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Human Resource Management in Australia

Marilyn Clarke and Margaret Patrickson

Introduction

Although the land area of Australia, almost 8 million square kilometres, is roughly equivalent to that of the continental United States and about twice that of the European union, its population is comparatively low, being only about 22 million, 80 per cent of whom live and work within 100 kilometres of the coastline, and over half of whom live on the eastern seaboard. Yet despite only about 6.5 per cent of the land area being arable, the country exports a wide range of agricultural products as well as mineral ores and selected manufactured goods. Being the world’s 13th largest economy, Australia enjoys a high standard of living, political freedom based on universal franchise, and relative economic stability having been better able to withstand the recent ravages of the global financial crisis given its high preponderance of mineral deposits.

By far the majority of residents are first or second generation immigrants, dominated by British or Irish ancestry. With two out of every seven residents born overseas according to the 2001 census, the government has elected to follow an official policy of multiculturalism, which, despite a few hiccups, appears to be working well. In common with other Western countries the population is ageing. Culturally the country reflects this largely Anglo-Saxon heritage as evidenced by its legal and governance systems, the dominance of the English language, its media programs, and its religious affiliations being largely Christian, despite observable poor church attendances. More recently, Asian cultures are gradually replacing southern European cultures as the second major influence on the local scene as more people begin to explore the benefits of healthy lifestyles.

Compared with its major trading partners, wage levels are comparatively high and this has led industrial policies to assume a central location in business practices. Awards exist for the majority of jobs that specify a bottom benchmark for individually negotiated wages and conditions. Workplace agreements, negotiated directly between employers and employees, now form the basis of employment in most large organisations, and salaries for the most senior staff often significantly exceed those of others. Health and Safety levels at work are high. It is within such a context that the recent developments in HR management are discussed more fully below. The chapter unfolds by initially looking at contextual factors such as economic and political conditions that determine labour force demand and supply before moving on to address how these factors have influenced the development and operation of HR practices. Next it examines key issues at the forefront of current HR practice such as employee engagement, work–life balance and cultural diversity before finally considering how the future for HR may unfold in terms of strategic developments and internationalism.

Developments in HRM

The evolution of HRM in Australia mirrors that of other developed countries. That is, HRM has moved from welfare to personnel and then to a more strategic partner role within organisations. These changes are primarily in response to structural changes in the economy, as discussed below, which have created the need for a more professional approach to people management. This is particularly the case in service industries, which are populated largely by well-educated, skilled employees. The journey towards a more professional approach to HRM began in 1992 when IPMA (the Federal Institute of Personnel Management of Australia) was rebadged as AHRI (Australian Human Resource Institute), the professional body for HR practitioners. AHRI aims to lead the direction and foster the growth of the HR profession by actively setting standards and building capability through relevant and accessible education, professional development and networking opportunities (Australian Bureau of Statistics, 2012b). Members of AHRI must complete an AHRI-accredited or relevant undergraduate qualification, or be able to demonstrate equivalent knowledge, skills and experience in the HR industry. In 2011 AHRI had in excess of 17,500 members thus indicating continuing rising numbers of tertiary qualified staff being employed within the discipline. HR departments, in turn, reflect this increasing professionalism and no longer take such a back seat in staff management activities. They have broadened their responsibilities, raised their profile and their salaries, and have begun to contribute to strategic forward planning. Positions advertised indicate that their improved status is recognised and reflected in higher offering salaries.

Key Factors Determining HRM Practices and Policies

The National Context

Domestic consumption in Australia is heavily geared towards the service sector with total household expenditure on goods and services comprising 18 per cent of total income while food and other consumables represents a further 16 per cent of the total (ABS, 2010a). In August 2010, there were 9.8 million employees. Of these, 70 per cent were full-time employees in their main job (ABS, 2010b). In August 2011 average weekly earnings were about US$1,300 (ABS, 2011a). Unemployment was steady at 5.1 per cent with an overall workforce participation rate of 65.6 per cent (ABS, 2011b). Over the past twenty-five years workforce skill requirements in Australia have gradually changed as comparatively lower wages in China and India have made many locally manufactured goods comparatively expensive for consumers and forced the export of associated manufacturing jobs abroad. In turn the local economy has responded towards developing its service sector. There are now few unskilled jobs in the workforce, and few jobs that do not demand computer literacy. Employees are more highly skilled than at any time in the past with relatively unskilled job-seekers finding it hard to secure steady employment. At the same time there have been changes in retirement age, with more working individuals electing to remain in the workforce, at least casually, if they can (ABS, 2012b).

A key characteristic of the labour force is that over recent decades there has been a gradual, long-term trend away from ‘standard’ full-time jobs to various forms of part-time work. From 1979 to 2009 the proportion of employed people working part time increased from 16 per cent to 29 per cent. While part-time work tends to be more prevalent among women, its increase over the past 30 years has been evident for both men and women. The proportion of employed women working part time increased from 34 per cent in 1979 to 45 per cent in 2009, compared to 5 per cent and 16 per cent, respectively, for men. The increased availability of part-time work has expanded opportunities for people to balance work with family responsibilities, to participate in education, or to make the transition to retirement. The majority of people who work part-time do not want to work more hours, or would not be available to work more hours even if the extra hours were available (ABS, 2010c). This trend is further exemplified by the high percentage of casual or temporary employees. Under Australian industrial agreements casual employees generally do not have access to the same rights and conditions as full-time or part-time employees. For example, they do not qualify for sick leave, holiday leave, carers’ leave or long-service leave (Burgess and Baird, 2003). In recognition of this exclusion from standard employment benefits they are often compensated through an additional hourly payment or ‘loading’ of somewhere from 15 per cent to 25 per cent. In 2006 the casual workforce, estimated to be about 26.9 per cent of the total, comprised both full-time and part-time casual employees (Burgess, Campbell, and May, 2008). Casual employment is found across all industries and all sectors but is generally inversely related to skill levels.

Reasons for such a high level of casualisation include the desire for more flexible employment on the part of employees, structural demand for seasonal, short-term or ‘at call’ labour, changes to employment regulations that facilitate and promote casual employment, and changes to labour use practices. While growth in the part-time, temporary and casual workforce has provided both organisations and employees with much greater flexibility it has also created new and more complex challenges for HR managers. Within this context HRM must deal with issues such as attraction and selection of employees with relevant skills and experience, training employees who may only stay for a short period, and the management and transfer of organisational knowledge (Watson, 2008).

Economic Factors

In the last 50 years the Australian economy has undergone significant structural transformations moving from an agricultural base to a predominantly manufacturing base and then more recently to a highly urbanised economy based primarily on the provision of services (Connolly and Lewis, 2010). In recent years there has also been a significant resurgence in the mining sector driven largely by demand for raw materials from growing economies such as China and India.

Structural change has been supported, and in some cases driven, by economic reforms at the federal government level including deregulation of a range of service industries (such as banking) and the lowering of tariffs for manufacturing and agriculture. Policies designed to foster greater competition and increase efficiencies have been pursued by successive governments in an attempt to assure Australia’s position in a global economy (Connolly and Lewis, 2010).

One outcome of these structural changes is that from a labour market perspective Australia is now facing what some commentators refer to as a two-speed economy (Garton, 2008): ‘fast speed’ and ‘low speed’.

The ‘fast-speed’ economy is associated with the mining sector, which is capital-intensive and comprises a relatively small but highly skilled blue-collar and professional workforce. Wages and other benefits in this sector are well above average in order to attract workers to remote locations either on a permanent or fly-in/fly-out basis. Importantly this has meant that jobs growth and wage dispersion has been concentrated in regions where there are large mineral deposits (Salary Survey, 2008).

The ‘slow-speed’ economy includes industry sectors such as services and manufacturing. Significant job growth has occurred in the burgeoning services sector in areas such as health, education, finance and business services. Service industries tend to be less capital-intensive but generally more labour-intensive with a high demand for skilled and well-educated employees (Connolly and Lewis, 2010). Growth in the services sector reflects societal changes, particularly an increase in the number of families where both parents work. This has led to the outsourcing of many household service activities such as child care, home maintenance and aged care (Connolly and Lewis, 2010). A less positive employment outcome has been the tendency for companies to send their business process operations offshore to countries such as India where wages are still much lower than in Australia (Russell and Thite, 2008). In addition, a significant proportion of jobs growth has been in part-time and casual positions (Burgess, Campbell and May, 2008). Many service sector employees, particularly those employed on casual contracts within the hospitality industry, perceive themselves to be under-employed, a situation that impacts on employee engagement and job satisfaction. From a HRM perspective this creates issues for training, development, performance management and career development. The future of manufacturing remains uncertain, although clearly there will need to be further major structural changes if this sector is to compete globally.

The Political Context

An important factor in any analysis of Australian HRM is the underlying industrial relations context, which has shaped the way in which employer–employee relations have evolved. Until 1983 Australia had an adversarial labour system regulated by a centralised conciliation and arbitration process. The system operated through permanent quasi-judicial tribunals, employer tribunals and union representation of employees. Employment contracts were framed by state and federal awards that specified minimum terms and conditions of employment, such as hours of pay, minimum pay and leave allowances (Kramar, Bartram and De Cieri, 2011).

From 1983 to 1996 gradual changes were implemented in an attempt to reduce the number of industrial disputes and to move to a more collaborative industrial relations environment. The driving force for these changes was an increasing awareness that Australia needed to become internationally competitive through a more neo-liberal policy regime based on market forces. The key change in this period was an innovative approach to incomes policy known as ‘The Accord’, an agreement between the Labour government and the trade unions to modify demands for wage increases in exchange for government commitments to advance economic and social policy issues (Kramar, Bartram and De Cieri, 2011).

By 1993 Australia had shifted from a centralised wage setting model to an enterprise bargaining model. The Industrial Relations Reform Act (Cwth) 1993 provided for decentralisation of employee relations through enterprise level negotiations over wages and working conditions and collective agreements between employer and employees rather than through trade unions. These changes set the scene for the next decade. When the conservative government won power in 1997 neo-liberal policies were further enforced through a shift to individual contracts, known as Australian Workforce Agreements (AWAs). A key outcome was that managerial prerogative was expanded and the role of trade unions was increasingly marginalised as the government sought to break what it believed to be a union stranglehold over many industries. The shift to the right culminated in the passing of the Workplace Relations Amendment (Work Choices) Act 2005, which offered significantly greater power to employers in negotiating wages and conditions.

To some extent this may have contributed to the conservative government losing power to the Labour party in 2007 after an election campaign that was fought largely on the issue of workers’ rights. By 2009 the Workplace Relations Amendment (Work Choices) Act had been replaced by the Fair Work Act (Kramar, Bartram and De Cieri, 2011), which provided the framework for a shift back to more collective bargaining, the re-introduction of safety net provisions through National Employment Standards (minimum levels), stronger unfair dismissal laws and bargaining in good faith provisions. Workers’ rights are protected through the 10 National Employment Standards covering areas such as maximum weekly hours, annual leave, parental leave, requests for flexible working arrangements and termination of employment.

Although trade unions continue to play a role in Australia their influence has been weakened in the last two decades as a result of the shift to enterprise bargaining and a decline in manufacturing. From 1990 to 2008 the proportion of employees who were trade union members in their main job decreased from 41 per cent to 19 per cent (ABS, 2009). Modernisation of the award system through a reduction in the number of awards from 4,053 in 2005 to just 122 in 2010 has also weakened the power of unions in the negotiation process. Both changing legislative frameworks and a decline in union membership have resulted in a significant decrease in the number of strikes and other forms of industrial action.

The Impact on HRM

In recent years economic and political changes have impacted on the HR function in a number of critical areas. Modernisation of the award system and the shift to enterprise bargaining have increased employer flexibility in terms of wages and salaries thus enabling organisations to pursue more competitive compensation strategies (Gollan, 2009). For example, in areas of skills shortages, such as accounting, engineering and information technology, the market has become more flexible but at the same time wage costs have increased. Many organisations are taking a skill-based pay approach in which pay rates are determined by the skills that employees acquire and their capacity to use those skills. This approach is well suited to an environment characterised by ever-changing technological advancements (De Cieri et al., 2009).

As Australia moves from manufacturing to service, mining and high-tech industries there is an urgent need to up-skill and re-skill its workforce and this has been aided by a range of government- and industry-sponsored education and training initiatives. ABS data shows that 9 per cent of large organisations, 70 per cent of medium-sized and 39 per cent of small organisations provide some form of structured training to their employees including in-house training, outsourced training or support towards gaining additional qualifications (ABS, 2003). About 80 per cent of employers claim to be providing training with about 50 per cent of workers taking part in formal training and 70 per cent receiving on-the-job training. Vocational training is largely provided by the Vocational Education and Training (VET) Sector, which offers qualifications ranging from Certificate I up to Advanced Diploma. These qualifications are based on training packages that set out qualifications, competency standards and assessment guidelines for particular industries and occupations (Smith and Smith, 2007). A major component of the VET system is apprenticeships and traineeships, which combine on-the-job and off-the-job training for skilled trades and which are based on industry competency and qualification standards. Vocational, work-skills related training is critical to the future of the Australian economy and thus the recruitment and management of VET trainees is often an important task for HR departments in medium and large organisations.

The tertiary education sector is also expanding with recent forecasts that by 2025 40 per cent of Australians aged from 25 to 34 years will be university educated, which will produce an additional 217,000 graduates (IBISWorld Industry Report, 2011). International education is Australia’s third largest export industry, generating US$18 billion in exports in 2009. It is 50 per cent larger than tourism–related travel, and has grown by 94 per cent since 2004. In 2009, there were 629,918 international students in Australia, of whom 203,324 were in higher education, 232,475 attended a VET provider and 135,141 were on an English language course (Phillimore and Koshy, 2010). Recent changes to student visa regulations will allow those with tertiary qualifications from a university to apply for a two-year working visa and then subsequently to apply for permanent residency, a strategy designed to help alleviate skill shortages in a range of professional areas (Sainsbury, 2011).

Remuneration

Compared to other countries in the region, particularly major trading partners such as China and India, Australians enjoy high wages and benefits. In the 10 years to 2011 wages rose on average by 57 per cent (ABS, 2011a). Changes in mean weekly earnings were affected not only by changes in the rate of pay, but also by changes in the composition of the Australian workforce, including diversity of employment arrangements, number of hours worked, the extent of part-time and casual employment; and mix of industries and occupations (ABS, 2010b). For HR managers, wages pose two competing challenges: the need to offer competitive salaries to attract and retain quality employees but, at the same time, the need to contain wage costs in order to remain competitive in both local and global markets.

One controversial area in relation to pay is executive remuneration. In the previous edition the authors noted that the relationship between CEO rewards and organisational performance had yet to be determined (Patrickson and Sutiyono, 2004). Recent reviews of the state of executive pay in Australia note that little has changed and that advice and data from remuneration consultants has been much more influential in determining executive packages than the views of shareholders, board members or industry associations (Peetz, 2009). While executive pay is not considered to be especially high in comparison to international standards, and not extreme in comparison to the United States (Fels, 2010), in Australia there is still a perception, often perpetuated by the media, that executive pay is excessive. A 2005 survey sponsored by the Australian Institute of Company Directors showed that the majority of those surveyed believed CEOs to be over-paid (Buffini and Pheasant, 2005) even though salaries are largely determined by market rates and the need to remain competitive, which is unlikely to change in the immediate future (Peetz, 2009).

Role and Importance of the Business–HR Partnership

HRM is now recognised as critical to gaining and maintaining a competitive advantage through the recruitment, development and rewarding of competent staff even though there is still some discrepancy between the ideal and the actual practice (Guzman, 2011). A 1995 survey showed that the typical responsibilities of HR professionals included traditional personnel-related roles such as recruitment and selection, performance management, compensation and reward management, health and safety, employee services, and job design and analysis as well as more strategic activities including staff planning, performance evaluation and diversity management (SHRM-BNA Survey, 1995). Recent Australian surveys indicate that both the scope and depth of HR responsibilities have increased and suggest that the majority of HR managers are responsible for broad policy development in areas as diverse as recruitment, performance appraisal, selection, occupational health and safety (OHS), work–life balance, family-friendly policies and career planning (Sheehan, Holland and De Cieri, 2006). Significantly, there has been an increase in the number of HR managers reporting directly to the CEO or board of directors. Accompanying these changes, in recent years there has been an increase in relative salaries of 5 to 10 per cent for competent HRM professionals (Fenton-Jones, 2008).

In keeping with international trends, Kulik and Bainbridge (2006) reported the continued devolution of HRM functions to line managers with HR professionals retaining responsibility for negotiations with unions and other regulatory agencies and line managers dealing with day-to-day activities such as coaching, performance management and disciplinary issues.

Progress may be slow but in a number of organisations there are also positive signs that the business–HRM relationship is becoming stronger. For example, in a recent restructure the Australia and New Zealand Bank decided to bring non-HR people into HR roles. Staff from all over the business were slotted into HR roles so that they could help educate HR professionals on the harder side of operations while at the same time developing better people management skills (Gettler, 2009). Similarly, at National Australia Bank HR people have been placed into operational roles while operational leaders have been put into roles normally associated with HR (Gettler, 2009). Another area where HR is making a stronger contribution is in the area of employee metrics. One organisation recently reported that it had collated a unique set of HR metrics in the form of a dashboard so that senior executives could see the direct relationship between employee costs and strategic issues in the business (Ross, 2011). The company’s Chief Executive HR claimed that the metrics were like ‘putting a human capital lens on our competitiveness’ (Ross, 2011: 23).

However, despite the rhetoric that HRM is now a strategic business partner, in practice there is considerable variation across organisations, and in many cases HR has not yet taken its place on the board. For example, data from a 1995 study of more than 800 organisations showed that 55 per cent had no HR representation on the Board of Directors, yet by 2005 (in a sample of more than 1,000 organisations) this had fallen to 42 per cent, which, although it indicates a strengthening of the HR function, nevertheless shows that there is still considerable scope for improvement (Sheehan, Holland and De Cieri, 2006). A 2007 survey by AHRI of almost 2,000 managers found that while most respondents believed HRM to be a critical function many did not fully understand the role of HR or feel that it was effective in serving the needs of the business (Sardo and Begley, 2007). Clearly there still remains a challenge to educate senior management on potential HRM contributions as well as the need for practitioners themselves to increase their competence in broader managerial functions.

Key Changes and Challenges for HRM

In the first edition of this text one factor considered to be a key driver in the uptake of HRM was the need to coordinate and manage high levels of downsizing and restructuring (Patrickson and Sutiyono, 2004). At that time HR practitioners, primarily in larger public and private sector organisations, worked closely with senior managers in downsizing activities such as planning workforce reductions, counselling retrenched staff and handling the restructuring process. However, in recent years there has been a marked shift in thinking with regards to the wisdom and effectiveness of embracing downsizing as an HR strategy.

After successive waves of downsizing in the 1980s and 1990s, many organisations discovered that they had lost key skills, corporate knowledge and experience. Studies from the United States also indicated that although downsizing may lead to short-term improvements in financial performance, in the longer term the effects were likely to be minimal (Cascio, Young and Morris, 1997). In the latest economic downturn downsizing has been far less prevalent than at the end of the twentieth century. Australian organisations have looked for creative ways to retain employees rather than using job cuts to manage immediate financial problems. Organisations now recognise that in a climate of skill and labour shortages there is much to be gained from keeping experienced employees. For example, in the automotive industry shorter shifts, reduced working weeks and enforced annual leave were used to contain costs while retaining workers until the economy improved (Clarke, 2011).

Managing the Workforce

In common with many developed countries, Australia is facing significant changes in relation to its demographic profile. A report by demographer Bernard Salt estimated that from 2010 to 2050 the proportion of Australians aged 65 and over will increase from 14 per cent to 23 per cent (Huntley and Salt, 2010). At the same time, it is estimated that by 2025 only 50,000 new workers will enter the workforce each year (which is less than the number who will leave), a sharp drop from the heyday of the baby boomer generation when the figure was around 200,000 per annum (Critchley, 2004). The implication of these demographic shifts is that in the future a key challenge for Australian organisations will be to attract and retain a workforce with the necessary skills and experience to meet organisational requirements. One approach for dealing with skill and labour shortages that has been discussed quite broadly at a policy level is to target older workers as a source of ongoing labour.

Research indicates, however, that Australians prefer to retire before they reach 65 years of age (Shacklock, Brunetto and Nelson, 2009) and that organisations continue to focus more on younger workers as the solution to their staffing problems. To address this problem organisations are being encouraged to develop innovative ways to retain older workers (Patrickson, 2011). Both governments and organisations will need to offer retraining to older workers so that they can continue to make an effective contribution in the later part of their working lives (Parker, 2011). At a policy level this is also being addressed. In 2009 the federal government announced a gradual increase in the age at which individuals can access government pensions so that by 2023 it will be 67 years rather than the current 65 years of age (DHS, 2009).

Another challenge for organisations is to find ways to transfer knowledge from older to younger workers so that corporate memory is retained. Many larger organisations have introduced mentoring programs as one way of assisting knowledge transfer while at the same time supporting career development for employees in the early stages of their careers. To assist in this process AHRI offers mentoring programs that link younger employees with more experienced staff as well as professional development networks for recent graduates (HR Monthly, 2007).

Employee Engagement

In a labour market characterised by skill and labour shortages workforce attraction and retention will become a key challenge for HR managers but so too will employee engagement. The next generation of employees will be better educated, will have higher expectations and are predicted to be more mobile than the current cohort of baby boomers. At the same time, as noted previously, organisations will need to find ways to engage the baby boomer generation to avoid losing much needed knowledge and experience (Quine, 2006). In this context employee engagement has become a critical issue and a key challenge for organisations. Employee engagement has been found to result in lower absenteeism and turnover as well as higher profits and higher levels of customer satisfaction. Engaged employees are important for gaining competitive advantage and maintaining overall organisational success (Ross, 2009).

Organisational approaches to employee engagement range from participation in programs such as the annual Australian AHRI Awards or seeking accreditation as an Aon Hewitt Best Employer, also referred to as ‘employer of choice’ (Kramar, Bartram and De Cieri, 2011). Increasingly having an Employer of Choice endorsement is seen as a major source of competitive advantage in attracting quality employees, although a 2007 workplace survey found that 52 per cent of job-seekers reported that they were rarely or never attracted to a company by such claims. By contrast 93 per cent of organisations surveyed considered it to be important and, of those who had not yet been accredited, more than 50 per cent stated that they planned to seek accreditation within the next two years (Chandler Macleod’s Workplace Barometer Report, 2007). Surveys by Aon Hewitt have indicated that for the employer of choice branding to be successful employer promises needed to be matched with action in areas such as looking after or valuing employees, career development and progression, the provision of challenging and engaging work and work–life balance or employee benefits (Chandler Macleod’s Workplace Barometer Report, 2007).

A recent survey indicated that there has been some improvement in employee engagement levels in recent years but there were still some worrying trends (Mercer Consulting, 2011). The survey found that one in five Australian employees were not happy with their job but were not planning to leave while four out of ten were thinking of leaving their organisation with those aged 25–34 most likely to be looking for alternate employment. Sixty per cent of older workers believed that their organisation had not provided sufficient opportunities for growth and development; females were less satisfied with career opportunities than men.

Given recent movements towards casualisation in the private sector and the lessening of union power it is not surprising that for many employees the public sector is emerging as an employer of choice given its relatively high salaries, the promotion opportunities, comparatively stable employment, flexible working hours and interesting job responsibilities (ABS 2012a). However, while it would appear that a number of Australian organisations are moving towards practices that support employee engagement there is still room for improvement in terms of delivering on promises.

Work–Life Balance

In common with many developed countries, the issue of work–life balance is increasingly on the HRM agenda. Although there has been steady growth in part-time and casual employment ironically there has also been a shift towards longer working hours for both full-time and part-time workers. In most Organisation for Economic Co-operation (OECD) countries the trend has been towards a shorter average working week yet in Australia the average full-time employee now works 42 hours per week, up from an average of 38 hours in 1982 (Rasmussen and Burgess, 2007). There has also been a significant increase in the number of people working 50 hours or more per week, often as unpaid overtime (Buchanan et al., 2006). Over this same period there has been a steady increase in the number of women in the workforce. In August 2010, there were 9.8 million employees, of whom 5.2 million were males and 4.6 million were females (ABS, 2011b). These changes provide the context for growing calls from employees for a better work– life balance. Recent ABS Social Trends’ figures indicate that 2.2 million workers believe that they are over-employed and want to work fewer hours. Reasons cited included wanting to spend more time with their family, more time to take care of children and more time for recreational and social activities (ABS, 2011c).

The HRM response has been to look for creative ways to match organisational and employee needs. Results of a 2005 study of more than 1,000 organisations found that work–life balance initiatives were being developed in 55 per cent of the organisations surveyed while 49 per cent had implemented family-friendly policies (Sheehan, Holland and De Cieri, 2006). Australian organisations are recognising that by offering flexibility, family-friendly benefits and generous maternity leave conditions they can gain a competitive advantage that may in fact determine their long-term survival. That is, with an ageing population and with skills shortages across many sectors there is a need to retain experienced employees. Yet, despite recognising employee retention as a major source of competitive advantage and despite significant progress in work–life balance policies in recent years, many women still leave the workforce after having children due to the pressures of finding suitable and affordable childcare, the difficulties associated with juggling the work–non-work interface, and male work cultures that may effectively discourage the take-up of flexible work options (Still, 2006). Redressing these issues will be a key challenge for organisations in general and more specifically for HR managers in the next decade.

Cultural Diversity

Australia is culturally diverse and becoming increasingly so. In the period up until World War II the majority of migrants came from the United Kingdom and thus were culturally very similar to Australians. After the war Australia experienced a wave of migration from Mediterranean countries, such as Italy and Greece, followed in more recent years by migrants from Middle Eastern, African and Asian countries. By 2006 approximately 25 per cent of Australia’s workers were born overseas with 15 per cent originating from non-English speaking background (NESB) source countries (DIMA, 2006).

Current immigration policy reflects growing concern as to how Australia will remain productive in the future given a relatively low birth rate and a rapidly ageing population. However, preference is still given to English-speaking migrants with either specific skills or professional qualifications in areas of workforce shortages. As a consequence Australia is still predominantly English speaking and still holds to primarily British values and attitudes. Australians tend to be wary of cultural differences and at times openly hostile to migrants from Islamic or Arabic backgrounds. There are indications that these issues are often left unad-dressed in the workplace (James and Heathcote, 2002). The management of cultural diversity is a low priority for Australian organisations and is often limited to legal compliance (Bertone and Leahy, 2001). As a consequence there is very little evidence of an integrated approach that takes into account race, ethnicity and religion (Syed and Kramar, 2010). There is also an under-representation of cultural diversity in higher level positions, a situation that perpetuates the over-representation of the views of mainstream employees at the expense of minority groups (Syed and Kramar, 2010).

Gender

More than a decade after the introduction of equal opportunity legislation (Equal Opportunity for Women in the Workplace Act 1999) and despite numerous affirmative action programs at state and federal level, women have still not managed to break through the glass ceiling to the executive ranks in Australian companies (Clarke, 2011b). Although women comprise 45 per cent of the workforce (with 55.9 per cent holding a tertiary qualification) women still make up only 2 per cent of chief executives of ASX200 (Australian Stock Exchange) companies, 8 per cent of board members of ASX 200 companies, 10.7 per cent of senior executives in ASX 200 companies and 37 per cent of senior public service roles (Equal Opportunity for Women in the Workplace Agency 2012). There are indications, however, that some organisations are taking pro-active measures to redress gender balance. For example, the accounting firm KPMG has increased its female managers by 6 per cent to 51 per cent since 2005 through a diversity program that includes paid parental leave, paid ad hoc childcare, family days and links to diversity networks such as Women on Boards. In the 2009 financial year, 40 per cent of its staff accessed one or more of the firm’s flexible work options (Ross, 2010).

Women also continue to experience wage inequality despite efforts from the late 1960s onwards to remedy the imbalance through both legislation and the centralised wage fixing system (Short and Nowak 2009). While some of the gap can be explained by the existing social/cultural values that impact on women’s ability to gain promotion or higher paid jobs there is also evidence that ‘women’s work’ (that is, in caring or service organisations) is not as highly valued and therefore attracts lower remuneration than jobs traditionally regarded as ‘men’s jobs’ (Short and Nowak, 2009). As more and more educated women enter the workforce HR has a critical role to play in gender equality through, first, identifying gaps in current practice and then, promoting voluntary actions to ensure that women take their place in leadership and management positions (Charlesworth, 2010).

Changes Expected in HR Functions in the Next Five Years

HRM in Australia has begun the transition to a recognised profession. In the next five to ten years people working in HRM are more likely to have appropriate qualifications and are more likely to be involved in strategic decision-making processes at senior levels in the organisation. In terms of qualifications, one study reported that in 2006 46 per cent of HRM professionals had completed some form of relevant graduate degree, an increase from 23 per cent in 1995 (Sheehan, Holland and De Cieri, 2006). A major shift, however, is needed in terms of career experience. Currently career paths tend to be via direct entry into HRM rather than through other business functions such as accounting, finance or sales/marketing. The implication is that many HR professionals lack broad strategic business experience or the skills and knowledge to contribute on an equal footing with other recognised professions (Sheehan, Holland and De Cieri, 2006). For HR professionals to increase their credibility they will be under pressure to gain experience across all areas of business, not just human resources.

Another major issue in the next five years will be the continued delegation of many HRM roles and functions to line managers (Kulik and Bainbridge, 2006). While this will reduce the amount of time that HR professionals spend on day-today administrative activities it will increase the need for training, coaching and mentoring of line managers to help them develop the requisite soft skills. It will also require an overarching strategy on the part of HR to ensure that delegated functions have a good fit with the organisation’s overall mission, vision and policies.

At a more strategic level the future of HRM in Australia will require a focus on two key areas: international HRM and the integration of HR management into the overall strategy of the firm. Australia has been described as a small, late inter-nationalising economy (Johnston and Menguc, 2007) with a future increasingly tied to global markets and multinational enterprises (MNEs). The Mayne Report (www.maynereport.com) 2010 found that 250 foreign-owned companies generate revenue of more than AU$250 million (US$250 million) in Australia. There are also about 80 Australian-owned firms that generate more than AU$200 million (US$200 million) revenue offshore. The recent AT Kearney confidence index (2010) ranked Australia as the seventh most attractive destination for foreign direct investment (FDI) and third for primary and retail sector investors. This data indicates that Australia is a significant contributor and an attractive destination as a host and source of multinational investment. Given anticipated growth in global markets over the next five years the focus for human resource managers will need to include international HRM. That is, HRM will need to expand its portfolio of skills to include expatriation and repatriation, industrial relations and employee relations across different countries, an understanding of HR practices in MNEs in Australia, and centralisation versus localisation. Staffing will include global talent management, a critical issue given current skills and labour shortages (McDonnell, Stanton and Burgess, 2011).

The second key focus will be on integrating HRM into the overall strategy of the firm and then demonstrating exactly how this adds value through its contribution to the triple bottom line (Compton, 2009). In other words, HR will need to provide tangible, quantitative evidence to support the argument for greater investment in human capital as a source of competitive advantage (Lundgaard, 2009; Ross, 2011). It will need to show how it supports key stakeholders – employees, line managers, key customers and shareholders (Ulrich, 2006). It will need to show that it can manage the ‘big five’ – managing cultural change, having personal credibility with business managers, demonstrating effectiveness in the traditional areas of HR, good business knowledge and the use of IT to support delivery of HR outcomes (Keen, 2004). This in turn will require the development of clear measures of HR activities that offer useful and meaningful data to assess and evaluate HRM’s overall contribution to business outcomes (Ross, 2010).

At this stage it seems that the challenges have been identified but the nature of the best response is still a little unclear. There are signs that HR is moving in the right direction towards becoming a full business partner. The question of where to go from here has several options and lacks convergence between those employed in the service industries, the mining sector or not for profit organisations given their present differences. Both between countries in Asia (Budhwar and Yaw, 2009) and between industrial sectors within any specific country in this region there is evidence of multiple pathways and Australia is no exception to this increasing level of complexity. Clearly Australia has to confront the issue of wage discrepancies between its income earners here and abroad, and within its own economy. It also has to address issues of individual differences such as race, ethnicity, culture and gender within its workforce. It needs to develop policies and practices that steer a delicate balance between the demands of its stakeholders. Such pressures add significantly to the complexities of the HR manager’s role and add further to the pressures both for professionalism in HRM and for understanding its broader impact on other business functions.

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Websites

Aon Hewitt

http://was2.hewitt.com/bestemployers/anz/pages/index.htm

Australian Human Resources Institute

www.ahri.com.au

Equal Opportunity for Women in the Workplace Agency

www.eowa.gov.au

Fair Work Australia

www.fwa.gov.au

Mercer Consulting

www.mercer.com.au/home