits, offering attractive compensation, and establishing training plans. The biggest
change came in the late 1970s and 1980s when human resource management was introduced. HR
departments performed a supporting function for business activities. HR specialists were mainly
occupied with compliance and legal issues, but slowly focused on the development of performance
management systems, organizational development, employee engagement, and retention. Strategic
human resource management was introduced at the beginning of the new millennium. Nowadays,
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HR specialists are considered business partners and advisors who can equally help fulfill an
organization's strategic objectives and goals. Strategic HR specialists are successful at people
management and are excellent administrators as well. Their main focus goes to the creation of an
attractive corporate culture and to gaining a competitive advantage through HR processes and
practices.
There were several movements in the US and in the UK which shifted HR practices to their current
status. In the US, the first HR department was established at the beginning of the 20th century due
to the increasing need for workforce management. In 1910, the Scientific Management Theory
defined by Frederick Taylor offered a differential pay system to motivate employees. Moreover,
throughout the 20th century in the US, federal governments and many state governments passed
laws which guaranteed basic rights to employees and encouraged them to join unions which
resulted in rights to a pension and insurance; offered a nation-wide minimum wage, overtime pay,
limited child labor; passed laws protecting employee equal pay for men and women, equal
opportunity regardless of sex, race, religion, pension reforms, and workplace accommodation for
people with disabilities; and prohibited discrimination based on race, gender, religion, and color in
several fields including employment. All these acts and laws helped to achieve the current state of
HR.
In the UK, the development and acceptance of different acts supporting employee rights was very
similar to that of the US. These, one of the most significant pieces of legislation to govern the
employment relationship is the Equality Act which prohibits discrimination on factors such as sex,
religion or belief, pregnancy and maternity, race, sexual orientation, marriage, disability, and age.
Other acts, such as the Employment Rights Act or the Trade Union and Labor Relations Act
enhanced and continue to enhance employees rights and relations from the first employee stage
67
(recruitment) to the last (retirement). Furthermore, professional associations such as the Industrial
Relations Association of America, established in 1919, or the Welfare Workers' Association
established in 1913 in the UK played an important role in the evolution of HRM. The development
of unions in the US and the UK in the late 18th century positively affect the workplace as well.
The second part of the thesis examined the ways in which businesses lead, motivate, organize,
manage, and engage the 21st century workforce. Business productivity, profitability, and success
are no longer influenced by technological advancements but are highly influenced by HR practices.
To create organizational and individual satisfaction and to increase business efficiency and
effectiveness, organizations must focus on three main sectors which bring the most challenges and
potential issues: learning & development, recruitment & selection, and talent management.
Learning is a crucial tool which helps organizations to attract and retain high-quality talent, engage
current employees, and develop a long-term partnership between an employer and employees. The
innovative concept of learning organization focuses on a continual creation, acquisition, and
transfer of knowledge is becoming the biggest differentiator in the current business market. The
learning organization helps employees build skills, improve abilities, and grow on their own which
results in business advantages. Therefore, it is a must for successful organizations in the 21st
century. Organizations must provide a suitable learning environment to all employees regardless
age, gender, or nationality. A diverse working environment brings many challenges with which
organizations must deal. However, when it comes to learning and development, organizations must
adapt to current requirements and provide several training portals, seminars, online platforms, and
repetitive trainings which will cover all employee training and development needs and wants.
Continuous improvement requires a commitment to education, learning, knowledge, and self-
development.
68
The nature of work in the 21st century presents many challenges for recruitment and selection
methods to include several possibilities for how to recruit and who to recruit. The most significant
change within the recruitment process is the rise of online recruiting. Online recruitment is needed
in innovative and competitive organizations when compared to traditional methods because is
costless, easy, fast, and generates greater quantities of diverse applicants. Recruitment is one of the
most important strategic approaches to achieve a competitive advantage and to overcome a chief
recruitment issue: talent shortages. Organizations must use several online recruiting platforms to
move throughs selections to fill a position with the right candidate. Yet, it is important for recruiters
to keep avoid recruitment errors and personal biases which might lead to business losses. To that
end, the trend influencing recruitment and selection methods the most, is the rise of diversity in the
workplace. Nowadays, this concept is a must for leading organizations as is presents fairness and
social justice. Successful organizations must make ethnic, gender, age, or other types of diversity
a business priority and reality to gain a competitive advantage. To stay ambitious, organizations
must adopt new strategies to attract and retain older talents and creative talents as well. Competition
for talent is intensifying and diversity management is one of the key ways prevent talent shortages.
Still, it is crucial for organizations to determine what type of diversity fits them the most to
maximize performance. Diversity is a competitive differentiator when smartly used.
Talent management is an important business strategy which focuses on recruitment, selection,
training, retention, management, and development of the best quality employees. Currently, talent
management practices are facing two issues: the shortage of talent and the rising cost and value of
total rewards and benefits compensation. To win the talent arms race, businesses must offer greater
benefits and an attractive corporate culture. Additionally, to gain employee appreciation with total
rewards and benefits packages, employers must communicate their real value properly and clearly.
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Furthermore, performance management, recognition, and management capabilities and interactions
are three main categories of talent management processes which need to be changed and upgraded
the most. Successful talent management practices enhance employee engagement, a very real
challenge due to employees´ diverse needs and wants. There is a big shift in the perception of
employees -that they are no longer dependent on organizations and therefore businesses must offer
the best possible care to motivate retention. Luckily, employees are willing to trade their innovative
ideas and exceptional outcomes for extraordinary care and benefits. Businesses must propose as
many engagement drivers as possible to benefit from an engaged workforce which will result in
such benefits as customer loyalty, employee retention, employee productivity, advocacy for the
organization, manager self-efficacy, organizational performance, and profit.
To conclude, there are many other HR challenges that businesses must face like the implementation
of management changes, leadership development, adaptation to innovation, human resource
effectiveness measurements/organizational effectiveness measurements, and workforce planning.
Hopefully, the majority of organizations can overcome the issues presented more than a half of a
century ago to focus on current trends, issues, and challenges.
70
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