Human Resource Management in the Internal Environment - Essay Example

Human Resource Management and the Internal Environment An essential part of the HRM process is that proper attention be given to the personnel function. The effectiveness of any work organisation is dependent upon the efficient use of resources, in particular human resources. The human element, as Armstrong and Baron (1995) called it, plays a major part in the overall success of the organisation. There must be effective management of human resources - there must be an effective personnel function. The overall purpose of HRM is to ensure that the organization is able to achieve success through people. According to Campbell (1997): HRM systems can be the source of organizational capabilities that allow firms to learn and capitalize on new opportunities (Campbell 1997, p.23). HRM plays a major and continuing role in the lives of all people, especially with the growth of large-scale business organisations and the divorce of ownership from management. HRM of one form or another are a necessary part of any company as it serves many important needs. HRM management in organisations has an increasing impact on individuals, other organisations and the community. It is important, therefore, to understand how HRM function and the pervasive influences which they exercise over the behaviour of people and organisation. Ulrich and Lake in their book "Organizational Capability: Competing from the inside out" (1990) wrote: HRM systems can be the source of organizational capabilities that allow firms to learn and capitalize on new opportunities (Ulrich and Lake 1990, p. 45). Specifically, HRM is concerned with achieving objectives in the areas summarized below. HRM is generally identified therefore as an element or support concept. In certain organisations, however, such as employment agencies, personnel is very much part of the productive process and will be a task function. In other organisations, noticeably in service industries, the role of HRM can also be closely associated with a task function. For example, in the hotel and catering industry many members of the workforce are in direct contact with the customer and are seen as being involved in achieving the objectives of the organisation. People are part of the finished product for which the customer is paying. Customer satisfaction is likely to be affected as much by the courtesy, helpfulness and personal qualities of the staff as by the standard of food and beverage, accommodation or other facilities. This places particular importance on the personnel function. So, different organisations need to employ different concepts of HRM in order to achieve their goals. In general, Human Resource Management is concerned more with: a long-term rather than a short-term perspective; the psychological contract based on commitment rather than compliance; self-control rather than external controls; an Unitarian rather than a pluralist perspective; an organic rather than a bureaucratic structure; integration with line management rather than specialist or professional roles; and maximum utilisation rather than cost-minimisation. HRM uses different concept providing different models of employees' treatment according to the organizational interests. The hard and soft models of HRM were introduced by John Storey in 1989. He supposes that HRM can be regarded as a "set of interrelated policies with an ideological and philosophical underpinning" (Storey 1989, p.31). The four aspects he underlines are: beliefs and assumptions; a strategic thrust; involvement of line managers; a set of techniques to improve the relationship. John Storey (1989) expresses this as follows: In stereotyped form HRM appears capable of making good each of the main shortcomings of personnel management. Its performance and delivery are integrated into line management: the aim shifts from merely securing compliance to the more ambitious one of winning commitment (Storey 1989, p. 33). Hard and soft approaches are concerned with the business-oriented and human-oriented aspects within an organisational setting. They involve the understanding, prediction and control of management and the factors which influence the performance of people as members of an organisation. There is a close relation between HRM approach and strategic goals of organisations. Hard and soft approaches do encompass the whole of management, and can be more accurately described in the narrower interpretation of providing one of the approaches to management practice. According to theoretical interpretation proposed by Armstrong (2003), the hard approach to human resource management deals with: quantitative, calculative and business strategic aspects of managing the headcount resource in as 'rational' as way as for any other economic factor (Armstrong 2003, p. 15). According to Storey (1989): The drive to adopt HRM is...based on the business case of a need to respond to an external threat from increasing competition. It is a philosophy that appeals to managements who are striving to increase competitive advantage and appreciate that to do this they must invest in human resources as well as new technology (Storey 1989, p. 34). The wording hard approach becomes widely accepted and is found increasingly in textbooks and literature on the subject. The term hard HRM approach is a convenient form of shorthand to refer to the multiplicity of interrelated influences on, and patterns of, behaviour of mangement within formal organisations. Another approach is called the soft model and closely connected with the human-relations concept. The core of this approach includes such notions as communication, motivation and leadership. Storey (1989) writes that soft approach involves treating employees as valued assets, a source of competitive advantage through their commitment, adaptability and high quality (Storey 1989, p. 33). Attention is also drawn to the key role of organizational culture. For example, when researchers talk about a "organization" they are really talking about the philosophy, attitudes and actions of top managers and/or departmental managers, or possibly an individual manager. So, it is evident that the choice of HRM approach, hard or soft, will have a great influence on the whole organization and embraces therefore an understanding of: the process of management: the behaviour of people; the organisational context in which the process of management takes place; organisational processes and the execution of work; and interactions with the external environment of which the organisation is part (Kay, 1993). Heene and Sanchez (1997) observed: "even if the rhetoric of HRM is soft, the reality is often hard, with the interests of the organization prevailing over those of the individual" (Heene and Sanchez 1997, p. 52). This suggests to the researchers that the distinction between hard and soft HRM was not as precise as some economists have implied. The similarity of both approaches is found in their understanding of human capital. Both approaches treat human capital as an integral part, assuming a vital strategic role in recent years as organizational attempt to compete through people. Today, firms can create a competitive advantage when they possess or develop resources that are valuable, rare, inimitable, and organized. Both approaches accept human capital theory as a core competence for their organisations. Hard and soft approaches view this theory as the benefit of choices in the work place, individuals who are required to make a substantial investment -for example, in education and training. The difference is that the hard approach shows that employees can increase value through their efforts to decrease costs or provide something unique to customers or some combination of the two. Empowerment programs total quality initiatives (Barney 1991) and continuous improvement efforts at companies are intentionally designed to increase the value that employees place on the bottom line People are a source of competitive advantage when their skills, knowledge, and abilities are not equally available to all competitors. For instance, Dow Chemical as described by Johnson (1992) went to court to stop General Electric from hiring away its engineers. This case shows that some companies recognize both the value and the rareness of certain employees Organisations employed hard approach view people are a source of competitive advantage when their capabilities and contributions cannot be copied by others (Grant 1991). Some companies like Southwest airlines or Disney, are known for creating unique cultures that get the most from the employees (through teamwork) and are difficult to imitate. Teamwork and cooperation are two pervasive for ensuring an organized workforce. Following Bateman and Snell (2004), it is important to note that hard approach sees the importance of people and shows the closeness of Human Resource Management through strategic management concept. In a recent survey by USA "Today" and "Deloitte and Touche", nearly eighty percent of corporate executives said the importance of Human Resource Management in their firms has grown substantially over last ten years, and two-thirds said that Human resource expenditures are now viewed as a strategic investment rather than simply a cost to be minimized. In contrast to the hard approach, the soft approach suggests that employees' skills, knowledge, and abilities are among the most distinctive and renewable resources on which a company can draw, their strategic management is more important than ever. Increasingly, organizations are recognized that their success depends on what people know, that is, their knowledge and skills. The hard approach uses the Porter's resource-based view of the firm introduced in 1985. According to this Porter's theory (1985) any organization can gain competitive advantage by developing resources, which add unique value, which can't be adopted by another company. Human capital adds value to the company and it cannot be imitated. According to hard HRM the added value that people can contribute to an organization is emphasized by human capital theory. It regards people as assets and stresses that investment by organizations in people will generate returns. Workers should not be treated as passive assets to be bought, sold and replaced but should actively control their own goals and performance (Reed 2001). The soft approach appeals to an employee skills, abilities and knowledge that have economic value. But while concepts such as sustainable competitive advantage and human capital are certainly important, they remain only ideas for action. Reed (2001) and Pferrer (1985) examine that Human Resource managers have many concepts regarding their workers an entire personal puzzle. These concepts include managing layoffs: addressing employee loyalty issues: managing diversity: creating a well-trained, highly motivated workforce; and containing health care costs. The emphasis on different Human Resource activities depends on whether the company is growing, declining, or standing still. In contrast to the hard approach, the soft HRM implements the ability to motivate and inspire employees. Managers must embrace coaching as a key weapon in the war to retain top talent, because good people will stay where they feel they are growing and learning In the Western world there is a loss of connection with the human spirit beginning to materialize, with traditional support structures such as the family and job disintegrating (Boehnke, Bontis 2003l; Senge 1990). The main difference between hard and soft management is found in their understanding of the HR concept. Hard approach sees HRM as a source to obtain added value, but soft HRM treats employees as value assets. The example given by Kay (1993) helps to explain a firm based on soft management. The soft based approach helps the organization to pay more attention to commitment and high quality than to quantitative and calculative strategies For instance, Honda Company (using soft HRM approach) sees the effect in coaching to insist upon 360-degree feedback, preferably, through one-to-one interview. In presenting such feedback to the executive it is possible to see clear themes in terms of performance and, equally important, in terms of perception. Lawton and Rose (1994) examine the concept of leadership and prove that the soft HRM pays attention to leadership as a way to inspire employees to achieve certain goals. Without the direct participation and support of an institution's leadership, this power cannot be pushed to its full potential. Leadership requires many of the characteristics common to all leaders, but also requires special abilities to manage any organization in today's rapidly changing environment. For instance, in the organization, based on soft HRM, employees prefer to have a leader who is a self-achiever and motivated to become a role model. Changes in technology often produce a "chaos situation" (Campbell et al. 1994), where change management in the use of instructional technology in teaching and learning becomes increasingly important. Leaders help each of their followers to develop into an effective self-leader by providing them with the behavioral and cognitive skills necessary to exercise self-leadership If an organization is based on hard HR approach it sees leadership as a tool to control HR performance in order to achieve competitive advantage. According to hard approach, an effective process leadership gradually becomes the operating system of choice as leadership and employees experience the benefits of the new design. Lynch (1997) writes: "everyone focuses on the organization's vision, mission, quality policy and operating principles. Employees at every level contribute to accomplishing company goals" (Lynch (1997, p. 67). Measures are developed to identify continual progress in attaining the top management. Structure and operating changes are implemented with minimal disruption. The rationale for strategic HRM is built on the idea that people, organizations, and nations engage in basically consistent, value-maximizing calculations or adaptations within certain constraints and competitive advantage (Campbell, Goold 1987). The rational model works as follows for the hard approach: an employee has goals or objectives and has a payoff, utility, or preference function that permits that person to rank all possible alternative actions by the action's contribution to the desired goals. The organization is presented with and understands alternative courses of action. Each alternative has a set of consequences. The employer chooses the alternative and consequences that rank highest in terms of the payoff functions; that is, that contribute most to the ultimate goal. In a rigorous model of rational action, the organization has comprehensive rationality, can accurately rank all alternatives and consequences, and can perceive all alternatives and consequences. In Daimler-Chrysler company performance was low because lack of workers' skills. To improve this situation Daimler-Chrysler Company decided to train employees taking into account rapid environmental changes. The purpose of training was to improve knowledge and skills. This can lead to many potential benefits for both individuals. In this case investments in training was used in order to achieve competitive advantage by Daimler-Chrysler avoiding motivation and communication techniques. Training was seen as a necessary expense to achieve output targets. It is not seen as providing long-term benefits or improving organisational performance. A common view of training was an activity undertaken by large corporate bodies who can afford it (www.daimlerchrysler,com). As well as to Daimler-Chrysler, Tempur Pedic company (a leader in mattresses and pillows industry) needed to improve production performance. HR department of the company decided to employ soft approach instead of a hard one. It paid attention to employees' motivation during the training program. The company introduced additional training focusing on employee's motivation and work design programs to help worker identify their goal and professional development strategies. As a result training: increase the confidence, motivation and commitment of staff; provide recognition, enhanced responsibility, and the possibility of increased pay and promotion; give a feeling of personal satisfaction and achievement, and broader opportunities for career progression; and help to improve the availability and quality of staff (www.tempurpedic.com) For hard management approach it is more common to use line communication which means authority flows vertically down through the structure (Taylor 1998). For example, from the managing director to managers, section leaders, supervisors and other staff. There is a direct relationship between superior and subordinate, with each subordinate responsible to only one person. Line relationships are associated with functional or departmental division of work and organisational control. Line managers have authority and responsibility for all matters and activities within their own department. It was mentioned that hard and soft approaches viewed training as an investment in people. According to Robertson, Smith, Cooper (1992), Winch and Schneider (1993) the difference between them is that training for its own sake (according to hard approach) achieves little in contrast to soft HRM philosophy. Becker, in his book "Human Capital" (1993) explains that there has to be a genuine commitment - "from top management and throughout all levels of the organization". The study of the Ford company shows that it should designed programs of development in accordance with the culture and specific requirements of the particular factory, production line and department, and the demands of particular managerial jobs. There should be a clear development policy together with regular reviews of individual performance and a program of career progression (www.ford.com) For instance, McDonald's corporation is to pursue the soft policy of investing in people and demands that they demonstrate a continuous commitment to training standards. Employees, for their part, receive positive recognition for good training achievements. Cost is obviously a major consideration in any selection process, but the costs are not considered in isolation. They are weighed against the costs of selection failure, either by the appointment of an unsuitable member of staff or by the rejection of a candidate who would have made a 'successful' member of staff. The financial costs of the selection process, as stated by Salancik (1977) are immediately apparent and usually clearly identified, for example selectors' time and administrative expense. The contributions from an efficient and effective selection process and the benefits derived by the organisation are not readily apparent and less easy to identify. Hard HRM is connected with the concept of intrinsic value which is based on the belief that what jobs and jobholders are worth is related inherently to what they are and what they do, respectively. In this case, mistake in selection are expensive, not only in the possible effects on staff moral and performance. Motivation is concerned, basically, with why people behave in a certain way. In general terms, motivation can be described as the direction and persistence of action. It is concerned with why people choose a particular course of action in preference to others, and why they continue with a chosen action, often over a long period, and in the face of difficulties and problems (Rosow, Casner-Lotto 1998). Beardwell et al. (2004) explains that motivation is typified as an individual phenomenon. Every person is unique and all the major theories of motivation allow for this uniqueness to be demonstrated in one way or another. Motivation is described, usually, as intentional. Motivation is assumed to be under the worker's control, and behaviours that are influenced by motivation, such as effort expended, are seen as choices of action. Motivation is multifaceted. Motivation is not the behaviour itself, and it is not performance. Motivation concerns action, and the internal and external forces which influence a person's choice of action. Soft approach gives special attention to the process of improvement the work and to motivation of its members. The manager must also encourage staff to direct their efforts (their driving force) towards the successful attainment of the goals and objectives of the organisation. As it was mentioned above, the soft approach is based on the human relations which demonstrate that people go to work to satisfy a range of different needs, and not simply for monetary reward. They emphasize the importance of the social needs of individuals (Schuler 1996), and gave recognition to the work organisation as a social organization. The socio-technical system is concerned with the interactions between both the psychological and social factors, and the needs and demands of people; and the structural and technical requirements of the organisation. The long wall coal-mining study, for example, demonstrated the importance of redesigning work in a manner which provides opportunities for team-work and social interaction. On the other hand, there are some organizations which successfully operates on the basis of hard model. Taking into account the specific criteria as organizational effectiveness, specified goals, specified quantified measures, stakeholder perspective, it was found that "hard" approach is more widely used in manufacturing because it allows to reduce the level of mistakes to a minimum in contrast to "soft" approach, which shows high effectiveness, but cannot be used in all types of organizations. In line with intellectual capital theory, hard approach emphasizes that investment in people adds to their value to the firm of any sector, in contrast to soft approach which is effective in sectors where communication is more important than technological process. It was illustrated that "soft" approach was successfully used in car factories, but still "hard" model is more common and effective for them. It should be mentioned that hard approach is also develops average 'goal profiles' showing the relative importance of different categories of needs for people in different occupations, and changes in profiles at different stages for an average manager. When an organization develops a highly committed work force, coupled with enlightened management, its self-managed multifunction teams will be able to take on the challenges of the future. With a team-based organizational structure, transformational leadership, and empowered employees, any organization will be equipped with the necessary and proper tools to compete and succeed in the highly competitive business environment of the future. Today, firms can create a competitive advantage when they possess or develop resources that are valuable, rare, inimitable, and organized. Both approaches are effective, but the level of their effectiveness differs to some extent because of strategic facilities and goals. References 1. 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