The end of HRM

The end of HRM

A.C. Hyde

Now on to the next of our “final four” issues in Views, where we examine the four core management functions of government: budgeting, human resources management (HRM), information technology (IT) management, and performance management. In the spring/summer issue, we addressed how realistic and workable budgeting is. In the fall issue, the function we address is HRM and its rationality and relevance. We’ve titled each of these lead commentary articles “the end of …,” since they mark this last volume of Views under our management.

There is more to Views than our parting commentary about the future value of management functions. Hyong Yi and Sandra Mobley have added book reviews on perspectives about work and the new workforce. John Crum continues his Fedland column series with a look at federal hiring practices.

The End of HRM

Perhaps no part of organizational management has been criticized more than personnel management. In the private sector, the range of response to the value of human resources management, or HRM, is from really bad to basically irrelevant. At the bad end are articles debating whether HRM should be dismantled; at the irrelevant end are articles discussing not why HRM should be outsourced, but how.

In framing this assessment of what is wrong with human resources management, it is important to recognize that behind the frustration many managers and employees have with antiquated HRM processes, rules, and regulations, there is also a body of research that questions whether HRM, progressively practiced, adds value. The influential 2000 McKinsey study, The War for Talent, compared organizations and concluded that better HRM processes basically made little difference in obtaining and sustaining good organizational talent. The 1999 NBER-MIT study on productivity improvement concluded that progressive human resource policies and practices produced little net organizational benefit–as increased labor costs tended to offset increases in productivity improvements. In the 2001 Brookings study, Intangibles, by Baruch Lev, the conclusion was that little evidence had been produced to date to verify the value added for human resources expenditures and human resource intangibles.

As for government, HRM is taken more seriously, of course. But here also, efforts to reform public-sector human resources management (like social security and tax reform) are stuck between general acceptance that current systems are inadequate and don’t work and disbelief that any of the proposed reforms will bring about change, much less make things better. Making matters worse, there is recognition that the pace of change has rapidly increased for public agencies both in terms of the complexity of their mission and the nature of the work they perform, far outpacing current efforts to modernize human resources management.

HRM Change and Global Warming

The changes in public-sector human resources management parallel rather aptly the trends in global warming and climate change. The federal government, for example, has for over a century had small, steady shifts and fluctuations in terms of HRM practice and process, but all within a fairly narrow range. As the size of government rose gradually and with it the numbers of employees in the civil service, various HRM issues were debated. Mostly minor changes were enacted either as reforms or modernization efforts.

But in the early 1990s, as the talk about the need for major reform in the federal civil service heated up, several significant HRM management shifts or dramatic climate changes took place. These changes are notable, not just for how much deviation they represent from past norms, but also for how quickly they have emerged.

* First. In both the Clinton and Bush administrations, there has been a major movement toward “results management”–government agencies, their political leaders, and their senior managers are expected to function in “a culture of performance management.” Agencies must identify problems, design solutions, devise plans, and meet objectives posited as “outcomes.” It is insufficient for most agencies to pursue “business as usual” practices and conserve resources waiting to deal with the unexpected. HRM is expected to play its role in this type of performance culture by ensuring that agencies have the right mix of employees (usually their most expensive resource) and the employees have incentives to link job rewards with agency performance outcomes.

* Second. The fragmentation of the central personnel system or the General Schedule (what we have referred to as the “Balkanization of public personnel management”) is breaking up the federal centralized management model and ultimately replacing it with a federalized competitive management model. Historically, there have always been some agencies with their own personnel systems, but discounting the U.S. Postal Service, they were a minority. Now, with the Departments of Homeland Security (DHS) and Defense (DoD) going online with their own personnel systems, the excepted services are now the large majority.

Part of this “Balkanization” shift is about creating more flexibility for agencies to create designer personnel systems that could be better tailored to meet unique mission needs. But there is also an underlying premise about competition and diffusion of best practice. The “opportunity” to create a separate tailor-made personnel system was initially given to agencies like the Federal Aviation Administration (FAA) and the Internal Revenue Service (IRS) during an agency management crisis. The expectation now is that as agencies compete with each other on personnel, they will examine features of different personnel systems and adopt them to make them more competitive in terms of obtaining talent. As a further incentive to modernize, both the Clinton and Bush administrations added contracting and outsourcing with the private sector into the mix to push agencies to be more efficient.

* Third. The realignment of labor-management relationships over the past decade has reached new magnitudes. First, the Clinton administration shifted the ground by enacting labor-management partnerships that required management to cooperate with unions in a “wide range of labor and management activities,” thereby greatly expanding the scale of bargaining and “collaboration.” Then, just as dramatically, the Bush administration revoked the partnership decree, opting for a “consultation” approach between management and unions, with management preserving its right to make all final decisions and unions reacting though political appeal.

All three of these trends represent dramatic shifts for the HRM climate in government. What these shifts signify about HRM is not that the impetus for reform has been lost, but rather that the assumptions for reform must be completely redefined.

Has HRM Lost Sight of Reform?

Within a decade of the passage of the Civil Service Reform Act of 1978, there were major calls for new reform. Reform advocates pressed an agenda that began with instituting broad banding, revising pay-for-performance, modernizing recruitment and retention efforts, and even rethinking the Senior Executive Service. For the usual political reasons, the reforms proposed in the last decade were never realized.

Now the context for reform has changed. The climate shifts noted above mean that broad system reform is not needed when one can design one own’s system, making compensation or hiring flexibilities or whatever moot. Agencies must still protect core merit system principles, but as any first year master of public administration student knows, those principles are basically protected as “prohibited practices” through statute and federal regulation.

Hence, HRM has to reassess reform in this new environment. This recognition has forced the U.S. Office of Personnel Management (OPM) and several prominent human capital advocates or “reformers” to rethink the basics of reform. The latter is currently best represented by a group of mostly Washington-based federal personnel experts and academics loosely chaired by the National Academy of Public Administration (NAPA) and the National Commission on the Public Service Implementation Initiative, who assembled the group.

Both OPM and the reformers have worked on producing guidance for the agency heads, career civil servants, and employee representative groups to design new systems and creating progressive human resource processes. Table 1, using short quotes from the OPM document and a press release update on the reformers, contrasts their views.

While there are differences, it is the similarity in themes that comes across most. The real tension will surely be in two places:

* First, between preserving the tenets of the merit system principles and providing the flexibilities that agencies profess to seek in adapting new HR systems to their missions

* Second, in promoting effective “collaboration” between two highly politically charged polar opposite approaches to labor-management relations–partnership versus consultation.

One other closing note about reform and HRM is probably in order. Everything that has happened in the HRM arena over the past two decades has made human resources in organizations more important, not less. When the prescription for productivity improvement and innovation is distilled, it boils down to “good people, good structures, and good technology.” The irony is that the importance of human resources has made the work of sustaining the organization’s talent pool too critical to be left to personnel or HRM.

The Future of HRM After the End

What will personnel look like after HRM is outsourced or redesigned? The outsourcing route is probably easiest to describe. Public agencies will quickly move (many already have) through a series of steps to centralize their human resources information functions, reorganize their HR staff into service centers, and automate much of the traffic–the endless communication with employees about pay, benefits, training and education, travel, etc. The template for managing all of this already exists in software systems designed to establish B2E–business-to-employee internal networks. And once these functions are established in service centers, employees get accustomed to virtual personnel, and the staff personnel officer is removed from the local office, the service provider can be public, private, or nonprofit.

In terms of redesign, that would leave human resource planning for workforce capability, performance management, and succession planning as the three core functions of HRM. (We assume that labor relations management and training and development have already basically seceded from HRM and are their own entities.) Now that public agencies have gotten beyond the myth of the human capital crises, they can begin to focus on how the nature of work and organizations, heavily influenced by new technologies, will change. HRM has focused primarily on the changing employee side of the equation, looking at the impacts of the graying workforce. If the dynamic work technology advocates are right, the future will be about shaping organizations where the work changes are the more dynamic factor. Sadly, HRM may not be seen as an innovative player in this arena.

Likewise, succession planning will be critical, not just in ensuring the next generation of leadership in an organization, but also in moving out of the leadership ranks executives who are no longer on the cutting edge. The problem for HRM is, again, that its experience in succession planning is mostly one dimensional and based on time-in-grade career progression ideals. One federal agency, in assessing its succession planning, found it had established a twenty-year training and experience cycle to reach the top ranks, resulting in unanticipated attrition rates at five to ten years for many top prospects.

The third area will be reshaping differential pay systems in public agencies.

TABLE 1 Contrast of View between OPM and Reformers

OPM THE “REFORMERS”

CONSTITUTIONAL OPM’s Guiding Principles The National Academy of

BASIS for Civil Service Public Administration and

Transformation, May National Commission on

2004 the Public Service

“Preserving the Ideal” Initiative, 2004

Fundamental values Core Values for the

(merit principles) are Federal Public Service

not compromised “Dedicated and accountable

to the collective public

interest, driven by

achievement of mission,

values the people who

work for it, is grounded

in merit principles.”

“Diversity is valued.”

ORGANIZATIONAL Maximizing flexibility Organization-employee

VIEW “Develop and deploy a relationships

civil service that is “Employees and employers

flexible, agile, and share responsibility for

responsive to adapt … enabling employees to

a system that can be achieve organization’s

molded and shaped to mission and objections.”

fit unique missions, “Entire workforce shares

functions, and work responsibility for

forces …” upholding core values and

accomplishing mission.”

“Advancement and rewards

are based on skills and

performance.”

“Accessible and

transparent government

operations”

ENTERPRISE VIEW Leveraging scale Flexible personnel

“Certain Elements of authority

Federal Civil Service Agency plans for “human

should remain part of a capital, developing

standard, overarching. leadership capacity,

architecture that financing, evaluating and

maximizes efficiency & reporting on the imple

effectiveness.” mentation of a new system

and a credible

performance management

system”

EMPLOYEE Ensuring collaboration Employee relations

PARTICIPATION VIEW and coordination “Ongoing communication and

Future designs must be involvement among

… open and employees.”

transparent, as “Employees have the right

inclusive and to organize.”

collaborative as

possible … not only

with their (agency)

employee organizations,

but also with OPM …

in its stewardship

capacity

OTHER BUSINESS “Inherently, governmental

PERSPECTIVE work is performed by

federal employees.”

Editors: A.C. Hyde and Hyong Yi

A Series of reviews, notes, commentaries, ideas, and references for public-sector professionals trying to keep pace with the accelerating rate of change in the information-technological-management environment.

COPYRIGHT 2004 Bureaucrat, Inc.

COPYRIGHT 2008 Gale, Cengage Learning