Personnel Practices Are a Source of the 'New Competitive Advantage?

To what degree does our knowledge of personnel practices in the UK indicate there has been a transformational shift in the way that personnel practices are a source of the 'new competitive advantage?

 Introduction:

Understanding employees’ practices is necessary both for company proprietors and for personnel within a human resources unit. The individuals in a corporation are too vital for its achievement. Personnel practices, now usually regarded as function of human resource department, involve several components that are important for the accomplishment of any business (Understanding Personnel Practices). Today, in the light of emerging new knowledge-based economy, it is important to revisit how far UK has succeeded in transforming its highly-efficient management expertise to acquire new competitive advantages; their direction and trends will have vital implications for future with fiercely competitive global environment and current economic recession that started from 2007.

Today, service sector in UK contributes around 75 percent of its GDP. In particular, its banking, insurance, and business services dominate, requiring high-skilled management professionals. The contribution of UK industry and manufacturing to GDP has declined over the years, which in 2008 was 22.8 percent. Both manufacturing and energy are in long-term decline. (Economy Watch) Not surprisingly, throughout this shift towards service sector, there has been a rise in the role of relatively new human resources department designed to meet new requirements and a corresponding fall in traditional unions. These traditional union systems were the result of exploitation of labors working in European cities by the capitalists during the industrial revolution in the eighteenth and nineteenth century; political, social, and economic realities of today are far more different. As Jacobs puts it: “A lot of the production work, design work, economic work that is being done now has a much higher proportion of what we call human capital in it and a much lower proportion of natural resources and other materials in it than in the past.” (Jane Jacobs: Unraveling the true nature of economics) This shift towards services is an important change that requires a fresh approach when it comes to managing employees. (Mabey, Salaman, and Storey, p.286).

For Jacobs observes: “After all, human capital - the experience, the skills, the inspiration, the imagination that goes into these things - is not a resource that is subject to the laws of diminishing returns. The more human capital is used, the more it grows.” (Jane Jacobs: Unraveling the true nature of economics) Perhaps, this also sums up the future expectations from human resources department to seize the opportunity to grow exponentially through skilful management of such human capital.

 Not surprisingly, unionization in UK has fallen on after reaching its summit in 1979. In comparison to the late1970s when around 13 million people or 58 percent of its employees were union members and over 70 percent of its employees’ remuneration set by collective bargaining, the number of employees who were members of trade union in 2003 was less than 30 percent. (Machin & Wood) These are in line with USA which has seen a phenomenal rise in contribution of services sector to its GDP and a corresponding fall in manufacturing industry and unions: In 2007, 78.5 percent of its GDP was from services, 20.5 percent from industry and agriculture was less than 1 percent. (Economy Watch)

It was observed, however, that the rate of new recognitions of unions was slightly greater than the rate of derecognitions among continuing private sector workplaces with 25+ employees. (Kersley) This is understandable because new firms that never opted for union is not included in it.

A study enquiring whether popularity of human resource management (HRM) has led to unions replacing their role to HRM found no evidence. It concluded: “We find no evidence of HRM substitution operating in the hypothesized way of it replacing unions and conclude that increased HRM incidence does not seem to be an important factor underpinning union decline in Britain.” (Machin & Wood) However, it is only natural that some form of trade unions will be there in traditional manufacturing industries. The decline of trade unionism and growing importance of human resource management in UK and elsewhere is perhaps due to unique requirements posed by the growing service sector industry in this new knowledge-based economy.

Recruitment and training of employees is one of the key roles of human resource department. Workplace Employment Relations Survey, 2004, noted a proportional rise in the specialist employment relations manager, a continuation of trends in the late 1990s. It also noted that 64 per cent of employees had undergone off-the-job training, which is up from 42 per cent in 1998. (Kersley) Also, over the years, management thinkers have supported decentralization over centralized decision-making. The findings in the survey did observe that there was greater decentralization of personnel function. However, employment relations function in many cases was still plagued by centralized-decision making, and monitoring systems in many of them were not found to be up-to-mark. (A New Workplace Survey Reveals an Improving Employment Relations Climate)

The significance of SMEs in the UK economy is great. At the beginning of 2004, number of private sector firms less than 250 employees was 1.16 million and employed 8.66 people or 36 percent of all employees in the UK. The small and medium-sized private sector enterprises (SMEs) were found to have an edge when it comes to personal satisfaction of employees on many parameters. Level of trust between managers and employees was found higher in SMEs than their larger counterpart. SMEs also recorded lower absenteeism, lower voluntary resignations, and higher autonomy for managers. (Forth, Bewley, and Bryson pp.X -X1)

The nature of workplace in terms of economic activity belonging to SMEs is different from larger firms. Forth, Bewley, and Bryson reports from the WERS, 2004: “Compared with workplaces belonging to larger firms, those belonging to SMEs were more likely to be engaged in Manufacturing (18 per cent, compared with 5 per cent), Construction (8 per cent, compared with 2 per cent), Other business services (19 per cent, compared with 13 per cent) and Health and social work (13 per cent, compared with 5 per cent). Workplaces belonging to SMEs were less likely to be engaged in Wholesale and retail (22 per cent, compared with 38 per cent)and Financial Services (less than 1 per cent, compared with 14 per cent)” (Forth, Bewley, and Bryson p.20) Moreover, it was found that for SMEs, personalized services and superior quality were more important for success than price, vis-à-vis large firms. However, it is feared that their reliance on single products or services and low customer base may place greater pressure at tough times than otherwise equivalent workplaces belonging to large firms. (Forth, Bewley, and Bryson, p. 25) For instance, when it comes to London Olympic 2012, SMEs lead the race of contracts with over two-thirds of the contractors applying for business belonging to SME category. It is expected to give such businesses a great learning experience.

According to Mc Fadden: “Constructing and hosting the world’s biggest sporting event will inevitably increase the expertise, efficiency and competitiveness of British business leaving a legacy which will benefit the UK economy for decades to come.” (UK Business winning London 2012 ‘economic gold) However, it is questionable how such new SMEs will adapt and survive once the event is over in the long run.

Perhaps, policy makers in UK should decide what kind of mix between small and medium-sized enterprises (SMEs) and large businesses will be good for long –term economic interests of UK and then put in place a strategy. As Joel Ross and Michael Kami puts it: “Without a strategy, the organization is like a ship without a rudder.” (Zimmermann, Polly Gerber, p.78) Clearly, SMEs and large businesses influence the economy in different ways. It is imperative that their optimum proportion be evaluated. Oster defines strategy in terms of such planned selective choice: “A strategy is a commitment to undertake one set of actions rather than another.” (Afuah, Allan, p.28) One model of an optimum workforce with high-end human intellectuals scattered toward SMEs offering consultancy and other such services to large firms can be contemplated.

Today, outsourcing is another big theme in the UK. Several organizations are magnetized by the idea of off shoring because of the potentially considerable cost cutback involved in it. However, any judgment to rearrange some features of an organization’s business offshore should incorporate a complete personnel safety evaluation. It should facilitate any cost saving to be evaluated carefully against any possible threats. A number of issues will influence the risk faced, for instance, the price of information, tools or service being off shored and forecasted impact of the loss, revelation, fraud or unavailability of these assets by means of insider action. A large number of reported incidents of leakage of confidential data from these outsourcing centers suggest that better monitoring of the credibility of such centers are required. For instance, in one of the many such reported incidents and investigations, The Sun newspaper claimed that one of its staff purchased personal details that included passwords, addresses and passport data for £4.25 from a Delhi IT call center agent. (Biswas)

Another issue which is important is the operating conditions. The operating conditions of any given nation are launched by its cultural and legal structure. These decide the rights of the owner and worker and have an effect on the pre-employment, continuing and exploratory security measures accessible to organizations in that place. If the offshore purpose is to be completely contracted out to a local 3rd party outworker, it is vital for the parent association to methodically assess their appropriateness before an agreement is arrived at. Preferably, it would demand written details of their personnel safety strategies, or assume an ‘associate assessment’ which believes how the 3rd party’s personnel safety compares with that of the parent corporation (Personnel Security in Offshore Locations, 5). This is important for the UK’s commitment to fair workplace practices globally. Moreover, outsourcing of jobs at the time of recession and high unemployment rate also comes under intense public scrutiny despite competitive advantages it gives in terms of reduced cost and other benefits. So, an effective strategy that optimizes keeping such conflict of interest should be put in place.

 It can be seen that the workplaces where “Equal Opportunities” (EO) are provided to the employees has maintained an increasing trend between 1998 and 2004. (Kersley)

The recruitment processes have also improved in U.K. According to 2004 estimation, only about 16 percent of the executive head asserted that age is one of the elements for hiring new workers. Nearly 80 percent of the workplaces had special systems to support applications from the uncharacterized groups. Approximately 21 percent of the offices in the public sector had some special processes to magnetize individuals from the minority groups (Kersley).

The figure reveals that the leave structure in an organization has improved over the years from 1998 to 2004. The numbers of leaves such as special paid leave in emergencies and paid paternities have increased from 1998 to 2004 while unpaid emergency leave has marginally declined. (Kersley).

The above figure portrays the flexible working schedules for the non-managerial workers in United Kingdom. The above diagram also shows a continuing positive trend of increase in such facilities from 1998 to 2004 (Kersley). These are positive qualitative changes, and their impact on the economy perhaps great cannot be measured in quantitative terms. .

Conclusion:

Effective personnel practices are partly proactive and partly reactive. The strategy to move towards service sector and outsourcing jobs has changed United Kingdom’s work environment. Without better quality of skilled professionals and reduced cost, UKs exposure to service and other knowledge-based sector in this competitive global environment could not have increased.

In 2007, Britain surpassed US with GDP per capita - measured at market exchange rates - for the first time since the Victorian era. (Stewart and Webb) As Cooper observes: "The UK has been catching up steadily with living standards in the US since 2001, so it is a well-established trend rather than simply the result of currency fluctuations." (Britons 'richer than Americans) In this transformation, there has been evidence to suggest that many workplace employment related practices such as work-life balance (WLB) and equal opportunities (EO) have changed for the better. It is reported that most employers today have dispute resolution procedures in place. (Kersley) These are subjective changes, and their consequences though perhaps great cannot be measured in economic terms. It is believed that when it comes to competing globally, UK’s performance has been on track. Cooper observes: “The last 15 years have seen a dramatic change in the UK's economic performance and its position in the world economy. No longer are we the 'sick man of Europe'." (Britons 'richer than Americans) The current weaknesses that we are seeing from 2008 are perhaps because of global recession and weak pound that may also need some adjustments with regard to personnel practices. For instance, now a policy that encourages job creation in UK to outsourcing may be favorable for the time being. (Seager) That is, human resources practice on macro and micro level should be fine tuned with economic needs of the day.

References:

1  Afuah, Allan. Strategic Innovation: New Game Strategies for Competitive Advantage. Routledge. New York. NY. 2009.

 2. Bach, Stephen, Sisson, Keith. Personnel management: a comprehensive guide to theory and practice. New Jersey: Wiley-Blackwell, 2000.

3. Biswas, Soutik. “How secure are India's call centres?” BBC News, Delhi. 24 June 2005. Retrieved on 13 November, 2009 from 

4. “Britons 'richer than Americans.” BBC News. 7 January, 2008. Retrieved on 13 November, 2009 from 

5. Economy Watch. Economy, Investment, and Finance Reports. UK Economic Indicators. Retrieved on 13 November, 2009 from