Employee relations: Cost management v people management?

Industrial relations encapsulated a confrontational 'them and us' scenario where union leaders negotiated basic terms of work and pay through collective bargaining. However, today the shift to 'Employee relations' belies a more modern approach, the U.A.E is a good example of an originally industrial production based economy, which is shifting to a service based industry and of course the tourism sector in Dubai. With a service based sector, individual worker skills have a larger impact on business and some would argue that skill sets increase from medium to high skills and on to knowledge working; where a high degree of experience, qualification and autonomy are required within the job role. The Chartered Institute of Personnel Development (2005) defines employee relations as;

'…the relationship with individual employees.'

'The ideas of 'employee voice' and the 'psychological contract' have been accepted by employers and reflected in their employee relations policies and aspirations'

'Employee relations skills and competencies are still seen by employers as critical to achieving performance benefits through a focus on employee involvement, commitment and engagement.'

With employee relations, managers are more concerned with individual performance and therefore individual working concerns, or should be. This concept has been slow if not pedestrian to reach these shores, where a predominately cost-based form of management is generally, with a few notable exceptions, much in evidence. Cost based management has its roots in Taylorism, where a task is broken down into its various component actions and the basic action allotted to an individual to do ceaselessly day in and day out. The luckless worker was then subjected to a time and motion assessment and production standards and a time limit set for the monotonous action. If the standard was not achieved penalties were introduced. It is this restrictive practice of treating even knowledge workers as machines, not valuing their human contribution or providing development opportunities, which is so prevalent in the region. Practices include having employees clock in and clock out, making them account for every single minute of their day with endless time logs and setting rigid 'production' quotas. This destroys any hope of a psychological contract with a win/win outcome, when hard working employees feel valued and appreciated by employers and employers get the benefit of high production, loyal staff and a low turnover. Good employee relations rely in part to a well structured organisation with basic HRM facets in place such as, job specification, job evaluation, induction, training, objectives, appraisals, performance management and reward management, but don't underestimate the importance of the psychological contract. The CIPD defines the psychological contract as;

'Joint obligations which are often informal and imprecise: they may be inferred from actions or from what has happened in the past, as well as from statements made by the employer, for example during the recruitment process or in performance appraisals. Some obligations may be seen as 'promises' and others as 'expectations'. The important thing is that they are believed by the employee to be part of the relationship with the employer '

Guest (2002) said that the extent to which employers adopt people management practices influences the health of the psychological contract.

High quality people management results in a vibrant psychological contract leading to increased employee commitment and satisfaction and a positive impact on business performance.

Cost based management/low quality people management results in a poor or broken psychological contract, where an employees' sense of fairness and trust and their belief that the employer is honouring the 'deal' between them is shattered resulting in poor or even disastorous business performance results.

A model of the psychological contract

* It is a problem with more modern flatter hierarchies that within Internal Labour Markets job roles don't exist in order to promote staff into them. This results in highly trained, but frustrated staff who have nowhere to go in the organisation. Employees are then liable to leave and employers are left to recruit from the occupational labour market, leading to a huge loss of intellectual capital and high recruitment costs.

People Management for Managers

Businessess can improve their psychological contract by moving away from the out-dated practice of cost management and train their managers to concentrate fully on People Management. Practical methods are listed:


• Assess manager's people management skills, address any lack

• Train line managers in people management skills: employees are more likely to trust their line manager

• Ensure managers commit to key messages: mixed messages will have a negative influence on employee attitudes

• Inform and consult employees about proposed changes: they are more likely to see the outcome as fair.

• Take care to fulfil commitments made to employees: managers say employees show more commitment to their employer than vice versa

• Consider if you need to renegotiate what employees are entitled to expect: otherwise they may feel let down when circumstances change

• Put more effort into managing change: employees believe change is badly managed

• Give employees more responsibility: autonomy increases satisfaction

• Use employee attitude surveys to get a clear idea of what is happening in the organisation:employees often do not share senior managers' views of reality

• Don't use tight management and close supervision: this will reduce employee satisfaction

• Use recruitment and appraisal processes to clarify the 'deal': employee expectations are influenced by a number of factors

• If you can't keep a promise, explain why: broken promises lead to a loss of trust

• Trust employees to do a good job: most are highly motivated to do so and will respond to the trust you show in them

• Benchmark salaries and take into account cost of living increases

• Don't forget the reward part of appraisals/performance management systems to motivate employees

• Be aware of changing expectations: for example, more employees now want to work for organisations that behave responsibly

• Ensure consistency of treatment: perceived unfairness undermines trust

• Treat employees fairly but understand that with status comes different rewards and fringe benefits

• Hold team meetings and focus groups: two-way dialogue will help identify issues at an early stage

• Do not understimate or take employees for granted

Conclusion

The psychological contract reinforces the need for managers to become more effective at people management. Employees are becoming both more critical to business performance and more demanding of the organisations for which they work. In the business environment of the U.A.E , true competition on value, service and product has yet to reach its zenith, however, when it does outstanding performance will be essential to survival. This level of performance cannot be achieved by downsizing or cost-management: it will only come from persuading employees to make a willing contribution, by setting the right company environmment. It is evident that businessess actively engaged in people management and pursuing the psychological contract will have productive, involved and engaged staff and will meet their goals. No doubt, those outdated companies with managers following the cost management model will quote the benefits of control and achieving the task, but will they sing the same tune when their staff underperform, eventually leave and their recruitment costs spiral?