DYNAMICSOF

HUMANRESOURCES
PLANNING
by

KeithLinard

Keithlinard#@#yahoo.co.uk(Removehashestoemail)

LubomirDvorsky

AWorkinProgress

xxxxxxxxxxxxx
 Centre for Business Dynamics and Knowledge

Management, University of NSW (ADFA),

Australia

Abstract

DYNAMICS OF HR PLANNING

The objective of this project is to assess, identify and model major components influencing an
organisations dynamics and its performance. There is a growing evidence that organisational
effectiveness, an organisations capacity to achieve its goals and to fulfil members needs, is a
function of the congruence between people, process, structure and environment. (Michael
Beer, A Social Systems Model for Organization Development)
 TABLE OF CONTENTS

1. THE MODEL ..................................................................................................... 5

1.1 Staff Supply Chain .................................................................................................... 5

1.1.1 Employee Categories .............................................................................................. 5
1.1.2 Progress Delay ........................................................................................................ 6
1.1.3 Turnover .................................................................................................................. 6
1.1.4 Hiring Policies ....................................................................................................... 11
1.1.5 Cost of Hiring ........................................................................................................ 11
1.1.6 Hiring delay ........................................................................................................... 11
1.1.7 Temporary Staff .................................................................................................... 11

1.2 Competence .............................................................................................................. 12

1.2.1 Skill Index ............................................................................................................. 15
1.2.2 Formal training ...................................................................................................... 15
1.2.3 On the job training ................................................................................................ 15
1.2.4 Supervision of Novices ......................................................................................... 16
1.2.5 Professional Development .................................................................................... 16

1.3 Capacity .................................................................................................................... 16

1.3.1 Productivity ........................................................................................................... 16
1.3.2 Motivation ............................................................................................................. 18
1.3.3 Morale.................................................................................................................... 20
1.3.4 Employee Satisfaction .......................................................................................... 20

1.4 Workload .................................................................................................................. 20

1.4.1 Planning ................................................................................................................. 20
1.4.2 Impact of Management on Planning..................................................................... 20
1.4.3 Unplanned work .................................................................................................... 20
1.4.4 Monthly Workload Pattern ................................................................................... 20

1.5 Work completion ..................................................................................................... 20

1.5.1 Quality Approval................................................................................................... 20
1.5.2 Rework .................................................................................................................. 20
1.5.3 Work deferred ....................................................................................................... 21

1.6 Work Stress .............................................................................................................. 22

1.6.1 Definition............................................................................................................... 22
1.6.2 Effects of stress ..................................................................................................... 23
1.6.3 Burnout .................................................................................................................. 24
1.6.4 Impact on Absenteeism ......................................................................................... 24
1.6.5 Stress Remedies .................................................................................................... 24
1.7 Innovation ................................................................................................................ 24

1.8 Organisational commitment .................................................................................. 27

1.9 Management Effectiveness ..................................................................................... 27

1.10 Service Quality......................................................................................................... 28

1.11 Customer Satisfaction ............................................................................................. 29

1.12 Research and development and Innovation ......................................................... 29

1.13 Fraud......................................................................................................................... 33

1.14 Governance .............................................................................................................. 33

1.15 Communication ....................................................................................................... 33

1.16 Finance...................................................................................................................... 34

1.17 Organisational Performance.................................................................................. 34

1.18 Human Capital ........................................................................................................ 38

ii
 LIST OF FIGURES

Figure 1 - Staff Supply Chain ......................................................................................................5

Figure 2 - Staff Turnover .............................................................................................................7
Figure 3 - Staff Hire ................................................................................................................... 11
Figure 4 - Formal Training ....................................................................................................... 15
Figure 5 - Supervision of Novices .......................................................................................... 16
Figure 6 - Rework....................................................................................................................... 21
Figure 7 - Work Deferred ......................................................................................................... 21
Figure 8 - Innovation Capital ................................................................................................... 25
Figure 9- Communication ........................................................................................................ 33

iii
 INTRODUCTION

Periodically, attempts have been made to develop a human resource valuation model,
capturing costs related to acquiring and developing a skilled workforce, and to allocate these
costs to the work and services performed. But without a consistent framework for external
validationwithout which it is impossible to measure progress within a firm, much less
generalise across companies - or a cost-effective means of capturing and manipulating the
necessary information inputs, these models have not generated widespread acceptance.

Drawing on the vast amount of literature across many disciplines we attempt to decribe the
driving forces and cause and effect relationship among the major elements of a professional
organisation.

Competitive advantage and ultimately superior performance stem not only from the
uniqueness and variety of the firm's current resources, but also from how they change over
time as a result of management policies applied. (John Morecroft, Resource management
under dynamic complexity).

Human resource skills are essential to future managerial success, as you can see from
observing what the best top managers say about their most critical challenges. Increasingly,
successful CEO's describe their success in terms of skillful management of people. Jack
Welch, CEO of GE, describes his "lessons for success", including "The only way I see to get
more productivity is by getting people involved and excited about their jobs", "Anybody who
gets this [CEO] job has got to believe in the gut that people are the key to everything and "If
you're not thinking all the time about making every person more valuable, you don't have a
chance."29 (John W. Boudreau, Human Resources and Organization Success)

iv
 GLOSSARY

Word. [Click and type definition here.]

v
 1. THE MODEL
Stocks:

Management staff

Support staff

Budget

Workload

Skills

Motivation

Morale

Job satisfaction

1.1 Staff Supply Chain

1.1.1 Employee Categories

Attriton_Rate Attriton_Rate Attriton_Rate Attriton_Rate Attriton_Rate

Novice_AttRate Trained_AttRate Competent_AttRate Skilled_AttRate Expert_AttRate

Support_Staff_hire progress1 progress2 progress3 progress4

! ! !
Novices Trained_ Competent__ Skilled_ Experts

InitNovice Progress_delay InitTrained Progress_delay InitCompetent Progress_delay InitSkilled Progress_delay InitExpert

Executive_Staff_hire

Figure 1 - Staff Supply Chain

4
Using the Hubert L. Dreyfus concept we have introduced five skill levels in our model.
Support staff are hired at the Novice level and as they acquire skills move trough Trained,
Competent and Skilled to the Expert level.

1.1.2 Progress Delay

Progress delay between different levels is impacted on by

Respondents were asked how long it took to recruit the right person into a middle
management role. Just under a third (30%) cited 3 months. This varied according to company
size. 19% of small companies felt it took them up to 3 months to recruit, compared with 35%
of medium companies and 37% of large companies. Financial services and IT were also more
likely than other industrial sectors to mention 3 months (39% and 38% respectively). The
mode length of time for a new recruit in middle management to become productive was up to
six months 29% of respondents. New recruits were more likely to take this length of time in
a large company (35%) than in a small company (21%). 20% of all respondents felt that it took
between 6 months and a year. Recruits in financial services and IT sectors were more likely to
up to 6 months to become productive than their peers in other industrial sectors. (PEOPLE
AND PRODUCTIVITY, Investors in People UK, October 2001)

1.1.3 Turnover

4
 Staff Turnover

External Organisational
Job Commitment
Opportunities

+ -
Management
Support -
-
+
Voluntary Job
Turnover Satisfaction

-
Management B1 - B2
Capacity

Capacity

Work Stress

Figure 2 - Staff Turnover

The plethora of research into the issue indicates the significance and complexity of the
problem.

Turnover comprises two types. Voluntary turnover is defined as the movement across the
membership boundary of an organization, which is initiated by the employee (Price, 1977).
Involuntary turnover, in contrast, is defined as the movement across the membership
boundary of an organization, which is not initiated by the employee (Price, 1977). Generally,
involuntary turnover includes dismissals, retrenchments and deaths (Campion, 1991).
Importantly, resignations are still the most prevalent form of turnover in Australia. According
to the Australian Bureau of Statistics (1998b), of those employees who ceased a job during the
year ending February 1998, 64 percent had left their jobs voluntarily (resigned) compared to
21 percent who had been retrenched. In terms of Australian industry trends, the average level
of voluntary turnover in the health care sector is around 20 percent (Morehead, Steele,
Alexander, Stephen, & Duffin, 1997). Further, from a human resources (HRs) perspective

4
there is ample empirical evidence to affirm that the formulation of specific HR strategies (e.g.,
family friendly policies) can influence an employee's decision to resign (Hom & Griffeth,
1995). (Roderick D. Iverson, An event history analysis of employee turnover)

Emotional exhaustion is a component of burnout and is considered to be a chronic condition

resulting from the stress of work (Maslach & Jackson, 1981; Miller et al., 1990). Burnout is
frequently found in human services organizations where employees have direct contact with
the public, such as in hospitals (Pines, 1982). Emotional exhaustion is associated with
increased employee turnover (Wright & Cropanzano, 1998). ((Roderick D. Iverson, An event
history analysis of employee turnover)

Job opportunity is sometimes described as environmental opportunity (Bluedorn, 1982),

opportunity (Price & Mueller, 1986), and the predictability of finding an acceptable alternative
(Mobley, Horner, & Hollingsworth, 1978). Job opportunity does not refer to the availability of
jobs within the organization, but to the jobs that are external to the organization. Although
Farrell and Rusbult originally hypothesized alternative value (i.e., job opportunity) to influence
job commitment, it is anticipated to directly impact on turnover. The supply and demand
created by the job market effects the mobility of employees. Where employees consider they
can obtain a job as good, better or much better than they presently have, the propensity to
leave is increased

Employee orientations reflect the affective responses to the job and organization. These
comprise the orientations of job satisfaction, organizational commitment, and intent to leave.
Job satisfaction refers to the overall degree to which an individual likes her/his job (Price &
Mueller, 1986), organizational commitment to the degree of loyalty to the organization (Porter
et al., 1974), and intent to leave as the behavioral attachment to the organization (Iverson &
Roy, 1994). There is strong support for the negative relationships of job satisfaction and
organizational commitment and the positive relationship of intent to leave with voluntary
turnover (Cohen, 1999; Farrell & Rusbult, 1981; Hom & Griffeth, 1995; Lee & Maurer, in
press; Lee, Mitchell, Wise, & Fireman, 1996; Mueller et al., 1994; Price & Mueller, 1986;
Somers, 1996; Weil & Kimball, 1995). (Mueller et al., 1994). (Roderick D. Iverson, An event
history analysis of employee turnover)

4
Apart from the human capital considerations of losing core employees, the cost of turnover
can be immense. A recent study of high performing Australian female mangers reported the
total turnover costs (direct and indirect) associated with separation, replacement, and training
to be around AUS$75,000 (Abbott, De Cieri, & Iverson, 1998). (Roderick D. Iverson, An
event history analysis of employee turnover)

(Kelley & Thibaut, 1978) proposed that employee turnover is determined by a combination of
job rewards and costs (i.e., job-related variables), job investments (i.e., personal variables),
alternative values (i.e., job opportunity), and employee orientations (i.e., satisfaction and
commitment). (Roderick D. Iverson, An event history analysis of employee turnover)

Several models have postulated job satisfaction and organizational commitment to be

antecedents of turnover (e.g. Williams and Hazer, 1986; Farkas and Tetrick, 1989; Arnold and
Feldman, 1982). Clegg (1983) contends that satisfaction and commitment have been the most
frequently investigated components of affect with regard to turnover decisions. One factor
that has been frequently associated with both work attitudes and turnover intentions is job
stress. Lofquist and Dawis (1969) argued that increasing levels of job tension or stress may
lead to a decision to quit. A study by Sheridan and Abelson (1983) showed that when
individuals' perceived job tension exceeded a threshold limit, they quit. Bedeian and
Armenakis (1981) found that job- induced tension causally affected satisfaction which, in turn,
influenced propensity to leave. (A.R. Elangovan)

Companies with better organization culture have better retention rates [51]. Mone says that as
management shuffles the organization by reorganising, downsizing, and eliminating layers of
workforce, there is a direct impact on the employees of the organisation. One of the
dysfunctional consequences of downsizing is that survivors of the shrinkage get nervous,
experiencing increased stress and job insecurity. Mone suggests that it is not always the
poorest performers who leave; in fact it is often the highest performing workers who find
good alternatives and are the first to leave.

Retention is really a construct and not just one variable. Researchers focus on different
aspects. For example, Muhammad found that stressors, such as work overload and role

4
ambiguity, might cause the employee to have low job satisfaction and motivation,
subsequently resulting in low organizational commitment, burnout and high turnover [41].

Staff experience is a necessity in maintaining work quality. Szajna [53] and Ravichandran [49]
point out that 25 percent of the project failures can be attributed to programmer turnover.
Indeed, turnover may lead to a loss of human resources weakening competitive positions.
While employees with low turnover tendency are characterized by high job satisfaction and
job security perceptions [20], employees with high turnover intent may be filled with
frustration and may not concentrate on their jobs. We measure turnover intent of existing
employees; this indicates the degree of contribution of the employees. Campion suggests that
the measures should be viewed as lying on a continuum rather than on one of the two ends.
Lower employee turnover intent may indicate better employee retention.

{Brenda L. Mak, Hy Sockel, A confirmatory factor analysis of IS employee motivation and

retention, Information & Management 38 (2001) 265-76}

Conceptually, behavioral commitment is the extent to which an employee plans to continue

membership with the current employer. The literature sometimes calls it intent to stay,
propensity to leave, intent to quit, or attachment (Halaby, 1986; Mowday, Porter, & Steers,
1982; Price, 1997).

Satisfied employees are more likely to be committed to the company, less likely to search for
employment elsewhere, and more likely to stay in the company. This finding is not surprising
or unusual, given that these variables were postulated to mediate, and indeed did mediate, the
impacts of a substantial number of exogenous variables on behavioral commitment. The total
effects of job satisfaction and organizational commitment are roughly the same, with job
search's effect being approximately 70 percent as great as these affective response variables.
Before the 1970s, job satisfaction was the only mediating variable examined in the causal chain
leading to employee retention. Industrial and organizational psychologists in the mid-1970s
and later (Mobley, 1982; Mowday et al., 1982; Porter et al., 1974), however, began to suggest
that organizational commitment is a more important mediating variable than job satisfaction.
Similarly, sociologists interested in employment relationships have given more attention to

4
 organizational commitment than to job satisfaction; Hodson (1991) has even questioned the
value of continuing to study job satisfaction. Recent sociological accounts, notably Halaby
(1988) and Halaby and Weakliem (1989), further argue job search as an important mediating
variable, while diminishing the importance of both job satisfaction and organizational
commitment.

Opportunity is another important environmental determinant in this study. Employees who

have alternative and more rewarding jobs available in the local labor market are less satisfied,
less committed, more prompted to search for a job elsewhere, and less likely to stay in the
company. The finding thus suggests that job openings affect behavioral commitment across
cultures. (Sang-Wook Kim, Behavioral commitment among the automobile workers in South
Korea,)

1.1.4 Hiring Policies

Novice_AttRate Staff Hire Requirements

Support_Staff_Hire_Actual
Admin_SupStaff_hire
Support_Staff_departed
Support_Staff_Hire_Delay
dvanced_AttRate

Support_Staff_Gap Decision_SupStaff_hire Tech_SupStaff_hire

ompetent_AttRate Automatic_Hire_Switch
ProfServ_SupStaff_hire
Executive_Staff_Gap

Proficient_AttRate
Executive_Staff_Hire_Actual SES_Staff_hire
Executive__Staff_departed Decision_ExecStaff_hire

Expert_AttRate
Executive_Staff_Hire_Delay
ES_Staff_hire

Automatic_Hire_Switch

Figure 3 - Staff Hire

1.1.5 Cost of Hiring

1.1.6 Hiring delay

1.1.7 Temporary Staff

4
1.2 Competence

Individual competencies can be specific to a job context, and may not be transferable to
another context. There are also generic competencies that have been identified as important
for individual learning such as being able to accept negative feedback without becoming
defensive (Argyris & Schn, 1978), having an orientation to self development (Pedler,
Burgoyne & Boydell, 1991), acquiring external knowledge (Bertini & Tomassini, 1996), and
having a scanning imperative (Nevis et al. 1995). Interpreting requires more than competence
and capability, however. It requires both motivation, and direction or focus. It is this nexus
between what individuals can do (capability), what they want to do (motivation), and what
they need to do (focus) that enhances individual learning (Watkins & Marsick, 1993).

(Nick Bontis at al., Managing ab organizational learning system by aligning stocks and flows,
2000)

Human capital has also been defined on an individual level as the combination of these four
factors:

Your genetic inheritance;

Your education;

Your experience; and

Your attitudes about life and business

(W. Hudson, Intellectual Capital: How to Build it, Enhance it, Use it, John Wiley & Sons, New
York, NY, 1993)

The 2% Challenge As you read this, the information inside your company the raw material for
decision-making is increasing about 2% per month. That means...

TRAINING One-quarter of last years training programs are out of date or useless

CHANGE The half-life of any change effort is just over 18 months

4
BRAND Within two financial quarters, over 10% of your loyal customers will be confused as to
what your brand stands for - ...Simply due to information overloads impact on your brand
positioning

CAPABILITIES, SKILLS Every 1100 days, your workforces ability to transform information into
work becomes twice as important - ...Every three years, the amount of information you need
to capture, organize, communicate, understand and build into solutions will double.

MATERIALS FOR WORK If you havent completely purged, replaced or updated 100% of your
organisational knowledge in a 36-month cycle, you cant compete effectively - ...Your ability to
make fast, innovative, right decisions will be out of date.

(The Jensen)

Both the primary and secondary research identifies lack of training and development as
perhaps the principal barrier to increased staff, and therefore organisational, productivity.
Correspondingly, providing adequate training to staff was viewed as among the most
important enablers of increased organizational productivity, both by employers and
employees. The major enablers of productivity are seen as:

having staff with appropriate skillsets

having a good training and personal development programme (clearly correlative)

having a clear management structure good resource planning.

( Investors in People UK, PEOPLE AND PRODUCTIVITY)

Measuring the effects of training on productivity is difficult. In most cases, wages are often
used the theory being that the growth in wages over a workers lifetime is largely the result
of productivity gains caused by training. The Institute for Fiscal Studies (IFS) reported several
studies regarding the impact of training on subjective measures of performance. In the UK, a
study identified that a 5% increase in the proportion of employees receiving training
was associated with a 4% increase in productivity . US data showed that a 10%

4
increase in training is associated with a 3% increase in growth (on a subjective
productivity scale) ( Investors in People UK, PEOPLE AND PRODUCTIVITY)

There is also some evidence that training can reduce labour turnover (Harrigan 1979). In the
right conditions, low turnover and high levels of training can reinforce each other. (Office of
Employment, Training and Tertiary Education, Victoria, Australia)

The main result is that we find a statistically and economically significant effect of training on
industrial productivity. A 5 percentage point increase in training is associated with a four
percent increase in productivity and a 1.6 per cent increase in hourly wages. Lorraine Dearden,
Howard Reed, John Van Reenen, Who gains when workers train?

The productivity effect of training is over twice as large as the wage effect, implying that
existing estimates have underestimated the benefits of training by focusing on wages.
(Lorraine Dearden, Howard Reed, John Van Reenen, Who gains when workers train?)

Black and Lynch have managed to construct a more representative sample of U.S.
establishments matched to the LRD (Longitudinal Research Database, an administrative data
source). In the cross section (Black and Lynch, 1995) they identified some effects of the type
of training on productivity, but they could find no effects at all when they controlled for plant
specific effects (Black and Lynch, 1996). Ichinowski et al (1997) argue that training per se is
likely to be less important than the overall combination of complementary human resource
practices. They demonstrate this in their panel of steel finishing mills. Black and Lynch (1996)
and Bartel (1995) do not find strong evidence of such interactions in their data. (Lorraine
Dearden, Howard Reed, John Van Reenen, Who gains when workers train?)

Managers feel that the most important skills required from their employees to carry out their
jobs effectively are problem solving and team skills, and more generally the ability to learn new
skills. Training of employees increased slightly in all areas compared to three years ago. On
average, 68% of the employees receive training. Computer and other office equipment training
is provided almost universally, while more than 90% of the units report professional and
technical training. The employees themselves initiate almost 1/3 of all training. (Anil Verma
and Zsuzsanna Lonti, Changing government workplaces)

4
Future challenges identified by managers include several issues, such as employee burnout and
fatigue, loss of experience and corporate memory, employee morale, and hiring and staffing.
(Anil Verma and Zsuzsanna Lonti, Changing government workplaces)

1.2.1 Skill Index

Human capital theory sees training as an investment in skills which increase productivity.

1.2.2 Formal training

Formal Training - Staff Development

Impact_of_Formal_Trg_on_Skills_Increase

EffectOfSDev_ProgressRate SD__Trg_MAvg Staff_Development_Impact_on_Turnove

SDD_in SDD_out
! ! !
!
SD_Moving_Avg

SD_Dollars_Index

SD_moving

ctual_prc_of_TP_On_formal_training
sired_prc_of_TP_On_formal_training Impact_of_Mngm_Effectiveness_on_SD

Figure 4 - Formal Training

1.2.3 On the job training

On the econometric side several micro studies have found impacts of training on subjective
measures of performance. In the US, Bartel (1995) found a significant relationship between
formal on-the-job training and the subjective performance ratings of professional employees

4
by using the 1986-1990 personnel records of a large US manufacturing company. Also on US
data, Barron et al. (1989) find that a 10% increase in training is associated with a 3% increase
in the growth of a subjective productivity scale, while Russel et al. (1985) find similar results
for a sample of retail stores. (Lorraine Dearden, Howard Reed, John Van Reenen, Who gains
when workers train?)

1.2.4 Supervision of Novices

"Expert" time required to supervise Novices

Monthly_Expert_time_on_OJT_rati
Monthly_Expert_time_on_OJT

Accum_Support_Expert_time_spent_on_OJT

Amount_of_Expert_time_for_OJT Novices Effective_Support_Experts_avail

Figure 5 - Supervision of Novices

New staff generate hidden a hidden workload for experienced staff and each new recruit
requires on-the-job coaching. (John Morecroft, Resource management under dynamic
complexity)

1.2.5 Professional Development

1.3 Capacity

1.3.1 Productivity

In most instances, employee performance is determined by three things:

Ability;

Work environment; and

4
 Motivation

(Griffin, R.W. (1990), Management, 3rd ed., Houghton Mifflin Company, Dallas, TX, p. 437.)

If an employee lacks ability, appropriate training can be employed. If there is an environmental

problem, altering the environment to promote higher perfor-mance is the key. However, if
motivation is the problem, the solution is more complex and more challenging. For
motivational problems, the best source of information is the employee. Employees must be
asked on a regular basis what sparks and sustains their desire to work. Their responses may
lead the employer to redesign jobs, increase pay, change the working environment, or give
more credit for work done. The key is, however, that managers avoid the assumption that
what motivates them, motivates their employees as well (Wessler, 1984, p. 29).

(Carolyn Wiley, What motivates employees according to over 40 years of motivation surveys)

The Jensen Group

mmmm

Another related concept that has become very popular among managers and organization
psychologist is work commitment or attachment to work. The assumption here, as well as
with the work ethic is that people who demonstrate high values on these characteristics are
somehow more effective or productive and consequently more valuable as employees and
managers. Such a causal relationship is more often assumed than tested. Causality, as we shall

4
see, is more likely to run in the other direction. People having high levels of education and
skill and occupying jobs with a fair measure of autonomy are very likely to hold high work
ethic values. People with lower skills, education, and control over their work tend to espouse
low work ethic values (MOW, 1987, 261-3).

Buckley and Casson (1994) have argued that the main threat to the position of economics as
an explanation of economic behavior "comes from accumulating evidence that cultural factors
are key determinants of economic performance". They argue that culture can be considered to
be a major component of human capital. The argument is that people in two different
countries may have identical skills, but one country's workers may be more productive
"because the moral content of the local culture makes them better motivated" (p.1040). The
"moral content of the local culture" seems very similar to our description of the work ethic
but the validity of the argument that local cultural differences or the work ethic can be
considered as "key determinants of economic performance" has not been established. (Frank
Heller, S. Antonio Ruiz Quintanilla, The Work Ethic)

1.3.2 Motivation

A useful motivation tool is development the opportunity for employees to experience

personal and professional growth.

(Hampton Hopkins, A challenge to managers: five ways to improve employee morale)

Poor retention can be due to employee turnover, burnout, and lack of commitment. Turnover
of employee should be well managed, because the people who leave may be among the best
employees [[37] M.A. Mone, Relationships between self-concepts, aspirations, emotional
responses, and intent to leave a downsizing organization, Human Resource Management 33
(2), 1994, pp. 281298.].

In other cases, even if the employees do not leave the lack of morale due to burnout or low
commitment may mirror the problems caused by employee turnover [ [38] J.E. Moore, A
causal attribution approach to work exhaustion: the relationship of causal locus,
controllability, and stability to job-related attitudes and turnover intention of the work

4
exhausted employee (burnout), unpublished dissertation, Indiana University, Business
Administration Management, 1997.]

The motivation of the IS personnel to perform well is thus affected by their satisfaction with
their job situation and the perception of the effectiveness of management policies on career
development.

Job satisfaction has traditionally been defined as a positive emotional state reflecting affective
(fondness) attitude or response towards the job situation. It is an important motivator for
employee performance; it is a causal antecedent to organizational commitment [39], and
negatively related to turnover [6,54] and absenteeism [40].

Previous research has found correlation in the range of 0.50 between job satisfaction and job
involvement, job satisfaction and organizational commitment, or job involvement and
organization commitment [8].

Poulin found that the organizational work environment had a signicant impact on social
worker's overall job satisfaction. In addition, change in professional development
opportunities was positively associated with increased job satisfaction [46,47].

Within the IS arena, satisfaction has been found to be related to turnover and performance
[29]. Blankertz and Robinson [5] demonstrated that employees with high job satisfaction are
highly motivated and have little desire to leave their jobs. Thus, job satisfaction is a key factor
for employee motivation.

Babin and Boles [3] found that perceptions of supervisory support could increase satisfaction
and motivation, reducing stress and improving job performance. Thus, management support
has a significant impact on employee motivation.

They noted that, because of changes in IS growth and promotions, there will be a greater
focus on effective management of IS professionals. They stated that some IS career
management strategies have been associated with problems, and have led to higher levels of
employee burnout and turnover.

4
{ Brenda L. Mak, Hy Sockel, A confirmatory factor analysis of IS employee motivation and retention,
Information & Management 38 (2001) 265-76}

1.3.3 Morale

1.3.4 Employee Satisfaction

1.4 Workload

1.4.1 Planning

1.4.2 Impact of Management on Planning

1.4.3 Unplanned work

1.4.4 Monthly Workload Pattern

1.5 Work completion

1.5.1 Quality Approval

1.5.2 Rework

4
hly_plan completing_work WORK_DONE WORK_COMPLETED

ORG_UNIT_WORKLOAD EndOfY

Approving

WORK_DEFERRED

rework_in Rework_Volume_Index
work_def_out work_def_in

Workload_Deferred

REWORK
rework_out

Figure 6 - Rework

1.5.3 Work deferred

thly_plan completing_work WORK_DONE

ORG_UNIT_WORKLOAD

WORK_DEFERRED
rework_in

work_def_out work_def_in

Workload_Deferred

Figure 7 - Work Deferred

4
1.6 Work Stress

1.6.1 Definition

This paper reports on the effects of work pressure. Various studies suggest that work pressure
has increased among the working population. In the beginning of this decade about 30 % of
the working people complained about work pressure (Diekstra, et al., 1994). However, recent
statistics indicate that this number has increased to about 50 % or 60 % of the Dutch working
population (CBS, 1999; Helvoort et al, 1998).{ F.R.H. Zijlstra & R.A. Roe, Work pressure as a
determinant of burnout}

Work pressure is the cognitive energetic state that may result when persons evaluate the
impact of the work demands of the present task and the manageability of the work that still
has to be done. { F.R.H. Zijlstra & R.A. Roe}

{All demands and strain on the human body, whether physical or social, give rise to some
reaction and, as a rule, most people can cope quite adequately with these demands. However,
if the stressor, which is the name of the strain or demand, is too strong, too repetitive, too
continuous, too intense and/or the individual is too weak, a sort of tension is built up in the
body which is commonly referred to as stress.

Positive stress. Stress is not necessarily a negative phenomenon. If the tension can be
handled in a positive way it can be of positive value. An athlete taking part in a competition
will give a better performance if under stress. Even in working life stress can be something
positive if there is freedom for the individual to handle the situation. Positive stress may
enhance job satisfaction, competence and self-esteem. One can, for instance, hear an assembly
worker say: We are all under stress, busy with changing our work organisation, but we have lots of fun all
the time.

Passive stress. Strong demands and strain are likely to give rise to stress. The opposite can
also be true. Temperature is a good example: too high, as well as too low, a temperature can
be harmful. The same is true for mental demands. Experiments have been carried out where
new-born apes have been isolated from all impulses whatsoever, such as light, sound and

4
touch, with the result that they have died, as some parts of their brain did not develop. This,
of course, is an extreme, but something similar is seen in a job free from all demands other
than continuous repetition of the same movements and without the slightest variation or
challenge. One can still see such jobs on assembly lines. (Dr. S. Kvarnstrm, Stress prevention
for blue-collar workers in assembly-line production)}

1.6.2 Effects of stress

{Stress in the workplace lowers the quality of working life and also has a negative effect on the
quality of life, on the whole, including leisure time. In addition, stress can severely affect
enterprise efficiency and competitiveness.

Absence due to sickness. Stress is the reason for a large part of absence due to sickness.
Stress is very seldom given as a medical diagnosis, as the effects are hidden among different
symptoms, but in workplaces where absence due to sickness is high, as much as half of it is
likely to be due to stress.

Personnel turnover. Stress has a definite influence on personnel turnover. It is an indication

of shortcomings in the workplace. When workers leave, it is impossible to say whether it is
because of stress or because of their inability to get on in the workplace. To cure the stress,
one has to cure the workplace.

Recruiting difficulties. Hand-in-hand with high figures for personnel turnover are the
difficulties encountered in recruiting a competent workforce. Assembly-line work is constantly
ranked among the least popular. Even in periods of high unemployment when the offer of
labour is at its peak, the workforce will never be as good as hoped for if the work
environment is not attractive.

Productivity. The effect of stress on productivity is impossible to calculate. However, it is

generally understood that shortcomings in quality and time delivery are often due to low
motivation from the workforce and that this, in turn, has its roots in stress. Workers time may
be bought, but their engagement, motivation and interest in the work must be earned. (Dr. S.
Kvarnstrm, Stress prevention for blue-collar workers in assembly-line production)}

4
1.6.3 Burnout

An organizational culture that becomes too stressful, abusive, inconsistent with its employees'
needs and desires may experience personnel burnout. Physical and emotional exhaustion may
increase this risk, which may become debilitating, with depression, internal personal problems,
and mental or physical illness.Muhammad found that work stressors, such as work overhead,
role ambiguity, conflict and resource inadequacy, were significantly related to `burnout'
symptoms in the form of psychosomatic health problems, when though the employee is not
entertaining the concept of leaving, the organization is no longer getting proper benefits from
the employee.

{Brenda L. Mak, Hy Sockel, A confirmatory factor analysis of IS employee motivation and

retention, Information & Management 38 (2001) 265-76}

1.6.4 Impact on Absenteeism

1.6.5 Stress Remedies

A key factor when reorganising work to minimize stress factors is the development of
competence. Competence is said to be a sum of knowledge, will and ability. (Dr. S.
Kvarnstrm, Stress prevention for blue-collar workers in assembly-line production)}

1.7 Innovation

4
 R&D and Innovation Capital
Management
Job Security
Resources
Innovation Capital
Life Expectancy
+
+
Level of
Commitment
-

R&D Resources +
Innovation
+
Innovation + Capital
Capital Implemented
+

-
+
+ Organisational Rework
Knowledge
Capacity
Productivity

+ Organisational
Capacity

-
Resources +
Available

Figure 8 - Innovation Capital

In the model tested here (see Figure 1), individual innovative behavior is viewed as the
outcome of three interacting systems -- the individual, leadership, and the climate for
innovation. Here, climate represents the signals individuals receive relative to organizational
expectations regarding innovation (Kanter, 1988), and leadership has often been posited as an
important influence on both climate formation (e. g., Litwin & Stringer, 1968; McGregor,
1960) and innovation (Kanter, 1983; Peters & Waterman, 1982).

{Susanne G. Scott, Reginald A. Bruce, The Influence Of Leadership, Individual Attributes,

And Climate On Innovative Behavior}

4
The complexity of innovation management is partly caused by its comprehensive
understanding. Traditionally, innovation management deals with all stages of the innovation
process (Schumpeter 1961):

invention, i.e., the phase where new products are developed;

innovation, i.e., the phase of introducing new products in the market;

imitation or diusion, i.e., the spread of new products in the market.

Although the problems in the rst stage are highly dynamic and complex, the second and
third stages - the phases of innovation and diffusion - are as, if not more, important to control
as the phase of research and development. This becomes obvious when empirically derived
new-product failure rates and innovation costs are analyzed. Figure 1 illustrates the cascading
process of innovation activity and the related innovation costs. On the one hand, only

4
approximately 40%of all research projects are successful from a technical point of view, 22%
have a chance of being economically successful, and 18% of the research projects are stopped
because they have no potential to be successful in the market place. Hence, 22% are
introduced to the market, but only 40% of them are really a success. On the other hand, more
than 50% of all innovation costs 1 occur in the second and third stages of the innovation
process (Mansfield et al. 1981). This shows the importance of the phases of innovation and
diffusion and the necessity for competent and sophisticated management in these stages.

1.8 Organisational commitment

Loyalty loss is an antecedent of turnover intentions. Loyalty, or organizational commitment,

has most commonly been studied as attitudinal or affective; it may be dened as a relative
strength of individuals' identication with the involvement in a particular organization.
Commitment has also been studied from a behavioral perspective, as proposed by Salancik
[50]. Behavioral commitment is tied to some future outcome and defined in terms of the cost
to leave the organization. Salancik's view is derived primarily from the commitment model of
Kiesler [33], where the focus is on behavior. Essential conditions are explicitness, revocability,
volition and publicity. One example is employees' response to improve communication [43]
and performance.

1.9 Management Effectiveness

Supervisory consideration and organizational commitment

Supervisory consideration refers to leader behaviours concerned with promoting the comfort
and wellbeing of subordinates[35]. It is hypothesized that employees who believe their
superiors are considerate leaders will be more committed to their organizations than those
who do not perceive their managers as such[31]. DeCotiis and Summers[23], Morris and
Sherman[36] and Zaccaro and Dobbins[28] all found empirical support for this view, although
the latter reported a rather low correlation. Johnston et al.[31] found that consideration did
not influence organizational commitment directly in their study. It only exerted an indirect
influence by reducing role conflict and thus improving job satisfaction. Based on the reported

4
empirical findings, Figure 2 shows that it is hypothesized that supervisory consideration will
have a positive influence on organizational commitment.

(Christo Boshoff, Gerhard Mels, A causal model to evaluate the relationships)

1.10 Service Quality

We are looking at a services providing organisation and its development

Improving service quality promises a myriad of benefits. It costs far less to keep a customer
than to win a new one, for example, and perceived high-quality service firms ca charge up to
10% more for their products than competitors (Daniel H. Kim; Service Quality Excellence:
Mastering the Moments of Truth; The Systems Thinker, Vol.3, No.7, September 1992)

Add the bit from Sterman talking about the falling quality of services in the US

Quality, as seen by the customer, is determined by each encounter with front-line personnel.
The net benefit of millions of dollars worth of capital equipment, buildings, salaries, etc. that a
company has assembled will be judged, in large measure, by the quality of those interactions.
Those moments of truth are numerous, ephemeral and difficult, if not impossible to measure.
And yet, the long-term reputation and success of a service company is largely riding on them
(Daniel H. Kim; Service Quality Excellence: Mastering the Moments of Truth; The Systems
Thinker, Vol.3, No.7, September 1992)

This would also suggest that the success and the quality of services provided will largely
depend on the quality of the employees in the organisation

Add the bit from TQM about Employee sat impacting on Customer sat

Many firms have been able to achieve significant competitive advantage by offering superior
service quality (Albrecht and Zemke, 1985; Collier, 1994; Lovelock, 1994; Schmenner, 1995;
Zeithaml et al., 1990). However, assuring quality in services is, in some ways, a more difficult
proposition than assuring quality in manufacturing. Two factors, in particular, contribute to
this difficulty. The production process of services involves the interaction of employees and

4
customers, making it difficult to insure consistency and reliability in the service process and
resulting product. Additionally, quality judgments of an intangible service are determined by
individual customers perceptions and expectations, making it difficult to discover and correct
service failures. Thus, both the employees and the learning ability of the firm are thought to
play a critical role in achieving superior service quality. Most experts agree that a learning
organization whose employees have a clear vision of the importance of service quality to the
organization and are motivated to provide that quality will achieve superior service quality.

Quality is an important predictor of both market share and profitability in many markets
(Buzzell and Gale, 1987; Capon et al., 1990; Phillips et al., 1983). The importance of customer
satisfaction and service quality to service firms is evident (Jones and Sasser, 1995; Oh and
Parks, 1997; Sasser et al., 1978; Zei-thaml et al., 1993). Although evaluations of service quality
are based on many factors, it is generally accepted that attributes associated with a service
firms personnel play a key role in the determination of customer satisfaction and customer
perceptions of service quality. (Julie M. Hays, Arthur V. Hill, A preliminary investigation of the
relationships between employee motivation/vision, service learning, and perceived service quality)

1.11 Customer Satisfaction

1.12 Research and development and Innovation

R&D activities can be described as creation of the know-how and know-why of new materials
and technologies that eventually translate into commercial development [Wheelwright-Clark
1992]. According to this definition, R&D activities can be summarised in two main phases,
which differently contribute to the company growth and shareholder value creation process.
These two phases can be identified as:

the generation, i.e. all those R&D activities whose output is mainly the
technological progress, both incremental and radically original;

the transition, i.e. all those R&D activities whose aim is to transfer the knowledge
on the products or on the manufacturing processes [Baglieri, 1997].

4
The two phases lead to different outputs. Actually, the former produces mainly a
potentiality which can take place and show its value through the latter. The way the two
phases of R&D activities contributes to company innovation processes can be represented by
the relation between the well known S-curve of the technological progress and what we call
the Step-curve, representing the transition of the technology onto the product or the
production process.
Technological

progress limit
Progress

Transition

Investments/Time

Figure 1. shows such a discontinuity. The product/process does not constantly embody the
"generation" results: the "transition" takes place only under certain conditions and at specific
times, ideally at the tangency points between the two curves.

The measure of R&D performance should allow an integrated evaluation of the expected
performance, as well as a separate assessment of the performance of the two critical phases of
R&D, namely the generation and the transition of the technology.

According to this goal, the measurement system should be articulated along two main
dimensions [Baglieri, 1997]:

the former is the "domain" of the measurement, distinguishing between the above
two main phases of the innovation process (metrics for "generation" should be
different from those for "transition", as a consequence of the different goals of
these two phases of the overall innovation process) and the "diffusion", those

4
 activities in charge of the commercial release and the launch of the new product
on the market;

the latter is the object of the measurement, distinguishing between output,

process and "input". This second dimension is suggested by the importance of
monitoring both the results (tangible and intangible) of the two phases (as a
measure of the competitiveness of the R&D activities), the way the two phases
contribute to the value creation (as a measure of their consistency to business
goals) and, finally, the human, financial and technical resources used to start any
process.
The value of R&D, as the sum of the value of the Kos and Kip, is influenced by three
basic dimensions:
the incremental cash flows (intensity) related to R&D activities, emerging during
the evaluation period;

the duration of such cash flows (time), that is related to some relevant
characteristics of the observed sector (industry specific) and of the barriers level,
built up to defend the competitive advantage (firm specific);

the risk and uncertainty associated to the cash flows.

The ability of the R&D function to improve the knowledge attributes above, fundamentally
depends on the R&D operational conditions, i.e. on the level of efficiency and effectiveness in
conducting R&D activities. ( Enzo Bagliery at al, Evaluating intangible assets; the
measurement of R&D performance)

4
4
 1.13 Fraud

1.14 Governance

1.15 Communication

Communication_Activities
Coms_activities_diminishing
! ! ! !

Impact_of_dollars_on_coms
Communicating

comms_in_progress Impact_of_Communication_on_Organisational_Performanc
s_spent_on_communication_infrastructure

of_contributed_time_on_comms

Impact_of_Communication_on_Innovation

Staff_time_contributed_to_communication

Figure 9- Communication

Work Communication provides the raw materials for individuals to make day-to-day choices
and decisions that lead to success

From study participant interviews: Work communication is about the exchange of useful
information and knowledge so the individual can make the necessary choices to satisfy
personal, customer, business and shareholder needs. Participants emphasized content that was
specific, easy-to-understand, consistent, clear and timely; as well as interactions that were
open, candid, two-way and face-to-face. This list represents the same challenge we saw in
Unclear Goals & Objectives. This is not revolutionary or the rethinking of communication.
This is basic. Corporate America is not focused on Communication 101. If we ever get
focused, a lot of work complexity will be addressed.

Simple translation: Day-to-day, get-it-done communication must always serve two objectives:

Heres what we need to do

4
 Heres what to look for the next time

The patterns in communication are what help people make decisions that lead to success, not
just getting stuff done. Many we interviewed were eager to have the next time patterns drive
their decision-making and discussions instead of the current fire-fighting approach to work
communication.

Senior management almost unanimously held the belief that effective communication was
directly linked to effective change. In 1992, we asked over 70 companies to show us how they
tracked the connection. We found no (0!) benchmarks or measures specifically linking
communication effectiveness to change effectiveness. These same companies tracked
precisely the impact of training on plant safety, advertisings impact on sales, and
investments impact on growth. But they tracked the success of change communication
intuitively. One study participant described the science of tracking change communication as
leadership sticking a moistened finger in the air. (Jensen Group)

1.16 Finance

1.17 Organisational Performance

Fortune magazine's November 1994 cover story tells us the six reasons "Why Companies
Fail:

Identity Crisis: Top managers don't have a "mental model" of the organizations
key competencies, so they succumb to management fads, creating "change
fatigue", and the work force resists their initiatives (examples include Josten's and
Subaru).

Failures of Vision: Managers prepare only for the most obvious future business
obstacles, failing to create strategies flexible enough to "deal with the wildest-case
scenario" (examples include the Commerce Clearing House and Quotron Systems,
both of whom failed to anticipate how computer technology breakthroughs would
fundamentally change their business).

The Big Squeeze: Managers take on excessive debt, assuming that present business
success will continue, or to discourage predatory raiders. The result can be

4
 reduced capability to weather business downturns, resulting in divestitures and
layoffs, or even bankruptcy.

The Glue Sticks and Sticks: Organization traditions, once a source of strength,
become obstacles to innovation and new thinking. Curing the problem often
requires tough decisions about which organizational leaders should leave, and how
to create and make room for those who can think differently. Managers at Digital
Equipment Corporation (DEC), once the premier provider of networked systems,
now struggle to trim a massive work force, and revitalize former flexibility and
inventiveness.

Anybody Out There?: Stick close to your customers, an often quoted mantra that
is more difficult to follow in practice. One key, a well-trained sales force that can
build expertise about key customers or markets, plus a system to motivate them to
gather and communicate information about changing tastes, and dissatisfaction
among clients. Managers must find a way to create "players", instead of
"cheerleaders". High-profile examples include Cross penmakers, Merry-Go-
Round fashion retailers, and General Motors.

Enemies Within: Managers who fail to consider the "human factor", risk creating
uncooperative or even hostile workers, who often have the means to scuttle even
the best-laid business strategies. By the time employees join unions, go out on
strike, or engage in sabotage, it's probably too late to deal constructively with the
problem. Encouraging risk-taking while penalizing good-faith failures, or
admonishing cost-reductions while taking record bonuses can sap employees'
loyalty and commitment, and perhaps their willingness to perform.

Organisational performance is a recurrent theme in most branches of management, including

strategic management, and is of interest to academics and practitioners (Venkatraman and
Ramanujam, 1986, p. 801). Although the importance of the performance concept (and the
broader area of organisational effectiveness) is widely recognised, some have expressed
considerable frustration with the concept. Therefore, an important issue to be addressed is to
define the domain of the performance concept. In this article we take the view adopted by
Venkatraman and Ramanujam (1986, p. 801) as defined below:

Financial performance. The domain of performance construct in most strategy

research e.g. sales growth, profitability;

Business performance. The enlarged domain reflected in recent strategy research e.g.
product quality;

4
 Organi sational effectiveness. The broader domain reflected in most conceptual
literature in strategic management and organisation theory.

(Mile Terziovski)

4
4
Fang Lee Cooke, Human resource strategy to improve organisational performance

1.18 Human Capital

Generalizing from these examples, we can derive three criteria for an asset: (1) it must provide
future benefits in the form of added cash inflows or the avoidance of cash outflows; (2) given
that there is uncertainty as to the timing and potential realization of future cash flows, there
must be a generally accepted surrogate that has recognized monetary value; and (3) it must be
owned or controlled by the organisation. Previous research has argued that these three criteria
can be applied to human capital as an intangible asset. Again, criteria 2 poses the greatest
difficulty, since there is yet no consensus on what could serve as an adequate surrogate for
human capital costs. (J. Liebowitz, K. Wright)

One of the arguments against capitalizing intangible assets is that of the uncertainty of the
anticipated benefits and the difficulty in deriving a valuation. Nevertheless, it should be clear
from the examples of physical assets described above that historical cost has proven to be an
acceptable proxy for asset valuation in other cases where the uncertainty is just as great. Of the
few generally recognized intangibles, goodwill, is based entirely on the purchase price of an
acquired business over its net asset basewith no guarantee that the new management will be
able to realize the gains that were assumed as part of the negotiations before purchase. (J.
Liebowitz, K. Wright)

Using a modification of Ohlson's (1995) framework the study finds that on average about
16% of all such costs are valued by the market as an investment in human capital, and that this
human capital asset amortizes at a rate of about 34% per year. Further, the human
capital asset averages about 5% of the total market value of the firm and accounts for about
16% of the difference between market and book value. The ratio of the human capital asset to
market value is found to be positively related to average salary paid to employees, operating
uncertainty, and the ratio of labor expenses to sales, but inversely related to the firms size.
(Marta Ballester, Joshua Livnat, Nishi Sinha, Labor Costs and Investments in Human Capital)

4
The estimated rate of depreciation of human capital assets, has a mean of 34% and a median
of 40%. This indicates that a typical firm in our sample loses about one third of its human
capital assets every year due to such factors as turnover of employees and advancing
technologies. As a comparison, Hirschey and Weygandt (1985) find that the economic
amortization rate for R&D expenditures falls in the 10 to 20% range (depending on the
growth rate of these expenditures), whereas for advertising expenditures it falls in the 10 to
20% range in the non-durable goods sector and in the 30-60% range in the durable goods
sector. (Marta Ballester, Joshua Livnat, Nishi Sinha, Labor Costs and Investments in Human
Capital)

In order to test whether the estimated parameters and the resulting human capital asset make
economic sense, we further test the association of the ratio of the human capital asset to
market value of equity with the following firm characteristics:

1. Average salary Firms which employ quality and skilled labor force are likely to invest more
in training and developing their human capital assets and therefore, should have relatively
higher ratios of human capital assets to market value. A skilled labor force commands a higher
salary, so we expect a positive relationship between average salary and the human capital asset.
Average salary is estimated by the ratio of 1997 labor expense to the number of employees.

2. Labor intensity Labor intensive firms are more likely to invest in retention and training of
this important input factor. Thus, we expect a positive relationship between the ratio of labor
expense to sales and the human capital asset.

3. Operating uncertainty When the environment is unstable, firms have to make larger
investments in human capital in order to prepare employees for the rapid changes in the
environment. Thus, we expect a positive relationship between the standard deviation of the
return on equity (measured over the most recent five years), and the ratio of human capital
asset to market value.

4. Profitability Profitable firms do not need to make further investments in human capital.
We expect such firms to have a negative relationship with investments in human capital.

4
Profitability is measured as the return on assets (income before extraordinary items divided by
total assets).

5. Growth A growing firm needs all its available resources to sustain its growth, and is less
likely to make investments to develop its human capital. Therefore, a negative relationship
between growth and the investment in human capital is expected. Growth is estimated as the
three-year historical growth of revenues.

6. Size Larger firms do not expect employees to carry out more than one task, and invest
less in their human capital. We expect a negative relationship between the investment in
human capital and size. Size is estimated as the log of total assets.

7. Competition Firms in less competitive (more concentrated) industries may invest more in
developing their human assets because they enjoy a relatively protected environment (due
perhaps to regulatory conditions and/or natural or technical barriers to entry). We measure
competition by the four-firm concentration ratio. We expect a positive relationship between
the concentration ratio and the ratio of human capital asset to market value of equity. (Marta
Ballester, Joshua Livnat, Nishi Sinha, Labor Costs and Investments in Human Capital)

(Marta Ballester, Joshua Livnat, Nishi Sinha, Labor Costs and Investments in Human Capital)

4
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