Impact of Current Economic Downturn on Startegic Human Resource Development - Research Paper Example

STRATEGIC HUMAN RESOURCE DEVELOPMENT Introduction The concept of Strategic Human Resource Development (SHRD) is new to most of the organizations. Theconcept of SHRD is a multi-level approach in order to enhance the organization’s long-term performance. The concept adds that when it is aligned to the strategic organizational goals, it can lead to the creation of firm-specific knowledge and skill (Garavan, 2007). Human resource development can allow organizations to incorporate different knowledge factors both new and old and internal and external to achieve sustained competitive edge in the market. The strategic human resource development can involve any of the following types of development such as short term or long term development, individual or group orientation, low participation or high participation techniques, spontaneous or systemic development and so on (Schuler and Jackson, 1987). But the dependence of these types of development techniques is based on certain pillars. These are as discussed by Garavan (2007) global environment, corporate strategy and culture, value and exclusivity of jobs and lastly employee expectation and careers. This essay will examine the importance of the contexts in the strategic human resource development while assessing the impact of the recent economic turmoil on these contexts in relation to human resource development. Furthermore, new steps initiated by organizations in response to the impacts will also be discussed. Importance of Four Contexts in Strategic Human Resource Development A swiftly changing economic environment illustrated by events such as globalization, deregulation of global markets, changing demands of customer and supplier, rapidly increasing competition in product-market and so on has become a change standard for organizations. Organizations in order to remain competitive, find ways to reduce costs, innovate products and processes and bring about changes in human resource management and development. Researches have addressed the concept of human resource as one that contributes to the accomplishment of organization’s operating and strategic goals. As the human resource strategies are built to accomplish the goals of the firms, certain objectives or framework also lies behind the development and objectives of strategic human resource. According to Garavan (2007) four levels of context are important in shaping organizations strategic human resource development: a) the global environment; b) the organization’s strategy, structure, culture, and leadership; c) the value and uniqueness that the firm attaches to particular jobs; and d) individual expectations, employability and careers. Each of these contexts is further explained separately. Global Environment According to Garavan (2007) the global environment that can affect the strategic human resource development include the local conditions such as economic movement, political atmosphere and industry attributes; national conditions which include technological change, labor market characteristics and country’s culture; and multinational conditions that comprise of cross-culture differences and international laws and regulations. In order to align the internal strategic human resource developments, the management continuously evaluates the external environment that can have an impact on the firm’s overall strategy. Therefore the human resource developments are designed in a way that can contribute to the organization’s ability to administer the global conditions. Organization Strategy, Structure, Culture and Leadership The organization strategy will have a greater impact on the SHRD performance. This is because every organization follows different strategies that can be either cost-oriented or innovation-oriented or task-oriented and so on. The type of strategy followed will determine to what extent does the firm invest in the SHRD practices. The structure of the organization will also impact the SHRD practices as a domestic organization will invest in SHRD practices but will not be sophisticated or organization-wide in contrast to the organizations with multinational structures. According to Garavan (2007) “The firm’s culture provides direction concerning the development of integrated and coherent SHRD systems.” The culture of organization can be aligned in two ways horizontal or vertical and on these two alignments the practice to SHRD rests. The notion of leadership acts as the building block on which human resource development is built as it can further develop a strong organizational culture with higher worker cooperation and commitment (Schuler and Jackson, 1987). Occasionally, the human resource managers are searching for leadership styles that can enhance the employee’s endowment and generate employee commitment, innovation and change. This is because human resource competitive advantages cannot be purchased like technological or other assets and thus development of the employees through leadership remains of strategic importance. Value and Uniqueness of Jobs According to Lepak and Snell (1999) uniqueness means the extent to which human resource is unusual, exceptional and firm specific. The SHRD practices are also aligned to the jobs meaning which type of job is more important and requires more commitment and effectiveness from the employees. The prioritization of jobs depends on its value and uniqueness that it is providing to the firm. Individual Expectations, Employability and Careers The effectiveness and efficiency of skilled workers will always be limited if they are motivated to perform their jobs well. This fact can affect the individual employee’s expectation of the job as well as its expectations towards career advancement. Thus, according to Delaney and Huselid (1996) the form and structure of the human resource development practices are built keeping the aforementioned fact in view and built around motivational practices. These practices can include merit pay, incentive rewards for meeting specific goals, protection from subjective treatment, employee participation programs and so on (Delaney & Huselid, 1996). Impact of Economic Downturn on Four Contexts The economic recession can affect the performance of the organizations in multiple ways but it depends on what kind of strategy have been deployed by the organizations before the recession. It is commonly perceived that organizations will have a downfall in recession but that is not necessary true as some organizations can even take recession to their advantage. But the dependence of such actions is on the organization’s position in the global economy and its internal strengths and weakness. As the SHRD is built on the four contexts aforementioned, these contexts can be affected by the recent recession and thus impact the SHRD practices of the organizations. Global Environment The business environment nationally and internationally has changed in the face of recession. The political and trade barriers have fallen in the present conditions and organizations are now trying to find strengths in the economic and business feasibility. The knowledge and ability of the labor market has drastically changed as the possession and requirement of knowledge in order to work effectively in the workplace has been redefined. According Randall (2009) the economic forecast envisages that the US GDP growth will by 2.1% in 2010. This is good news for all the organizations that are having a hard time maintaining business in the global slowdown. It should also be kept into view that the positive GDP is not an indicator that the organizations will grow out of survival mode into the mode of sustainability and profitability (Randall, 2009).The factors that can hinder such progress is related to the overall expected global expansion that can trigger a price spike in prices of commodity such as steel, copper and so on. Organizations also have to face a new mandate as a result of economic downturn, which is health insurance. Organizations would have to have better insurance plans or pay a stiff fine per employee as employees are being heavily laid off and is hard to retain new employees. Organization Strategy, Structure, Culture and Leadership The greatest impact of the global economic slowdown is that the organization’s work culture is changing. The increasing number of layoffs and reduction in salary are inducing employees to choose the path of entrepreneurs that is enterprising. The organizations are now opting for other methods of getting the work done which include freelance jobs, part-time jobs, and hourly paid jobs and so on. Organizations are blindly cutting costs and management levels without aligning them to the organization structure or analyzing how the work is to be completed and decisions are made therefore, organizations are headed towards system inefficiency that can cause organization failure. Some organizations are still following the obsolete strategies of product extensions and so on and are failing to recognize the rapid changes that the economic downturn is bringing with itself. The impact of such strategies and economic recession is that the organizations are becoming incapable of sustaining environments that can support culture and structure necessary to advance in the economy of today. Value and Uniqueness of Jobs The present scenario does not present itself as a bright future for the employment opportunities although it does teach the people that they should be prepared to adjust to any possibilities of jobs that come their way. There are job opportunities in the market for only those who are qualified. The value of jobs in the organizations has increased as now more than 10 persons are after the same job. Everyone who has not being laid off, is trying to work better and putting in all the efforts to improve organization’s performance. It does not matter what kind of job a person is doing, as long as it pays for its expenses. Individual Expectations, Employability and Careers The ability, talent and skill of an individual employee are the basic factor in the enhancement of organizational performance. The combined ability of all the employees in the organization can alleviate the performance. The present economic downturn and so-called recession have caused a lot of job losses causing immense mental and economic pressures on the individual. The situation has taught many individuals how to sharpen the current skills and knowledge and gain some new in order to remain continuously employable. In the organizations, factors such as qualification based employment and stable employment expectations are now gone. The new demand in the world of corporations, whether they are operating globally or nationally, is for the competitive skills, abilities and knowledge. The demand of the organizations has now shifted towards employability of the employees so that they can provide continued growth for the organization. In return, the management can facilitate the career advancement of the individual employee. HRD Practices in Response to Affects on Contexts According to Randall (2009) organizations cannot achieve operational efficiency unless the management starts investing in the training and development process of the employees. Old organization principles and processes must be up-dated and be in sync with the lean principles. Repetitive processes such as handwritten data rechecking and keying into computers must be automated as well as redesigned. The impact of economic turmoil has had its drag on almost all the organizations. In response, the organizations are now going towards flatter, less bureaucratic and hierarchical and fast responsive organization structures. People are engaged in a more efficient and cost effective ways in order to harness the power of their capabilities and channel it to make the organization’s competitive advantage. The key to apply the correct the employee skills in order to gain its advantage is to first identify the people whose skills and abilities match into the organization’s management style and then support them. This is true as each strategic management style has a contact on the character of the organizations. This is due to the fact that each style expects various things from various employees through its culture, successful competencies and commitments. The aim of the human resource management now is to bring together such employees that align with the strategy of the organization. After this, the development of such employees can take place. Investment in the development of human resources has become imperative as new skills and knowledge are now needed for the organization’s growth and development in order to cope with the recession. Many techniques are been deployed by the organizations in lieu to retain employees and increase their morale. One such technique is collaboration. Through this method, employees can learn from management by imitation of their practices in the strategic human resource development. Employees can see their own ideas being put into action and consider different aspects and alternatives. The success of this method is that the employees can challenge their acquired knowledge continuously by trying to adapt to the interpretations of the management. SHRD is being impacted by two factors due to recession. The first factor is instructional factor and other is organizational factor. Therefore a fit between the two factors is needed in order to respond to the new learning ideas. This fit is transformed into the model depending on each organization’s environment. Depending on the impact of recession on each organization, different steps are being taken to develop the human resources. Most of the organizations have laid off half of their workforce in order to manage the finance properly. The remaining employees’ morale is low in regards of unexpected termination. Therefore depending on the employees’ capabilities and skills, development strategies are designed by the human resource function. Conclusion The literature on strategic human resource management suggests that the conceptualization of strategic human resource development must be aimed at the evaluation on the connection between organizational strategies, human resource development policies and practices, multiple stakeholders as well as on the organization’s multilevel analysis. Strategic human resource development must acknowledge both emergent and planned strategies as means of change in the organizations. Both these strategies have certain implications on the role and workings of SHRD. The concept of SHRD is a multilevel type that contributes to the organization in order to enhance its performance in the long-term phase. Strategic human resource development makes certain that “organizational members have access to resources for developing their capacity for performance and for making meaning of their experience in the context of the organization’s strategic needs and the requirements of their jobs” (York, 2004). Strategic human resource development places hard challenges for the department. In order for the success of SHRD, the management needs to meet the current demands of the organization’s stakeholders as well as predicting future demands. The management has to find appropriate development solutions that can meet the organization’s requirements, tackle the needs of the stakeholders, address the issue of change in the organization that the recession in bringing upon the organizations and at the same time develop solutions and methods to become flexible in order to survive the downturn and get back up. The development techniques are based on the global approach which also facilitates the need of local and regional organization’s culture and structure. As this is a difficult balance to obtain, the management and the human resource department work together to make models of employee development that can be used to achieve internal and external competitive edge for the company. REFERENCES Beer, M. “The Transformation of Human Resource Function: Resolving Tension between Traditional Administrative and Strategic Role.” Human Resource Management Journal. Vol.36, No. 1 (1997). Delaney, J. & Huselid, M. “The Impact of Human Resource Management Practice on Perceptions of Organizational Performance.” Academy of Management Journal. Vol.39, No. 4. (1996) Garavan, T. “A Strategic Perspective on Human Resource Development.” Advances in Developing Human Resources. Vol. 9, No. 1 (2007) Idanan, J. “Strategic Human Resource Management.” Thinking Made Easy. (2009). 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