Overview Of The Human Resource Activities Management Essay

Overview Of The Human Resource Activities Management Essay This essay gives an overview of the Human Resource activities in Goldman Sachs Group with particular concern to the challenges faced at the senior management level. In Goldman Sachs, Human resource management is referred to as Human Capital management and during my investigation it was revealed that the Groups HR managers employ the SOFT approach that emphasis the need to gain commitment of employees through involvement and communication. The challenges faced by this division are as a result of the rapid changes occurring in the external business environment and some internal re-structuring adopted regularly to tackle short and long-term un-foreseen circumstances. The Goldman Sachs Group is a global investment banking and securities firm which engages in investment banking, securities, investment management, and other financial services primarily with institutional clients. Goldman Sachs was founded in 1869 and is headquartered at 200 West Street in the Lower Manhattan area of New York City, with additional offices in major international financial centre. The firm provides mergers and acquisitions advice, underwriting services, asset management, and prime brokerage to its clients, which include corporations, governments and individuals. The firm also engages in proprietary trading and private equity deals, and is a primary dealer in the United States Treasury security market (Goldman Sachs, 2010). According to Leif Edvinsson (2002), the only essential value an enterprise has is the experience, skills, innovativeness and insights of its people; Goldman Sachs believes human resource management plays a critical role in managing the firms most important asset, the people. People are our most valuable asset is a truism which no member of the senior management team would disagree with. The HR division serves the firm globally from locations in the Americas, Europe, India and Asia, and is responsible for a broad range of activities that relates to that outlined by Henry Fayol (1841-1925). Question 1: Business environment is rapidly changing and bringing new challenges to the workplace. What are the challenges face by the HR Manager in your chosen organization and suggest how these can be overcome by effective HR strategies. There is a dynamic shift in the global business environment today and more dramatic change is expected in the next decades especially at senior level (CIPD, 2010). As a result, HR managers at Goldman Sachs must play special roles in dealing with these changes and must develop specific competencies to tackle the effect. These changes include Workplace Diversity, Pay structure, the transfer of work abroad, either to outsourced providers or on a global in-sourcing basis; the e-enablement of many HR process; greater sophistication in the HR information technology, new structures for international HR functions; greater competition for talented staff at all levels of organization; more protracted and strategic talent pipelines. Stuart (2009) wrote in an article that If HR is not yet sufficiently respected in financial services, especially in the Investment banking industry, and then such an important issue, affecting both corporate image and the compensation of senior executives, is unlikely to be delegated to them. I strongly concur with this logic, implying that other senior executives will make the decisions, while HR is left to handle the vast amount of day-to-day paperwork: This is not the case in Goldman Sachs Group. After a careful research into the Human resource activities in Goldman Sachs, this report revealed that there is a well-structured strategy tailored specifically for senior level employees. This is because of their strong concern for long term leadership scheme required for the sustainability of their cooperate strategy. They accept as true that Human Capital management has been the bed-rock of the Organizations success so far (GS leadership Summit, 2009). There is a direct link between the corporate strategy and the HR strategies in Goldman Sachs. As a result, the HR managers in various locations continually strive to hit a balance in the way and manner they deal with executives in the top level (Goldman Sachs, 2010). The HR managers have long wanted to get away from the old reputation of telling line managers what they cannot do, by concentrating on business partnering, change management, leadership development and of course Financial Directors that are also seldom turned on by reconciliations and Internal Audit, but they do it while still remaining strategically relevant (Taylor, 2009). In Goldman Sachs, the HR function is viewed differently according to the organizations sub-divisions; however, the financial crisis has given rise to four key issues that provide HR managers in Goldman Sachs with the chance to demonstrate the value of its expertise and elevate its image and status within the Investment banking industry. These issues are: Leadership selection and development, pay structure, Workplace Diversity, intelligent and efficient downsizing, and the need for new ways to manage, engage and retain staff for higher management positions. Spencer (2009) in a research discovered that these issues are key factor that could affect the future of any organization in the long term hence the need for critical response by the HR managers in Goldman Sachs. Leadership selection and development Establishing a strong pipeline of potential leaders is important for Goldman Sachs future success (Goldman Sachs, 2008). In the financial services industry, organizations have often felt compelled to reward high revenue-generating employees with promotion to management positions, the results have been mixed indeed, it could be argued that the inappropriate selection of managers contributed to the recent crisis. The Goldman Sachs group as a whole is still grappling with this issue, thinking of effective ways to integrate star performers within the management structure without compromising standards. A good retention plan as well as training and development programs for senior executives (as illustrated in the later part of this paper) can help Goldman HR managers tackle this challenge. Pay structure The financial crisis has brought the compensation structure within all divisions in Goldman Sachs back to the drawing board (FT, 2009). There is a widespread feeling that short-term pay deals encouraged risk-taking behavior which, at least in part, contributed to the crisis. As a result, growing pressure from government, media and the general public has resulted in many investment banks rethinking the way they pay their front-line staff. The need for greater transparency, a remodeled financial incentive for risk-taking, and more precise measurement of individual performance is a topic of much debate within Goldman Sachs. At the very least, HR can anticipate heavy involvement in ensuring compliance with newly introduced and very detailed legal and regulatory requirements on pay. Workplace Diversity The future success of Goldman Sachs relies on the ability to manage a diverse body of talent that can bring innovative ideas, perspectives and views to their work. The challenge and problems faced of workplace diversity can be turned into a strategic asset if Goldman Sachs is able to capitalize on this melting pot of diverse talents. With the blend of talents of diverse cultural backgrounds, genders, ages and lifestyles, they can react to business opportunities more rapidly and creatively, especially in the global investment banking industry. Alison (2008) confirmed that this fact must be one of the important corporate goals to accomplish for greater success. More importantly, if Goldman Sachs internal working environment does not support diversity broadly, they risk losing talent to competitors. In order to effectively manage workplace diversity especially at senior level, Cox (1993) suggests that HR Managers at Goldman Sachs needs to change from an ethnocentric view (our way is the best way) to a culturally relative perspective (lets take the best of a variety of ways). This shift in philosophy has to be deep-rooted in the managerial framework of the HR Management in her planning, organizing, leading and controlling of the Groups valued asset Our People. Since pay is no longer a necessarily key motivator, other ways to attract, engage and retain staff need to be emphasized or discovered for long-term benefits. Intelligent downsizing A harsher economic climate has resulted in several Investment banks downsizing their staff level considerably. Goldman Sachs HR managers most consider reshaping the organization so that it can ride the downturn with morale intact, while ensuring that it is prepared to capitalize when the economy recovers, this will present a clear opportunity for HR managers at Goldman Sachs to prove their commercial value. However, at their annual stakeholders conference (2009), doubts were expressed about whether HR has so far managed to stamp its authority on this process. Question 2: Comment on how HR activities contribute to the success of your chosen organization. Use any 2 HRM Models to explain your answer. A number of studies have noted significance of human resource activities in the success or failure of an organization (Terpstra Olson, 1993). Human resource factors form one of the most important areas for success for Goldman Sachs (Castanias Helfat, 1991; Spender, 1993; Lei Hitt, 1995; Conner Prahalad, 1996). Carter, et al. (1994), as well as Nucci (1999) wrote that business continued existence and success is associated to human resource as well as the financial factors at the early start-up phase. A study of new businesses by Bamford, Dean, McDougall (1996) acknowledged acquiring competent human resources was critical for any Business success or failure because HR management (also called Human capital management in Goldman Sachs) influence and may determine how well success can be achieved in a highly competitive global market environment. HR managers at Goldman Sachs employ a model synonymous to the Harvard analytic framework which focuses on the different stakeholders interest that impact on employee behavior and performance. All the successful internal operational activities have been shaped by their Human Resource strategic choices (Goldman Sachs, 2009). Like the Harvard analytical framework, HRM policies at Goldman Sachs are derived from Stakeholders interest and the outcomes which are in-line with the HRM policies produces corresponding Long-term consequences (Organizational effectiveness). These consequently have a direct effect on the Stakeholders interest and several situational factors (Workforce, Business strategies, Management Structure and Culture). Stake holder Interests Shareholders Management Employee Groups HRM policy HR outcomes Long-Term Government choices Consequences Community Employee Commitment Individual Unions influence Compliance well-being Human resource Congruence Organizational flow Cost effectiveness effectiveness Rewards systems Societal well- Work Systems being Situational Factors Workforce Characteristics Business Strategy and conditions Management Philosophy Labor Market Unions Task Technology Law and Societal values Figure 1: Harvard analytical framework adapted from Beer et al (1984) Guest strategic Human Resource management model best summarize the strategies and contributions of Human Resources managers at Goldman Sachs. The model draws a link from the HRM policies (concerning Organizational design, management of change, Recruitment, selection, development and reward systems) to the Human Resource outcomes (strategic integration, commitment and quality) produced by such policies and onto the corresponding Organizational outcomes (High job performance, innovation, Cost effectiveness and competitive advantage). HRM Policies Human Resource Outcomes Organizational Outcomes High Organizational design Job performance Management of change Strategic Integration High Problem-solving Change Recruitment Commitment Innovation selection socialization Appraisal training Flexibility High development Cost Effectiveness Reward systems Quality Low Turnover Absence Grievances Leadership/ Culture/Strategy Figure 2: SHRM model Adapted from Guest (1989) The degree of the overall HR performance at Goldman Sachs is positively associated with success and growth as explained by Fombrun et al (1984). The approaches to employee recruitment and selection are many. The firm often has greater resources to filter potential workers, yet the HR managers have greater insight regarding a potential recruit at the individual level. Regardless of the types of recruitment, tests, interviews, and measures of potential performance, recruitment and selection of the right people for company positions affects the probability of success. Effective recruitment and selection is positively associated with success and growth. Designing and implementing adequate work environments, reward systems, benefits packages (among others) are part of HR function at Goldman Sachs. These are often critical to retain the highest performing quality employees. At Goldman Sachs, difficulties sometimes arise in keeping their best people from accepting posts that are more attractive. This is particularly true in the Investment banking sectors of high demand for particular human capital. Retention of quality employees is positively associated with success and growth. In the same way, Employee Satisfaction is positively associated with success and growth. The Group recorded an increase in profit from 15.6% as of November 28, 2008 to 16.0% In March 27, 2009 and this was linked to the effectiveness of her HR managers with particular concern on the way and manner they managed issues relating to recruitment and selection of the Groups senior executives, established successful retention of quality employees (created high number of high ranked staffs renowned in the investment banking industry), and excellent succession planning strategies. Rewards Selection Performance Appraisal Training Figure 3: Human Resource circle adapted from Fombrun et al (1984) HR managers at Goldman Sachs provide enhancement of human capital by education, training, mentoring and other programs as a means to improving business outcomes. These programs not only increase the skills of employees, but also motivate them and inspire new ideas. There are positive effects in the interrelation between knowledge-structures (such as development and training) with the corporate goal. Employee training and development is positively associated with success and growth. Question 3: What role HR planning plays in your chosen organization? Describe any 3 HR planning Methods that has been used to achieve organizational objectives. In March 27, 2009 Goldman Sachs improved her balance sheet, reporting a Tier 1 ratio of 16.0% (an increase from 15.6% as of November 28, 2008); credit was given to the effectiveness and proactive strategies of her HR managers for successful planning across all divisions of the group (GS summit, 2009). Goldman Sachs HR managers believe that a good planning requires an assessment of present and future needs of the organization compared with present resources and future predicted resources. Effective HR planning has anticipated and mapped out the cost and benefit of their business strategy on the effectiveness of their Human resources (Bott, 2010). These plans have enabled them anticipate the future needs of their Human resource management, and indentify practices that will help them meet those needs. Although, Goldman Sachs corporate strategy guides the HR strategies, their HR plans are highly congruent with their Business strategy (vertical integration). In like manner, the HR strateg ies are cohesive and mutually supportive to all functional departments and divisions across the Group (Horizontal integration). HR planning has contributed immensely to the emulating succession planning at Goldman Sachs (Goldman Sachs, 2009), it has helped to anticipate and prevent chaos within the organization (Smoke detectors), help to resolve employees challenges especially at the senior level, enable an effective Retention plan, and several developmental programs to ensure staff competency (Goldman Sachs treasured asset). It has also helped the group to answer question like; where will the next generation of our managers come from, how they can retain their highly skilled staffs, and what number of staffs they should employ. Several HR planning methods has been employed by HR managers at Goldman Sachs to achieve success in these areas. Some of such planning methods are; Bench Strength Plan; this planning method is more of a targeted succession planning at Goldman Sachs. It emphasizes on the Human capital on reserve that are capable of succeeding a senior executive when they leave. It is currently the least automated talent management procedure within the Group but has also provided the senior executives with global visibility into the talent pipeline and overall bench strength by leveraging dynamic talent pools and advanced analysis of capable staffs that would take over if a senior executive leaves (softscape, 2009). Goldman Sachs Succession planning systems have helped to identify, prepare, and track high potential employees for promotion and advancement. This planning method further reaffirms the fact that the key success factor as stated in the Groups Values is Our People (Goldman Sachs, 2010). Practically, Goldman Sachs examines the capabilities of her employees and follows up their performance and effectiveness from basic roles to leadership qualities. Senior executives are encouraged to select at least three employee of their choice who would be monitored and later given more responsibilities within a division by way of heading smaller departments (see figure 4). These selected employees would then be observed and scrutinized considering several behavioral and professional factors. After a specified period, one out of the three would be groomed specifically for the proposed senior position. Figure 4: Succession planning adapted from Goldman Sachs (2010) Retention Plan; this planning method enables the Goldman Sachs HR managers to identify competent employees who are of great value to the organization and have the capabilities of stepping into senior positions. This category of employees are then developed and mentored through a planned procedure to equip them with the classified ethics of the Group (GS annual conference, 2009). Goldman HR managers also use tools like competitive pay rate, quality training, and continuous development programs as a retention strategy for senior executives. Although Goldman Sachs keeps all vital information regarding their senior executives classified. Effective Retention planning has helped Goldmans HR managers to anticipate unforeseen circumstances that may occur if an employee under grooming decides to leave (Lloyd, 2008). Horizontal Progression plan; as a result of the recent economy down-turn Goldman Sachs has integrated many job positions to shrink cost (FT, 2008). The effect of this change created an un-safe environment for their employees and resulted to under performance across all divisions. As part of the strategic intervention by the HR managers, Horizontal progression plan was introduced to enable job rotation and staffs transfer across the Group (Goldman Sachs, 2009). This created a boost in their employees morale and there was a recorded Tier 1 ratio of 16.0% increase in Balance sheet (an increase from 15.6% as of November 28, 2008). Question 4: Recruitment Selection strategies ensure the deployment of a new human capital in the organization. What Recruitment and Selection strategies are taken in your chosen organization to recruit select senior management staff to enhance organizational performance? Goldman Sachs global business reputation and success begin from the recruitment and selection of competent and talented employees (Lloyd, 2009); this statement forms the bedrock on which GS HR managers build recruitment and selection strategies for senior executives. Fletcher (1996) started that an organizations workforce should match her corporate vision; hence the HR policies for recruitment and selection of senior executives at Goldman Sachs have been tailored to best fit their business goals. There is a clear definition of who is needed and a well defined role and responsibilities of any selected senior executive at all division. A recent report by KPMG (2009) started that in the USA 20 percent of the entire workforce will retire in 2011, in London 60 percent of skilled employers are facing skill shortage already, and the average cost of recruitment and selection process runs into an excess of about  £4800. Recruiting senior staff members is a critical procedure for HR managers at Goldman Sachs, unlike the general recruitment process; Brains are not just enough, there are several stages to determine whether a prospective candidate meet the Goldman Sachs intellectual standards. Prospective employees are identified, assessed and selected on the bases of their work experience and professional recognition within the financial trading, asset management and investment banking industry. Some of the best fit recruitment strategies employed by Goldman Sachs HR managers includes; Employers Branding, In-house search, Head hunters, Employee referral schemes, Professional social networks like LinkedIn (Crawford, 2010) a nd sometimes newspaper advert. Employers Branding Minchington (2005) defines employer brand as the image of an organization as a great place to work in the mind of existing employees and key stakeholders. Simon and Tim (1996) defined it as the package of functional, economic and psychological benefits provided by employment. HR managers at Goldman Sachs use their employer brand in the form of series of messages and images about the company to communicate its culture and value- from the employees point of view during the pre-recruitment phase. They employ this strategy as a strong tool to attract and recruit talented senior executives across the investment banking industry as well as retention strategy for existing senior employees (Goldman, 2009). In-House Exploration Goldman HR managers identify existing employees who have the capabilities and can possibly fill in a vacant senior position when the need arise (Goldman Sachs Tactical recruitment option, 2009). The advantage of this option is that it reduces the cost of going through the rigorous recruitment and selection process for fresh candidates. However, the disadvantage of this strategy is that when a junior employee is identified to fill up a senior position, the position of that employee becomes vacant thereby creating the need for the recruitment of another junior employee to fill in such gap. Head Hunters Traditionally, Headhunter is the industry term for a third-party recruiter, who seeks out possible candidates. Goldman Sachs has got in-house Headhunters who have been employed to network, cultivate relationships with various companies, maintain large databases, purchase company directories or candidate lists, and cold call prospective recruits (GS, 2009). This category of employees is part of the Goldman Sachs HR team and their sole responsibility is to source for possible candidates to fill any senior job role vacancy. Employee referral schemes This is the case where existing Goldman Sachs senior employees suggest potential candidates drawn from their own networks and connections. Goldman Sachs HR managers adopt this strategy very often considering the quality of these existing senior employees and their contribution to the success and standard of the Goldman Sachs Group. Latest CIPD Recruitment and Retention survey  ¬Ã‚ ndings indicates that the percentage of organizations that attract applicants by this method has increased from 38% in 2005 to over 47% in 2010 (CIPD, 2010). Purcell et al (2003) started that the willingness of existing employees to recommend their organization to others is used as a measure of organizational commitment in high performing workplaces. The advantage of employee referral schemes includes reduced recruitment costs, as well as enabling applicants to achieve a more realistic job preview. Professional social network (LinkedIn) Goldman Sachs has a network on LinkedIn a social networking site that is career focused and has got a tremendous reach across geographies. Goldman Sachs HR managers use LinkedIn to post job vacancies especially for senior management roles. Sometimes, the use of LinkedIn search prompts which has a sophisticated algorithm to job match possible candidates may become handy (Goldman, 2010). This strategy is often adopted when the need for a candidate to fill up a vacant role arise rather impromptu. However, the tendency for such situation to arise is slim due to the proactive nature of HR managers at Goldman Sachs. The right selection strategy is as important as any recruitment strategy employed by Goldman Sachs HR managers. The aim is to ensure that candidates are employed based on realistic competency rather than an acclaimed quality usually presented in resumes (Milner, 2009). Goldman selection process aim to quickly, accurately, and efficiently identify the best potential candidate for a vacant position. As a result, Goldman Sachs selects potential senior employee by means of direct telephone interview, board-room presentation and on rare occasions, face-to-face interview. Goldman Sachs HR managers adopt this medium considering the necessity for a fast, efficient and cost effective selection process for any prospective candidate who has been deemed fit for a senior position. Interviewing is the most widely used selection process in Goldman Sachs; where first and second interviews are conducted. Interviews are normally conducted between business hours, which are from 8:00 a.m. until 4:30 p.m. Interviews are ideally scheduled one week in advance, but may not always be possible, therefore negotiation between GS HR representative and prospective senior employee may be necessary. Behavioral interviewing is a common practice at during Goldman selection process, alongside with reference checks and psychometric assessments. It is advised that a combination of these selection methods be utilized to guarantee that the best candidates are screened and to benefit from a reduction in future costs associated with hiring and training, even at the fundamental entry level positions. It is also important to consider compensation and benefits packages in order to retain and attract the best candidates. Question 5: HRD interventions help organization to develop highly competent staff and teams. Describe the use of at least 3 HR training Development methods taken to enhance the competence of the senior management staff in your chosen organization. To a large extent, models of strategic HRD presupposes a rational and linear model of strategy formulation and implementation of process involving objective settings, the analysis of environmental trends and available resources, evaluation of options, and ending with a careful planning of the strategys implementation (Storey, 1991). Hendry (1995) suggested that the ideal HRD strategy should be the one that best fit Goldman Sachs business goals not actually the best practice. Beer and Spector (1989) added that strategic HRD can be viewed as a proactive system-wide intervention which is linked to strategic and cultural changes. Goldman Sachs Business objective Goals and strategies Departmental strategies Finance,Marketing,HRD,HRM,Operations HRD policies HRD plans HRD procedures HRD practices Evaluation Figure 5: Strategy and HRD adapted from (Wilson, 1999) Figure 5 illustrates the contribution of strategic HRD interventions to the training and development of Goldman Sachs human capital at every stage of the organizations strategy breakdown structure. HRD is an essential factor that affects employees capability and performance. It shows that HR development in policies, plans, working procedures, and practices would lead to staff competency. Human resource development focuses on the development of people, enhancing their skills, knowledge, attitudes so that they create value (human capital) for Goldman Sachs business needs. HRD seeks to optimize the human potential readily available across all Goldmans divisions (Shames, 2010). Goldman Sachs believes that human resource development interventions should be proactive rather that reactive (Lloyd, 2009). Employees are frequently groomed to become efficient in their core competency. Like the Japanese Kaizen, training and development is a continuous process in Goldman Sachs; the quality and standard of employees reflects the effectiveness of the HRD strategies employed by HR managers at all divisions of the Group. The training and development methods adopted are; Job rotation: Flexibility within working environment is a breeding-ground for development (Frederic, 2006). Senior executives are obligated to perform different job roles on regular bases as part of Goldman Sachs continuous development plan. This is a proactive strategy that does not only increase employees competency but also ensures that all senior employees can play several roles within the organization to reduce cost. It also creates an avenue for the HR managers to identify who best fit certain roles for efficiency and productivity. Coaching: Although rarely employed at senior level, Coaching at Goldman Sachs explains the development process where a more experienced senior executive (trainer) ensure that the senior employee under development (trainee) is monitored and guided through a well structured on-the-job training program. Usually, the trainer commits the trainee to undertake certain un-familiar responsibilities while he looks out for errors. These errors would be corrected in a manner that wouldnt tarnish the morale of the senior employee under development else the aim for the program would be ruined. This method ensures a close working relationship between the trainer and the trainee. Self-development and Learning: During the GS annual conference in March, 2008, Goldman Sachs CEO Lloyd C. Blankfein stated We cannot recruit an employee who doesnt have value for self development. Self development is enhanced by continuous learning and development in a broader perspective increases competency. Goldman Sachs encourages its senior management staffs to improve by constantly challenging them with greater job responsibilities as well as a regular review of working standards. Figure 5 illustrates the model of Goldmans employees continuous learning where they engage in learning opportunities to maintain, or improve, their employability. Figure 6: GS continuous learning structure adapted from (eBusiness Community Model, 2010) Question 6: What role Performance Management plays in achieving higher performance in your chosen organization? M