First, understand the business!

Business-oriented HRM curriculum

I am teaching undergraduate and postgraduate HRM and for the last 8 weeks I have been walking the post-graduates, in particular, through a simple heuristic for understanding a business model and its HRM implications.

Of the many different businesses they have chosen to work on, two please me in particular: the first is Islamic banking and the second is insurance broking (in Cameroon).

Simple heuristic for understanding a business

I am grateful to Michael Riley of Sussex University for learning (via his writing) a simple heuristic for understanding a business.

Inspect the revenue graphs and understand how revenue varies

  • as a trend (increasing or decreasing)
  • seasonally
  • with events
  • and randomly in the short term.

Once we understand ‘sales demand”, we can look at the derived labor demand.  In manufacturing, labor demand may be mediated by technology.  In services, like banking and insurance broking, labor demand is far more direct.  When we have a good feel about who we will need, when and where, then we can set about managing our labor supply.

Variability in Islamic banking

My Islamic banker, after shyly announcing he was an Islamic banker and taking the trouble to educate me on the principle of “no interest” and the products they sell, reacted as most people do when they talk about HR.  He started describing the HR systems and described a business that was ultra-stable.  Because Michael Riley’s heuristic had cued us to look for variability, we asked a few more questions and this is what we come up with.

  • Their long term growth or contraction depends upon reputation.
  • They have three Islamic festivals, such as the Eid which is coming up shortly, when as at Christmas, spending (and borrowing) is very high.
  • As with all banks, they are affected by weather, economic and political events which they monitor closely.
  • After 9/11, they came under suspicion even from Islamic customers.

Now that we understand how the need for service varies, we can imagine when line managers will be calling for skill and the skills they will call for.  And we have a fair chance of matching labor supply to labor demand.

When we achieve this match (which will never be perfect), then we can contribute to the ‘bottom line’ of the organization.

How we do that is the technical skill of HRM.  But to use our tools, first we must have a mental image of the match we are trying to achieve.

Insurance Broking in Cameroon

The insurance brokers in Cameroon, as far as I can see, are structured as any independent insurance brokers would be.  They are a family owned firm.  Their business peaks at the calendar year end and has a steady though variable stream of business throughout the year.

Once again, once we understand this pattern, we can easily see what is necessary to match the demand with supply.

Sales Demand and the Credit Crunch

Interestingly, the cause of the credit crunch seems to be some back-room sales activity: borrowing money on the wholesale markets.  I think if HR Directors had fully understood the sales demand of their firm, they might (and this is speculative) have partitioned the business and noticed earlier that the non-wholesale parts could not sustain their payrolls.  They might certainly have taken active steps to protect the pension funds which is a serious obligation if they are also Trustees.

I remember working with the HR Director of a combined investment, corporate and retail bank.  She had noticed that their payroll exceeded their interest income (not relevant to an Islamic bank!) and they were being sustained by fees.  On that basis, she had carefully structured her payroll into ‘columns’ beginning with the essentials (basic pay, state insurance, pension, health insurance, etc) moving across the page to luxuries.  She then brokered a signed agreement with employee representatives that in a downturn, they would start removing benefits from the right hand side first.  This is proactive, sensible HR policy.

As all the above is absolutely speculative, I wonder if anyone has information on the HR and the credit crunch?  And if anyone else uses Michael Riley’s heuristic?

UPDATE: For an HR Managers perspective on the Recession, I have written a summary on a new post.

Do you think HR could ever be elegant?

Elegance and HR?

Mmm, that sounds like asking me to cook a souffle.

Today, two things happened today.  First, someone on LinkedIn asked why policy and procedures are important in HR.  As he had asked twice before, I took him to be a student who was trying to figure out how to structure an essay and decided to help him out on what is after all an not well articulated topic.

Then, I had dealings with an HR Department, and I despaire.  I had to put my CV through them on their form.   This form is well over 10 pages long and with all the additional information they want, it could well stretch to 20 pages.  It was in Word, not a wiki, so very difficult to manage, and eventually, approaching exhaustion, I printed it out.  I have an HP printer (another sad story) and the pages tend to shoot up all over the office.  Guess what, they weren’t numbered!!  Deary me – what is it with HR?

So, what did I say to the ‘student’?  I suggested his question is what policy and procedures do we need?

Documents I expect to see in a well-run HR office

1. Strategy (a detailed file with a short synopsis for circulation)

  • The nature of our industry
    • How demand for labor arises in the firm and what moderates demand – technology, short term volatility, etc.
    • The supply of labor in our industry (occupational structures & training)
  • Our firm’s competitive position
    • Current and desired
    • Our firm’s strategy for reaching its desired position
  • HR strategy
    • Desired internal labor market strategy and corresponding relationship with the external labor market
    • Specific features that result: training, supervision style, etc.
    • Include leadership and consultation style that we need and why (see 4)

2. The soft behaviors essential to be competitive in our business (detailed trail of the research and analysis and short engaging persuasive summary for distribution)

  • Talk to all stakeholders about their tacit knowledge
  • Drill down to the link between the behavior they espouse and the link to competitiveness in this industry
  • Tell people what behaviors are required in what situations and why

3. The policy and procedures manual

  • The purpose of a policy and procedures manual is to reduce administration.
  • Is it clear to anyone at a glance what they have to do?
    • Test all p&p with the most impatient and the most analytical.
    • Anything debatable does not belong here.
  • Some people have a gift for simplicity and elegance.  Ask them to review the P&P.

4. Methods of adjudication

  • An organization is an arena of conflict and bargaining.  Ultimately the test of HR is the quality of its refereeing.
  • Define the decision making processes in the organization and processes of consultation required for each decision.
  • Ensure that everyone is able to argue a position vigorously and robustly without recrimination, and that everyone affected by a decision has an equal opportunity to do so.
  • Ultimately the added margin that our people bring to the firm comes from these moments.  Because they can be contentious, we need to manage them well.

5. Review of HR Strategy, Policy and Procedures (a schedule and last year’s file)

  • When is HR Strategy reviewed and in conjunction with what other review processes?
  • When is HR implementation reviewed and how?
  • How can any  member of the organization prompt a review?

Keep it thorough but simple

Forms that are over 10 pages long without page numbers just don’t meet the simplicity principle.  Sorry!

I have worked in a place which had a standard contract for all employees (couple of blanks to fill in).  We had one form to fill in each year (it did require 6 copies oddly).  Our annual report went via the department/division/organization report.

As a general rule the organization ran on five principles:

a) Put your proposal in writing before we discuss it.

b) Confine yourself to one side including the routing (we ask A to make a decision for onward submission to B to . . .).

c) Brief everyone prior to the meeting. At the meeting we will discuss the proposal together and decide whether to back you or not.

d) If you cannot speak succinctly to your paper at the meeting and answer questions crisply, we will ask to withdraw your proposal.  By all means, come back when you have your thoughts together.

e) No decision is ever, ever made retrospectively.

What a simple life.  Other organizations may need another list of principles to match their organization.  But they can be simple. Indeed they should be simple and they will be simple if you have done the background work on what you do and why!