14

Human Resource Management in New Zealand

Ann Hutchison and Noelle Donnelly

Introduction

On the surface, the development of human resource management in New Zealand follows a similar path to that of other Anglo-American countries, especially those with shared colonial pasts. However, deeper examination reveals several distinguishing aspects. This chapter begins with an overview of HRM’s historical development within New Zealand. It then outlines the political, economic and cultural context within which HRM practices have emerged. Finally the chapter examines the current and future challenges facing HRM in New Zealand.

New Zealand is a small country situated far south in the Pacific Ocean. It comprises two islands, the ‘North Island’ (population approximately 3.3 million) and the ‘South Island’ (population approximately 1.1 million). While the North Island hosts the largest city, Auckland (population approximately 1.1 million), and the capital, Wellington (population approximately 400,000), the South Island is sparsely populated, known for its rugged beauty. The country’s peaceful, clean image makes it one of the most visited places in the world by international tourists and immigrants alike. Furthermore, New Zealanders enjoy a high standard of living, with the country having been rated third on the United Nations’ Human Development Index (United Nations Development Program, 2010).

The country itself is isolated, with its closest neighbour, Australia, being at least a three-hour flight away. Only 4.4 million people inhabit a land size that is similar to the United Kingdom (population approximately 61.8 million). This ‘smallness’ gives New Zealand a lower global profile than its Anglo-American counterparts; and, while multinational enterprises (MNEs) are represented on its shores, the majority of New Zealand’s businesses are small to medium sized. In fact, 97 per cent of its businesses employ less than 20 employees (Statistics New Zealand, 2011a), making the small-to-medium enterprise (SME) the norm, and lending a particular flavour to the nation’s HRM practices.

Although New Zealand shares a colonial history with the United Kingdom and Australia, it is culturally distinct, in that its indigenous Māori heritage makes a strong contribution to its national identity. Indigenous Māori comprise 14.6 per cent of the population (Statistics New Zealand, 2006), and their representatives visibly contribute to government policy, social commentary and business activity. This visibility traces back to the founding document, the 1840 ‘Treaty of Wait-angi’, signed by Māori leaders and the British crown (King, 2007). An important and sometimes contested part of New Zealand’s historical context, that treaty today symbolises the importance of New Zealand’s indigenous heritage and renders cultural diversity an important HRM consideration.

Historical Development of HRM

Phase I: The Early Years: A ‘Very’ British Heritage

The development of HRM in New Zealand has been shaped by historical ties with the ‘mother country’, Britain (Ransom, 1966), resulting in the mirroring of British HRM practices. Like other Anglo-American countries, HRM progressively shifted from an administrative to a strategic business function, while concurrently pursuing a professionalization agenda, requiring qualifications and specific expertise among its members (Toulson and DeFryn, 2006).

Not only can the development of HRM in New Zealand be traced back to British welfarist notions, elements of which remain today (Toulson and DeFryn, 2006), but a clear administrative focus is also evident in its early development (Rudman, 2010). The first personnel officers arrived in New Zealand with large overseas MNEs, their role being to administer head office policies. Employment relationships at that time were tightly regulated through a number of laws beginning with the Trade Unions Act 1878, the Factories Act 1891, 1894, the Employment of Females Act 1873, the Industrial Conciliation and Arbitration Act 1894 and the Public Service Act 1912. As a result, personnel administrators had a straightforward role to play in labour management (Bryson, 2006; Toulson and DeFryn, 2006).

That picture changed with World War II, which led to labour shortages and attraction and retention challenges (Toulson and DeFryn, 2006). It was at this time that MNEs started to enter the country, further exacerbating those difficulties. Personnel officers started to play a bigger role, using health and safety to attract and retain staff, tackling issues such as absenteeism and on-site welfare (Bryson, 2006). These activities, although basic, heralded the beginnings of the HRM profession and by the 1950s businesses had started to recruit specialist personnel experts (Toulson and DeFryn, 2006).

Phase II: The Path to Professionalism

From the mid-1950s the HR profession in New Zealand began to evolve, with HRM practices such as development, performance management and reward becoming more innovative (Cleland, Pajo, and Toulson, 2000; Toulson and DeFryn, 2006). Early attempts to professionalise began with the 1956 formation of the Personnel Managers Association, which eventually grew into the New Zealand Institute of Personnel Management (NZIPM), under the governance of the New Zealand Institute of Management (NZIM). The first two decades of the NZIPM were directed towards growing membership and setting professional performance standards. In 1985 the Institute of Personnel Management (NZ) set itself up as an independent national organization, and its focus grew to encompass continuing professional development. By 1999 it was rebranded as the Human Resources Institute New Zealand (HRINZ), the professional body that remains today. From a membership base of 220 in 1986, HRINZ has grown to 3,900 members in 2010, representing 52 per cent of the known HR workforce in New Zealand (HRINZ, 2011a).

Phase III: Embracing All Things Strategic

The 1980s represented a turning point, with a ‘new’ philosophy espousing HRM’s strategic value widely touted (Beer et al., 1984; Fombrun, Tichy, and Devanna, 1984; Guest, 1989). The ascendency of strategic HRM principles raised HRM professionals’ awareness of their potential contributions, and called for them to demonstrate their role’s value to employers (Toulson and DeFryn, 2006). New Zealand also began to experience extensive economic and political change, businesses were downsizing, and there was a need for increasingly thoughtful HRM (Toulson and DeFryn, 2006), all of which led to higher pro-activity among HRM professionals. Despite pro-active intentions, however, HRM professionals reported struggling credibility, lamenting that they were ‘firefighting’ rather than adding value (Cleland, Pajo and Toulson, 2000; Toulson and DeFryn, 2006). Only one-third of HRM professionals reported to the chief executive (Gilbertson, 1984), suggesting that HRM was still not being given substantial influence.

During the 1990s, the HRM profession gained a slightly higher strategic profile in New Zealand, shown by Stablein and Geare’s (1993) survey and Cleland, Pajo and Toulson’s (2000) exploration of that period. HRM professionals increased in number over this decade and New Zealand’s universities started to offer HRM education, resulting in a dramatic increase in the percentage of HRM professionals who were tertiary qualified, from 37 per cent in 1990 to 85 per cent in 1998. By 2000, 48 per cent of HR professionals reported taking a more strategic focus than previously, and 34 per cent reported an increasingly value-added focus (Cleland, Pajo and Toulson, 2000).

The Level of Business–HR Partnership

The level of business–HR partnership can be seen in the extent to which HRM (a) is represented at a senior management level, (b) contributes to business strategy, and (c) is devolved to line managers, so that HRM professionals can focus on strategic decision making (Lawler and Mohrman, 2003). On the first matter, it would appear that New Zealand’s largest organisations have an HR executive reporting to the chief executive, although Rasmussen, Andersen and Haworth (2010) have found that only 40 per cent of small, medium and large organizations had an HRM expert in their senior management team and other surveys have found similar figures for board representation (Cleland, Pajo and Toulson, 2000; Johnson and Mouly, 2002).

In terms of strategy, HR professionals appear to be operating at a reasonably strategic level. Rasmussen, Andersen and Haworth (2010) reported that 79 per cent of organizations have HR contributions to corporate strategy, although the extent of involvement varies and that 60 per cent have a written HR strategy. Rasmussen et al.’s data comes from a wider global survey, known as the Cranet survey (www.cranet.org), and the data mirrors other Western countries’ findings, suggesting that New Zealand’s level of HRM–business partnership is not particularly unusual. Interestingly, however, the same Cranet survey was conducted in New Zealand in 1997, and produced very similar results (Johnson, 2000; Johnson and Mouly, 2002), leading to the question of whether New Zealand’s business–HR partnerships have peaked in the last decade.

Devolution in New Zealand also indicates a reasonably strong HRM–business partnership. Rasmussen et al. (2010) show that most organizations devolve HRM activities to line managers, with the exception of employment relations issues, which tend to be more centralised. Overall, then, it seems that New Zealand’s HRM profession is reasonably engaged in business partnership. However, since the above surveys, New Zealand has been through an economic crisis (Reserve Bank of New Zealand, 2011), which will have inevitably shifted the foci of HR professionals towards downsizing and other business-survival activities. Further research is now needed to explore how recent factors have affected HRM-business partnership.

Key Factors Determining HRM Practices and Policies

Political Factors

Understanding New Zealand’s HRM practices requires a deeper look at the political frameworks that govern employment relationships and, in particular, the historical development behind today’s political system. Some of the first employment laws, implemented by British settlers, reflected a traditional British approach to class conflict, perpetuated by the New Zealand government’s efforts to control employment relationships (Bryson, 2006; Deeks and Rasmussen, 2002). New Zealand’s industrial relations were dominated by a national system of compulsory conciliation and arbitration for most of the twentieth century (Deeks and Rasmussen, 2002). Along with Australia, New Zealand was distinctive in adopting this system of labour regulation, but even more unique in adopting it almost a centenary earlier than Australia.

While the introduction of the Industrial Conciliation and Arbitration Act 1894 was designed to facilitate the settlement of industrial disputes, it also became a mechanism for the control and constraint of wage policy (Barry and Wailes, 2004). Furthermore, it strengthened the role of trade unions, ensured that settlements were legally binding and limited the use of strike action and lockouts (Rasmussen, 2010). The impact was ‘primarily one of centralisation, state involvement and a legalistic, adversarial approach to employment relations’ (Deeks and Rasmussen, 2002: 54). In short, until 1984 the industrial relations system was characterised by government intervention.

The year 1984 is regarded as a ‘watershed’ year in New Zealand politics (Allen, Brosnan, and Walsh, 1999; Bray and Walsh, 1998). A change of government led to one of the most radical deregulation programmes across the Organisation for Economic Co-operation and Development (OECD). Almost overnight New Zealand abandoned protectionism, opening its economy to the full force of global competition. The New Zealand ‘experiment’, as it became known, resulted in the deregulation of financial markets, currency flotation and the privatization of state services ( Allen, Brosnan, and Walsh, 1999; Barry and Wailes, 2004).

A major cornerstone of the reform programme was the restructuring of government structures. Through the State Sector Act 1988 and the State-Owned Enterprises Act 1986 significant HRM changes in the public sector were introduced. New Zealand became a ‘world leader’ in its adoption of New Public Management (NPM) principles to ‘modernise’ its public sector by introducing private sector management practices and strategic HRM into a public sector environment (Whitcombe, 2008).

A change in government in 1990 saw a response to mounting pressure from employer groups. With the introduction of the Employment Contracts Act (ECA) 1991 almost 100 years of conciliation and arbitration were removed. That act made unionism voluntary and gave all employees access to grievance procedures and rights to individual bargaining, representing a shift from collectivism to individualism (Rasmussen and Lamm, 2005). The political thinking was that such changes would promote higher productivity. The ECA resulted in what some refer to as a regulatory avalanche, giving rise to personal grievances and a shift toward individual contracts (Cullihane and Donald, 2000).

The most recent legislative shift came with the election of a centre-left government in 2000. With the introduction of the Employment Relations Act (ERA) 2000, that government tried to institute a return to collectivism (Rasmussen, 2010), giving greater support to unions, adding employment contracting constraints and encouraging ‘good faith bargaining’. Interestingly, however, despite this shift, union density has remained static. Having dropped in the 1990s, it now sits at about the 20 per cent mark (Blumenfeld and Ryall, 2011). Despite attempts to revive union rights, the expectations of the ERA have yet to materialise (Rasmussen, 2010). If anything, the support for collectivism has paradoxically resulted in a decline in collective agreement coverage in the private sector. Recent commentators suggest that the legacy of the 1990s remains, with a rise in individual employee rights and individualised employment relationships (Rasmussen and Lamm, 2005).

Now, New Zealand’s government is led by the centre-right National Party, elected in 2008. That government has retained the ERA, but made a number of changes to employment legislation, diminishing employee protection and union support, and further strengthening the individualistic focus (the Employment Relations Amendment Act 2010; Holidays Amendment Act 2010). The current legislation seeks to strike a balance between protecting employee rights and allowing organisations’ freedom, taking the form of various protective legal requirements that stipulate minimum workers’ rights (the Holidays Act 2003, the Human Rights Act 1993, the Privacy Act 1993, and the Health and Safety in Employment Act 1992).

Economic Context

Over recent decades the New Zealand economy has transformed from a protected agrarian economy, dependent on preferential trading arrangements with Britain, to an open, industrialised, free-market, mixed economy (New Zealand Treasury, 2010). The preferential trading arrangement with Britain, for the exporting of agricultural products, contributed to high standards of living during the 1950s (Bryson, 2006). However, when Britain joined the European Economic Community in 1973, New Zealand lost its main export market. In 1955 65.3 per cent of New Zealand’s exports went to Britain, by 1973 that figure had declined to 26.8 per cent and today stands at 2.9 per cent (Statistics New Zealand, 2010). While economic independence led to a greater focus on national identity and sustainability (Toulson and DeFryn, 2006), it also led to a decline in productivity from the 1950s onwards. Recognising the need to compete globally, the newly elected government in 1984 set about liberalising the economy, as noted earlier, with the introduction of the New Zealand experiment (Hawke, 1985).

Concurrently, the government sought to increase its international engagement in the pacific through a number of free trade agreements and the building of its ‘closer economic relations’ with Australia where there is free trade in goods and most services between the two countries. These agreements have rendered the nation’s businesses vulnerable to off-shore competition and have enabled overseas businesses to play an active role in local commerce. Importantly for HRM, the increase in global trade has increased the need for New Zealand to develop the skills to do business in the Asia-Pacific region.

Today the New Zealand economy is based on an export-oriented primary sector (agriculture, farming, forestry and fisheries), a relatively small manufacturing sector and a fast-growing services sector (Statistics New Zealand, 2011b). It relies heavily on its agricultural exports, which comprise half of the total exports sent to Australia, China, Japan and the United States (New Zealand Treasury, 2010). Despite this emphasis on goods and agriculture, however, the Department of Labour (2010) notes that New Zealand’s knowledge economy has the potential to raise productivity, suggesting that New Zealand needs to be increasing its research and development skills, innovation, and managerial professionalism.

Overall, New Zealand’s economy is comparatively advanced. However, similar to many Western economies, New Zealand went into recession in 2008 for five successive quarters. Although the economy has recovered, productivity remains of concern, being among the lowest in the OECD (Sloman and Malinen, 2010; Statistics New Zealand, 2011b). The government believes that skills development holds the key to improvement, but also notes that the nation has serious skills shortages (Sloman and Malinen, 2010), thus raising the importance of human resource development initiatives within organisations, industries and professions. HRM’s role in enhancing productivity was borne out in a recent report that examined the performance of New Zealand manufacturing firms relative to their global counterparts. The research, undertaken by the London School of Economics and McKinsey and Co., found that New Zealand firms did indeed have lower productivity than their counterparts, and that a poor approach to ‘people management’ appeared to be the main differentiating factor. The report recommended that New Zealand firms pay particular attention to building management capability, particularly around HRM practices (Green and Agarwal, 2011).

Despite signs of economic recovery, recent reports suggest that the outlook remains fragile with recovery shallower than anticipated (Nicholls, 2012). Such tight economic conditions continue to exert downward pressure on wages, particularly within the public sector (Blumenfeld, Kiely and Ryall, 2011; New Zealand Herald, 2012a). Furthermore, cost-containment strategies have seen some firms adopt ‘harder’ approaches to performance management, and more recent attempts to renegotiate collective agreements have resulted in a number of strikes and lockouts (Edwards, 2012). Despite the need to retain and attract staff, it appears that the economic climate is simply constraining the ability of organisations to take ‘softer’ approaches to HRM.

Business Environment

The demographic landscape of New Zealand businesses is largely populated by small to medium enterprises, with a smaller population of multinational enterprises (foreign- and domestic-owned) and indigenous Māori-owned firms. This large representation of SMEs within New Zealand presents HRM challenges, as the visible and resource-intensive practices in large MNEs may not be appropriate for smaller businesses, given their need for flexibility (Gilbert and Jones, 2000). Recent research into the HRM practices of SMEs revealed that most operate informal HR practices that they see as facilitating employee engagement and loyalty (Massey et al., 2006).

There are few economies where geographic location is more of an issue than New Zealand. While many point to the need to overcome ‘the tyranny of distance’ (Gyngell, Skilling and Thirlwell, 2007), others suggest that New Zealand businesses have a relative advantage in being located closer to key Asian markets (Donnelly and Dowling, 2010). In an attempt to overcome their relative isolation, New Zealand businesses have increasingly begun to offshore and outsource key aspects of their operations, closer to overseas consumers.

Many of New Zealand’s businesses are owned off-shore, particularly those in the banking and retail sectors (Boxall & Frenkel, 2012), and for Australian-owned companies, the New Zealand operation tends to take the form of a regional office, with policies dictated by the Australian head office. Numerous MNEs have small offices in New Zealand and operate centralised approaches to HRM. Such practices can be sub-optimal, however, if not tailored to the New Zealand context.

Quite separately, Māori-owned businesses, owned by Māori tribes or collectives, make a substantial contribution to the nation’s economy, particularly in terms of tourism, fishing and forestry. Such businesses, although profit-seeking, tend to focus more heavily on social goals rather than on mainstream businesses, and Māori values, such as collectivity and inclusiveness, feature heavily in their objectives. While further research is needed to explore HRM practices in Māori businesses, it is likely that pay, staffing and development in those organisations look quite different to the mainstream.

In general the demography of New Zealand businesses presents a particular set of challenges for their respective HRM functions: For SMEs there is a need to understand and evaluate the more sophisticated practices of larger organisations; for domestic MNEs the role of HRM in managing the dilemma of global integration and local differentiation is key; for the subsidiaries of foreign-owned MNEs the issue of localising to the New Zealand context is imperative; and, finally, for Māori businesses the adaptation of HRM practices to collective values is key.

Cultural Factors

Although the blend of British and Māori heritage has led some to label New Zealand ‘bicultural’ (Jones, Pringle, and Shepherd, 2000, p. 367), ‘multicultural’ is a more widely used term, given that 9.2 per cent of the population is Asian, and 6.9 per cent come from the Pacific Islands, in addition to 14.6 per cent being Māori (Statistics New Zealand, 2006). Ultimately, this multiculturalism makes diversity an HRM challenge. It is questionable, for example, whether New Zealand’s Anglo-American models of management, such as performance management practices that are geared around individual achievement, are suitable for Māoris and Asians, who typically hold collectivist values (Haar and Delaney, 2009; Hofstede, 2005).

New Zealand also has one of the world’s lowest scores in power distance (Hofstede, 2005), meaning that it is common to see managers behave in ways that are informal and egalitarian (Inkson, Henshall, and Marsh, 1986). Compared to organisations in the United States and in the United Kingdom, New Zealand workers report higher levels of management consultation and employee discretion (Boxall, Haynes, and Macky, 2007)

The increase in New Zealand’s cultural diversity, and the unique characteristics of the Asian and Māori cultures in particular, render diversity-management practices important, not only at the policy level, but also in the practices that managers adopt to interact, coach and manage different ethnicities in the workplace.

Review of HRM Practices

We now present four core areas of HRM practice that best capture New Zealand’s points of HRM difference. These areas are staffing (that is, recruitment and selection), development, performance management, and reward. We acknowledge that there are other HRM activities, but it is these four broad functions that form the ‘core’ of HRM practice in New Zealand, and when combined, it is these four that have the greatest potential to address New Zealand’s skills shortages and productivity issues.

Staffing

New Zealand’s skills shortages have intensified the need for effective staffing practices, with almost half of employers reporting difficulties in filling positions (Hudson, 2011). Literature is sparse, however, on whether employers in the current economic climate are investing in recruitment innovations to tackle these shortages.

Certainly, organisations in the public sector do display care in recruitment and selection, as the State Sector Act 1988 requires documented practices, clear policies, panel interviews, structured interview questions and reference checks. That said, the ultimate purpose in setting such constraints is that public sector organisations will be ‘good employers’. Whether these processes are as effective as they could be for attraction and retention is unclear.

An obvious strategy for attracting skilled staff would be to cast the recruitment net globally, particularly to Australia, whose citizens do not need work permits to work in New Zealand. Historically, this has been the case to some extent; Johnson (2000) has reported that one-fifth of SMEs and one-third of large organisations have deliberately targeted the overseas labour market (Johnson, 2000). The Internet presents a good opportunity to reach the global labour market, but based on a study of 1,229 employers across diverse industries, Clark et al. (2001) reported that only 26 per cent were recruiting staff online. Our observation suggests that online recruitment has since increased, although recent data on this practice do not appear to be available.

The 1997 Cranet data showed that internal recruitment was a more popular staffing strategy than overseas recruitment (Johnson, 2000). In that sample, about 70 per cent of employers invested in internal development to meet skill needs, with 72 per cent recruiting middle managers from within. However, internal development was not working well for filling leadership positions, as most employers (70 per cent) were using executive search or recruitment agencies for senior roles.

In fact, the recruitment industry has developed in recent years, becoming more widely used (HRINZ, 2011b), and innovative. For example, recruitment consultants have embraced psychometric testing, with 89 per cent conducting personality tests during selection, and 64 per cent conducting cognitive ability tests (less common than usage within organisations; Taylor, Keelty and McDonnell, 2002). Furthermore, 37 per cent use assessment centres in their selection processes – more so than organisations themselves (10–14 per cent) – indicating a move towards innovative practices on the parts of consultants.

Despite the recruitment industry’s move towards value-adding activities, New Zealand’s selection practices lag behind what research shows to be effective. While the largest organisations tend to use more panel interviews, psychometric assessments and a larger variety of selection techniques than other nations (Ryan et al., 1999), only 9 per cent of organisations (large, medium and small) structure their reference checks, only 43 per cent use behavioural or situational interview questions (a finding supported by Hudson, 2011, and Johnson, 2000), only half of assessment centres are conducted by a well-trained assessor, and only 50 per cent of organisations and 10 per cent of consultants rate applicants in a structured way during selection (Taylor et al., 2002). In fact, when asked which methods had the greatest predictive validity, most HR professionals and recruitment consultants did not know (Taylor, Keelty and McDonnell, 2002), suggesting that, although so-called ‘best practice’ is used in New Zealand, selection practices may not be implemented as thoughtfully as they could be.

Furthermore, some practices are completely absent. In Taylor et al.’s (2002) study of 200 organisations and 30 recruitment consultants, none said that they conduct a systematic job analysis based on critical incidents prior to recruitment, although some do use existing position descriptions to shape their selection practices. Also, none reported that they use personality data in a way that is tailored towards the specifications of a given role, despite research that shows how important this is (for example, Hogan and Holland, 2003).

Human Resource Development

Human resource development (HRD) is seen by the government as critical in helping New Zealand address skills shortages and raise its productivity (Sloman and Malinen, 2010). On a national level, however, HRD tends to be deregulated, happening very much at the organisational level. This is different to, say, Europe, which has a stronger emphasis on government-regulated apprenticeships and vocational training (Winterton, 2007). That said, New Zealand does have industry training organisations (ITOs), which develop accredited training programmes for certain industries and go some way towards raising skill levels (see www.itf.org. nz for further details of how these organisations operate).

At the organisational level, employers spend an average of 2.5 per cent of salary on HRD, which is slightly higher than in Europe (2 per cent) (Johnson, 2000). Furthermore, it seems that, through the global economic crisis, and despite inevitable budgetary constraints, employers have sought to retain an emphasis on HRD (EEO Trust, 2009). Nevertheless, although HRD investment is occurring, wider methods of development beyond traditional training are somewhat lacking, which perhaps reflects a lack of resources and expertise among SMEs.

The Cranfield data, for example, showed that only one quarter of employers used development methods besides training, with only 26 per cent of employers conducting succession planning, 25 per cent doing developmental job rotation, 22 per cent using formal career plans, 17 per cent using expatriate assignments, 14 per cent using high-flier schemes and 10 per cent using assessment centres (Johnson, 2000). Since then, HRD practices do not appear to have changed substantially. Bothwell (2010) reported that 51 per cent of organisations do not have a professional development strategy and that needs assessments happen purely by scanning performance appraisals (84 per cent), responding to line managers’ requests (78 per cent), and employee requests (67 per cent). In fact, only about one half of employers used business-plan-based training at the time of the 1997 Cranet survey (Johnson, 2000). Furthermore, although most employers (75 per cent) try to measure their HRD effectiveness, none evaluate it comprehensively, using all of Kirkpatrick’s (1998) four measures (reaction, learning, behaviour, and results). Finally, it appears that investments are not extending substantially to leadership and management development. Bothwell (2010), for example, surveyed 75 HR professionals about their organisations’ practice and found that only 48 per cent of organisations have leadership development programs and 60 per cent spend less than NZ$2,000 (US$1,672) per manager on development. Admittedly this is a relatively small sample, but the results do suggest that New Zealand’s HRD practices are perhaps not as innovative as academics may hope, and they have not moved substantially beyond traditional training.

Performance Management

Overall, research on performance management advocates a shift from traditional form-filling performance appraisal to more strategy-driven and continuous ways of defining, measuring and encouraging performance (Latham, et al., 2005), but is this shift actually happening in New Zealand? Certainly, our observation suggests that larger organisations are trying to take thoughtful, systematic and integrated approaches to performance management, but once again, anecdotally it appears that resources constrain the practices of smaller organisations.

Generally, traditional performance appraisal is widely implemented, with only 10 per cent of organisations reporting that they do not conduct regular appraisals, and organisations frequently reporting that they use multi-source data (that is, data from peers, subordinates and/or customers) in their appraisal processes (Johnson, 2000). Usually, the employee has the opportunity to contribute to their appraisal and participate actively in the process (Johnson, 2000), which is perhaps reflective of the participative management approach noted earlier in the chapter.

Beyond traditional methods, however, New Zealand research shows that some organisations are moving towards more innovative approaches to performance management. Most notably, Walsh, Bryson and Lonti (2002) conducted a study to explore the HRM practices of New Zealand’s most successful companies. They found that strategy-driven performance management was a factor that char-acterised these successful organisations. Most notably, these organisations deliberately used performance management to enhance agility and flexibility, focusing on values and desired behaviours instead of constraining employees to particular duties (Walsh, Bryson and Lonti, 2002). This reinforces the earlier argument that strategy-driven approaches to performance management are desirable, but whether these approaches are reaching New Zealand’s smaller businesses is unclear, and further research is needed to explore the national prevalence of innovative performance management.

Rewards

The global economic crisis has raised the need for organisations to develop prudent salary budgets, and will have inevitably affected their ability to use rewards as an attraction and retention tool. Supporting this, very little movement was seen in remuneration levels over 2009 and 2010, with only marginal increases of about 1 per cent (Department of Labour, 2011a). Over that period, wage freezes and chief executive pay cuts were common (Doughty, 2010; Strategic Pay, 2011).

Under normal circumstances, these cuts and freezes may have affected job satisfaction and retention. However, New Zealand’s reward consultancies have reported a concurrent shift in employees’ priorities, with employees reporting acceptance of pay freezes in the current economic environment, and a gratitude for job security (Strategic Pay, 2009), and perhaps reward has become less salient for employees than in buoyant times. Now that the economy is seeing moderate improvement, however, employers are forecasting moderate pay increases once again (Doughty, 2010), which may prompt shifts in employees’ priorities.

We observe that innovative approaches to reward in New Zealand have been encouraged by several local, boutique reward-consultancies, all of whom have used practitioner literature, local conference presentations and widely marketed workshops, to raise the awareness of approaches like broad banding and competency-based pay. That said, traditional approaches are still alive and well. For example, job evaluation remains popular, with the Hay scheme having a strong and loyal customer base. In the public sector especially, job evaluation is common, forming part of the State Sector Act’s centralised approach (Walsh et al., 2002).

To our knowledge, there is no literature to confirm the incidence of the various approaches to reward. However, local reward consultants state that variable pay is on the increase. Even in 2000, two-thirds of employers used performance-related pay of some sort; with 80 per cent of employers using merit pay, 30 per cent using group bonuses, 20 per cent using individual commission, 22 per cent using profit sharing, and 18 per cent of organisations using stock options despite the small size of the New Zealand stock market (Johnson, 2000). Consultants’ observations that variable pay has increased further will mean that it is a strong feature of reward practices in New Zealand.

In terms of benefits, 25 per cent of organisations use flexible benefits plans, incorporating the usual range of benefits – including cars, healthcare and pension schemes. However, childcare allowances and career break schemes tend to be rare, in the order of 5 per cent (Johnson, 2000). Interestingly, a recent survey of 1,139 New Zealand workers found that flexible working hours are the most desired non-monetary job perk (New Zealand Management, 2011).

Key Challenges Facing HRM and the Future of HRM

Demographic Shifts

The HRM profession faces several challenges within New Zealand, many of which relate to projected demographic shifts. While New Zealand has long been a ‘substantial hub for migrants’ (Inkson and Maani, 2011: 1), in recent years the composition of those migrants has changed. While most (67.7 per cent) New Zealanders identify themselves as European, the fastest-growing ethnic group is Asian (Department of Labour, 2008). Census figures reveal that the Asian population increased by 104 per cent from 1996 to 2006 (Statistics New Zealand, 2006). It is anticipated to increase to 15 per cent by 2026 (Badkar and Tuya, 2010). This anticipated growth in the Asian work-force represents a significant future source of skilled labour (Badkar and Tuya, 2010), but also requires greater understanding of the diverse work approaches of different ethnic groups.

The New Zealand labour force has also become older and is projected to continue ageing over the next 20 years, due to increases in life-expectancy, declines in fertility rates and the ageing of the baby-boomer generation (Stephenson and Scobie, 2002). By 2020 one in four workers will be 55 years or over (Department of Labour, 2009). Similar to the Asian population, older workers are a potential source of knowledgeable labour, but as they retire they will leave gaps in the workforce. Representative groups of older workers have called on organisations to provide flexible work arrangements, opportunities to up-skill, and suitable workplace ergonomics in the employment of older workers (Department of Labour, 2009).

Globalisation

For a small open economy like New Zealand, exposure to the costs and benefits of globalisation is heightened. Some of those costs became visible with the global financial crisis, which hit New Zealand hard and inevitably had an impact on HRM. Employers became less able to invest in innovative HRM practices, but still needed to retain high-performing staff in preparation for the inevitable, but unpredictable, upturn – calling for innovative, but minimal-cost HRM tactics.

One benefit of globalisation, however, is the opportunity for organisations to integrate their production or service provision systems, and outsource and offshore those operations, thus saving costs and locating closer to key markets (Skilling and Boven, 2006). Such a model allows businesses to expand in a low-cost manner and to overcome skill shortages. With cheaper labour nearby, in emerging economies, it is now possible for New Zealand organisations to outsource high-value work. The outsourcing and offshoring of production systems raises significant HRM challenges in terms of international management.

Another outcome of globalisation is the international mobility of labour. Alongside the large numbers of migrants entering New Zealand, there is concern about the large number of skilled people leaving New Zealand. This outward migration of skilled labour has resulted in much discussion about the ‘brain drain’, or ‘talent flow’. In 2006 it was reported that a quarter of a million New Zealand-born people were working in Australia (Haig, 2010), and that higher income levels are the driving force behind the decision of many New Zealanders to migrate to Australia. Using 2006 census figures, average incomes were estimated to be 25 per cent higher in Australia than in New Zealand (Haig, 2010), presenting retention challenges for New Zealand organisations.

Skills Challenges

In the next 10 years it is expected that New Zealand will face skills challenges or ‘supply constraints’, especially for professional roles (Department of Labour, 2010, p. 2). Higher levels of outward migration, an ageing population and increased reliance on knowledge work, all contribute to skills challenges that New Zealand organisations face.

Skills shortages persisted even through the recent recession (EEO Trust, 2009), and will worsen once baby boomers start to retire, leaving gaps in the middle management and senior executive ranks. Although certain industries are particularly susceptible, the skills shortage is seen across all industries. While government initiatives have focused on training, academics have argued that the solution really lies in greater organisational investment in managerial coaching, peer-group learning and less formal approaches to learning (Sloman and Malinen, 2010). It is here that HRM professionals can really add value.

Investment in skills is futile, however, if those skills are not retained, so development efforts have to be matched by retention efforts. Interestingly a 2011 survey of workers by Hudson showed that about 50 per cent of people are actively or passively seeking another job, meaning that they are at least thinking of changing roles, even if they are not taking proactive steps to do so (Hudson, 2011). Employees are now becoming far more discerning and mobile, reference-checking employers, as well as vice versa (HRINZ, 2011b), requiring interesting work, and being willing to leave if that interesting work is not provided (Boxall, Macky, and Rasmussen, 2003). Over the next five years, then, intensified skills shortages will probably force organisations to be more innovative in their staffing, development and retention methods.

Changing Nature of Work

A quite separate factor has also called for quick and innovative HRM responses, and that is the fact that the nature of work has substantially changed in recent years, due to the sheer pace of technological advancement and subsequent increases in the speed and capacity to transfer information (Department of Labour, 2008).

In keeping with developments overseas, the demand for flexible working arrangements (FWAs) among New Zealand workers is significant (Fursman and Zodgekar, 2009). For organisations the benefits of FWAs are manifold: improvements to the attraction and retention of key staff, employee commitment and an ability to respond more effectively to labour market changes (Kelliher and Anderson, 2008). Within New Zealand, recent legislative changes have sought to mandate the provision of workplace flexibility. These changes include the Parental Leave and Employment Protection (Paid Parental Leave) Amendment Act (2002), the Employment Relations (Flexible Working Arrangements) Amendment Act (2007) and the Employment Relations (Breaks, Infant Feeding, and Other Matters) Amendment Act (2008). Similar to provision within the United Kingdom and Australia, employees with caring responsibilities are given the statutory ‘right to request’ FWAs and employers have a ‘duty to consider’ such requests. Recent research into women’s experiences of flexible working point, however, to a number of factors that limit the uptake. Workloads, time pressures, fears of job insecurity and ‘not wanting to burden their co-workers’ were key reasons why FWAs were not taken up by women workers (Proctor-Thomson, Donnelly and Plimmer, 2010). The implication for HR practitioners is that the uptake of FWAs is complex and dependent on workplace contexts.

Useful Websites

Business New Zealand: www.businessnz.org.nz

Department of Labour: www.dol.govt.nz

EEO Trust: www.eeotrust.org.nz

Employers and Manufacturers Association: www.ema.co.nz

Equal Employment Opportunities Trust: www.eeotrust.org.nz

Human Resources Institute of New Zealand: www.hrinz.org.nz

The Human Rights Commission: www.hrc.co.nz

Industry Training Federation: www.itf.org.nz

New Zealand Institute of Management: www.nzim.co.nz

New Zealand Trade Development Board: www.nzte.govt.nz

NZ Council of Trade Unions: www.union.org.nz

Office of the Privacy Commissioner: www.privacy.org.nz

State Services Commission: www.ssc.govt.nz/hrframework

References

Allen, C., Brosnan, P., and Walsh, P. (1999) ‘Human resource strategies, workplace reform and industrial restructuring in Australia and New Zealand’, International Journal of Human Resource Management 10: 828–841.

Badkar, J., and Tuya, C. (2010).The Asian Workforce: A critical part of New Zealand’s current and future labour market. Wellington, NZ: Department of Labour.

Barry, M., and Wailes, N. (2004) ‘Contrasting systems? 100 years of arbitration in Australia and New Zealand’, Journal of Industrial Relations 46: 430–447.

Beer, M., Spector, B., Lawrence, P., Quinn Mills, D., and Walton, R. (1984). Managing Human Assets. New York, NY: Free Press.

Blumenfeld, S., and Ryall, S. (2011) ‘Unions and union membership in New Zealand: Annual review for 2008’, New Zealand Journal of Employment Relations 35: 84–96.

Blumenfeld, S., Kiely, P. and Ryall, S. (2011) Employment Agreements: Bargaining trends and employment law update 2010/2011, Victoria University of Wellington, Industrial Relations Centre, New Zealand.

Bothwell, J. (2010) ‘University of Otago professional development survey: Summary report’, www.hrinz.org.nz/Site/Resources/Research/Research_Participation_Information_and_Results.aspx, accessed 26 October 2011.

Boxall, P. and Frenkel, S. (2012) ‘Models of human resource management in Australia and New Zealand’. In C. Brewster and W. Mayrhofer (Eds), Handbook of Research on Comparative Human Resource Management, pp. 644–662. Cheltenham: Edward Elgar.

Boxall, P., Haynes, P., and Macky, K. (2007) ‘Employee voice and voicelessness in New Zealand’, in R. B. Freeman, P. Boxall, and P. Haynes (eds), What Workers Say: Employee voice in the Anglo-American workplace, pp. 145–165. Ithaca, NY: ILR Press.

Boxall, P., Macky, K., and Rasmussen, E. (2003) ‘Labour turnover and retention in New Zealand: The causes and consequences of leaving and staying with employers’, Asia Pacific Journal of Human Resources 41: 195–214.

Bray, M., and Walsh, P. (1998) ‘Different paths to neo-liberalism? Comparing Australia and New Zealand’, Industrial Relations 37: 358–386.

Brock, P. (2011) ‘Why HR has been integral to Kiwibank’s success’, Human Resources, August/September: 8–10.

Bryson, J. (2006) ‘Human resource management in New Zealand’, in A. Nankervis, S. Chat-terjee, and J. Coffey (eds), Perspectives of Human Resource Management in the Asia Pacific, pp. 111–142. Sydney, Australia: Pearson.

Clark, D., Bowden, S., Corner, P., Gibb, J., Kearins, K., and Pavlovich, K. (2001) Adoption and Implementation of E-business in New Zealand: Empirical results, Research Report, University of Waikato Management School.

Cleland, J., Pajo, K., and Toulson, P. (2000) ‘Move it or lose it: An examination of the evolving role of the human resource professional in New Zealand’, International Journal of Human Resource Management 11: 143–160.

Cullihane, J., and Donald, D. (2000) ‘Personal grievances,’ in J. Burgess and G. Strachan (eds), Research on Work, Employment and Industrial Relations, Proceedings of the 14th AIRAANZ Conference, Newcastle, 2–4 February, pp. 52–60.

Deeks, J., and Rasmussen, E. (2002) Employment Relations in New Zealand. Auckland, NZ: Pearson.

Department of Labour (2008) Workforce 2020: Forces for change in the future labour market of New Zealand. Wellington, NZ: Department of Labour.

Department of Labour (2009) Understanding the job mobility and employability of older workers – synthesis report. Wellington, New Zealand: Department of Labour.

Department of Labour (2010) Skills Challenge Report: New Zealand’s skills challenges over the next 10 years. Wellington, NZ: Department of Labour.

Department of Labour (2011) ‘Wage growth – June 2011 quarter’, 2 August, www.dol.govt. nz/publications/lmr/lmr-wage-growth.asp, accessed 6 October 2011.

Donnelly, N., and Dowling, P. (2010) ‘Managing globalisation and IHRM’, in J. Connell and S. Teo (eds), Strategic HRM: Contemporary issues in the Asia Pacific Region. Victoria, Australia: Tilde University Press.

Doughty, S. (2010) ‘Remuneration and rewards in 2010’, Employment Today May: 146 42.

Edwards, B. (2012) ‘Political round up: 6 March’, New Zealand Herald, 6 March, www.nzherald.co.nz/best-of-political-analysis/news/article.cfm?c_id=1502734&objectid=10790186, accessed 6 March 2012.

EEO Trust (2009) ‘People management in tough economic times: Employers’ responses to the recession’, November, www.eeotrust.org.nz/content/docs/reports/People per cent-20management per cent20in per cent20tough per cent20economic per cent20times per cent202009.doc, accessed 1 August 2011.

Fombrun, C., Tichy, N., and Devanna, M. (1984) Strategic Human Resource Management. New York, NY: Wiley.

Fursman, L., and Zodgekar, N. (2009) ‘Making it work: The impacts of flexible work arrangements on New Zealand families’, Social Policy Journal of New Zealand 35: 43–54.

Gilbert, J., and Jones, G. (2000) ‘Managing human resources in New Zealand small businesses’, Asia Pacific Journal of Human Resources 38: 55–68.

Gilbertson, D. W. (1984) ‘Personnel’s path to organizational effectiveness’, Proceedings of the National Conference of the New Zealand Institute of Personnel Management, October, 48–51.

Green, R. and Agarwal, R. (2011) ‘Management matters in New Zealand: How does manufacturing measure up?’, Ministry of Economic Development Occasional Papers 11/03.

Guest, D. (1989) ‘Human resource management: Its implications for industrial relations and trade unions’, in J. Storey (ed.), New Perspectives on Human Resource Management. London, UK: Routledge.

Gyngell, A., Skilling, D., and Thirlwell, M. (2007) ‘Australia and New Zealand in a globalising world’, Lowry Institute Perspectives, www.lowyinstitute.org, accessed 28 October 2011.

Haar, J., and Delaney, B. (2009) ‘Entrepreneurship and Māori cultural values: Using “Whanaugatanga” to understanding Māori business’, New Zealand Journal of Applied Business Research 7: 25–40.

Haig, R. (2010) Working Across the Ditch – New Zealanders Working in Australia. Wellington, NZ: Department of Labour.

Hawke, G. (1985) The making of New Zealand: An economic history. UK: Cambridge University Press.

Hofstede, G., (2005) Cultures and Organisations: Software of the mind. New York, NY: McGraw-Hill.

Hogan, J., and Holland, B. (2003) ‘Using theory to evaluate personality and job-performance relations: A socioanalytic perspective’, Journal of Applied Psychology 88: 100–112.

Hudson (2011) Next Generation Recruitment: Battle strategies for the talent war, Report published by Hudson Highland Group Inc.

Human Resources Institute New Zealand (HRINZ) (2011a) ‘The history of the human resources institute of New Zealand’, www.hrinz.org.nz/Site/About/history.aspx, accessed 26 October 2011.

Human Resources Institute New Zealand (HRINZ) (2011b) ‘HR practice in New Zealand’, www.hrinz.org.nz/Site/Resources/hrm_in_nz.aspx, 26 October 2011.

Inkson, K., Henshall, B., Marsh, N., and Ellis, G. (1986) Theory K: The key to excellence in New Zealand management. Auckland, NZ: Bateman.

Johnson, G. (2000) ‘The practice of human resource management in New Zealand: Strategic and best practice?’, Asia Pacific Journal of Human Resources 38: 69–83.

Johnson, G., and Mouly, S. (2002) ‘The human resource function in New Zealand organisations: The Cranfield survey’, New Zealand Journal of Human Resources Management 2: 1–15.

Jones, D., Pringle, J., and Shepherd, D. (2000) ‘“Managing diversity” meets Aotearoa/New Zealand’, Personnel Review 29: 364–380.

Kelliher, C., and Anderson, D. (2008) ‘For better or for worse? An analysis of how flexible working practices influence employees’ perceptions of job quality’, International Journal of Human Resource Management 19: 419–431.

King, M. (2007) The Penguin History of New Zealand Illustrated. London, UK: Penguin.

Kirkpatrick, D. L. (1998) Evaluating Training Programs: The four levels. San Francisco, CA: Berrett-Koehler.

Kiwibank (2013) ‘Kiwibank: more about us’, www.kiwibank.co.nz/about-us/more-about-us, accessed 7 February 2013.

Latham, G. P., Almost, J., Mann, S., and Moore, C. (2005) ‘New developments in performance management’, Organizational Dynamics 34: 77–87.

Lawler, E., and Mohrman, S. (2003) HR as a Strategic Partner: What does it take to make it happen? University of Southern California: Center for Effective Organizations.

Massey, C., Lewis, K., Cameron, A., Coetzer, A., and Harris, C. (2006) It’s the People that you Know: A report on SMEs and their human resource practices. Massey University: New Zealand Centre for SME Research.

(2012a) ‘Political round up: 6 March’, www.nzherald.co.nz/best-of-political-analysis/news/ article.cfm?c_id=1502734&objectid=10790186, accessed 6 March 2012.

New Zealand Herald (2012b) ‘Wage inflation speeds up in private sector, slows for public’, 7 February 2012, www.nzherald.co.nz/business/news/article.cfm?c_objectid=10783900, accessed 7 March 2012.

New Zealand Management (2011) ‘Bend it like a kiwi’, New Zealand Management 58(3): 8.

New Zealand Treasury (2010) ‘New Zealand economic and financial overview’, www.treasury.govt.nz/economy/overview/2010/nzefo-10-1.pdf, accessed 30 October 11.

Nicholls, P. (2012). Tracking the economy. National Business Review, 16 March 2012, www.nbr.co.nz/article/tracking-economy-113196, accessed 7 February 2013.

Proctor-Thomson, S. B., Donnelly, N., and Plimmer, G. (2010) Constructing Workplace Democracy: Women’s voice in the New Zealand public service. Wellington: Public Service Association (PSA) and Industrial Relations Centre, Victoria University of Wellington.

Ransom, S. W. N. (1966) ‘Background of management’, in G. Hanley (ed.), Personnel Management in New Zealand. Wellington, NZ: Sweet and Maxwell.

Rasmussen, E. (2010) Employment Relationships: Workers, unions and employers in New Zealand. Auckland, NZ: Auckland University Press.

Rasmussen, E., Andersen, T., and Haworth, N. (2010) ‘Has the strategic role and professional status of human resource management peaked in New Zealand?’, Journal of Industrial Relations 52: 103–118.

Rasmussen, E., and Lamm, F. (2005) ‘From collectivism to individualism in New Zealand employment relations’, Paper presented at the 15th AIRANNZ Conference, 9–11 February, University of Sydney.

Reserve Bank of New Zealand (2011) ‘New Zealand economic and financial chronology, 2011–1993’, www.rbnz.govt.nz/about/whatwedo/1613129.html, accessed 15 September 11.

Rudman, R. (2010) Human Resources Management in New Zealand. Auckland, NZ: Pearson.

Ryan, A., McFarland, L., Baron, H., and Page, R. (1999) ‘An international look at selection practices: Nation and culture as explanations for variability in practice’, Personnel Psychology 52: 359–391.

Skilling, D., and Boven, D. (2006) The Flight of the Kiwi: Going global from the end of the world. Auckland, NZ: The New Zealand Institute.

Sloman, M., and Malinen, S. (2010) ‘One size doesn’t fit all: The skills debate and the New Zealand economy’, New Zealand Journal of Human Resource Management, 10(2): 83–98.

Stablein, R., and Geare, A. (1993) ‘Human resource management in New Zealand: Profession and practice’, Asia Pacific Human Resource Management 31: 26–38.

Statistics New Zealand (2006) ‘QuickStats about culture and identity: 2006 census’, www.stats.govt.nz/Census/2006CensusHomePage/QuickStats/quickstats-about-a-subject/culture-and-identity.aspx, accessed 26 October 2011.

Statistics New Zealand (2010) New Zealand Business Demography Statistics: At February 2010, October 2010, www.stats.govt.nz/browse_for_stats/businesses/business_characteristics/BusinessDemographyStatistics_HOTPFeb10.aspx, accessed 7 February 2013.

Statistics New Zealand (2011a) ‘New Zealand in profile’, January 2011, www.statistics.govt. nz/browse_for_stats/snapshots-of-nz/nz-in-profile-2011.aspx, accessed 15 August 2011.

Statistics New Zealand (2011b) ‘Economic development indicators’, www.statistics.govt.nz/ browse_for_stats/economic_indicators/productivity/development-indicators/2011-indicators.aspx, accessed 15 August 2011.

Stephenson, J., and Scobie, G. (2002) The Economics of Population Ageing, New Zealand Treasury Working Paper 02/05.

Strategic Pay (2009) ‘Credit crisis hits employees in the back pocket’, www.strategicpay.co.nz/Portals/0/Documents/Press%20Release%200109.pdf, accessed 26 October 2011.

Strategic Pay (2011) ‘CEO pay to go backwards?’, www.strategicpay.co.nz/Portals/0/Documents/CEO%20pay%20to%20go%20backwards.pdf, accessed 26 October 2011.

Taylor, P., Keelty, Y., and McDonnell, B. (2002) ‘Evolving personnel selection practices in New Zealand organizations and recruitment firms’, New Zealand Journal of Psychology 31: 8–18.

Toulson, P. K., and DeFryn, M. K. (2006) ‘The development of human resource management in New Zealand’, Human Resource Management 52: 75–103.

United Nations Development Program (2010) ‘Human development report 2010’, November 2010, http://hdr.undp.org/en/media, accessed 26 October 2011.

Walsh, P., Bryson, J., and Lonti, Z. (2002) ‘“Jack be nimble, Jill be quick”: HR capability and organizational agility in the New Zealand public and private sectors’, Asia Pacific Journal of Human Resources 40: 177–192.

Whitcombe, J. (2008) ‘Contributions and challenges of “new public management”: New Zealand since 1984’, Policy Quarterly 4: 7–13.

Winterton, J. (2007) ‘Training, development, and competence’, in P. Boxall, J. Purcell, and P. Wright (ed.), The Oxford Handbook of Human Resource Management. UK: Oxford University Press.