What is Marketization of HRM? Do We Really Need to Worry About It?

In a session few weeks ago, my lecturer shared his thought related to marketization of human resources management (HRM) and the potential demise of HRM caused by it. I was a bit confused but was so interested to learn about it more, as I thought that by using the word ‘demise’, my lecturer seemed to give no room for ‘improvement in HRM’ which I pretty much was not agree with it. The discussion, however, started from how financialization shapes corporate governance and impacts the HRM.

In short, financialization is defined as the way economies being operated both nationally and internationally which are currently linked to the increasing role of financial institutions, motives, markets, and actors behind it (Epstein, 2005:3). The era of financialization is believed to start in the moment when the idea of a “market for corporate control” came up in the 1970s and 1980s (Lazonick, 1992). “Market for corporate control” would suggest that the market conditions (which one of the indications is the price of stocks) determine the fate of the company. Batt and Appelbaum (2013) explain that whenever the value of the company’s stock is under its assets’ value, it would easily be traded, rearranged, and some parts of it could be sold again.

Office

Office (Source: https://pixnio.com/people/crowd/crowd-interior-people-architecture-building-stairs-steps-fences)

As the financialization happened, the new form of corporate governance which leads to marketization of HRM takes place.

Marketization of HRM refers to the idea that HR strategies and its practices have to be ‘pro-market’ instead of ‘pro-business’ (Dundon and Rafferty, 2018). By ‘pro-market’, it aims to support the short-term profitability based on the emerging market principles. This ‘pro-market’ term resonates with what Lazzonick (1992) termed as ‘market of corporate control’ aforementioned above. The HR strategies has no more in favor of ‘pro-business’, which supposedly supports the long-term development goals and ‘wider societal interests’ (Dundon and Rafferty, 2018).

As this short-term profitability became the center of focus, the role of HRM may be argued to become a “handmaiden of efficiency” to produce higher shareholder value through ‘labour rationalization’, instead of being a “strategic business partner” or “employee champion” as discussed by Ulrich (1998) (Dundon and Rafferty, 2018). To create efficiency, the HRM function becomes such an implementer for investors to cut wages, to reduce employee rewards and pension, or to restructure the workforce as well as to facilitate transfer of employment (Palpacuer, Seignour, & Vercher, 2011).

In relation to that, companies were being downsized -or looking for new models of employment (e.g. ‘gig’, outsource, platform based crowdsource, etc)- to minimize internal labour costs and as a way to do operational austerity. Using the study of Jung (2011) that analyses 681 large companies between 1984-2006 which announced downsizing, Batt and Appelbaum (2013) argue that downsizing is also seen as a way to increase share price and market valuation. Interestingly, another study by Shin (2010) informs that higher compensations were offered to the CEOs for subsequent years in corporations that decided to downsize.

Since the late 1970s, however, as the rise of financialization, the development of hyper-individualism became such a significant new face of the workforce (Dundon and Rafferty, 2018). Further, it is argued that hyper-individualism provides ‘an ideological justification’ to reward such label as ‘super manager’ (Piketty, 2014) in relation to the ‘modern cult of leadership’. Therefore, HRM also transforms its role to become a ‘supporter’ for individualistic determination of pay, based on structural authority as rationalized by falsely perceived market freedoms.

In this point of discussion, I became really curious about the history of HRM. I was then looking at several literatures and found that this note from Kaufman (2007) is worth to discuss:

… the term ‘HRM’, particularly in Britain, was started to be used in the mid 1980s in some journal articles. In short, British writers ‘opted for view that HRM was a substantively different model (of management) built on unitarism, individualism, high commitment, and strategic alignment (e.g Guest, 1987; Storey, 1995 in Kaufman, 2007). The concept of HRM itself perceived as a threat of a long stand industrial relations model, which also seen as a means to avoid union establishment in ‘Thatcherist neo-liberalism’ (Guest, 1987; Purcell, 1995 in Kaufman, 2007)

An interesting point that I realized from that note is, as the term HRM is actually emerged at the same era of the rise of financizalization (late 1970s-1980s), it might be argued that the concept of HRM, with its ‘unitarism, individualism, high commitment, and strategic’, is not “being shaped”, but actually “being transformed” in orchestra of the development of financialization.

Therefore, I personally saw that the HRM shall not be viewed as being threatened or would be irrelevant (potentially demise) because of the financialization or marketization. The condition aforementioned, however, might resonate with what Kaufman refers as ‘strategic alignment’ (I might need to check it again). Yet, again, as a relatively new concept (Kaufman, 2007), I guess HRM might also need such rooms to be improved and to be developed from time to time.

However, I would say that HRM, which was seen as ‘a replacement’ for personnel administration and industrial relation model might be demised if industrial/business model was totally/or at least significantly changed. So far, various names such as human capital management, people management/operations, etc. are being used instead of HRM, but the concept’s roots are quite the same with the original concept of HRM from the 1970s.

To conclude, the term ‘marketization of HRM’ is quite problematic; to me, if you want to be ‘pro-business’ you would also need to be ‘pro-market’, as business most probably changes when the market changes. The challenge here is how HRM could be ‘business partner’ & ’employee champions’ (mentioned in the article) in ‘always-changing’ market.

On another note related to the topic, the use of ‘hyper-individualism’ used by Dundon and Rafferty (2018) as an impact of the ‘marketization of HRM’ implies an indication how it significantly sharpens the value of individual and started to dismantle the collective approach through HRM activities. Importantly, a need of individual efforts to develop ‘external employability’ to stay relevant with labour market became necessary (Currie et al., 2006). Further, this individual’s effort, would help to find a way to secure oneself in facing ‘blocked careers or employment instability’. I would probably try to discuss more about this ‘external employability’ in another blog-post.

What do you think? How HRM might be transformed in the future?

@yosea_kurnianto

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#MayDay and The Dark Shades of Employment Relations in Gig Economy (in Indonesia)

The International Labours/Workers Day or May Day is ‘celebrated’ in many countries, including Indonesia. Various issues and demands were voiced by Indonesian trade unions in each year’s May Day ‘celebration’. Lately, the demands were predominantly around issues of outsourcing and (increased minimum) wages. The movement does indeed contain positive message in improving the condition of Indonesian working class. However, several riots and chaos situations happened during the May Day brought negative stigmas about trade unions.

Many companies started to find a way to avoid the establishment of trade unions in their company by making their own employee relations programs, to using certain employment models, such as outsourcing, zero hours’ contract, or even using term of ‘partner’ instead of employee as applied by some newly web/app-based companies.

Companies that design their own employment relations programs are tried to minimize the ‘noise’ of the employees by providing certain level of open internal communication, easily access management team, and such effort to involve employee representatives before deciding any policy. Using this way, the companies expect that employees would not feel any need to gain ‘power’ (through union) for negotiating or communicating their grievances to the management.

Companies that use the term ‘partner’ instead of employee indeed limits the ability of the workers to form a lawful union under the company, or to join any. This raising trend was marked by the development of online/web/app-based companies, which many literatures refer as gig economy.

Nevertheless, with the freedom of association as the right of Indonesian citizen and under the sense of ‘solidarity’, those ‘partners’ and/or online workers formed such ‘online workers’ association’ both in social media and even conducted such offline manifestations to voice their grievances.

Gig economy, however, is not something new and not merely in technology or digital based business. Friedman (2014) explains that ‘gig workers’ work to complete a particular task or for a defined time. This could be employed as a waiter in a restaurant, a cleaner of a building, a singer in a pub, etc. Nevertheless, Cockayine (2016) argues that gig economy is also usually referred as on-demand or ‘sharing’ economy. In his perspective, technology and digital platform strongly enhance the development of this model, which resonates the current situation in Indonesia: online ride-hailing (ojek online), online selling, etc.

Some companies who employ this ‘partnership’ model, save lots of money as they don’t need to provide any kind of employee benefits such as holiday/sick pay, parental supports, etc as ‘normal’ companies do. Yet, those companies most possibly do not have any clear strategy to manage the grievances of their ‘partners’, which might happen quite a lot as it’s believed that ‘partners’ under this employment model have weaker ‘psychological contract’ with the companies.

These kind of gig companies have been seen unable to manage the grievances in their business models, as we can observe that the disputes and grievances of ‘partners’ through ‘online workers’ associations’, were addressed to the government, instead of the companies.

It is worth noting that industrial relations involve at least 3 actors: company, employee representations (trade unions), and government. In the event where company and employee (or in this case, partner) representations failed to establish a good employment/partner relation, government would need to intervene.

In regards to that, government has significant role to both actively facilitate the growth of economy and identifying potential disputes by designing appropriate regulations and law. It’s hardly to say that Indonesian government is quick enough to properly response to any potential disputes related to employment so far. Take example on the online ride-hailing service. At the end of 2015, the Ministry of Transportation banned this service because it’s considered as ‘unlawfully established in the context of public transportation regulation’. The President, however, argued that the service is ‘needed by the society’, which then the service continues to operate. Yet, nothing to hear from the Ministry of Manpower or published comprehensive discussion from related stakeholders about the employment model caused by this service which now make lots of ‘noise’ in the employment/partner relations.

Aside from above case, it’s interesting to see that since June 17th 2016, the government, through the Minister of Information and Technology affairs, fully supported the launch of an initiative called ‘Gerakan Nasional 1000 Start-Up Digital’ (The National Movement of 1000 Digital Start-Up). Cited from a press release, more than 32.000 people registered themselves which 6500 of them joined the provided entrepreneurship training in 10 cities, resulted 123 start-ups so far. Observing from various newly digital start-ups that employ such ‘partnership’ employment model, it is important to note that those start-ups also need be equipped with the capability to manage employment/partner relations in the future.

To maintain a positive relations and its stability, (gig) companies have to understand the importance of providing a continuous communication with employee/partner representations and to act on it. For instances, an Indonesian e-commerce based in Jakarta establishes a community for its online sellers. The community is maintained through an online platform and several offline meetings across the country to develop ‘selling skills’, but also as a platform of grievances mechanism from the sellers to the platform provider (the management). This model is also possible to be adopted by (gig companies) in transportation and education services to better manage their ‘employment’ or ‘partner’ relations.

It is believed that 3 actors of industrial relations have to establish a harmony. Some argue that trade union might not be the best form of employment representation in the near future because of the transformation of employment model. Yet, whatever the form of employment representation: could be trade union, establishment of work council (e.g. in Germany), or even softly’ managed by the company; both government and companies shall carefully provide accessible communication mechanism with the workers in creating the best working condition that could be achieved, although there might be tension of interests from each actor.

@yosea_kurnianto

Is Posthuman (or Superhuman?) Resources Management Needed?

McKinsey & Company (2016) released a research based article entitled “Where machines could replace humans – and where they can’t (yet)”. The conclusion they made were involving analysist of 2000 plus activities from more than 800 occupations from US Bureau of Labor Statistics and O*Net. It is worth noting that the report was not considering only the jobs but rather the details of activities (within the jobs). Activities were categorized based on their feasibility to be automated by current technology and machine, such as robots and artificial intelligence. In conclusion, jobs that involve predictable (routine) physical work (78%), processing data (69%), and collecting data (64%) might be replaceable. In another side, jobs that involve unpredictable physical work (25%), stakeholders’ interactions (20%), applying expertise (18%), and managing others (9%) are still less likely to be automated with currently demonstrated technology.

Frey and Osborne (2013) from Oxford University Engineering Sciences Department and the Oxford Martin Program argue that 47% of total employment in the US is in the high risk category. By saying high risk, Frey and Osborne (2013) refer to the automation expectancy at a decade or two. It is true that computerization has already taken some tasks with explicit rule and routine based activities (Autor, et al., 2003 in Frey and Osborne, 2013). However, big data, artificial intelligence, and robots are rapidly entering the area of pattern recognition for doing non-routine tasks, even enhanced with senses and various skills which previously were done manually (Brynjolfsson and McAfee, 2011; MGI, 2013 in Frey and Osborne, 2013). Thus, it is believed that nature of work in various industries and occupations will be changed significantly, although Frey and Osborne (2013) see that some bottlenecks of computerization and automation will make the process longer, especially in the activities and jobs that involving perception and manipulation, creative intelligence, as well as social intelligence.

In other released article, McKinsey & Company (2015) stated that less than 5% of whole jobs can be automated using current technology. Yet, 60% of jobs could have 30% or more of their activities to be automated with current technologies, including robots and artificial intelligence. In other words, most jobs would need quite significant redefinition as well as business processes transformation in the near future. Bessen (2017) argue that based on the data of manufacturing employment in the United States since 1950, there is a strong evidence that the view that automation eliminates jobs wasn’t always true, with consideration of globalization as well. This statement is supported by other evidences, for instances from Gaggl and Wright (2017) which stated that “technology tended to raise employment in wholesale, retail, and finance industries, but had no statistically significant effect on other sectors, including manufacturing”. Gregory, Salomons, and Zierahn (2016) find “that automation of routine tasks tends to eliminate certain jobs (activities), but that net employment increases”.

As a scholar in human resources management and industrial relations, who have been working for 4 years as an HR practitioner and consultant, some reflections related to that issue will be discussed in this article. I will try to deliver two important perspectives related to whether HR jobs will still be relevant and what kind of HR leader is needed in the future.

In a book entitled ‘Homo Deus: A Brief History of Tomorrow’, Harari, (2016: 56) argued that “Human species is not going to be exterminated by a robot revolt. Rather, human is likely to upgrade itself step by step, merging with robots and computers in the process…”. He added that ‘humans will make a bid for divinity, because humans have many reasons to desire such and upgrade, and many ways to achieve it”.

Sophia, a robot that received a citizenship from a country. Photo source & article: https://www.weforum.org/agenda/2017/11/an-interview-with-the-artificially-intelligent-robot-sophia

Clearly, Harari believes that human species (in his term Homo Sapiens) would continue to experience kinds of evolution to be ‘more than human’ or I will use the term ‘posthuman’ in this writing. ‘Superhuman’ could also be an alternative term, yet more references and previous writings by scholars we found using ‘posthuman’ term. The term ‘Posthuman’ is actually not a new concept. The origin of it was at the cybernetic movement in 1940s. It became quite explosive in 1990s because Donna Haraway’s Simians Cybors, and Women: The Reinvention of Nature in 1991. Haraway’s doesn’t use the term ‘posthuman’ in explicit way, yet her believes that boundaries between human and other creatures (in this context is technology) is ‘no longer secure’, and is able to be a hybrid, or cyborgs. However, in this age of technology, posthuman is being used to describe “a time in which ‘human is no longer the most important things in the universe’, where ‘all technological progress of human society is geared towards the transformation of the human species’, and where ‘complex machines are and emerging form of life” (Pepperell, 2003:177 in Gane, 2006). The term ‘posthuman’ gains various critics in previous years, but it becomes clearer today that “a new culture, in which the ‘purity’ of human gives way to new forms of creative evolutions” is being more acceptable (Gane, 2006).

Some evidences show that the process of this kind of upgrade or creative innovations are already happening for marking the ‘posthuman’ era. Gray in BBC Story (2017) uses a term of “another level of convenience” to describe how an employee of a software firm Mozilla was voluntarily being implanted with a rice-grain-sized microchip, which enable to open doors, log in into computers, and contain his all contacts address. Further updates related to this matter, the New York Times reported that on August 1st 2017, employees in Three Squared Market, a technology company based on Winconsin, were offered to be injected a chip in between their thumb and index finger. Once it is done, anything related to RFID jobs such as accessing office building or make payment for foods in office cafeteria can be done with waving the hand. It was not a compulsory, but as much as 50 out of 80 people were voluntarily being injected with the microchip. This program, as believed to be the first in the United States, was cooperated with a Swedish Company, Biohax International, which also already applied in another Swedish Company, Epicenter.

Despite of the debates whether it’s risky or any other perspectives among employees and society in general, this phenomenon is as exactly as what Harari (2016) mentioned above. Slowly, human will upgrade and evolve themselves to be integrated with robots, that would enable them to redefine jobs, create new employment systems / environments, and transform existing business process. Indeed, this will not be happened in a day or in a year, but slowly, the ‘posthuman’ will be new normal.

Reflecting to aforementioned two perspectives related to HR and referring to automation feasibility from McKinsey & Company’s report, some activities within HR related jobs are already automated (personnel administration, payroll, some parts of learning and development, some degree of recruitment process, and some of compensation and benefits). Yet, some other activities that involve managing others (e.g. talent management), stakeholder’s interactions (e.g. industrial /employee relations), applying expertise (e.g. organizational development, employee selection), and even unpredictable physical work (e.g. organizing employee events) might yet to be replaced by robots and artificial intelligence. With the raise of ‘posthuman’ in the making, HR practitioners will also need to be ‘upgraded’ in order to be relevant and to be able to shift from human resources management to posthuman resources management.

Before going deeper to posthuman resources management, it is important to note that HR team would be dealing with managing people in business transformation process affected by robots and artificial intelligence. As some predictable and routine activities and jobs in, for instance, manufacturing are replaceable by machines, HR team would be in charged to determine redundancy (laying off certain number of employees) or design and implement relearn / reskill for its employee to be allocated to other activities or jobs in order to avoid redundancy. This indeed will depend on business strategy, financial condition, and board management’s goodwill.  Nevertheless, high level skills of project management, communication, interpersonal, and emotional intelligence would be needed to be equipped by HR team to make sure the process run smoothly.

The Circle movie, starred by Emma Watson and Tom Hanks which released on April 2017, tells a story of an employee in giant technology company and how she’s worried about damaging implications resulted by the company. Albeit receiving many negative comments and critics because of its story plotting and flat content, some movie segments show the condition of how current technology transform some HR related jobs such as performance management, employee engagement, as well as integrated employee health, compensation, and benefits. In the time forward, when business transformation came into its shape by embodying robots and artificial intelligence in most sectors. AS posthuman are coming to the workplace, a new face of posthuman resources management needs to born.

In 2015, The World Economic Forum, in cooperation with Accenture, released a report entitled “Industrial Internet of Things: Unleashing the Potential of Connected Products and Services”. One of the highlights is discussing how the emerging job market will demand new and different skill set of the workforce. This ‘new skill set of workforce’ is underlined with an emphasize of ‘new mindset’ towards the emergence of robots and technology. By saying ‘new mindset’, posthuman resources management leaders need to equip themselves with the understanding of posthumanism and how to collaborate with them in making sure the organization’s goals are achieved.

In attempt to be a future leader in post-human resources management, some skills and technology augmentations need to be done. Organization design might be different in posthuman era, in which some kind of structures might be needed, some others might need to be dismissed. The recruitment process would also need to be improved in selecting the most suitable ‘posthuman’ with the new form of jobs. The learning and development process might be integrated into certain database embedded in ‘posthuman’ individual, and would be continuously aligned with the business processes. The performance management system would be easily assessed and recorded, yet needs to be adjusted with the posthuman conditions in new jobs era. The form of compensation, benefits, and even pensions might need to be transformed into different types of packages.

In conclusion, I don’t feel worry if my job as an HR practitioner (or at least I don’t feel anything yet) would be taken by robots and/or artificial intelligence – as from the perspective of ‘can’t do anything except to embrace’. It is believed that human species will be continuously evolved, transform themselves with creative ways, and being integrated with the robots (Harari, 2016), which in this writing is referred to ‘posthuman’ era (Gane, 2006). Thus, the HR management field of jobs might also be evolved to PostHR management or any kind of it. Towards becoming a future PostHR practitioner, I believe that owning a ‘new-mindset’ which allow to open more learning processes in all HR management spectrums from organization design to compensation, benefits, and pension scheme. At the moment, it is important to keep being relevant by following the updates and gaining understanding of what is happening, as well as being relevant with the updates of technology in HR management fields by being connected with employers and related innovators.

The next question might be whether the new set of ethical leadership / management is needed for this era. Will see 🙂

@yosea_kurnianto