305-Article Text-980-1-10-20190531
305-Article Text-980-1-10-20190531
305-Article Text-980-1-10-20190531
This study describes strategic human resource (HR) practices in a convenience sample of
organizations in the Philippines, and compares results of Cranet surveys conducted in 2003
and 2008. Characteristics of sample organization as well as their strategic HR practices have
generally remained the same since 2003. A formalized strategic planning process generally
obtains, but involvement of HR from the outset of business strategy formulation does not yet
characterize the majority of these organizations.
HR practices that have basically remained the same include, among others, the following: the
most common source of HR head is HR specialists from outside the organization, and
responsibility of HR policy decisions is shared between HR and line managers.
On the other hand, a few practices have changed in the following manner: increase in the
application of HRIS (human resource information system) in payroll, time and attendance,
but decrease in application in recruitment and selection. In addition, performance appraisal
is practiced across all staff categories in 2008; in 2003 only the managerial and
professional/technical workers are generally appraised through a formal system.
1 Introduction
As organizations enter international markets, the environment in which they compete becomes
global. Competition for markets for products and services as well as for resources becomes more
complex. Likewise, managing resources, especially human resources, becomes a challenge because
operational contexts such as culture, human capital, economic and the lego‐political systems are
different (Noe et al., 2000). Indeed, what is critical in a global economy is the development of
competencies and capabilities in employees to develop new products and provide services more than
innovation, speed, and low cost per se (Becker et al., 1997). This is because these employees are
better able to accurately assess the rent earning potential of their organization’s resources (Alchian
& Demsetz, 1972), and more flexible to adapt to changing environmental conditions (Wright & Snell,
1998).
It has been argued that a key element of successful global human resource management is the
ability to formulate policies and practices that integrate employees located globally while
recognizing elements in the local environments that affect utilization of human resources (Sparrow
et al., 1994). An important component of this is the knowledge on prevailing HR practices in a
country.
While it has been suggested that strategy influences individual human resource practices (Shih &
Chiang, 2003; Keefe & Katz, 1990; Kerr, 1985; Huselid, 1995) in any country, HR practices that
emerge in organizations are also a reflection of the environments of the organization (Galang, 2004).
Organizations operate in a social network and strive to gain legitimacy to be accepted by this
network. Such tendency increases isomorphism or the semblance of one organization with others in
its environment (Di Maggio & Powell 1983; Deephouse, 1996). Empirical evidence of mimetic
dynamics operating in the environment was observed in the semblance of substantive nature of
management development of multinational corporations in the Philippines with those of local
corporations (Supangco, 2003).
One objective of this study is to describe current strategic HR practices in selected Philippine
organizations that participated in the 2008 Cranet survey. Another objective of this study is to
compare results of the 2003 and 2008 Cranet surveys.
* Correspondence: Tel: +63 2 928 4571; Fax: +63 2 920 7990. Email: vivien.supangco@up.edu.ph
36 Strategic HR Practices in Some Organizations in the Philippines
3 Methodology
This paper describes HR practices in a convenience sample of companies in Metro Manila. The
2008 Cranet survey results provide the data used in this paper. Results of the 2003 Cranet survey
round also provided data for comparison. This section discusses the background of Cranet and
describes data collection in 2008. Refer to Appendix for a background of Cranet.
data, the means or average and the standard deviations are presented. To compare results of the two
surveys, test of means and test of proportions were performed.
Given the non‐probabilistic nature of the sampling approach used in this study, generalization of
results is limited to the organizations that participated in the survey.
Sufficient to Sufficient to
Gross Revenue make small 43.8 48 make small 42.9 28 ‐ 0.08
profit profit
*p<.05
6 Strategic HR Practices
The following sections describe the different HR practices in the basic HR functions, namely:
staffing, training and development, and compensation. As a description of the state of the HRM
practice in the Philippines, this part of the study provides answers to some questions HR executives
in the Philippines or those wanting to do business in the Philippines, might ask:
• What are the prevailing strategic HR practices in organizations in the Philippines?
• What practices have changed from 2003 to 2008?
Moreover, the common applications of HRIS are in payroll, time and attendance, individual
personnel records, payroll, and benefits (Table 8). The least common applications are in recruitment,
health and safety, and career and succession planning. Application of HRIS has significantly
increased in payroll, time and attendance, and work scheduling, but application in recruitment and
selection has significantly decreased.
Vivien T. Supangco 41
The three more common methods of selecting management, professional/technical, clerical, and
manual staff are one‐on‐one interview, application forms, and psychometric tests (Table 10). Of the
three methods, psychometric tests are the least used in selecting the above‐mentioned staff
categories, and this is not a common method of selecting managerial staff. The use of application
forms is the most common method of selecting clerical and manual staff, while one‐on‐one interview
is used in selecting professional/technical and management staff. Panel interview is the second most
common method of selecting managerial staff. This method, however, is not used in the selection of
the other three staff categories. The use of one‐on‐one interview, panel interview, and application
form in selecting managerial employees has significantly increased in 2008.
42 Strategic HR Practices in Some Organizations in the Philippines
There is an increasing use of one‐on‐one interview, panel interview, and use of application forms
in recruiting management employees indicating a more formal and intensive selection process.
Recruitment methods used for technical employees have not changed much from those obtaining in
2003, except for a more extensive use of the one‐on‐one interviews. No significant changes also
occurred in recruiting clerical employees. However, recruitment of manual workers has moved
towards more formal methods of using application forms, one‐on‐one interviews, and the use of
psychometric tests.
Table 11. Proportion of Workforce Assessed via Regular Formal Appraisal System
2003 2008
Staff Category Standard Standard T Value
Mean N Mean N
Deviation Deviation
Training is one means to narrow performance gap. On average, sample organizations spend
13.7% of payroll cost on training in 2008 (Table 12). The professional/technical employees enjoy
the highest training days (11.54 days) while the manual employees enjoy the lowest training days
(6.14 days). Average training days of each category of employees have increased except for the
manual employees. Such changes, however, are not statistically significant.
7 Measuring HR Effectiveness
An important aspect of strategically managing the HR function is to assess its effectiveness. The
Cranet data provides information on overall measures of HR effectiveness such as labor cost,
turnover rate, and average days absent.
There is a significant increase in annual staff turnover rate from 8.3% in 2003 to 16.0% in 2008,
and a decrease in average days absent from 9.9 days in 2003 to 6.1 days in 2008 (Table 14). Labor
cost has increased from 32.0% in 2003 to 39.2% in 2008. However, such increase is not statistically
significant.
Two of the overall measures of HR effectiveness do not augur well for the companies under
study. The doubling of turnover rate can be a cause for concern from an HR effectiveness
perspective, especially when turnover is of the voluntary type, that is, one that is initiated by the
employee (Noe, 2010). However, such increase could be an effect of the crisis in 2008; hence,
turnover is involuntary on the part of the employees. However, Cranet data does not distinguish
from the voluntary and involuntary turnover. Clues as to the nature of turnover come from both
external factors and internal changes in practices and characteristics of the employees. Knowing that
the survey took place in 2008, when the country is still managing the impact of the global crisis, could
lead to the conclusion that the turnover is of an involuntary nature. The decline in average
employment size (Table 3) also implies that attrition is greater than accession and points to a
conscious effort to decruit. Further result of such effort is seen in the decrease in the proportion of
employees below 25 years old (implying less accession). Decruitment could be of the early
retirement type that encourages employees to retire early. In such a scheme, the long tenured and
older employees would be attracted to leave the organization. The decrease in the number of
employees above 45 years is an implication of such a scheme. Another implication is an increase in
labor cost because the organization needs to provide for early retirement packages that are usually
greater than the package one gets during normal retirement. Another telling sign that turnover is of
an involuntary nature is the increase in the use of performance appraisal especially of the more
vulnerable groups like the clerical and manual workers. When it is management who decides on who
leaves the organization, it must have legally acceptable bases of doing such. The increase in the use
of performance appraisal especially among vulnerable groups is another clue that, indeed, turnover
is involuntary, because management needs to differentiate the productive from the unproductive
employees.
When there is still work to be done, increase in labor cost could come from labor expense
associated with decruitment while a decrease in average days absent is a logical response to a
decrease in employee number.
common source is HR specialists from outside the organization, which has remained the same since
2003.
One objective of the study is to describe the strategic human resource management activities of a
convenience sample of organizations in the Philippines. Strategic HR is described in terms of a
process and as a set of activities. On one hand, strategic HR as a process takes a long‐term approach,
is involved the activities of the board and in strategic formulation at the outset, and involves line
managers in defining policies. On the other hand, strategic HR as a set of activities focus on those
that add value, utilizes computerized information system, and engages the services of external
providers for activities that have low strategic value.
Based on the above conception of strategic HR, there is indication that HR practices in the
Philippines tend toward a strategic HR approach and such approach has been observed unchanged in
the two survey years. Data shows that a formalized strategic planning process generally obtains, but
involvement of HR from the outset of business strategy formulation does not characterize the
majority of these organizations yet. Again, responsibility of HR policy decisions has also remained
the same. HR and line managers collaborate in policy decisions. HR still provides the lead in major
policy decisions in the traditional HR functions such as pay and benefits, recruitment and selection,
and training and development, while line managers take the lead in policy decisions regarding
workforce expansion or reduction—decisions that directly affect the bottom line of the units
involved.
HR to be strategic needs to focus on activities that add value by utilizing computerized
information system, and engaging the services of external providers for activities that have low
strategic value. It appears that in general, companies in the sample have not yet taken advantage of
the benefits of outsourcing of non‐value adding HR activities. Data along these lines show that
organizations in general do not outsource payroll, pensions, benefits, outplacement and workforce
reduction, and HRIS, but training and development are partly provided by external providers. There
is evidence of the widespread use of HRIS, and its common applications are in individual personnel
records, payroll, benefits, and time and attendance. The least common applications are in
recruitment, health and safety, and work and succession planning.
Another objective of this study is to compare results of the two survey years pertaining not only
to strategic HR practices, but also to the basic HR functions namely: staffing, training and
development, and compensation.
While some HR practices have changed during the two survey periods, some have remained the
same. Training activities have remained the same since 2003. Indicators such as percentage of
payroll cost spent on training, and average training days for management, professional/technical
employees, and manual employees have generally increased. However, these are not statistically
significant. In addition, compensation is still generally determined at the company and individual
levels across the different staff categories.
Some practices have changed. Application of HRIS has significantly increased in payroll, time
and attendance, and work scheduling while application in recruitment and selection has significantly
decreased. Increased application of HRIS is a positive indication of computerizing personnel
databases. However, the decrease in the use of HRIS in recruitment may be attributed to a decrease
in hiring activities per se as indicated in the higher turnover or employees and lower average
employment size of companies in the sample.
There is evidence of utilization of broader sources of employees, which could lead to better
quality applicants for jobs. Significant changes have occurred in sourcing the different categories of
employees. In 2008, organizations source management employees from internal employees,
professional and technical employees from advertising, clerical jobs from speculative applications,
and manual employees from word of mouth. In 2003, the predominant source of management,
professional/technical, and clerical employees comes from internal employees, while source of
manual employees comes from word of mouth. Meanwhile, two selection methods stand out as the
common method used across employee categories: application forms and one‐on‐one interview. The
panel interview is distinctly used in selecting managerial staff, while the psychometric test is a
method common only in selecting the other three staff categories. The significant increase in the use
of formal selection methods especially in the managerial and manual worker categories mean
employing workers better fit for the job and the organization.
46 Strategic HR Practices in Some Organizations in the Philippines
Performance appraisal is practiced across all staff categories in 2008, which is quite different
from the general practice in 2003, when only the managerial and professional/technical workers are
generally appraised through a formal system.
At first glance, measures of HR effectiveness paint a negative scenario: higher turnover and
higher labor cost. However, closer analysis points to the impact of global crisis on HR effectiveness,
practices, and employee characteristics. This is not meant to excuse HR from being effective, it points
to the need for HR to be prepared for such influences.
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48 Strategic HR Practices in Some Organizations in the Philippines
APPENDIX
Background of Cranet
The Cranfield Network on International Human Resource Management (Cranet) is a research
consortium of 40 countries. Its Human Resource Research Center is based in Cranfield School of
Management, Cranfield University, United Kingdom (Cranet.org). The consortium conducts an
international research survey every three years. The Cranet has the following objectives
(Cranet.org):
The Cranet was launched in 1989, when Gavin Adam, a partner in the then Price Waterhouse
approached Cranfield School of Management in U.K. to conduct a survey on comparative human
resource management. Initially, Universities and Business Schools in France, Germany, Spain, and
Sweden joined Cranfield University in its initial survey. More members were invited to join the
Network across Europe and the network has since expanded to countries outside Europe (Cranet,
2011). In 2003, Cranet invited the Philippines to join the network; only one university represents
each country. In 2003, membership was composed of 24 European countries and 10 countries
outside Europe.
Although ideally the Network conducts the survey every three years, the survey in the
Philippines, which was first conducted in 2003, was followed only in 2008.