Human Resource Management in Context - Human Capital and Its Importance - Assignment Example

? HRM in Context Introduction to Human Capital and its importance: Managing work force or human resource of any company has become the most important aspect of any business. Today’s companies understand the importance of human capital and they are increasingly realising it as the most sought after asset of any organization. This is because every company wants to build a competitive advantage and now companies have come to know that only its work force can provide that competitive edge. It is true because technology and other aspects of any business can be easily copied, but its people and their unique skills and expertise can never be copied; and this is why we see that some companies try every effort to retain their most valued employees (David, 2009, p. 5). Key Developments in Human Resource Management – Hard and Soft Versions: The above-mentioned reason is enough to explain so many developments in Human Resource management in recent times. Human Resource Management can be differentiated between hard and soft versions. The followers of hard version treat their employees as one of the inputs in the business and try to utilize them in the best possible way to generate the most profit. For this, they try to reduce cost and try to focus on flexibility techniques. On the other hand, the followers of soft version of Human Resource Management believe employees to be the most precious asset of the organization and they apply different strategies to retain their employees and to make them happy (Armstrong, 2009, p. 5). It would be wrong to say as to which technique is the best. Companies choose a version on Human Resource Management depending upon its core values and company’s philosophies and design their HR strategy accordingly. There are companies that apply a combination of both soft and hard versions of Human Resource Management. Changing Role of HR Professionals as Business Partners: These recent developments in Human Resource Management have even changed the role and responsibility of an HR professional. Now, an HR professional is not seen as someone who is working at an operational level, dealing with employees, and dealing with their concerns. That old approach of HR was bottom to top i.e. HR professionals would deal with the concerns of the employees as they arise from the employees’ side. However, the view of looking at an HR professional and the span of its roles and responsibilities have changed drastically over time. Now, HR professionals are seen in most organizations as business partners (Hunter, 2006, p. 6). The word “business” in Business Partners implies a strategic intervention. It refers to something that has to be implemented from the top i.e. designing the strategy. Besides, the term “partners” refers to working alongside, and at the same level with that of the top management (Charles and Fombrun, 1984 , p. 3). Now, HR professionals sit with the top management, help them, and advise them in designing a company’s strategy and that is where the role of strategic HRM comes into play (Charles and Fombrun, 1984 , p. 3). Once, a company’s strategy is designed then HR strategy is designed keeping in view company’s strategy. For example, if company’s business strategy is cost leadership so the culture in the organization would be such that would incentivise its employees on cost-cutting activities and the like (Kenton and Yarnall, 2009, p. 2). This is why, when today one talks about HR professionals, he talks about someone who is working hand in hand with the company in order to implement its strategy from top to bottom, and is thus playing a role of a Business Partner of that company. External Contexts of HRM: Today’s HR professional has to be aware about the key developments in the business or in business’ strategy. Moreover, he also has to be aware about the external context in which the business operates. By external context, we mean a company’s macro environment. This includes socio-cultural, technological, economical, environmental, political, legal and ethical aspects of doing business. An HR professional should be aware about the above-mentioned changes in the environment as these changes make a company to change its strategy and thus it changes the span of activities that an HR professional has to undertake (Price, 2007, p. 5). 1. Socio-cultural Context: Socio-cultural context broadly includes social and cultural aspects of the business. This means that if a company were expanding geographically then it would have to first analyse the demographic, social and cultural aspects of the business and then make its decision accordingly. For example, when McDonalds decided to expand geographically in India and other Asian countries, it took into consideration different aspects of their culture and population. It is important to follow the famous idiom “when in Rome, do as Romans do”. This is because if a company does not keep in mind the difference in socio-cultural context of their home country and foreign country then it would be a total mishap (Welsing, 2006, pp. 35-39). Similarly, if one talks about HR policies in specific; in some countries, job security is the foremost concern of every employee; therefore, HR policies in that country should be designed in a way to cater to the aspect of job security so that the company can attract the best people around. Similarly, if a country opens a subsidiary in Japan, then it should be aware of the demographics and population of Japan. Therefore, the company should be aware of the age of average employee in Japan, as it would help the company to design its HR policies accordingly. 2. Technological Context: The next external context that is important to an HR professional is technological aspect. Technology helps any company to be in competition. The moment an organization starts lagging behind in technology, it slows down and goes away from the competition. Therefore, it is extremely important for organizations to stay in competition by updating themselves with the latest technology. Today, with the introduction of HR databases, Google, Facebook, Twitter and the like; it has become easier to manage things electronically and at the same time, it has become extremely easy to communicate and stay in touch. A repercussion to this is that now businesses have gone 24/7 and the lives of employees have become very tough (Wood, 2009, pp. 56-64). Employees are called for conference calls even on Sundays and in other words, the business never shuts down. With that, we also see an increase in flexi-timings and contractual jobs and the like. Technology has not only made people come closer, has made communication easy and has made things easy to manage; at the same time, it has shown advancement in health technologies and has thus increased the overall life expectancies of people. 3. Economical Context: Third external context that is important for designing HR strategy in which an HR professional works is Economic context. This includes the economic indicators like GDP, GNP and the overall state of the economy. In today’s tough times of recession, experts have seen an increase in unemployment because organizations are looking for every way to cut cost and increase their profits (Sims, 2007, pp. 31-47). Moreover, because of an increase in multi-national organizations, the demand for national companies has drastically decreased which has further caused unemployment. When there is an increase in unemployment, the companies are pressurised to retain their employees to a certain extent. Furthermore, it has changed the demand and supply of the labour market and has increased competition among the employees working inside the organization. Now, there are more candidates competing for one position that there were ever before. Moreover, business experts have observed an increase in the demand of high-skilled labours. Besides, agricultural and manufacturing age has gone and today’s age is labelled as technological and service age. Service industries are booming in today’s time. Therefore, companies now need to pay attention to training their existing employees and hires news employees for the skills needed. All the above-mentioned economic factors and more have led HR professionals to mould their HR practices and policies. 4. Environmental Context: The next external context is environmental. There has been an increase in concerns about environment found in people due to increase in awareness caused by television and the internet. This has made the companies to go for eco-friendly products and services and this has altered their HR policies. This means that now companies have to provide good and environmentally friendly working environment to its employees and have to make sure that it is working for the maximum benefit of its stakeholders. So much concern in environment has given roots to Green HR policies when employers are trying to promote their positivity and willingness to work for the benefit of the environment (Rosalind and Searle, 2011, pp. 71-88). 5. Political Context: Political context is also one of the most important contexts in which an HR professional operates. Free market economy has changed the demand and supply dynamics of all the products. Moreover, political influence guides company policies many times, and companies have to support in the political campaigns in order to derive their own personal objectives. Besides, there have been recent observations indicating more and more government involvement in the labour market for which companies have to keep themselves prepared in order to give a timely response to governmental pressures. 6. Legal Context: The next context in our list is legal context. Legalities have increased in doing business in the last couple of years like nothing else. Doing business was never so regulated and legalised before as it is today. This can be seen even in the employee-employer relationship in the form of contracts, discrimination legislation and the like. Now, companies are not allowed to dismiss any employee for no reason or for an unfair reason as there are redundancy laws and laws for unfair dismissal (Bratton, 2001, pp. 56-67). Moreover, there are minimum wage laws, health and safety laws, human rights laws and the like that every company has to comply with. Additionally, companies have to design their HR policies to cater to these and more laws. In other words, they have to redesign their recruiting, hiring, salary and compensation, training and development by considering all these laws and regulations closely. 7. Ethical Context: The last external context is Ethical. This is the only context that is subjective. If looked at it from a broader sense then ethics in business itself is an oxymoron, but there are some rules defined that most of the organizations tend to follow and comply with most of the time. Ethical conduct can be classified into two. The first one is that it is demanded in a specific situation, like in some companies it is alright to accept and give gifts, which are one of the forms of bribery; whereas, other companies strongly condemn it. The other aspect of ethics is principles of behaviours that are considered appropriate to abide by. These include pay rate, union rights etc. Ethical conduct and increasing need of people to be treated ethically has made it necessary for HR professionals to redesign their HR policies according to the changing ethical requirements. All the above-mentioned external contexts of doing business are extremely important for the successful implementation of a company’s overall strategy. This is because knowing the above; guidelines are formed that are necessary to be included in the HR policies, which are later linked with the corporate strategy in order to align business strategy with the whole of the organization (Charles and Fombrun, 1984 , p. 10). STEEPLE Analysis – A Summary: STEEPLE analysis i.e. the one done above is extremely important for every company in order to design an effective HR strategy. STEEPLE analysis includes knowing about the socio-economic, technological, economical, environmental, political, legal and ethical contexts of the business and analysing it in depth in order to formulate an effective HR strategy. It is important to note that implementing STEEPLE analysis in the business strategy is not an easy task. The company faces problems with all its stakeholders when it tries to implement any major change in the strategy. STEEPLE Analysis – An Example: An example of effectively implementing corporate strategy is Starbucks. Starbucks was established with an aim to provide premium coffee and to give people an ambience to sit in the coffee shop for hours and have a good time. Starbucks’ corporate strategy is differentiation i.e. it aims to differentiate itself by selling premium coffee to high-end customers that want a place to have a time of their own. In order to provide that corporate strategy and show it to the customers, they aligned their HR strategy accordingly (Bratton, 2001, pp. 36-45). Therefore, their HR strategy included hiring highly ambitious people, giving them company’s shares, giving them proper training as to how to deal with customers, picking up the phone within three rings, ways to deal with difficult customers and the like. All these strategies at the functional level made Starbucks what it is today. Moreover, the work force made Starbucks able to differentiate itself from others, other than their premium coffee. Therefore, Starbucks is one of the best examples of seeing how HR policies are designed in order to achieve corporate strategic goals. Challenges to HR Professionals: 1. Size of the Workforce: Today’s recession and economic instability has made businesses to layoff many workers. This has raised many legal and ethical concerns. Legal concerns because it is against anti-redundancy laws and it is regarded as firing for unfair reasons, and ethical concerns because the company even fires its permanent employees and is increasing in the count of unemployment (Sims and Quatro, 2005, p. 29). 2. In-house or Outsourcing: Similarly, another challenge to today’s HR professionals is whether to outsource employees or hire them to work in-house. Both the options have pros and cons and they have repercussions for the organisation. If an organisation goes for outsourcing labour, the main objective of doing this is to cut cost. In order words, that company is seen as a company that is solely driven by profit motives and other permanent employees feel insecure in that organization and feel as if they would be fired shortly if the company finds a cheaper replacement. In this way, the company fails to provide lower level need of security as identified by Maslow in his hierarchy of needs theory (Rosalind and Searle, 2011, pp. 89-95). Moreover, outsourcing is also seen as unethical as the companies that do massive outsourcing do it in third world countries or in countries with high population and unemployment like Pakistan, India, China so that people in those countries happily take up the work for very less salary. On the other hand, if the company keeps on hiring employees and gives them market competitive salary, then it cannot work efficiently and such a company has to compromise with its profits. This way, the company is not trying to reduce its cost. If in the same example above whether to outsource of not, it is an HR practitioner’s duty as a business partner to look at the corporate strategy of the company. In this regard, if the company is following cost leadership strategy then the HR professional should go with outsourcing as it is the most viable option for the company. Google, for example, focuses on creativity and innovation so the HR professional has to make sure the all the hires are creative and innovative and are ready to face the challenge every day. Therefore, an HR professional’s role as a business partner is very critical as he as a business partner grabs the key strategic points from the top of the organisation and formulates linking strategies to link it back to the business and functional levels. 3. Going Multi-National: A company faces similar other problems when it decides to expand geographically. Expanding geographically is wrong ethically as you would be competing for market share with other national companies and this might lead to a reduction in demand of goods and services of national companies (Wood, 2009, pp. 78-88). This is particularly seen when the parent company is in a developed country and the foreign country where the subsidiary is opened is a developing or a third-world country. In this case, the demand of the national goods and services in the foreign company reduces drastically because of the technologically advanced products and services of the multi-national company and its efficient ways of producing and managing business. 4. Centralization vs. Decentralization: Centralization vs. Decentralization is one of such other challenges that an HR professional faces (Sims, 2007, pp. 30-46). Centralization has various advantages including tough decision-making, unity, etc. On the other hand, it has drawbacks that include red-tapism, prolonged decision making time and the like. Decentralization, on the contrary, capitalises on the drawbacks of centralization. Today, more and more companies are going decentralised because of the many benefits associated with it. It gives the employees a sense of ownership and belongingness to the organization as employees do not always have to ask for consent from the top management. 5. Flexible Work Schedules: Today, more and more companies are providing Flexi-timings or flexible working schedules to its employees. This is because, now we have more and more female employees in the organization. Moreover, it is seen that companies now have day care centres and the like in the company premises, in order to cater to the needs of female employees in specific. 6. An increasing trend in Contractual Jobs: Similarly, now more and more jobs are contract-based and there is an upward trend in people working from home, which has made HR professionals to cater to such employees and make specific policies for them. 7. Ageing Population: As mentioned earlier, ageing population is one of the determinants of HR policies in many western countries. This is because if your employees were in their later half of the life so their needs and requirements would be very different as compared to having younger employees in your workforce (Welsing, 2006, pp. 29-39). For example, younger employees are more creative, energetic and ambitious and they tend to switch jobs more frequently. On the other hand, aged employees are more inclined to having job security at work. 8. Increasing trend in Consultancies: Not only this, how HR professional used to work before and now has changed. Earlier, all the companies had a full-fledged human resource department. However, now since all the companies have become a victim of the recession, they are desperately looking for cost-cutting solutions. Therefore, we see an increasing trend in human resource professionals working individually or doing freelancing or working with other HR professionals as a consultancy. Now, companies find it more expensive to have their whole HR department inside the organization, and they are moving towards outsourcing entire HR areas to individual HR professionals or consultancies that are specifically made to cater to that specific HR area. For example, there are consultancies that do recruitment drives and other consultancies that are specialised in training and the like. Conclusion: This way, organizations have found out many ways to deal with challenges posed by its external environment and have come up with creative ways to deal with it. The above-mentioned issues present staffing concerns to the HR professionals and they have to be very careful in designing staffing policies and should consider above mentioned trends and more when it comes to staffing employees. Issues like these are very controversial and a company has to look out at all the options available at hand and should then try to find out the best way to maximize its stakeholder’s equity by being as ethical as possible. Thus, this is where the role of an HR practitioner becomes critical as he has to look at all the options available and then has to find a way that best matches it corporate identity (Charles and Fombrun, 1984 , p. 30). Works Cited Armstrong, M. 2009. Armstrong's Handbook of Human Resource Management Practice. Kogan Page Publishers. Bratton, J. G. 2001. Human Resource Management: Theory and Practice. Routledge. Charles J., Fombrun, N. M. 1984 . Strategic Human Resource Management. John Wiley and Sons. David, L. 2009. Human Resource Management. Pearson Education India. Hunter, I. 2006. HR Business Partners. Gower Publishing, Ltd. Kenton, Barbara, Yarnall, J. 2009. HR: The Business Partner. Routledge. Mathis, Robert L., Jackson, J. H. 2011. 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