HR Globe

Traditional factors of competitiveness such as technology, product features, and distribution network can be — and often are — duplicated by the competition in business. While such factors are imperative to become a market player, they do not guarantee leadership in the industry. Leadership originates from such organisational strategies as speed, responsiveness, agility, learning capacity, and employee competence.

Successful organisations know how to turn strategy into action, first and fast. They know how to manage processes intelligently and efficiently. They know how to optimise employee contribution and commitment. They know how to create conditions required for accomplishing a seamless change. To achieve the above objectives, they know how to maintain a holistic employee relationship.

It is people who make the difference between an ordinary and an extraordinary company. The workforce is the most vital and critical asset. Technology and capital can be accessed and acquired from a range of players around the world. But the real and sustainable competitive edge has to come ultimately from the manner in which capable and motivated employees apply such resources to work.

The key to creating a capable and inspired workforce is to develop a harmonious band of Human Resource Management systems in the organisation. A sound and profound employee relationship strategy is the answer to achieving an appropriate climate for human resource management. Discussing about and writing on this subject, some management thinkers stress the significance of the "psychological contract".

This term denotes the aspirations and expectations that employers and employees entertain about each other. It is what one segment of human resource in the organisation looks forward to receiving from another segment. It is an equation of mutual and reciprocal demand and supply.

Competitive Pressures

A break in the conventional contract — especially in the case of managerial employees — is considered a major issue in employee relationship. The concern is about increasing competitive pressures — generated mostly in the global marketplace — which warrant continuous changes and extremely tight cost-control measures. The employer can no longer offer job security, promotion opportunities, or regular pay increases — all of which were the quid pro quo element of the earlier era to obtain employee loyalty, commitment, and competence.

The employee relationship is much more than what is contained and conveyed by the above elucidation of the "psychological contract". It has a few other key factors, which need to be understood and effectively handled in order to manage that relationship effectively. First, it embraces an economic exchange factor. Employees make their `contribution' to the realisation of the organisational objectives. In return, they receive a level of remuneration. Putting a price on this `contribution' is a matter of market supply and demand.

Even more significant is to ensure that employees do deliver what they are supposed to, an aspect that often gets management into real difficulties. A variety of control mechanisms must be in place. This is not automatic, but has to be orchestrated. In effect, all that the management can do is buy the right to take advantage of the physical presence of their employees. Beyond that how it motivates them to perform at their best depends on the people-management skills the firm employs.

Second, investment in human capital is intangible. It is difficult to measure and, therefore, difficult to justify. Companies cannot be fully sure that they can capture the returns made on such intangible investments. For instance, any innovation involving performance-upgradation requires upfront investment of both a general and solution-specific nature. The risk element here is that employees so trained can quit even before the returns are realised.

Difficult Questions

Third, there is also a social relationship. Employees gather at the workplace where they interact with one another. When employees are assigned to work in different occupations, the company creates the basis and the context for collective action on the part of employees. For example, questions such as, "What is a fair day's work?" or "What is an acceptable treatment of employees, and what is not?" begin to surface and demand a satisfactory answer. Eventually, all these issues lead to collective bargaining and formation of trade unions.

Fourth, the employee relationship also involves a legal framework. Companies are required by law to give employees a contract of employment. It provides a charter of duties and responsibilities that arise from legislative enactments, which have been refined, redefined, and reinforced by several judicial pronouncements. It is by managing all these key factors in a satisfying manner that a company may be able to clear and demystify the enigma of employee relationship.