Introduction
The objectives of the HR department within any organisation include handling issues that relate to employees. Functional responsibilities of the HRM in an organisation comprise training and development, recruitment and selection, employee conflict resolution, driving employee motivation and job satisfaction programmes, and taking active roles in the establishment of remuneration programmes among other issues that relate to employees (Ollapally & Bhatnagar 2009).
Organisations encounter challenges of changing work environments. The main challenges include developing people to ensure that they acquire requisite skills to enable them meet the emerging changes. According to Revels and Morris (2012, p.63), ‘rapid change requires skilled and knowledgeable workforce with employees who are adaptive, flexible, and focused on the future’. Human resource management arm of an organisation has the responsibility of developing an organisation’s workforce to enhance productivity through training and development.
Performance is a function of the productivity of employees (Crook 2011). For organisations that seek to build their success in the short-term and in the end, human resource is organised in such a manner that it permits all employees to develop skills and knowledge. Highly skilled employees are able to deliver optimally the expected outcomes of various tasks that are allocated to them both within the shortest possible time and at pre-set quality standards. While this depends on the effectiveness of the training and development as a functional responsibility of the human resource, motivation is necessary.
Organisations that seek to raise their profitability focus on reducing costs. High costs in comparison with sales result in lower profits (Herman & Renz 2008, p.411). Effectiveness of HR in terms of execution of its mandates can increase or reduce the costs that are associated with employees. For example, poorly motivated employees make an organisation encounter higher costs of poor performance in tasks that are allocated to them, thus leading to the rejection of finished products after undergoing quality standards tests.
The need to rework on a certain automobile part, say machining a crankshaft, not only leads to the accumulation of in-process works, but also delays the completion of the assembly of the engine and the whole automobile. This claim implies a reduction in the number of units of vehicles that are scheduled for completion in a day. Consequently, daily sales levels reduce while the costs of production such as factory overheads increase. In this effect, the productivity level of the organisation decreases due to the decreasing profits.
Addressing this problem requires the HRM to focus on training and development of employees while at the same time establishing strategies for enhancing workforce satisfaction. One way of accomplishing this task is setting motivational programmes. Sveiby (2009) and Cohn, Khurana, and Reeves (2005) support this assertion by finding motivated employees satisfied. Since job satisfaction correlates directly with productivity, motivation is essential in enhancing profitability of an organisation.
Advantages and Disadvantages of Methods for Motivation
Motivation refers to the driving force, which determines the desired human behaviour. Several theories for motivation such as Maslow’s hierarchy of needs, Herzberg’s two-factor theory, and Taylor’s scientific management theory among others are available at the disposal of HRM (Cascio 2012). The appropriateness of each of the theories rests on its advantages and disadvantages depending on the context that induces motivation.
People report to work due to drive that compels them to do so. Abraham Maslow’s theory suggested that this drive emanates from the need to satisfy various needs, which keep on evolving as an employee progresses from one hierarchy level of needs to another. He grouped these needs into five categories, namely physical needs, safety needs, social needs, esteem needs, and self-actualisation (Bowey 2005, p.24). Monetary reward in the form of wages and salaries is important for satisfaction of the first three groups of human needs and motivators for work. This implies that HRM can motivate people who belong to these first three groups by incremental monetary reward systems.
The main advantage of Maslow’s theory of motivation is that increased wage results in increased productivity. For example, the longer the employees stay in an organisation, the better they perfect executing their duties more effectively and with speed (McDonnell, et al. 2010). Consequently, an organisation does not suffer from higher costs since additional wage and salaries are countered by increased output levels.
Unfortunately, this theory has a disadvantage in that monetary reward ceases to be a source of motivation at some point when people begin to seek for esteem needs. Thus, the increased productivity that is accounted for by increased wages and salaries may be lost, thus plugging an organisation into high costs of running business.
Taylor’s scientific theory does not view esteem and self-actualisation needs for employees as sources of motivation. Rather, it states that people are motivated by money only (Dessler 2004, p. 90). While it may have advantages for people who belong to lower levels of needs in the Maslow’s hierarchy of needs, Taylor’s scientific theory faces the disadvantage of discounting people. Crook (2011) confirms that salaries and wages are not always a source of motivation, especially for people who seek recognition and sense of organisational ownership. While Taylor’s theory encounters disadvantages in enhancing motivation for these groups of people, Maslow’s theory becomes effective in enhancing motivation for them.
Herzberg’s two-factor theory reveals that people in an organisation have two main groups of needs. The first group comprises the hygiene need such as competitive salaries and good working conditions. The second group comprises the motivators such as the creation of career progression opportunities, recognition, achievement, and a feeling of responsibility.
Tidd and Bessant (2009) suggest a major advantage of this theory by finding direct correlation of motivators with job satisfaction among high-ranking employees. Huselid (2007) found that the satisfaction with salaries and wages influence employee performance and commitment in their work.
Satisfaction correlates positively with improved workforce productivity, enhanced improvement of workforce engagement, and decreased staff absenteeism together with decreasing of workforce turnover (Dessler 2004, p. 87). Apart from sharing the disadvantages associated with inducing the motivation through increased wages and salaries as in the case of Taylor’s scientific and Maslow’s hierarchy of needs theories, the main disadvantage of Herzberg’s two-factor theory is that providing motivators also entails accountability, which many employees may not want to embrace.
Why Reliability and Validity are Key considerations for all Employee Assessment Methods
Validity of employee assessments refers to the degree of accuracy in the results of the assessments in terms of the realisation of what was intended to be measured compared to the actual assessment results. While conducting recruitment and selection assessments, validity may take the form of construct validity, criterion-oriented validity, and content validity (McDonnell, et al. 2010, p.157). Reliability implies the consistency of results when an assessment is administered more than once under similar conditions. For example, when administering aptitude assessment tests, employees under the test should portray the same emotional response when exposed to similar conditions that are meant to arouse or stir up their emotions.
Reliability and validity constitute key considerations for all employee assessment methods during recruitment and selection, assessments conducted while developing incentives and rewards systems, or during employee promotions and succession plans. In a bid to enhance the competitive advantage of an organisation by utilising employee skills, talents, and potential, the HRM must measure and/or evaluate the required degree of employee engagement and career development and training needs (Shane & Lafferty 2004, p, 316).
To come up with the best procedures and paradigms for strategising the mechanisms for employee development, elements such as validity and reliability of assessments are required. Their absence implies that HRM may come up with the wrong techniques for developing and equipping employees with skills that are required for effective performance (Shane & Lafferty 2004, p. 316).
Employees perform better when allocated jobs that fit their skills and knowledge base. Hence, assessments that are conducted to unearth the talent potentials, skills, and knowledge of employees need to yield reliable and dependable results. McDonnell et al. (2010, p. 157) support this assertion by adding, ‘Managers use employee assessments and surveys to allow them scope job requirements, evaluate how potential employees fit jobs, and identify changes that will keep employees engaged’.
Through good understanding of people who are employed by an organisation, many critical challenges become possible to solve. For example, with valid and reliable employee assessment information, HRM can make effective decisions on fitting employees in the right jobs such that they can excel to improve services, enhance their retention, and/or develop effective and highly productive work teams.
A significant challenge that HRM encounters includes individual strategic growth and development of employees to ensure ardent utilisation of their talents for organisational gain. To tap this crucial resource successfully, HRM requires the development and implementation of training and growth programmes in the most effective manner (Shane & Lafferty 2004, p.317).
Possessing valid and reliable data on training and development requirements for different employees makes it possible for the HRM to empower, mentor, manage, and motivate employees effectively to mitigate labour turnover, which increases the cost of recruitment and subsequent training and development. Through reliable and valid assessment data, HRM takes stock of aptitude tests together with employee interests to facilitate the application of their talents appropriately (Takeuchi & Wang 2007, p.1071). This claim suggests that validity and reliability in all employee assessments are crucial in understanding the fits between employees and the job that is allocated to them.
Controllable and Uncontrollable Costs that are associated with Absenteeism
The costs of HRM influence the profitability of organisations. They include turnover, compensation, training and development, and absenteeism costs (Hom & Kinicki 2007, p.976). All these costs can be either controllable or uncontrollable. HRM can have a way of reducing the costs in case of controllable costs or uncontrollable costs. An example of controllable absenteeism cost is low motivation. Examples of uncontrollable absenteeism costs are sickness (for employees or their family members), unexpected emergencies, and accidents (Frank 1998, p.34).
The HRM does not have the capability to control when employees get sick. When employees fall sick, it implies that their contribution to the productivity of an organisation is gone, hence reducing its profitability since such employees are paid for a sick day off despite the reduced production capacity of the organisation. The HRM also has no control over when and the nature of the accident in which employees are involved.
While the company will have to pay employees over the period they are seeking treatment, it may also suffer from additional costs in terms of reduced employee effectiveness when they recover since accidents may make them disabled. Labour policies do not allow organisations to lay off employees on grounds disability after being involved in a situation that does not reduce significantly their ability to execute jobs (Hom & Kinicki 2007, p.978). Even if organisations were allowed to do so, costs would still be incurred in recruitment and selection followed by training and development of new employees.
Absenteeism may emanate from low work morale or poor job satisfaction among other causes. This situation may compel employees to feign sickness when they are not realistically sick. Escalated conflicts in an organisation may make employees consider skipping work (Hom & Kinicki 2007, p.981). Assessment and evaluation of causes of absenteeism due to low work morale call for organisations to design and implement strategies for workforce motivation. A part from avoiding skipping work, better-satisfied employees are less likely to report to work late, evade responsibility, and/or waste time (Wright & Gardner 2005, p.413).
Irrespective of the type of costs that are associated with absenteeism, they (costs) are harmful to an organisation. Absenteeism costs disrupt the operations of an organisation. Besides, it raises the costs of operation. For example, where a given job requires two people to complete within a day, when one person is absent, the work takes two days to complete. Hence, productivity of the work unit reduces by 50% or even higher due to the reduced morale that is associated with working in a lonely environment.
To help organisations deal with the challenge of absenteeism by determining its impacts on productivity, the US Bureau of labour statistics developed a scale for measuring it (Frank 1998, p.34). The scale measured the rate of absenteeism as the percentage of the number of days in a month that an employee is absent after being divided by the total number of days that the employee worked. A rate of 4% and above is considered high. Organisations must look for ways of reducing it (Frank 1998, p.34).
Key Issues taken in the Development of an Incentive Programme Budget
Employee incentive programmes are established to foster and encourage certain behaviour. An incentive programme budget should reflect the company’s goals, objectives, vision, and missions. The recognised behaviour that is awarded the largest share of the monetary reward is the one, which closely profiles these aspects of an organisation. The incentive programme budget should reflect the summary of things that the HRM intends to achieve in terms of expenditure of organisational monetary resources through employee incentives.
These objectives need to be measurable, specific, and easy to compare their intended outcomes against the allocated monetary resources (Cascio 2012). The target audience of incentive programmes together with all persons whose behaviours are targeted for improvement by the programme and/or who are listed against the cost of inducing such behaviours should be included in the budget.
A budget for an incentive programme begins by computing the value of desired behaviour to an organisation in terms of productivity as a measure of organisational performance. Reasonable amounts of money resources go to rewards and recognition strategies that are meaningful to an organisation in the context of the desired behaviour.
Costs for administration of the programme, communication, and more importantly, training together with the development are also included (Incentive Performance Centre 2013, Para.6). In this extent, there are three main aspects of incentive programme budget, namely the anticipated results, the number of people to take part in the programme, and the time taken to complete the programme.
The size of the group of employees who are targeted by an incentive programme is important in the process of the budget development together with the capacity to communicate efficiently and effectively while at the same time measuring the results of the programme in an accurate manner. The number of participants helps in the calculation of financial resource requirements to fund the programme per day. A higher number of employees who are targeted by a given incentive programme results in higher administration costs in terms of monitoring whether the expected behaviours are being developed in awards and recognition.
Communicating to few numbers of people is also cheaper in relation to communicating to large groups of people, especially where such people work in different departments. A programme that takes a long time to conclude requires a higher expenditure. Hence, the time in which an incentive programme lasts helps in the computation of the overall cost of the programme. For example, if an incentive programme requires an expenditure of $500 per day, a plan lasting for three months would cost $45000, which is the total cost of the programme that appears in the budget.
The budget also needs to reflect the expected outcomes, especially in terms of incremental gains in an organisation’s profitability on a weekly or monthly basis. Incentive Performance Centre (2013) confirms that this helps in deploying the advantage of self-liquidating aspect of incentive programmes in funding the budget. Incentive programme budgets can be open-ended or close-ended. Thus, the HRM personnel in charge of making incentive programme budgets should compute the maximum costs incurred for closed-ended incentive programmes while also making estimates for similar costs in case of open-ended budgets.
An Effective Performance Management System
Effective performance management system in an organisation should reflect compensation and performance feedback models to help an organisation make decisions on whether the incentive programmes that are designed to induce performance are yielding results. Any performance measurement process must possess a mechanism of providing feedback to the developed strategies for success.
Devinney and Yip (2009) reckon that the performance is a reliable criterion that is deemed appropriate for evaluation of various organisations, environments in which they operate, and their actions. Measuring whether a strategy to improve performance is successful encompasses the evaluation of its outcome through a feedback loop.
Performance feedback may involve evaluating financial performances upon the implementation of a strategy of performance improvement. This process includes the return on organisational investments, changes in organisational assets, and the evaluation of changes in the profitability (Lambert 2007, p.19). Feedback on the performance management approaches can also be evaluated from the context of increments on the market share, changes in sales level, and even shareholder returns in the form of an increase in the magnitude of dividends.
Balanced scorecard can capture all the above indicators of the success of organisational performance. An important measure of performance of an organisation involves the determination of success of strategies that are deployed to enhance performance through alteration of managerial approaches to promote employee engagement by ensuring that cross-cultural differences of employees are managed well to enhance global growth of an organisation. In this extent, the scorecard provides the required feedback of performance management model.
In the process of recruitment, consideration of the available resources to pay a given employee a certain amount of compensation and benefits that are considered maximum offer by an organisation is important. For example, deliberation on the wages and/or salaries that an employee of a given professional calibre would be willing to take as the start up salary is necessary. It forms the basis of determining possible future mechanisms of enhancing performance and employee motivation.
Via psychometric evaluation of the person being recruited, organisations identify persons who fit in the organisation well (Lambert 2007, p.23). Fitting in an organisation implies recruitment of persons who can work to deliver on their job requirements when paid according to the offered benefits and compensation packages. Job requirement is developed consistently with the desired short-term and long-term organisational outputs. The comparison of these desired output and the actual output is the measure of organisational performance.
Highly performing organisations focus on the mechanism of creating wealth, which is then directed towards the improvement of employee welfare. Frustration and anger emerge when inequalities exist in the systems of rewarding employees (Herman & Renz 2008, p.405). If people are managed such that they are motivated through reward systems, it becomes possible for organisations to improve their performance. Hence, it sounds sufficient to infer that a direct relationship exists between salaries and welfare benefits that are awarded to employees and their performance levels in the execution of organisational tasks, which help in improving profitability and organisational performance.
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