Human resource management in Australian registered training organisations

The vocational education and training (VET) sector has an ageing and casualised workforce. Technical and further education (TAFE) institutes and private providers face a further challenge, in that both are attempting to meet client demands for improved ?exibility and responsiveness in their services in an increasingly contestable marketplace.

Being able to recruit, reward and retain the right staff with the right skills is particularly important. So is having staff who enjoy what they do and who ?nd their work and workplace rewarding. A high-quality, well-integrated and strategically focused human resource management system is key to organisational success and improved capability.

Nevertheless, private and public providers operate in different environments. In part this is a factor of size, but it is also affected by the relative degree of regulatory control.

Key messages

For TAFE institutes

• Human resource management is not strategic in TAFE institutes.TAFE institutes need to bring human resource management ‘in from the cold’ and give human resource managers a place in the most senior executive forums of the organisation.

• Human resource management is a well-established function in TAFE institutes, but it operates within the quite tight constraints imposed by state government human resource management policies. Governments need to relax their grip on human resource policies and procedures.

For private registered training organisations

• Human resource management in private registered training organisations is informal. While this gives private registered training organisations a high degree of ?exibility, most of them will have to develop more effective human resource management policies and practices to ensure their successful future growth.

• With the rapid growth in their businesses, private registered training organisations face the challenge of formalising human resource management, but at the same time they need to ?nd ways to avoid excessive bureaucratisation of this function.

Readers interested in this research should also refer to other research from the consortium on building VET provider capability, in particular the work undertaken by Callan and his colleagues, Approaches for sustaining and building management and leadership capability in vocational education and training providers, that of Clayton and her colleagues, Study in difference: Structures and cultures in Australian registered training organisations, and Hawke, Making decisions about workforce development in registered training organisations.

Tom Karmel
Managing Director, NCVER

This report forms part of a comprehensive research program that has examined issues related to building the organisational capability of vocational education and training (VET) providers. It focuses on the current state of human resource management practice in both public and private registered training organisations (RTOs) in Australia and offers an assessment of the extent to which human resource management plays a truly strategic role in them.

The study method involved four elements:

• the preparation of a comprehensive literature review and discussion paper

• a series of interviews with experts drawn from across the VET sector

• a survey of 60 technical and further education (TAFE) institutes and 618 private training providers

• a series of seven case studies, comprising four TAFE institutes and three private training providers.

The survey was carried out in late 2006 and the case studies during mid-2007.

This report distinguishes between TAFE institutes and private registered training organisations, but does not intend to compare them explicitly: they have fundamentally different characteristics and modus operandi, although both compete in an increasingly contestable training market. TAFE institutes are typically large, multi-campus, comprehensive and publicly funded training providers. Their approach to human resource management and business strategy resembles that of other large public sector organisations, such as hospitals or universities. Private registered training organisations are typically very small organisations, competing in a well-defined niche of the training market. These organisations display many of the characteristics usually associated with small business operations. Although it is instructive to read the results of the research into these two types of registered training organisation side by side, it cannot be concluded that one is better than the other. The human resource management arrangements found in TAFE institutes and private registered training organisations represent different forms of adaptation to quite different circumstances.

Human resource management in TAFE institutes

TAFE institutes provide a comprehensive range of training programs to a wide variety of clients. They face an increasingly competitive environment: 61% of the TAFE respondents to the project survey claimed that competitive pressure had increased dramatically in the last five years. The opening-up of the training market to some competition has been coupled with an increasing emphasis on increasing the size and capability of their businesses through fee-for-service activities and meeting the needs of local industry. As a consequence, TAFE institutes have responded strategically by adopting a range of business strategies. The majority of respondents to the survey (51%) claimed that they were using a cost leadership strategy—a strategy based on efficiently servicing and defending an existing client base. Another 35% of TAFE institutes reported they were pursuing a strategy based on capturing market niches, and a small number on offering new and innovative products to the market. ¹

Human resource management is a well-established operational function in TAFE institutes and is supported by relatively large and well-resourced human resource departments that provide a range of high-quality, traditional human resource services, including: recruitment and selection; performance management; training and staff development; and employee relations. Procedures are usually highly formalised and documented, including having written human resource management and training plans. In some cases the degree of external control by some government agencies on both policy and practice results in highly prescriptive human resource management practices which may limit flexibility. Recruitment and selection procedures often emphasise procedural fairness and qualifications rather than address cultural fit in the organisation. Performance management systems tend to be focused on staff development rather than on performance evaluation. Nevertheless, human resource systems work well, and institutes generally enjoy a good employee relations climate and operate harmoniously with trade unions in a traditionally highly unionised industrial environment.

Human resource departments are headed by a manager who, in most cases, is not part of the institute’s senior executive team, and who therefore has no direct input into the high-level processes of strategy-formation. Because of the important role workforce capability plays in assuring organisational capability, human resource management should be a strategic issue for TAFE institutes. However, human resource managers and departments are usually involved in strategy implementation rather than contributing to strategy formation. This situation appears to be gradually changing as senior management groups in TAFE institutes look to human resource
managers for more strategic input, although the function is still in a process of transition, from ‘people processing’ to ‘strategic business partner’.

Future directions for human resource management in TAFE institutes

A number of possible directions with the potential to assist the process of creating a more strategic approach to human resource management in TAFE institutes arise from this study.

• Give human resource management ‘a seat at the table’. Human resource management needs to be acknowledged as a strategic function within TAFE institutes and human resource managers need to report directly to chief executive officers (CEOs) and be given a place on the senior executive teams of institutes.

• State governments, which currently exercise very strong control over human resource policies and procedures within TAFE institutes, should give TAFE institutes greater autonomy in determining how people are recruited and managed at the institutional level, including greater freedom in relation to enterprise bargaining.

• Important human resource procedures for areas such as recruitment and selection, performance management and training need to be better aligned with the strategic direction of TAFE institutes. This means emphasising ‘hiring for fit’ in selection procedures, evaluating staff performance in performance management systems and extending more training opportunities to staff, especially to non-teaching and casual teaching staff, who do not currently receive the same levels of investment in training as managers and permanent staff.

Human resource management in private registered training organisations

Private registered training organisations are usually quite small organisations operating from a single site. As in TAFE institutes, perceptions of the level of competition in the training market are high. Amongst private registered training organisations who responded to the survey, 41% reported that competition had increased dramatically in the last five years. Generally, private registered training organisations have responded to this market pressure by adopting a wide variety of business strategies. About equal proportions of respondents to the survey reported that they had adopted a cost leadership, a differentiation (innovation) or a segmentation (niche market) strategy. Private registered training organisations reported that in the future they were more likely to follow either a cost leadership strategy by consolidating their present market through price or through a segmentation strategy by seeking out future market niches for growth.

Human resource management in private registered training organisations conforms to the informal approaches taken within small business generally. Most private registered training organisations do not employ a human resource specialist or support a human resource department. Human resource management is most often the domain of the CEO (60% of respondents), rather than a corporate services or other manager. The direct control of human resource management by the CEO means that private registered training organisations should have a more strategic focus, but this was not necessarily the case. Nevertheless, informal approaches to human resource management give these organisations the flexibility to develop the new and innovative human resource policies they need to adopt in both the competitive training product and staff labour markets.

Most private registered training organisations recruit and select staff on the basis of their alignment with the values of the organisation (‘cultural fit’) rather than on qualifications. This emphasis on fit for selection helps private registered training organisations to achieve quite low levels of employee turnover. At the same time evidence from the case studies showed that some private registered training organisations had devised novel retention strategies that allowed then to recruit and retain particularly valued employees—a clear advantage in a tight labour market. On the other hand, other aspects of human resource management are quite undeveloped. Performance management systems, while they cover casual and sessional staff, are very diverse and often ineffective. Levels of training and development for staff, especially for non-teaching staff, can be quite low. But most respondents to the survey reported that they enjoy a very positive employee relations climate and this is a strength on which private registered training organisations can build in the future.

One key issue for private registered training organisations is that their rapid growth may quickly overwhelm their capacity to manage their human resources well. The case studies provided evidence of private registered training organisations facing the challenge of formalising their human resource management in order to cope with business growth.

Future directions for human resource management in private registered training organisations

This study suggests that the future development of human resource management in private registered training organisations would be enhanced by adoption of the following strategies.

• An informal approach to human resource management has both advantages and disadvantages for private registered training organisations. It can confer great flexibility in the management of people, allowing them to prosper in a competitive market. However, approaches to performance management and training in private training organisations—often an area of weakness in their current human resource systems—need to be systematised, but not at the expense of flexibility.

• The key challenge for many private registered training organisations is dealing with business growth. As organisations grow, their ability to manage people on an informal basis quickly disappears as they confront the need to formalise their approaches to human resource management. This challenge also represents an opportunity to devise human resource management philosophies that combine efficiency and fairness with strategic relevance and integration.

This report is complemented by a comprehensive literature review, which is contained in the support document. It can also be used as a discussion starter of human resource management issues.

¹ Porter (1985) has identified three basic generic business strategies: cost leadership, which emphasises efficiencies and economies of scale; differentiation, which involves the creation of a new product; and segmentation, where the organisation concentrates on a few select or niche markets.