Article from Business Brief
Article from Business Brief – April/May
Does HR management contribute to business success?
Increasing demands are being placed on human resource departments. Aside from the traditional role of handling day-to-day staff and administrative issues, many organisations today also expect their HR functions to contribute to ultimate success through improved people performance and profits, and lowered costs. In addition, many HR departments are struggling to recruit and retain talent in a world in which there is all-too-often a shortage of skills. Just what are the challenges facing HR managers in South Africa today and are they coping with the demands being placed on them? And how important is the HR function to business success? This feature examines some of the important trends in HR management.
Torn between two imperatives
In many companies in South Africa HR finds itself stretched between two major imperatives, suggests Dr Graeme Codrington of TommorrowToday.biz. On the one hand he says, that good HR teams understand the need to be strategic in focus. In a world dominated by a “war for talent” and buffeted by global shifts in values and expectations, the ability to attract and retain talented staff has never been a more important corporate capability than it is now. “This requires scenarios for future staffing needs, and detailed insights into societal shifts and changing human values,” he continues. “Key focus areas should be the development of an employer brand, a long term view of recruitment and the creating and sustaining of a consistent and attractive employment proposition.
“Yet on the other hand, most companies expect their HR departments to focus on managing and mitigating people risk. HR therefore spends most of its time on hiring and firing, and the policies in between (in other words, it is an IR department managing industrial relations) and on training and development of the human resources of the company. HR is often hamstrung with not enough resources of its own, and has limited access to strategic information.”
A place in the boardroom?
Dr Codrington’s view of HR as being under increasing pressure as a result of multiple demands and as needing to play a greater role at the strategic level is a common one in South Africa today.
Should HR really have a place in the boardroom and does the HR function affect the success of an organisation? Dr Albert Wöcke of the Gordon Institute of Business Science is not so sure. He suggests that the linkage between comprehensive HR programmes and business success is far from proven. He points out that HR programmes can be astronomically expensive if not undertaken correctly. Indeed an over emphasis on human resource management can have a disruptive affect on business and cause it to lose focus.
Dr Wöcke believes that human resources functions are not core business functions and are usually best outsourced. One of the most important roles of the HR department today should therefore be to manage the relationships with outsourced services. Other important functions should include capacity building and training (which should usually be undertaken with a training partner), internal communications and the encouragement of employee commitment.
Much of the HR function should be undertaken by line managers, who are central to the core business functions, and should themselves manage aspects such as employee performance, he suggests. HR should assist and add value between line managers and employees.
He does say that the HR function is vital to get right, however. “Mistakes in managing human resources can be more difficult to repair than say a mistake made with a product. HR is certainly important, but it should only be considered a support function.”
Pros and cons of accreditation
In Dr Wöcke’s view, the South African Board for Personnel Practice’s (SABPP) move to accredit practitioners and professionalise the HR industry is an impractical and unsound one. The industry is a large one composed of individuals from various other professions who are making a valuable contribution, but who would be excluded from the field. In addition, enforced registration would place an undue emphasis on qualifications rather than on the value-adding role that HR must take.
Professor Karel Stanz of the University of Johannesburg’s Department of Human Resource Management, on the other hand, suggests that accrediting HR professionals will protect against unethical HR practices and maintain a high standard of professional conduct. The profession needs to protect clients from unqualified practitioners who could pose a threat to businesses, he says.
Progress in South Africa
Prof Stanz is of the school that believes that HR has an increasingly important role to play and should provide strategic value to a company. HR directors should therefore form part of any company board. He agrees with Dr Codrington that in many South African companies, HR is still bogged down in administrative tasks. He says that technology is increasingly being used to help relieve HR of this burden and allowing it to participate more at the strategic level and in vital functions such as talent retention and development.
Asked whether South African companies were successfully using HR management to achieve strategic advantage, Prof Stanz said that there were “pockets of excellence” in this country that were world class. Companies such as Sasol and South African Breweries were prime examples of corporates that had successfully allowed HR to help guide strategy.
Dealing with the talent ‘war’
There is a world-wide trend of developing employees and finding ways to retain them, according to Prof Stanz. However, he notes that many companies in South Africa do not pay sufficient attention to employee development, as they are concerned that their talent will be ‘headhunted’ and that expensive training and development efforts will be wasted.
Is there really such a shortage of talent and skills in South Africa as is so commonly suggested? This is not as easy a question to answer as it might at first appear. While we so often hear of the ‘brain-drain’ and shortages of talent in certain sectors such as engineering and IT, other sectors enjoy an over-supply. Ten years ago when the building industry was in a slump, there were too many builders and few would have dreamed of taking it up as a career, but in today’s building boom there is a severe shortage of good builders. Skills move to areas of demand and in today’s increasingly global economy across borders to areas of opportunity. In South Africa the demands of BEE are further complicating the picture with most sectors struggling to find and retain black talent. How then do we hang on to our talent both at the company and global level?
Sandra Burmeister, CEO, Landelahni Business Leaders, says that many companies today are viewing mobility as crucial to increasing performance standards, economic growth and the creation of a vibrant entrepreneurial environment.
Burmeister believes that in those sectors where skills shortages are experienced, a multi-pronged strategy to skills development and attracting talent is necessary. She believes that businesses need to change their mindset on mobility, which can significantly accelerate skills development. They also need to start thinking differently about a-typical forms of employment such as project and contract work, which is becoming increasingly common around the globe.
Recruiting and retaining talent
“What is important in attracting and keeping staff is the company’s internal value proposition,” points out Burmeister. “This holds true at all levels. It is not enough to focus on the top 20% of high flyers in an organisation. The company needs to be able to feed talent in consistently at every level of the organisation.
“At the same time, the global and local skills shortage has heralded a move to the outsourcing of recruitment services as one way of finding scarce skills. Another is the trend to project-labour driven by the increasing mobility of skilled employees such as engineers and accountants.”
Tracy Czakan, Kelly Group Marketing Director, says there are a variety of ways to retain and recruit talent. According to a recent survey undertaken by the group, talent is motivated by personal achievement rather than power and money, and look for the following in a job:
Czakan says that in an effort to recruit and retain talent many employers are adopting more flexible working arrangements with employees. Some companies are allowing employees to work flexi-hours. Technology is also enabling more employees to work from home.
A talent ‘pipeline’
Jerry Molefe, HR Executive at the law firm Werksmans, says that there is a dearth of talent in the law profession, and particularly of black candidates. There is consequently a great deal of competition between firms for promising and outstanding legal professionals. As a result Werksmans has adopted a very proactive approach to recruitment and retention. This includes using a variety of recruitment methods including trusted recruitment partners and technology based recruitment. Werksmans has developed relationships with universities and offers articles and bursaries to promising candidate attorneys in order to ensure a talent pipeline into the future. The firm also has induction, mentoring and career-pathing programmes in place, according to Molefe.
The challenge of finding black candidates
Ivor Rimmer, MD, Bateleur Resourcing, believes that an ongoing challenge for South African companies is to find and retain good BEE candidates, as companies weigh the balance between lip service and achieving a measurable return on investment. Unfortunately, the pool of well-qualified BEE people is severely limited, and these employees are likely to be poached on a regular basis as increasingly lucrative incentives tempt black executives to job-hop.
“Organisations need to define a process that enables them to fulfil BEE quotas and criteria while simultaneously benefiting the business – anything else is simply counter productive in the long run.”
Rimmer warns that companies willing to poach staff and pay above-average rates should take care to adjust their existing, loyal team members’ salaries at the same time – to protect them from being head-hunted in turn. He advises locking in the skills base and leveraging intellectual capital by identifying managerial and leadership skills.
One solution lies in preparing the widening pool of middle management black employees to take over executive positions in the future. To achieve success in such an initiative, companies will be compelled to demonstrate their commitment, primarily through effective mentoring programmes.
“By investing in their people, organisations can secure their own future. Ultimately, it’s a case of developing potential while simultaneously meeting the corporate and regulatory requirements. It’s a win-win situation, as people receive opportunities to develop their skills, and the company meets its commitments without risking the bottom line,” Rimmer says.
Jenni van der Merwe of Careers24.com says that more companies and individuals are realising the benefits of using online services to recruit for job vacancies. Online sites continue to evolve and offer more streamlined services for recruiters to find the job match. To make the online recruitment process even more effective and efficient, some online recruiters are today able to offer services such as psychometric testing, background checks and assessment screening of potential employees.
Identify training and development needs
All too often businesses implement the ‘same old’ training programmes year-in and year-out. Huge amounts are often spent on sending people on such training courses, and yet there seems to be no improvement in performance or impact on the business. This, suggests Sarah Babb of the Skills Framework, is due to the lack of strategic input in devising the overall training and development strategy and plan.
Babb says that the following are key influences on identifying strategy training and development needs of a business:
Taking advantage of the Skills Development Acts
According to Samuel Isaacs of SAQA, the Skills Development Act (SDA) and Skills Development Levies Act (SDLA) were implemented in an effort to raise the skills levels in South Africa and improve the country’s economic competitiveness.
An organisation wishing to participate should find out which Sector Education and Training Authority (SETA) it falls under. Each SETA facilitates education and training within a specific economic sector and will support particular kinds of training programmes relevant to that sector. So for example the Tourism and Hospitality Education and Training Authority (THETA) facilitates training for those in the tourism and hospitality sector.
Employers need to register with SARS as a Skills Development Levy payer (SDL) in accordance with the SDLA. By the provisions of the Act, employers with a payroll of R250 000 per annum must pay 1% of their salary bill to SARS on a monthly basis.
Employers are then asked to develop a workplace skills plan (WSP) in consultation with their employees. This is a strategic training plan (STP) that highlights how the employer intends training and empowering employees with skills relevant to their workplaces and business skills priorities. The WSP is based on a skills gap analysis that indicates the organisation’s training needs and is submitted to the relevant SETA for approval.
The employer also has to register a skills development facilitator, who will be responsible for liaising with the SETA on behalf of the company. This is usually a training manager or someone with expertise in skills development.
Employers who comply with the requirements of these Acts can claim back up to 70% of the levy paid. There are also further incentives for organisations that register learnerships (refer to Chapter 7 for further information on learnerships), which provide learners with recognised qualifications.
Besides being able to claim back their levies and enjoy the benefits of a more skilled workforce, companies are also able to benefit from investing in skills development in terms of their BEE ratings, points out Keith Levenstein of EconoBEE. The new BEE Codes assign a substantial 15 points for skills development.
Human resource information systems lift burden
According to Sandra Swanepoel of VIP Payroll, effective human resource information systems (HRIS) are becoming increasingly sophisticated and taking over many of the mundane administrative tasks that previously had to be handled by HR departments. This is allowing HR managers to concentrate on more important tasks such as development and training.
An HRIS system should manage your payroll electronically as well as track hiring, termination and training costs; time and attendance; and employee benefits. It can track key performance indicators of every member of staff and relate them all the way back through their training needs and achievements to their pay slip and benefits.
Attie Taljaard of Oracle, says that many organisations spend considerable amounts of money on IT systems, but neglect the human resources. In addition to other benefits, good HRIS systems should offer employee self-service (ESS), where employees manage their own leave, sick leave, pension, insurance and administration according to company specific rules built into the system
Val Moodley, Product and Marketing Manager at SAS South Africa, notes that an effective system enables the organisation to make workforce decisions based on facts. This creates a corporate culture based on trust between employees, customers and the company, which increases revenue and profits.
A workforce optimisation solution should bring together internal information from IT, corporate finance, and applicant and recruiting systems with information from external sources, such as competitive salary surveys.
“An HRIS system should allow any number of changes in an employee value proposition to be analysed. It should help the company to make decisions about compensation levels and benefits, such as introducing new insurance programs, by spelling out the impact that adding or altering programs may have on the bottom line.”
Should you outsource?
Wayne Alcock of Quyn Outsourcing says that trends have shown that more and more companies are finding it strategically effective to outsource various expertises that are non-core business functions. He says that outsourcing is becoming so popular for the following reasons:
According to Murray Dicks, MD of Deloitte Legal, the use of contractors assists companies to obtain specialist skills for specific projects as opposed to keeping the skills available in-house. The contractors are happy with this arrangement as they have additional flexibility to service a number of different clients. However, the tax and employment law dealing with independent contractors is complex and confusing, warns Dicks. Often contractors are paid outside of the payroll and bypass human resource controls. This exposes companies to potential under-deductions of PAYE as well as legal liability and labour disputes with disgruntled contractors.
Keep abreast of labour laws
Jonathon Goldberg of Global Business Solutions suggests South African companies should keep abreast of the changes and challenges in the labour law such as the details for implementing the Broad Based Black Economic Empowerment Codes passed by Cabinet on 6 December 2006 which is imperative for an organisations economic growth and development.
“Human resources are an integral part of an organisation in dealing with human aspects of an organisation such as dismissals, employment contracts and litigations,” he continues. “Sometimes not all of management including human resource practitioners has the competencies and confidence to properly manage an organisations human resource or labour issues. If managed effectively it can even save a company millions of rands in debt. Constant employee training and development in labour matters is therefore essential to keep organisations ahead of the pack.
Dion Masher, partner at law firm Bell Dewar & Hall agrees. He says that the suite of labour legislation that has been promulgated following South Africa’s transition to democracy has given rise to a workforce that is alert to its rights and intolerant of unfair dismissal, unfair labour practices and, increasingly, unfair discrimination. Many employers, on the other hand, are vague and uncertain about their rights. This can open a business to significant financial and reputational risk.
“Given the extensive cost, disruption and negative publicity that a badly handled dispute can cause, one would expect that the labour risk would rank equally with other significant risks to a business and that measures to avert it would be an integral part of good corporate governance.”
Generally speaking, however, this is not the case, he says. “Employers often do not pay sufficient attention to the development and implementation of their employment policies and practices and, as a result, place themselves at risk”. For example, employers may choose to keep renewing a fixed term contract, rather than engaging an employee for an indefinite period, because they believe that this will make it easier to terminate the contract. Such an employer is setting itself up for a claim of unfair dismissal, says Masher. He points out that employers also often fail to appreciate that while they may dismiss participants in an illegal strike, they still need to pay attention to the Code of Good Practice on Dismissal.
“The scope and complexity of South Africa’s labour legislation means that businesses need consistent access to the right expertise and their policies and practices need to be subjected to a regular risk audit. The human resource function is no longer a routine, back office role. Employment issues are now such that they need the full attention of senior management.”
“It is a myth that South Africa’s labour legislation favours employees. But finding the balance between the rights of employees and those of employers requires competent managers. Employers are protected and those who know their rights are able to position themselves strategically so as to build stable and mutually beneficial partnerships with their workforce”.
CCMA under resourced?
Lavery Modise, a partner at Routledge Modise believes that South African labour legislation is generally sound, but feels that many of the processes and procedures are cumbersome and are causing unnecessary delays. He also suggests that the CCMA is under resourced and over-burdened. He asks whether it isn’t too accessible and requires some sort of screening mechanism to sift out cases that should not have been heard.
Tanya Venter, CEO Tokiso Dispute Resolution agrees that the CCMA is under resourced. She says that some of the blame for this lies with employers. Tokiso research shows that 45% of dismissal cases that were disputed were found to be unfair. Among the reasons for this is the high level of non-compliance of employers, who often simply do not come to arbitration. Some 27% of awards referenced to directors, meanwhile are ignored with employers refusing to reinstate or compensate the employee. Such actions are placing a tremendous additional burden on the CCMA.
Venter says that the CCMA is also to blame. While the Labour Relations Act makes provision for bargaining councils and private agencies such as Tokiso to be accredited to handle arbitrations, the CCMA has not yet accredited them. According to Venter, Tokiso applied for accreditation more than four years ago, but the CCMA has yet to make a decision in this regard. Private labour dispute resolution bodies could ease some of the burden on the CCMA, she concludes.
Employers should participate in bargaining councils
In 1995, radical changes were introduced to the South African labour force, introducing the concept of organisational rights. The laws are known as the Labour Relations Act 66 of 1995 or LRA. These rights are the framework of the collective bargaining system and it is this system that has brought about serious debate and not a little acrimony.
Rather than resent the collective bargaining system as they are want to do, employers should actively participate in it, suggests Vusi Ngcobo, of Labour Assist, a subsidiary of Europ Assistance South Africa. In most industries where the employees are members of unions, there are employers’ organisations and bargaining councils in place. At bargaining council level, employer’s organisations engage with trade unions to negotiate certain terms and conditions of employment in the industry. These negotiations often lead to collective agreements being concluded at the bargaining council. These agreements are binding upon all the employers and employees in the industry.
Participation at bargaining council effectively gives the employer an opportunity to have an input in the making of the rules that govern their particular industry. The agreements made at bargaining councils are binding on all the employers and employees even if they did not participate in the collective bargaining process. In addition, employers may be liable to pay levies prescribed at the bargaining council for their particular sector or industry. The collective bargaining system operates on the basis of voluntarism and no-one can be forced to join a trade union or employers’ organisation.
It is imperative that employers fully understand the environment in which they conduct their business, and find out if there are collective agreements in place, what unions are involved and whether there are employers’ organisations to which they may become affiliated. In all instances, it is important to take up concerns with professionals before these concerns escalate into what may become costly and disruptive problems in the business.
Whether one accepts that HR departments should be playing a greater role in the boardroom or not, with the shortage of skills and problems with retention of talent evident in many sectors today, business leaders need to seriously consider their human resource issues if they do not already do so.