Human Resources: Carrying Out Organizational Activities - Research Paper Example

HUMAN RESOURCE MANAGEMENT In the current era, human capital is considered as the linchpin of the organizations. Companies are investing a huge sum of money on their intellectual powers because they have become acquainted with the fact that no organization can persist in such stiff competition without harnessing their human assets in the best possible way. Despite a shift in trends of human resource realm, yet the practitioners are oblivious of the fundamental tenets behind the management of human capital. They are in desperate quest for finding methods and procedures that can harvest human skills and abilities in the most efficient manner. More importantly, they are caught in serious dilemma that whether HR should be used as a supportive function or it should remain as a building block of the organization. The term “Human resource management” is broad in its scope and there is no unique definition attached to this term. According to Torrington and Hall (2008), HRM can be regarded as ‘a distinctive philosophy towards carrying out people-oriented organisational activities.’ This definition differs from the traditional style of human resource management across various dimensions. The two key terms in this definition, “distinctive philosophy” and “people-oriented organizational activities” are the focus of this paper. We will expound the above definition and discuss the implications associated with it. “Distinctive philosophy” connotes that the management views human resource as a distinct function. It will be given all the rights and privileges of a separate function. In the traditional environment we find that HRM was interchanged with the word “personnel management” which implied the dealing of payroll administration, complying with the local regulations and handling related tasks. However, in the contemporary environment, HRM has to do a lot more than “personnel management”. The distinctive philosophy warrants that an organization should not only perform administrative tasks but it should also add the notion of strategic assistance to its human capital. The term “strategic human resource management” can be defined as “the pattern of planned human resource deployments and activities intended to enable an organization achieve its goals and objectives (Snell and Dean 1992)”. For instance, we find nowadays there is a trend in moving towards implementing Just-in-Time inventory management systems, Quality control systems, and using Six- sigma approach to enhance the quality of the products and minimize the costs. Since all these methods are regarded as an essential part of the organizational strategy therefore they are given extra importance by the organizations. All these plans and quality improving approaches are executed by the human capital. Hence, in these cases “Strategic human resource management” entails assessing the skill of current employees whether they can carry out these plans or not. If there is a gap between the required skills and available skills than HR management needs to bridge the gap between desired and available skills. So they can engage in HR practices such as selection or they can train their internal employees to develop these skills. The human resource can be used as a strategic weapon for creating a competitive advantage. Strategists have discovered that quality products or superior physical locations are not sufficient to create an upper hand over the competitors. Since these facilities or products can be duplicated and emulated therefore they are not considered as a proper source of competitive advantage. To create a successful competitive advantage, companies need to heavily invest in human capital and thus they can derive an advantage from their skills, logistics capabilities, knowledge bases, and other unique strengths which the competitors can not imitate in their businesses. In addition to that, strategists also believe that the achievement of competitive advantage is contingent upon the firm’s ability to make use of its existing knowledge and as well as its ability to generate new knowledge more effectively and efficiently than its rivals. Lado & Wilson (1994) showed that human resource can be an indispensable tool that can contribute to the mobilization and utilization of knowledge in various ways. The strategic view of human resource demands that the professionals in this field should acquire four different competencies in order to cope with the current environment. The first is “business competence” which implies that the HR professionals should completely know their business with a special understanding of the strengths and weaknesses associated with it. Secondly, they need “professional technical knowledge” which is related to special areas of Human resource such as compensation, staffing, rewards & recognition, performance appraisal, selection techniques, training delivery methods etc. While the knowledge of these methods is essential, these professionals should also evaluate these methods with respect to their advantages and disadvantages, and than should select only those methods that provide value to the organization. Third, they must be proficient in “management of change process” as an organization always experiences some change during its life time. For instance, an HR professional might be asked to implement a new training program or a new compensation plan. Within the organization, some people may deter the implementation of plan as it may be against their personal interest but as a whole the plan can be favourable for the organization. These changes produce resentment, disputes, and confusion within the organizational culture which should be handled in the most convenient way. A survey conducted in fortune 500 companies found that 87% of the companies had the function of “change management” as a part of their HR department (R. Schuler and J. Walker, 1990). Finally, these people must possess “integration competence” which implies their ability to integrate the other three competencies in order to enhance company’s worth. This competency demands that the HR professionals should be able to keep all the other three competencies in mind while making decisions. Therefore the approach should be general in nature and it should make a trade-off between all the other three dimensions. Continental Airlines, a leading airline company in the globe, was using HRM as a strategic tool to plan and implement a profound turnaround in its company. For the years, the Airline was bogged down by a thorny problem of low customer satisfaction and financial instability. To get to grips with these problems, the company appointed a CEO Gordon Bethune to formulate a new strategy. The new strategy devised by the appointed CEO comprised of four spectacular elements; Fly to win (to be in the top quartile of the industry), Fund the future (To eradicate the financial instability and reduce the burden of debt), Make reliability a reality (To improve the quality of service), and Working Together (Building a corporate culture which fosters strong relationship between employees and make employees feel contented). Mr. Bethune charged Ken Carrig as a vice president of Human resource department. The HR’s president formulated a plan to achieve corporate strategy. He developed a new pay system which was linked to performance of the employees. So this produced a cost advantage for the organization but at the same time it also rewarded the employees who performed well. The base pay was lower as compared to the other organizations operating in the industry, but employees were also eligible for bonuses and profit-sharing schemes. If Continental airline ranked among the top three airlines for on-time arrival in any month than each employee was entitled to receive a cheque of $65. Such plans made the employees ruminate and they started to come up with inspiring ideas regarding how to improve on-time performance. As soon as the quality dimension was rehabilitated, customers began returning to the improved Continental (Carrig 1997). Alan Speaker (2000) developed a conceptual typology which emphasizes on the strategic role of human resource activities where he has clearly differentiated between strategic and operational activities. Figure 1: (Strategic Typology of Human Resource Activities) The above model classifies the quadrants on the basis of two dimensions; Type of HR activity and Strategic Value of activity. The type of activities represent whether it is transactional in nature (Administrative tasks) or it is relationship oriented. The relationship oriented tasks require a high level of interpersonal skills, political knowledge and sensitivity. On the other hand, value of activity shows the importance of activity in the organization as regard to whether it serves a high or low strategic purpose. The prevailing wisdom of strategic human resource management affirms that a function can make its greatest contribution when it is relationship-oriented and it serves a high strategic purpose. The executives belonging to HR department are in a desperate endeavour to shift their department in this quadrant. They believe that this quadrant is directly related to the firm’s ability to implement its competitive strategy. For instance, if the firm is having a poor relationship with their labour union than this will surely result in restrictive work rules and the organization shall not be able to make flexible work arrangements hence they will face overwhelming difficulty in implementing a low cost strategy. Since these activities are of cardinal importance for the organization therefore it is not feasible to outsource these activities as they provide a competitive advantage in terms of cost and differentiation. All the major planning related HR activities fall into the transactional/high strategic value quadrant. These activities relate to the firm’s ability to implement future strategies. For example, staffing planning is done to provide an adequate supply of qualified individuals to meet the future requirements and fill the jobs in an organization. The third quadrant transactional/low strategic value is not considered to be of major importance in the sight of executives however for the employees it assumes a high importance since they are usually engulfed in these activities and they become very concerned when their pay-checks are not in right amount. The final quadrant relationship/low strategic value activities are mainly of trust and relationship building with little strategic value. For instance, good corporate citizenship can be a good relationship oriented program but it does not greatly contribute to the accomplishment of organizational strategy. The second aspect of Torrington and Hall’s HR definition deals with “people-oriented organizational activities” which implies that HR treats each employee as an individual and it offers each of them services which are tailored to the individual needs. This aspect demands that activities related to Human resource must be compatible with the mindset of employees. Therefore HR department focuses to build healthy relationship with the internal customers with the aid of people-oriented organizational activities. People-oriented organizational activities are developed to nurture an atmosphere of trust between employees and management. Both of the parties aim to display a genuine commitment which is a part of their psychological contract. A psychological contract refers to unwritten expectations that employees and employers have about the nature of their work relationships. It comprises of tangible items such as pay, benefits, attendance & employee productivity and intangible items like employee commitment, fairness and job security. So as per the definition of Torrington and Hall, the psychological contract should not demonstrate only compliance with working conditions but rather it should be a complete dedication from both the parties. It is imperative for people-oriented organizations to reward the employees whom show genuine commitment towards achieving organizational goals. Without proper remuneration it is impossible that an employee feels motivated and thus he may withdraw from his responsibility. Compensation and Benefits management is one of the most important aspects of HR administration and it is important for the management to pay meticulous attention to this issue. The composition of pay and benefits has a profound influence on employee attitude and behaviour. There are various benefit plans being provided by the organization these days which mainly consist of Retirement plans, Pension plans, Health care benefits, Educational assistance, Social and Recreational benefits, and Paid Time off programs. A new emerging concept of Flexible benefit plan can be catered to the individual needs of the employees. This plan encompasses of a variety of “dishes,” or benefits, thus it allows each individual to select a blend of benefits within some overall limits. By rewarding appropriate behaviour, an organization can align the interest of employees with its goals and objectives. Employees are concerned about compensation and benefits policies as they affect their standard of living. More importantly it has been found that retention of employees is inextricably linked with the level of pay given by the organization. However, keeping in mind all these considerations, yet companies should minimize their total costs related to pay and benefits as these costs are almost half of the organizational expenditure. The three major airlines in the global industry Meseba and Express Airlines have developed employee recognition programmes that encourage and appreciate well-performing employees. After implementing these people-oriented plans they have experienced dramatic results in terms of performance. They have minimized their disputes with labour unions and improved the employee retention rate. Meseba has increased its retention rate to 85% for the 319 employees who received awards through the Spectrum Awards programme that was initiated in 1996. In addition to that, Express Airlines also organizes social events such as picnics, alfresco meals and ice-cream breaks where the President hands out ice cream to ramp workers. Furthermore, Safety awards are also given to employees who come up with unique ideas to “propagate safety” once a month (Commuter/Regional Airlines News, 2001). Flexible scheduling is also one of the new key trends in the realm of Human resource management. In the traditional environment we find that employees were required to work 5 days a week with 8 hours long working time. Many of the employees complained that they were not able to devote proper time to their family life. Hence, now organizations have adopted a new concept of flexitime which caters to the need of every individual employee. Under this concept, each employee works a set number of hours per day but with different starting and ending times. Generally, use of flexitime concept has resulted in higher employee morale and reduced absenteeism. The success of distinctive philosophy and people-oriented approach is only possible if it is armed with top management support from the initiation. The backing of top management is required as issues pop up during changes in job and organizational structure. During the change management process we know that employee resentment and anxieties climb to their peak therefore these employees at this juncture need to be properly managed and strongly motivated. I personally deduce from the above findings that all the human resource activities need to be utilized as a strategic tool to achieve corporate objectives. Furthermore, without the top management’s support and commitment, the above definition of Torrington & Hall remains futile. BIBLIOGRAPHY Carrig, K. 1997, ‘Reshaping Human Resources for the Next Century: Lessons from a High-Flying Airline’ Human Resource Management, Vol. 36, Issue 2, pp. 277–89 Schuler, R. and Walker, J. 1990, ‘Human Resources Strategy: Focusing on Issues and Actions’ Organizational Dynamics, Summer, pp. 5–19. Snell, S. and Dean, J. 1992, ‘Integrated Manufacturing and Human Resource Management: A Human Capital Perspective’, Academy of Management Journal, Vol. 35, pp. 467–504. Speaker, Alan W. 2000, Synhrgy HR Technologies, Alpharetta, GA, Torrington, D., Hall, L. & Taylor, S. 2008, Human Resource Management, 7th ed., Financial Times Prentice Hall, Harlow Wilson, M. C. & Lado, A. A. 1994, ‘Human resource systems and sustained competitive advantage: A competency-based perspective’, Academy of Management Review, Vol. 19, pp. 699-724 ‘Management Needs to Focus on Effective Employee Rewards’ 2001, Commuter/Regional Airline News, June 11, pp. 19-23 Read More