The world of human resource management Is changing more rapidly than we can Imagine....

Advances and challenges in human resource management in the new millennium


The world of human resource management Is changing more rapidly than we can Imagine. Constant environmental changes mean that human resource managers face constant challenges. They must respond by taking advantage of gradual yet profound changes in the nature of the field, current practices, and overall human resource management policies, mission and vision.

Two stories will illustrate our topic and its importance. The first one is from Japan. The Japanese Minister of Industry and Commerce predicted that in the next five years three quarters of the Gross National Product (GNP) of Japan would come from products and services that, up to now, had even not been invented. Think of it - in only 1,825 days, the future of the Japanese economy will be shaped by new technological innovations that we are now totally unaware of. Japan's situation is not unique. What happens there is also happening in the rest of the world. While the amount and rate of change are unprecedented, they become more significant when viewed in the context of education. When today's students finish school, the job market will have a completely different profile than today. Will these students and universities be prepared?

The second story comes from Sao Paulo, Brazil. In the first semester of 1999, the Catho Institute (a professional outplacement center) worked with about 850 executives who had, for various reasons, been released by their employers, and now wanted to reenter the labor market. Half were placed in other companies, though in many cases with different salaries. But the other half is still waiting for work. And they may have to wait a long time, for the characteristics of this group are troubling. Eighty percent had not read even one book in their area of specialization in the past 12 months.

Ninety percent had not attended any job-related training program, seminar or workshop. Seventy-five percent don't understand computers; 70 percent do not speak another language (such as English, French or Spanish). The forecast is that it will be difficult for anyone in this group to get a job at the level that they had before.

What do these two stories have in common? It's very simple - we're at the threshold of the new millennium. The world is changing quickly and relentlessly, and many do not know it. They're simply being marginalized, left out of the job market, sitting on the sidelines as opportunities pass them by.

How does this reality affect what contemporary human resource managers need to learn to be competent professionals tomorrow? The challenges posed by the new millennium are so complex as to make simple and objective responses to this question difficult. But some trends help answer it - or at least reduce our uncertainty about the future. In fact, the emergent business environment generates 14 major challenges for HRM professionals. Let's examine each in turn.

Challenges For Human Resource Management (HRM)

From the Industrial Age to the Information Age. Work performed in factories by machines is being replaced by work in offices or at computer terminals. And instead of working with things, people increasingly work with ideas and concepts. Information and knowledge have replaced manufacturing as the source of most new jobs.

From Restricted Markets to Globalization. Our old local regional vision is giving way to a new global economic order and business vision. The new demand is think globally and act locally. We are also used to dealing with restricted or concentrated markets. We need to become accustomed to dealing with business from a new global perspective.

From Bureaucracy to Adhocracy. The rigid organizational hierarchy with its monolithic chain of command is giving way to integrated team networks based on autonomy and flexibility. Rigid departmentalization is being replaced by flexible organizational structure - business units and profit centers that change rapidly. We are used to working in mechanical, bureaucratic, vertical and pyramidal organizations. We need to become accustomed to working in organizations that grow and change as if they were alive.

From Stability to Change. Static, permanent organizations designed for a stable and predictable world are giving way to flexible, adaptive organizations more suited for a new world of change and transformation. Emphasis on permanence, tradition and the past is giving way to creativity and innovation in the search for new solutions, new processes, and new products and services. Maintaining the status quo is less important than a vision of the future and the organization's destiny. We are used to dealing with certainty and predictability. We need to become accustomed to dealing with uncertainty and ambiguity.

From Command to Orientation. The traditional hierarchical notion of authority based on vertical imposition of orders and instructions is giving place to democratic leadership based on the organization's mission and vision. Blind, reactive obedience is giving place to spontaneous, proactive collaboration, and employee commitment. We are used to working under authoritarian, autocratic command. We need to get used to working with democratic, inspirational leadership.

From Muscular to Mental Work. Repetitive physical labor that doesn't add value is increasingly being replaced by mental creativity. Routine and monotony are giving way to innovation and a break with tradition. in the past, people were considered to be merely workers, an old concept that associated people with things. Now people are considered purveyors of activities and knowledge whose most important contributions are their intelligence and individual talents. We are used to dealing with physical, repetitive manual labor; we need to become accustomed to dealing with mental, creative, and innovative work.

From Solitary to Collective Activity. Teamwork is supplanting individual activity The old emphasis on individual efficiency (on which the total efficiency of the organization depended) is being replaced by group synergy. It's a matter of multiplying efforts, rather than simply adding them. We are used to individualized, isolated work; we need to change to high-performance teamwork.

From Specialization to Multitasking. The traditional division of labor with its consequent fragmentation of activity is evolving toward more varied and integrated work. Compartmentalization is changing to a systematic holistic vision, unified rather than separate. We are used to dealing with division of labor and task specialization. We need to become accustomed to working in teams and with holistic organizations. From a Focus on Products and Services to a Customer Orientation. In the past, the product or service was the most important element. Now, the customer to whom this product or service is targeted has become fundamental. Before, an internally focused vision based on the product or service prevailed. Now, an externally focused vision for the customer who is going to use that product or service predominates. In the past, the product/service was the goal. We're used to working with the products and services we produce or offer. We need to shift toward looking after the customer's needs.

From Full-rime to Part-Irme Work. Work carried out with total and exclusive dedication to a single company is coming to an end. It is being replaced by work carried out at any time, and at any place, to the extent that workers are becoming suppliers for various activities and various companies at the same time. The old concept of a job with a single schedule and a formal job description, dating back to the Industrial Revolution and the main feature of the Industrial Age, is being supplanted by a new concept of work that typifies the digital age. Part-time work, remote work, and virtual work constitute these new forms of human activity We are used to the old concept of a single job for life, exclusive and full time. Now, we need to become accustomed to work as it is defined in the digital age.

From Followers of Orders to Entrepreneurs. The old concept that people are hired workers who hold certain positions according to fixed schedules and following internal rules and regulations is being supplanted by a new concept that rewards internal entrepreneurship. In the past, performance evaluation emphasized things like absenteeism, punctuality, and personal discipline. Now, it focuses on vision, goals and results, and especially on personal contributions to organizational objectives. Rather than being conservative bureaucrats, workers are becoming innovative and creative. And the new generation of workers (the networked generation) created by digital technology is leaving the older generation behind. We are used to working by following rules and regulations, external controls and standards; now we need to become goaloriented and mission driven.

From Human Resources to Business Partners. In the past, human resources were considered passive agents of the company Now, employees are considered active and proactive agents of the business they manage together. In the past, workers were considered an organizational resource. Now, they manage the company's organizational resources. We are used to talking about organizational resources. But a resource is a thing. People are human beings with minds, talent, motivation, and the proactive capacity for decision-making. They can no longer be considered only as objects.

From Agents to Leaders. The old autocratic, authoritarian, people-controlling bosses are becoming democratic leaders and people promoters. Formal hierarchical authority is being replaced by such modern concepts as motivation, leadership, communication, interpersonal relationships, and development of high-performance cohesive work teams. We have been used to bosses who give orders to subordinates based on their linear hierarchical authority. Now we need to become accustomed to working with leaders who move, motivate and stimulate workers - leaders who are communicators and visionaries.

From Financial to Intellectual Capital. Emphasis on money as the most important organizational resource is shifting to knowledge as the unlimited and fundamental input for business success. Traditional accounting, centered as it is on physical assets convertible into financial currency, is being questioned for not involving such intangible aspects as internal systems, customers, and intellectual capital. This happened as researchers began to perceive that investments in people provided such intangibles as company image, organizational climate, respect, job satisfaction, customer service, creativity and innovation, competitiveness, and much more. They also, undoubtedly, cause other intangible changes that traditional accountants don't include in their reports, which are essentially numerical and quantitative, based on the past rather than the future.

Advances in Human Resource Management



These environmental challenges have created the need for fundamental advances in human resource management:

A New Philosophy of Action. The concept of "human resource management" must disappear and be changed by a new term that is gaining greater acceptance, namely "people management." To be precise, "managing people" is increasingly the responsibility of middle management. Based on the fundamental change described previously, people are considered human beings, not simply organizational resources. Their activities and individual differences are considered and respected, because they are endowed with unique personalities and intelligence, and differentiated aptitudes, knowledge and abilities. And the new philosophy goes even beyond this. Some more advanced organizations do not even talk about managing people, because this concept could imply that people are simply passive agents who depend on decisions from higher levels. Now, human resource researchers talk about managing with people, as if workers were business partners rather than foreign elements apart from the organization. This concept means that people at all levels of the organization are considered responsible for, as well as involved in, the company's business, just as midwives are responsible for the health of a mother and child. Being "responsible" means that employees use available information, apply their abilities and knowledge, and make adequate decisions that achieve the desired results. Besides the competitive advantage obtained through more competent personnel, this is the true difference between the old and new philosophies. There is an increasing consensus that the main customers of the company are its workers. This explains the widespread use of external marketing techniques within the organization, in that the objective is to keep workers well informed about the company's philosophy, policies and goals; to integrate workers through a range of participative programs; to help them achieve their needs and aspirations; and make them feel that they are part of the company, and should, therefore, cooperate through dynamic interrelationships. This change also explains the concept of holistic management, whereby people are seen within an organizational context that is totally human, and not simply as a component of a productive system. Managing jointly with employees, moving toward a new way of conceptualizing business - this is the issue.

A Rapid Transformation from Staff Services to Internal Consultation. The old departmental FIRM structure is being replaced by more flexible entities responsible for processes focused on customers and internal users. The functional organization is disappearing, and a network organized by process-based teams is emerging in its place. Instead of units or departments, HRM is now trying to coordinate business processes or subsystems. This is a change from a function-oriented to a process-oriented culture, from an organization that offers services (where the internal customers are always right) to a concern for the organization's ultimate productivity. This means a change in the nature of the FIRM department from an implementing organization to an internal advisory team. Instead of its usual functions (hiring, training, conducting performance evaluations, assigning salary raises, etc.), HRM is increasingly responsible for teaching managers and their teams to perform these tasks. To put it another way, HRM is teaching people how to fish instead of giving them fish.

A Gradual Transfer of Functions and Decision-Making to Middle Managers. There is a notable tendency for certain activities that were previously centered exclusively on HRM to devolve to middle management. Selection, training, performance evaluation and pay are the primary activities affected. Managing people is a strategic activity. It is important that it be centralized and entrusted to a single department. Managers from various areas are becoming managers of people, and they are gaining full autonomy to make decisions and take action with respect to their subordinates. Managers are gradually becoming empowered to act as managers of their human resources. They are becoming multipliers of the process of preparing and developing people; therefore, managerial training has become intensive and continuous. This means a profound commitment by upper management to trust middle management with safeguarding new non-technical skills, which are basically conceptual and interpersonal components of everyday managerial behavior. Along with this, HRM is concerned with the productivity of the organization's intellectual capital and with managerial performance. Managers should be able to demonstrate efficient leadership and full achievement of organizational objectives through the personal contributions of the people directly linked with the final results. Recruitment and selection processes should validly identify and attract people with the requisite characteristics and talents. Training and development processes should generate results for the organization and the people. Wage systems should be capable of motivating and channeling efforts to achieve desired goals, results, and related issues. The essential thing is the search for efficacy and excellence, starting with people, with emphasis on goals rather than on means.

A Close Connection with the Company's Mission. HRM is becoming increasingly involved with strategic planning and the development of means by which people can work proactively toward the achievement of organizational objectives. This means a broader perspective focused on objectives and results. It implies personal commitment by each worker to the company's goals. The need for this personal commitment means that employee education, communication, and involvement now become fundamental. This being the case, companies develop and emphasize an HRM philosophy to which top management is deeply committed, and which is clearly articulated and practiced by all employees. HR planning is closely linked with strategic planning, so as to support the company mission and give incentives to support its achievement. HRM objectives are indicative of such organizational objectives as profit, growth, productivity, quality, change, innovation, flexibility - and especially competitiveness. Besides this, the impact of HRM processes on people and businesses is continually evaluated to provide the adjustments necessary for a world of constant change.

A Clear and Accelerating Tendency toward Downsizing. Downsizing refers to the gradual and systematic dismantling of an area - its redefinition and decentralization in the direction of the other areas of the company. HRM is gradually being restructured and reduced to its essential or core activities. As this area is reduced, top-level HR executives are changing their competencies radically, or are simply disappearing from the scene. The strong trend toward flattening the organization, reducing hierarchy, decentralizing decision-making, debureaucratization, deregulation, separation into strategic business units, continuous quality improvement programs, reengineering, and other trends in contemporary administration are accompanied by parallel changes in people management. And it could not be otherwise. The search for a flexible, creative and innovative company that rewards total quality, as well as the participation and commitment of all its members, has been one of the major HRM objectives.

Emphasis on a Participative and Democratic Culture within the Organization. Participative decision-making, continuous consultation, opportunities for dialogue, direct and open communication, suggestion programs, use of meetings and awards ceremonies, more freedom in task selection and the methods to carry them out, group work and teamwork, work schedule options, availability of online information, and real time are gradually leading companies to adopt a primarily consultative and participative management style through which workers can coexist within a vibrant and democratic culture. There is constant, deep concern with organizational climate and employee satisfaction. Quality of life became an obsession in successful companies, because they perceived that the quality of their products and services was a direct function of the quality of life of the people that made or provided them. What does "quality of life" mean in this context? It means good salaries and benefits, adequately defined tasks, a healthy organizational environment, democratic and efficient leadership, high motivation and continuous feedback. It means rewards for productive contributions such as psychological effort, intense communication and interaction, continued education, and all the rest. A worker cannot have a good quality of life within a company, if he or she does not enjoy these conditions. Nor can the worker enjoy this quality of life outside the company, if it does not exist within. "Quality of life" creates the psychological state necessary for the employee to produce quality work for the company in return. The change is worth the investment. A happy worker works better and produces much more than an unsatisfied, rebellious worker. To support this new culture, a new organizational structure is gradually arising, with few hierarchical levels that allow it to move the organization's base to the top. HRM is also being completely deregulated with respect to sanctions and disciplinary action. This area is losing its former negative and punitive connotation and is acquiring new support among workers.

Strong Use of Motivational Tools and Personal Achievement. Individual objectives and needs are being intensely assessed and emphasized. Companies are also continually designing ways to offer opportunities for full development of their employees. People are developed as persons and not simply as productive resources; therefore, improvements in education and training take place among workers and managers on the basis of both the workers' and the company's needs. Workers become aware of the importance of self-development as support, and, therefore, they participate together in MBO-type initiatives through which both managers and subordinates negotiate company goals and objectives together. Rewards are not standardized, but are variable based on contributions to productivity and profit. The old concept of managing by objectives is revitalized in ways that make it more liberal, participative, friendly, involving and motivating than before. The result is less traumatic and generates less employee anxiety, as it provides effective conditions for reaching previously established goals. Variable pay represents the direct material reward for effort. Both the company and the workers benefit simultaneously through gain sharing. Variable remuneration is self-financed by its own results, so that productivity increases are achieved without added costs. Besides, the systems of recognition and retribution are abundant and varied, widely used and accepted within companies.

Flexibility of HR Policies and Practices Based on the Needs of the People Involved. The previous tendency toward centralized rules and procedures is being supplanted by alternative practices designed according to the individual worker's wants and needs. Instead of complex, generic procedures, companies are using more and more choices, options and alternatives for adjustment to individual differences. HRM is constantly creating alternate selection methods or compensation packages in the area of benefits or employee services, training, career management, work schedules, and so on. Instead of a single health plan, for example, workers can choose the one that best meets their expectations or personal preferences.

A Complete Change Toward Customer Service, Be it Internal or External. HRM is becoming totally customer oriented. As a consequence, managers and employees are being constantly reoriented toward customer satisfaction. Training in quality and productivity is intensive, obligatory and cyclical in most successful companies. Quality is recognized and rewarded. Quality circles, multifunctional groups, autonomous teams, task forces, and committees are widely encouraged. Work that must be performed in restrictive or isolated work sites is being replaced by teamwork as a means of social interaction, and the design of functions and tasks uses all aspects of motivation intensively. Customer satisfaction is being gradually replaced by an implacable focus on attracting the customer and exceeding his or her expectations. Looking for excellence has that standard, and FIRM is being aggressively reoriented in that direction.

A Strong Concern for Adding Value within the Organization. There is effort toward creating value for the customer or taxpayer; and emphasis on making profits that add wealth. This emergent process of adding value can be called a systemic or synergic effect, or even profit maximization. The critical element is that, starting with this concept, each director is interested in making the organization more valuable; each manager is interested in training people better; and each person is interested in increasing the value of products and services delivered to customers. The goal is to increase stockholder assets, satisfy customers, and increase the value of human capital. It is this value chain that provides an increase in equity and the intellectual capital of a company, and the constant improvement of a business. HRM is vitally involved with educating people and increasing their awareness of what it means to generate value within the company.

A Strong Concern with Knowledge Management and Generating Intellectual Capital. The information age made knowledge the most important organizational resource. The traditional factors of production - nature, capital, and labor - have already exhausted their contributions. Now the important activities are the generation, structure, development, spreading, sharing and application of knowledge. And where is this knowledge? To whom does it belong? It belongs to people. Successful companies are becoming learning organizations. Organizational effectiveness will increasingly depend on attracting, utilizing and retaining people who can use their knowledge to solve problems, create services, develop new work processes and satisfy customer needs.

An Overriding Concern with Preparing the Organization and its Employees for the Future. HRM is abandoning its passive and reactive approach in favor of a proactive strategy focused on the future, so that it can anticipate the company's demands and needs. It has stopped preserving the past, so that it can begin creating the future, HRM is more and more interested in continually preparing the company for the organization of the future, and preparing personnel for the future that will certainly arrive, if it has not already done so. In the most advanced companies, HRM is moving beyond conformity with the present and predictability in the current situation, by considering that everything can be improved beyond the standard of excellence it has already achieved. It holds that other people are not yet totally prepared and developed, that the quality of life can be improved, and that the company can achieve even better results, rather than resting peacefully on its laurels.

Without doubt, these 12 tendencies - as were the 12 labors of Hercules - are not easy or harmonious organizational transitions. They reflect the need for competitiveness in a turbulent and changing world - and the necessity to depend absolutely upon the support and contributions of internal partners to attract clients and achieve results. These trends reflect a vision that takes into account the tremendous capacity people have for developing and creating value - and the need to place faith on that capacity for the success of the organization. A company's competitiveness is based on its employees. This is what HRM is all about.

[Footnote]

Notes

[Footnote]

Based on books by the author:

People Management: the New Role of Human Resources. Editorial Campus.

Management in the New Times: New Horizons in Management. Editorial Campus.

How to Manage HR-- from an Expense Center to a Profit Center. Makron Books.

[Author note]

Idalberto Chiavenato

[Author note]

This article was originally published as: "Conferencia Inaugural: Alcances y Desafios de la Administracion de Recursos Humanos en el Nuevo Milenio," in Violeta Pallavicini Campos and Ferdinando Goni Ortiz (eds.), 2000. Memoria del Congreso International: Avances y Desafios de la Administration de los Recursos Humanos al Inicio del Tercer Milenio. San Jose, Costa Rica: Editorial de la Universidad de Costa Rica, pp. 204211. Permission to translate and reprint in Public Personnel Management is given to the IPMA by the author and by the sponsors of the Congreso Internacional.

[Author note]

Author

[Author note]

Idalberto Chiavenato Alameda Brasil, 904

Alphaville, Barueri, Sao Paulo, Brazil 06470-000

[Author note]

Idalberto Chiavenato has an MBA and Ph.D. in Business Administration from the City University of Los Angeles, California. He has completed postgraduate work in business administration with the Getulio Vargas Foundation in Brazil, and has earned degrees in law from Mackenzie University and philosophy and education from the University of Sao Paulo. He is well known as a management consultant and conference presenter throughout Latin America. His professional background includes high-level positions as a business manager, professor of business administration with the Getulio Vargas Foundation and its Interamerican School of Public Administration in Rio de Janeiro, and other Brazilian universities. He is a world-renowned author in business and human resource administration. His biography includes authorship of over twenty books and numerous articles in professional journals and periodicals. His works have been translated into Spanish, and are widely used in Brazil, Mexico, Spain, Portugal and Latin America.

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