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Managing Human Capital
Assignment Report
Yousef Hamad
L0009SBSB0913
Group 21
Tutor: S. Purcell
16 February2014
London School of Commerce
MBA for Executives
1
Abstract
Although ARC is a wholly state-owned company recruiting locally, having no international
partnership and no competition -as the oil refining business is governmentally monopolised-,
it is generally affected by global marketplace as well as the surrounding forces and internal
context.
This report discusses the impact of such forces on the company aspects and especially on
Managing Human Capital (HRM) and how to minimise such adverse impact in order for
ARC to become more creative, competitive, flexible and responsive to change, and how
important is the adoption of HR approaches within the organisation. It shows the significance
of HR policies and practices that shaped by the context, and demonstrates their effectiveness.
The report also highlights –in contrast with norms- how possible the HR strategy drives the
business strategy for short-term for stability purposes.
Introduction
No doubt, the human capital is a core in any organisation. The growth in economy creates
jobs which need different skills of country’s human resources (human capital); the asset in
which nations invest to build their workforce meeting the market needs by education, training
and development. Economy is grown by effective business and to be effective, business has
to have efficient processes and operations which require workforce of high performance.
Applying the HRM proper-appropriate initiatives such as recruitment, selection, appraisal,
training, development, motivation and reward leads to achieve high performance.
The report covers most of these initiatives in five main parts “Task” and conclusion
extracting some findings.
Due to the broadness of the HRM discipline and richness of theories and approaches, the
report cannot cover all of them, however, it presents some that foreseen relevant to the case.
Because of ARC bit-deteriorating situation, the report recommendations mostly focus on
eliminating problems hence attaining the stability after which contemporary HRM and
SHRM can be promoted.
To avoid exceeding the permissible limit of words, the appendixes used to accommodate
some important details and descriptions. (Report words number: 4440)
2
Contents
Task 1 ..........................................................................................................................................4
Recommendations.................................................................................................................... 7
Task 2 ..........................................................................................................................................8
Planning...................................................................................................................................9
Recruitment and Selection ...................................................................................................... 10
Recommendations .............................................................................................................. 11
Competency approach......................................................................................................... 12
Task 3 ........................................................................................................................................ 13
Current Situation.................................................................................................................... 13
Obstacles ............................................................................................................................... 14
Recommendations for Improvement........................................................................................ 15
Task 4 ........................................................................................................................................ 17
Maslow.................................................................................................................................. 17
Maslow in ARC Context........................................................................................................ 18
Hertzberg Theory.................................................................................................................... 18
McGregor Theory.................................................................................................................... 19
Expectancy Theory.................................................................................................................. 19
Recommendations.................................................................................................................. 21
Hybrid Proposal...................................................................................................................... 22
Task 5 ........................................................................................................................................ 24
Challenges.............................................................................................................................. 25
1. Micro environment...................................................................................................... 25
2. Macro: ........................................................................................................................ 25
3. Globally:...................................................................................................................... 25
Conclusion ................................................................................................................................. 28
Findings ..................................................................................................................................... 30
Appendixes ................................................................................................................................ 31
Appendix-1 HR Models....................................................................................................... 31
Harvard Model.................................................................................................................... 32
Michigan Model.................................................................................................................. 32
Storey’s Hard and Soft Views ............................................................................................... 33
Guest Model....................................................................................................................... 33
Strategic Human Resource Management.................................................................................. 34
3
Resource-Based Model........................................................................................................ 34
Strategic-Fit........................................................................................................................ 35
Universalist HR Models........................................................................................................ 35
Configurational Approach.................................................................................................... 36
Contextual Approach........................................................................................................... 36
The Integrative Approach..................................................................................................... 36
Appendix-2 HRMContext................................................................................................... 37
Appendix-3............................................................................................................................. 38
Appendix-4 Real Case......................................................................................................... 39
Appendix-5............................................................................................................................. 39
Appendix-6............................................................................................................................. 40
Appendix-8 Motivation Theories......................................................................................... 41
McGregor Theory................................................................................................................ 41
Maslow’s Theory................................................................................................................. 43
Hertzberg Theory ................................................................................................................ 44
Expectancy Theory .............................................................................................................. 45
Appendix-9 Findings........................................................................................................... 46
References................................................................................................................................. 47
4
Task 1
There are several debatable HRM-models and SHRM-approaches arose over decades that
interfere each-other, meet at some aspects and conflict at others, and evolved over time with
the HRM development such as Harvard, Michigan, Guest and Storey (Hard and Soft) models
and Universalistic, Configurational and Contextual perspectives (detailed in Appendix-1).
(CIPD, 2009; Market/Wire, 2005; Kates, 2006; Lawler, 2006; Porter/Yergin, 2006) argued
that the true challenge is how to select the suitable model, understand the complexity behind
and implement it in-a-way fits the organisation context. Every organisation has its own
unique circumstances so it needs insight into its context developing a framework that suits its
challenges. (Holley, 2009)
Boxall and Purcell (2008) as cited by Kew and Stredwick (2010) stated that there is no
common model appropriate for all situations but different strategies convenient for different
organisational settings and circumstances.
ARC is an oil refining state-owned company established in 1974. Its organisation composed
of four-main divisions as to chart.
Armstrong (2009) stated that HRM is more-comprehensive than the personnel management
treating people as assets rather than variable costs.
5
However, within its organisation ARC used to have Administration department taking care of
the employees’ affairs (attendance/absence, payroll and assessment), training and
recruitment. After the staff had started increasing in late-eighties, a new organisational
structure has been adopted isolating between Personnel and Training. ARC has never have
Human-Resource department. The training department works on fulfilling the training and
development needs within allocated budget. ARC has about 3200 employees weighed-down
by 60% overstaff.
As no competition (government monopolised refining business), oil firms tend to work at low
efficiency (Porter & Yergin, 2006).
The organisation is entirely affected by its context. HR policies are contingent upon the
work-law, and there is no consideration of Strategic HRM (Paauwe,2004; Bloisi, 2007), See
Apprndix-2.
Employers by work-law (15/1981) are not allowed to terminate people except in few critical
cases. Work contracts were endless unless employee resigns, retires or fired. This law pre-set
low salary with poor allowances. Salaries increase by time not by performance. The
retirement starts with 63-years old causing old-staff to hold the managerial/senior positions,
whilst younger employees have rare opportunities that arise especially when structure
expanded. This law made employers treating people as any other resource inevitably with no
sense of human-side, use them ‘as-much-as-possible’ at lower costs embodying Michigan-
model (Fombrun et la. 1984) and Hard-version (Storey, 1989).
Later amending law (12/2010) issued mainly to permit employers signing annual contracts,
hire and fire. Also it improved the salary-scale and allowances leading to satisfy/retain
employees. In 2006/2007, the Libyan-market has been penetrated by Oil&Gas international
operators which attracted lots of local competencies offering better packages where employee
can reflect his/her knowledge and experience and feels his/her value as part of the
organisation meaning Soft-version (Beer et la. 1985; Guest, 1987; Storey, 1989).
Guest (1989a, 1989b and 1990) developed four propositions -when combined- generate
effective organisation (Beardwell et la, 2004), then came-up with six-analytical dimensions
Guest (1997) which are practically considered by the contemporary HR managers (Price,
2011) that contradicts with ARC classical HRM.
6
Instead of achieving the corporate strategy objectives, focusing on the core business and
investing in upgrading/expanding the refinery to be viable and economic, ARC -due to the
excessive overstaff- builds more offices, enlarges transportation fleet and expands township,
canteens and car parking. The business seems driven by inevitable circumstances: internal
dues and external threats and entitlements (Armstrong, 2009). The situation is critical and
very challenging that maybe considered chaos.
As Kew & Stredwick, (2010) stated, ARC needs to deal seriously with this difficult situation
and break-down its complex environment. It should enhance its culture to cope with any
extreme/unexpected changes, and must comprehend how to live with such chaos.
Theories of Latham & Locke (1979) where goals are connected to performance outcomes,
and Bandura (1986) where employee with self-efficacy impacts his performance can possibly
be affective, however, there are no real performance management and follow-up procedure. It
is a very traditional process of control, monitoring and reporting/feedback. Each line manager
-through the supervisors- monitors daily the employee behaviour, performance and
contribution, then forwards one single performance report to the Personnel manager with
overall grade. Only weak and excellent employees notified and receive warning and
congratulate letters respectively. There is no systematic motivation and reward strategy.
This situation negatively affected the wages and HRM aspects causing many talents to
quit seeking better situations abroad, particularly in Arabic-Gulf.
7
Recommendations
The optimal SHRM approach that can relatively fit this situation is the Integrated-approach
(Martı´n-Alca´zar et al. 2005b) putting-together configurational, contingency, universalistic
and contextual approaches in single strategic HRM-model respectively considering also
Storey-Soft-vision:
HR practices should be set in-a-way to express the organizational-context which is usually
tough to implement due to several-influential factors (Bloisi, 2007):
Drawing on E.V.R Congruence Thompson (2005), ARC is mostly “lost organisation” where
values, resources and environment are incongruent; consequently rapid-strong actions are
compulsory to recover congruence in the long-term (Kew & Stredwick, 2010).
8
Task 2
ARC recruitment processes is handled in a very basic-conventional way (basic resume with
simulated interview). Due to the internal and external forces, the favouritism excessively
affect the recruitment and selection processes. The principle “the right people, with the right
skills, are in the right place at the right time” does not work.
As it is entirely state-owned, ARC is obliged to secure jobs for those imposed by the central-
government which contributed dramatically to overstaffing thus overburdening the
organisation. Moreover, and under the social pressure, ARC should recruit people from the
region where it exists which exacerbates the overstaffing-problem harming the overall
performance, as well as people supported by managers using their power. As cited by
Beardwell et la. (2004), Chan (1997) reflected a situation like ARC where employee
dismissal was not permitted unless he/she committed gross-negligence, no remarkable
incentives for workers to struggle for promotion.
Lower productivity is caused by overstaffing leading to yearly loss (Muncherji et la,
2009).
ARC cannot properly run its business with potential problems with unclear vision and
strategies, internal/external forces and overstaffing. ARC must set-up a short-term plan with
clear-applicable objectives hence defining HR strategy; first to removing all business
obstacles, second to take course of actions to exterminate chaos. HRM is key of achieving
this by adopting the HR state-of-art knowledge.
Establishing a standard HRM department is substantial.
9
Planning
As the objective is to mitigate the critical situation having things done urgently, this needs
setting a tactical plan (Bloisi, 2007). Data and information are needed to attain good plan.
The planning will be for:
Once fulfilling these tactical goals, a strategic HR plan is then developed through which ARC
anticipates the organisation-strategy-consequences on HR requirements (Prince, 2007) as
well as contingency plan for alternative actions and sudden disruptions (Bloisi, 2007).
The very-complex situation may lead to adapt/tune the business-strategy to achieve HR-
strategy objectives for short-term (HR-Strategy drives Business-Strategy) till stabilisation.
After steadiness, the recruitment and selection should be performed in a-way-to align with the
HR-strategy which is set to attain the business-strategy.
10
Recruitment and Selection
Any organization success depends on the quality of people which the organisation attracts,
employs and retains. Recruitment plays big role to enable organisation attaining competitive-
advantage. Steve Crabb, Personnel Today magazine Managing Editor says “Any organization
that does not take recruitment seriously is cutting its own throat. It must be a top priority for
any business,” (Brown and Swain, 2009).
The major pains here are favouritism, overstaffing and talents immigration.
As cited by Truss et la. (2012), Wright et la. (2004) stated that one of the most HRM
challenges that impact HR–strategy is Staff-retention; and also significantly affected by
staffing-level (Truss and Gratton, 1994; Baron and Kreps, 1999; Monks and McMackin,
2001). Grant (1991) as cited by Armstrong (2009) argued that the company’s resources
(people inclusive) and capabilities are concrete in materialising strategies for which realising
the relation between capabilities, resources, profitability and competitive-advantage is
required. Employees (HR) are core to maintain reputation, however, they are liable to
esteemed companies’ attractiveness (Armstrong, 2009).
Accordingly, ARC overstaff is an obvious issue, therefore predominating this is a core in
setting HR-strategy, as a result fulfilling business strategy. See Appendix-3.
11
Recommendations
ARC is recommended to take following actions:
Apart from these problems, the competency-approach could be the best choice for
recruitment and selection.
12
Competencyapproach
The selection is typically based on the applicant competencies. It targets personal abilities of
performing a job rather than characteristics. Torrington et al.(2008,p.170) noted that this
model as an integrated-approach can be utilised for selection, development, evaluation and
reward tasks. (Rees & French, 2010)
(CIPD, 2007c; IRS, 2008) proposed to recruiting through Internet, as of applicants
preference and attracting. Fairness is an important element that increases the process
efficiency and helps in avoiding discrimination. (Rees & French, 2010)
13
Task 3
As a strategic-approach, HRD is used to invest in human-capital employing other HR
processes to determine the true and potential talents. In order for HRD to reconcile the
corporate future needs, a framework is needed for training programmes, self-development
and career advancement (Price, 2007).
Current Situation
There are local and overseas training programmes implemented mostly with the principle of
“first-come-first-serve” meaning the employee knows in advance his training period and
duration regardless his performance. However, the planned programme is subject to
favouritism and internal/external interventions.
The training abroad is sometimes granted as a reward. ARC also sends graduated employees
abroad for postgraduate studies (MSc) many of which resigned after completing their studies,
and moved to either international firms locally exist, or to Gulf-countries. The most effective
programmes are those of on-job training.
ARC also allows some employees to do part-time self-financing learning through which
individual aims higher education level that might organisationally promote him.
The process starts from the Training department asking all line managers to provide their
departments’ training needs. Consequently after receiving the information, Training
department starts planning the training and development programmes that meet the
requirement at estimated budget. There is no real-effective monitor process. Trainee feedback
does not count (see real-case in Appendix-4).
14
Obstacles
Like most of Oil&Gas companies (NOC affiliates), ARC faces several challenges causing
pains (Porter & Yergin, 2006):
(See Appendix-5)
15
Recommendations for Improvement
All personnel, training and development activities should be integrated in one HR department
that follows standards and common practices.
Once HR department lunched, it should start with resolving the overstaffing by start working
on long-term integrated-fundamental learning and training programmes focusing on English
language, IT and work skills (Porter & Yergin, 2006) that improve their knowledge and
skills, and reduce the number of people in workplace where they disrupt the operations.
Involving all line managers in investigating, studying, analysing and evaluating the
workforce at all levels is necessary coming-up with workforce strengths and weaknesses,
opportunities and threats (SWOT). This also helps in knowing the actual-active structure and
workforce quality levels, talents, skills, competences, shortages, gaps, uselessness, potentials,
actual vacancies, and many others from which primary steps can be taken forward to improve
the performance as of Beardwell et la, (2004): (a) screening each unit and its workforce to
precisely specify the real needs of both; (b) analysing and identifying the training needs and
requirement and (c) analysing the quality and effectiveness of existing programmes.
(Beardwell et la, 2004; Prince, 2007; Bratton & Gold, 2007; Bloisi, 2007; Armstrong, 2009;
Dessler, 2011; and Truss et la, 2012) the table will also be considered:
16
See Appendix-6
17
Task 4
There are several theories argued the motivation from which some are selected for the
following criticism. More details are available in Appendix-8.
Maslow
The needs hierarchy is one of the most famous theories that developed in 1940s and prevalent
across several disciplines such as psychology and management. It puts into levelled pyramid
five-human needs hierarchically where achieving satisfactorily one level of needs is
necessary to move to the next level. Even-though it is deemed well-ordered, simple,
apparently-practical and cognitively-attractive, it is “plain, flat, dead wrong” (Denning,
2012). It is simple to performance and reward, as manager should develop his reward strategy
based on understanding employees’ motivators at each stage, and at which stage each
employee works (Beardwell et la. 2004).
Rutledge (2011) criticized the model that missed the social-connection role without which
none of needs are possible, and no survival without collaboration. She says: “Maslow’s model
needs rewiring so it matches our brains”. And indeed self-actualisation and leadership are not
necessarily needs for everybody who may also be incapable of.
Beardwell et la.(2004) criticised that Maslow neglected the capacity of employees and those
around them to realise what needs and how to meet them.
18
MaslowinARC Context
These criticisms are valid for ARC workplace where the majority of employees relate and
loyal to tribes (not organisation) those impose ARC to secure job and development
opportunity. Before starting job, individual often has interpersonal relationships within the
workplace meaning belongingness might not be motivator. Maslow is invalid for female who
cannot aim more than being employee, as to social restrictions. Also recognition is not motive
as money and other tangible benefits.
In- fact the organisation structure is often standstill where old people hold positions, hence
most employees do not aspire higher positions. For example, the author has worked thirteen-
years for ARC where directors and managers remain the same swapping sometimes their
positions giving no chance for generations next to them.
Hertzberg Theory
According to (Beardwell et la.2004 and Tayson, 2006), Herzberg-theory developed Maslow-
system classifying two groups of different quality and influence:
19
As cited by Armstrong (2009), Opsahl & Dunnette (1966) attacked Hertzberg-theory as it did
not identify the relation between performance and satisfaction; also there is no clue that
satisfaction leads to productivity improvement. As Hertzberg followed Maslow’s humanistic
rout, it falls in similar criticism that valid in ARC atmosphere. Furthermore the dissatisfaction
removal can be by increasing Hygiene factors (Bloisi 2007). Many of these factors are
granted for ARC employees thus no dissatisfaction which does not mean satisfaction
(Beardwell et la. 2004). Managers may undervalue motivators believing that this will protect
their positions form potential-employees acquisition.
McGregor Theory
Theory-X is extreme, however, works seldom with ARC cheap staff and labours as well as
subcontracted workers for short-specific tasks but not always. Theory-Y is not applicable, as
several managers –to protect their positions- do not promote potential employees that may
acquire such positions. Also it cannot be active in a state-owned business environment where
people are bit lazy. Armstrong (2009) posited that McGregor-theory stresses the commitment
importance which is less important with ARC employee majority those drop in between X
and Y.
Expectancy Theory
Vroom (1964) introduced it including Valence-Instrumentality-Expectancy “VIE”
(Armstrong, 2009).
Bloisi (2007) explained the theory that employee faiths in the relation among effort,
performance and rewards for having job done, and cited, Vroom (1982) proposed that
employees motivation anchored with fulfilling a desired target so long as their actions of
attaining such target is at their expectancies. Beardwell et la. (2004) added that the basic
‘expectancy’ concept is the expectation of what will happen that impacts the employee’s
behaviour choice.
20
According to Dessler (2011), Motivation = V.I.E
No motivation when any variable equals zero:
Dunford (1992) argued that the employee logically evaluates the potential reward and
circumstances before he acts, whereas in reality people rarely conduct sophisticated
computation as Vroom proposed. Landy & Coote (2010) added that emotions affect
employee decisions. (Yair, 2011)
Employee will put big efforts if he expects firm-relationships ‘between effort and
performance’, ‘performance and outcome’ and ‘outcome and personal objective satisfaction’.
All these relations are affected by other factors, for instance skills, ability and pay-off value.
However, it comparably seems valid, as employee -for several behaviours- considers
expected rewards. (Robbins, 2012).
21
Recommendations
Society highly affects ARC work environment where favoritism, corruption and overstaffing
are facts disrupt the motivation. As ARC is 100% state-owned-Oil&Gas company, it shares
some aspects with public-sector firms and contradicts in others, even-though, Public Service
Motivation (PSM) theory is not applicable in ARC case, as PMS relates to individual
behavior and commitment to public-sector unique motives (Perry & Wise, 1990) as cited by
Hug (2010). The motives that stimulate people to work for ARC are mainly secured job and
tenure, location (coastal and close to Capital), free housing, health-insurance and others, and
training opportunity abroad granted.
Before adopting any particular or hybrid theory(s), ARC management is needed to take the
following actions:
22
Hybrid Proposal
Maslow two lower levels are relatively workable with temporary worker who can be
motivated by offering free canteen, transportation and others, and extending his contract, not
more. Theory-X works slightly with cheap staff and labours as well as subcontracted workers
for short-specific tasks but not always. Herzberg-theory could work for short-particular tasks
and missions but not for routine work. Expectancy-theory is most likely applicable within
ARC organisation as far as there are valuable outcomes and justice. Managers need to be fair
and see workforce by individuals motivating each individual according to his/her VEI factors.
Fairness is a vigorous motivator. In presence of real-satisfying incentives and rewards, and if
manager can be fair-enough, performance improves. This makes employees believe if their
work is quantitatively/qualitatively good, the reward will be good too.
In contrast, “When pay is based on factors such as having seniority, being cooperative, or
“kissing up” to the boss, employees are likely to see the performance–reward relationship
as weak and demotivating” (Robbins, 2012, p.225).
.
23
Managers shall consider the job sophistication and associated risk when motivating and
rewarding. Important to survey employees listening to them and having their feedback in
tuning the motivation and improving reward thus maximising performance. Manager should
be smart-intelligent enough to seek the Catalyst for better performance such as applying
fairness, minimising routine, creating challenging jobs, job design, teamwork, motivate for
innovation, training and development, building mutual trust and confidence, recognition,
support the respect and ethics.
24
Task 5
“Change management is defined as the process of achieving the smooth implementation of
change by planning and introducing it systematically, taking into account the likelihood of it
being resisted” (Armstrong, 2009, p.424).
Restructuring is a process of taking-apart and recombining the organisational structure for
cost reduction, duplication’s termination and efficiency improvement (Price, 2007).
Armstrong (2009) stated that there are many change models help organisations in
implementing the change such as Lewin (1951), Beer et la (1990) and others.
Kotter (1995) as cited by Robbins & Judge (2103) introduced a detailed eight-steps model
building on Lewin mode:
Ulrich (1997a) posited that one of HR specialists’ main-roles is functioning as change agent
delivering culture change and organizational-transformation. Purcell (2001) believed that
strategic HRM is a core in the change implementation process where HR can play a big role.
Scholes (1997) argued that integrating HRM policies with HR strategies and process of
strategic change, HRD, employees relationships and others is important for successful change
management. (Armstrong, 2009)
25
Challenges
ARC organisation has been affecting by several factors at different levels challenging change:
1. Micro environment: Change will handle overstaffing problem as one of the major
issues exaggerates costs and decreases performance. The big challenge is the
impossibility of firing people as to governmental policy, therefore overstaff remains a
number in the change equation and must deal with (see Task-2). Favouritism bit-
highly influences the change implementation and results too, unless ARC
adopts/applies decisive policies to secure the change quality which needs establishing
a corporate governance and compliance systems which are additional challenges. Fear
of change; Truss et la. (2012) took Crail’s (2007) survey as an example that 91% of
HR respondents confirmed that people resistance was a big problem. Due to their
culture and attitudes, employees including mangers will resist the project particularly
those who believe change will cut their benefits. Kotter (1995) suggested to involve
more people in promoting and driving the change. Skills lacking increases the
difficulty of selecting people to participate in change implementation which is also
disrupted by talents immigration. Aging senior staff may strain-back retaining the
status-quo. Employees might not be cooperative with managerial imperatives (Truss
et la. 2012).
2. Macro: political, economic and social forces and government restrictions. ARC is an
affiliate of National Oil Corporation (NOC) which uses ARC only to refine crude-oil
producing fuel and sells it subsidised in the local market meaning ARC is tied-up with
political/economic policies. Unexpected-frequent change in governmental policies
especially HR policies will be harmful. Social environment highly impacts ARC
policies and practices. As long as policies are involved, they impact change.
3. Globally: market penetrated by multinational companies that steal talents. Social-
media opens windows on the glob where employees communicate with other cultures,
contact universal workforces that increases employees’ sophistication thus affect the
change.
26
Though it assists in achieving the change, understanding the STEEPLE factors: social,
technology, economic, environment, political, legal and ethical and global marketplace is
deemed challenge. The most primary challenge is the right leaders selection who will
properly lead the change creating the encouraging-atmosphere that helps employees
exceeding their prospects hence convincing for change (Pryor et la. 2008).
Wischnevsky (2004) compared the organisational-actual performance to an internal/external
benchmark to develop the change. This probably leads to create tremendous changes
implicating overall-business performance, top management and environmental shifts. (Pryor
et la. 2008).
Pryor et la. (2008) posited Vision development is incorporated by all change approaches
which is essential to move from the status-quo to future-state. Since ARC-core business is
linked to NOC, developing a vision that serve ARC as a whole is difficult. ARC difficult
situation may impose: “HR Strategy leads Organisation Strategy” exceptionally for short-
term. Vision statement depends on either promoting this principle or the opposite. Once
developed, leaders should communicate it to employees (Kotter,1995) not forgetting “leaders
are exemplars” necessary to walk the talk.
As (Ulrich, 1997a; Scholes, 1997; Purcell, 2001) claimed, HRM, SHRM and HRD are
engaged in executing the change, and because there is no ARC HR department and HR
strategy , change will not be an easy task for which enough time and comprehensive scope
have to be taken into account.
Selecting external agent is subject to long tendering process and corruption those could
threaten the right selection.
Because of new issues resulted from implementing the change, the plan will be modified
accordingly incorporating such issues.
Reward system is needed for attaining change (Armstrong, 2009) which ARC does not have
as a system but has some reward attempts with fabricated solutions. Reward instead of
supporting the change implementation, it will be part of change targets.
27
Data and hard-evidences are mighty tools for fulfilling change (Armstrong, 2009). This needs
information-system and information-technology which are both poor at ARC. For instance,
ARC spent huge money on IBM-Main-Frame utilising only 10% of its functions. ARC does
not utilise outlook emailing system in communication among divisions and still uses a very
conventional post system emphasizing paperwork and bureaucracy, and lots of hard clues are
badly stored in metal containers.
The biggest challenge is that what supposed to be supporting-facilitating factors and
catalysts for the implementation process, are –instead- targets for change.
28
Conclusion
It has been concluded from this report that now-a-days in order for ARC to be effective in the
business, one of HR-professionals duties is to understand STEEPLE factors in which the
company operates and the hoists steering change within it. Also to understand the universal
marketplace for more effective competitive position.
Nevertheless ARC has no very strong-direct link with the global marketplace, it is affected by
this marketplace in several aspects such as technology, foreign manpower, multinational
operators and international contractors/suppliers. The Oil&Gas is generally influenced by the
international politics and economy such as crude prices. Crude oil is the feed-stock of any
refinery which is direct function in the refinery economies.
Fulfilling a competitive-advantage as a goal needs an organisation to adopt relative-
appropriate HR strategies and respond to change. However, in ARC case where HR area
suffers from serious problems and troubles, ARC needs to adapt its business strategy to meet
in short-run the HR strategy objectives of eliminating such problems and attaining sustainable
stability.
The intervention of STEEPLE was one of the key factors of causing such problems and
creating obstacles harmful to the operations and performance. ARC management should work
not only on the internal factors within its boundaries but also on minimizing the STEEPLE
influences as possible. ARC can negotiate the society and government to reduce their
impositions and to improve the governmental policies and legal and economic issues in-a-
way mitigating the problems and helping in making the refinery viable and economic. In
order for the refinery to be viable and economic, ARC should have the green-light from
government for revamping and upgrading the refinery applying foreign-technology hence
creating employment, and for organisational restructuring. In other words terminating the
centralisation. These will of course decrease overstaff and accordingly favouritism as a result
step-on-the-way forward better performance.
29
Subsidising fuel and selling it cheaply increases the demand thus overloads the refinery
bearing in mind that the refinery is technologically old and suffering from overstaff,
favouritism, rigid policies, frequent changing law/regulations and governmental restrictions
on having international partnership, recruiting foreign competencies and on revamping the
refinery exploiting the latest technology. This implicates STEEPLE including the global
factors.
ARC needs to realise and consider the above and consequently reduce the counteractive
affects that disrupt its operations and impair the performance.
ARC is accordingly needed to consider the circumstances of its context, adopt the best-
optimal HR frameworks restructuring its HRM policies and practices, promote critical
awareness in regards to HR strategy, realise what can be accepted by employees and
managers and react to change, improving standards and applying proper theories and
techniques that can help ARC management in matching between the business needs and the
circumstances. As the society and governmental policy excessively influence the recruitment
and selection, outsourcing both of them can minimise such influence. Partnership with an
international HR partner can play a key role in beating this impact and add values to the
organisation. HR partner will help in restructuring the HR policies and practices and enabling
the proper planning, recruitment and selection, job designing, performance appraisal, training
and development and motivation, reward and promotion, in other words managing the HR
aspects as whole.
ARC HRM should utilise utmost its resources particularly human-capital which is the most
significant resource in inducing/increasing the overall performance and applying the best
motivation approaches and improving the rewards. Employees should be treated as per
SOFT-vision targeting their loyalty and commitment, and involved in driving change. These
all can reduce the talents immigration. However, HARD-vision is needed in some cases at
some levels.
To secure effective processes and efficient operations to achieve these goals, a robust
monitoring system is mandatory for which ARC must establish a Corporate Governance and
Compliance department.
30
Findings
The report came up with the following findings:
31
Appendixes
Appendix-1 HR Models
Human Resource Management ‘HRM’ and Strategic Human Resource Management ‘SHRM’
are two-very-interrelated fields rich of models, theories and opinions evolved over decades
which cannot entirely be covered here, so that this report goes through some of them
highlighting the key concepts and issues, and explaining the most significant ones.
Armstrong (2009) stated: “HRM is a strategic, integrated and coherent approach to the
employment, development and well-being of the people working in organisation.” However,
there are several definitions mainly in the USA and the UK that debated the HRM definition
such as (Beer et la, 1984), (Guest, 1987), (Storey, 1995), (Legge, 1989) and many others.
Armstrong (2009) stated that the HRM is more-comprehensive than the personnel
management treating people as assets rather than variable costs.
HRM-models are HRM views/approaches of achieving the HR objectives. HRM model
comprises the HR activities when discharged efficiently and effectively, the organisational
targets are attainable by competent taskforce. Primarily strategic HRM frameworks
emphasise the HRM-performance and human-capital efficient usage, however they seemingly
neglect the standpoint of how organisation affects the future-base development for human-
capital (Ehnert, 2009). The strategic HRM is the moderator/interface between the HRM and
strategic management developing HRM concept (as integrated, strategic and consistent
approach) that aligned with the strategic management notion (Boxall, 1996) as cited by
Armstrong (2009).
US Approaches: Kaufman (2007) as cited by Truss et la. (2012) showed that the HRM as a
concept appeared in 1960s when it was reciprocally used with ‘Personnel Management’ term
in the USA where two influential approaches occurred. The first is called ‘Harvard
framework’ (Beer et la. 1985), and the second is called ‘Michigan model (Fombrun et la.
1984).
32
HarvardModel
Price (2011) argued that Harvard Model/Map could be the most HRM effective model. It
deems people as resource but should not be managed as managing the other non-human
resources. This approach perceives mutuality factor where employees are substantial
stakeholder. They have needs and aspirations as shareholders, clients and the rest of
stakeholders have. Harvard abstracted four human resource areas: (a) HR flows such as hire
and fire, evaluation and promotion; (b) reward and motivation; (c) employee effect in terms
of authority, delegation and power and (d) work system like work definition/design and
people alignment. This lead to fulfil four HR policies: (i) Commitment; (ii) Congruence; (iii)
Competence and (iv) Cost effectiveness. Beer et la (1984) recommended to use these four Cs
in assessing and analysing the long-term consequences (HR policy’s costs and benefits) at the
individual, organisational and social levels.
MichiganModel
Contradicting with Harvard map, Michigan model (Fombrun et la. 1984) emphasised the link
between the organisation’s business strategy and HRM practices (Truss et la. 2012).
Although both models recognised people as invaluable resources, Michigan model did not
firmly account human-side considering employees like any other resources. All business
resources including people, materials and apparatus should be managed similarly, obtained at
lower costs, lightly used, developed and utilised as-much-as possible. It also called “matching
model”, “best-fit” or “contingency” approach. It requires the HR strategy/policy to tightly
match the corporate umbrella strategy (Price, 2011).
Price (2011) stated that Michigan model diminished the HR functions to reactive roles, and
depreciated the usefulness of external factors such as labour union, therefore it is tough to
conform with present work-life. Fombrun et la. (1984) as cited by Armstrong (2009)
explained that the HR cycle comprises four common elements: selection, appraisal, rewards
and development. Price (2011) cited that with Michael Porter’s influence, Schuler and
colleagues advanced the matching-model with complexity involving important factors such
as organisational size/structure, business sector, technology and societal.
33
UK Approaches: Truss et la. (2012) exhibited that UK-based-academics differentiated
between “Hard” and “Soft” HRM approaches to manage people. In line with Michigan-model
(Fombrun et la, 1984), Hard HRM stresses on people as resources deploying them for
performance-maximisation, while Soft HRM emphasises the human-side aiming employees
commitment and loyalty for higher performance (Legge, 1995).
Storey’sHardandSoftViews
Storey (1989) distinguished between two human resource management HRM versions. The
Hard version where people are considered as essential resources that increase performance,
consequently create a competitive advantage. The organisation should therefore acquire,
invest-in and develop people to obtain benefits. It emphasises the strategic, quantitative and
measurable sides of managing human-capital. However, the Soft version stresses the human
side treating people as invaluable assets aspiring their loyalty and satisfaction to attain a
competitive advantage via their commitment. It also emphasises gaining the employees’
minds and hearts building mutual-trust, counting on them via more engagement, leadership
and communication, with considering the organisational culture major aspects
(Armstrong, 2009). Then Storey (1995) raised-up his HRM definition.
GuestModel
Guest–model perceived that the HRM varies from the personnel management (Price, 2011).
Guest criticised Harvard-model deriving (Guest, 1987, 1989a, 1989b and 1990). If a model is
fruitful, it should be so in both researching and practical fields, Guest confirmed. Accordingly
he developed a group of propositions -when combined- generate highly-effective
organisation: (i) strategic integration; (ii) high commitment; (iii) high quality and (iv)
flexibility. ( Beardwell et la, 2004)
Such critique maybe obsolete after Guest (1997) had come-up with six analytical dimensions:
(a) HRM strategy; (b) HRM practices; (c) HRM outcomes; (d) behaviour outcomes; (e)
performance outcomes and (f) financial outcomes which are theoretically and practically
considered by the contemporary HR managers. Harvard model asserts that the business
outcome is linked with the commitment concept, in contrast, Guest recognises that this
concept is confused and tough to establish such link. It pursues a “flow” approach,
considering underpinning practices of strategy that attaining many desired results. Guest-
model as its American ancestor is unitary when linking the commitment and behaviour
together as a strategic management objective, and unenthusiastic in the trade-union worth.
34
Strategic Human Resource Management
SHRM is how to achieve the organisation objectives through people by integrating HR
management, policies and practices. It based on two main approaches: (i) resource-based
view and (ii) strategic fit (Armstrong, 2009). Schuler (1992) as cited by Armstrong (2009),
stated that SHRM centres on three HR elements: (a) management integrates with the
company’s strategy and needs; (b) policies cohere over hierarchies and policy areas; and (c)
practices are adapted, accepted and then adopted by line managers and employees.
Resource-BasedModel
As a concept it is based on employing all organisation resources to fulfil a unique position
and create a competitive-advantage. Grant (1991) as cited by Armstrong (2009) argued that
the company’s resources and capabilities are concrete in materialising strategies for which
realising the relation between capabilities, resources, profitability and competitive-advantage
is required. Mueller (1996) posited that although employees sustain firm’s business and
reputation, most firms valuate their entities, product/service fame and then employee skills
and knowledge, and added: human-capital should be treated like other resources array.
Employees (HR) are core to maintain reputation, however, they are liable to esteemed
companies’ attractiveness. (Armstrong, 2009)
Wright et la (2001) introduced three HRM significant components effectible to HR system:
(i) human-capital pool/bank composed of employee know-how, skills, behaviour and
motivation; (ii) human-capital flow where skills and knowledge move all-over the
organisation and (iii) dynamic process that changes and/or renew the company. Nevertheless
this debate whether or not endures, so-far (Wright et la, 2001) research highly contributed to
SHRM. (Allen & Wright, 2006).
35
Strategic-Fit
Delery and Doty (1996) prescribed as “contingency” perspective (Armstrong , 2009). As to
Wright & McMahan (1992), it relates to two dimensions that recognise strategic HRM.
Horizontal-fit refers to the coherence among the several HRM practices, whereas the
Vertical-fit refers to the relation between the HRM practices and the organisation’s strategic
management process. Managing employees depends on the circumstances, especially overall
strategy (Truss et la. 2012). This framework is contingent entirely on the organization’s
strategy, context and culture (Wright & Snell, 2005). It seems to be stationary, as it does not
consider the change processes, ignores the institutional power that formulate HRM and
cannot be deemed that companies are free in making independent decisions (Armstrong,
2009).
UniversalistHRModels
Delery and Doty (1996) implied that there are several HRM practices that any organisation
can select the best for superior organisation performance. Plenty of studies have concentrated
on how-many components universalist approach have. (Truss et la. 2012)
Best-Practice approach refers to adopting a group of best HRM practices that deemed
universal as they are best at any case (Armstrong, 2009). Pfeffer (2005) outlined thirteen
interrelated Best-Practices that are derived from his reading and discussion with HR
executives: Employment security, Selective recruitment, High wages, Incentive pay,
Employee ownership, Information sharing, Participation and empowerment, self-managed
teams, Training and skill development, Cross-utilisation and cross-training, Symbolic
egalitarianism, Wage compression, Promotion from within. However, Pfeffer (2005) claimed
that the managing people approach is more important than the practices exact number.
Applying one single bundle of such practices is difficult within a firm (Truss et la. 2012).
Practices that work effectively in one firm should not be necessarily as so in other firms, as it
might not be fit/match its strategy, management style, culture, and others (Armstrong, 2009).
36
Configurational Approach
It recognises configuring or bundling HR practices that anticipates supreme performance
when applied together, or the right strategy, or both. Fulfilling organisational effectiveness
needs HR system based on both horizontal/internal fit and vertical/external fit. Both best-
practice and contingency frameworks are fuzzy with the configurational approach. Its notion
generally means HR practices effectively-integrated that are convenient for different
corporate strategies (Deb, 2009). For example, achieving competitive advantage needs
employee-high- performance that can be attained by thorough selection, training and
development, and by fostering the motivation via remarkable rewards. The dilemma is how to
bring together different practices, as no clue of certain bundle is better than another.
(Armstrong, 2009)
Contextual Approach
It refers to the relationship between the strategic HRM and its context (Martı´n-Alca´zar et al.
2005b). Paauwe, (2004) argued that such relationship is reciprocal where both elements affect
each-other. Brewster (1999) claimed that this model does not emphasise the performance
only but also to analyse SHRM internally and externally (PESTEL context, cultural context
and competitive context) knowing what is unique in the context and why. Also added; this
approach considers that different actors could have different interests in the organisation.
SHRM goes beyond the organisation to the macro-level: zone, society and government which
is adopted to attain organisational goals that may harm also such macro components. As per
Martı´n-Alca´zar et al. (2005b), SHRM exceeds HR managers’ responsibilities towards the
significance of all line managers. (Ehnert, 2009).
TheIntegrativeApproach
Martı´n-Alca´zar et al. (2005b) as cited by Ehnert (2009) introduced this approach as the key
contributions of the configurational, contingency, universalistic and contextual that are
summarised in one strategic HRM model.
 Configurational-approach is to analyse HR systems’ internal relationships and
matches among HR policies, practices and strategies.
 Contingency-approach is to consider the relationships with the organisational
surrounding. Universalistic- approach is to express the HRM strategic significance.
 Contextual-approach is to analyse HRM in its social-context and consider mutual
relationship between HRM and its environment clearly laying-out the strategic HRM.
37
Appendix-2 HRM Context
HRM processes appear within the organizational-context interacting with the
internal/organizational factors and external environment that influence the firm practices and
policies (Kew & Stredwick, 2010). As cited by Armstrong (2009), Paauwe (2004) explained
that there are several internal and external elements impact the relationship between HRM
policies and practices, and the performance.
HR practices should be set in-a-way to express the organizational-context which is usually
tough to implement due to several influential factors: (i) internally such as technology,
business type, employees type and organisation size, culture and age; and (ii) externally like
social, political, economic and legal which in order to respond to, organisation need to make
polices hence practices flexible-enough (Bloisi, 2007).
38
Appendix-3
1. ARC needs to treat Overstaffing issue and minimising it to the lowest levels by:
o Creating jobs. ARC should start immediately the two planned projects (Refinery
Revamp and Marine Harbour) which can accommodate lots of employees during the
execution phase and operations.
o Employment-freezing, instead recruiting from within the organisation, relocate
permanent employees, and not renewing temporary contracts (K.I. nd).
o Engaging employees with contractors to learn and gain experience, as this approach is
often part of service contracts.
o Applying IT systems, internet and emails performing some activities at home. This
also decreases the operating costs and internal hassle.
o Decreasing work-shortage by minimising outsourcing. If outsourcing is necessary,
supplier should absorb maximum number of employees from the outsourced service.
Outsourcing decision should be preceded by thoroughly analysing what mandatory
activities to be outsourced considering the consequences (K.I. nd).
o Apply a scheme of early-voluntary retirement which most probably accepted by many
employees (Jain et la. 2009).
2. Outsourcing the Selection and part of Recruitment that can improve their efficiencies
and mitigates favouritism and internal/external influences (Kew & Stredwick, 2010). The
outsourcing could comprise even training and development. This will let ARC
concentrating on its core business and eliminate favouritism and society force. HR agent
should exist abroad far-away from the organisational context.
3. Alternatively establishing a shared-service centre involving call-centre to offer HR
advices (Marchington & Wilkinson, 2008). However, this will not be as effective as
outsourcing.
4. Another alternative that establishing Recruitment and Selection Unit abroad, for example
in China to cut cost and avoid interventions of society thus decreasing favouritism.
39
Appendix-4 Real Case
IT engineer was granted 6-month training course in the UK. He cut the course and went back
home, then submitted his feedback to his boss and training manager that the course was a
piece of wasting time and money. Training manager and his boss were not happy with the
feedback and instead of thanking him, he had not been given any training chance for years.
Appendix-5
1. Libya’s education outcomes do not meet job market needs hence workforce is skill-
shorten, and curriculum is outdated and not updated to comprise computer and language
effective training thus workforce is predominantly formed by under-qualified employees.
2. Business is negatively influenced be weaknesses in skills and poorly- evolved regulation
and rules.
3. Insufficient/ineffective training with no R&D contribute to the poor performance.
4. With no alternative plan, government applied restrictions on foreign workers made them
leaving the country, as a result deteriorating the performance.
5. Less and poor training with being under-qualified/under-incentivised, highly-skilled and
competent Libyans emigrated.
6. Drain of talents dramatically increases towards the international companies which offers
good packages and high-quality training.
7. There is often a disconnection between ARC (like other operators) job-required skills
and the worker skills brought on the table.
40
Appendix-6
1. Set a short-term HRD Strategy with clear-achievable objectives. This mainly to treat
and stabilise the current situation.
2. Consequently set HRD plan with the following milestones:
 Relocation in case of vacancies arose. This may comprise also interchanging
positions among the employees in best-possible way.
 Filling gaps between the company requirements and employees knowledge and
skills.
 Updating the organisational structure and job specifications.
 Decide on the proper techniques of training and developing groups and individuals.
3. Designate concern people responsible for the plan.
4. Plan implementation overlapped by monitoring and assessment process issuing
feedback.
5. Plan editing and rectification.
6. As soon as attaining the short-term strategy and situation stabilised, long-term strategy
is formulated to meet the business strategy.
7. Undertake critical affair workshops for key personnel and communication and
progressing training across the industry increasing consciousness of the need for
change. Engage skilled professionals in global forums to exchange know-how and
experience (Porter & Yergin, 2006).
8. ARC should carefully select the training institutions in terms of quality, curriculum,
commitment and reference list. This can be performed throughout prequalification
screening and tendering processes; Thomson and Mabey (1994) as cited by Price
(2007).
9. Conduct critical issue workshops for the key energy sector professionals and ongoing
training and communication across the sector to raise awareness of the need for change
and the available options.
10. Start an integrated education reform program, with training as a top priority for the
workforce as a whole. In particular, focus on workforce skills, IT and language training
that will re-tool the population and prepare them for the wave of economic
development.
41
Appendix-8 Motivation Theories
McGregorTheory
McGregor (1960) as cited by Armstrong (2009) introduced his theory analysing people
different views and the way of their motivation in two components: (i) Theory X where
average human tends to work aversion and responsibility avoidance, thus it is necessary to
oblige, command and intimidate people with penalties to get jobs done; and (ii) Theory Y
where individuals are considered self-directed in achieving the goals to which they are
devoted and rewarded accordingly. Practically the workforce majority falls someplace
between practicing both theories. Although they have different approaches, both agree that
the resources -comprising people- are organised by managers in the corporate sake;
McGregor concluded that most organisations adopt either of them (Burn, 2008).
As cited by (Yair, 2011), Robbins & Judge (1998) stated that McGregor recommended
managers to promote workers by creating challenging job, giving authority and
responsibility, and participating in decision-making. And based on Bruce & Pepitone, (1998).
Theory Y suggests also self-achievement and recognition are significant as money.
No clue of either bundle of assumptions is applicable for both Y and X theories (Dessler,
2001).
42
Source:http://thecriticalpath.info/2011/08/22/theory-x-vs-theory-y/
McGregor in ARC Context
Theory X is extreme, however, works seldom with ARC cheap staff and labours as well as
subcontracted workers for short-specific tasks but not always. Theory Y is not applicable, as
several managers –to protect their positions- do not promote potential employees that may
acquire such positions. Also it cannot be active in a state-owned business environment where
people are bit lazy. Armstrong (2009) posited that McGregor theory stresses the commitment
importance which is less important with ARC employee majority those drop in between X
and Y.
43
Maslow’sTheory
Maslow submitted his theory
“Hierarchy of human needs” with five
needs’ levels starting from bottom to
top. Hierarchy presents each level
significance to motivation. The
motivation is strongest at the bottom, as
this level is of inevitable-physiological
needs. Motivation strength declines as
the needs level goes up over hierarchy.
Life is dependent on physiology needs and once this is satisfied, safety and protection against
danger come next. Then belongingness comes where relationships are built for wellbeing and
after that esteem needs come having the recognition and respect. Finally the self-actualisation
level is where individual needs are all fulfilled with no more struggling; and it is his decision
what important and priority. The model demonstrates that employee’s behaviour is
circumstances-dependent and at any given time he can work at different levels. Managers
should understand each stage, as this helps them knowing what level drives and motivates
each worker onwards attaining the targets (Burn, 2008).
44
Hertzberg Theory
According to (Beardwell et la. 2004
and Tayson, 2006), Herzberg theory
developed Maslow system
classifying two groups of different
quality and influence:
(i) Motivation which creates
satisfaction and comes from within the organisation such as responsibility, recognition of
work execution, personal growth opportunity and attainment sense;
(ii) Hygiene factors those relate to work environment and conditions for which continual
considerations are necessary to remove dissatisfaction such as job security, firm policy, work
circumstances, reward and supervisory quality which are employees attractive but neither
satisfactory nor promotive; meaning despite these factors are well-attended, employee may
become uninterested when feeling job senseless.
45
ExpectancyTheory
Vroom (1964) introduced it including Valence-Instrumentality-Expectancy “VIE”
(Armstrong, 2009).
Bloisi (2007) explained the theory that employee faiths in the relation among effort,
performance and rewards for having job done, and as cited, Vroom (1982) proposed that
employees motivation anchored with fulfilling a desired target so long as their actions of
attaining such target is at their expectancies. Beardwell et la. (2004) added that the basic
‘expectancy’ concept is the expectation of what will happen that impacts the employee’s
behaviour choice.
According to Dessler (2011), Motivation = V.I.E
No motivation when any variable equals zero:
Valence
(V)
Pay-off should have value to worker, hence his preferences will be
considered by manager. If worker ignores reward, he will put little effort
into the task.
Expectancy
(E)
No motivation if worker does not expect that his effort will create
performance. Manager should motivate his worker by job design, training
and others to secure enough skills to complete the task.
Instrumentality
(I)
Employee should believe that his successful performance will lead to
outcome. Manager can conclude this simply by realise the incentive plans
(Dessler, 2011).
Theory main shortfall as Dunford (1992) argued is that the employee logically evaluates the
potential reward and circumstances before he acts, and in reality people rarely conduct
sophisticated computation as Vroom proposed. Landy & Coote, 2010) added that people
often decide with narrow logic allowing emotions affect their decisions. (Yair, 2011)
“Many organizations reward things besides performance. When pay is based on factors such
as having seniority, being cooperative, or “kissing up” to the boss, employees are likely to
see the performance–reward relationship as weak and demotivating”(Robbins, 2012, p.225)
46
Appendix-9 Findings
1. Even if the organisation exists in a closed-local market, it is affected by the global
forces.
2. HR strategy can drive the organisational strategy for short-term to overcome certain
situations.
3. Fairness is a key element in motivating and rewarding employees.
4. The job sophistication and the risk associated are functions in the reward value. The
more risky and sophisticated the job the higher the reward value.
5. Overstaffing, talents immigration and favouritism disrupt the HRM even with
adopting best HR models. Overlap actions needed to resolve these problems and
apply HR approaches.
6. In organisation like ARC, more than one HR-framework can be adopted depends on
the job nature and workforce type.
47
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MBA assignment for Managing Human Capital

  • 1. Managing Human Capital Assignment Report Yousef Hamad L0009SBSB0913 Group 21 Tutor: S. Purcell 16 February2014 London School of Commerce MBA for Executives
  • 2. 1 Abstract Although ARC is a wholly state-owned company recruiting locally, having no international partnership and no competition -as the oil refining business is governmentally monopolised-, it is generally affected by global marketplace as well as the surrounding forces and internal context. This report discusses the impact of such forces on the company aspects and especially on Managing Human Capital (HRM) and how to minimise such adverse impact in order for ARC to become more creative, competitive, flexible and responsive to change, and how important is the adoption of HR approaches within the organisation. It shows the significance of HR policies and practices that shaped by the context, and demonstrates their effectiveness. The report also highlights –in contrast with norms- how possible the HR strategy drives the business strategy for short-term for stability purposes. Introduction No doubt, the human capital is a core in any organisation. The growth in economy creates jobs which need different skills of country’s human resources (human capital); the asset in which nations invest to build their workforce meeting the market needs by education, training and development. Economy is grown by effective business and to be effective, business has to have efficient processes and operations which require workforce of high performance. Applying the HRM proper-appropriate initiatives such as recruitment, selection, appraisal, training, development, motivation and reward leads to achieve high performance. The report covers most of these initiatives in five main parts “Task” and conclusion extracting some findings. Due to the broadness of the HRM discipline and richness of theories and approaches, the report cannot cover all of them, however, it presents some that foreseen relevant to the case. Because of ARC bit-deteriorating situation, the report recommendations mostly focus on eliminating problems hence attaining the stability after which contemporary HRM and SHRM can be promoted. To avoid exceeding the permissible limit of words, the appendixes used to accommodate some important details and descriptions. (Report words number: 4440)
  • 3. 2 Contents Task 1 ..........................................................................................................................................4 Recommendations.................................................................................................................... 7 Task 2 ..........................................................................................................................................8 Planning...................................................................................................................................9 Recruitment and Selection ...................................................................................................... 10 Recommendations .............................................................................................................. 11 Competency approach......................................................................................................... 12 Task 3 ........................................................................................................................................ 13 Current Situation.................................................................................................................... 13 Obstacles ............................................................................................................................... 14 Recommendations for Improvement........................................................................................ 15 Task 4 ........................................................................................................................................ 17 Maslow.................................................................................................................................. 17 Maslow in ARC Context........................................................................................................ 18 Hertzberg Theory.................................................................................................................... 18 McGregor Theory.................................................................................................................... 19 Expectancy Theory.................................................................................................................. 19 Recommendations.................................................................................................................. 21 Hybrid Proposal...................................................................................................................... 22 Task 5 ........................................................................................................................................ 24 Challenges.............................................................................................................................. 25 1. Micro environment...................................................................................................... 25 2. Macro: ........................................................................................................................ 25 3. Globally:...................................................................................................................... 25 Conclusion ................................................................................................................................. 28 Findings ..................................................................................................................................... 30 Appendixes ................................................................................................................................ 31 Appendix-1 HR Models....................................................................................................... 31 Harvard Model.................................................................................................................... 32 Michigan Model.................................................................................................................. 32 Storey’s Hard and Soft Views ............................................................................................... 33 Guest Model....................................................................................................................... 33 Strategic Human Resource Management.................................................................................. 34
  • 4. 3 Resource-Based Model........................................................................................................ 34 Strategic-Fit........................................................................................................................ 35 Universalist HR Models........................................................................................................ 35 Configurational Approach.................................................................................................... 36 Contextual Approach........................................................................................................... 36 The Integrative Approach..................................................................................................... 36 Appendix-2 HRMContext................................................................................................... 37 Appendix-3............................................................................................................................. 38 Appendix-4 Real Case......................................................................................................... 39 Appendix-5............................................................................................................................. 39 Appendix-6............................................................................................................................. 40 Appendix-8 Motivation Theories......................................................................................... 41 McGregor Theory................................................................................................................ 41 Maslow’s Theory................................................................................................................. 43 Hertzberg Theory ................................................................................................................ 44 Expectancy Theory .............................................................................................................. 45 Appendix-9 Findings........................................................................................................... 46 References................................................................................................................................. 47
  • 5. 4 Task 1 There are several debatable HRM-models and SHRM-approaches arose over decades that interfere each-other, meet at some aspects and conflict at others, and evolved over time with the HRM development such as Harvard, Michigan, Guest and Storey (Hard and Soft) models and Universalistic, Configurational and Contextual perspectives (detailed in Appendix-1). (CIPD, 2009; Market/Wire, 2005; Kates, 2006; Lawler, 2006; Porter/Yergin, 2006) argued that the true challenge is how to select the suitable model, understand the complexity behind and implement it in-a-way fits the organisation context. Every organisation has its own unique circumstances so it needs insight into its context developing a framework that suits its challenges. (Holley, 2009) Boxall and Purcell (2008) as cited by Kew and Stredwick (2010) stated that there is no common model appropriate for all situations but different strategies convenient for different organisational settings and circumstances. ARC is an oil refining state-owned company established in 1974. Its organisation composed of four-main divisions as to chart. Armstrong (2009) stated that HRM is more-comprehensive than the personnel management treating people as assets rather than variable costs.
  • 6. 5 However, within its organisation ARC used to have Administration department taking care of the employees’ affairs (attendance/absence, payroll and assessment), training and recruitment. After the staff had started increasing in late-eighties, a new organisational structure has been adopted isolating between Personnel and Training. ARC has never have Human-Resource department. The training department works on fulfilling the training and development needs within allocated budget. ARC has about 3200 employees weighed-down by 60% overstaff. As no competition (government monopolised refining business), oil firms tend to work at low efficiency (Porter & Yergin, 2006). The organisation is entirely affected by its context. HR policies are contingent upon the work-law, and there is no consideration of Strategic HRM (Paauwe,2004; Bloisi, 2007), See Apprndix-2. Employers by work-law (15/1981) are not allowed to terminate people except in few critical cases. Work contracts were endless unless employee resigns, retires or fired. This law pre-set low salary with poor allowances. Salaries increase by time not by performance. The retirement starts with 63-years old causing old-staff to hold the managerial/senior positions, whilst younger employees have rare opportunities that arise especially when structure expanded. This law made employers treating people as any other resource inevitably with no sense of human-side, use them ‘as-much-as-possible’ at lower costs embodying Michigan- model (Fombrun et la. 1984) and Hard-version (Storey, 1989). Later amending law (12/2010) issued mainly to permit employers signing annual contracts, hire and fire. Also it improved the salary-scale and allowances leading to satisfy/retain employees. In 2006/2007, the Libyan-market has been penetrated by Oil&Gas international operators which attracted lots of local competencies offering better packages where employee can reflect his/her knowledge and experience and feels his/her value as part of the organisation meaning Soft-version (Beer et la. 1985; Guest, 1987; Storey, 1989). Guest (1989a, 1989b and 1990) developed four propositions -when combined- generate effective organisation (Beardwell et la, 2004), then came-up with six-analytical dimensions Guest (1997) which are practically considered by the contemporary HR managers (Price, 2011) that contradicts with ARC classical HRM.
  • 7. 6 Instead of achieving the corporate strategy objectives, focusing on the core business and investing in upgrading/expanding the refinery to be viable and economic, ARC -due to the excessive overstaff- builds more offices, enlarges transportation fleet and expands township, canteens and car parking. The business seems driven by inevitable circumstances: internal dues and external threats and entitlements (Armstrong, 2009). The situation is critical and very challenging that maybe considered chaos. As Kew & Stredwick, (2010) stated, ARC needs to deal seriously with this difficult situation and break-down its complex environment. It should enhance its culture to cope with any extreme/unexpected changes, and must comprehend how to live with such chaos. Theories of Latham & Locke (1979) where goals are connected to performance outcomes, and Bandura (1986) where employee with self-efficacy impacts his performance can possibly be affective, however, there are no real performance management and follow-up procedure. It is a very traditional process of control, monitoring and reporting/feedback. Each line manager -through the supervisors- monitors daily the employee behaviour, performance and contribution, then forwards one single performance report to the Personnel manager with overall grade. Only weak and excellent employees notified and receive warning and congratulate letters respectively. There is no systematic motivation and reward strategy. This situation negatively affected the wages and HRM aspects causing many talents to quit seeking better situations abroad, particularly in Arabic-Gulf.
  • 8. 7 Recommendations The optimal SHRM approach that can relatively fit this situation is the Integrated-approach (Martı´n-Alca´zar et al. 2005b) putting-together configurational, contingency, universalistic and contextual approaches in single strategic HRM-model respectively considering also Storey-Soft-vision: HR practices should be set in-a-way to express the organizational-context which is usually tough to implement due to several-influential factors (Bloisi, 2007): Drawing on E.V.R Congruence Thompson (2005), ARC is mostly “lost organisation” where values, resources and environment are incongruent; consequently rapid-strong actions are compulsory to recover congruence in the long-term (Kew & Stredwick, 2010).
  • 9. 8 Task 2 ARC recruitment processes is handled in a very basic-conventional way (basic resume with simulated interview). Due to the internal and external forces, the favouritism excessively affect the recruitment and selection processes. The principle “the right people, with the right skills, are in the right place at the right time” does not work. As it is entirely state-owned, ARC is obliged to secure jobs for those imposed by the central- government which contributed dramatically to overstaffing thus overburdening the organisation. Moreover, and under the social pressure, ARC should recruit people from the region where it exists which exacerbates the overstaffing-problem harming the overall performance, as well as people supported by managers using their power. As cited by Beardwell et la. (2004), Chan (1997) reflected a situation like ARC where employee dismissal was not permitted unless he/she committed gross-negligence, no remarkable incentives for workers to struggle for promotion. Lower productivity is caused by overstaffing leading to yearly loss (Muncherji et la, 2009). ARC cannot properly run its business with potential problems with unclear vision and strategies, internal/external forces and overstaffing. ARC must set-up a short-term plan with clear-applicable objectives hence defining HR strategy; first to removing all business obstacles, second to take course of actions to exterminate chaos. HRM is key of achieving this by adopting the HR state-of-art knowledge. Establishing a standard HRM department is substantial.
  • 10. 9 Planning As the objective is to mitigate the critical situation having things done urgently, this needs setting a tactical plan (Bloisi, 2007). Data and information are needed to attain good plan. The planning will be for: Once fulfilling these tactical goals, a strategic HR plan is then developed through which ARC anticipates the organisation-strategy-consequences on HR requirements (Prince, 2007) as well as contingency plan for alternative actions and sudden disruptions (Bloisi, 2007). The very-complex situation may lead to adapt/tune the business-strategy to achieve HR- strategy objectives for short-term (HR-Strategy drives Business-Strategy) till stabilisation. After steadiness, the recruitment and selection should be performed in a-way-to align with the HR-strategy which is set to attain the business-strategy.
  • 11. 10 Recruitment and Selection Any organization success depends on the quality of people which the organisation attracts, employs and retains. Recruitment plays big role to enable organisation attaining competitive- advantage. Steve Crabb, Personnel Today magazine Managing Editor says “Any organization that does not take recruitment seriously is cutting its own throat. It must be a top priority for any business,” (Brown and Swain, 2009). The major pains here are favouritism, overstaffing and talents immigration. As cited by Truss et la. (2012), Wright et la. (2004) stated that one of the most HRM challenges that impact HR–strategy is Staff-retention; and also significantly affected by staffing-level (Truss and Gratton, 1994; Baron and Kreps, 1999; Monks and McMackin, 2001). Grant (1991) as cited by Armstrong (2009) argued that the company’s resources (people inclusive) and capabilities are concrete in materialising strategies for which realising the relation between capabilities, resources, profitability and competitive-advantage is required. Employees (HR) are core to maintain reputation, however, they are liable to esteemed companies’ attractiveness (Armstrong, 2009). Accordingly, ARC overstaff is an obvious issue, therefore predominating this is a core in setting HR-strategy, as a result fulfilling business strategy. See Appendix-3.
  • 12. 11 Recommendations ARC is recommended to take following actions: Apart from these problems, the competency-approach could be the best choice for recruitment and selection.
  • 13. 12 Competencyapproach The selection is typically based on the applicant competencies. It targets personal abilities of performing a job rather than characteristics. Torrington et al.(2008,p.170) noted that this model as an integrated-approach can be utilised for selection, development, evaluation and reward tasks. (Rees & French, 2010) (CIPD, 2007c; IRS, 2008) proposed to recruiting through Internet, as of applicants preference and attracting. Fairness is an important element that increases the process efficiency and helps in avoiding discrimination. (Rees & French, 2010)
  • 14. 13 Task 3 As a strategic-approach, HRD is used to invest in human-capital employing other HR processes to determine the true and potential talents. In order for HRD to reconcile the corporate future needs, a framework is needed for training programmes, self-development and career advancement (Price, 2007). Current Situation There are local and overseas training programmes implemented mostly with the principle of “first-come-first-serve” meaning the employee knows in advance his training period and duration regardless his performance. However, the planned programme is subject to favouritism and internal/external interventions. The training abroad is sometimes granted as a reward. ARC also sends graduated employees abroad for postgraduate studies (MSc) many of which resigned after completing their studies, and moved to either international firms locally exist, or to Gulf-countries. The most effective programmes are those of on-job training. ARC also allows some employees to do part-time self-financing learning through which individual aims higher education level that might organisationally promote him. The process starts from the Training department asking all line managers to provide their departments’ training needs. Consequently after receiving the information, Training department starts planning the training and development programmes that meet the requirement at estimated budget. There is no real-effective monitor process. Trainee feedback does not count (see real-case in Appendix-4).
  • 15. 14 Obstacles Like most of Oil&Gas companies (NOC affiliates), ARC faces several challenges causing pains (Porter & Yergin, 2006): (See Appendix-5)
  • 16. 15 Recommendations for Improvement All personnel, training and development activities should be integrated in one HR department that follows standards and common practices. Once HR department lunched, it should start with resolving the overstaffing by start working on long-term integrated-fundamental learning and training programmes focusing on English language, IT and work skills (Porter & Yergin, 2006) that improve their knowledge and skills, and reduce the number of people in workplace where they disrupt the operations. Involving all line managers in investigating, studying, analysing and evaluating the workforce at all levels is necessary coming-up with workforce strengths and weaknesses, opportunities and threats (SWOT). This also helps in knowing the actual-active structure and workforce quality levels, talents, skills, competences, shortages, gaps, uselessness, potentials, actual vacancies, and many others from which primary steps can be taken forward to improve the performance as of Beardwell et la, (2004): (a) screening each unit and its workforce to precisely specify the real needs of both; (b) analysing and identifying the training needs and requirement and (c) analysing the quality and effectiveness of existing programmes. (Beardwell et la, 2004; Prince, 2007; Bratton & Gold, 2007; Bloisi, 2007; Armstrong, 2009; Dessler, 2011; and Truss et la, 2012) the table will also be considered:
  • 18. 17 Task 4 There are several theories argued the motivation from which some are selected for the following criticism. More details are available in Appendix-8. Maslow The needs hierarchy is one of the most famous theories that developed in 1940s and prevalent across several disciplines such as psychology and management. It puts into levelled pyramid five-human needs hierarchically where achieving satisfactorily one level of needs is necessary to move to the next level. Even-though it is deemed well-ordered, simple, apparently-practical and cognitively-attractive, it is “plain, flat, dead wrong” (Denning, 2012). It is simple to performance and reward, as manager should develop his reward strategy based on understanding employees’ motivators at each stage, and at which stage each employee works (Beardwell et la. 2004). Rutledge (2011) criticized the model that missed the social-connection role without which none of needs are possible, and no survival without collaboration. She says: “Maslow’s model needs rewiring so it matches our brains”. And indeed self-actualisation and leadership are not necessarily needs for everybody who may also be incapable of. Beardwell et la.(2004) criticised that Maslow neglected the capacity of employees and those around them to realise what needs and how to meet them.
  • 19. 18 MaslowinARC Context These criticisms are valid for ARC workplace where the majority of employees relate and loyal to tribes (not organisation) those impose ARC to secure job and development opportunity. Before starting job, individual often has interpersonal relationships within the workplace meaning belongingness might not be motivator. Maslow is invalid for female who cannot aim more than being employee, as to social restrictions. Also recognition is not motive as money and other tangible benefits. In- fact the organisation structure is often standstill where old people hold positions, hence most employees do not aspire higher positions. For example, the author has worked thirteen- years for ARC where directors and managers remain the same swapping sometimes their positions giving no chance for generations next to them. Hertzberg Theory According to (Beardwell et la.2004 and Tayson, 2006), Herzberg-theory developed Maslow- system classifying two groups of different quality and influence:
  • 20. 19 As cited by Armstrong (2009), Opsahl & Dunnette (1966) attacked Hertzberg-theory as it did not identify the relation between performance and satisfaction; also there is no clue that satisfaction leads to productivity improvement. As Hertzberg followed Maslow’s humanistic rout, it falls in similar criticism that valid in ARC atmosphere. Furthermore the dissatisfaction removal can be by increasing Hygiene factors (Bloisi 2007). Many of these factors are granted for ARC employees thus no dissatisfaction which does not mean satisfaction (Beardwell et la. 2004). Managers may undervalue motivators believing that this will protect their positions form potential-employees acquisition. McGregor Theory Theory-X is extreme, however, works seldom with ARC cheap staff and labours as well as subcontracted workers for short-specific tasks but not always. Theory-Y is not applicable, as several managers –to protect their positions- do not promote potential employees that may acquire such positions. Also it cannot be active in a state-owned business environment where people are bit lazy. Armstrong (2009) posited that McGregor-theory stresses the commitment importance which is less important with ARC employee majority those drop in between X and Y. Expectancy Theory Vroom (1964) introduced it including Valence-Instrumentality-Expectancy “VIE” (Armstrong, 2009). Bloisi (2007) explained the theory that employee faiths in the relation among effort, performance and rewards for having job done, and cited, Vroom (1982) proposed that employees motivation anchored with fulfilling a desired target so long as their actions of attaining such target is at their expectancies. Beardwell et la. (2004) added that the basic ‘expectancy’ concept is the expectation of what will happen that impacts the employee’s behaviour choice.
  • 21. 20 According to Dessler (2011), Motivation = V.I.E No motivation when any variable equals zero: Dunford (1992) argued that the employee logically evaluates the potential reward and circumstances before he acts, whereas in reality people rarely conduct sophisticated computation as Vroom proposed. Landy & Coote (2010) added that emotions affect employee decisions. (Yair, 2011) Employee will put big efforts if he expects firm-relationships ‘between effort and performance’, ‘performance and outcome’ and ‘outcome and personal objective satisfaction’. All these relations are affected by other factors, for instance skills, ability and pay-off value. However, it comparably seems valid, as employee -for several behaviours- considers expected rewards. (Robbins, 2012).
  • 22. 21 Recommendations Society highly affects ARC work environment where favoritism, corruption and overstaffing are facts disrupt the motivation. As ARC is 100% state-owned-Oil&Gas company, it shares some aspects with public-sector firms and contradicts in others, even-though, Public Service Motivation (PSM) theory is not applicable in ARC case, as PMS relates to individual behavior and commitment to public-sector unique motives (Perry & Wise, 1990) as cited by Hug (2010). The motives that stimulate people to work for ARC are mainly secured job and tenure, location (coastal and close to Capital), free housing, health-insurance and others, and training opportunity abroad granted. Before adopting any particular or hybrid theory(s), ARC management is needed to take the following actions:
  • 23. 22 Hybrid Proposal Maslow two lower levels are relatively workable with temporary worker who can be motivated by offering free canteen, transportation and others, and extending his contract, not more. Theory-X works slightly with cheap staff and labours as well as subcontracted workers for short-specific tasks but not always. Herzberg-theory could work for short-particular tasks and missions but not for routine work. Expectancy-theory is most likely applicable within ARC organisation as far as there are valuable outcomes and justice. Managers need to be fair and see workforce by individuals motivating each individual according to his/her VEI factors. Fairness is a vigorous motivator. In presence of real-satisfying incentives and rewards, and if manager can be fair-enough, performance improves. This makes employees believe if their work is quantitatively/qualitatively good, the reward will be good too. In contrast, “When pay is based on factors such as having seniority, being cooperative, or “kissing up” to the boss, employees are likely to see the performance–reward relationship as weak and demotivating” (Robbins, 2012, p.225). .
  • 24. 23 Managers shall consider the job sophistication and associated risk when motivating and rewarding. Important to survey employees listening to them and having their feedback in tuning the motivation and improving reward thus maximising performance. Manager should be smart-intelligent enough to seek the Catalyst for better performance such as applying fairness, minimising routine, creating challenging jobs, job design, teamwork, motivate for innovation, training and development, building mutual trust and confidence, recognition, support the respect and ethics.
  • 25. 24 Task 5 “Change management is defined as the process of achieving the smooth implementation of change by planning and introducing it systematically, taking into account the likelihood of it being resisted” (Armstrong, 2009, p.424). Restructuring is a process of taking-apart and recombining the organisational structure for cost reduction, duplication’s termination and efficiency improvement (Price, 2007). Armstrong (2009) stated that there are many change models help organisations in implementing the change such as Lewin (1951), Beer et la (1990) and others. Kotter (1995) as cited by Robbins & Judge (2103) introduced a detailed eight-steps model building on Lewin mode: Ulrich (1997a) posited that one of HR specialists’ main-roles is functioning as change agent delivering culture change and organizational-transformation. Purcell (2001) believed that strategic HRM is a core in the change implementation process where HR can play a big role. Scholes (1997) argued that integrating HRM policies with HR strategies and process of strategic change, HRD, employees relationships and others is important for successful change management. (Armstrong, 2009)
  • 26. 25 Challenges ARC organisation has been affecting by several factors at different levels challenging change: 1. Micro environment: Change will handle overstaffing problem as one of the major issues exaggerates costs and decreases performance. The big challenge is the impossibility of firing people as to governmental policy, therefore overstaff remains a number in the change equation and must deal with (see Task-2). Favouritism bit- highly influences the change implementation and results too, unless ARC adopts/applies decisive policies to secure the change quality which needs establishing a corporate governance and compliance systems which are additional challenges. Fear of change; Truss et la. (2012) took Crail’s (2007) survey as an example that 91% of HR respondents confirmed that people resistance was a big problem. Due to their culture and attitudes, employees including mangers will resist the project particularly those who believe change will cut their benefits. Kotter (1995) suggested to involve more people in promoting and driving the change. Skills lacking increases the difficulty of selecting people to participate in change implementation which is also disrupted by talents immigration. Aging senior staff may strain-back retaining the status-quo. Employees might not be cooperative with managerial imperatives (Truss et la. 2012). 2. Macro: political, economic and social forces and government restrictions. ARC is an affiliate of National Oil Corporation (NOC) which uses ARC only to refine crude-oil producing fuel and sells it subsidised in the local market meaning ARC is tied-up with political/economic policies. Unexpected-frequent change in governmental policies especially HR policies will be harmful. Social environment highly impacts ARC policies and practices. As long as policies are involved, they impact change. 3. Globally: market penetrated by multinational companies that steal talents. Social- media opens windows on the glob where employees communicate with other cultures, contact universal workforces that increases employees’ sophistication thus affect the change.
  • 27. 26 Though it assists in achieving the change, understanding the STEEPLE factors: social, technology, economic, environment, political, legal and ethical and global marketplace is deemed challenge. The most primary challenge is the right leaders selection who will properly lead the change creating the encouraging-atmosphere that helps employees exceeding their prospects hence convincing for change (Pryor et la. 2008). Wischnevsky (2004) compared the organisational-actual performance to an internal/external benchmark to develop the change. This probably leads to create tremendous changes implicating overall-business performance, top management and environmental shifts. (Pryor et la. 2008). Pryor et la. (2008) posited Vision development is incorporated by all change approaches which is essential to move from the status-quo to future-state. Since ARC-core business is linked to NOC, developing a vision that serve ARC as a whole is difficult. ARC difficult situation may impose: “HR Strategy leads Organisation Strategy” exceptionally for short- term. Vision statement depends on either promoting this principle or the opposite. Once developed, leaders should communicate it to employees (Kotter,1995) not forgetting “leaders are exemplars” necessary to walk the talk. As (Ulrich, 1997a; Scholes, 1997; Purcell, 2001) claimed, HRM, SHRM and HRD are engaged in executing the change, and because there is no ARC HR department and HR strategy , change will not be an easy task for which enough time and comprehensive scope have to be taken into account. Selecting external agent is subject to long tendering process and corruption those could threaten the right selection. Because of new issues resulted from implementing the change, the plan will be modified accordingly incorporating such issues. Reward system is needed for attaining change (Armstrong, 2009) which ARC does not have as a system but has some reward attempts with fabricated solutions. Reward instead of supporting the change implementation, it will be part of change targets.
  • 28. 27 Data and hard-evidences are mighty tools for fulfilling change (Armstrong, 2009). This needs information-system and information-technology which are both poor at ARC. For instance, ARC spent huge money on IBM-Main-Frame utilising only 10% of its functions. ARC does not utilise outlook emailing system in communication among divisions and still uses a very conventional post system emphasizing paperwork and bureaucracy, and lots of hard clues are badly stored in metal containers. The biggest challenge is that what supposed to be supporting-facilitating factors and catalysts for the implementation process, are –instead- targets for change.
  • 29. 28 Conclusion It has been concluded from this report that now-a-days in order for ARC to be effective in the business, one of HR-professionals duties is to understand STEEPLE factors in which the company operates and the hoists steering change within it. Also to understand the universal marketplace for more effective competitive position. Nevertheless ARC has no very strong-direct link with the global marketplace, it is affected by this marketplace in several aspects such as technology, foreign manpower, multinational operators and international contractors/suppliers. The Oil&Gas is generally influenced by the international politics and economy such as crude prices. Crude oil is the feed-stock of any refinery which is direct function in the refinery economies. Fulfilling a competitive-advantage as a goal needs an organisation to adopt relative- appropriate HR strategies and respond to change. However, in ARC case where HR area suffers from serious problems and troubles, ARC needs to adapt its business strategy to meet in short-run the HR strategy objectives of eliminating such problems and attaining sustainable stability. The intervention of STEEPLE was one of the key factors of causing such problems and creating obstacles harmful to the operations and performance. ARC management should work not only on the internal factors within its boundaries but also on minimizing the STEEPLE influences as possible. ARC can negotiate the society and government to reduce their impositions and to improve the governmental policies and legal and economic issues in-a- way mitigating the problems and helping in making the refinery viable and economic. In order for the refinery to be viable and economic, ARC should have the green-light from government for revamping and upgrading the refinery applying foreign-technology hence creating employment, and for organisational restructuring. In other words terminating the centralisation. These will of course decrease overstaff and accordingly favouritism as a result step-on-the-way forward better performance.
  • 30. 29 Subsidising fuel and selling it cheaply increases the demand thus overloads the refinery bearing in mind that the refinery is technologically old and suffering from overstaff, favouritism, rigid policies, frequent changing law/regulations and governmental restrictions on having international partnership, recruiting foreign competencies and on revamping the refinery exploiting the latest technology. This implicates STEEPLE including the global factors. ARC needs to realise and consider the above and consequently reduce the counteractive affects that disrupt its operations and impair the performance. ARC is accordingly needed to consider the circumstances of its context, adopt the best- optimal HR frameworks restructuring its HRM policies and practices, promote critical awareness in regards to HR strategy, realise what can be accepted by employees and managers and react to change, improving standards and applying proper theories and techniques that can help ARC management in matching between the business needs and the circumstances. As the society and governmental policy excessively influence the recruitment and selection, outsourcing both of them can minimise such influence. Partnership with an international HR partner can play a key role in beating this impact and add values to the organisation. HR partner will help in restructuring the HR policies and practices and enabling the proper planning, recruitment and selection, job designing, performance appraisal, training and development and motivation, reward and promotion, in other words managing the HR aspects as whole. ARC HRM should utilise utmost its resources particularly human-capital which is the most significant resource in inducing/increasing the overall performance and applying the best motivation approaches and improving the rewards. Employees should be treated as per SOFT-vision targeting their loyalty and commitment, and involved in driving change. These all can reduce the talents immigration. However, HARD-vision is needed in some cases at some levels. To secure effective processes and efficient operations to achieve these goals, a robust monitoring system is mandatory for which ARC must establish a Corporate Governance and Compliance department.
  • 31. 30 Findings The report came up with the following findings:
  • 32. 31 Appendixes Appendix-1 HR Models Human Resource Management ‘HRM’ and Strategic Human Resource Management ‘SHRM’ are two-very-interrelated fields rich of models, theories and opinions evolved over decades which cannot entirely be covered here, so that this report goes through some of them highlighting the key concepts and issues, and explaining the most significant ones. Armstrong (2009) stated: “HRM is a strategic, integrated and coherent approach to the employment, development and well-being of the people working in organisation.” However, there are several definitions mainly in the USA and the UK that debated the HRM definition such as (Beer et la, 1984), (Guest, 1987), (Storey, 1995), (Legge, 1989) and many others. Armstrong (2009) stated that the HRM is more-comprehensive than the personnel management treating people as assets rather than variable costs. HRM-models are HRM views/approaches of achieving the HR objectives. HRM model comprises the HR activities when discharged efficiently and effectively, the organisational targets are attainable by competent taskforce. Primarily strategic HRM frameworks emphasise the HRM-performance and human-capital efficient usage, however they seemingly neglect the standpoint of how organisation affects the future-base development for human- capital (Ehnert, 2009). The strategic HRM is the moderator/interface between the HRM and strategic management developing HRM concept (as integrated, strategic and consistent approach) that aligned with the strategic management notion (Boxall, 1996) as cited by Armstrong (2009). US Approaches: Kaufman (2007) as cited by Truss et la. (2012) showed that the HRM as a concept appeared in 1960s when it was reciprocally used with ‘Personnel Management’ term in the USA where two influential approaches occurred. The first is called ‘Harvard framework’ (Beer et la. 1985), and the second is called ‘Michigan model (Fombrun et la. 1984).
  • 33. 32 HarvardModel Price (2011) argued that Harvard Model/Map could be the most HRM effective model. It deems people as resource but should not be managed as managing the other non-human resources. This approach perceives mutuality factor where employees are substantial stakeholder. They have needs and aspirations as shareholders, clients and the rest of stakeholders have. Harvard abstracted four human resource areas: (a) HR flows such as hire and fire, evaluation and promotion; (b) reward and motivation; (c) employee effect in terms of authority, delegation and power and (d) work system like work definition/design and people alignment. This lead to fulfil four HR policies: (i) Commitment; (ii) Congruence; (iii) Competence and (iv) Cost effectiveness. Beer et la (1984) recommended to use these four Cs in assessing and analysing the long-term consequences (HR policy’s costs and benefits) at the individual, organisational and social levels. MichiganModel Contradicting with Harvard map, Michigan model (Fombrun et la. 1984) emphasised the link between the organisation’s business strategy and HRM practices (Truss et la. 2012). Although both models recognised people as invaluable resources, Michigan model did not firmly account human-side considering employees like any other resources. All business resources including people, materials and apparatus should be managed similarly, obtained at lower costs, lightly used, developed and utilised as-much-as possible. It also called “matching model”, “best-fit” or “contingency” approach. It requires the HR strategy/policy to tightly match the corporate umbrella strategy (Price, 2011). Price (2011) stated that Michigan model diminished the HR functions to reactive roles, and depreciated the usefulness of external factors such as labour union, therefore it is tough to conform with present work-life. Fombrun et la. (1984) as cited by Armstrong (2009) explained that the HR cycle comprises four common elements: selection, appraisal, rewards and development. Price (2011) cited that with Michael Porter’s influence, Schuler and colleagues advanced the matching-model with complexity involving important factors such as organisational size/structure, business sector, technology and societal.
  • 34. 33 UK Approaches: Truss et la. (2012) exhibited that UK-based-academics differentiated between “Hard” and “Soft” HRM approaches to manage people. In line with Michigan-model (Fombrun et la, 1984), Hard HRM stresses on people as resources deploying them for performance-maximisation, while Soft HRM emphasises the human-side aiming employees commitment and loyalty for higher performance (Legge, 1995). Storey’sHardandSoftViews Storey (1989) distinguished between two human resource management HRM versions. The Hard version where people are considered as essential resources that increase performance, consequently create a competitive advantage. The organisation should therefore acquire, invest-in and develop people to obtain benefits. It emphasises the strategic, quantitative and measurable sides of managing human-capital. However, the Soft version stresses the human side treating people as invaluable assets aspiring their loyalty and satisfaction to attain a competitive advantage via their commitment. It also emphasises gaining the employees’ minds and hearts building mutual-trust, counting on them via more engagement, leadership and communication, with considering the organisational culture major aspects (Armstrong, 2009). Then Storey (1995) raised-up his HRM definition. GuestModel Guest–model perceived that the HRM varies from the personnel management (Price, 2011). Guest criticised Harvard-model deriving (Guest, 1987, 1989a, 1989b and 1990). If a model is fruitful, it should be so in both researching and practical fields, Guest confirmed. Accordingly he developed a group of propositions -when combined- generate highly-effective organisation: (i) strategic integration; (ii) high commitment; (iii) high quality and (iv) flexibility. ( Beardwell et la, 2004) Such critique maybe obsolete after Guest (1997) had come-up with six analytical dimensions: (a) HRM strategy; (b) HRM practices; (c) HRM outcomes; (d) behaviour outcomes; (e) performance outcomes and (f) financial outcomes which are theoretically and practically considered by the contemporary HR managers. Harvard model asserts that the business outcome is linked with the commitment concept, in contrast, Guest recognises that this concept is confused and tough to establish such link. It pursues a “flow” approach, considering underpinning practices of strategy that attaining many desired results. Guest- model as its American ancestor is unitary when linking the commitment and behaviour together as a strategic management objective, and unenthusiastic in the trade-union worth.
  • 35. 34 Strategic Human Resource Management SHRM is how to achieve the organisation objectives through people by integrating HR management, policies and practices. It based on two main approaches: (i) resource-based view and (ii) strategic fit (Armstrong, 2009). Schuler (1992) as cited by Armstrong (2009), stated that SHRM centres on three HR elements: (a) management integrates with the company’s strategy and needs; (b) policies cohere over hierarchies and policy areas; and (c) practices are adapted, accepted and then adopted by line managers and employees. Resource-BasedModel As a concept it is based on employing all organisation resources to fulfil a unique position and create a competitive-advantage. Grant (1991) as cited by Armstrong (2009) argued that the company’s resources and capabilities are concrete in materialising strategies for which realising the relation between capabilities, resources, profitability and competitive-advantage is required. Mueller (1996) posited that although employees sustain firm’s business and reputation, most firms valuate their entities, product/service fame and then employee skills and knowledge, and added: human-capital should be treated like other resources array. Employees (HR) are core to maintain reputation, however, they are liable to esteemed companies’ attractiveness. (Armstrong, 2009) Wright et la (2001) introduced three HRM significant components effectible to HR system: (i) human-capital pool/bank composed of employee know-how, skills, behaviour and motivation; (ii) human-capital flow where skills and knowledge move all-over the organisation and (iii) dynamic process that changes and/or renew the company. Nevertheless this debate whether or not endures, so-far (Wright et la, 2001) research highly contributed to SHRM. (Allen & Wright, 2006).
  • 36. 35 Strategic-Fit Delery and Doty (1996) prescribed as “contingency” perspective (Armstrong , 2009). As to Wright & McMahan (1992), it relates to two dimensions that recognise strategic HRM. Horizontal-fit refers to the coherence among the several HRM practices, whereas the Vertical-fit refers to the relation between the HRM practices and the organisation’s strategic management process. Managing employees depends on the circumstances, especially overall strategy (Truss et la. 2012). This framework is contingent entirely on the organization’s strategy, context and culture (Wright & Snell, 2005). It seems to be stationary, as it does not consider the change processes, ignores the institutional power that formulate HRM and cannot be deemed that companies are free in making independent decisions (Armstrong, 2009). UniversalistHRModels Delery and Doty (1996) implied that there are several HRM practices that any organisation can select the best for superior organisation performance. Plenty of studies have concentrated on how-many components universalist approach have. (Truss et la. 2012) Best-Practice approach refers to adopting a group of best HRM practices that deemed universal as they are best at any case (Armstrong, 2009). Pfeffer (2005) outlined thirteen interrelated Best-Practices that are derived from his reading and discussion with HR executives: Employment security, Selective recruitment, High wages, Incentive pay, Employee ownership, Information sharing, Participation and empowerment, self-managed teams, Training and skill development, Cross-utilisation and cross-training, Symbolic egalitarianism, Wage compression, Promotion from within. However, Pfeffer (2005) claimed that the managing people approach is more important than the practices exact number. Applying one single bundle of such practices is difficult within a firm (Truss et la. 2012). Practices that work effectively in one firm should not be necessarily as so in other firms, as it might not be fit/match its strategy, management style, culture, and others (Armstrong, 2009).
  • 37. 36 Configurational Approach It recognises configuring or bundling HR practices that anticipates supreme performance when applied together, or the right strategy, or both. Fulfilling organisational effectiveness needs HR system based on both horizontal/internal fit and vertical/external fit. Both best- practice and contingency frameworks are fuzzy with the configurational approach. Its notion generally means HR practices effectively-integrated that are convenient for different corporate strategies (Deb, 2009). For example, achieving competitive advantage needs employee-high- performance that can be attained by thorough selection, training and development, and by fostering the motivation via remarkable rewards. The dilemma is how to bring together different practices, as no clue of certain bundle is better than another. (Armstrong, 2009) Contextual Approach It refers to the relationship between the strategic HRM and its context (Martı´n-Alca´zar et al. 2005b). Paauwe, (2004) argued that such relationship is reciprocal where both elements affect each-other. Brewster (1999) claimed that this model does not emphasise the performance only but also to analyse SHRM internally and externally (PESTEL context, cultural context and competitive context) knowing what is unique in the context and why. Also added; this approach considers that different actors could have different interests in the organisation. SHRM goes beyond the organisation to the macro-level: zone, society and government which is adopted to attain organisational goals that may harm also such macro components. As per Martı´n-Alca´zar et al. (2005b), SHRM exceeds HR managers’ responsibilities towards the significance of all line managers. (Ehnert, 2009). TheIntegrativeApproach Martı´n-Alca´zar et al. (2005b) as cited by Ehnert (2009) introduced this approach as the key contributions of the configurational, contingency, universalistic and contextual that are summarised in one strategic HRM model.  Configurational-approach is to analyse HR systems’ internal relationships and matches among HR policies, practices and strategies.  Contingency-approach is to consider the relationships with the organisational surrounding. Universalistic- approach is to express the HRM strategic significance.  Contextual-approach is to analyse HRM in its social-context and consider mutual relationship between HRM and its environment clearly laying-out the strategic HRM.
  • 38. 37 Appendix-2 HRM Context HRM processes appear within the organizational-context interacting with the internal/organizational factors and external environment that influence the firm practices and policies (Kew & Stredwick, 2010). As cited by Armstrong (2009), Paauwe (2004) explained that there are several internal and external elements impact the relationship between HRM policies and practices, and the performance. HR practices should be set in-a-way to express the organizational-context which is usually tough to implement due to several influential factors: (i) internally such as technology, business type, employees type and organisation size, culture and age; and (ii) externally like social, political, economic and legal which in order to respond to, organisation need to make polices hence practices flexible-enough (Bloisi, 2007).
  • 39. 38 Appendix-3 1. ARC needs to treat Overstaffing issue and minimising it to the lowest levels by: o Creating jobs. ARC should start immediately the two planned projects (Refinery Revamp and Marine Harbour) which can accommodate lots of employees during the execution phase and operations. o Employment-freezing, instead recruiting from within the organisation, relocate permanent employees, and not renewing temporary contracts (K.I. nd). o Engaging employees with contractors to learn and gain experience, as this approach is often part of service contracts. o Applying IT systems, internet and emails performing some activities at home. This also decreases the operating costs and internal hassle. o Decreasing work-shortage by minimising outsourcing. If outsourcing is necessary, supplier should absorb maximum number of employees from the outsourced service. Outsourcing decision should be preceded by thoroughly analysing what mandatory activities to be outsourced considering the consequences (K.I. nd). o Apply a scheme of early-voluntary retirement which most probably accepted by many employees (Jain et la. 2009). 2. Outsourcing the Selection and part of Recruitment that can improve their efficiencies and mitigates favouritism and internal/external influences (Kew & Stredwick, 2010). The outsourcing could comprise even training and development. This will let ARC concentrating on its core business and eliminate favouritism and society force. HR agent should exist abroad far-away from the organisational context. 3. Alternatively establishing a shared-service centre involving call-centre to offer HR advices (Marchington & Wilkinson, 2008). However, this will not be as effective as outsourcing. 4. Another alternative that establishing Recruitment and Selection Unit abroad, for example in China to cut cost and avoid interventions of society thus decreasing favouritism.
  • 40. 39 Appendix-4 Real Case IT engineer was granted 6-month training course in the UK. He cut the course and went back home, then submitted his feedback to his boss and training manager that the course was a piece of wasting time and money. Training manager and his boss were not happy with the feedback and instead of thanking him, he had not been given any training chance for years. Appendix-5 1. Libya’s education outcomes do not meet job market needs hence workforce is skill- shorten, and curriculum is outdated and not updated to comprise computer and language effective training thus workforce is predominantly formed by under-qualified employees. 2. Business is negatively influenced be weaknesses in skills and poorly- evolved regulation and rules. 3. Insufficient/ineffective training with no R&D contribute to the poor performance. 4. With no alternative plan, government applied restrictions on foreign workers made them leaving the country, as a result deteriorating the performance. 5. Less and poor training with being under-qualified/under-incentivised, highly-skilled and competent Libyans emigrated. 6. Drain of talents dramatically increases towards the international companies which offers good packages and high-quality training. 7. There is often a disconnection between ARC (like other operators) job-required skills and the worker skills brought on the table.
  • 41. 40 Appendix-6 1. Set a short-term HRD Strategy with clear-achievable objectives. This mainly to treat and stabilise the current situation. 2. Consequently set HRD plan with the following milestones:  Relocation in case of vacancies arose. This may comprise also interchanging positions among the employees in best-possible way.  Filling gaps between the company requirements and employees knowledge and skills.  Updating the organisational structure and job specifications.  Decide on the proper techniques of training and developing groups and individuals. 3. Designate concern people responsible for the plan. 4. Plan implementation overlapped by monitoring and assessment process issuing feedback. 5. Plan editing and rectification. 6. As soon as attaining the short-term strategy and situation stabilised, long-term strategy is formulated to meet the business strategy. 7. Undertake critical affair workshops for key personnel and communication and progressing training across the industry increasing consciousness of the need for change. Engage skilled professionals in global forums to exchange know-how and experience (Porter & Yergin, 2006). 8. ARC should carefully select the training institutions in terms of quality, curriculum, commitment and reference list. This can be performed throughout prequalification screening and tendering processes; Thomson and Mabey (1994) as cited by Price (2007). 9. Conduct critical issue workshops for the key energy sector professionals and ongoing training and communication across the sector to raise awareness of the need for change and the available options. 10. Start an integrated education reform program, with training as a top priority for the workforce as a whole. In particular, focus on workforce skills, IT and language training that will re-tool the population and prepare them for the wave of economic development.
  • 42. 41 Appendix-8 Motivation Theories McGregorTheory McGregor (1960) as cited by Armstrong (2009) introduced his theory analysing people different views and the way of their motivation in two components: (i) Theory X where average human tends to work aversion and responsibility avoidance, thus it is necessary to oblige, command and intimidate people with penalties to get jobs done; and (ii) Theory Y where individuals are considered self-directed in achieving the goals to which they are devoted and rewarded accordingly. Practically the workforce majority falls someplace between practicing both theories. Although they have different approaches, both agree that the resources -comprising people- are organised by managers in the corporate sake; McGregor concluded that most organisations adopt either of them (Burn, 2008). As cited by (Yair, 2011), Robbins & Judge (1998) stated that McGregor recommended managers to promote workers by creating challenging job, giving authority and responsibility, and participating in decision-making. And based on Bruce & Pepitone, (1998). Theory Y suggests also self-achievement and recognition are significant as money. No clue of either bundle of assumptions is applicable for both Y and X theories (Dessler, 2001).
  • 43. 42 Source:http://thecriticalpath.info/2011/08/22/theory-x-vs-theory-y/ McGregor in ARC Context Theory X is extreme, however, works seldom with ARC cheap staff and labours as well as subcontracted workers for short-specific tasks but not always. Theory Y is not applicable, as several managers –to protect their positions- do not promote potential employees that may acquire such positions. Also it cannot be active in a state-owned business environment where people are bit lazy. Armstrong (2009) posited that McGregor theory stresses the commitment importance which is less important with ARC employee majority those drop in between X and Y.
  • 44. 43 Maslow’sTheory Maslow submitted his theory “Hierarchy of human needs” with five needs’ levels starting from bottom to top. Hierarchy presents each level significance to motivation. The motivation is strongest at the bottom, as this level is of inevitable-physiological needs. Motivation strength declines as the needs level goes up over hierarchy. Life is dependent on physiology needs and once this is satisfied, safety and protection against danger come next. Then belongingness comes where relationships are built for wellbeing and after that esteem needs come having the recognition and respect. Finally the self-actualisation level is where individual needs are all fulfilled with no more struggling; and it is his decision what important and priority. The model demonstrates that employee’s behaviour is circumstances-dependent and at any given time he can work at different levels. Managers should understand each stage, as this helps them knowing what level drives and motivates each worker onwards attaining the targets (Burn, 2008).
  • 45. 44 Hertzberg Theory According to (Beardwell et la. 2004 and Tayson, 2006), Herzberg theory developed Maslow system classifying two groups of different quality and influence: (i) Motivation which creates satisfaction and comes from within the organisation such as responsibility, recognition of work execution, personal growth opportunity and attainment sense; (ii) Hygiene factors those relate to work environment and conditions for which continual considerations are necessary to remove dissatisfaction such as job security, firm policy, work circumstances, reward and supervisory quality which are employees attractive but neither satisfactory nor promotive; meaning despite these factors are well-attended, employee may become uninterested when feeling job senseless.
  • 46. 45 ExpectancyTheory Vroom (1964) introduced it including Valence-Instrumentality-Expectancy “VIE” (Armstrong, 2009). Bloisi (2007) explained the theory that employee faiths in the relation among effort, performance and rewards for having job done, and as cited, Vroom (1982) proposed that employees motivation anchored with fulfilling a desired target so long as their actions of attaining such target is at their expectancies. Beardwell et la. (2004) added that the basic ‘expectancy’ concept is the expectation of what will happen that impacts the employee’s behaviour choice. According to Dessler (2011), Motivation = V.I.E No motivation when any variable equals zero: Valence (V) Pay-off should have value to worker, hence his preferences will be considered by manager. If worker ignores reward, he will put little effort into the task. Expectancy (E) No motivation if worker does not expect that his effort will create performance. Manager should motivate his worker by job design, training and others to secure enough skills to complete the task. Instrumentality (I) Employee should believe that his successful performance will lead to outcome. Manager can conclude this simply by realise the incentive plans (Dessler, 2011). Theory main shortfall as Dunford (1992) argued is that the employee logically evaluates the potential reward and circumstances before he acts, and in reality people rarely conduct sophisticated computation as Vroom proposed. Landy & Coote, 2010) added that people often decide with narrow logic allowing emotions affect their decisions. (Yair, 2011) “Many organizations reward things besides performance. When pay is based on factors such as having seniority, being cooperative, or “kissing up” to the boss, employees are likely to see the performance–reward relationship as weak and demotivating”(Robbins, 2012, p.225)
  • 47. 46 Appendix-9 Findings 1. Even if the organisation exists in a closed-local market, it is affected by the global forces. 2. HR strategy can drive the organisational strategy for short-term to overcome certain situations. 3. Fairness is a key element in motivating and rewarding employees. 4. The job sophistication and the risk associated are functions in the reward value. The more risky and sophisticated the job the higher the reward value. 5. Overstaffing, talents immigration and favouritism disrupt the HRM even with adopting best HR models. Overlap actions needed to resolve these problems and apply HR approaches. 6. In organisation like ARC, more than one HR-framework can be adopted depends on the job nature and workforce type.
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