The Human Resource Management (HRM) practice selected for evaluation is recruitment and selection. The organisation is a medium-sized company based in the United Kingdom with offices in London, Aberdeen and the Channel Islands. The business of the organisation is the management of client assets. The HRM group is small with well-documented processes and has been responsible for the recruitment of well-qualified staff over time. The recent economic downturn has caused business difficulties resulting in some employees leaving for other companies and enforced redundancies. The company has a fairly well-developed IT infrastructure with good communications and the routine HRM activities are captured and recorded.
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Process
The selection and recruitment of staff for the company follows a documented policy which complies with appropriate legislation. Recruitment of new or replacement staff is performed by agencies who arrange the advertising, pre-selection and initial candidate assessment prior to submitting a short-list for the company’s consideration. This adds to the costs but reduces the burden on internal staff. Job specifications are documented at the lower skill levels, whereas the senior roles tend to be more general and based on relevant business experience. Following an initial interview with an HRM and line manager, the candidates are subjected to a second, more in-depth interview prior to a hiring decision. There has been low staff turnover until recently when economic conditions forced several departures. The methods are traditional and have not changed in response to market conditions. Potential employees are not given in-depth company but provided with basic information on a printed sheet covering a summary of company activities. The business downturn forced downsizing of its main assets in the form of employee skills and knowledge. These separations of staff were not always best managed, and a number of key skills became scarce. This resulted in the recruitment of expensive temporary or contract staff, sourced through agencies.
Discussion
Lack of management information of recruitment costs and human resource planning are disadvantages. The company utilises a basic system to keep track of employee details, contact numbers, holiday and sickness, pension and other benefits, but this does not extend to people planning for the future, hiring requirements, application tracking, and it does not have the capability for tracking or analysis of total hiring costs.
There is a lack of strategic planning for human resources, with the result that recruitment tends to be driven by the loss of key employees, or an upsurge in demand for particular skills, and as a result, the HRM function is always operating in catch-up mode in relation to recruitment. The lack of human resource planning has the effect of driving hurried reactive behaviour in the event of the loss of key staff, sometimes resulting in hasty and ill-considered decisions to hire. As described by Armstrong (2000) an employee resourcing strategy involves human resource planning in the form of assessing future business needs and deciding on the numbers and types of people required. Planning is also required for finding people internally, linked with training programs to facilitate the learning of new skills. If people cannot be sourced from within the organisation, then preparation of long-term plans should ensure that recruitment and selection processes will be in place to satisfy anticipated demand. There should also be retention plans for people the organisation needs and would find difficult to replace. Planning for increased flexibility in the use of human resources enables the organisation to make the best use of people and adapt swiftly to changing circumstances.
The number of applicants for any given role has escalated due to market conditions, causing the company to choose to notify only those selected for interview, creating a poor image, and potentially affecting recruitment. Price (2007) argues that pre-selection offers an ideal opportunity to reject unwanted candidates without having to give detailed reasons. However, unless the organisation has an applicant tracking system, with each application logged, categorised, and tracked throughout the selection procedure, pre-selection can be a loophole, allowing for the possibility of hidden discrimination.
The failure to use an appropriate selection approach has resulted in some negative effects in that some employees are hired without a clear understanding of the role they are expected to perform, resulting in situations where the new employee is not seen to be a ‘good fit’, and either is moved, or in time, departs. This is an expensive waste of time for both parties. The competencies approach to the selection of the person and their characteristics required for the role is discussed by Roberts (2000). He argues that preparing the job specification in the form of competencies ensures that both the selector and the client have a clear understanding of the person being sought, and a clear agreement on what is meant by those terms. Competencies can include achievement, leadership, creativity, resilience, flexibility, technical knowledge, judgement decision-making capability, planning and organisational skills, people management skills, personal energy and financial judgement. These are all individual competencies, and while they all may not be required, for a particular role, they are best assessed by differing techniques. For example technical knowledge and the ability to manage staff can be indicated by screening the applicant’s CV, while aspects such as creativity, judgement and decision-making might best be determined by psychometric testing. An interview may gauge energy, flexibility and reinforce the decision-making capability, and testing using set exercises may uncover leadership qualities, planning and organisational capabilities and financial strengths.
Using competencies to break down the job specification means that the appropriate technique can be used to gauge a particular requirement and this approach can help to identify which selection techniques, such as psychological testing, are most likely to produce useful evidence of suitability for the vacant role. It provides basic information enabling a structured interview in which questions can focus on particular competency areas to establish the extent to which candidates meet the specifications in competency terms. The advantages of such as approach include increasing the accuracy of predictions about suitability, facilitating a closer match between the person’s attributes and the demands of the job; helps prevent interviewers making hasty judgements (Armstrong 2006).
A disadvantage is that the company fails to capture cost information on recruitment and no analysis is available. Because the HRM function plays a valuable role in ensuring organisational success, it requires an HRM information system (HRMIS) which can not only capture all the activities and associated costs related to previous, current and potential employees of the organisation. Human resource forecasting and planning information made available to management can enable the most cost effective hiring plans. When the human resource plan reveals that additional or replacement personnel are required, the management of the company can be affected as hiring decisions have the horizontal effect on other functions such as finance and vertically by affecting the overall business strategy of senior management. Many companies test potential employee’s skills using computer systems and some us the Internet for screening of job applications, inviting the loading of resumes into a template (Stair et al 2009). This can make the desired situation of placing the right people in appropriate posts at the correct time, can apply to both internal and external candidates, and is cost-effective.
The cost of employing a person who turns out to be unsuited to the role, leads to discontent and poor performance reviews, which may require additional training and management time, both of which cost the company time and money. One method of enhancing the recruitment process is requesting referrals from current employees. A company’s employees often know of someone qualified for a position and who would fit in with the organisation’s culture. Many organisations offer cash awards to employees who submit names of people who subsequently accept employment, because referral by current employees of one of the cheapest and most reliable methods of external recruiting (Daft 2006). This avoids search and pre-selection agency fees and reduces interview costs.
Torrington et al (2008) argue that there are sound arguments that can be made in favour of a certain amount of staff turnover. Some organisations need to be rejuvenated by the introduction of fresh blood from time to time if they are to avoid becoming stale. This is particularly true at senior levels, where new leadership is often required periodically to drive change forward. Also it is possible to argue that a degree of turnover helps managers to keep firmer control over labour costs then would otherwise be the case; this is particularly true of organisations which are subject to regular and unpredictable changes in business levels. The costs of replacing people who have left range from the cost of placing recruitment adverts, through time spent administering and conducting the selection process, to expenses required in inducting and training new employees. On top of these are less easily measureable losses sustained as a result of poorer performance on the part of less experienced employees.
In the UK, the National Audit Office (NAO) provided and analysis of external recruitment in six government organisations, finding that lack of monitoring and reporting of time spent on recruitment by staff throughout organisations and therefore the cost of recruitment is typically underestimated. Using their estimates, the NAO calculated that the average cost per recruit is between £1400 and £2676, compared to a cross sector average published by the Chartered Institute for Personnel and Development (CIPD) of £2000. Organisations that recruit a higher volume of specialist roles typically require more costly assessment methods and will have a higher average cost per recruit. The NAO analysis of the costs for a typical recruitment campaign indicates a wide range in the internal staff cost per recruit from £556 to £1921, and the cumulative time taken to recruit ranges from 64 to 212 days, Cumulative time represents the combined duration of all process steps when performed one after the other, providing better visibility of the total effort and cost incurred (National Audit Office 2009).
The advantage of using electronic recruitment has so far been neglected by the company. Bonadrouk (2009) reports on three cases of the use of e-recruitment which provided a significant amount of evidence that the use of e-recruitment can lead to cost reduction and efficiency gains. Each of the three organisations in the cases studies reported positive outcomes from using e-recruitment that helped them to achieve a more efficiencies. Both Cancer Research UK and Marks and Spencer experienced process improvements and massive increases in efficiency with a reduction of administration by 60 percent as a result of the move to e-recruitment. BOC have achieved significant cost savings through a reduction in headcount and agency fees.
To lessen the effect of loss of key staff which the company has experienced the company has hired expensive contractors, which has caused resentment among existing employees. As described by Mathis and Jackson (2007) former employees and former applicants represent a source for recruitment, and both groups offer a time-saving advantage because some degree of knowledge about them exists. Applicants who failed or individuals who left might be willing to return because the other jobs and employers turned out to be less attractive than initially thought. Former applicants are an attractive source as the means of contacting them can be found readily from their previous documentation when they first contacted the company. This can also be a rapid means of filling an unexpected vacancy.
The company follows traditional recruitment methods which have not changed in response to the changing business environment. This places the company at a disadvantage in dealing with recruitment and competing with other companies who have adopted more flexible methods. As related by Beardwell et al (2004) many of the traditional methods of recruitment and selection are being challenged by the need for organisations to address the increased complexity, greater ambiguity and rapid pace of change in the contemporary environment. According to McCourt and Eldridge (2003) there are several ways, apart from the standard selection procedure, in which an organisation might satisfy the staffing need in question. Organisations are increasingly delegating responsibility for budget management to line managers, and a line manager responsible with a staff budget has more options than a manager who must simply operate within what senior management allows. An advantage of looking at staffing decisions flexibly is that it allows managers to take account of today’s reality that many organisations are more concerned with shedding existing staff than with recruiting new employees. Therefore alternatives such as reallocation of duties may be spread among existing staff by a line manger, or in some cases, changes in work practices means that some of the duties of the post are no longer required. Internal transfers may also be considered for situations where the employee can be spared from their existing post or are better suited to the vacant one.
Some potentially excellent candidates have been contacted only to find that they have formed a negative perspective on the organisation by the basic nature of information provided at the interview. As discussed by Bratton and Gold (2001) recruitment and selection are the first stages of a dialogue between applicants and the organisation, which forms the employment relationship. Failure to appreciate the importance of forming expectations during recruitment and selection may result in the loss of high-quality applicants and set the initial level of the employment relationship so low as to make the acceptance of the applicant less likely.
The interviewing techniques used by the company tend to be based on checking facts contained within the applicant’s CV, as opposed to inviting the candidate to elaborate on their potential contribution to the company. According to Armstrong (2008) the use of open or probing questions which cannot be answered by a simple yes or no, can bring out relevant information which may not have been disclosed are more effective in forming a true impression of the candidate.
Because of the sheer volume of applicants for posts in the company, the HRM function has initiated a process of telephone screening to reduce the volumes to manageable proportions. Unfortunately, the telephone interviews are conducted by line management with no specific training in interview techniques, with the disadvantage that unsuitable candidates are called for face-to-face interview with all its associated costs. According to Martin and Jackson (2002) telephone techniques include thorough preparation of questions accompanied by an interview assessment form for later consideration is essential. The candidate should be informed ahead of the interview of the time, nature, purpose and structure of the telephone interview. The first questions should be of a screening type to establish a basis for agreement before proceeding further. The opportunities offered by the role should be clearly outlined to the candidate and prior to closing the conversation the candidates understanding of the role and their continued interest should be established.
Recommendations
The traditional methods of recruitment should be immediately altered to reflect the fact that the rate of change of the business has accelerated rapidly in recent years and shows no sign of slowing down. Senior management support should be sought to ensure these changes are fully supported by line management.
Pre-selection should be carried out by the HRM function and could be initiated immediately, by inviting potential applicants to upload their profiles into a standard template. As there are existing computer systems and the company has its own webpage, the cost of this would be absorbed in normal IT and HRM budgets. As soon as feasible a joint project for a more elaborate e-recruitment process should be developed as a joint project between IT and HRM as this will result in significant cost savings. Pre-selection will reduce the administrative and interview costs and save a proportion of overall HRM and line management time. This would reduce HRM time to less than 30 minutes per candidate at pre-selection and, using published figures, save a percentage of hiring costs which average £2000 per recruit, and takes several days.
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To obtain the true costs of recruitment, a record should be kept of the expenditure at each stage and subjected to analysis by the computerised system. Most packages available on the market allow for the recording of budget and expenditure associated with the recruitment and selection process, and the ability to record the costs of induction training. Software packages are available for recruitment management, and recruitment activities and training from as little as £3500 capital costs and less than £500 annual maintenance and support fees. If an average of one recruit per month takes place, at an average cost of £2000 for the total process, this type of expenditure, while not covering all associated costs for recruitment, is an attractive option financially.
The use of internal employee recommendations should be pursued, as this is a very cost-effective method of successful recruitment. The HRM function should set this capability up and publicise it in the short term for any future vacancies. This could be accomplished by means of internal e-mail, posters in places where employees gather, such as the canteen or meeting rooms. This would be a low cost exercise with payments only required in the event of successful hiring. Typical bonuses would depend on the level of post, and would normally be in the range of xxx.
Line managers should be required to consider the total cost o recruitment when requesting a new hire, or a replacement for departing employees, so that they examine all the alternatives available prior to justifying the decision to hire externally.
It is recommended that a process of re-recruitment be set up to replace the contract staff with employees who have left the organisation, but who may be persuaded to return wit
There should be a focus on developing a staff retention policy for employees who are considered as key to business success. This could involve a closer monitoring of their performance reviews, and rapid response if the employee shows signs of discontent.
The HRM function should immediately begin the process of evaluating key job functions and keep employees who would be difficult to replace in the event of their departure. Once identified, the staff in question should be closely monitored as regards performance and career prospects within the company to facilitate loyalty. In addition, a close watch should be kept on industry trends in the way of competitive salaries for such individuals.
As this company is in effect a professional services organisation, staff turnover should be minimised and an employee retention policy initiated as the personal relationships with clients which have been established and may be damaged by departure of key employees.
Setting expectations at the interview should be emphasised in order to not lose interested applicants who may depart with a negative impression of the company as the advantages of employment were not outlined beyond the basics of salary and conditions.
The interviewing techniques should be revised to enable more open ended and probing questions to be asked of the candidates to avoid acceptance of the basic facts contained in written CV’s.
Telephone pre-screening should be conducted by trained interviewer staff, or line management provided with a check sheet to base the types of questions they wish to ask of potential candidates. This would reduce costs by eliminating unsuitable candidates for the cost of a phone call and minimal management time.
The overall effect of these recommendations would be to better fit the company’s recruitment and selection practices to the current market conditions, reduce overall costs significantly, and open up the possibilities afforded by flexibility of response to vacancies.
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