Keys to Manage Human Resources – Rules of Thumb: Part 1

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By Guido Stein, Ángel Cervantes and Marta Cuadrado

This article, which is in two parts, aims to acquaint readers with the main personnel management policies found in enterprises. It is intended not to be exhaustive but to serve as a reference for managers in charge of their own teams, regardless of their position or department. It was not written specifically for human resources experts, although they too may find this direct academic approach – reinforced by daily practice – rather useful.

People are not robots, which is to say that they cannot be automated. Therefore, two people may respond differently to the same order, incentive, or external cause. This incontrovertible reality makes management more exciting but much more difficult. Policies, which are nothing but decision-making rules integrated more or less successfully after being applied in practice, take this reality into account in the case of personnel management. Meanwhile, they contribute to the company’s smooth operation by trying to impose order where subjectivity and freedom reign. Their use does not ensure effectiveness, but their absence is a sure sign of chaos. Companies can live with some chaos, although they do not have to: management’s job is to manage or avoid it as much as possible. In addition, sound policies help us avoid many mistakes.

The line between arbitrariness (deciding and doing things differently each time out of personal desire) and discretion (deciding and doing things differently because the circumstances so require) is drawn between a person who relies on objective criteria and one who does not. Nepotism is arbitrary, while proper leadership is discretionary. Uncertainty is part of the human experience, and applying rules will not dilute much of what surrounds us. But our surroundings are better managed when we do resort to rules. Human resources policies based on a healthy dose of common sense will provide more fairness than frustration, which is what ultimately matters when people are the priority.

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1. Performance Management and Talent (Potential) Management

When implementing HR policies and using them to make decisions, they should be viewed as impacting two distinct but related business realities: an employee’s performance, on the one hand, and the talent from which his or her future potential derives, on the other.

The following are key to performance management:

• Formulation of the job description.
• Accentuation of performance achievements.
• Focus on immediate objectives and roles to be performed.
• Identification of current performance levels in relation to expectations for the position.
• Determination of the individual’s training needs.
• Fixed compensation, which evolves according to the extent to which the objectives are achieved.
• Variable compensation, based on measurable quantitative and qualitative objectives.
• Evaluation by management and self-assessment.

The following are key to talent management:

• Skills and conduct (competences) that improve performance.
• Skills that should be included within the catalog of those described by the company in its strategy.
• Objective identification (based on observable conduct) of the employee’s current capabilities and his or her potential for growth within the organis
• Detachment from compensation, since the key is to grow rather than to reward.
• Using multisource assessment schemes such as 360° feedback, but only in those organisations whose management so permits.
• Leveraging in relation to employees’ interests and aspirations.
• Performance management foundation, but with a view to the future.

Effective policies are those that do not confuse one reality for the other and thereby distort both.

 

2. Hiring and Recruitment

Given the speed at which most businesses operate today, the need for quick results, and the complexities of the labor market (high unemployment with a shortage of specialists, among others), the strategic importance of recruitment and hiring processes is increasingly greater.

The first step in the recruitment and hiring process is to objectively determine short- and medium-term staffing needs. The absence of a rigorous and clear procedure for determining the necessary number of people, and their qualifications and terms, will give rise to more difficult situations, for example:

a) Imbalances in the workforce’s functional distribution: in some sectors with a highly diversified sales network, it is normal for large back office concentrations to arise.
b) Staffing requirements are justified by subjective perceptions: “I cannot attain objectives because I’m missing X number of people.”
c) And, on the contrary, insufficient staff causes overtime labor, along with the additional costs involved.The business requires more people than is strictly necessary: it is an accepted practice in periods of expansion, when there is greater demand for people in the sales network. Without a strategic approach to hiring, the process would be undertaken only upon request and reactively, and would be difficult to manage.

An organisational plan suitable for the business facilitates success in hiring and promotes reflections such as “Do I have the structure, the jobs, and people with the precise skills to achieve business objectives?” while avoiding assertions such as “I’m missing X number of people.”

 

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2.1 Recruitment Approach. What Profile Does My Organisation Need in the Short and Medium Term?

It is necessary to have in place a management system (e.g., by skill set) that enables hiring managers to have an idea of the combination of knowledge and skills a candidate for a given position must possess. The worst enemy of HR management is subjective perception as the main source of information and criteria for decision making. When these tools are disregarded, many decisions about people (not only in the hiring process) may end up erroneous and will bring about costs and problems.

Prior to the crisis, the focus was on identifying pure salesmanship skills: initiative, communication, customer relationships, or negotiation. Knowledge was seen as secondary, and sales became the area that would receive graduates in fields other than the more traditional technical ones. Over time, knowledge gained its value back, as customer loyalty is based not only on the front office’s empathy but also on its technical capacity to serve the customer.

This is even more obvious in the back office. Specialisation is widespread. Companies have been absorbing those not only coming from the real estate sector but those professionally specialised in finance and risk due to regulatory pressures (e.g., capital management).

In other sectors, depending on a position’s level and the type of company, management skills are as or more important than knowledge: a manager in the automotive sector with experience in factory management can successfully fulfill the same role in the dairy industry; a textiles salesman can quickly learn to sell beer.

2.2 How to Attract the Right Talent

It is useful to differentiate between companies firmly committed to an internal promotion model (also immersed in organic growth processes) and those combining internal promotion with the integration of professionals formerly employed by competitors. The first group focuses on recent graduates in the fields of economics, business, law and engineering.1 The way to reach these candidates was through print advertisements, which were later replaced by digital ads on general employment sites (Infojobs, Infoempleo, etc.). CV collection naturally evolved into the creation of dedicated sections on corporate websites where offers were published. Although businesses began collaborating with universities, specialised schools, and professional associations to access the databases of final-year students and recent graduates, these actions were primarily reactive.

Prior to the crisis a peculiar phenomenon took place in the retail banking sector: the job offers for recent graduates were such that some websites (Buscaoposiciones, for example) became forums where candidates informed each other about the place, characteristics, or specific tests related to hiring processes. In addition, they openly expressed their views on the hiring companies. Specific emphasis began to be placed on the companies’ image as employers and not just the brand conveyed to markets, shareholders, or customers. Hence the need to build and properly care for company employer brands. Today, the marketing, communications, and HR departments should work closely together so that their respective target audiences end up with objective and desirable perceptions of the company. Furthermore, given that the best candidates today have the luxury of choice, that they are more connected than ever, and that the sector has suffered a huge reputational blow, employer branding systems can make the difference.2 It is also true that companies have greater information on candidates today thanks to the digital footprint the latter leave online.

For companies that combine internal promotion with the integration of professionals from competitors, the processes were quite homogeneous as far as hiring the latter. Most companies opt to use consultancies depending on the profile of the candidate sought. Therefore, relationships with external suppliers are key. Often, consultants would scout the area where the company was to open a branch, and would make the initial contacts with possible candidates for the job. The hiring process was extremely fast and relationships with the consulting firms focused on the operational. Some information on the customer and the job was enough, as rapid integration was prioritised over any other aspect. Some consulting firms were even acquired by their clients.

It should be noted that the use of personal references can provide quality to the hiring process and often increases employee retention over other sources of recruitment.

 

3. Onboarding and Integration Processes

The onboarding (induction) plan is a structured process whereby new employees are given precise information about the organisation, job, people with whom they will first be in contact, who is who, company culture and values, available tools and services, etc., with the main objective being that the person can immediately begin to carry out his or her role. The objective is for the new professionals to achieve greater autonomy in the shortest time possible and become acquainted with the benefits of working for the company – other than salary. Regardless of the method used, a well-structured onboarding process present at all levels of the organisation is key to motivating new employees, while the absence or noncompliance thereof may lead to failure. The new hires must be under the impression that the company was awaiting their arrival.

3.1 Who Manages the Onboarding Processes?

Human resources departments are usually in charge of the onboarding and integration processes, but they are not the real difference makers. Because time is limited, new employees usually receive their first direct input from the training department, normally at an in-person course.

In recent years there has been a boom in digital corporate portals that include sections dedicated to new employees. These have also become training content “warehouses,” thereby replacing the initial courses at which new employees received their first direct inputs with online training. The training department’s role in onboarding processes has accordingly been losing value.

The use of employee portals as the backbone of the onboarding process has great advantages but admittedly runs the risk of placing responsibility for the process on the new hire.

The use of employee portals as the backbone of the onboarding process has great advantages but admittedly runs the risk of placing responsibility for the process on the new hire. The main actors in the onboarding process are those who will work directly with the new employee: his or her direct manager and peers. This is particularly relevant in sectors with highly dispersed workplaces, which have correspondingly limited staff (three or four people).

An otherwise careful onboarding process can fail due to a bad first day at the workplace or poor reception by the new employee’s peers. These situations, as well as inadequate company supervision, constitute the most fragile components of onboarding processes. Therefore, it is important that those responsible for the company’s new hires participate from the outset. They must be aware of their role as integrators, properly trained, and committed. It will also enable them to understand and, to some extent, better internalise what happens in the human resources domain.

3.2 Placement Processes

Not everyone, however well trained, is an ideal “first boss” for a new employee. In this respect, the retail banking sector’s evolution is a clear example. The speed of integration was so high that new employees would start their jobs (usually at branches) after excessively rapid and sequentially disorganised onboarding processes. The branch managers were thus, more than ever, the company’s first and only reference points for new employees. In addition, there was a change in the profile of new hires as a new generation began to enter the workforce, causing a greater rift between managers and new employees. The new hires wondered about their schedule, short-term career outlook, quality of life, and work-life balance. Furthermore, 60% of new hires between 2002 and 2007 were women. This all occurred at a time of external rotation within the sector, with demand exceeding supply. A bad reception could become the first reason for new hires to think about changing companies.

The new employee was normally placed to fill a vacancy, without there being any rotation processes aimed at “stimulating” vacancies depending on the branch manager’s profile. There are branch managers who are very skilled at facilitating the integration of new hires and others who are not. Typically, new employees begin working in branches overseen by managers who are closely linked to the organisation and used to integrating new employees. Generating vacancies at such branches requires continuous and planned internal rotation. However, these rotations were not made given the speed with which the hires were made. By consequence, employees were not optimally placed, ending up at branches on the basis of the manager’s profile or for other reasons, such as the type of business. This would have a major impact on the new employee.

As the HR director of one of the big banks warned:

“In 2005 and 2006 we were worried about the increasing percentage of new employees (hired for six months and then indefinitely) who quit within the first three months. We started calling those who had quit 15 days after their departure: most stated that their career expectations at the bank had vanished within the first week. I remember two specific cases. One was a girl with an excellent background and exceptional English relative to the new hires. She left after two months, telling us she had made her decision on her first day on the job. Her manager clearly and frankly told her that ‘he did not care what she had been told during the onboarding process’ and that her job was ‘to maintain the archives and forget about everything else.’ The other was a guy with a very good sales background who went to a branch in a small town 300 kilometers from his home city. He finished his first training course (prior to joining the branch) on a Friday and his assigned branch manager instructed him to report on that Saturday (he had to drive home and travel the 300 kilometers again). When Saturday came, after having driven almost overnight, he found that his manager had taken the day off and that he was instead received by the controller, who left the bank a week later. He lasted one month.”

Onboarding processes are not immune to fragility.

The crisis brought an opportunity to emphasise new hire placement schemes within onboarding processes. The present generation, known as the “millennials,” view their career as an opportunity to work on the projects they like, reject the idea of working for only one company throughout their careers, place a lot of importance on their careers independent of their company’s culture, and value having enough time for personal life. They appreciate transparency and need to be constantly connected. However, they also require reference and instruction, so their bosses can play a crucial role as mentors. For some sectors, these new mentors have a very important task to undertake: they must counterbalance their reputational image in the eyes of the new employees.

 

4. Development and Training

Training is also one of the few HR systems that transcend its own objectives: it is a major tool for internal communication.

Training and development are HR management tools primarily aimed at employees’ continuous adaptation of knowledge and skills in line with business needs. However, training is also one of the few HR systems that transcend its own objectives: it is a major tool for internal communication (“Whatever you want to communicate to your staff can take the form of training”), it contributes to the building of loyalty and commitment, or stimulates a sense of belonging, and also serves to support transition processes.

One of the keys to a successful policy is to identify the real needs, either through a performance assessment or an evaluation of the potential and talent. The former can help with the design of job-specific training plans, and the latter with comprehensive development plans.

4.1 Client Mentality

The first point is to treat the training program attendee as a client. When a person is called into a training program, he or she has to be immersed in a process in which everything works. Therefore:

The content and methodology must be perfectly aligned with the objectives of the training course. These objectives must be clearly communicated to the attendees (this is obvious but sometimes fails to be observed in practice), both through the invitation to participate and, more importantly, by the immediate manager.

– If the course is in-person and requires travel, the expense reimbursement process (tickets, accommodation, and meals) should run perfectly.
– If the program is Web-based, companies must be especially mindful of the technological aspects (servers, accessibility from any device and from anywhere, etc.).
– However, the most important aspects of the program are its content and delivery, which directly impact employees’ perceptions of the company, and therefore their sense of belonging. Another HR director of a regional bank noted:

For the first time, recent graduates of the bank’s executive development program were able to invite their partners to the graduation ceremony. Program participants who lived outside Madrid arrived with their families the night before. The next morning we learned that the hotel (with which we had been working for four years) did not have rooms for five participants and their invitees, who had to find their own accommodation (in short-term apartments). When we learned of this (too late, obviously), my sole concern was to apologize and have the hotel somehow compensate them. A fellow team member told me that everything had gone well and that we should not worry about it anymore. However, two days later, once we got the hotel to compensate them with a free stay at any location of the chain, one of the affected executives called me and said, “Thank you for the apology and for the compensation, but above all, thanks for giving me a way to show my wife (who was very upset by what happened) that I work in a company that cares about people.”

4.2 Priorities

The primary objective of a training and development department is to combine the knowledge and skills of the personnel with the strategic and business needs of the company. The essential step to achieving this objective is to properly determine the level of knowledge and skills of the company’s employees. To develop skills, it is necessary to rely on a performance evaluation system that is well defined, communicated, and known by all those involved in the training process. The less the evaluation process is clear, communicated, or known, the more subjective perception will play a role in defining training needs. When dealing with knowledge, the updating of job descriptions allows the training department to work reliably.

In models based solely on internal promotion, access programs must be accordingly emphasised in the training model.

The most important aspects of the training program are its content and delivery, which directly impact employees’ perceptions of the company, and therefore their sense of belonging.
In retail banking from 2002 until 2008, there was a mass hiring of new graduates, which was accompanied by a high number of veterans leaving through early retirements. It was a time of company expansion, with many branches opening due to the housing boom. Generational change caused losses not only in experience but also in knowledge.

The new hires were valued for their theoretical commercial competence, with basic practical experience being treated as secondary. A mid-sized firm launched an executive development program based on skills, leaving knowledge aside; 30% of participants were recent graduates or diploma recipients in either economics or business. This all took place despite regulations beginning to require technical training in the area of financial advice for those employees who would be dealing directly with the public. This approach produced a de-emphasis on knowledge in the banks’ front-end networks. In a context of expansion in which the banks’ core business was credit and where client negotiations centered primarily on price and trust, there did not appear to be a need for substantial investments to enhance technical knowledge. Now it seems that excessively commercial tendencies are a thing of the past, having been replaced by advisory services (particularly in taxation and secondary markets, achieved through proper training combining knowledge and skills).

As noted, due to greater regulatory complexity and tighter budgets, retail banking has again started to emphasise internal training and external training with highly personalized content and tailored to very specific needs, in place of more general training and with less impact on daily operations.

About the Authors

Guido Stein is Professor at Iese Business School
Ángel Cervantes is an HR Consultant
Marta Cuadrado is a Research Assitant at Iese Business School

 

References

1. This model risks compromising diversity and encouraging people to grow within a uniform culture.
2. Employer branding is evolving from attracting CVs from candidates towards greater selectivity: companies are becoming only interested in candidates with a greater potential to fit their culture (i.e., incentive-based referral programs to employees who nominate candidates, including family, friends, and acquaintances).

 

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