For all HRD professionals it is essential to understand and become familiar with the ways in which HRD activity is funded and what needs to be done to secure additional investment if this is required.
It is important for HR professionals to understand financial information, including the preparation of budgets (which was introduced in B863).
If you wish to review this background topic, you may find it useful to read ‘Managing financial resources and performance’ (Open University, 2012) – which is available as Reading 24 in the B863 Reader, or as a PDF in Suggested additional resources.
This reading summarises the overall approach to budgeting and financial management within an organisation..
Table 5.7
Covers issues relating to the funding of HRD activity
Activity 5.6:
HRD funding
As well as exploring different modes of funding, within many organisations there is a difference between:
Annual budgeting, which often assumes a regular, repeated cycle of HRD activity often calculated on a cost-per-head basis.
One-off project budgeting for new initiatives, where the cost is additional to a regular budgeting process.
Many organisations approve an annual budget and only require a specific business case to be developed for projects over a certain amount or when external resources such as consultants are to be used.
Others, particularly small organisations, will require all aspects of HRD work to be costed and budgeted before they are approved.
Because there will be a wide variation in the actual processes within individual organisations, you are advised to ensure that you research the particular approach within your own organisation well in advance of any requirement to produce a business case at work.
Questions that you should ask in your own organisation include:
How is each element of HRD funded?
Asking this question allows an understanding of the distribution of funding. It also enables you to explore the way in which HRD activities are constructed as financial components.
How does this compare with other HR activities? How does this compare with other service functions such as finance or IT?
These questions enable a comparative analysis of HRD funding compared to other HR activities and, then, other services.
Has it always been done this way? And if not, when and why was it changed?
Asking these questions allows exploration of whether the funding approach changes in times of profit compared to more difficult economic circumstances. It might also uncover the role of leaders in the organisation in shaping the funding strategy.
What reports are available that show how the HRD budget has been spent over the last five years and/or planned spend over the next year?
Financial reports are essential organisational documents which capture the essence of funding decisions.
What financial measures and assumptions are applied to the budgeting process?
This question can allow an investigation of the underlying mechanisms and assumptions beneath funding processes.
This last question is a particularly critical one for HRD professionals to ask. It can be easy to assume that the production of financial forecasts, estimates and budgets is an objective and scientific process – however, this is not the case. It is really important to be able to question and debate the assumptions that have been used, particularly if those producing the figures for HRD activity are not those with a detailed knowledge of the area. However, at the same time HRD professionals should also then expect a robust questioning of their own financial calculations.
5.6 (a) Developing an HRD business case
The previous section explored HRD funding and started to unpack the way in which funding decisions might be made in different organisations.
We highlighted that it is often necessary to develop a business case to secure funding for a particular HRD initiative.
While the specific requirements of a business case tend to vary between organisations (and sometimes even within them) this section aims to offer general advice on business case preparation.
You will then have the opportunity to consider different business case scenarios and assess their persuasiveness.
While one essential part of a business case is the presentation of the key facts and figures about a planned initiative, it is also important to think of the central message about the initiative that you want to convey.
In marketing terms, what is its ‘USP’ or unique selling point?
Alongside the numbers about the work to be done and benefits generated, you need to consider how you will get your stakeholders interested and motivated to support the initiative.
Our first piece of advice on developing a business case is therefore know your audience.
You can use stakeholder analysis to develop an understanding of your audience.
Sometimes it is possible to recruit members of different stakeholder groups to the project team developing the business case so that they are directly involved.
On smaller projects bringing representatives of these groups together for a focus group or brainstorming session can help generate important input to your business case.
You may need to present your business case to the board or another approval body.
If possible speak to others who have been through the process recently and take time to review their past decisions and understand why particular cases have been successful (or unsuccessful).
This understanding of the process for approval is closely related to our second piece of advice: ensure you know what needs to be included in your business case and how you must submit this.
These days we often assume that a presentation means a set of PowerPoint slides and that we can simply email copies directly to those involved, but this may not always be the case.
(The unit author has just been involved in a submission which required 13 paper copies to be delivered to a group secretary.)
If at all possible, obtain examples of business cases developed for past projects so that you can learn how these were presented.
It can be very useful to see an example of a case that did not gain approval as well as reviewing those that were successful.
(In the case of the unit author’s recent submission, the team used several past bids as a clear model for this submission but also made sure to give a clear message about the benefits of the particular knowledge-sharing event being proposed.)
Often when you are involved in developing a proposal you develop certain understandings about the project that might not be clear unless spelled out to others.
(For example, in the proposal recently developed by the unit author, the team had an assumption about opening up the workshop to research students but how this would actually be facilitated was not worked out until the last minute before the proposal was submitted.)
Therefore our third piece of advice is to clearly articulate your assumptions.
It is often necessary to have a clear set of working assumptions that enable you to calculate key aspects of the business case. An example is that the cost per participant of many HRD initiatives requires that you estimate the number of likely participants.
Being clear about the assumptions underlying this number is vitally important so that you can take account of the impact of many changes (for example an increase in recruitment).
Assumptions are necessary because they define the limits of a criterion or aspect, and make developing the business case more manageable.
However, it is important to ensure the following:
(a): Check that the assumption is written down and agreed by the team.
(b): Ask whether the assumption is necessary for the development of the business case.
(c): Be clear what aspect of the business case the assumption relates to.
(d): Eliminate any surplus assumptions and clarify the underlying basis for those that remain.
At this point in the development of the business case, and using the base assumptions, you will need to set out what needs to be done in as much detail as possible. This approach is often called ‘bottom up’ estimating. There may be some circumstances where you might also need to adopt a ‘top down’ estimating approach if you are already aware of constraints that will limit the budget, such as a cap on expenditure or timeframes.
Often, it is necessary to iterate between the two approaches so that you work within any limits set but at the same time develop a clear understanding of the tasks involved. As before, having access to past plans can be really helpful here, particularly as they might alert you to any tasks or costs you may have forgotten to include.
Remember that you may need to group your tasks to present at a more summary level within the final business case. Be careful, therefore, not to make changes at the summary level without working out the implications for your understanding of what needs to be done.
From this basis you can now move to estimate the costs and the benefits of the planned project. These will need to be developed in parallel as specific benefits might only arise from certain expenditure and vice versa. Some organisations might request that you present costs and benefits based on several different scenarios.
It is nearly always the case that you will need to find out how the plan needs to be costed and what costs should be included in your plan. For example, will staff costs be based on a salary cost only or on a costing basis that includes overheads?
Do you need to include only one-off costs or produce a plan for ongoing costs over subsequent years? What currency should be used and how will exchange rate variance be factored? Understanding the basis for these costs is essential. HRD projects often need to include a cost associated with the development, delivery and evaluation of the initiative.
You will also find that you need corresponding guidelines for the way in which the benefits need to be estimated. It is essential that you can clearly tie the projected benefits to the expected outcomes of the HRD initiative and are not tempted to over— promise on the likely results. The benefits of HRD initiatives are notoriously difficult to calculate. However, you may be able to use a benchmarking or other comparative approach to find suitable figures on which to base your estimates.
Once you have worked out an understanding of both the costs and benefits you will be able to calculate the return on investment (ROI) which is an essential financial indicator for any business case. This is also often the key selling point for senior managers.
Most business cases will also include a risk analysis, which will require you to consider the risks of both proceeding and not proceeding with the project. Usually, for each risk identified you will need to estimate the likelihood of the risk occurring and explain how you will mitigate against this. Sometimes you may need to develop a detailed contingency plan, but in many organisations this might only be required once funding has been approved.
Completing all these activities does not mean that the business case is ready to submit. It will often be important to get an informal review of your draft business case and review and refine it before you finally submit it. In some organisations you may need to consult with a range of individuals from other departments (such as finance and IT) who might be required to sign-off that your case is adequate from their perspective.
As you develop your plan it is useful to ensure that alongside all the detail you have developed, you can answer the following questions in a relatively straightforward manner and present your ideas at a summary level:
(a) Why is this project needed?
(b) What is the ‘do nothing’ scenario?
(c) What are the overall costs and timescales involved?
(d) What are the risks involved?
(e) Who is accountable?
In Activity 5.7, you have the opportunity to assess three different business cases and determine whether or not you would recommend each project proceeds.
Activity 5.7:
Reviewing HRD business cases
Evidence-based practice
One of the terms heard most frequently in the context of HRD business cases is the concept of ‘evidence-based practice’.
Watch Video 5.3, in which a range of expert HRD practitioners, consultants and coaches discuss their understandings of this term and some of the issues to consider when gathering evidence in support of HRD business cases.
Video 5.3:
Video - Evidence-based practice.
Transcript - Evidence-based practice.pdf
5.7 Ethical considerations for HRD professionals
The previous section focused on the business imperatives and justifications for HRD activity. However, within the broader context of HRD work there are often strong social justice motivations that drive professional concerns.
HRD professionals are not only required to ensure that they personally uphold professional ethical standards but are also often tasked with responsibility for the development of ethical behaviour among an organisation’s employees (Valentine et al., 2013).
This is an important comment to bear in mind when reflecting on the previous discussion about business cases.
A business case traditionally focuses on the financial rather than the ethical implications of a particular course of action.
It also typically identifies risks in terms of costs rather than moral grounds. Ardichvili and Jondle (2009) suggest that HRD practitioners have a role to play in ensuring ethical considerations are also brought into consideration in making business decisions and that ethical costs, benefits and risks are fully considered.
The CIPD (2015, p. 3) has commented that this is a challenge for HR professionals as ‘ethics aren’t something that we in HR necessarily feel comfortable talking about’.
Ethics can be considered in respect of the codes of conduct that guide the work of HR professionals, including those working in HRD (as discussed in B863).
Different codes of conduct are set out by HR professional associations across the world to guide the ethical behaviour of their members.
For example, the Code of Ethics from the Society for Human Resource Management (SHRM) in the USA sets out principles and guidelines in respect of professional responsibility, professional development, ethical leadership and the use of information (SHRM, 2014) – see Box 5.3.
Box 5.3.pdf
The Society for Human Resource Management (SHRM) Code
Activity 5.5:
Reviewing consultancy arrangements
Ethics and leadership
The SHRM guidance emphasises the role of HR and HRD in terms of leadership and role-modelling. This means that HRD professionals are responsible not only for the leadership behaviours of people in their organisation, but also – crucially – for their own leadership behaviours.
Although it is beyond the scope of this unit to discuss the topic of leadership in depth, you should note this increasing emphasis on the HRD practitioner role as a leadership role, and the resulting connections that can be made with the academic and practitioner literature on leadership ethics.
Ciulla (2004) highlights the various ways in which leadership ethics emerge:
The ethics of means:
What do leaders do or use to motivate others to obtain their goals?
The ethics of person:
What are leaders’ personal ethics, values or beliefs?
How do these relate to the goals of the function or organisation?
The ethics of ends:
What is the ethical value of a leader’s accomplishments?
Do the ends justify the means?
How might this be assessed?
One of the complexities in this area of leadership ethics is how to think about the interactions between these three aspects. Do leaders have to be ethical in all three areas for their behaviour to warrant the label ‘ethical’?
For instance, how should we evaluate a leader who displays a strong sense of personal ethics, but then uses unethical means to achieve ethical ends? Some might argue that the only thing that matters in organisations is getting things done – in other words, the ethical nature of the leader’s accomplishments. Others might feel that means and ends are relevant to organisational ethics, but that the leader’s private values belong to a separate realm altogether.
These are the debates that are relevant to the business leaders and line managers who are supported by the HRD function in an organisation, but the SHRM code reinforces the point that they are just as important and relevant to HR and HRD professionals themselves.
These are the debates that are relevant to the business leaders and line managers who are supported by the HRD function in an organisation, but the SHRM code reinforces the point that they are just as important and relevant to HR and HRD professionals themselves.
Thinking about how the practices and standards you apply to others also apply to your own experiences is, of course, an underlying theme of this whole module, and was a particular feature of Unit 4.
Suggested additional material on leadership ethics.
Ethics and culture
The SHRM guidance also highlights that HR and HRD practitioners have a particular role, responsibility even, in ensuring an ethical culture.
(Schneider et al., 2013, p. 362)
Culture can be defined as:
The shared basic assumptions, values, and beliefs that characterize a setting and are taught to newcomers as the proper way to think and feel, communicated by the myths and stories people tell about how the organization came to be the way it is as it solved problems associated with external adaptation and internal integration.
Ardichvili and colleagues (2009)
Suggest the essential elements for achieving an ethical organisational culture can be represented as follows:
Figure 5.2:
Five clusters of characteristics of ethical business cultures.pdf
Within this broad context, HRD activity is often heavily implicated within many organisations’ attempts to promote ethical practice.
Usually this is through the development and delivery of learning and development programmes to ensure that there is a clear understanding of the ethical guidelines and procedural frameworks set out by the organisation.
Ardichvili and Jondle, (2009)
Such training often includes both rule-based and values-based elements:
Rule-based elements
Refer to the actual policies and procedures the organisation has put in place to regulate behaviour.
These might be called the ‘hard’ elements of ethical culture.
Values-based elements
Refer to the ‘softer’ elements of ethical culture, which includes the attitudes and values that the organisation would like its employees to embrace.
HRD interventions (ADHD)
HRD interventions whether they be designed to address areas of individual behaviour (as might be the case within a coaching or mentoring context, for example) or in ensuring that management are able to role model appropriate behaviours (which might need to be embedded within leadership development activity, for example.
In setting out the essential ingredients for delivering ethical business cultures, Ardichvili and colleagues (2009) suggest that HRD practitioners have a particularly important role to play in facilitating communication and cooperation across an organisation to share information about ethical practice.
These authors also suggest that traditional approaches to learning and development are only one part of the potential HRD toolset that can be significant:
These authors also suggest that traditional approaches to learning and development are only one part of the potential HRD toolset that can be significant:
Ardichvili and Jondle,
(2009, p. 240)
A lasting impact on the organization can only be achieved if the organizational values are fully integrated into all HRD interventions and day-to-day operations.
Because values develop and strengthen in interactions and through personal example, HRD practitioners, being among the most visible carriers and promoters of organizational values, must act as role models of ethical behaviour within the organization.
Furthermore, because the tools have a decisive impact on our ability to achieve desired outcomes, to serve as the catalyst of ethical culture transformation, HRD needs to reexamine currently used models and frameworks.
Stewart and colleagues 2011, p. 583
Further suggest that research shows that an individual’s ‘perceptions that one’s organization has established and maintains an ethical code through communication and policy’ are significant.
Their research suggests that positive perceptions of ethical culture are associated with similarly positive measures of various employee attitudes and overall lower turnover intentions.
However, others have considered the ethical role of HRD practitioners from a critical perspective and suggest that there is a need to move beyond organisational outcomes and consider the social responsibility associated with HRD.
Contu and colleagues (2003)
Suggest that we have become rather seduced by the notion of learning as a solution to a range of organisational problems.
Learning and development is universally and unproblematically regarded as a good thing, good for individuals, teams and organisations.
HRD activity can therefore become positioned as the ultimate ‘win-win’ as it can be difficult to see anything other than positive outcomes.
However, Contu and colleagues (2003) highlight that the practice of learning should be considered within the context of power relations between employer and employee.
Thus, while framed as a ‘win-win’ proposition, learning in organisations may often be based on a narrow set of topics that are ‘useful’ to learn with a particular emphasis (or indeed onus) on the individual employee to take responsibility for their own learning.
5.7 (a) Ethics in day-to-day practice
Here we have provided an overview of the different dimensions of ethics that the HRD professional needs to be alert to within their day-to-day practice.
Alongside overall considerations, it is necessary to consider how practitioners can ensure they make ethical decisions.
This is a complex issue.
One of the main challenges apparent in the consideration of any ethical dilemma is that as you experience it in the moment, the decisions that are required are rarely clear-cut.
Moreover, the desire to act ethically, to do the right thing, does not always guarantee an ethical outcome.
This may be for a number of reasons which impact our decision making including:
A lack of information available about the decision.
A lack of understanding about the information available.
A lack of time to develop an understanding or apply the information to the decision.
Butterfield and colleagues (2000)
Adopting a perspective based on psychological understandings of information processing.
Noted that our decisions will also be impacted by the magnitude of the consequences, how the issue is framed and the degree of social consensus perceived about the issue.
This is a complex area of research; if you are interested you may like to review Craft (2013),
Suggested additional material on leadership ethics.
However, the key point for HRD professionals to take from the research on ethical decision making is that it is rarely straightforward. Professional, organisational and personal values will all play a role in informing how we approach and reach difficult decisions. In the next activity you will first read a summary of practical skills and approaches to ethical decision making before applying these to an HRD scenario.
Activity 5.8:
(TGF) Ethics case study.pdf
Before leaving the subject of ethics, it is important to note that the term ‘ethics’ frequently conjures up automatic associations with ‘research ethics’ – a topic with which you may already be familiar in connection with your dissertation for this Masters programme.
Ethics in business research revolve around issues such as:
How should researchers treat participants who volunteer to take part in their research?
What steps should researchers take to honour participants’ anonymity and confidentiality?
How should researchers handle any disclosures of organisational wrong-doing that emerge?
How should researchers respond to any distress or anxiety that participants may experience during the research process?
Full details of this subject area are provided elsewhere in this programme.
The main point to stress here is that the term ‘ethics’ covers a very wide scope of activities and concerns, so it is important to be clear what you mean when you use the term.
5.8 Diversity and the HRD professional
Kossek et al., 2005.
Diversity acknowledges the fact that people differ in many ways, visible or invisible, in terms of age, gender, marital status, social status, disability, sexual orientation, religion, personality, ethnicity and culture.
Building on the discussion of ethics in the previous section, diversity is another aspect of contemporary organisations that is increasingly seen as a key area of concern for HRD professionals.
Martins, 2005.
In part this is because achieving an organisational culture in which diversity is truly valued is dependent on learning at all levels of the organisation.
Watson and Reissner (2010)
Key principles of an HRD approach - (Table 5.8) - that is built on a commitment to an extensive understanding of diversity:
Table 5.8:
Evaluating the five principles of diversity.pdf
CIPD and Bernard Hodes Group, 2012
It is suggested that there are both ethical and business case arguments for organisations valuing diversity.
Whereas once the business case argument would centre on the need to avoid the financial and reputational cost of employee discrimination cases, now there is more emphasis on the positive business benefits of a diverse workforce including potential value created through increased innovation, employee engagement and organisational image.
CIPD and Bernard Hodes Group, 2012
As within the discussion of ethics above, to which diversity is closely connected, there is a strong association with both rules and values based learning and development initiatives in ensuring organisational diversity outcomes are achieved.
Figure 5.3:
What do your diversity and inclusion strategy, policy or guidelines cover.pdf
Specific initiatives that were reported showed a particularly strong focus on training and development for line management (Figure 5.4):
Figure 5.4:
What has your organisation done in the last three years to support line managers.pdf
King et al., 2012
While it seems likely that this particular report is influenced by the survey options provided, it also shows a heavy reliance on some form of training activity.
Given the previous discussion of training evaluation earlier in the module, it will not surprise you to learn that research investigating the efficacy of diversity training has found that evaluation is often limited to reaction and sometimes learning levels.
Researchers found little follow-up in terms of understanding whether training is successful in achieving overall diversity and inclusion goals.
Three further challenges arise when considering the notion of diversity training:
1st Challenge:
We often have very little understanding of the organisational assumptions about diversity and the range of issues encompassed within initiatives under this heading.
Doing ‘diversity’ often includes central aspects such as gender and ethnicity but organisations vary widely as to what issues are considered under the heading.
2nd Challenge:
There is a danger in assuming that ‘one size fits all’ and that the approach adopted for one aspect of diversity (for example, ethnicity) can be adopted and applied for others.
While HRD practitioners are often advised to consult widely, this can be challenging and controversial for some aspects of diversity.
This is especially true when individuals may feel a risk in identifying with a particular label and want issues to remain private.
3rd Challenge:
A related issue is the assumption that it is possible to consider diversity in a ‘neutral’ way and that an organisation does not need to take account of its current composition or of those who are leading or developing an HRD programme.
There is a valid concern with the way in which ‘normal’ and ‘different’ might be constructed within diversity initiatives, albeit unintentionally.
Within the time available in this unit it is not possible to fully explore how these issues relate to all the different aspects of diversity and their intersections.
Therefore, we now focus on the topic of age diversity and its implications for HRD practitioners.
Age diversity is an emerging concern but has varying dimensions across the globe.
The United Nations Population fund
Provides an excellent resource through which to explore different demographic trends and implications, and it is important to note that it reports on matters concerning both youth employment and ageing as they relate to contemporary organisations.
From an HRD perspective, issues related to both older and younger ages can be pertinent.
For example, in Unit 3 you explored the opportunities and challenges of incorporating apprenticeship schemes within an HRD strategic approach.
Apprenticeships have typically been associated with younger age groups and certainly some funding incentives have been particularly targeted at school leavers.
However, news reports (for example, Wright, 2015) have expressed concerns that some low-paid entry jobs have been ‘rebranded’ as apprenticeships allowing organisations to pay even lower wages to young employees who gain little by way of recognised qualifications.
Moving to look at issues at the other end of the age spectrum, there are assumptions that ‘older’ workers are not ‘worth’ HRD investment as they:
Are not interested in participating in HRD activities.
Will not be able to absorb or apply new learning (as in the expression ‘you can’t teach a dog new tricks’).
Will not be working for long enough for the organisation to see a return on investment.
Already have a surfeit of knowledge and are therefore suitable as mentors or coaches but are not seen as the primary recipients of HRD initiatives.
Pritchard and Whiting, 2014.
This is further compounded when ideas about ‘talent’ at work are seen as associated with youth and entwined within assumptions about the potential and energy of different age groups at work.
Fredman, 2003, p. 40.
Chronological age is often used as a proxy for performance in the context of selection for training whereas there is ‘convincing evidence that age is not a good proxy for capability’.
Hertel et al., 2013.
Indeed, it appears that the variance of work ability grows with age, which is to say that there are more instances of both poor and good performance as chronological age increases.
found that negative stereotypes about older workers are very persistent and can also have a detrimental effect as they become a self-fulfilling prophecy as older workers become demotivated and disengage from their work.
Hertel et al., 2013, p. 736.
They suggest that ‘organizations need to learn that chronological or perceived ages can be traps that outshine reality and prevent a precise perception of individual aspects, work ability, and motivation’.