Human Resource Management is a critical department in the construction industry. Most of the construction companies do not understand the importance of human resource management in developing and utilizing the employees in the pursuit of optimum organizational performance, and consider making an investment in HR practices as a ‘luxury’, and ‘pen pushers’ (Wilkinson, Johnstone, and Townsend, 2012). In this industry, extensive labor outsourcing takes place, creating an opaque and transient employer-employee relationship. This cyclical nature of demand for the labor force makes the process of HR more difficult.
This sector works with subcontractors, joint ventures and alliances, and creates new entities for accomplishing a single project (Wilkinson, Johnstone, and Townsend, 2012). This essay will discuss the present state of HRM practices in the construction industry using the available literature, highlight different HR theories and frameworks, and analyze how the current state can be improved using a human focus HR practice.
The construction industry works based on projects of a predetermined duration and economic and contractual factors. This is an industry that involves the employment of a lot of the skilled and unskilled workforce in temporary payrolls. Construction industry also involves working with many third parties, subsidiaries, and vendors. Because of these multiple layers, often the HR practices of the main company running the projects are not followed by the contracting and subcontracting companies.
Kokkaew and Koompai (2012), in their research on Thai construction industry, have shown that the existence of any standard health and safety practices is almost non-existent. Although labor cost constitutes the significant chunk of the total construction costs, apart from a few skilled laborers, there are no particular rules and regulations related to hiring or firing, working hours, and performance management in place. Among the South East countries, Thailand has the highest use of HRM, but still the percentage of companies using the standard HR practices is extremely low.
Zhang and Gong (2009) conducted a study on the small and medium sized construction subcontracting firms, many of which supply laborers to the big construction companies. In China, most of the labor forces are supplied to the construction companies through small and medium scale subcontractors in an unorganized manner. The labor condition for those employed in these small and medium size firms are often pathetic to the core. More than a dozen people are forced to share a single makeshift room during the course of the entire construction project, lasting for a few years. As there is no clear working hour clause in their contract agreements, often these laborers are forced to work for more than 12-14 hours a day, seven days a week. They do not even get any leave for years. All leaves taken are counted as leave without pay. The rate of attrition is not very high because these workers, all of whom come from poor families, are threatened with harsh penalty if they leave the construction camp.
Zhang and Gong (2009) also found in their research that the laborers employed directly to the mother construction firms and not to the subcontractors are often paid well, given hefty bonus, and have a better work life balance than those employed to the subcontractors. Two laborers working in the same labor camp doing the same kind of work are treated differently, depending on the rules and regulations of their employers. Zhang and Gong (2009) also reported that there is no directive given from the main construction companies to the subcontractors as regards the enforcement of proper HR practices out of the fear that it will increase the construction costs. However, there is an increasing trend of implementing a human resource evaluation system among the Chinese small and medium size construction enterprises because of the emergence of more and more American and European construction firms that are forcing these contractors and subcontractors to implement standardized HR practices.
Tabassi and Bakar (2009) studied the construction projects of Iran extensively. Iran is a country where the rate of death and injuries among the construction workers as well as the death rates due to poorly constructed projects is one of the highest in the world. For example, the average lifespan of an Iranian home is 20 years, whereas the average is 80-100 years in most of the developed and developing countries. This is mostly attributed to the poorly constructed homes. Poor construction takes place because of the lack of training and knowledge among the construction workers. Tabassi and Bakar (2009) found that the two factors that determine the quality of construction are training and motivation. Often leadership plays a great role in construction projects and its quality. Among other factors, they also found that the ethical treatment of workers, incentive payments, health and safety conditions, and overtime payments play a big role in motivating employees. Tabassi and Bakar (2009) also noticed that the lack of knowledge is not only limited to the government construction workers; the workers of private construction enterprises as well as international construction firms are also poorly skilled and trained.
Jamshidi et al (2012) conducted a research among the managers and high-skilled professionals in the construction industry in Malaysia. It is a common belief that managers and high-skilled laborers in the construction industry are treated with extreme care and are the recipients of good remuneration and rewards. However, the research shows otherwise. Malaysian construction industry has a huge skill shortage, and it is not due to the lack of available resources. It is observed that the high-skilled resources in the construction industry typically stay less than two years in a project before leaving the organization. Often, these resources go to the construction companies in the developed countries where not only the remuneration is higher, but the HRM practices are better managed as well. Jamshidi et al (2012) conducted a survey to find out the main reason for the high level of attrition among the high-skilled employees. They came up with the finding that the primary reason for attrition is the lack of security in the job profile, stress and long working hours. Remuneration was also cited by some as a reason, but it was not found to be a primary cause of attrition.
India is fast becoming one of the major construction hubs of the world with a good many projects taking place as the country is experiencing a high rate of GDP growth. Raj and Kothai (2013) conducted a survey among the Indian construction workers to understand the factors influencing the employee satisfaction. They found that the working hours in the Indian construction industry are not as bad as that of China and some of the Middle Eastern countries. 66% of the workers replied that the construction site congestion, poor living conditions at the site, and overtime were the main factors of demotivation. 38% of the workers cited that incentives and rewards as well as on-time payment are the main motivating factors for work. Work satisfaction, the quality of work, and the sense of accomplishment were given less importance (Raj and Kothai, 2013). Two other factors that were also cited as the main motivators were safe working conditions and the availability of health insurance as part of the remuneration package.
Discussion and Analysis
HRM Practices in the Construction Industry
Figure 1: Factors Affecting HRM in global construction projects (Du et al.)
Construction workers are either self-employed or subcontracted or directly employed to the main construction company payroll. In the developed countries, the percentage of self-employed construction workforce is very high (36% in the UK), whereas the same in the developing countries is very low (less than 5% in India) (Wilkinson, Johnstone, and Townsend, 2012). Because of the globalization, the dimensions of HRM are changing. In most of the current large construction projects, if the project is outsourced to big international vendors, then most of the skilled workers come from other regions or countries, whereas most of the unskilled workers are acquired through subcontracting or generally come from developing and underdeveloped countries like Bangladesh, Thailand, India, and China. This makes the HRM process more difficult as the need and standard of an HRM system vary across the countries.
Wilkinson et al (2012) proposed that a three-pronged approach of human focus, resource focus, and management focus from both micro and macro level should be taken to address all the issues prevailing in the construction industry. Human focus deals with the employee rights, needs and wellbeing, health and safety, grievance management, and work-life balance. Resource focus tries to balance between the employee needs and organizational goals. The main aim of resource focus is to improve the productivity and efficiency of the employees and keep their satisfaction level high (Wilkinson, Johnstone, and Townsend, 2012). The management focus is a newer concept in HR practices. However, most of the current construction project involving many parties makes the management focus more relevant. The management focus deals with the needs and concerns of the employees not only within a single firm but also for the whole construction organization as a whole. There are various HR models proposed by the researchers. Upon analyzing a few of these models, we will try to see which one fits the bill perfectly.
Analysis of Different HRM Models in the Construction Industry
In this section, those models of HRM that deal with the human focus HR practices will be discussed. I have chosen human focus as the most appropriate aspect for the construction industry because as it is seen in the literature review section that the majority of the problems in this industry arise from the areas of work-life balance, long working hours, and the lack of health and safety practices. Resource focus is not taken as the main HRM aspect for the construction industry because already it seems that the industry is aligned towards profitability and productivity, completely ignoring the human factors. Therefore, the future emphasis on resource focus only will worsen the situation as the companies will continue to only look at organizational goals, ignoring the employee needs completely. Therefore, a dedicated HRM model aligned towards human focus is required to address various employee issues.
Figure 2: The Harvard Model (Agyepong, Fugar and Tuuli, 2010)
One of the pioneering HRM models used in the global organizations is the Harvard Model developed by Beer et al in the 1980s. The salient features of this model are as below:
- It recognizes the interest of various stakeholders.
- It also includes the role of ‘employee influence’ in an organizational framework.
- It tries to create an association between managerial strategies with socioeconomic and product market logics (Agyepong, Fugar and Tuuli, 2010).
Figure 3: Warwick Model (Agyepong, Fugar and Tuuli, 2010)
The main problem with the Harvard model was that it was mainly based on the American context, lacking the cultural context. The use of Harvard model was not entirely effective for the organizations that work in a multi country and multi-cultural environment. Warwick model developed in the 1990 in Europe by Warwick and Pettigrew included the cross cultural factors in the HRM framework. It created two contexts for an organization. Outer context included parameters as were defined in the Harvard model. Warwick model further touched upon an inner context to include culture and structure (Agyepong, Fugar and Tuuli, 2010).
Kilby and McCabe (2008) explored the UK construction industry before proposing their goal based HRM model for construction. Kilby and McCabe’s model stands on three basic aspects; 1) Respect, 2) Recruitment, and 3) Retention. The goal for any HR company in the construction business should be to focus on and optimize these three critical processes. As the projects are cyclical with a need to constantly hire new workers, the HRM process for recruitment should be streamlined. The retention of employees is another big challenge in this industry. If a company can create a work environment motivating enough for employees to stay, then that company can generate significant competitive advantages over others. Finally, respect for the unskilled laborers is non-existent in the industry. Even the smallest efforts undertaken by the HR as regards giving respect to these employees can generate higher productivity, profitability and lower attrition rate. The 3R model of Kilby and McCabe (2008) was well-received among the developed economies as it showed promising result. However, it seems the same cannot work for the developing nations as respect is not a high motivational factor for the employees of developing nations, and recruitment is not a big challenge due to the availability of a lot of unskilled workers.
Figure Z: Four outer contexts of HRM Model (Sawalhi, 2012)
Kokkaew and Koompai (2012), based on their research on the Thai construction industry, found that the four major factors influencing the HRM practices in Thailand include culture, training/education, economic system, and political system. Currently, the construction industry practices the system of hiring and firing in which workers are selected for a particular project and then are released when the project ends. Kokkaew and Koompai (2012) proposed a model of employment where the employees will be pooled by the subcontractors and will be used in multiple projects and will not be recruited only for a single project. This project oriented recruitment tactics will increase the security among the employees immensely.
Figure B: HRM in Classically managed construction project and modern process (Kokkaew and Koompai, 2012)
Olomolaiye et al proposed a “lean construction” HRM model that combines the concepts of lean six sigma and JIT with HRM concepts of Warwick model. In this model products are replaced with workers, and higher quality means a high level of employee satisfaction.
The global construction industry is seeing a major change in the last 10-15 years. With the increasing trend of globalization, almost all the big projects in the construction industry involve a number of parties working together towards the completion of a project. This creates a unique challenge for the HRM managers in the construction industry. Based on the information provided in various literatures, it seems that the major challenges faced by the HRM managers in this industry are complaints from the workers regarding poor working conditions, health and safety issues, remuneration, working hours, and job security. Additionally, because of a multi-party and multi layered environment, there is also a huge cultural factor involved. All these factors negatively impact the projects by making the deliveries delayed, keeping it difficult to maintain the timeline and increasing the project costs substantially. There are several HRM models used in this industry with and without success. Harvard and Warwick models are base models for many other models. In modern times, other model like “Lean construction” is also gaining popularity as it is more attuned towards the construction industry.
The construction industry has a typical employee-employer relationship. Globalization and the involvement of multiple parties and multiple layers of contracting have made the management of resources very difficult. Human focus should be of foremost importance in this industry as substantial amount of construction costs is attributed to paying the salary of skilled and unskilled labors. Therefore, a strong human focused HRM model should be used for any construction project to improve the satisfaction of workers, which in turn will increase the productivity and bring down the cost. The following recommendations are suggested for the construction industry:
- Any construction industry performance goals should consist of time, cost and the quality of delivery.
- Leadership: Leadership is a very important factor in the construction industry, especially, when a lot of Asian companies and subcontractors are involved. Under a good leader, Asian workers tend to work much better. However, for the American and European organizations, the influence of leaders in the construction projects is much less. It is, therefore, important to choose the leadership carefully for Asian construction projects.
- Motivation: Motivation is one of the key factors to help improve productivity, reduce attrition and improve the quality of delivery. Motivational factors vary largely from one country to another and one culture to another. In the US, the major factors of motivation are recognition, empowering the workers, and effective training, whereas in Europe, incentive payments, overtime payments and retirement pension are the main motivating factors. In Asia, money is associated with higher motivation.
- Other factors: For the US and European construction workers, safe work environment is extremely important, which is not always the case with the workers from Asian countries. HRM managers should consider festive bonus and job security to motivate the Asian workers.
Agyepong, S.A., Fugar, F.D.K., and Tuuli, M.M. 2010. The Applicability of the Harvard and Warwick Models in the Development of Human Resources Management Policies of Large Construction Companies in Ghana. Procs West Africa Built Environment Research. [online]. Available from World Wide Web: https://www.academia.edu/190994/The_applicability_of_the_Harvard_and_Warwick_models_in_the_development_of_human_resource_management_policies_of_large_construction_companies_in_Ghana [accessed 18 October, 2014].
Brandenburg, S. G., Haas, C. T. and Byrom, K. 2006. Strategic Management of Human Resources in Construction. Journal of Management in Engineering. [online]. Available from World Wide Web: http://homepages.uwp.edu/crooker/786-SHRM/articles/indust-construct-jmie-042006.pdf [accessed 18 October, 2014].
Cooper, C.L. and Burke, R. J. 2011. Human Resource Management in Small Business: Achieving Peak Performance. Edward Elgar Publishing.
Coyle-Shapiro, J. et al. 2013. Human resource management. London School of Economics and Political Science. [online]. Available from World Wide Web: http://www.londoninternational.ac.uk/sites/default/files/programme_resources/lse/lse_pdf/subject_guides/mn3075_ch1-4.pdf [accessed 18 October, 2014].
Du, J., Liu, C. and Picken, D. A Preliminary Study on Human Resource Management in International Construction. The Australasian Journal of Construction Economics and Building. The International Journal of Management. Vol 7(2). [online]. Available from World Wide Web: http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=5&cad=rja&uact=8&ved=0CD0QFjAE&url=http%3A%2F%2Fepress.lib.uts.edu.au%2Fjournals%2Findex.php%2FAJCEB%2Farticle%2Fdownload%2F2986%2F3167&ei=mJ5CVOKTBpC3yATJs4HQBQ&usg=AFQjCNHUsxLx3NONpBH12ToCwnFeKvwHKw&sig2=U-7kBjSgOiRzZLwHMQmtaA&bvm=bv.77648437,d.aWw [accessed 18 October, 2014].
Ejohwomu, O.A., Proverbs. D.G. and Olomolaiye, P. Multiskilling: A UK Construction and Building Services Perspective. Association of Researchers in Construction Management. [online]. Available from World Wide Web: https://www.academia.edu/2663849/MULTISKILLING_A_UK_CONSTRUCTION_AND_BUILDING_SERVICES_PERSPECTIVE [accessed 18 October, 2014].
Green, S. D. The Human Resource Management Implications of Lean Construction: Critical Perspectives and Conceptual Chasms. The University of Reading. [online]. Available from World Wide Web: http://www.personal.reading.ac.uk/~kcsgrest/Lean-hrm.htm [accessed 18 October, 2014].
Holt, G. D. 2000. Constructing Empowerment: People, Processes, Participation and Profit. International Conference on Systems Thinking in Management. [online]. Available from World Wide Web: http://ceur-ws.org/Vol-72/037%20Holt%20Empowerment.pdf [accessed 18 October, 2014].
Jamshidi, M.H., Zeinahvazi, M., Adal, H., and Ghasemi, P. 2012. Essential Competencies for the Human Resource Managers and Professionals in Construction Industries. Journal of Basic and Applied Scientific Research. [online]. Available from World Wide Web: http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=4&cad=rja&uact=8&ved=0CDgQFjAD&url=http%3A%2F%2Fwww.researchgate.net%2Fprofile%2FMir_Hadi_Jamshidi%2Fpublication%2F251571294_Essential_Competencies_for_the_Human_Resource_Managers_and_Professionals_in_Construction_Industries%2Flinks%2F00b7d51f0e4898edac000000&ei=mJ5CVOKTBpC3yATJs4HQBQ&usg=AFQjCNGTSGit27XvaR1Skz2AiqyHlq3UVg&sig2=g_a2GryZk3SxkbDT4fmGpA&bvm=bv.77648437,d.aWw [accessed 18 October, 2014].
Kilby, A. and McCabe, S. 2008. Human Resource Management (HRM) in Construction: An Exploration of Issues and Practice. [online]. Available from World Wide Web: http://www.arcom.ac.uk/-docs/proceedings/ar2008-103-112_Kilby_and_McCabe.pdf [accessed 18 October, 2014].
Kokkaew, N. and Koompai, S. 2012. Current Practices of Human Resource Management (HRM) in Thai Construction Industry: A Risk and Opportunity Perspective. Society of Interdisciplinary Business Research. Vol 1. [online]. Available from World Wide Web: http://sibresearch.org/uploads/2/7/9/9/2799227/riber2012-037_1-14.pdf [accessed 18 October, 2014].
Loosemore, M., Dainty, A. and Lingard, H. 2003. Human Resource Management in Construction Projects: Strategic and Operational Approaches. Taylor & Francis.
Mustapa, M. and Rashid, R.A. Human Resource Management in Construction. The University of Tennessee at Martin. [online]. Available from World Wide Web: https://www.scribd.com/doc/209781931/HRM-in-Construction [accessed 18 October, 2014].
Ngoc, P. H. 2012. Human Resources Management in Construction: A Case Study - Foundation Phase of A Construction Project Executed by Saigon - RDC Workforce. Asian Institute of Technology. [online]. Available from World Wide Web: http://professionalprojectmanagement.blogspot.com/2012/04/humanresource-management-in_5280.html [accessed 18 October, 2014].
Raj, V. A. and Kothai, P. S. 2013. Study on the Impact of Human Resource Management Practices in Construction Industry. The International Journal of Management. Vol 3(1). [online]. Available from World Wide Web: http://www.theijm.com/vol3issue1/1.324.pdf [accessed 18 October, 2014].
Raja, J.Z., Green, S.D., Leiringer, R., Dainty, A. and Johnstone, S. 2013. Managing multiple forms of employment in the construction sector: implications for HRM. Human Resource Management Journal. Vol 23 (3). [online]. Available from World Wide Web: http://onlinelibrary.wiley.com/doi/10.1111/j.1748-8583.2012.00202.x/abstract [accessed 18 October, 2014].
Sawalhi, Dr. N. I. E. Human Resources Management in Construction. Islamic University of Gaza. [online]. Available from World Wide Web: http://site.iugaza.edu.ps/nsawalhi/files/2012/03/Human-Resources-Management-in-Construction2013-2.pdf [accessed 18 October, 2014].
Tabassi, A. A. and Bakar, A.H. Bakar. 2009. Training, motivation, and performance: The case of human resource management in construction projects in Mashhad, Iran. International Journal of Project Management. [online]. Available from World Wide Web: http://www.researchgate.net/publication/222664261_Training_motivation_and_performance_The_case_of_human_resource_management_in_construction_projects_in_Mashhad_Iran [accessed 18 October, 2014].
Wilkinson, A. Johnstone, S. and Townsend, K. 2012. Changing patterns of human resource management in construction. [online]. Available from World Wide Web: http://www98.griffith.edu.au/dspace/bitstream/handle/10072/52863/82728_1.pdf?sequence=1 [accessed 18 October, 2014].
Zhang, J. and Gong, J. 2009. The Construction of Human Resource Management System in Small and Medium-sized Private Enterprises. International Journal of Business and Management. Vol 4 (8). [online]. Available from World Wide Web: http://www.ccsenet.org/journal/index.php/ijbm/article/view/3382 [accessed 18 October, 2014].