Workplace Management Dynamic - Australian Industry Skills Councils - Case Study Example

Name: xxxxxxxxxx Course: xxxxxxxxxx Institution: xxxxxxxxxx Title: Workplace Management Dynamic Date: xxxxxxxxxxxxx Workplace Management Dynamic Introduction The Australian Industry Skills Councils (2011) reported that approximately one half of all working age Australians had insufficient language, literacy and numeracy skills to participate in training programs required for key professional occupations or trades such as engineering, electrical and plumbing. These findings point to a challenge facing businesses and firms in competitive environments, that of an apparent skills shortage in the labour supply which makes it harder for businesses in competitive industries to cope with the demands of changing business environments. This essay discusses this contemporary challenge facing businesses or firms in competitive environments- skills shortage in labour supply-in relation to the four goals of employers in HRM in competitive environments as discussed by Boxall (2007). Boxall (2007) argues that in competitive and changing environments, there are four fundamental economic and socio-political motives or goals for employers. Firms should pursue cost effectiveness within their industrial context while simultaneously ensuring that they achieve some level of social legitimacy in the societies they operate in. furthermore, firms also need to develop both short run and long run flexibility in HRM in addition to their managers securing sufficient autonomy or managerial control to be effective in changing business environments. This essay explores each of these four employer’s goals as discussed by Boxall in relation to the contemporary challenge of skills shortage in the labour supply. The essay discusses the implications of skills shortage in labour supply on each of the four goals, identifying the challenges posed and identifying the links between these goals and some of the strategic tensions and problems faced by managers in managing change. The essay will briefly discuss each goal. Critical analysis of these goals with respect to the challenge reveals that the skills shortage compromises employer’s cost effectiveness and constrains the firm’s flexibility. The skills shortage also poses legitimacy problems for employers in terms of affirmative action since they have to source for labour from demographic groups with lower LLN skill levels. The skills shortage in the labour supply also erodes managers’ autonomy and their power to act and become effective in managing change their firms due to unpredictability and constraining their planning which may complicate their efforts. In conclusion, it will be argued that the skills shortage compromises the achievement of employers’ goals as indicated by Boxall. Cost Effectiveness The primary problem or principal economic objective of firms in competitive environments is to secure their economic viability (Boxall 2007). Therefore, the main economic goal of HRM in competitive environments is to ensure that firms remain competitive by making labour productive at a reasonable cost which in turn ensures the viability and profitability of the firm in its industry. The basic problem is to identify which HR system is most cost effective or profit-rational in the specific market context (Boxall 2007). For many businesses, this may imply labour cost minimization through lower wages since labour costs are essential to the firm’s survival. However, in other industries, higher HR investment is required. In competitive environments, labour productivity remains essential to cost effectiveness. A key aspect of labour productivity is labour supply skills, which essentially implies that language, literacy and numeracy skills in the labour supply are vital for achievement of employer’s economic goals in terms of cost effectiveness (Snell and Bohlander 2012) Language, learning and numeracy (LLN) skills are both an essential component of and a prerequisite for productive labour in competitive industries. Indeed, there is sufficient evidence that points to the various economic benefits of higher literacy levels in the labour supply for employers. The Australian Bureau of Statistics (2006) indicates that the rationale for the wage differentials among employees in many industries is their literacy and numeracy skills profile. The implication is that labour productivity is perceived by employers to be a function of employees’ LLN skills. A study by Chiswick et al (2003) also confirmed the connection between labour market success for employees and their levels of education and literacy and numeracy skills. Based on the human capital model and the resource based view of the firm theory, the conclusion by Chiswick et al (2003) was that among the employees studied, higher levels of education were associated with higher levels of numeracy and literacy and consequently greater labour market success. This could be indirectly linked to the employers’ goal of cost effectiveness in management of employment relations in competitive environments since application of the human capital model suggests that the LLN skills of educated workers would make them better decision makers in the workplace and also more efficient in performing tasks (Daly 1993) Therefore, what apparently appears to be a progressively worsening situation in terms of skills shortage in the labour supply poses a significant challenge to employers who sometimes have to bridge the gap between the actual and the desired LLN skills profile of their prospective employees to meet their cost efficiency goals (ISC 2011). According to the Industry Skills Council (2011) approximately half of all working age Australians have LLN problems. This translates to a skills shortage in labour supply since the Industry Skills Council established that most of the labour supply has insufficient skills to participate in training for key industry trades. The skills shortage in the labour supply has several implications for employers in terms of realising cost effectiveness. Employers have to invest heavily in recruitment and selection to identify the most appropriately skilled workforce. In addition, for those in competitive industries, this implies heavy further investments in employee training that may undermine cost effectiveness and profitability of the firm (McCourt and Eldridge 2003). LLN problems also act as barriers to learning in these training programs in addition to eventually hindering effective performance at the workplace. Another problem also related to the skills shortage is high labour turnover since these firms have to consistently upgrade the skills profile of their employees to keep pace with changes in the industry and maintain a competitive edge (Boxall 2007). Frequent labour turnover is expensive for firms and therefore, the insufficiency in LLN skills in the labour supply implies additional costs in training and retraining employees to ensure competitiveness. This is not cost efficient for businesses in competitive environments seeking to optimise or maximise labour productivity. This challenge can also be exacerbated by labour scarcity as a problem facing management since firms in competitive environments have to compete for a relatively smaller pool of skilled labourers which may necessitate raising wages beyond optimal levels to try and attract rare skilled labourers (Boxall 2007). Social Legitimacy In addition to pursuing cost effectiveness in the industries in which they compete, firms should simultaneously strive for legitimacy in employment relations as a social political objective in the societies in which they operate (Boxall 2007). Social legitimacy as a goal entails firms allocating part of their resources not just to the achievement of their economic goals but also to making sure that they have moral legitimacy and ethical standing in the societies they operate in. From a cultural relativist point of view, the pursuit of social legitimacy takes many forms in as many countries or socio political contexts (Snell and Bohlander 2012). What are considered best-practice or socially acceptable standards may vary in substance, form and application from location to location and it is important for firms to identify the important areas to be addressed to achieve social legitimacy in the societies they operate in. With regards to the skills shortage in the labour supply, several factors surrounding marginalized groups or minorities, affirmative action or equal employment opportunity legislation and corporate social responsibility need to be addressed for firms to achieve social legitimacy (Harigopal 2006). There are various dimensions of the skills shortage in LLN skills for training with respect to legitimacy goals in employment relations for employers. The Australian Bureau of Statistics (2006) and the Australian Literacy and Lifeskills Survey indicate that on aggregate, LLN skills tend to be lower for immigrants as opposed to Australian born people. In addition, language and literacy skills also tended to be higher among immigrants from English speaking countries as opposed to immigrants from non-English speaking countries. The ABS also reported on aggregate lower levels of LLN skills among people from indigenous communities (Aboriginal and Torres Strait Islander) (ABS 2006). These statistics combined with the fact that wage levels typically tend to be higher for skilled, educated and consequently employees with higher levels LLN skills as compared to unskilled, lower level educated and lower level LLN skills may result in a situation where a firm’s labour force may be characterized by wage inequalities between and among employees from different ethnic and racial backgrounds due to a prevalent LLN skills shortage in marginalized or minority groups. Indeed, Daly (1993) noted that there exist significant wage and income inequalities between Aboriginals and non-indigenous Australians which are a reflection of their disadvantage in employment prospects due to significantly lower levels of LLN skills (Bradley et al 2007). Therefore, with respect to social legitimacy as a socio-political goal, employers operating in such multicultural contexts or environments must take into account affirmative action issues in their employment relations. This includes balancing between upholding their legal responsibilities in terms of state specific Equal Employment Opportunity (EEO) legislation under regional Anti Discrimination Acts and simultaneously ensuring that they recruit and retain employees with LLN skills consistent with the demands of the competitive environment (Harigopal 2007). This may pose a challenge since in pursuit of efficiency employers would be predisposed to sourcing employees with desired LLN skills profile regardless of their racial or ethnic status. Therefore, a skills shortage only compounds the challenge for firms especially in environments where they face risks of legal enforcement (Boxall 2007). Social legitimacy would also demand that employers facing a labour supply shortage of LLN skills make a positive contribution to society by upgrading the LLN skills of prospective labourers. Failure in legal compliance or corporate social responsibility would draw comparisons between the firm and other complying firms and attract bad press or a negative image (Boxall 2007). This goal is also linked to legitimacy challenges facing employers since the wider society will carefully monitor whether employers are willing to undertake self auditing on issues of affirmative action and employment equity. Successful self auditing for firms goes a long way in enhancing a firm’s social legitimacy. Flexibility Another economic goal for employers with regards to employment relations in competitive environments is organizational flexibility. Flexibility entails putting in place HR strategies to react to changing circumstances and effectively manage change both in the short run and it the long run (Boxall 2007). In the short run, this can take the form of labour flexibility in managing the number of employees during peak and trough points in the business cycle or financial flexibility in terms of the price of labour which can enable a firm to maximise productivity and returns due to fluctuating wage rates. In both cases, the rationale the emphasis is adjustment of labour costs commensurate with changes in business revenues (Boxall 2007). The challenge of insufficient LLN skills to participate in training or a skills shortage in the labour supply would hamper a firm’s short run labour flexibility in a competitive environment since the additional labour force to be employed during peak labour demand seasons may not have the sufficient skills profile to enable the firm maximize labour productivity or maintain competitive advantage (Boxall 2007, Snell and Bohlander 2012). The basic rationale for short run responsiveness as an economic goal is to be able to optimize on revenues with changes in the business cycle. However, this flexibility must not be at the cost of competitive advantage or it would not make sense. A skills shortage in the available labour supply implies that firms may not be able to take advantage of peak periods in business cycles since the prospective labour cannot be integrated into the workforce as timely and in efficiently a manner as desired (Harigopal 2006). With regards to long run agility, many industries that require skills training are experiencing rapid technological change in means of production and methods of management. Therefore, for firms contemplating changes in their production or manufacturing methods, the availability of labour with adequate and ready LLN skills for training is essential for organizational capacity building if they hope to achieve any meaningful or sustained competitive advantage in competitive environments (Boxall 2007). A skills shortage in the labour supply would hamper a firm’s ability to innovate or introduce new technologies efficiently especially for manufacturing firms. Labour supply with sufficient LLN skills for training is also essential for capacity building for firms seeking to expand their operations or seeking to shift production facilities and labour forces which would ensure long run agility to survive in competitive environments (ISC 2011, DEEWR 2010). Managerial Autonomy In addition to achieving social legitimacy, another socio political goal of employers in competitive environments is to enhance their autonomy or power to act (Boxall 2007). There is a natural tendency for the managers of firms to attempt to enhance their room to manoeuvre or their autonomy to make decisions or the power to act in managing change by exercising managerial control over a changing and uncertain environment (Boxall 2007). The skills shortages in labour supply may indirectly negatively affect manager’s efforts to achieve their “security objective” of managerial control or autonomy in competitive environments. As indicated by Boxall (2007), management’s drive for power or the protection of managerial prerogative may significantly affect the realisation of other goals- cost efficiency, social legitimacy and flexibility. Therefore, for employers to be able to justify or rationalise their desire for greater managerial control over their businesses’ affairs against competing parties such as trade unions, shareholders and labour market regulators, they need to demonstrate a capability to effectively manage changing business environments through ensuring the firm’s profitability and flexibility to take advantage of changing business environments (Mc Court and Eldridge 2003, Snell and Bohlander 2012). In this regard, a skills shortage in the labour supply may negatively impact on managements’ leverage in the pursuit of control and autonomy. For example, as already illustrated, the skills shortage may compromise on cost effectiveness and flexibility by greatly constraining a manager’s ability to plan effectively in anticipation of changes in competitive environments (ISC 2011). Skills shortages in labour supply complicate the managers’ job in critical aspects such as workforce planning and therefore compromise on their political goal of autonomy and managerial control. Managers also have to grapple with the politics of management as realising the objective of autonomy includes winning the support of key stakeholders both within the firm’s organizational structure and in the firm’s environment such as labour market regulators and trade unions (Boxall 2007, Harigopal 2006). Conclusion One of the HRM challenges facing employers in competitive business environments is the problem of skill shortage due to insufficient LLN skill levels among working age Australians. This challenge has significant implications for employer’s four fundamental HRM goals of cost effectiveness, social legitimacy, flexibility and managerial autonomy as discussed by Boxall (2007). From the discussion and critical analysis of how skills shortage as a contemporary challenge affects each of these goals, it has been concluded that skills shortage in labour supply compromises all the four economic and socio-political goals of cost effectiveness, flexibility, social legitimacy and managerial autonomy. For employers to effectively manage organizational change, they need to collectively confront such challenges in the business environment as concluded by the Industry Skills Councils (2011). References ABS (Australian Bureau of Statistics) 2006, Adult Literacy and Life Skills Survey, Summary Results, Cat. No. 4228.0, Canberra. Boxall, P. 2007 ‘The goals of HRM’ In Boxall, P., Purcell, J. and Wright, P. (eds) The Oxford Handbook of Human Resource Management, Oxford: Oxford University Press. Bradley, S, Draca, M, Green, C & Leeves, G 2007, ‘The magnitude of educational disadvantage amongst indigenous minority groups in Australia’, Journal of Population Economics, Vol. 20, No.3, pp. 547-569. Chiswick, B, Lee, Y & Miller, P 2003, ‘Schooling, Literacy, Numeracy and Labour Market Success’, The Economic Record, Vol. 29, No. 245, pp. 165-181. Daly, A 1993, ‘The Determinants of Employment for Aboriginal People’, Australian Economic Papers, Vol. 20, No. 60, pp 134-161. Department of Education, Employment and Workplace Relations (DEEWR) 2010, Skill shortages Australia, Retrieved on May 10, 2012 from < http://www.deewr.gov.au/Employment/LMI/SkillShortages/Documents/NationalSkillShortageReport.pdf> Harigopal, K 2006, Management of Organizational Change: Leveraging Transformation, New York: SAGE. Industry Skills Councils (ISC) 2011, No More Excuses: An industry response to the Language, Literacy and Numeracy Challenge, Retrieved on May 10, 2012 from < https://www.cshisc.com.au/docs/nomoreexcuses_final_single_page.pdf> McCourt, W & Eldridge D 2003, Global Human Resource Management: Managing People in Developing and Transitional Countries, Cheltenham (UK): Edward Eldridge Publishing. Snell, SA & Bohlander, GW 2012, Managing Human Resources, New York: Cengage Learning. Read More