The future demand for Human Resource professionals in light of some structural changes

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The future demand for Human Resource professionals in light of some

structural changes

Master Thesis Human Resource Studies University of Tilburg, Faculty of Social Sciences

October, 2009

Marieke Kaptein

ANR: 815547

1st_{supervisor UvT:} _{Dr. M. Verhagen} 2nd_{supervisor UvT:} _{Prof. Dr. J. Paauwe}

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M.S. Kaptein – Master Thesis Human Resource Studies 2 The future demand for Human Resource professionals in light of some structural changes

Marieke Kaptein Tilburg University

The primary goal of this study is to examine what the effects of societal and business trends are on the future employment of HR professionals,

through empirical research. Secondly this study will try to give an insight on the most significant HR activities executed by HR professionals currently. Data is collected through time registration, observation and interviews within six large Dutch organizations. The results show that the demand for the HR role is changing due to trends, but

not as fast and in the same way literature claims however.

The Netherlands counts 35.000 active internal Human Resource (HR) professionals and almost the same amount of external HR advisors, trainers, recruiters etc, a total of 70.000 HR professionals (NVP, 2007). During the last decade there has been a constant debate in literature on the changing role of the HR professional, suggesting a decrease in employment for HR professionals. This academic debate is based on theoretical ideas, assumptions and anecdotes, containing very little empirical evidence. This research will therefore attempt to analyse what is actually changing in the demand for HR professionals through empirical research.

The main returning subjects in the debate in the Netherlands regarding the HR function are the increasing attention for efficiency and strategic Human Resource Management (HRM) (Berenschot, 2007). This is clearly visible in organizations today, where there is a constant talk of downsizing, outsourcing and redesigning how an organization operates to ensure it remains competitive and efficient (Farndale, Paauwe & Hoeksema, 2009). Increasingly new approaches to delivering HRM in organizations are being explored due to the impact of economical and technological factors, both inside and outside the organization (Boxall & Purcell, 2003).

Organizations are increasingly placing a greater emphasis on business acumen and are outsourcing and automating administrative HR functions. In the Netherlands organizations like the government, ING, ABN

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M.S. Kaptein – Master Thesis Human Resource Studies 3

AMRO, Unilever and Heineken are centralizing HR functions through so called Shared Service Centres (SSCs) in order to economize (PW Intermediar, 2003). The demands to do more with less people have grown exponentially for most HR functions.

Due to the centralization and automation of HR activities, a distinction between operational and strategic levels of HRM has arised, which has received considerable attention in literature (Ulrich & Beatty, 2001).

Some argue that the “old HRM” that emphasizes expertise in transactions and paperwork is dying in a sense. Personnel practitioners are exhorted to enhance their organizational contribution by playing a more “strategic role” (Ulrich & Beatty, 2001; Lawler & Mohrmann, 2003; Brockbank & Ulrich, 2003). According to Brockbank & Ulrich (2003) the HR role is shifting due to changing business demands, which require evolution in the HR role.

As mentioned before the available empirical material on the actual impact of these changing demands on the HR function in daily practice is however very limited. Furthermore very little attention is paid to the way HRM is actually given shape to within organizations. Most literature only describes “the way it should be”; it has the character of “wishful thinking”. It is not clear to what extent the findings in literature can be supported by empirical evidence. At the same time it seems that in practice organizations are not as far in the changing process as literature presumes (Biemans, 2007).

Although this study and the debate on the changing roles of HR professionals and the new required competencies overlap, the focus of this study will be on the quantitative demand for HR professionals in the HR departments in the Netherlands. The primary goal of this study therefore is to examine what the effects of business and society trends are on the demand for HR professionals, through empirical research. Secondly this study will try to give an insight in the most significant HRM activities executed by HR professionals currently. Instead of continuing the debate on the changing HR role, it is more interesting to examine what activities HR professionals are actually carrying out in daily practice. Furthermore most research on this topic has been done in the USA and UK. Besides research by Paauwe and Farndale (2008) there is little empirical evidence on what the impact will be on the HR function in the Netherlands.

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From the above mentioned the following research question and sub questions can be formulated:

“What is the impact of current trends in business and society on the future demand for HR professionals in the Netherlands?”

Sub questions:

1. What is the effect of outsourcing and shared service centres on the employment of HR

professionals?

2. What effect does the rise of HR technology systems have on the employment of HR professionals? 3. Does the increased involvement of line management imply a decrease in activities for the HR

professional?

4. How are HRM activities currently distributed within HR departments and what character and size do

these activities have?

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Theoretical framework

The 4 logic scorecard

The market for HR professionals is derived from the demand for HRM activities. This demand is influenced by trends and developments in the business environment and society, such as outsourcing, shared service centres, advancement in technology, individualization, decentralization, the role of line managers etc. Inspired by the “4logic HRM scorecard” by Paauwe (2004), which measures the performance of the HR department based on 4 dimensions, the factors influencing and shaping the HRM function will be divided among one of these four dimensions. The four dimensions are the strategic logic, the professional logic, the societal logic and the delivery logic. Each logic is a different perspective from which we can view the HR function. Below, the four logics and corresponding trends in business will be

described.

Figure 1: The 4 HRM dimensions

Strategic PMT logic Societal SCL logic Delivery logic Professional logic HRM

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M.S. Kaptein – Master Thesis Human Resource Studies 6 Delivery logic

The delivery logic is focused on achieving cost-effectiveness, through a choice of delivery channels for the range of HR services: HR department, line management; teams and employees. Furthermore some of the HR practices can also be executed through channels such as; outsourcing, shared service centers or web-based delivery mechanisms (Paauwe, 2004). The effects of these mechanisms will be described below.

Outsourcing and SSC

The HR function has changed a lot over the past years due to new organizational forms, enhanced technology and globalisation (Caldwell, 2003). The increase in competition for example has lead to a greater interest in cost reduction (Burke & Ng, 2006), which has also lead to an increase in outsourcing of several parts of organizations (Gilley & Rasheed, 2000).Outsourcing can be defined as „the delegation of one or more business processes to an external provider, who then owns, manages and administers the selected processes based on defined and measurable performance metric (CIPD, 2007).

Within the context of HR outsourcing the processes included in an outsourcing arrangement will vary from organization to organization. One major issue in outsourcing HR is to decide what types of HR activities should be outsourced. In making this decision, organizations need to consider the likely impact of outsourcing these activities on the organization‟s performance. To do so, they may need to distinguish between “core” and “non-core” activities. Ulrich (1998) for example argues that core activities are

transformational work that creates unique value for employees, customers, and investors. Non-core activities would be transactional work that is routine and standard and can be easily duplicated and replicated.

The most often outsourced HR activities are personnel administration, recruitment and selection and training (Cooke et al., 2005). Some observers see HR outsourcing as the key trend shaping the future of HR. They envision HR departments focused entirely on strategic activities leaving all the administrative activities to vendors for which these processes are core business (Adler, 2003). Farndale et. al (2009) argue that the separation of transactional and transformational activities will improve service

cost-effectiveness and quality by improved focus. Delivery channels need to be aligned to the different nature of HR activities: from highly standardised to highly customised, in order to achieve this improvement.

Others however doubt if the strategic and operational aspects of HR can be separated so cleanly. There is very little consensus on the consequences of HR outsourcing for organizations (Adler, 2003; Gilley & Rasheed, 2000; Greer & Rasheed, 2004).

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A lot of advantages of outsourcing are mentioned in research, such as: the reducement of costs, the improvement of the quality of HR activities, getting access to external HR expertise, the decrease of administrative load, the increase in flexibility concerning market forces, the averting of internal risks and being able to focus more on the strategic side of HR (Cooke et al., 2005; Dickmann & Tyson, 2005; Gilley & Rasheed, 2000; Greer et al., 1999; Klaas et al., 2001; Lilly & Gray, 2005).

Disadvantages are mentioned as well however, such as; an increase in costs for HR activities, becoming dependent of service providers, the exchange of very confidential data, the loss of knowledge and quality, the fear of losing control (Gilley & Rasheed, 2000; Greer et al., 1999; Klaas et al., 2001). Hence, the outsourcing of HR can lead to both positive and negative outcomes for organizations.

But what are the effects of outsourcing for HR departments and the HR function? Outsourcing might lead for example to a reduction in the size of HR departments as the transactional work that they have done until now is replaced by transformational, value added work (Brewster, Woods, Brookes & van Ommeren, 2006). It could also be argued that as a consequence of outsourcing, HR departments have more time to concentrate on strategic HR issues (Greer, Youngblood, & Gray, 1999; Ulrich, 2000). It enables

decentralized structures that support higher rates of innovation and flexibility. But does this imply a focus of HR departments on strategic issues only? A consequence could also be that these changes just cause a shift in roles and responsibilities, not automatically implying a shift in the strategic direction. According to Brewster et.al (2006) the implication for HR is clear; when HR activities are outsourced there is less need for people in the HR function. Not clear is however in what function levels of the HR profession there will be less need for people.

Moreover one of the consequences of new forms of organization flexibility, ongoing cost reduction and advancement in technology is the shift of several HR responsibilities to line management (Caldwell, 2003). Appraisal and team development are for example often the responsibility of line management (Whittaker & Marchington, 2003). Nowadays most organisations believe the implementation of HR practices should be in hands of line management (Biemans, 2007). Line managers should be able to execute “soft” HR responsibilities as well as the “hard” business responsibilities.

Besides outsourcing and the shift in responsibilities to line management another emerging form of organization structure for HR is the shared service centre (SSC) (Farndale, Paauwe & Hoeksema, 2009). This is the creation of an internal „hub‟for the delivery of HR services. According to research done in the Netherlands by Farndale, et. al (2009), increasing numbers of HR shared service centres (SSCs) are being established. This research also shows that there is a trend rising of companies setting up shared service

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centres with much publicity regarding potential cost savings and hence other companies may be being seduced into following the same trend to maintain their legitimacy and chances of survival in the marketplace.

In SSCs, this organizational form typically starts with the consolidation of transactional activities such as payroll, benefits management, pensions and employee records (Adler 2003). The longer term goals can then be to establish centres of expertise around the more traditional (recruitment, selection, training, performance management) and transformational (change management, strategic HRM, knowledge management) HRM activities (Farndale et.al, 2009).

Gilley et al. (2004) claim that most standard HR activities, which do not need special business knowledge are more suited to standardisation and automatisation. Highly standardized transactional HR activities are the most suitable to place in SSC. The SSC model centralises the transactional HR activities, creating more space for transformational HRM at the local level (Farndale et.al, 2009).

SSCs make it posssible to centralize transactional activities creating more space for tranformational HRM). The change in HR delivery through SSCs results in other internal changes within an organization as well. Because of the centralization of transactional activities more time is created to set up HR expertise teams within organziations. These internal changes and outsourcing also result in new responsibilities for HR professionals. HR remains responsible for the delivery of HR services, HR has therefore a coordinating role in the process of outsourcing and SSCs making sure HR services are still delivered up to quality standards.

The total effect however of SSCs and outsourcing will vary depending on the way the HR function is organized within the organzation. These effects are likely to be different for each HR function level as well.

Most large organizations have organized their HR delivery channels according to the „three legged stool model „by Ulrich. This model consists of three commonly recognised aspects, namely centralised provision of shared administrative services (SSCs), centres of expertise and business partners. Farndale et. al (2009) found some evidence for the „three-legged stool‟ model of HR delivery in there sample of 15 large Dutch companies. Research by CIPD (2007) recently done in the UK shows that 18% of HR functions have all three elements in place. Ulrich argues that in order to deliver value the HR function in large organizations needs to consist of the following streams of work: transactional HR carrying out administrative work through service centres, embeddded HR working directly with business leaders, centres of expertise providing specialist advice and at last coporate HR which oversees the whole function, implementing

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organization-M.S. Kaptein – Master Thesis Human Resource Studies 9

wide initiatives and working with the top leaders (People management, 2007). Changes within these channels of delivery, such as outsourcing and SSCS will have a different impact on each HR function level.

Based on these arguments the following proposition is stated:

Proposition 1: The consequences of outsourcing and SSC on HR activities will differ between activities and between HR function levels.

By standardizing several HR activities greater economies of scale can be reached through outsourcing or SSCs, delivering services of the highest value at the lowest cost to internal clients. This structure also transfers increasing responsibility away from HR to line managers for the implementation of HRM, as well as enabling line managers and employees to access self-service functionality (Reilly and Williams 2003; Strikwerda 2004).

Research by the CIPD (2007) shows that the vast majority of organizations in the UK maintain their shared services operation in-house. 11% of the survey participants expected to outsource their total HR shared services in three years, half of the participants expect to only partly outsource some of their shared services. The assumption is that a SSC increases the quality of services for customers. Advancements in technology make this all possible as people can communicate and share information through web based progams without having face to face contact (Ulrich, Brockbank & Johnson, 2008). The intention of this thesis is to explore what effect the increase in outsourcing and SSC has on the character and size of HR activities and what this means for HR moving forward.

Technology

Besides outsourcing and shared service centres, technology is also a large factor that has caused the HR function to change a lot over the past years (Caldwell, 2003). Technology has opened up a new market of administrative service providers for outsourcing a wide range of organizational activities, as well as firms working with technology enablers to run in-house systems (Farndale et. al, 2009). Evidently the latest advanced technologies offer the potential to streamline many HR functions; businesses are increasingly utilizing information technology to design and deliver their HR practices. E - enablement of HR is being engineered on a global basis (Harris, Brewster & Sparrow, 2003). Not surprising, given the substantial benefits that can emerge from integrating information technology into the HR function. New work environments such as telecommuting, new technologies, working conditions and competencies are becoming increasing available (Lachance, 1999). At the same time new generations of software have revolutionized HR information systems improving HR productivity, increasing control of employee benefits,

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streamlining compliance efforts, lowering the cost of recruiting (Adler, 2003). A survey conducted by Stamford, Connecticut based Towers Perrin (2001) showed that almost two thirds of the companies represented in the survey were planning to increase their investments in HR related technologies in the immediate future.

Snell, Stueber and Lepak (2002) point out that HR can be more strategic, flexible, cost efficient and customer oriented by leveraging information technology. They also claim that information technology makes it possible to lower administrative costs, increase productivity; speed up response times and enhance customer service. With the growth of information technology much of the administrative aspects of HR can be accomplished through technology solutions within the company or outsourced (Lawler & Mohrman, 2003). This is also been argued by Shrivastava and Shaw (2004) who note that IT driven HR solutions seem to have lead to two parallel developments: outsourcing of HR sub functions to external vendors and the market for HR applications for in-house installation.

Some companies view the building and operating of new IT systems as cost distractive and do not see the prospect of sustainable lead. They see outsourcing as an appealing alternative instead. On the other hand HR professionals are more than often using technology and the internet to execute their activities. The trends in E-HR are: reductions in costs and time for many HR activities, transition of administrative actions from HR to employees and managers themselves, increasein information readily available to employees and managers and an increased emphasis on HR as a strategic business partner (Ruël, Bondarouk & Looise 2004). The division of HRM responsibility between line management,

employees and HR staff is also coming further to the fore with the widespread implementation of employee and management self-service systems. The advancements in technology free HR up from some of its routine tasks, creating a better opportunity to become a strategic partner (Brockbank, 1999; Ulrich, 1997). By removing transactional activities more time and opportunities can be created for HR to deliver

transformational HRM (Farndale et, al, 2009). Due to technology, outsourcing and the increased use of SSCs, HR will be active in new tasks such as relationship management and central purchasing of external services and at the same time remain responsible for the transactional activities. The increase of new activities however does not alter the fact that the greater part of the HR activities will disappear. The argumentation above leads to the following proposition:

Proposition 2: Reductions in HR activities are mostly expected in routine based functions

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All these changes require new approaches for the management of organizations in general and in particular for the management of HR. Organizations are for example also putting in to place HR information systems which enable managers to undertake a number of HR related activities themselves, such as absence monitoring or leave registration. It is evident that the transformation HR is undergoing is driven by a.o. technology.Not all companies however are utilizing the developments in technology to move HR towards becoming a strategic business partner. Some may simply use IT to reduce the transaction costs and the size of the HR department (Lawler & Mohrman, 2003).In summary, the exact effects of technology on the HR function still remain unclear.

Societal logic

The societal logic, the fitting of HRM policies with society at large, focuses on works councils, government, trade unions and other interest groups and factors inside and outside the organization influencing the HR function (Paauwe, 2004).

Most literature on the HR function is based on American or British research with little attention for differences in organizational context, while the importance of context is being addressed more and more in international HR literature (Budhwar & Sparrow, 2002; Farndale & Paauwe, 2005). The HR function is influenced by the institutional context, the labour market and the national culture an organization is

surrounded by. There are large differences between American, British and Dutch context in institutional and cultural dimensions. Labour legislation for example plays a large role in the Netherlands (Paauwe &

Farndale, 2008). In the Netherlands there is legislation concerning employment relationships, labour agreements, labour circumstances, trade unions and diversity management. The more complex labour legislation is the more time and energy HR professionals will have to put in the accompanying

administrative tasks (Brewster et.al, 2006).

The system in the Netherlands concerning labour relations, the so called “Dutch polder model”, emphasizes consent in the interactions between employers organizations, trade unions and the

government. Legislation, institutions and other stakeholders play a large role in the development of HR policy and activities. The focus in this system is on stakeholders, which has for example lead to a strongly regulated salary policy, through legislation and collective labour agreements (Paauwe & Farndale, 2008). The “polder model” system also contributes to the reduction of power distance between employers and employees and employee participation.

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organization (Bovenberg & Wilthagen, 2008).

The Dutch “polder model “ is under pressure however due to societal developments such as decentralization and individualization. This is noticeable in union membership numbers for example, since 1995 this has declined from 28%, 1.516.000 members, to 21%, 1.381.000 members in 2008 (CBS, 2009). Union density is continuously decreasing, which puts the position of trade unions under pressure. While the position of trade unions is under pressure, there is more and more attention for involvement on

organizational level, which results in an increasing interest in works councils.

More often works councils are involved in collective labour agreements for the harmonisation of working conditions. The demand for a representative works council is increasing due to the decentralization of employee conditions which continues and collective labour agreements which are more and more turning into frame work arrangements. The workload for HR increases this way, as employment relationships are more and more tailor made and the involvement of works councils is increasing as well.

The HR role in relation to labour relationships has two dimensions, on the one hand a consultation partner for trade unions and works councils and on the other hand a discussion partner for employees. In large organizations HR has mostly a strategic and professional role (Paauwe & Farndale, 2008). Paauwe and Farndale (2008) identify 4 HR roles in their research in Dutch organizations; the strategic and change partner, the consultation partner for trade unions, the discussion partner for employees and the policy executor.

HR managers within the Netherlands have a professional working relationship with works councils and trade unions. HR is for example increasingly cooperating closely with works councils as collective labour agreements are turning more into a frame work arrangement. A good understanding with trade unions, works councils and employees is an important strategic element of the HR function as these stakeholders are an essential part of modern employer/employee relations. An effective relationship is crucial to delivering HR strategy within an organization HR and trade unions, works councils work in an atmosphere of mutual cooperation for the benefit of employees. Especially within large organizations HR therefore has a strong focus on relationship management with all the stakeholders involved. Expertise teams are often created within these organizations which spend all their time on preparing negotiations with trade unions on collective labour agreements and providing the works councils with the right documentation.

An example of a phenomenon which organizations today need to consider and in which HR is largely involved is “flexicurity”. The European Union is currently introducing the concept of “flexicurity”, aiming at simultaneously enhancing both flexibility and security in the labour market in view of the

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globalization of the economy and far-reaching demographic developments such as the ageing of the population. The Netherlands often serves as an example (Bovenberg & Wilthagen, 2008).

The Dutch labour market is characterized by substantial contractual diversity, including part-time work, fixed-term work and agency work. In 2006 46 percent of the employed labour force worked part-time. Working part-time is even regarded as a normal and desired type of employment, which is illustrated by the high share of part-time workers who report that they voluntarily work in this type of employment. Especially women work parttime, 75% in NL in 2006 (Bovenberg & Wilthagen, 2008).

Security on the other hand remains to be a precondition for both employer and employee. Security for these „a-typical‟ workers is provided by law. This holds true not only for the position of the employee under civil law, but also for social security legislation and entitlements.

The challenge for the future will be to create a good balance between flexibility and security. As flexibility is desired and more and more is arranged decentralized on an organizational level instead of collectively from a central point, HR will play a larger role in facilitating these flexible arrangements. Besides the increased interest of employees for a better work life balance and flexible working conditions, organizations are interested in flexibility, in terms of employee relations, as well.

Labour flexibility, and especially internal labour flexibility, with instruments such as flexible working hours and part-time jobs will help in balancing the needs of the employee and those of the employer.

Professional logic

The professional logic focuses on the expectations of line managers, employees and other stakeholders and refers to the degree of customer orientation of the HR function and the quality of its services (Paauwe, 2004), for which use is made of the following criteria:

- Tangibles: These are the evident products of the personnel function, such as procedures for appraisal, remuneration, evaluation systems and training & development facilities.

- Reliability: This relates to the capacity to implement the required services in an adequate way.

- Responsiveness: This is the willingness to provide rapid and timely assistance when needed.

- Empathy: This is the ability to perceive and understand different groups of customers and their backgrounds.

- Assurance: This is the ability to convince the customer that the department can handle its interests because expertise and hence credibility is available.

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As mentioned before HRM in organizations today is pressured to outsource and downsize and at the same time maintain high levels of service quality. The HR function in some organizations is undergoing a

significant reorganization aiming to achieve maximum efficiency or competitive advantage for the firm. The impact of the increase in use of advanced technology and shared services as described in the delivery logic is also high on the professional logic. SSCs restructure the delivery of HR through a client driven model of organization improving customer focus and the quality and cost effectiveness of the function. SSCs are not primarily technology driven, but are actually about restructuring how employees and line managers interact with and experience HR. SSCs for example bring together the notion of centralising activities to avoid duplication, but simultaneously remaining responsive to local business needs. The quality of HR services must stay as high as possible; SSCs are thus designed to deliver services of the highest value at the lowest cost to internal clients (Farndale et. al, 2009).

Technology and the structure of SSCs at the same time make it possible to transfer responsibilities away from HR to line managers as well as enabling line managers and employees to access self service functionality (Strikwerda, 2004) Due to this possibility the HR function itself can create the opportunity to meet its own desires for greater opportunities for transformational involvement while line managers and employees always demand a seamless service and excellence in transactional tasks.

The distinction between transactional and transformational activities implies better awareness of the opportunities for using different delivery channels, for higher quality more customer focused service and more cost effective HR activities.Separation of transactional and transformational activities will

improve service cost-effectiveness and quality by improved focus. For example the traditional method of delivering transactional HRM through HR managers makes it subject to inefficiencies whereas it suited to standardisation and automation through which a higher quality of service providing can be achieved (Farndale et. al, 2009).

The establishment of expertise centres as a delivery channel for example also makes it possible for HR professionals to deliver high quality services. Centres of expertise around the more traditional

(recruitment, selection, training, performance management) and transformational (change management, strategic HRM, knowledge management) HRM activities make it possible for HR experts to build corporate transparency and consistency through sharing a common base of knowledge (Farndale et. al, 2009). Professional expertise can be provided across the organization.

Transformational HRM does however require a more customised approach to a fit specific organization domain. It will take time to develop high quality services and it will require knowledge and

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sensitivity. Transformational HRM can only be carried out by a well informed HR manager working together with a specific unit.

By removing transactional activities from the HR manager‟s portfolio with the application of new delivery and professional logics, time and opportunity can be created to deliver transformational HRM. This change in HR delivery through the application of SSCs thus results in a greater focus on the business partner role and added value. The greater focus on the business partner role will be further explained in the in the strategic logic.

As mentioned before the separation of transactional and transformational activities will improve service, cost effectiveness and quality of HR practices. The old fashioned stand alone Personnel Manager is developing into a highly sophisticated partnership between in-house specialist and staff based attention both in practice and research to the whole issue of how to monitor control and govern the chain of related HR activities being carried out and delivered by a differentiated set of delivery channels and professionals (Farndale et.al., 2009).

At last the HR function is being reorganised in to a more customer focused function, with better flow and management of work processes and reduced costs. This transformation of HR, is resulting in new functions such as demand management, contract (SLA) management, and service/value chain management within HR but located outside the HR SSC (Farndale et. al, 2009).

Strategic logic

The strategic logic focuses on the expectations of boards of directors, CEO‟s, shareholders and financial institutions. These are particularly interested in the planning and policies and outcomes of the strategic dimension and the way in which it will contribute to the whole process of generating added value. This dimension reflects the notion of economic rationality and can be expressed in criteria such as efficiency, effectiveness, flexibility, agility, quality and innovativeness (Paauwe, 2004). The effects of these

mechanisms will be described below.

Organizations are undergoing dramatic changes with significant implications for how human resources are managed. Business environments are changing rapidly and the modern organizations are becoming increasingly complex. The increased interest for the relationship between HRM and performance (Guest, 1997; Boselie, Paauwe & Jansen, 2001) caused the debate to evolve around the different roles the HR function should have in order to create added value for the organization.

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HR professionals are often exhorted to enhance their organisational contribution by playing a more strategic role (Ulrich et.al 2008). There have been repeated calls for HR to become more of a business partner.

Paauwe (2004) argues that the shift in HRM roles can be summarized by the fact that the HRM function has had to become more business oriented, more strategic and more oriented towards

organizational change. According to Ulrich et. al (2008) HRM functional expertise, knowledge of the business and management of change are the competences most required by clients of an HRM

professional for the purpose of adding value to the business. Brockbank, Ulrich et.al (2008) note that HR professionals increasingly have needed more knowledge about financial management, external competitive and customer demands in order to function well. The focus has shifted from administration to a larger focus on more strategic issues. Ulrich et. al (2008) claim that HR professionals must understand the fundamental drivers of business dynamics, such as advancements in technology, economic turbulents, etc. Each of these trends has direct or indirect implications for HR which HR professionals must understand and be able to communicate. Now more than ever HR professionals are expected to be able to adapt HR practices to changing business conditions and align HR policy with the overall business strategy.

One of the consequences of new forms of organization flexibility, ongoing cost reduction and advancement in technology is the assignment of several HR responsibilities to line management (Caldwell, 2003). Researchers argue that the hand over of HR responsibilities to line management should no longer be seen as a one way relationship, but as a strategic partnership (Lawler en Mohrmann, 2003; Sheehan, 2005). In this strategic partnership HR must be able to fulfil a business partner role, by understanding the business, being able to think a long with line managers in a strategic and proactive way and be oriented towards organizational change, instead of only executing transactional activities in a seamless way. Lawler and Mohrman (2003) also conclude that strategic partnerships between HR professionals and line

management are very profitable for the fulfilment of the business partner role of HR, as this way HR systems can be developed and implemented which support the overall business strategy. In order for line management to play a good part in the strategic partnership, Lawler and Mohrmann (2003) point out that it is important that line managers are actively engaged in HR activities by giving them HR responsibilities (self-service). This gives them a good illustration of the relevance and usefulness of HR for the business (Lawler & Mohrmann, 2003) and gives HR professionals the opportunity to focus more on strategic HR activities (Budhwar, 2000). The change in HR delivery through SSCs as mentioned before and through line management results in a greater focus on the business partner role and added value (Farndale et. al, 2009).

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This leads to the following proposition:

Proposition 3: The role of business partner compensates for HR activities which are being transferred to SSCs or outsourced.

By removing transactional activities from HR manager‟s portfolio, time and opportunity can be created to focus on the business partner role and deliver added value other than in a transactional way. The focus on business partner role leads to an increase in HR activities in a different way which makes the impact of SSCs on the workload of HR less drastic.

There is a lot of attention for the changing HR role in literature. As described above the HR function has undergone a series of transformations due to various factors. The increase of downsizing and

reorganizations in organizations is also a factor which has a big influence. The HR function is being transformed in order to meet these challenges and to respond intensely and quickly to critical occurrences within companies. The process roles of HR become salient at times of rapid change. The unpopular changes associated with downsizing and reorganizations have provided opportunities to strengthen the strategic influence of HR staff. HR will face the challenge of coping with the long term effects of downsizing and reorganisations (Sahdev, Vinnicombe & Tyson, 2001).

This will probably imply a shift in focus on activities. In addition the following proposition is stated:

Proposition 4: Large projects within organizations such as downsizing and reorganizing will have influence on size and character of activities executed by HR professionals

Assumptions are made on how the HR role is changing and what the effects are within organizations. There is however very limited evidence from empirical research. The question arises if the HR role is really changing as fast a described in literature and if it is actually shifting towards the strategic side, into a business partner role. The intention of this thesis therefore is to explore what the actual effects of business and society trends are on the demand for HR professionals through empirical research.

In summary, important trends and changes in the emerging field of HR are: outsourcing, SSC, technology, focus on HR roles, involvement of line management and developments in society which are all reflected in the 4 logics:

The delivery logic which focuses on the various ways in which HRM practices can be delivered is going through some major changes due to these business trends. HR practices are being more and more delivered through line management; outsourcing and SSCs. Advanced technology is also playing a large role in these developments. The focus within the delivery logic is on cost effectiveness and increased

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efficiency. More space is created fort transformational HRM by centralizing and outsourcing the transactional HR activities (Farndale et. al, 2009.

From a societal logic point of view a lot of changes are going on as well. The largest trends in society are individualization and decentralization. Due to development of these trends employers and employees are more and more in search of the right balance between flexibility and security. These effects will not be researched empirically in this study, but will be considered in relation to other developments in the research.

Within the professional logic, which focuses on the level of quality of the services provided by the HR function (Paauwe, 2004), a lot it changing as well. The HR function in some organizations is undergoing a significant reorganization aiming to achieve maximum efficiency or competitive advantage for the firm. The separation of transactional and transformational activities improves the quality of HR by an improved focus.

At last the strategic logic, which is about linking HRM strategy with corporate strategy, is also a dimension in which developments are taking place due to business trends. Now more than ever HR professionals are expected to be able to adapt HR practices to changing business conditions and align HR policy with the overall business strategy. By removing transactional activities from HR manager‟s portfolio, time and opportunity can be created to focus on the business partner role and deliver added value other than in a transactional way.

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Methodology

Research steps

In order to create insight in the impact trends in business and society have on the future demand for HR professionals, empirical research was done. This research can be described as an explorative research. In the case of explorative research the factors researched are not totally clear in advance, but will become clear along the way. This can be defined with the term: explorative approach. Data for the research is collected in three phases.

In the first phase use was made of a case study within a financial institution. A case study is particularly suited to research problems when the phenomenon in which one is interested must be seen in its context (Vaus, 2001). Yin (1994) defines a case study as an empirical method for learning about a complex phenomenon, within a real life context. By using a case study in this research it was possible to do a more in depth research. It creates the possibility to gather much more specific information and investigate the research question thoroughly.

In the second phase semi - structured interviews were used. Qualitative research through the use of semi- structured interviews is an effective way to create insight in the motives of respondents (Baker, 1999). Qualitative research has the aim to understand the choices of respondents and discover what factors influence these choices. Furthermore Baarda, de Goede and Kalmijn (2000) indicate that in the case of qualitative research less foreknowledge on possible answer alternatives is required, as through semi-structured interviews answer alternatives can be localized which have not been anticipated on before.

In the third phase secondary data analysis and data collected in phase 1 en 2 were used to formulate and integrate several possible scenarios for the future of the HR professional.

Procedure

Phase 1: In this first phase the intention was to gain detailed knowledge about the current character and size of HR activities and how they are distributed within the HR department. In order to get a notion of the present situation use was made of time registration and observation within the HR department of a financial institution. By using time registration and observation instead of for example questionnaires, much more specific and profound data could be gathered.

In 2002 time registration was used in research within the HR department as well. These data in combination with the data gathered through time registration within the present research, make it possible to make a comparison and analysis of how things have developed in the past years. The research was

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executed by the HR director for internal use and is not published however. This should be taken in

consideration when making a comparison. The fact that the entire organization was going through a major restructuring, retrenching a large part of its staff during the time registration phase should also be taken in account when analyzing the results.

HR professionals within the financial institution were approached personally and asked to

participate in the time registration process. The goal of the time registration and accompanying instructions was explained orally. Agreements were made on the length of the time registration period. During this phase the HR professionals were observed as well. This way an impression could be made of what activities they were engaged in on a daily basis.

HR activities were divided into categories according to research by Berenschot (2007) as described in table 1 below.

Table1: Categories of working areas, Berenschot (2007)

1. Managing 8. Job Valuation

2. Inflow 9. Advise & Research

3. Outflow 10. Employee policy

4. Recruitment & Selection 11. Personnel/Salary administration 5. Management Development 12. Internal Communication 6. Training & Development 13. Corporate Healthcare 7. Rewards

The focus was set on the general and frequent occurring HR activities in HR departments, such as recruitment, rewards/compensation, training, etc. HR professionals from different levels within a financial institution were asked to register on a daily basis how much time they spend on activities and the character of the activities. By collecting these data an indication could be made of the character and size of activities executed, the HR professionals involved and how much time is spent on the activities by HR professionals of various levels.

The various process steps related to the activities were analysed.

After making an inventory of the activities done, these activities were divided into several categories following the model by Berenschot (2007), making it possible to make an analysis of the character and quantity of activities executed within the HR department.

Phase 2: In the second phase interviews were held in organizations in different sectors. Before conducting the interviews a literature study was carried out, which served as a guideline throughout the research. The

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interviews were held by phone or via email. The population existed of 6 large organizations which are in the AEX index. A document study was done to form a notion of the organizations before interviewing. Only large organizations were approached as these in all probability have HR departments (Guest & King, 2004). The variation in data is limited by only researching large organizations. Large organizations often have to do with cost reduction and cost efficiency which can lead to outsourcing and SSC (Adler, 2003).

First of all an email was sent out to the respondents within the organizations. After this contact by phone was made in order to make an appointment for the interview. The time needed per interview varied, but was approximately half an hour, in case of an interview by phone. The interviews were held with random HR professionals who indicated they had enough knowledge about the outsourcing or SSC process within their company. During the interviews the researcher attempted to avoid leading questions which could influence the answers of the respondents. When a respondent did not understand the question, the researcher rephrased the question or underlined it with an example. By interviewing these large organizations an analysis could be made of what the effects of business and societal trends are on the demand for the HR professional. Subsequently future scenarios for HR professionals were outlined.

Phase 3: In the third phase several possible scenarios for the future were formulated and integrated. These possible scenarios are different depending on the impact of various trends in the future. In order to

formulate various scenarios use was made of secondary data analysis on research reports of HR trends and statistics of the labour market of HR professionals.

There are several options possible for describing these scenarios. One way is by distinguishing three scenario‟s based on several cases; a minimum, an average, a maximum and describe the impact of the developments on these cases.

Another way is for example describing several possible scenarios. Using outsourcing as example:

a. Outsourcing will be turned back b. Outsourcing will be constant

c. Outsourcing will have same growth rate as in past ten years d. Outsourcing will grow exponentially.

Based on the data gathered in the case study, data from interviews, data from the document study and the literature study, future scenario‟s for the HR professional were outlined.

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M.S. Kaptein – Master Thesis Human Resource Studies 22 Measures/Instruments

In order to be able to answer the research question a new instrument was developed. To create insight in what the impact of societal and business trends are on the future demand for HR professionals, use was made of a combination of time registration and observation within this research. The time

registration and observation was executed in different HR function levels (manager, administrator, advisor, recruiter, project officer) within the HR department of a financial institution. By using time registration and observation as an instrument it was possible to examine what is currently going on in HR; what activities are executed and how they are distributed. A much more detailed notion of the impact of trends on the

employment of HR professionals could be formed this way than is currently discussed in literature. Semi – structured interviews were used as well. These were used to find out what the effects of outsourcing, shared service centers, technology, changes in Dutch economy and involvement of line management are on the HR function in organizations. In order to increase the validity of the interviews and to be able to, if necessary, make some adjustments first some test interviews were done with HR

professionals within the financial institution. In order to treat the collected data confidentially all the interviews held were processed anonymously in this research. The categories used in research by

Berenschot (2007) were used to categorize and analyze the activities registered by HR professionals within the financial institution.

Afterwards future scenarios were outlined by using an overview of HR activities executed by the financial institution (X), the benchmark consisting of all organizations interviewed (B) and the most extreme situation (M). A scale from 0% to 100% was used to indicate to what extent the HR departments execute HR activities themselves. A percentage of 50% for example indicates that HR is involved for 50 % and the other 50% of the HR activity is done by an external party or line management. The positions on the scale of X, B and M with regard to each other were used to outline the future scenarios.

Data analyses

First of all, all interviews were transcribed and read carefully in order to get a good overview and

understanding of the collected data. These reports were used to discard all non relevant information which did not answer the interview question. Then all data were split per interview question and were arranged. This provided an insight to answer patterns within each question. Subsequently comparisons could be easily made between the different organizations.

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The same applies to the time registration of the HR professionals within the financial institution. The data from the interviews and time registering were classified in a certain group according to the model by Berenschot (2007). This way each HR activity could be allocated to a certain group of activities in order to measure which activities take the most time and take place the most. With information on the time spent on various HR activities and the character of the HR activities an analysis was made of the impact trends in business (outsourcing etc) will have on the HR function. After which scenarios for the future demand of HR professionals were outlined.

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Results

Case study in a financial institution

This section describes the results after analyzing the time registration research within the HR department of the financial institution. Figure 2 below shows how the HR department within the financial institution is set up.

Figure 2: Organization chart HR department financial institution

HR operations consists of HR administration, HR salary administration and HR communication. This entire team consists of 3 administrators, 2 salary administrators and 1 employee who is responsible for all outgoing communication on HR topics within the organization. These team members all report to the head of operations. Development & projects consists of 4 development & project officers, who all report to the HR director. The development & project team is responsible for all development programs & all HR projects such as, the performance cycle, job valuation, incentive plans etc. HR account & program management consists of 3 HR account managers, who report to the head of account and program management. The account managers are overall responsible for all advice and recruitment within the business divisions they service. The account managers are supported by three HR advisors, responsible for all advice to line management within their business and 3 recruiters, responsible for all recruitment within their business. They also report to the head of account program management.

Within the HR department outsourcing i.e. third party suppliers are used for the HR activities training & development, job valuation and recruitment. The employee and salary administration is done by the HR department internally. The intention is to outsource the salary administration as from 2010 however. None of the other HR activities have been placed in a SSC.

HR Director HR Operations HR Development & Projects HR Account & Program Management

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First the results of the HR department in total will be described. In table 2 below, time spent on each working area by all HR staff members in relation to the total amount of time spent, is expressed in

percentages. Subsequently the results will be made clear per function level within the HR department, i.e. administrator, advisor, recruiter. Here the percentage of time spent by the various staff members on each HR activity will be outlined. Finally a comparison will be made between the results of the time registration research held now and the results of the time registration research held in 2002.

Table 2: Percentage spent time per HR activity

HR activity 2009 2002

Recruitment & Selection 12 21

Training & Development 14 8

Job Valuation 1 1

Individual employee counselling 13 9

Administration 27 14

Meetings/Consultation 16 24

Other activities 17 23

Total 100 100

In 2002 the HR department existed of 19, 7 full-time equivalent (fte), with one vacancy, so in formation 20,7 fte. The salary administration was at the time part of the controller‟s office, consisting of 2 fte. In 2009 the HR department consisted before the restructuring of 25, 7 fte. After the restructuring this decreased to 19, 7 fte.

There is no large difference in the absolute hours worked between 2002 and 2009. It only increased temporarily during the restructuring phase where more working hours were put into.

Within the HR department most time is currently spent on administration, other activities and meetings/consultation, respectively 27%, 17% and 16 % of the total amount of time spent. Administration consists of personnel administration and salary administration. Other activities consist mostly of ad hoc activities, such as answering urgent questions from line management through email/telephone and giving advice. Meetings/Consultation consists of all occurring meetings; mutual meetings, meetings with internal clients, such as line managers and external clients, such as temporary agencies, trainers and other external suppliers.

A lot of time is spent on meetings in order to stay up to date withinthe HR department and be able to work efficiently as a team. Meetings with line management, consultation moments, occur frequently for the same reason. Compared to 2002 time spent on meetings/consultation has decreased. The HR director had the opinion that more time than necessary was being spent on meetings and consultation moments

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within the HR department. By organizing meetings and consultation moments in a different way, less frequent and more efficient, more time was successfully created for other HR activities.

Time spent on administration consists of time spent on personnel and salary administration of all employees within the organization. This is still an activity on which a lot of time is spent as all administration is processed by HR internally. No aspects have been placed in a SSC or have been outsourced within the financial institution.

The above table also shows a high percentage for other activities. Other activities have often been considered by respondents as ad hoc activities, answering questions. HR has to do with ad hoc questions coming from line mangers which are often complex and take a lot of time to sort out and answer. HR activities recruitment & selection, training & development and individual employee comparatively cost the same amount of time. Time spent on recruitment & selection has decreased substantially in comparison to the past as line management is taking over a lot of process steps. The least time is spent on job valuation. Job valuation is not a daily reoccurring activity. Most jobs within the company have been valued in the past and will be revised in a few years from now. Time spent on training & development depends a lot on the amount of training sessions that take place. During the time registration phase an intensive training period regarding the young talents took place, resulting in a percentage of time spent on training & development.

A lot of changes in time spent on the various HR activities are a result of the restructuring of the organization as a consequence of the economic recession which was taking place during the time registration phase.

Time spent on administration for example almost doubled compared to 2002. A restructuring phase brings on a lot of administration, as this is a process in which HR has to document data extremely accurate. In order to communicate clearly organisation wide, information packages were set up and employees were sent letters regularly. In case of redundancy, employee files needed to be up to date and contain all information available, as accurate as possible. This brings on a lot more administration for HR than in “regular times.” Time spent on individual employees has also increased, because of the uncertainty of employees about what the exact outcome of the restructuring was going to be for them and what the organization would be like after the restructuring, many questions were put to HR.

There was also more consultation with line management about employees, more time was spent on informing employees and there was more attention for absenteeism, compared to “regular times.”

As the financial institution was cutting down costs and retrenching a large part of its staff, several functions within the organisation stopped existing and vacancies barely arised. The few vacancies that did

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arise were occupied by internal candidates who lost their old jobs due to the restructuring. This explains the large decrease in time spent on recruitment & selection compared to 2002.

The decrease in time spent on meetings/consultation is partly a consequence of the restructuring. A large element of meetings and consultation is discussion on key issues. Within the HR department several HR staff members are responsible for a certain key issue, such as labour market positioning, student recruitment, bonus & benefits, corporate healthcare etc. Priorities were set differently during the restructuring phase and so discussion on key issues, with knowledge sharing as primary objective, was pushed into the background.

Table 3: Percentage spent time per HR activity per function level

The table above shows that an administrator spends most time on administration and employees, respectively 70% and 21% of the total amount of time spent. Administration is the main HR activity within this function, so obviously most time is spent on this part. The 21% percent time spent on employees consists mostly of providing information to employees. This is because employees often turn to administrators with questions about illness, leave registration and payment issues.

The recruiter obviously spends most time on recruitment & selection, respectively 46% of the total amount of time spent. Employees and meetings/consultation take up a lot of time as well, respectively 13% and 16% of the total amount of time spent. Time spent on individual employees consists of providing information, consultation with line management on individual employee issues and individual care.

Time spent on meetings/consultation consist mostly of meetings with line management and fellow recruiters. With line management vacancy details and preferred recruitment channels are discussed. Regular consultation with fellow recruiters is necessary to stay informed on the status of other vacancies and candidates involved. Very often candidates appear to be suitable for multiple job openings.

HR activity Recruitment _{& Selection} Training _&Development Job _Valuation Individual employee

counselling Administration

Meetings/Cons

ultation Other Activities

Administrator 0 1 0 21 70 6 2 Recruiter 46 2 4 13 9 16 10 Advisor 0 0 1 20 9 36 34 Projects & Development officer 0 47 0 0 28 10 15 Account manager 5 4 0 14 8 37 32 Average time spent 10 11 1 14 25 21 19

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The advisor spends most of the time on meetings/consultation, other activities and employees, respectively 36%, 34% and 20% of the total amount of time spent. Time spent on other activities is a lot due to the restructuring phase. A lot of extra activities such calculation of resignation compensation; draw up of resignation letters, transition of redundant employees to parent company, regular reporting to higher management, advising line management on conversations redundant employees etc. occur in this phase, which have been registered under the headline: “other activities”.

The project and development officers spend most of their time on training & development and administration, respectively 47% and 28% of the total amount of time spent. The high percentage of time spent on administration is a result of to the restructuring phase. The project officer was involved in mapping out were jobs would be cut off, the composition of redundancy files etc., a process involving a lot of

administration, which has to be processed very accurately. The other activities consist of the gathering of benchmark and survey data for various projects. Other large projects (e.g. employee satisfaction survey) were pushed into the background for the time being.

The development officer spends most time on training and development, respectively 47% of the total amount of time spent. Most of these hours are spent on the actual training of employees. The 10% spent on meetings/consultation is spent on team meetings, preparing training material and advising line management on training programs.

The account manager spends most time on meetings/consultations and other activities, respectively 37% and 32%. As the account manager is overall responsible for several business units, frequent meetings with line managers are necessary to keep HR activities and procedures running smoothly through out all business units. Other activities mainly consist of reporting on business units to higher HR management levels, which is a time consuming activity.

Observations made during the time registration phase confirm the previous described

developments. As mentioned before the HR director wanted to bring down time spent on meetings and consultation moments. It was clearly visible within the department that the HR employees spend less time in meetings and are actively working on arranging these meetings differently, in a more efficient and structured way. Various meetings were held less frequent and in different compositions. At the same time the

communication within the department went through a change as well. Communication within the HR department has become more structured and efficient. By for example sending short emails containing an update on a certain project of activity, the whole HR department is informed in just a few minutes time.

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This way everyone keeps up to date in a very efficient way. Previously the staff members were informed only partially or not at all about each others activities. During the restructuring phase structured

communication moments were planned for every week. These short half hour meetings worked out to be very efficient and keep everyone informed at best of the latest developments regarding the restructuring of the organization.

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Results

Developments in benchmark organizations

This section describes the results after analyzing the data obtained from the interviews. Based on the literature study and the time registration research and observation within the HR department of the financial institution, interviews were conducted. The interviews were conducted with HR managers within 6 large Dutch organizations. In these organizations HR is actively engaged in the development and execution of the organization strategy. In one of the organizations the HR director is even a member of the management board. The size of the HR departments within the organizations interviewed varies from 50 fte up to 200 fte.

Banco and Financo are both financial service providers, with a worldwide presence, employing over 60.000 people. Consumco operates in consumer goods, employing over 174.000 people in 100 countries worldwide. Engineerco is an industrial company consisting of a group of energy and petrochemical companies, operating worldwide. This organization employs over 100.000 employees in more than 100 countries. Teleco is active in the telecom sector in 3 countries, employing more than 35.000 people. Transportco operates worldwide in the global transportation and distribution business. This organization is situated in 64 countries worldwide, employing over 163.000 people. These large organizations were chosen for the data collection as they are expected to have a professionally set up HR department.

HR SSC and Outsourcing

The use of SSCs and outsourcing within the six organizations have been outlined in table 4 below. Table 4: HR activities outsourced and/or placed in SSC

Organization Recruitment & Selection

Training & Development

Job Valuation

Performance evaluation & Reward review

Employee & Salary administration

Banco O* O - - S**

Consumco SSS + OOO S + O - - SSS + OOO

Engineerco O O - - SSS + OOO

Teleco O O - - SSS + OOO

Financo - OOO - - SS

Transportco OO O - - S + O

*O, OO, OOO = intensity of outsourcing use

** S, SS, SSS = intensity of Shared Service Centre use

Table 4 shows that every organization, except for Financo, uses outsourcing and/or SSC in their recruitment and selection process.

Consumco is the only organization that uses both SSC and outsourcing in their recruitment and selection procedure. The HR manager interviewed at Consumco indicated that their SSC, which has been outsourced, executes the recruitment process from publishing a vacancy up to the selection of a candidate.