Strategic Human Resource Management - Coursework Example

Introduction Strategic Human Resource Management (SHRM) means to align or integrate decisions about people with decisions about the results an organization is trying to obtain. This requires integrating HRM into the planning process, emphasizing HR activities that support mission goals and building strong HR/management relationships (USOPM, 1999). In the past the primary role of HR has been compliance with laws, rules and regulations. With the work environment having undergone a change, the private sector recognizes that it is not merely the financial and technological capital that provides the competitive edge, the human capital or people are equally important. An organization cannot succeed without attracting and retaining the right people in the right job. Hence people have been recognized as a company’s most important asset. This realization has brought about innovation in the HR practices. Thus, today various concepts are found in HR – emotional intelligence, flexible HR, outsourcing HR functions, workforce planning or even line managers performing HR functions. All these terms and roles have been developed as part of the planning process of strategic human resource management and may differ across industries and even firms within the same industry. Redefining of roles Strategic HR has led to redefining the roles of the top management. They offer ‘transformational leadership’ and they share their vision for future success with other employees. Budhwar (2000) cites the reasons why devolvement has taken place and why line managers have been entrusted with the primary responsibility of HRM. Certain issues are too complex for the top management to comprehend and it is easier for the local managers to respond fast to it. The middle managers play a vital role in any organization because they are the ones who interact most frequently with the employees (Thornhill & Saunders, 1998). They are thus expected to have the ability to inspire, encourage, motivate, enable and facilitate change by allowing the employees to become committed to the organization. When middle managers are allowed to use discretion and take decision, it prepares them to be future managers at top management. Besides, the cost to company is reduced with such a practice, contends Budhwar. Line managers in HR role Due to downsizing and devolution of HRM responsibilities, the line managers have assumed key positions by virtue of having knowledge that enables them to influence both strategic and operational organizational priorities (MacNeil, 2003). Added to this are introduction of sophisticated software and the development of smart computer systems, which have further reduced the workload on the HR freeing the key personnel to concentrate on the change agent and strategic partner roles (Larsen & Brewster, 2003). The line managers are not competent in HR work and need to regularly reflect and be critical about their work. They attempt to increase the speed of decision making by wanting to by-pass procedures, which demonstrates that HR should not be outsourced but the HR functions should be expanded (Renwick, 2003). A study of four companies in the financial sector by Bond and McCracken (2006) showed that line managers do take decision when employees make requests for time off at a short notice. This decision depends on several factors which include how committed the employee is to work and to the organization, the nature of emergency, how this leave would affect the work during the period of absence, whether it is keeping in line with the HRP policies, the good impact or the benefit to the employee concerned and if refused whether it would adversely affect the morale of the employee. This in general practice may be a very practical way of handling such issues because the HR personnel may not be in a position to understand the employee and his problems as there is no regular interaction between them. Discretion is a key feature and maturity of the line managers is important. Besides, it is also important that such employees who are granted leave are willing to work extra hours in case of emergencies. Whittaker and Marchington (2003) agree that line managers have to work in conjunction with HR practitioners. While HR personnel took the lead in framing policies, they either have the sole responsibility or took it in conjunction with the line managers. Line managers have a significant role in resourcing and employee relations, rewards and recognitions (Whittaker & Marchington) while Cunningham & Hyman (1995) contend that the line managers’ influence on manpower planning is not very strong but in areas of discipline and dismissal they are effective. They are definitely better positioned to evaluate what is essential for the role of the staff (Gibb, 2003). Doubts have also been expressed whether the line managers possess the necessary skills and knowledge. The line managers need the HR support, training and advice (Whittaker & Marchington) but they definitely have more opportunity to translate the HRM policies into practices at the operational level (Bond and McCracken ), for instance a study on local pay in the NHS revealed that middle managers used their discretion on a number of issues thereby operationalizing HR strategy. Huselid, Becker & Beatty (2005) contend while the HR professionals are responsible for hiring the staff but performance problem can only be identified by the line managers. The HR views the entire workforce equally but the line managers may prefer a more differentiated system and the firm’s culture may make it impossible to treat execution of the workforce strategy anything more than an administrative core. The costs of such a strategy may not be immediately apparent but benefits are definitely there as the success of workforce indicates firm performance. If all the jobs are treated equally, the firm may under-invest on top performers and over-invest in underperformers. As a result the high performers leave while the low performers stay which eventually leaves a mark on firm’s performance. This justifies the role line manager plays in differentiating and identifying the workforce. There is no market equivalent to determine the strategic value of a job and the workforce strategy requires investing in human capital that have the capability to contribute to the firm’s strategic success (Huselid, Becker & Beatty). The NHS Trusts in UK have empowered the supervisors who are entrusted with the responsibility of discipline, dismissal, recruitment, issuing contracts and absence as it allows the personnel to develop a future strategy and it empowers the supervisors to have control over the subordinates (Cunningham & Hyman, 1995). Evolution of strategic role Globalization, internationalization, global strategies, labor market changes and the competitive work environment has posed great challenges. HRM refers to the totality of people management practices found in organizations, and not to a particular approach to the philosophy of people management (Gibb, 2001). Delegating selected business functions to external providers allows organizations to concentrate on their core business activities, utilizing external expertise and reducing costs (Jones & Finlayson, 1999). Their change role is expected to bring about innovation, quality enhancement and cost-reduction. Recruitment HRM has gone through a number of stages and towards the end of the last century its role became strategic, and the concept of strategic human resource management was born (Roos, Fernstrom, & Pike, 2004). (Davis (2006) foresees structural and cultural change as the central strategic task for human resource managers. Emphasis on cultural issues to encourage autonomy and devolve decision making, on personal/organizational development and learning and to be responsive to changing customer needs, has given rise to the concept of outsourcing the HR functions. During downsizing, hiring of outplacement specialists takes place. Recruitment is increasingly done over websites. Counseling takes place through telephone helpline sans emails. At times, transfer of human resources takes place from the outsourcing company to the vendor but these in UK have to be governed by various Employment Regulations and Rights Acts. The existing terms of service have to be guaranteed by the vendor (Lee, 2000). Outsourcing HR Outsourcing is taking place in all functions of HR – training and development, recruitment and selection. Mills (2002) states it is impossible to run the recruitment process single-handedly while simultaneously developing the core business. It is advisable to outsource the primary candidate selection and the first round of interviews while keeping the final selection decision with the company. Outsourcing recruitment process alleviates the administrative burden of sourcing and screening candidates with the right skills but Fish and Macklin (2004) caution the HRM professionals must ensure that the service providers have knowledge, integrity, conscientiousness, and effectiveness. Flexible HR In an effort to align the objectives, the policies and processes are integrated to improve organizational performance and the HRM model differs across firms. The HR department is constantly under pressure to deliver more for less. Most models of HR believe in a ‘flat, fast and flexible’ organization (Caldwell, 2004). Caldwell suggests that it is only in theory that the flexible organizations are not only more responsive to change, they also overcome the negative features of Fordist (what is Fordist? Any source?) mass production and bureaucracy. The word flexibility itself means differently to different people. Having an employee-centered approach, not being authoritative, being anti-hierarchical, persuasive, or even empowering and considering the employees as equal stakeholders are some of the ways that ‘flexibility’ has been defined (Caldwell). Hence ‘flexible HRM is not a norm which firms follow. It is a state of mind, and the practice itself varies from firm to firm. Within an organization also, flexibility provokes mixed reaction. While some consider flexibility an employee problem, the senior management thinks of it as a cost cutting strategy. The flexible approach has also led to the evolution of self-managed teams who work closely together to achieve greater horizontal coordination across organizational divisions. Marlow (1997) contends that in the UK few HRM initiatives that are being adopted are aimed at raising employee productivity without the return of rewards. Marlow further cites that the destruction of traditional style industrial relations and the lack of industrial policy articulated by the state have led to neo-Fordism. Hence, the flexible HR practices are used to induce the labor into higher productivity. It does not form a part of the larger process of post-Fordism. Since these are not supported by technology and training, these practices become unsustainable. Further arguments arise that flexible HR practices come about due to market volatility and labour weakness, and not due to sophisticated approach to labour management. Knowledge transfer is an important part of the new HR practices but this requires the ability and the right motivation for the employees to absorb knowledge (Minbaeva, 2006). Those firms who examine the core competencies and engage in extensive selection and recruitment procedures are able to generate skilled external candidates. Systematic training helps to eliminate the skill deficiencies. Internal promotions work as great motivators. All these lead to higher commitment and involvement but according to Fuchs (2002) the flexible labour market will lose its most strategic resource. The hospitality industry operates in an uncertain environment with great emphasis on responsiveness to customer needs and the provision of superior quality, customized goods and services. This requires an innovative and developmental approach to HRM which aims at providing employee flexibility, adaptability and commitment to the organization. Research suggests that if cost control is the core business strategy, flexible HR practices are ineffective (Hoque, 1999). Firms are now attempting to replicate the Japanese style of HRM practices which is successfully responding to the crisis of mass production (Winfield, 1994). The Toyota unit at Derby has a new model workforce committed to corporate goals. Its HRM policies and practices have resulted in a totally committed and cooperative workforce. Assembly workers are expected to sort out the production problems themselves. The workers are seen as intellectual, problem-solving beings rather than being employed as entities to be controlled. This philosophy is an extension of Fordism. Its central tenet of Just-in-time is based on the Fordist principle of chronicity. Both are based on the fact that if there are wild fluctuations in the flow of work, the entire system will break down. During the recruitment process they give considerable weight to personality factors such as group compliance, low ego needs and high tolerance for frustration. Toyota’s HRM practices tend to maximize integration, employee commitment, flexibility and adaptability and quality of working life. Thus even in the era of mass production, Toyota is able to maintain a committed workforce. Emotional Intelligence in HRM The context in which people have to be managed has changed due to global competition, new technology, new methods of working and organizing work (Armstrong, 2000). ‘Emotional intelligence’ (EI) is considered to be a new concept pointing towards a new means of controlling workers. Organizations today operate across national boundaries and trade in different parts of the globe. The effectiveness of cross-cultural online communication is critical to business today. Online communication can foster information and knowledge based culture but it can also destroy individual or group performance if it is poorly planned, developed, and implemented by an organization (Fujimoto et al., 2007). EI in the individuals can give them the right perception and guidance. It is often argued that managers successful in the domestic operations are not successful in the international arena as the competencies required differ. These competencies include personality traits, behaviors, skills, values and knowledge. Such global leaders should possess global emotional intelligence according to Kets de Vries and Florent-Treacy (2002) although according to Goleman (pls state source) emotional intelligence is observed when a person demonstrates the competencies that constitute self-awareness, self-management, social awareness and social skills at appropriate times and ways in sufficient frequency to be effective in the situation (cited by Jokinen, 2006). Thus global leadership competency necessitates a high degree of emotional intelligence. Such personal attributes help the global manager to determine how and when the knowledge and skills should be applied. Apart from the cognitive skills, a global leader must have the emotional resilience or the ability to maintain confidence and objectivity under difficult circumstances. Whitbread Pub’s Restaurant Division was in the transition stage and needed people who were oriented to and believed in people and teams. It was felt that EI could contribute to developing those skills and abilities (Orme & Longhorn, 2003). Various managers and leaders were already aware of EI and expressed their opinions. Their opinions included that EI is beneficial both for the employee and the organization. Employees use it to develop themselves while the organization uses it to enhance performance through recruitment and development. As far as learning and development is concerned, EI enables the firm to assess the strength of its employees and utilize their talents accordingly. In the service industry, 60 to 80% of interaction with guests is based on emotion. Since EI drives the behavior, it is essential to recruit good quality and then train on the technical issues. EI hence is a tool to recruit good quality. Such deep reflection by the managers made it easier to create a successful intervention at Whitbread. Performance-related-pay in HR Performance-related-Pay (PRP) has become an important toolkit for optimizing human resources in the face of competition. PRP influences not just the economic performance but also impacts the issue of pay inequality. An organization needs to measure performance because it helps to determine if a function is productive and where to focus energies on (Hendry, Woodward, Bradley & Perkins, 2000). They must know where to use the quantifiable and data effectively thereby justifying the need for additional resources. One of the reasons for introduction of PRP is employees’ motivation but organizations do not always meet with success (Lewis, 1998). Incentives depend on the business cycle stage of the firm. The reward system is based on the assumption to attract, motivate and retain people and PRP attempts to restructure these assumptions. Money linked to performance targets has varied opinion – some feel it is the sole motivator while others feel that motivation is purely intrinsic and money should never be linked to it (Hendry et al.,). The support of senior management is essential in determining the PRP. At the same time, pressure can result in disastrous results. Snow Brand Milk was the largest producer of milk and dairy products by 2000 in Japan. The brand was so powerful that consumers in blind taste test preferred the competitor but when they saw the Snow Brand, they wanted nothing else. As deregulation increased competition, even Snow Brand had to bring down prices as private brands were found on the shelves. The pressure to cut costs was paramount and the factory units resorted to unethical and unhealthy production conditions until a disaster struck affecting 13000 people. One of the three primary reasons was attributed to pressure for results which forced the plant managers to resort to unethical and illegal actions (Finkelstein, 2005). In the manufacturing sector in the UK, PRP was the standard method of structuring workers’ compensation. Although it is on the decline in the manufacturing sector, it is steadily on the rise in the service sector. Research suggests that PRP is associated with higher intra-workplace inequality. This in turn is negatively associated with organizational performance but Belfield and Marsden (2003) contend that any negative effect is overpowered by the positive incentive effect provided by the pay structure. Managers are aware that there cannot be a perfect system in place to implement PRP. They have to take into account the pay system’s interaction with workplace specific factors. Managers too realize that this is a complex issue and hence resort to trial and error method to determine the best possible system. PRP in the British Public Services has failed to motivate the public employees in Britain and its operation had been divisive (Marsden, 2004). Performance has to be determined in terms of the output in customer service. This requires working more intensively when necessary to meet the customer’s needs like the patients in a hospital or the taxpayer. Incentives and goal-setting in PRP still play a vital role but motivation is only their secondary function. Goal-setting theory places less emphasis on rewards and stresses on the motivating power of defining appropriate work goals. This also results in greater employee commitment. Work force management is an important part of SHRM. Work force planning determines the number of workers, the skills necessary, foresees the requirements well in advance and starts the process of recruitments accordingly. Future employment patterns can be predicted. In UK too, all these practices have been found although the trend is yet to pick up. Conclusion Thus SHRM involves looking into all aspects of HR rather than just traditional recruitment, payrolls and abiding by laws and regulations. Every process has been made strategic to align with the company’s objectives. Even though recruitment can be done online, the process is more comprehensive than before. Certain functions of HR are outsourced which are routine in nature and do not require core strategic decisions. This leads to savings in cost as well. Due to globalization and cross cultural employment, flexible HR practices have become necessary. People today want flexibility in the hours of work, the time of the day and even the work they wish to execute. Emotional Intelligence is extensively being used during recruitment so that the right person gets the right job and both the employer and employee benefit equally. Line managers now take over a lot of HR functions as they are closest to the subordinates although in many cases the line managers do lack the expertise. People are now recognized as human capital and valuable resources. Hence strategic management of human resources is as important as finance and technology. Investment in human capital is necessary to achieve the organizational goals. This requires training and development of the right skills and in the right people. Hence every aspect of HR functions – which implies, selection, recruitment, retention, compensation, performance-related-pay, global placements, assigning the right job – all have to be very strategically planned and executed. References: Armstrong, M., (2000), The name has changed but has the game remained the same? Employee Relations, Vol. 22 No. 6, 2000, pp. 576-593. 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