HR Management & Leadership - Harald Meier - E-Book

HR Management & Leadership E-Book

Harald Meier

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Every organisation, whether for profit or as non-profit, needs motivated employees. HR Management is often not seen as a core function and most managers do not receive a systematic and sustainable leadership training either. In this book, the essential basics of modern HR Management and Leadership are presented systematically and always with practical examples. The focus is on the scope of action as a manager responsible on any hierarchical and process level or in HR Management. Step-by-step, to understand HR Management and Leadership policy, strategies and concepts as well as for current challenges in International Management, in 4.0 and in Social Business. The target group are graduates and specialists who are systematically preparing for a new management position (e.g. in a General Management or MBA program), consultants, management trainer and lecturers.

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Edition Management Essentials

by IfTQ-Cert

International Institute for Training Quality Certification

Bonn/Germany (www.iftq-cert.de)

Vol. 1 Business Management (2020)

Vol. 2 HR Management and Leadership (2021)

Vol. 3 Entrepreneurship (2021/2022)

Vol. 4 Social Business (in prep.)

Vol. 5 Intercultural Management (in prep.)

Vol. 6 Intercultural Project Management (in prep.)

Edition Management Essentials

by IfTQ-Cert

International Institute for Training Quality Certification

Preface

Organisations, whether private or public, profit or non-profit oriented, need human resources and managers to accomplish the corporate strategies and operational tasks. Mostly, managers are having a specific professional expertise and work experience, when they apply or being promoted for their first leadership function. And they need to understand HR Management, which is creating and controlling the leadership tools. The basics of modern HR Management and Leadership are introduced systematically and easily understandable.

Parallel and step-by-step structured, this manual leads from the corporate policy and strategies and external socio-economic trends to day-by-day HR Management organisation and operations and Leadership situations and behaviour including the basic common theories and always with examples from practises. Also, HR Management and Leadership specifics are reflected in International Management and Diversity, in Industry 4.0 and Artificial Intelligence, and in CSR, Social Businesses and NGOs.

This book is based on the author's own experience in managing teams and organisations, in HR management and consulting as well as on conception and lectures in MBA programs worldwide. The target group is for example, lecturers and management trainer and consultants, young managers and specialists from other fields of expertise who are preparing for a management position e.g. with a degree in General Management or an MBA.

Bonn, January 2021

Since English is the first or second official language with its own expressions and spellings in more than 80 countries, no uniform spelling is considered.

Numbers are in German style: 1.000.000 is for e.g. 1,000,000 for US/UK.

Coming together is a beginning;

staying together is progress;

working together is success.

Henry Ford, 1863-1947

Brief Contents

Preface

HR Management Policy and Strategy

1.1 HR Management Policy

1.2 Concepts and Instruments of HR Policy

Leadership

2.1 Organisational Psychology and Leadership

2.2 Operational Leadership Instruments

2.3 Leadership Development

HR-Organisation and Operations

3.1 HR Management Organisation

3.2 HR Management Operations

3.3 HR Controlling

Challenges in HR Management and Leadership

4.1 International HR, Leadership and Diversity

4.2 HR Management and Leadership in Industry 4.0

4.3 Social Business HR Management and Leadership

Contents

Preface

Figures

Abbreviations

HR Management Policy and Strategy

1.1 HR Management Policy

1.1.1 Corporate Policy and HR Management

1.1.2 Governance, Compliance and Co-determination

1.1.3 HR and Leadership related Megatrends

1.1.4 Strategic HR and Human Capital Management

1.2 Concepts and Instruments of HR Policy

1.2.1 HR and Leadership Guidelines

1.2.2 Employee Relations, HR Research and Survey

1.2.3 Works Agreement

1.2.4 Employer Branding

1.2.5 Annual HR Report and Staff Meeting

1.2.6 Change Management

Leadership

2.1 Organisational Psychology and Leadership

2.1.1 Organisational Theory, Behaviourism and Work

2.1.2 Motivational Theory

2.1.3 Leadership Roles

2.1.4 Leadership Theory

2.1.5 Leadership Styles

2.2 Operational Leadership Instruments

2.2.1 HR Policy related Leadership instruments

2.2.2 Personnel Planning, Job Profile and Staff Selection

2.2.3 Work Introduction and Onboarding

2.2.4 Staff Dialogue and Team Meeting

2.2.5 Employee Evaluation Report

2.2.6 Team Development

2.3 Leadership Development

2.3.1 Action Maze: Leadership case

2.3.2 Management Development

HR-Organisation and Operations

3.1 HR Organisation

3.1.1 Organisational Theory and HR Management

3.1.2 HR Management Organisation

3.2 HR Management Operations

3.2.1 Personnel Planning Scheme

3.2.2 HR Marketing and Recruitment

3.2.3 Onboarding and Retention Management

3.2.4 Training and Development

3.2.5 Personnel Downsizing

3.2.6 HR Administration and Feelgood Management

3.3 HR Controlling

3.3.1 HR Information System

3.3.2 Personnel Costs, Budgeting and Index Analysis

3.3.3 Personnel Statistics and Key Factors

3.3.4 HR Early Warning System

3.3.5 HR Portfolio and HC Reporting

Challenges in HR Management & Leadership

4.1 International HR, Leadership and Diversity

4.1.1 International HR Management

4.1.2 Intercultural Leadership

4.1.3 Diversity Management

4.2 HR Management and Leadership in Industry 4.0

4.2.1 Artificial Intelligence and Industry 4.0

4.2.2 HR Management and Leadership with AI

4.3 Social Business HR Management and Leadership

4.3.1 Ethics, CSR and Social Business

4.3.2 HR and Leadership in NGOs and Social Business

Bibliography

Index

Figures

Fig. 1.1: Corporate Business Plan and HR Management

Fig. 1.2: Development of the Age Structure

Fig. 1.3: International Demography

Fig. 1.4: Potential Workers till 2060

Fig. 1.5: Personnel Management – HR Management

Fig. 1.6: HR Management Concept

Fig. 1.7: HR Commitment Index

Fig. 1.8: Life phase-oriented Personnel Policy

Fig. 1.9: Generations XYZ

Fig. 1.10: Employee Survey

Fig. 1.11: Change in the Corporate Organisation

Fig. 2.1: Theory X, Theory Y

Fig. 2.2: Pyramid of Needs

Fig. 2.3: Two-factor Theory

Fig. 2.4: Dynamic Leadership Roles and Hybrid Skills

Fig. 2.5: Trait Theory of Leadership

Fig. 2.6: Behavioural Leadership Theory

Fig. 2.7: Leadership Situation Theory

Fig. 2.8: Managerial Grid

Fig. 2.9: Leadership Styles and Leadership Corridor

Fig. 2.10: Job Requirement Profile

Fig. 2.11: Checklist Employee Introduction

Fig. 2.12: Checklist Supervisor Conversation Rules

Fig. 2.13: Checklist Conflict Moderation

Fig. 2.14: Employee Evaluation Report

Fig. 2.15: Project Team Size

Fig. 2.16: Management Seminar Moderation

Fig. 2.17: Corporate Career Models

Fig. 3.1: Centralised HR Department

Fig. 3.2: Decentralised HR Department

Fig. 3.3: HR Department

Fig. 3.4: Planning the Manpower Demand

Fig. 3.5: Personnel Planning Scheme

Fig. 3.6: Traineeship Program

Fig. 3.7: Change in Company Qualification Structures

Fig. 3.8: HR in a Management Information System

Fig. 3.9: HR Marketing Budget

Fig. 3.10: Calculation Personnel Process Costs

Fig. 3.11: Distribution of Salary Groups

Fig. 3.12: Balanced Scorecard

Fig. 3.13: HR Portfolio

Fig. 3.14: Strategic HR Planning Portfolio

Fig. 4.1: Employees and Turnover of large Companies

Fig. 4.2: Cultural shock and assimilation process

Fig. 4.3: Personnel Costs International Assignments

Fig. 4.4: Cultural Map – World Value Survey

Fig. 4.5: Telemetry – Smart Factory Connection

Fig. 4.6: Leadership Styles in Industry 4.0

Fig. 4.7: Distribution of employee structures

Abbreviations

AD

anno domini

AG

Aktiengesellschaft (corporation)

approx.

approximately

BC

before Christ

BetrVG

Betriebsverfassungsgesetz (works constitution act)

chap.

Chapter

cent.

century

CRM

Customer Relationship Management

CSR

Corporate Social Responsibility

CSV

Corporate Shared Value

c.v.

curriculum vitae

Dpt.

Department

Dinks

Double income no kids

DCC

Double career couple

DCGK

Deutscher Corporate Governance Code

Ed.

Edition

e.g.

exempli gratia (for example)

esp.

especially

est.

established

EU

European Union

EUR

Euro

e.V.

eingetragener Verein

excl.

excluding

Expat

Expatriate manager

FAQ

frequently asked question

Fig.

Figure

F&I

Finance and Investment

gGmbH

gemeinnützige GmbH (non-profit)

GmbH

Gesellschaft mit beschränkter Haftung

HC

Human Capital

HCM

Human Capital Management

HCR

Human Capital Reporting

HCVA

Human Capital Added Value

HR

Human Resources

HRM

Human Resources Management

ICT

Information and Communication Technology

i.e.

id est (that is)

Impat

Impatriate manager

incl.

including

in prep.

in preparation

IsT

Internet of Things

ISO

International Organisation for Standardisation

KPI

Key Performance Indicator

MBA

Master of Business Administration

MbD

Management by delegation

MbO

Management by objectives

m

million

min/s

minute/s

MIS

Management Information System

MIT

Massachusetts Institute for Technology

NGO

Non-governmental Organisation

OECD

Organisation for Economic Co-operation and Development

QM

Quality Management

p. / pp.

page / pages

p.a.

per annum

PLC

Public Limited Company

PPP

Public Private Partnership

ppp

planet, people, profit

R&D

Research and Development

SCM

Supply Chain Management

SE

Societas Europaea

spec.

specific

sq.km

square kilometre

STEM

Science, technology, engineering, and mathematics

TG

Tarifgruppe (tariff group)

TQM

Total Quality Management

TV

Television

UA

Unified Architecture

UK

United Kingdom

UN

United Nations

US

United States (of America)

USD

US Dollar

WW

World War

www

World wide web

1. HR Management Policy and Strategy

1.1 HR Management Policy

1.1.1 Corporate Policy and HR Management

1.1.2 Governance, Compliance and Co-determination

1.1.3 HR and Leadership related Megatrends

1.1.4 Strategic HR and Human Capital Management

1.2 Concepts and Instruments of HR Policy

1.2.1 HR and Leadership Guidelines

1.2.2 Employee Relations, HR Research and Survey

1.2.3 Works Agreement

1.2.4 Employer Branding

1.2.5 Annual HR Report and Staff Meeting

1.2.6 Change Management

1.1 HR Management Policy

1.1.1 Corporate Policy and HR Management

Corporate Policy (policy: consciously enforcing will) is decision making and design of the long-term corporate goals and their adaptation to internal and external framework conditions or influences – as basis for following operationalized divisional, department etc. planning activities (see following example in the HR Division).

Fig. 1.1: Corporate Business Plan and HR Management

ExampleCorporate Policy Operationalisation

The example is showing a typical corporate policy objective (increase profit and rentability) operationalised top down to an individual workplace objective:

Corporate Policy: Increase Profit + Rentability

HR division

Reduce HR costs, increase performance.

HR Dpt. Recruitment

Reduce Recruiting Costs.

Reduce general fluctuation.

Team Management Recruitment

Train Recruiting staff in virtual interviews.

Legal check per country (maximal possible

probation times).

Reduce absent time (shorter business trip).

and fluctuation in Recruiter teams.

Recruiting Manager

Reduce business trips (for interviews) and do virtual selection interviews.

Negotiate longer probation times (6 months), and

reduced salary during probation time.

Overtime/shift-work (in foreign interviews).

Performance related bonus (low fluctuation in recruiting process/first two years related to your recruiting segment’s performance.

Influences on Corporate Policy

The diversity and complexity of influences on an HR and Leadership policy are resulting from many different internal and external stakeholders, company history and culture, megatrends (demography, globalisation …) and socio-political discussions (minimum wage, work-life balance …) in the society. Typical HR and Leadership related claims of stakeholders are e.g.:

Manager

: job satisfaction, high income, prestige, power and career, self-development, ...

Employees

: job and social security, healthy work conditions, training and career opportunities, social contacts, ...

Collective partner

(e.g. union, works council): compliance with and participation in a collective agreement, fairness of the negotiations, …

Economy: labour market situation, purchase power, …

Compliance environment:

labour law, co-determination due unions and works council, …

Socio-political:

values, education, demography, diversity, income tax, policy, income distribution, minimum wage, working time regulations, …

Technology:

ICT acceptance, home office, virtual work, …

Shareholder Value- and Stakeholder orientated HR Policy

While a traditional shareholder value-orientated corporate policy is mainly stability-, conservative- and short term-oriented, the stakeholder-oriented approach is progressive and focused on long-term corporate development, investing in training and personal development of the employees.

Shareholder Value-oriented HR and Leadership:

HR is seen as a cost factor, e.g.:

focus on short-term oriented individual and team performance to create profit/corporate value,short-term oriented personnel planning and recruitment,performance related income concepts,more training for direct work success than long-term development programs.

This traditional one-dimensional focus on a short-term return on invest equity has becoming increasingly critical, not only because of the discussion about ethics.

Stakeholder orientated HR and Leadership policy:

HR Development seen as an investment,

primary goal is searching and creating new potential candidates, andfeelgood-, talent- and career management for long term employer branding,

In the same as in the general corporate policy companies often move between these polarities due situational factors and corporate policy dynamics, or larger ones follow different policies parallel in their different divisions. Especially in the last two decades in the background of corporate ethics, work-life balance and CSR more and more companies are tending to become more stakeholder-oriented.

The individual corporate profit orientation as a guiding principle must to be see critically today, as it often leads beside environmental damage to individual psychological and social problems (e.g. mental problems, unemployment).

ExampleCriticism of the Shareholder Value approach

In our times almost 200 of the leading US-entrepreneurs (e.g. from Apple to Pepsi and Walmart) are moving away from maximizing profits in a public statement. They distanced themselves from a pure shareholder-value approach by defining new principles of corporate management: … we know that many Americans have problems. Too often hard work is not rewarded and enough is not done to allow workers to adapt to the rapid pace of economic change. In the future, the focus will be more on investing in employees, in environmental protection and in fair and ethical dealings with suppliers.1

1.1.2 Governance, Compliance and Co-determination

Corporate Governance and Corporate Compliance are partly interdepend-dent: the governance focus in on the corporate's constitutional (legal) basis, compliance aims at whether and how these are followed, and if necessary other voluntary rules of conduct such as Business Ethics and CSR. Co-determination due unions and works council or employee participation is (culturally depending) by laws and/or a lived social standard in a society.

Corporate Governance and Compliance

Traditionally, corporate governance in the sense of shareholder value-oriented management aims at responsible management and corporate control to create value.

This has played an important role for HRM and Leadership in recent years, esp. against the backdrop of spectacular bankruptcies and the legally and ethically dubious management behaviour of known consulting firms (e.g. Arthur Anderson, EY) and companies (e.g. Wirecard, Enron, Volkswagen Dieselgate). Frequent criticism (esp. from foreign investors) is e.g. lack of transparency in company management or lack of independence of German supervisory boards. Or the unusually high manager salaries or success bonuses in Germany with the simultaneous systematic destruction of company values. Accordingly, more and more socially recognized rules for responsible corporate management are being discussed in public.

ExampleCorporate Governance in Germany

Corporate Governance

The German Corporate Governance Code (DCGK) developed by a government commission in 2002 contains various rules and recommendations on different levels of commitment:

important legal regulations (e.g. from the German Stock Corporation law like renumeration of the executive board or the supervisory board),voluntary recommendations and suggestions for action, e.g. on the ethical management behaviour.

Corporate Governance Report (DHL Group, excerpt)2

Essential elements of its corporate governance structures: the declaration of conformity by the executive board and the supervisory board, essential corporate governance practices that go beyond the legal requirements, e.g. as

Code of Conduct and Compliance Management as ... guidelines for all employees and at all hierarchy level daily behaviour with focus on respect, tolerance, honesty, openness, integrity towards employees and customers, to assume social responsibility, e.g. with an anti-corruption policy or mandatory staff training and compliance auditing.

Management Ethics

Even if there is little talk on corruption and fraud in industrialized countries, corruption in and by companies is more widespread than is publicly known. For example, in Germany approx. 70% of companies have corporate compliance guidelines (see example below). There are just a few cases shown in the media (e.g. emission scandal by Volkswagen, known as Dieselgate), but for years the number of corruption and fraud cases uncovered has been increasing – also through the corporates' compliance policy. The spectrum ranges from culturally expected invitations (restaurants, events) to company services (e.g. untaxed private use of company vehicles/aircraft) to active bribery.

ExampleGlobal Fraud Survey – results for Germany

A study of over 2.500 companies in 55 countries worldwide by EY shows, among other things:3

that e.g. almost no manager in Scandinavia, in Switzerland or in Germany regards this as widespread in their own country, butcontrary to this subjective assessment, cases of fraud or corruption registered in Germany have been increasing for years (in more than every sixth company there was a major fraud case in 2016/2017), andevery 6th manager also holds e.g. restaurant/event invitations for justified.

Examples of ethical goals for managers should be:

Knowledge and implementation of ethical aspects in their functional responsibility (e.g. customers, purchasing, production),

as well as in relation to their employees and team leadership.

Induce and empower your team members to self-critically examine their own values and actions.

They should encourage their employees to raise ethical concerns, and

support them in making decisions about ethical behaviour.

Ensure that everyone feels committed to the common corporate values and basic social values.

Freedom and support for ethically justified changes in the work area.

ExampleCorporate Compliance Policy (Bayer)4

With its corporate compliance policy as a basis for action, Bayer (active in nearly all countries, 104.000 employees) wants to be successful in competition through innovation, quality, reliability and fairness, while adhering to company-specific and legal rules: Our decisions are legal, ethical and responsible. Doing the right thing is not always easy or clear, but it is necessary. For help, consult our internal experts for input or guidance.

Examples and rules of action are set out under following headings for implementation:

We compete fairly in every market.

We act with integrity in all our business dealings.

We balance economic growth with ecological and social responsibility.

We observe trade controls that regulate our global business.

We safeguard equal opportunity in securities trading.

We keep accurate books and records.

We treat each other with fairness and respect.

We protect and respect intellectual property rights.

We act in Bayer’s best interest.

We protect and secure personal data.

Labour Law and Co-determination

Even despite the widespread slavery, already the Romans were familiar with the principles of labour law in ancient times, such as to the service contract (locatio conductio operarum) for Roman citizens.

Today’s labour law developed through the first forms of wage-related labour in the late 18th cent., e.g. limiting child work in the UK. As a result, the increasing political discussion of the contradiction between capital and labour gradually developed workers' rights and often a kind corporate social policy in industrializing countries. Today, usually individual employees and/or their committees like a works council have a wide range of rights, depending on the different labour law cultures in the industrial and threshold countries. In most countries it distinguishes between:

Individual labour law

inside the company between employees (often represented by their elected works council) and the company, and

Collective labour law

as general rights and obligations (like, for example, collective tariff agreements) between employers (or associations) and employee representatives (such as works councils and unions) for a region or an industry.

Internationally, labour law sows a broad spectrum:

from general to situational self-image (in sense of friendly-cooperative community of interests up to open-fighting opposition,

both at the socio-political level between trade unions and business associations, as well as

in companies between works councils (or unions) and companies,

up to a direct participation of trade unions and/or works councils in management bodies like board of directors and supervisory board.

ExampleCultural Roles of Unions

Germany: Unions are institutionalized by law with participation on all levels (factory, industry). Usually, unions and the industry association negotiate collective tariff agreements. Unions tend to be politically social-democratic and being pragmatic. Even if they have a constitutional right to go on strike, in Germany there are compared to other countries relatively less strikes.Roman countries (France, Italy, Belgium): Unions are the non-formalized political opposition to companies/nation with traditional socialistic targets, e.g. modernizing work conditions and bring more social political power for employees; with a high level of willingness to strike compared to other European standards.USA: Non-institutionalized negotiations between local union and company, no socio-political focus outside the company; level of organisation rather low what means low power in negotiations.

Globalization led in global companies to international associations for the employers (e.g. Association of International Motor Vehicle Manufacturers) and employees (e.g. European Works Council or World Group Works Council at Volkswagen, or international union associations like International Trade Union Confederation) as well as Equal Opportunity Officers (or Committees) as representatives for the rights of young people, disabled employees, gender equality, etc.

ExampleWorks Council rights (Germany)

Participation rights for Works Council

In Germany the Betriebsverfassungsgesetz (BetrVG, kind of Works Constitution Act) regulates participation of employees through their works council, elected by them in companies with at least five regularly employed employees, e.g. the right of …

co-determination, e.g. in the case of social plans for major corporate downsizing or closure, or determination of performance bonuses,initiative, e.g. for internal job advertisements,consent, e.g. personnel surveys or employee evaluation,veto, e.g. in the case of recruiting, re-grouping or employee transfers in other jobs/departments,advice, e.g. in vocational training measures, or planning of production sites or technical systems,to be heard, e.g. in the case of individual or mass dismissions,information, e.g. in the personnel demand planning.

Global Works Council adopts Charter for Temporary Employees

VW group was one of the first set up a European Works Council (by EU law) and Global Works Council voluntarily. The approx. 671.000 employees have representatives from more than 60 locations in about 15 countries worldwide (as of 2019). Main objective (acting in addition to national works councils) is to represent, coordinate and act as a main negotiating partner for the employees worldwide with the VW board on global issues.

For example, in 2013 the VW group board, the European and the Global Works Council adopted the charter for temporary employees at VW group with principles for them worldwide: among other things about employment and payment conditions as well as qualification offers in terms of equality with the VW permanent workforce.

1.1.3 HR and Leadership related Megatrends

Megatrends are medium and long-term changes over one or more product life cycles with a fundamental, often for decades change for companies. The typical ongoing Megatrends like Demography, Social Change, Technology and Digitalisation, Globalisation, Climate Change etc. are having mostly, depending on the industry, more or less influence on HRM and Leadership, e.g. for industrial countries like Germany:

Demography and Population: decreasing total population due lower birth rates and longer life expectancy, structural change (more older people and migrant cultures) …

this means for HRM for example: fewer young school and university graduates on the labour market and in companies, but lot more 50+ employees in future, more applicants and employees with a migrant background, higher life expectancy leads to socio-political discussion about retirement age (currently 67, up to 70+ is in discussion in Germany), the Young old as a new labour potential, age-adapted work- and workplace conditions etc., and

for Leadership more elder employees and migrant backgrounds, therefore onboarding and team development activities, reorganising work, working time and work-place related to age, intercultural sensitivity leadership and communication training for the manager and for the team, …

Globalization: more free trade and protectionism at same time, adapting international standards, global value creation (SCM), more global markets and competition, permanent worldwide migration …

this means for HRM for example, more employees with migrant background or international staff in the home country, local staff in foreign subsidiaries, and esp. due global production, sales and procurement more cross-national business trips and Expat management due foreign assignments (incl. family). In this nearly all HR operations are involved, e.g. highly diverse income tax and social insurance due different country laws and cultural standards, assignment contracts with very different compensation factors and salary, preparing (e.g. language and intercultural training), mentoring (while working abroad), re-integration of expats etc., and

for the manager e.g. more business trips abroad, staff with migrant background up to an intercultural team, intercultural onboarding and team development incl. intercultural conflict management (due intercultural misunderstandings or prejudices) and tolerance. In big or in global oriented companies like the medium-sized hidden champignons often the operations language turns generally into English.

Among others, these trends partially influence each other, e.g. demography and changing social values or globalisation. They affect the majority of companies in industrialized countries regardless of their size or industry. In addition, there are relatively new trends that so far have only affected a few countries, industries or companies (Urbanization, Individualization and New Work, Mobility and Migration, Gender Equality). For example, Migration (national, cross-national, global) has now become one global megatrend that goes beyond demographic aspects.

ExampleDemography and Labour Market Germany (I)

Nobody can help the Germans is a typical headline in the media for many years. Like other industrialized countries, Germany has a steadily declining and aging population (fig. 1.2). Cuts in the 1983 statistic are showing a lack of people e.g. due first global economic crisis, WW I+II, invention of the birth control pill, and more recently changing social values towards Singles, DINKs and DCCs.

Fig. 1.2: Development of the Age Structure (Germany)

Similar developments apply to all industrialized countries worldwide. And the emerging economies with their industrial regions with a growing income-secure middle class are showing the same developments (fig. 1.3).

Stable demographics in industrialized countries require an average of 2,1 children/woman. Due to the low birth rates in the past, there are now fewer women. An increasing birth rate in the next two decades will have relatively little effect on demography – to stabilize the population, which has been reduced for decades, 3,6 children per woman are now required – and the new-borns will only reach the labour market in around 20 years.

A common misconception that migrants would have many children is wrong. On one hand, migrants (e.g. Germany) are pre-dominantly men. And on the other hand, their birth rates will slowly adjust to the society's average (demonstrably in the next generation).

Fig. 1.3: International Demography(Example continues next paragraph: prognosis of potential workforce).

Future Employment Potential

Often without needed experiences (e.g. language, school or vocational qualification, professional experience) and with problems to accept or understand local cultural values, their professional integration is an essential requirement for their (and their family) social integration. But the sometime lower level of education and qualifications must not be generalized: overall, their academic quota (20%) is almost equal to Germany (22%). For example, migrants from Eastern Europe (esp. women) have on average a significantly higher level of education than native German. And more importantly: Every second child graduates at high school a generation later, because most parents invest heavily into their education.5

ExampleDemography and Labour Market Germany (II)

15 m potential new employees (born 1992-2012) are now entering the labour market and at the same time approx. 25 m (born 1947-1967) will leave. Germany currently needs a high level of immigration. Even with an (assumed) higher employment rate (e.g. longer working time, higher retirement age, more female employment) and (assumed) net immigration of approx. 200.000 people/ year.

The forecast by IAB (German state research institute for labour market and vocational training) on labour integration shows that approx. 50% of migrants are in regular work after five years. Many are initially in internships, part-time or less-valuable employment. There are annual increases: 10% of those who came to Germany in 2015 were employed in the first half of 2016, 22% which came in 2014 and 31% of those from 2013. Main reason for this relatively positive development is that approx. 70% of these migrants are relatively young. This development is correspondent to previous migrations and current OECD studies in Europe.

Fig. 1.4 shows the development of the potential number of working people in three different scenarios until 2060: Parallel to the negative demographic development, the new megatrend Global Migration can only partially compensate for the shortage of young people.

Fig. 1.4.: Potential Workers till 2060 (Germany)6

1.1.4 Strategic HR and Human Capital Management

The HR Management approach

The approach of Human Resources Management (HRM) is becoming more and more popular (in contrast to traditional Personnel Management) in modern companies. HRM is based on a strategic importance of the human resource factor – staff is no longer seen as an entrepreneurial planning and support function, but rather focuses on creating optimal framework conditions for the procurement, development and motivation of human performance potential.

Even if both, Personnel Management and HRM mostly are simply used synonymously in many companies and publications, they differ in their clear strategic and stakeholder orientation. While in traditional Personnel Management employees were mainly seen as a cost factor, HRM aims to see employees as indispensable and to encourage and bind them accordingly for the company's development (fig. 1.5).

Fig. 1.5: Personnel Management – HR Management7

ExampleHR Management (Harvard approach)8

The HRM approach at Harvard Business School sees HR as a contribution to strategy implementation with a focus on a general management perspective: This is why administrative HR tasks such as personnel administration and accounting, personnel controlling, etc. belong to Personnel Management, whereas strategy-implementing tasks belong to HRM with four central HRM policy areas:

Employee participation

(participation philosophy),

HR movements

(recruitment, deployment, adjustment),

Salary system

(incentive, salary and participation systems),

Work organisation

(work structuring).

These policy areas are influenced by different stakeholder interests (employees, works council, management, trade unions, state ...) and situational factors (employment structure, corporate strategy, labour market conditions, technology, social values ...).

Fig. 1.6: HR Management Concept (Harvard)

Due to the dynamically changing framework conditions (megatrends, see chap. 1.1.3), employees and esp. their qualifications and motivation are becoming a corporate strategy factor. Since more and more products, quality and prices are similar, the qualified advice and support of customers or the motivation, qualification and flexibility of the employees’ preference-forming factors for customer demand. The HR Department accompanies the employees in the different phases of their operational careers, from job selection and job introduction, to training and development, performance and potential assessment, up to compensation and retirement from the professsional life.

ExampleRevolution in the Labour Market

The ongoing shortage of young talent and skilled workers and the further demographic development cannot be compensated for by migration, more working women and longer working hours (fig. 1.4 in chap. 1.1.3). For HRM, digital modernization and rationalization with AI and networked robotics (Industry 4.0 in chap. 4.2) with an estimated productivity increase of up to 50% depending on the industry in the coming years is the greatest strategic challenge (according to Bain & Company).9

Over the time, relatively more traditional jobs are lost because, as a rule, the demand for goods and services grows much more slowly than the production potential. It is forecast that approx. a quarter of the current jobs – this applies not only to traditional low-skilled jobs but also to high-skilled jobs, with the exception of digital experts – there is a threat of division the corporate’s workforce. In addition to this relatively dramatic assessment, there is also recent experience that gigantic technological developments (e.g. in the 1980s there was talk of winners and losers in rationalization) do not have such a radical effect on the labour market and the workforce. Statements relating to HRM regarding personnel policy can be expressed using different instruments, e.g. in company and personnel guidelines, through management principles or the leadership style, through company agreements or through regular employee surveys.10

Human Capital

The term Human Capital usually describes the economically usable knowledge and potential of employees as a quasi-immaterial value in the company – extended definitions incl. e.g. also the working atmosphere or a knowledge database and the leadership quality of management.

Human capital is not, like e.g. machines and material stocks, capital in traditional accounting or (mostly also qualitatively oriented) controlling with the traditional instruments of finance and accounting are only inadequately recorded and evaluated in a statistically quantifiable manner. However, human capital is an asset and entrepreneurial potential for success, which is e.g. is reflected in share prices or is assessed qualitatively in the case of company acquisitions.

When calculating human capital in the sense of the shareholder value approach (chap. 1.1.1), one usually refers to short-term successes with the attempt to calculate human capital as a key figure or value, e.g. the (less informative) key figure Human Capital Value Added (HCVA, chap. 3.3.5) as a value contribution from HR measures or the profitability of employees. However, development opportunities, innovation, creativity, esp. through teams, changing working and environmental conditions as well as changing customer behaviour or life phases of employees are not taken into account.

ExampleHuman Capital Index

HR Commitment Index (Telekom)11

The employee satisfaction (commitment index) is according to the group-wide employee surveys carried out in 2017/2019 …