Navigating people management and performance

Everyone knows that good people management is vital to organisational success and, relatedly, employee well-being. Today's pace of change makes this ever more crucial but also more challenging. Line managers and HR professionals have to contend with multiple complexities around technology, workforce diversity, skills, and changing regulations in a context of increasing competition and pressure on resources. It seems that effective people management has never been so important nor so difficult.

What's the problem?

On the face of it, the New Zealand economy is in pretty good shape. Average annual GDP growth is 2.3 percent since 2000, notwithstanding the global financial crisis. However, the per capita average was half this (1.2%) and the growth rate falls to just 0.7 percent when measured per hours worked. In other words economic growth has been driven by immigration and long hours rather than through innovation, and the underlying picture is flat.

The fundamental problem is low productivity. The OECD confirms that New Zealand has very low productivity growth by international standards, and overall GDP per hour worked is around half that of Ireland. Much of the problem is structural. The economy is small, geographically remote and dominated by commodity exports and tourism. There is a preponderance of small firms in low-wage, low-skill sectors or large firms in oligopolistic markets where low population size inhibits effective competition. At the same time, there is a serious agency problem. According to a MED report focused on manufacturing, 'people management performance' is poor in New Zealand compared to other countries.

Late last year a team from Massey University's MPOWER research group surveyed managers and HR people to see how they, and their organisations, are responding to what is now called a 'VUCA' (volatile, uncertain, complex, and ambiguous) environment. How strategic is the HR function, and how effective are line managers in motivating and leading people? A positive answer to both is vital if New Zealand is to shift from a low productivity model perpetuating low skills and low pay.

The survey was endorsed by HRINZ and IMNZ and 116 useable responses were received. Around half of respondents were employed in HR and a third were third line managers, with most in senior/executive (47%) or middle-level (28%) positions. Over half (56%) work in private sector firms, a third of which are overseas-owned, and public-sector employers comprise a third of the sample.

The productivity problem - workforce and management skills

The most commonly reported difficulty facing HR, encountered in 78 percent of organisations, was finding employees with the required skills. Workforce skills were also seen as one of the biggest barriers to improving productivity, reported by 62 percent, though behind the biggest problem which was management capabilities (73%). In contrast 'hard' productivity constraints such as scale, competition, market structure, capital investment, and equipment or infrastructure were problems reported by only a minority of organisations.

The key to successful HR is of course line management. So how are they doing in terms of managing people? We looked at four key areas. First, managers were seen to be effective overall at providing leadership and building trust. A large majority rated their managers highly at providing support to employees and treating them fairly. The more problematic areas were in managing change, delegating and improving the engagement of employees.

This was reinforced by answers to the second dimension, communication and involvement. Managers were pretty good at listening to and communicating with employees, but less so in actively involving them in decision making. Here, more people rated their managers ineffective than as doing a good job.

In the third area, training and development, managers were generally seen as effective at coaching and supporting employees but perhaps less so at longer term talent development and in attending to their own development and learning.

Finally, in terms of motivation and performance, managers were said to be good at recognising and rewarding good performance, but not at dealing with poor performance or attending to employee stress and well-being. A significant proportion also reported problems in conducting appraisals, goalsetting and feedback.

So there are a number of ways in which managers could do better to engage, motivate and thereby enhance staff productivity. Why aren't they doing so? Over half (56%) highlighted insufficient training or development in people management skills. A similar proportion felt that many managers didn't have a personality suited to bringing the best out of employees. However the biggest set of barriers (reported by 70%) were practical - work demands, competing priorities and time constraints. Managers were simply too overworked to pay proper attention to their employees.

People - our greatest asset?

Another, perhaps deeper, factor might relate to how organisations actually value their staff. Most academic and professional HR development courses nowadays reference the resource-based view of the firm, which one textbook describes as 'the predominant paradigm driving strategic HRM'. In this model, people and culture are seen as the way to drive sustained competitive advantage, in large part because they are difficult to replicate. People are indeed the organisation's greatest asset.

But this longer-term view is often undermined by everyday realities. A majority of organisations are in highly competitive sectors, with nearly three in five respondents reporting intense or strong competition. When asked to rank the importance of six factors for organisational success, the workforce was placed last (52%) or second to last (10%) by most. Fewer than one in five placed workforce in the top two, which was dominated by the need to deliver on product or service price (63%) as well as quality (82%).

Some of the most effective productivity initiatives are based on strong employee involvement and the delivery of win-win outcomes. Gainsharing plans have long been a feature in the US, focusing on sharing improvements with workers financially. Increasingly, employees may also gain in terms of working time flexibility and work-life balance. However, as noted above, managers aren't too good at involving employees.

A third of our employers did say they had recently introduced a change to work organisation delivering mutual gains for the organisation and workforce. The most common involved changes to working time arrangements. Interestingly, virtually all of these organisations were unionised, suggesting unions could potentially act as a mechanism for useful employee involvement. Where employers dealt with a union, only 11 percent reported an unsatisfactory relationship and a large number said the union worked 'very well' (13%) or 'well' (24%) with management. Yet a third of employers in the sample remain unfavourably disposed to employee union membership.

HR - increasingly strategic, increasingly stretched

Given the importance of people management and the constraints that managers face, there is a clear need for strategic partnerships and interventions from HR. Nearly four out of the five organisations surveyed have a HR department. Three in five believe HR makes a strategic contribution to the business, acting as a change agent and challenging management thinking and practice. Employee advocacy is also an important role. Nearly 70 percent say that HR articulates employee concerns.

The scope, scale and multi-dimensionality of organisational change is indicated below. When asked about major changes or initiatives introduced in recent years, the most common related to new technology but many other programmes were also evident. Significantly, HR was involved in designing the change initiative in three quarters of cases, and a still higher proportion had a role in implementation and evaluation.

The question is, though, is there just too much going on? There are six key obstacles to HR making a strategic contribution - two, including the most significant overall, relate to internal HR capabilities and two to workload and resourcing of the function. The issue is whether HR people are equipped to act strategically in this rapidly changing context. This might also inform management attitudes, which were also commonly perceived to be a barrier to strategic HRM, as were employee attitudes to a lesser degree.

Conclusion

New Zealand faces a productivity problem and a large part of this is due to deficiencies in people management. Line managers need to have a deeper understanding and ownership of HR processes and be enabled to lead, include and support their employees. The HR function also needs to be ever more strategic whilst ensuring close and effective partnership with, and service to, the business. However, workloads resulting from the multifaceted and accelerating nature of commercial and labour market change is a serious brake on both. If there should be one priority for organisations it is to better involve staff. This oils the wheels of change by generating trust and new ideas - an investment of time and resources that is very well spent.

Jim Arrowsmith is a Professor at the School of Management, Massey University (Auckland). His principal research and teaching interests relate to strategic HRM, including employee engagement, pay and flexible working time. Email: [email protected].

Co-authors: Dr  Fatima Junaid, Dr Nazim Taskin, Professor Jane Parker, Dr Shane Scahill (All School of Management, Massey University).

Pullquote:

People management performance is poor in New Zealand compared to other countries

Managers are simply too overworked to pay proper attention to their employees