One of the most critical success factors regarding how a company is run is dictated by the quality of human resources services. Effective human resource management practices drive employee satisfaction and commitment. This in turn leads to higher customer satisfaction and loyalty which results in increased profitability and growth. Some research has even shown that effective people management is more important than technology, quality and competitive strategy in its impact to the bottom line.
We need to keep in mind, however, that different environments call for different human resource approaches. Those HR practices that served companies well in the industrial era are not adequate for the challenges of the knowledge economy. Critical success factors have changed. Nowadays, business success is largely dependent upon adaptability, speed, and innovation. To be impactful in knowledge economy, HR should seek ways to reduce red tape and build more flexibility.
A shift in mindset
Unfortunately, too many HR people are still stuck in the mindset which was dominant in industrial economy. As industrial firms focused on enhancing the efficiency of production and work processes, personnel administration’s main role was to ensure compliance and standardization. Personnel function was expected to play a policing role through setting policies and procedures, maintaining control, and providing consistency.
Today we are still witnessing a lot of accepted HR practices centered in that experience. For instance, HR is still known for creating Bible-thick policy manuals which nobody ever reads cover to cover. I have come across a one-hundred-thirty page employee handbook and most of the rules noted in the manual were centered on telling employees only what not to do.
When employees are focused on avoiding the negatives, they are unlikely to make many positive contributions. They need to be trusted to do what is in the best interests of the company. For example, HR policy stipulates that employees should have lunch breaks between twelve and two o’clock. It seems reasonable to trust employees to decide when they want to have their lunch breaks. I can see no reason why an employee couldn’t have lunch at 11.30 a.m. if she chooses to and her work schedule allows it.
There are countless more examples of HR policies that put unreasonable restrictions on employees. Job descriptions run to two or three pages, attempting to cover every possible task that the perfect incumbent should be able to perform, but there are many changes and uncertainty in today’s workplace and no job description can adequately describe all possible situations. People are best able to sense and make judgments to find best solutions in different situations. Overregulation can prevent employees from quickly responding to change or taking proactive steps in anticipation of change.
Instead of restricting people with all kinds of policies and procedures, HR should rather focus on enabling activities. First, every role should be designed so employees can understand the interconnections between their role, the business strategy, the deliverables, and the customer. Second, more emphasis should be placed on guiding employees with company values. Values help them execute strategy and make appropriate decisions when facing unfamiliar problems or situations.
We have all come across HR policies that unreasonably limit managers’ decision making rights, such as HR not allowing line managers to promote their employees before they have worked with the company for a certain period of time, or HR not permitting the line manager to give his employee a certain job title because she doesn’t have anyone reporting to her, or HR not being supportive of telecommuting because of its potential negative sides. As these real-life examples clearly demonstrate, HR policy can be overly policy and compliance driven, stifling the ability of managers to be effective. And, because managers are ultimately held responsible for the outcome of their section, they should utilize HR guidance but have the authority to make section based decisions based on the individual and the situation.
Some research even suggests that companies are up to twenty-nine percent more successful when line managers— rather than human resources—are responsible for recruiting, performance management, and retention. This is not to say that human resource management is not needed, as we play a vital role in coaching and guiding line managers on how to manage people effectively in terms of best practices and legal compliance. However, human resources shouldn’t push decisions and managers should ultimately have the final say on human resource decisions.
Balancing efficiency and flexibility
The overabundance of policies and rules causes people to experience more hindrance-related stress. This type of stress is negatively related to job satisfaction as it constrains and interferes with employees’ work achievement. As job satisfaction declines, performance drops and counterproductive behaviors such as tardiness and absenteeism increase. Reduced job satisfaction can lead to higher voluntary turnover. This is not to say that it is reasonable to remove all policies and rules to ensure flexibility and agility as some degree of structure is necessary to achieve efficiency and consistency.
According to the theory of dualities organizations are in a constant tension between efficiency and flexibility. This tension is unresolvable because companies have to cope with the simultaneous and changing needs of flexibility and efficiency. In many companies, the balance still seems to tip in favor of efficiency. Most successful companies tend to be fairly high in both efficiency and flexibility. However, today’s critical success factors such as adaptability, agility, and innovation inevitably push companies more towards flexibility. As the world moves towards a more flexible operating model, HR also needs to rethink how our role can foster more useful flexibility while reducing redundant bureaucracy.
When human resource managers are immersed in their own world, it is quite easy to lose touch with the processes that drive company output. So, HR leaders should perform reality checks to modulate themselves and policy doctrine. HR should hold periodic company meetings to get feedback and suggestions from line managers regarding existing internal HR policies and procedures. Managers should be encouraged to vet policies and procedures they think restrict efficiency and why. By discussing efficiency versus policy from different angles, HR remains relevant and effective. HR leaders should pay special attention to rules that get mentioned over and over as this is a clear sign those specific policies need to be reevaluated. And, while it is not always possible to entirely eliminate a policy or a rule, it is almost always feasible to find a less bureaucratic way to achieve the same goal.
When dealing with efficiency and flexibility it is crucial to take a both rather than either approach. This compromise mindset allows for greater variety and scope of outcomes. For instance, telecommuting can be both an efficient and flexible option for positions that are suitable for remote employee arrangements. While telecommuting might be a new way of doing business, efficiency can be increased if clear expectations are set up front. Other steps to adapting to a telecommuting business model include ensuring that remote employees have necessary equipment and line managers are trained about how to properly manage their remote employees. In this example, flexibility is achieved by allowing employees to decide where, when, and how to get their work done. When efficiency and flexibility are well balanced better employee and organizational outcomes result, such as productivity, job satisfaction, commitment, and retention.
In knowledge economy, business success is largely dependent upon adaptability, speed, and innovation but this change requires a different mindset from HR leaders. Focusing on compliance and standardization is not sufficient to help companies achieve success. Instead, HR should ensure that policies and processes enable people rather than constrain and HR should take an active role in reducing red tape and increasing flexibility in the workplace.
Indrek Lepner works as an HR Partner at Danske Bank, Estonia Branch. He received his master’s degree in Human Resource Management from Rollins College, FL, US in 2014. Prior to his studies in the US, Indrek served as an HR manager of Bitipank OÜ, an Estonia-based software developer.
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