The latest emphasis among academics and practitioners on “public” or “people management systems” as a source competitive advantage has focused greater than ever on the science and practice of Human Resource Management. While academics have made a number of significant contributions to these development by means of research, Steve Kerr of General Electric has had an argument that the great number of the best work is being done by consultans and professionals in the field (Hodgetts, 1996). Actually, one could make a persuasive case that the practice of HRM has outpaced the academic work on this particullar topic. However, data on how organisations in fact manage people to provide a source of competitive advantage are insufficient. Studies that compare and distinguishes human capital management system in leading organisations are even more difficult to find. In fact, while the empirical literature linking between HRM with strategic goals and objectives of the organisation’s performance has constantly found than more effective HRM is associated with greater financial performance (Becker & Huselid, 1998), what is missing is clearer understanding of how these processes work, and subsequently how organisations could actually manage their staff to help provide a basis of competitive advantages.
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The purpose of this essay is to examine how linking of HRM with strategic goals by any organisation would improve business performance and develop organizational cultures that foster innovation and flexibility. That is why I have considered three main points, ( heading, content’s page) because of in my opinion they are the ones which will broaden the concept of this essay. I will first examine the importance of HRM to strategy as well as SHRM and its objectives. In the second part, I will look at the skills of manager which would help to improve business performance and develop or increase organisations culture. Finally, I am going to demonstrate case studies of different types of organisations which has integrated strategy of HRM.
1. Importance of HRM to strategy
Human resource management has become more important to the management in general, mainly as a result of its role in providing competitive advantage, the run to competitiveness, and an awareness of the demands of the technologically advanced environment of the future. According to the findings of Strategist Michael Porter human resource management is a key to obtaining competitive advantage (Michael E. Porter, 1998). In a growing number of organizations, human resources are now seen as a source of competitive advantage. There is greater recognition that distinctive competencies are acquired through highly developed employee skills, unique organizational cultures, management processes, and systems. Increasingly, it is recognized that competitive advantage can be achieved with a high-quality employees, which enables organizations to compete on the basis of market responsiveness, product and service quality, differentiated products, and technological innovation instead of relying on low costs. An example of human resources a competitive advantage is said by John Deere’s efforts to automate its factories. The pursuit of exceptional talent and experience in industrial automation, the company established a technology division ( Dyer, 1983 p.257) Another example is provided by ARCO’s increased importance on human resource management issues in its executive development program (ARCO, 1986) . Examples like these points out the broader responsibilities and importance of today’s more strategically oriented human resource management. Apart from its role in providing competitive advantage through a quality workforce, the needs of control labor costs also has increased the role of human resource management. As an outcome of strong pressure to control labor and other costs, managers have become more aware of the effects of inefficient use of human resources. Administrators need look no further than the underutilized workers, lack of confidence, resistance to change, the work of antagonistic relationship management, motivation problems, and restrictive labor practices to find the causes of low productivity. The resources allocated towards better use of human resources can become more profitable than investment in plant and equipment. Because of the potential cost efficiencies, improved human resource management can play a key role in competitive strategy and organizational development competencies. Economic turmoil also has increased the importance of the strategic role of the human resource management. Turbulence, globalization, technology, radically changing demographics, and differences in the values of the labor force have created uncertainty in the environment almost without precedent. Strategic management of human resources and the thread of human resource planning are increasingly being seen as a means of buffering environmental uncertainty. Not surprisingly, management of human resources is increasingly integrated in the formulation of strategy and planning process. As managing human resources becomes a more important component of competitive strategy of a company, general management has an incentive to ensure alignment and consistency between strategy and human resource practices and policies. The challenge of adaptation first comes to finding the answer to the question: “What kind of people who will necessary to lead the organization in the coming years? ” (Miller, 1986, p12). The expectation is that people and practices that are aligned with the future strategic needs, produces superior organizational performance. While there is evidence on this point, some recent empirical studies have found higher returns to be related to the integrated and strategic human resources. He has been the recognition of the contributions of human resource management to the company’s success in international efforts. This success is more likely when the international participation is rewarded and international business training is provided. Also more likely when selection criteria include management and promotion of international experience. However, before such contributions can be made, a coherent strategy for human resources must be developed and linked to the overall strategy organization.
1.1. SHRM and its objectives.
The concept of strategic human resources management has become a widely used in management literature. In overall, the goal of the strategic human resources management is the effective implementation of those resources to meet the strategic needs of organizations and objectives. In defining the term, doctors tend to emphasize its implementation role, (Schuller, 1992, p 18-32) according to the following definitions: How the company strategy implemented effectively making everyone from the top of human organization in the background doing things that make successful business. ” (Ibid, p 18). A broader academic definition of the strategic human resources management, says the following: strategic human resources management is largely about how to integrate and adapt. SHRM’s concern is to ensure that: a) human resources (HR) management is fully integrated with the strategy and the strategic goals and objectives of the company, b) HR practices are adjusted, accepted and used by managers and employees as part of their daily lives work (IBId). Patrick Wright and Gary McMahan have offered a similar definition of strategic human resources management (Wright, Patrick M. 1992 p 295). They defined SHRM as “the pattern of a planned human resource operations and activities intended to enable an organization to achieve its objectives.” Given these definitions of strategic human resources management, a general theoretical framework can now be used to organize knowledge of how human resource practices are affected by strategic considerations.
Strategic human resources can make contributions to the strategy and
strategic planning to set goals of organisation in a different ways. Systems such as performance appraisal, staffing, training, and compensation allowing managers to implement the organization’s strategic plan. The human resources planning also links strategic management and business planning with these systems. The great number of models of strategic human resources management vision function of having an enforcement role, and has been less common to find companies that use unique human resources capabilities as a leading entry in the strategy formulation. However, more companies are turning to human resources management in the process of formulating the strategy . As an instance for it could be Arthur Andersen’s unique capabilities of human resource training. The accounting company’s Saint Charles, Illinois, training centre, which resembles a campus of college, provides it with competitive advantage (Porter E. Michael 1998). Thousands of employees of Arthur Andersen are given uniforms training of the company’s own highly regarded instructional labour at this service each year. Due to its facilities and at home instructors, the company can react quickly to the changing demands of its customers.
Objectives of Human Resource Management. The objectives are pre-determined strategic goals to which person or group activity in an organization is concentrated. The institutions are established to achieve certain specific objectives. The objectives of the any industry are mostly to earn profit as much as possible while educational institutions are mostly to provide education or research etc. However, the main and the fundamental purpose of any organization is survival. Organizations are not just satisfied with this goal. Moreover the goal of most organizations is the growth or profits.
Institutions to acquire and manage various resources including human for achieving the objectives. Thus, human resource management is used to divert and use its resources to achieve the objectives of the organization. So basically, the goals of human resource management derive from and contribute to the achievement of the objectives of the organization. The other objectives of human resource management are to meet the needs, aspirations, values and dignity of employees and with due concern for socio-economic problems of the community and country.
The objectives of human resource management can be as following:
To create and use a workforce capable and motivated to achieve the basic organization goals.
To establish and maintain solid organizational structure and desirable working relationships among all the members of the organization.
To ensure coordination and integration of groups within the organization by co-ordination of the individual and group goals with the employees of the organization.
To create facilities and opportunities for individual and group development to coincide with the growth of the organization.
To achieve efficient utilization of human resources in achieving the objectives of the organization.
To identify and meet individual and group needs to provide adequate and equitable wages, employee benefits and social security
To measure for challenging work, prestige, recognition, security, status.
To maintain the high morale of employees and good human relations by maintaining and improving the various conditions and other facilities.
To strengthen and assess human capital through continuous training and development programs.
To examine and contribute to minimizing the social and economic problems such as unemployment, underemployment, inequitable income distribution and wealth to improve the welfare of society by providing employment opportunities to women and disadvantaged sectors of society .
To provide fair, acceptable and effective leadership .
To provide facilities and working conditions and the creation of enabling environment to maintain employment stability
Management has to create a conducive environment and provide necessary conditions for achieving the objectives of personnel management after formulation. (Source from
2. Skills which manager should acquire in order to achieve strategic goals in the organisation.
The human resources function sometimes does not play an important role in the process of formulating the strategy of the organization because of the inadequacies of human resources planning executives (Burack, Elmer H, 1985 p133). However, planning difficulties are not unique to these executives . In fact, the managers of all functional areas have problems with strategic planning. It is well known that managers are action-oriented, often prefer the action of the decision -making or problem- solving interactions. On the contrary, part of the planning process is conducted in isolation. There is a lack of information or knowledge of results for long periods of time. Also, It is hard to justify the time needed for planning in relation to more immediate problems that press for solutions. Thus, despite its value, many managers do not like to plan. Further, these general planning issues, there are more problems with strategic planning because it often leads to restructuring of resources that determine the power and status. Effects of the desire to maintain the status quo, through resistance to change is obvious symptoms such as excessive defence of the allocation of existing resources, the accumulation of the information and excessive control of the planning process by manipulating programs. Other causes of problems in the strategic planning process is the mismatch between planning tasks and competence of manager’s skills. Strategic planning requires considering in terms of the organization as a whole and the relationships between the organization and the many factors that affect their environment. One of the most important abilities in SHRM is to see objects at the macro level rather than processing bits of information to find solutions to problems at the micro level. One symptom of this imbalance is a propensity to fall on operational issues and the inability to complete tasks. A final problem is the lack of senior executive commitment to the strategic planning process. The symptoms of this problem include attempts by managers to read between the lines to find out the real opinion of top management in the importance of the process.
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Human resources executives often lack the skills to play an important role in strategic planning processes of the company. Requirements for those who can operate in the strategic human resources management is beyond the requirements of functional competence. Research for the role characteristics reveals that following professional qualifications needs to be considered in the managers’ involvement : 1) Management information skills such as statistics, analysis, and research. 2) Planning skills, knowledge of planning and planning methodologies and statistical techniques.3) Knowledge management skills in different business functions and environmental analysis.4) Integration skills- competition in the management of organizational interfaces and skill in assessing the organization and as setting priorities. 5) Change management skills- the ability to anticipate the future, facilitate change, and organizational development activities (Baird, p 126-27).
Besides the selection of human resources executives on the basis of these qualifications, the weaknesses with the current staff can be overcome, even if there are imbalances of cognitive skills. For example, planners of linking compensation with the skills and the use of planning teams can minimize the effect of individual cognitive deficits. Planning tasks can also be divided into phases, some of which may be made by those whose cognitive abilities are not well adapted to the strategy formulation. For instance, greater responsibilities for data collection can be assigned to those whose strengths are not consistent with strategic thinking (Lenz, Managing SHRM, (1986): p 57-66 ).
3. The linkage of HRM with integration of strategic goals and objectives in the different types of organisations (Cases).
Integrating Strategy and Human Resources Management in the organisations.
Experiences from several organizations are good examples of the integration of strategic goals with human resource management. One of the such examples is provided by the experience of People’s Bank , a financial services company headquartered in Bridgeport, Connecticut. Massive changes began to take place in the business environment of banking with deregulation and lowering of interest ceilings. Money markets started draining the funds normally was in bank’s deposits, forcing them to resort to more expensive sources of funds. In addition, money centre banks began competing in the same market environment as regional banks. People’s, which was a small regional bank, responded changing its strategy from a product orientation to one directed toward markets . With a product orientation, the products are developed and then looks for markets that sell the product. By contrast, a market orientation implies an opposite approach, where market demand are identified and then product developed to serve the market. As a result of these changes, People’s became a diversified financial services company with 139 branches and fully integrated banking services and stock trading presence on the Internet (People’s Bank, Coleman M. Sharon, 2000 ). Due to major changes in the People’s strategy, there was a recognition that new organizational structures would be needed to adapt to changes. The organization was decentralized, remove hierarchical levels formed strategic business units, and new senior vice presidencies created within a matrix structure. The bank undertook a study of the types of employees that would be required with the ability of the new strategy and the needs of the organization. The main changes took place as a result of the audit. For example, the performance appraisal system was revised. The revised system emphasizes setting goals, the achievement of individual goals by linking with HRM, and the rewards by means of achievement of the objectives of the bank, and places greater emphasis on performance appraisal, marketing and sales. In addition, human resource planning was more fully integrated with the strategic planning process through the synchronization of scanning processes with the bank’s general environmental scanning process (HRM Planning, Lesher, 1986, p 39-44).
The experiences in integration of strategy and human resource management of the U.S. Navy could be another example. As a result of linking strategic planning with human resource management, the Navy was able to follow a proactive strategy that provides lower costs of labor. In this case, Navy’s human resources planners analyzed the labor cost savings of a strategy for their civilian employees that would replace the local wage policy with national wage policies. Through the development of human resource predictions to determine labor market reactions to these changes, planners could determine whether sufficient labor supply would be available with savings of cost strategy. In this particular example, the strategic planners of Navy also considered the impact of the reduction in private sector middle management positions and found that higher quality employees could be hired. (Atwater, et al. , 1988, p 119-36)
Ingersoll-Rand’s experience with one of its divisions also provide a good example of the results of a strong linkage between strategy of this organisation and human resource management. Ingersoll-Rand’s rock drilling division was experiencing rapid growth and there was a shortages of manpower. It was also necessary to train their employees to work with new technologies and wanted to control the costs of labor. The result of the integration of human resource capabilities with its strategic planning process was that the company implemented a series of programs which also included profit sharing and participation of employee as a team in every aspects. It also had employees participate in decisions about purchasing new technology and a significant commitment to technological training. (McManis, Gerald, 1988)
To conclude with this last example about the integration of strategy and human resources in Maid Bess, which specialises in manufacturing uniforms. The company faces intense competition from foreign manufacturers, and controlling of labor expenses became critical. Due to the intensity of labor, the company closely integrated human resources management with the strategic planning process in order to reduce labor cost. As a result of the integrated strategic planning process, executive vice president of the company designed a compensation program that includes bonuses that increased productivity, increases in the salaries of employees and reduce turnover. (Charles R. Greer, SHRM, 2001, p 278)
In a recent years more organizations are recognizing that human resources are a source of competitive advantage. This recognition, side by side with increasing environmental uncertainty, increased pressure to control costs and increased government regulation, have elevated the strategic role of human resource management. As a result, there is increasing involvement of HRM in strategy formulation. When human resources are the source of an organization’s competitive advantage, HRM plays a critical role in providing “up front” to enter the corporate level, the strategic planning process in order to achieve its objectives. Human resource planning is of the important linkage with the strategy of the organization by providing input on the availability of critical manpower and by adding timing process to cope with the shortage and surpluses of employees. Other strategic inputs of SHRM functions include environmental scanning and competitive intelligence. The next level of strategy formulation, SHRM help align personnel practices, policies and programs with the strategy so that desired roles of employee and their actions will support different strategies such as innovation, quality, enhancement, cooperation, effectiveness of work, ability to performance, desire to work, cost reduction etc. A typology of activities shows how human resource activities vary in their contributions to a strategically implementation.
Despite recent developments, in most companies, there is still need for greater integration of human resource planning with the formulation of organization’s strategy. Factors which influencing the level of integration of the include industry differences, changes in economic activity, technological changes and demographic changes. I have provided several examples of integration of strategy in organisations and its linkage with Human Resources, and also the barriers that often have limited integration in the past.
To conclude with, My personal view is that human resource managers should develop the personal skills that necessary to contribute to the process of strategy formulation.
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