LITERATURE REVIEW - The Human Resource Competencies and HR Effectiveness: The Moderating Effect

This chapter discusses the reviews of the relevant literature of HR competencies and HR effectiveness, including moderating effects of Challenge and Hindrance stressors. The first part of this chapter explains a review of previous studies about HR competencies, and HRCS model 2012.

The second part of this chapter presents the earlier investigations about HR effectiveness. Finally, the last section of this chapter reviews the previous findings and the literature of Challenge and Hindrance stressors.

Mongolian Labor Market

Mongolia is located in the north of central Asia with a total size of the territory of about 1.6 million sq. Km, and a population of approximately 3.1 million (National Statistical Office of Mongolia [NSOM], 2016). The country is landlocked between the Russian Federation and the People’s Republic of China. Mongolia has shown steady growth in the recent years (UNDP in Mongolia, 2016). However, there were times that Mongolia has encountered a sudden economic growth and declining poverty in the past due to the fluctuation in price of coal in the world market, but today Mongolia is facing severe financial challenges caused by years of highly expansionary macroeconomic policies, a sharp drop in foreign direct investment, and plummeting commodity prices (Asian Development Bank [ADB], 2016). Despite the current economic challenges, the labor market is the most stable factor for Mongolia (Tudev, & Damba, 2015). There is a total of nearly 1.2 million people in the labor market, forming 63.7 percent of the total labor force (Tudev,

& Damba, 2015). As for the unemployment rate in Mongolia has increased slightly compared to the previous year in April from 8.6 percent growth to 9.1 percent in the third quarter of 2017 (NSOM, 2016).

Mongolia’s educational sector shows positive trends. Mongolia has a total number of 95 universities, institutes and colleges estimated from Mongolian national statistic of 2016. Although, the educational level of the workforce and school enrollments are rising in Mongolia, the labor market study done by Shatz et al., (2015) found that about more than one-fifth of youth expressed that their biggest obstacle was to get a job related to their education. Also, the majority of them reported that the current Mongolian educational system could not help them accumulate work

experience, for instance, through an internship or any other programs. On the other hand, the labor market in Mongolia is characterized by a shortage of skills in specific sectors and a more general mismatch between demand and supply of skills, dependence on seasonal and temporary employment, gender inequalities and particular labor market challenges for certain age groups (both the very young and the generation aged 40 and above) (ADB, 2016; Gassmann, François, &

Trindade, 2015; Shatz et al., 2015). More generally, one gap on the labor demand side is that employers need some certain kind of skills and abilities from employees, but they still can't find enough of employees who hold this type of skills which the Mongolian labor market has not been able to provide so far. In accordance to the interviews with employers by Gassmann et al. (2015) revealed that there is certain kind of gaps in soft skills, critical thinking, and other general skills that are essential for workplace success and are not being taught as well as they could be.

In fact, for employees above the age of 40 to find a new job is very hard, especially if they have never been able to update their general or professional KSAOs because a self-development is counted as one of the fundamental abilities that each applicant has to demonstrate in the current labor market in Mongolia. This phenomenon occurs not only amongst middle-aged employees but also between the graduates of secondary schools, Technical and Vocational Education and Training (TVET) colleges or higher education institutions that have significant troubles to find employment nowadays. In recent years, it has been observed commonly that employers usually seek for applicants who have necessary work experience. Besides this fact, they also prefer to employ candidates who have certain life skills in order to reduce the high job turnover rate in the labor market.

Generally speaking, HR professionals play an essential role in the labor market. They are influential participants who are involved in making company' policies and regulations in order to solve general problems and labor-related issues that firms encounter today. At this point, HR professionals' involvement and investment can be crucial contribution to resolve these labor market problems in Mongolia because they are two-side players between employers and employees. Also, they are active participants in the labor market who know what kind of KSAOs shortages and gaps exist in the field where they run the business. In order to close gaps in employees expected performance and organizational outcomes, HR professionals have to take actions such as doing the needs assessment, designing expedient and effective training programs and initiating additional programs that support employees' training needs. Thus, it is clear that HR

professional is one of the guiding forces in the Mongolian labor market where specific problems have already reported and needed to be solved in the previous studies mentioned above. Whereas, there is no research telling that HR professionals who are capable of making the required contribution that needs to be done in the Mongolian labor market, so it is necessary to investigate HR professional competency and their effectiveness including some stress factors which impact on their work outcome.

The Human Resource Competency

In this part, a literature review is collected to obtain insight into HR competency’s research, including the historical perspective of HR competency and Human Resource Competency Study (HRCS) will be discussed.

In order to be confident in accomplishing tasks and generating efficient outcomes in a workplace typically depends on ones’ own KSAO and passion. Therefore, evaluating ones' professional competencies and updating them frequently is a base of not only being successful in their career path but also having a good personal life. Consequently, this study will focus on the general competencies of HR professionals, and also will take into account that all HR professionals have to possess general HR competencies despite sector and industry in order to perform their tasks efficiently in organizations.

Definition of Competency

The term “competency” has been familiarized through the book by Boyatzis (1982) and also has brought broadly the concept of competence closer to the HR practitioner’s domain, instead of being exclusively academic (Sun & Shi, 2008).

By the investigation of Ulrich, Brockbank, Yeung, and Lake (1995), the competency is described as an individual's demonstrated knowledge, skills, or abilities. Their main view was that if HR professional demonstrate three competencies (1) knowledge of business, (2) delivery of HR and (3) management of change processes when they have to add value to their firms by providing ideas, programs and initiatives which assist the organization compete successfully in the market.

In the broadly-cited book by Becker et al., (2001), the competency is defined as someone's knowledge, skills, abilities, or other personality characteristics that affect her or his job

performance. Also, the authors have emphasized that three difference assessment tools to measure HR performance by using HR competencies (1) the Michigan University study of sixty behaviorally anchored questions, (2) to create a visible guide to the competencies which HR professionals have to demonstrate and assess the extent to which they do (3) to tie rewards or incentives to demonstrate competence in order to evaluate HR competencies. Their central concept was to determine HR competencies in behavioral terms, and an organization can utilize any number of assessment tools such as 360-degree feedback technique to evaluate the extent to which an individual demonstrates the competency.

According to Dubois (1993), competency can be defined as the employees' capacity to meet job requirements by producing job outputs at an expected level of quality within the constraints of the organization's internal and external environments. Dubois (1993) also explains that there must be a match between what the employees can do and what business obliges from them.

Swanson and Holton (2001) identified that competency is about displayed behavior within a specialized domain in the form of consistently demonstrated actions of an individual which are both minimally efficient in their execution and effective in their result. Previously being mentioned in another definition above, Ulrich et al., (1995) stated that demonstrated action is not only about effectiveness and efficiency, but it is about helping firms: HR professionals demonstrate competence when they help their businesses to compete.

In contrast, competency was defined as one's characteristics that can differ significantly between effective and ineffective performance (McClelland, Spencer, & Spencer, 1990). On the other hand, recently, some researchers proposed more accurate definitions that determine competencies as work-related personal attributes: knowledge, skills, and values that individuals draw upon to do their work well (Roberts, 1997). However, this study jumps to a deeper level, into the competencies as someone’s knowledge, skills, abilities, or other personality characteristics that are used to get someone’s job done (Becker et al., 2001). HR professionals must have specific essential competencies in order to perform their functions consistently, with efficiency and effectiveness, within various circumstances in organizations.

The Human Resource Competency Models

There is a rich literature on managerial competencies, and the interest towards the concept is increasing every day (Boyatzis, 1982). Nevertheless, there are a few major studies on HR

competencies (Khatri & Budhwar, 2002), and HR models that are about the information, skills, abilities and individual characteristics required for high performance. The groups composed of competencies are defined as competency models (Özdemir, Akatay & Eroglu, 2015).

The competency approach can be dated back to early studies by the Ontario Society for Training and Development (1976) and the American Society of Training and Development in 1967, 1983, 1987 (Storey, Wright, & Ulrich, 2009). After these studies, Ulrich and Brockbank initiated and conducted the Human Resource Competency Study (HRCS) since 1988 (Storey et al., 2009). Until now, seven rounds (1988, 1992, 1997, 2002, 2007, 2012 and 2016) have been investigated so far.

Last year in 2016, they have revealed their seventh updated version, for introducing nine severe domains, including strategic positioner, human capital curator, total reward steward, analytics designer and interpreter, compliance manager, technology and media Integrator, paradox navigator, culture and change champion and credible activist. Before HRCS model 2016 was presented to the public, an SHRM's competency model 2011 had been considered as the world's largest and most comprehensive competency model for HR (Cohen, 2015) should not be ignored in this study.

Furthermore, there are other competency models existing. The Society for Human Resource Management (SHRM) has joined in the data collection for Ulrich’s model (Ulrich, Younger, Brockbank & Ulrich, 2012) as well as in the development of other models, such as Lawson and Limbrick (1996) and Schoonover (2003). Even though these models should be critical to our knowledge in the field, HRCS model can be the most ongoing, massive and comprehensive study nowadays.

In order to demonstrate the difference between each HRCS competency model’s scope and transitions, the summarized table (Table 1.1) below has been built. The table is partly adapted from the comparison tables by (Bondarouk, Marsman, & Rekers 2014; Rekers, 2013), and modified by adding three more columns namely dimensions, total study respondents and participants’ region.

Table 2.1.

Overview of the Seven HRCS Model (1988-2016) and SHRM Competency Model (2011)

Study Relative importance

3 - HR professionals had a unique set of competencies that could be tracked around the world.

10.291 USA

4 - Personal credibility was added.

- Businesses that experienced low rates of change and

5 - The ability to manage culture was an essential factor in the overall view of HR.

- Business knowledge and HR delivery had the lower impact on HR professional individual competency, and it was not differentiators.

3.229 USA

(continued)

15 Staffing and organizational design were essential competencies. Business knowledge was not distinctive anymore for high or low- performing HR professionals.

7.082 UK, USA, supportive of the other roles.

- Differences in perception of HR and non-HR.

- Differences in traditional vs. emerging markets.

- Organization design has become equally important as talent management.

- Culture management as the unique dimension.

- Business impact 20%.

6 - There were opportunities for HR to make a difference.

- Change has become so critical that it has to become a separate element in the model.

- These dimensions not only showed what a capable HR professional should do but also how an HR professional should be effective for business.

- Strategic positioner and capacity builder was necessary for business.

Main findings Total study

respondents

9 Two central questions have been raised to be answered by their survey: How do individual HR professionals deliver value? How do HR departments drive value? (The RBL group, 2016)

To be included not only the competencies of individual HR professionals but also HR departments’ competencies as well

HR professionals should have more impact on key stakeholders when they work as an

effective HR department (The RBL group, 2016)

Paradox navigators, Strategic positioners, and credible activists are emphasized more in the seventh round in order to help organizations to differentiate from their competitors.

18 Table 2.1. (continued)

Study Relative importance dimensions

Dimens ions

Main findings Total study

respondents (HRCS project

team)

Participants region

SHRM 2011

- HR technical expertise and practice

- Relationship management - Consultation - Leadership and

navigation - Communication - Global and cultural

effectiveness - Critical evaluation - Ethical practice - Business acumen

9 - These nine key competencies are identified to be linked to the successful job performance of an HR professional.

- The research and the model provides the detailed set of 94 subcompetencies along with nine critical competencies (Cohen, 2015)

32.000 29 cities in 8 countries, from

33 nations

In short, a summary of Table 2.1, it can be seen that the survey of HRCS model regularly conducted five years for each period, for introducing the updated versions and new domains, starting from three main competencies of HR professionals (HRCS 1988) to nine core competencies (HRCS project team, 2016). On the other hand, it can be concluded that from time to time HR professionals have been required for HR professionals to have a new set of competencies regarding the time frame of the HRCS study. Hence, HR professionals must expand their knowledge and experience beyond where it is today, and it must be competency base (Cohen, 2015). The competencies have changed in the past; we can expect they will change in the future too (Rekers, 2013). Also, even if the number of HR competency researchers has been increased, they have neglected Asian countries in their competency study. The 2012 HRCS was the third version of the global HR competency study done by RBL group and Michigan University, which included the Asian context for the first time instead of focusing on only USA or UK participants.

Even though the scholars have included some Asian countries such as China and India, it is still not clear to say whether the Asian developing countries such as Malaysia, Indonesia, Vietnam, and Mongolia got involved in their study.

After reviewing the literature on the HR competency models, in this study, the HRCS model 2012 fits to examine the competencies of HR professionals in Mongolia. There are six categories of competencies the scholars have identified in the sixth round of HRCS model. The sub-dimensions are strategic positioner, credible activist, capability builder, change champion, HR Integrator/innovator, and technology proponent.

Competencies of HR Professionals

Strategic positioner. HR competencies have been discussed to be a set of characteristics contributing to effective HR performance, enabling an organization to accomplish its business strategies in a competitive marketplace. Nevertheless, many HR executives and professionals have not accepted them to be one of the members at the strategic planning table in an organization because they do not display the required competencies (Barney & Wright, 1998; Selmer & Chiu, 2004) in which executives and top management team expect HR executives/professionals to demonstrate in their workplace. In the 2012 HRCS model, the strategic positioner refers to an HR professional who can understand evolving business contexts, shareholder expectations, and today’s competitive business requirements, and transform them into talent, culture and leadership

activities in their workplace. Behind this factor, three dimensions must be demonstrated by a high performing HR professional: “Interpreting global business context," “decoding customer expectations” and “co-crafting a strategic agenda" (The RBL group, 2012). This competency requires HR professionals to be highly sensitive to the business environment and conditions, including technological, economic, environmental and political because these factors will affect today’s business strongly. It also obliges HR professionals to serve and deepen their knowledge of not only their internal customers but also the external core customers in order to align organization’ actions to meet customer needs and expectations. They are expected to co-design their organizations' strategic responses to business conditions and customer expectations by helping build and make strategic and system choices (Ulrich et al., 2012).

Credible activist. The credible activist means taking care of the internal organization, building and developing a relationship of trust between internal clients, and performing what they have promised to do. Being a trusted advisor and activists, HR professionals must know not only about HR activities but business demands and performances. In addition, there is also one more hidden meaning beyond the credible activist is to influence others positively through clear and consistent communications. The sub-factors belong to this dimension are "Earning trust through results,"

"Influencing and relating to others," "Improving through self-awareness," and "Shaping the HR profession" (Ulrich et al., 2012).

Capability builder. The capability builder who helps an organization to succeed in defining and creating the organization capabilities. It implies that successful HR professionals can determine and build essential organization capabilities by melding individual abilities into an efficient and robust organization. In this context, skills refer to as a company’s strategy, culture, practices, process, practices or identities. This dimension also includes one important capability of the successful organizations must create a meaningful work environment where employees find purpose and value to work. The sub-domains for the capability builder consists of three factors, namely: "Capitalizing organizational capability," "Aligning strategy, culture, practices, and behavior" and " Creating a meaningful work environment" (Ulrich et al., 2012).

Change champion. Primarily, this dimension consists of two core factors named "Initiating change" and "Sustaining change." Therefore, the authors decided to break up those elements into small sub-levels. To put them all together, HR professionals need to initiate and sustain change in the individual, initiative, and institutional levels. As change champions, one of HR professionals'

roles is helping the organization make change happen at institutional (changing patterns), initiative (making things happen), and individual (enabling personal change) levels. First, HR professionals initiate change, which means they bring the visible statements to make employees understand why change should be crucial to happen and what benefits come in afterward, overcome resistance to change from different parties, tightly cooperate with key stakeholders in the process of change, and highly articulate the decisions to start happing change in an organization. Second, HR professionals sustain change by organizing change through organizational resources, structure, communication, and continual learning. As change champions, HR professional partner to build systems that are nimble, flexible and responsive and make the transformation take place in ways that produce sustainable value (Ulrich et al., 2012).

Human resource innovator and integrator. This is one of the most critical competencies of HR professionals because it is composed of five fundamental factors in HR field: "Building leadership brand," Optimizing human capital through workforce planning and analytics,"

"Developing talent," "Shaping organization and communication practices" and " Driving

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