External Labor Market Factors that Have an Impact on the Organisation - Case Study Example

External Labour Market Factors that Have an Impact on the HRP of an Organisation Student’s Name: Course: Tutor’s Name: Date: Table of contents Table of contents ii Introduction 1 The idea that human resource capital is the most important asset that an organisation can have has been extensively propagated in literature. However, most scholars and authors do not always reveal to readers that attaining quality employees takes more than just recruitment and training; in some cases, organisations have to engage in human resource planning (HRP) if at all they are to be assured that their HR needs will be met adequately, both in the short-term and long-term. To clearly understand the scope of this paper, it is vital that one understands just what HRP is. According to Boella (2000, p. 208), HRP “is the process of interpreting the environment, predicting its effects on the organisation, evaluating these effects and planning and controlling the appropriate measures in order that the right human resources are available when required.” Bulmash, Chhinzer and Speers (2010, p.29) on the other hand define HRP as the process of “determining how many employees, at what time, in which location, and with which specific skill sets” are needed for immediate and future needs of an organization. Based on the definitions from different sets of authors above, it is clear that understanding the environment in which the organisation is operating in is a prerequisite to effective HRP. Additionally, organisations also need to effectively interpret the results of an environment scan, and put the right intervention measures in place for purposes of ensuring that employees would be available for the organisation on a needs basis. This paper will analyse the external labour market factors that are likely to impact HRP in organisations in the hospitality industry. It will also issue recommendations on how best organisations in the hospitality industry can handle the external labour market factors in order to ensure that there are no skills gaps in their organisations in future. 1 The hospitality industry and external labour market factors affecting HR availability 2 By its very nature, the hospitality industry is dynamic in that there are high seasons that require a lot of input from the employees, and low seasons when the demand for labour is low. To balance the shift in the demand for labour between the two seasons, most organisations within the industry rely on the contingent workforce to augment the services provided by the permanently employed workforce. The contingent workforce includes contractual, seasonal, interns and part-time employees who usually come in at the height of the labour demand, and are laid-off as soon as the demand for their input dies down (Bulmash et al., 2010). The main challenge that most hospitality industry organisations have to contend with is finding a reliable supply of casual labourers especially at the peak of the high-demand seasons. As Bulmash et al (2010) note, organisations that are unable to meet the human resource capacity are at risk of providing low-quality services since the available employees will be attending to a high client ratio. Fortunately, the hospitality industry can utilise forecasting as a tool for HRP. According to Bulmash et al. (2010), forecasting requires decision makers in the various organisations to use their cognitive and perceptual processes to identify characteristics in the external environment that would affect labour demand. For example, during an economic recession, the decision maker should forecast that the high season will not be as demanding as ordinary non-recession years. Consequently, the decision-maker would forecast that the demand for casual employees would be much lower in recession years compared to the non-recession years since consumers would be more careful in their spending habits. That aside, there are specific factors in the external environment that HRP decision makers in the hospitality industry must consider; they include: 2 Competition 3 Being a lucrative industry, with relatively low entry barriers, the hospitality industry attracts a substantial number of new entrants (Boella, 2000). Such precedence hence increases the competition between different players, not only for clients, but also for the contingent workforce. In most cases, the hospitality organisations that offer the best remuneration packages to the contingent workforce end up attracting the best skilled employees. 3 New technologies 3 The advent of new technologies, most especially the social networks have affected HRP to a great extent (Raleigh, 2006). Dissatisfactions in the workplace by one employee can be quickly spread to others through social networks, and this can affect the willingness of others to work for the same organisation. The situation is made worse by the competition from other organisations, which makes it easier for contingent employees to choose the type of place they want to work in. 3 Public policy/Legal compliance demands 4 Different governments have set different legal requirements that organisations in the hospitality industry must comply with. In Australia for example, the organisations must comply with the Occupational Health and Safety (OHS) Act and regulations (WorkCover New South Wales, 2003). In the Act, both the employer and the employee have some responsibility to fulfil in order to attain full compliance. The employer however has the burden of ensuring that the employee knows just what is expected of them under the Act (Quinlan, 2003). While such may be an easier task when dealing with the job-secure workforce, the situation may be different when dealing with the contingent workforce, and the decision makers involved in HRP may be unable to forecast the willingness of future employees to abide by existing legal rules. HRP suffers impact when there occur legislation changes in issues such as minimum wages and rehabilitation effects applicable to employees in case of injuries. 4 Demographic changes 4 Like other developed countries, Australia’s population is aging and leaving the workforce at a higher rate than can be compensated for by the new workforce entrants (Service Skills Australia, 2011). Usually, the hospitality industry makes use of the contingent workforce, whose significant majority is made up of pre-schoolers who have not established solid career paths (Quinlan, 2003). Raleigh (2006) however notes that most young people are not satisfied with the career opportunities in the hospitality industry, and therefore end up leaving for better prospects in different industries. Much of the work in the hospitality industry is physically demanding and therefore the organisations would benefit from younger employees who have high energy and effort levels. 4 Timeframes 5 According to Bartlett, Johnson and Schneider (2006), HRP timeframes should be divided into three segments i.e. immediate (under 6 months), short term (6 months- 5 years), and long term (5 years and above). The more years in a timeframe, the higher the degree of uncertainty the HRP will have (Bartlett et al., 2006). In Australia for example, immediate HRP timeframes for hospitality organisations would target addressing the immediate skills shortage. In the short-term however, HRP would target identifying how best they can attract sufficient employee numbers to cater for their demands. Specifically, the HRP function could identify ways of improving the people performance and rewards aspects of the organisation in order to fill any foreseeable skills gap. 5 State of the economy 5 Economic status such as recessions, inflation, or even depression often affects consumers purchasing patterns. While some of the economic statuses are hard to predict and therefore difficult to plan for in HRP, others like inflation can be analysed and used as a basis of forecasting. In the recent past, the Australian dollar’s volatility against major world currencies, the rising prices of crude oil, and the post 2008-2009 economic effects are all economic factors that should have had an impact on HR plans. Service Skills Australia (2011) also observe that careers that are perceived as more economically rewarding attract a significant number of potential employees from the hospitality industry. A 2009 review of career commencement and completions revealed that only less than 50 percent of people who begin hospitality careers stick with them to the end. 5 Geography and space 6 In Australia, some territories have higher populations than others. Others (like the Northern Territory) have a relatively younger population compared to their counterparts (Service Skills Australia, 2011). The two identified aspects impact HRP because as Service Skills Australia (2011) notes, hospitality organisations are mainly located within highly populated areas, with the exception of some tourism establishments, which operate in remote less-populated areas. 6 Recommendations and conclusion 6 Collectively, the external factors identified in this paper may provide valuable pointers for use during HRP. However, every HR planner should be cognisant of the fact that though the cliché that ‘failing to plan is planning to fail’ is applicable in human resources too, people are unpredictable in nature. As such, much as organisations have sound HRPs, they should also be flexible enough to check and monitor changes in the external factors, which may alter their HRPs. Flexible organisations would therefore be able to devise plans that will counter the changes brought about by uncertainties in the business environment without creating a skills gap in the organisation. For example, an abrupt improvement in the economic fortunes in a country would increase the demand for hospitality services. This would in turn increase the demand for contingent workers in the industry and only the flexible organisations would succeed in changing their HRPs to accommodate the new economic development and its effects. 6 Introduction The idea that human resource capital is the most important asset that an organisation can have has been extensively propagated in literature. However, most scholars and authors do not always reveal to readers that attaining quality employees takes more than just recruitment and training; in some cases, organisations have to engage in human resource planning (HRP) if at all they are to be assured that their HR needs will be met adequately, both in the short-term and long-term. To clearly understand the scope of this paper, it is vital that one understands just what HRP is. According to Boella (2000, p. 208), HRP “is the process of interpreting the environment, predicting its effects on the organisation, evaluating these effects and planning and controlling the appropriate measures in order that the right human resources are available when required.” Bulmash, Chhinzer and Speers (2010, p.29) on the other hand define HRP as the process of “determining how many employees, at what time, in which location, and with which specific skill sets” are needed for immediate and future needs of an organization. Based on the definitions from different sets of authors above, it is clear that understanding the environment in which the organisation is operating in is a prerequisite to effective HRP. Additionally, organisations also need to effectively interpret the results of an environment scan, and put the right intervention measures in place for purposes of ensuring that employees would be available for the organisation on a needs basis. This paper will analyse the external labour market factors that are likely to impact HRP in organisations in the hospitality industry. It will also issue recommendations on how best organisations in the hospitality industry can handle the external labour market factors in order to ensure that there are no skills gaps in their organisations in future. The hospitality industry and external labour market factors affecting HR availability By its very nature, the hospitality industry is dynamic in that there are high seasons that require a lot of input from the employees, and low seasons when the demand for labour is low. To balance the shift in the demand for labour between the two seasons, most organisations within the industry rely on the contingent workforce to augment the services provided by the permanently employed workforce. The contingent workforce includes contractual, seasonal, interns and part-time employees who usually come in at the height of the labour demand, and are laid-off as soon as the demand for their input dies down (Bulmash et al., 2010). The main challenge that most hospitality industry organisations have to contend with is finding a reliable supply of casual labourers especially at the peak of the high-demand seasons. As Bulmash et al (2010) note, organisations that are unable to meet the human resource capacity are at risk of providing low-quality services since the available employees will be attending to a high client ratio. Fortunately, the hospitality industry can utilise forecasting as a tool for HRP. According to Bulmash et al. (2010), forecasting requires decision makers in the various organisations to use their cognitive and perceptual processes to identify characteristics in the external environment that would affect labour demand. For example, during an economic recession, the decision maker should forecast that the high season will not be as demanding as ordinary non-recession years. Consequently, the decision-maker would forecast that the demand for casual employees would be much lower in recession years compared to the non-recession years since consumers would be more careful in their spending habits. That aside, there are specific factors in the external environment that HRP decision makers in the hospitality industry must consider; they include: Competition Being a lucrative industry, with relatively low entry barriers, the hospitality industry attracts a substantial number of new entrants (Boella, 2000). Such precedence hence increases the competition between different players, not only for clients, but also for the contingent workforce. In most cases, the hospitality organisations that offer the best remuneration packages to the contingent workforce end up attracting the best skilled employees. New technologies The advent of new technologies, most especially the social networks have affected HRP to a great extent (Raleigh, 2006). Dissatisfactions in the workplace by one employee can be quickly spread to others through social networks, and this can affect the willingness of others to work for the same organisation. The situation is made worse by the competition from other organisations, which makes it easier for contingent employees to choose the type of place they want to work in. Public policy/Legal compliance demands Different governments have set different legal requirements that organisations in the hospitality industry must comply with. In Australia for example, the organisations must comply with the Occupational Health and Safety (OHS) Act and regulations (WorkCover New South Wales, 2003). In the Act, both the employer and the employee have some responsibility to fulfil in order to attain full compliance. The employer however has the burden of ensuring that the employee knows just what is expected of them under the Act (Quinlan, 2003). While such may be an easier task when dealing with the job-secure workforce, the situation may be different when dealing with the contingent workforce, and the decision makers involved in HRP may be unable to forecast the willingness of future employees to abide by existing legal rules. HRP suffers impact when there occur legislation changes in issues such as minimum wages and rehabilitation effects applicable to employees in case of injuries. Demographic changes Like other developed countries, Australia’s population is aging and leaving the workforce at a higher rate than can be compensated for by the new workforce entrants (Service Skills Australia, 2011). Usually, the hospitality industry makes use of the contingent workforce, whose significant majority is made up of pre-schoolers who have not established solid career paths (Quinlan, 2003). Raleigh (2006) however notes that most young people are not satisfied with the career opportunities in the hospitality industry, and therefore end up leaving for better prospects in different industries. Much of the work in the hospitality industry is physically demanding and therefore the organisations would benefit from younger employees who have high energy and effort levels. Timeframes According to Bartlett, Johnson and Schneider (2006), HRP timeframes should be divided into three segments i.e. immediate (under 6 months), short term (6 months- 5 years), and long term (5 years and above). The more years in a timeframe, the higher the degree of uncertainty the HRP will have (Bartlett et al., 2006). In Australia for example, immediate HRP timeframes for hospitality organisations would target addressing the immediate skills shortage. In the short-term however, HRP would target identifying how best they can attract sufficient employee numbers to cater for their demands. Specifically, the HRP function could identify ways of improving the people performance and rewards aspects of the organisation in order to fill any foreseeable skills gap. State of the economy Economic status such as recessions, inflation, or even depression often affects consumers purchasing patterns. While some of the economic statuses are hard to predict and therefore difficult to plan for in HRP, others like inflation can be analysed and used as a basis of forecasting. In the recent past, the Australian dollar’s volatility against major world currencies, the rising prices of crude oil, and the post 2008-2009 economic effects are all economic factors that should have had an impact on HR plans. Service Skills Australia (2011) also observe that careers that are perceived as more economically rewarding attract a significant number of potential employees from the hospitality industry. A 2009 review of career commencement and completions revealed that only less than 50 percent of people who begin hospitality careers stick with them to the end. Geography and space In Australia, some territories have higher populations than others. Others (like the Northern Territory) have a relatively younger population compared to their counterparts (Service Skills Australia, 2011). The two identified aspects impact HRP because as Service Skills Australia (2011) notes, hospitality organisations are mainly located within highly populated areas, with the exception of some tourism establishments, which operate in remote less-populated areas. Recommendations and conclusion Collectively, the external factors identified in this paper may provide valuable pointers for use during HRP. However, every HR planner should be cognisant of the fact that though the cliché that ‘failing to plan is planning to fail’ is applicable in human resources too, people are unpredictable in nature. As such, much as organisations have sound HRPs, they should also be flexible enough to check and monitor changes in the external factors, which may alter their HRPs. Flexible organisations would therefore be able to devise plans that will counter the changes brought about by uncertainties in the business environment without creating a skills gap in the organisation. For example, an abrupt improvement in the economic fortunes in a country would increase the demand for hospitality services. This would in turn increase the demand for contingent workers in the industry and only the flexible organisations would succeed in changing their HRPs to accommodate the new economic development and its effects. References Bartlett, K, Johnsons, K, & Schneider, I E 2006, ‘A comparative study of strategic HRD approaches for workforce planning in the tourism industry’, University of Minnesota, viewed 22 February 2012, http://www.tourism.umn.edu/prod/groups/cfans/@pub/@cfans/@tourism/documents/article/cfans_article_127370.pdf Boella, M J 2000, Human resource management in the hospitality industry, Nelson Thornes, Cheltenham, Great Britain. Bulmash, J, Chhinzer, N Speers, E 2010, Strategic planning for human resources, first edition, McGraw-Hill Ryerson, Whitby, Ontario. Quinlan, M 2003, ‘The global expansion of precarious employment: Meeting the regulatory challenge’, Australian Council of Trade Unions, viewed 22 February 2012, http://www.actu.org.au/public/ohs/quinlan.html. Raleigh, L 2006, ‘Top ten issues in the hospitality industry for 2007 international society of hospitality consultants’, Hotel Online Special Report, viewed 22 February 2012, < http://www.hotel-online.com/News/PR2006_4th/Nov06_ISHC.html> Service Skills Australia 2011, ‘Tourism, Hospitality and events- environmental Scan 2011’, viewed 22 February 2012, WorkCover New South Wales 2003, Occupational Health and Safety in Hospitality’, Supervisors Training Manual, viewed 22 February 2012, Read More