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Human Resource Management: management’s tower of Babble?

Human Resource Management: management’s tower of Babble?

By Jack Feeney who can be contacted at

1. Introduction

Human Resource Management or HRM is the modern-day version of personnel management with a splodge of 1950’s Motivational research thrown in.

Peter Drucker, one of the greatest management thinkers and writers of the last century, received much criticism for his 1961 dismissal of personnel management as 'largely a collection of incidental techniques without much internal cohesion'. In the 21st Century, the collection of ‘incidental techniques’ has been re-named Human Resource Management but has received the addition of paint-balling, team-building games, dubious motivational theory application and more recently statistics, statistics and more statistics.

Earlier this year, Price Waterhous Coopers (PWC) brought out their ‘2003/2002 Global Human Capital Survey‘. It was based on data collected from over 1000 companies in 47 countries in Europe and the Middle East. It ‘alleged’ that companies with a HRM focus were better off than those that didn’t have one.

Interpretation of the report gives varying conclusions, ranging from a 35% increase in revenue as a result of a documented HRM effort, to less than 23% of the executives interviewed, admitting HRM departments were having no effect on overall strategy? Why - because HRM staff were spending too much of their time on activities that others could be doing, like interviewing for instance.

Such ’administration’ tasks, according to the study, currently account for 27% of the departments total working hours as compared to 38% in 2000 - that’s an 11% improvement in three years or 29% on the 2000 figures - a statistically significant improvement!

But this is what staff did (administration) 90% of the time when HRM was called Personnel management?

On close examination, one can read anything from the report depending on whether you’re pro-HRM, or like me, you‘ve severe reservations about the whole HRM phenomenon.

The main thrust is the much chanted management cliché, ’People are our greatest asset’ - apply Human Resource Management and your organisation will thrive. Like much HRM, the report is founded on gross, over-simplistic assumptions and huge extrapolations:

>> HR Software reduces organisational absenteeism by 12% or Most successful companies have detailed HR documented strategies, or

>> Organisations with HRM department have 35% more revenue

2. Chicken or egg?

Did the suggested 35% increase in revenue come about as a result of HRM activity or did HRM activity come about as a result of available revenue? Only companies with excess or supernormal profits can afford to have legions of people (HRM departments) carrying out employee climate surveys, measuring organisational unity and coordinating paint-balling weekends, en masse.

No organisation in its right mind could afford an entire department of quasi-behaviorists, adding nothing but a forced grin to the product/service they provide. HRM currently enjoys its greatest presence in ‘Obese’ organisations, of which there are three types :

1. Companies making supernormal profits: Supernormal or excess profits – like idle hands, idle profits have to go somewhere.

2. Large ineffective dinosaur organisations requiring an independent department to bind itself together and sustain an otherwise crumbling edifice.

3. Sleepy (not-for-profit) semi-state and state companies, seeking to mirror the success of private enterprise in public enterprise by assuming, HRM equals success, as opposed to HRM initiatives may have come about as a result of excess success!

People are of paramount importance to all organisations but HRM is a massive Red Herring. The thinking behind HRM is fundamentally flawed - that people can be managed through a separate management silo. If management are not managing people - they

are not managing - period. It’s a fad based on assumption and extrapolation - People are organisations greatest and strategic asset, therefore HRM is the organisations greatest and most strategic management function. I don’t think so! If HRM has any role in the future, it should look to the past and not go beyond the ‘personnel’ brief, acting as support for all other functional managers and staff.

The authors of the report, HRM Benchmarking 2002/3, PWC, were in the news again in May 2003 when they were involved in another ‘Human Resource’ issue. They were called in by one of their clients, Manchester–based personal injury claims firm. The Accident Group, to swing the axe on 2400 employees.

Employees were told of their fate by a text message with a number to ring at head office. An answer machine message from PWC, said: "All staff who are being retained will be contacted today. If you have not been spoken to you are therefore being made redundant with immediate effect." It added: "Unfortunately there are effectively no funds available to pay the salaries for May."

How spineless, cold and despicable can an organisation be to its ’greatest assets’ (People, in Human being language) to communicate impending unemployment, via a text-message?

Have PWC really got a handle on ‘managing people’ and management? What are the implications of making 2400 redundant via text messaging, will anyone want to work for this insurance firm? And more importantly, should we just accept that PWC and their HR Benchmarking report has any sort of credibility? Even the mighty can be wrong as the ENRON shenanigans demonstrated last year.

In my quest to investigate as to whether HRM is anything but a poor substitute for good management, I asked HR.com subscribers to provide objective evidence, as to the benefits of HRM. I was directed to the research of Watson Wyatt. I had seen the name associated with another HRM initiative entitled ’Excellence through People’, run by the Irish National Training Authority but hadn’t scrutinised their findings in any detail. Perhaps their research would convince me that HRM actually adds something positive and of real value to a organisation?

In 1999, Watson Wyatt surveyed more than 400 US and Canadian companies to investigate the relationship between HRM and shareholder value creation. A series of multiple regression analyses were created to identify the relationship between HRM practices and shareholder value creation. Thirty HR practices were associated with a thirty percent increase in market value. Human Capital Index (HCI) scores were then created for individual companies so that results could be expressed on a scale of 0- 100. A HCI score of 0 represents poor HRM while a score of 100 represents ideal HRM.

In 2000, Watson Wyatt then carried out a European survey and 250 responses from 16 countries were thrown into the data pool. The European survey showed correlations between 19 HRM practices and a 26% increase in market value. Finally, in 2001, more data from 500 North American companies was brought into the data pool. Next, the data crunching and analysis! With data (HCI scores and financial performance) now available for 1999 and 2001, two correlations were created, A and B:

>> Correlation A was the 1999 HCI score X 2001 Financial Performance = 0.41

>> Correlation B was the 1999 Financial performance X 2001 HCI score = 0.19

The assumption is, if better financial performance is what creates superior HRM practices, Correlation B should be larger than correlation A. However, correlation A is 0.41 and bigger than correlation B at 0.19 - THERFORE - It pays to manage people right!

It’s a hell of a lot of data, statistics, assumption and extrapolation to arrive at a fairly obvious conclusion: ‘ It pays to manage people right’. Furthermore, is this conclusion, not something that’s been understood, since we first, as a species stood upright ?

Who ever suggested that treating people badly was a recipe for entrepreneurial success? At the risk of repeating myself, People are the organisations greatest asset - HRM is, at best, a poor substitute for good management. Using complicated data, statistics, assumptions and extrapolations doesn’t convince me that HRM adds anything of any value to any organisation. I remain unconvinced despite the convoluted, complex and torturous data analysis by Watson Wyatt.

Watson Wyatt were recently in the Irish National Newspapers as being involved in another HRM initiative - the FAS (National Training Authority) ‘ Excellence Through People’ programmes. This is a scheme that recognises the efforts of companies to grasp the whole HRM thing.

An independent HRM specialist from FAS visit’s the organisation, assesses management efforts at managing Human Resources (people) and awards an ’Excellence’ certificate based on the assessment. In May of this year, FAS ran an eight-page advertisement feature, in National Newspapers, promoting the ’Excellence thru’ People’ programmes.

In reporting the phenomenal merits of the award, they cited several case-studies of companies who had achieved the ‘excellence award‘. The First example they gave was ’Dairygold’ - an Irish dairy product cooperative, but only weeks later, hundreds of Dairygold employees (between 1500 and 2000) are facing redundancy. How can HRM be so blind or is it that HR managers have their heads so far up their own asses, that they let the organisation die whilst maintaining their own position? It defies common sense.

Again, with the ‘Excellence through People’ programmes, there is no objective evidence to suggest that HRM adds anything of value to the organisation. Dairy Gold Ltd. may have received the ‘Excellence through people’ award but its small consolation to the near 2000 people who will soon find themselves out of work. I remain unconvinced!

Finally, I’ve heard HRM professionals suggest that a separate department is the most efficient means of dealing with people issues. This does make sense but sometimes efficiency should take second place to sending out the right corporate message as to how an organisation values its ‘greatest assets’ - its people.

Take the case of one Multi-national Pharmaceutical company with a large HRM department. Anyone making an application to the company will receive the same reply: "Thank you for your recent application to us. Your application is currently being assessed

against the requirements of the position. If you are selected for an interview, we will be in contact with you over the next four weeks to confirm interview arrangements. If you do not hear from us during this time, then we sincerely regret to inform you that we do not have a suitable vacancy at this time but will retain your curriculum vitae should a vacancy arise in the future. May we take this opportunity to thank you for your interest in our company".

Surely, all Human Resources (people) are entitled to the most basic courtesy of a polite and professional refusal letter? Should common courtesy really be compromised in the name of efficiency and how effective could this response be from a wider organizational perspective? There’s some screwed up irony here but Human Resource Management is probably the most inhuman and inhumane way to manage people.

3. Conclusion

In the past 100 years, People may have had less rights, less benefits, less representation, less paint-balling and less ass-clenching, Team building games but were given more respect, dignity and courtesy - something all fellow humans should be afforded. It’s not progress - its regress, on a subtle though substantial scale. Human Resource Management is neither human nor humane! It’s personnel management with a twist and a splodge of 1950’s motivational research thrown in.

I’ve entitled my research and next book ‘Management-The Tower Of Babble’, because I truly believe that HRM is to Management what the Tower Of Babel was to Civilisation – a Wake up call.

It won’t, like the Tower of Babel, be taken out by a bolt of lightening from the Heavens but by a realisation from management and business people that it has very unsound foundations and so far, has provided little objective evidence to support its continuation.

It will not survive the ravages of time and common sense! People are, and always will be, the organisations greatest asset. Ignore them, manage them badly or manage them through a HRM department - at your peril!


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Gary Watkins

Gary Watkins

Managing Director


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