Strategic Integration with HRM - Assignment Example

 Strategic Integration with HRM Abstract Strategic human resource management was identified as the pathway for better performance and a podium to gain competitive advantage in the market a few decades ago. In this view literature based on theoretical concepts proposes integration of corporate business strategy into human resource management practices. However, many complex repercussions of such integration have been evidenced in various organizations affecting different functions, internally and externally. This paper explores this side of strategic integration with HRM, in words of Karen Legge (1995) with reference to situations and examples. Introduction Strategic human resource management practices have enhanced company’s growth and profitability through its integration with business purposes. This field has received much attention in the recent years exclusively in the areas of the traditional HRM, organizational behavior and industrial relations. The concept of Strategic Human Resource Management has been introduced to address many of limitations of the conventional HRM practices, and works on the philosophy of integration of HR strategy with business strategy. Achieving strategic integration is one of the policies described in the Harvard model by David Guest (1987, 1989a, 1989b, 1991) and it is the ability of the organization to integrate HRM issues into its strategic plans, ensure that the various aspects of HRM cohere, and provide for the line managers to incorporate an HRM prospective into their decision making (Armstrong, M 2000; p 13). For this, Karen Legge (1989) explains that integration of human resource policies with strategic business planning can help in bringing about appropriate organizational change (qtd. by Armstrong, M & Baron, A 2002; p.12). A different perspective of this was explained later in 1995 by Karen Legge distinguishing strategic human resource management and human resource strategy, with the former being more efficient and effective in achieving organizational goals. The difference between strategic HRM and human resource strategy comes from the intentions or the goals the organization wants to arrive at. For instance, the long-term people issues that the organization anticipates and puts in place suitable plans constitute strategic HRM whereas the HR strategies are the plans that need to be developed and/or changed like the suitable people required for the job, their training, reward and recognition programs for their motivation, teamwork and stable employee relation programs etc. According to this, strategic HRM decisions are built into the strategic plan while HR strategies are derived from it. Strategic planning and management aspects have been embraced by organizations to improve their performance in terms of thinking, acting, and learning (Bryson, 2004; p.xiii). To this effect, strategic planning and management aim to incorporate vital elements such as clear goals, adequate resources, enthusiasm and commitment. Institutionalization of management practices in specific preplanned manner is strategic management. Thus, strategic management is the process by which an organization establishes its objectives, formulates actions designed to achieve these objectives in the desired timescale, implements the actions and assesses progress and results (Thompson, J.L.1993; p.xiv). Thompson further elaborates that strategic management also involves individual management functions, seeking to integrate them so that managers in one part of the business consider the implications of their decisions for other activities and mangers. Ideally, strategic management functions in the achievement of long-term goals of an organization. Integration of strategy and HRM Integration of corporate strategy with human resource management is a complex process. Once the strategy has been formulated, the HRM specialist will start designing policies and practices that will help implement the strategies. If the HRM function does not participate in the strategy formulation, this process becomes all the more difficult. It may also require revision as chances of omitting certain key elements may be possible, due to disconnect in strategy communication. Also, the policies formulated have to be unbiased and balanced as they can impact any function of the organization. This integration should consider human, financial and technological aspects of the organization. Theoretically, human resource strategies combine all people management activities into an organized and integrated program to meet the strategic objectives of an organization. It is claimed also that HRM is different from personnel management primarily because of its supposed emphasis on the link between people and policies and overall business strategy. Strategies are the connecting blocks between HRM and personnel management to bring about integration between strategy and HRM. Traditionally, personnel management focused on the short-term operational matters only, with little interest in the long-term goal realization, whether organizational or for people. On the contrary, HRM focuses on the long-term organizational goals, emphasizing competitiveness and efficiency of the organization through people policies and overall business strategy. Thus, people policies are made in line with the organizational strategic goals. Implications of strategic HRM: Strategic HRM practices provide a better knowledge of organizational goals and the reasons for certain policies and practices laid. People’s goals are better aligned to the organizational goals. Strategic HRM practices foster leadership even among those who do not directly connect with people. Strategies in HRM are more people-centric and can be achieved only through people (Andersen, K.K et al., 2005; p.2). Thus, motivational factor plays a vital role in achieving organizational goals. Hence, those leaders involved in the strategic planning process also contribute their bit of leadership in guiding people towards their own and organizational goals. Strategic approach to HRM provides the opportunity to lead in establishing a vision for change and gathering the support required to lead the change. Strategy and HRM: Price describes strategy as the means by which an organization seeks to meet its objectives. Strategy is a decision taken well in advance to meet the long-term goals of the organization (2007; p.256). Strategic HRM focuses on widespread aspects of organization such as organizational culture, individual career development, having right people for the right job, etc. Overall, strategic HRM is meant to achieve sustainability in terms of performance and competitiveness at the organizational level. To achieve this, four different perspectives have been described by Mabey, Salaman and Storey (1998). SHRM entails complex activities that are beyond the responsibilities of personnel or HRM managers and extend to all aspects of managing people. This means, it includes the social and economic context of management of internal and external environments impacting the organization and its people. It also includes impact of strategies on business performance, and thus emphasizes on measurement of performance. Management styles are more defined and are according to the existing people and goals. Development of organizational capability is encompassed through strategic knowledge management. Strategic HRM is often measured by the integration of HR function in the strategic management process, the development of HR practices to line managers, and the impact of these practices on firm performance. Issues with strategy and HRM: Strategy formulation has received high importance from management theorists in the recent times. Strategy, according to these management theorists, encompasses high-level decisions connected with big agenda. Strategy helps formation of analytical and conceptual framework for the business and operations from a far end. Strategic management, as mentioned earlier, encompasses strategic thinking, planning, and learning. Thus, only one of these cannot bring the desired results. Strategic HRM usually entails long-term goal achievement and is linked to the interests of senior management team because strategic planning, decision making and implementation are usually executed at that level. Accomplishing successful implementation of these strategies requires knowledge of the wider business function at the lower management cadre, and they should be able to relate the strategic decisions to their job responsibilities. This process can entail differing interests and outlooks of life and can lead to a serious failure of communication. Also, in the absence of strategically planned change, these strategic decisions may get disturbed due to the historic role of independent actions that existed between the staff and management. Also, integration of strategy into HRM can be difficult for the personnel specialists who lack strategic skills needed to contribute to their organization’s effectiveness. On these lines, Karen Legge argues that ‘evidence shows that the integration of strategy and HRM is at best a lengthy, complex and iterative process and, at worst, that there is little evidence to suggest that widespread integration is achieved” (1995, p.124). This is evident from the fact that strategic HRM strongly advocates manpower planning as one of the strategies; however, it fails to consider environmental trends and is predominantly short term in nature (Brunstein, I 1995; p.147). This aspect does not ‘fit’ into the strategic management perspective. Many organizations have adopted strategic HRM systems; however, a great deal of work is required to develop a truly strategic and internally consistent process of managing human resources, as evidenced in many Irish organizations (Brunstein, I 1995; p.148). Another example with regards to strategy formulation and issues related to its implementation can be seen from Waitrose, an upmarket supermarket in the UK; their strategy is ‘to dominate on product and differentiate on service’ (Storey, J 2007; p.63). This business strategy points to providing the best product (food) and high quality service. Best food entails employing the best suppliers in the market. This strategy, from a quality perspective, also means premium price corresponding to the quality. Both these components of the business require highly knowledgeable and trained staff; high-quality raw materials; and good market research. Thus, the three criteria of importance, significant commitment of resources, and not easily reversible aspects have to be met. To achieve these, huge investment would be required in terms of infrastructure, supplier base, and recruitment of highly qualified staff with handsome pay package. Incorporation of these requirements to run the business may somewhere alter achievement of the strategic goal, as the strategy focuses on high service at premium prices. In the governmental healthcare sector which aims to achieve international goals, human resource development forms the deciding factor (Wyss, K; 2003). To achieve these goals, personnel with specific social, ethnic, and cultural characteristics would be required. At the services level, appropriate team bonding and interaction needs to be established. Healthcare personnel must be well trained and appropriate responsibilities should be assigned. Physical working environment plays a significant role. The personnel should be paid appropriately and monetary incentive schemes would be required to motivate them. Appropriate retention policies should be implemented. Salaries in the governmental healthcare sectors are comparatively low. Thus, though integration of strategy into HRM is seen, it is not widespread to achieve the targeted strategic goals. Evidences have also proven that unidirectional strategic integration with HRM has resulted in complex and undesirable outcomes (Schuler, R.S & Jackson, S.E 1999;p. 30). Integration of strategy and HRM involves various dimensions, broadly categorized into two: integration of HRM with organizational strategies that can be achieved through direct participation of HR heads in the decision making process. Secondly, strategic orientation of HR functions and operational areas through indirect involvement of HR personnel in goal-oriented organizational decision. Another method of achieving the integration is through change of organizational expectations, for example, norms, rules or programs; this would require implementation of specific HR policies and practices (Brewster, C & Larsen, H.H 2000; p.45). Supporting Karen Legge’s statement, Brewster and Larsen (2000; p.48) point out that there is little research data that can provide evidence of the integration of HRM specialists into corporate strategy making in an informal view of strategy. In the area of direct participation of HR specialists, evidences suggest that HR specialists’ involvement in key decision making is minimal in most of the European companies (p.49). Other evidences also suggest that in some countries like Sweden and Finland, matters related to HRM either receives highest priority or no absolutely no importance at all. In addition, various companies in the European Union have disproportionate strategies and mission statements, with little or no relevance to personnel strategies. Translating strategy into action requires two more components other than the strategic plan and implementation. These two components are power politics and culture which can be most effectively driven through HRM. Also, a substantial difference was found by Khilji and Wang (2006) between the HRM strategies formulated and those implemented. However, consistent implementation of these strategies could lead to higher employee satisfaction and better organizational performance (Price, A. 2007; p. 273). This clearly indicates a gap in strategy implementation and existence of hurdles, which were left unseen during strategy planning; this could be either due to inappropriate integration of business strategy with HRM or absolute lack of consideration of HRM aspect during planning. A widespread integration of HRM and strategy are required to achieve management objectives. Three spheres of achievement have been generalized by David Guest (1987). Firstly, integration of HRM issues in an organization’s strategic plans and securing the acceptance and inclusion of HRM view in the decisions of line managers. The HRM policies must be consistent with particular corporate strategy. For instance, HRM policies in relation to recruitment, appraisal, compensation, training, etc differ according to chosen business strategy. For example, a strategy of innovation may require pay systems less influenced by market rates but which rewards creativity, and the pay rates would even be low so long as there are ways of making up the earning package. Similarly, cost reduction strategy would have income packages depending upon the market levels. Training and development would have less importance in this strategy than in innovation-linked objective. Such integration can be achieved only with the inclusion of HRM view in decisions and practices of the strategy making teams. Secondly, HRM will have to ensure commitment through strong culture at the organizational level that can be achieved by uniting employees through a shared set of values based on both employee and organizational interests (Ohmae, K 1995; p.81). Thirdly, HRM needs to be flexible and adaptable to the changes imminent in the globalizing world. Practices such as training and multi-skilling, reorganization of work to broaden job classification should be adopted. HRM policies and practices to recruit, develop and retain quality staff, formulate and implement agreed performance goals and measures should be designed (De’Silva, S 1997; p.28) Another perspective of widespread integration of HRM with corporate strategy, described by Hendry (1995; p.64) lies in the ability to derive the desired results from integrated policies, systems and practices. This, Boxall (1996; p.60) relates to conceptual difficulties associated with efforts to cover both sides of strategy and HRM. Evidences reveal that neither the strategic nor the descriptive model provide much insight into how HRM policy and practice translates into high performance or achievement of goals. This would require the right fit of external and internal elements of business. Meyer (1976) has explained that integration of strategy with HRM was realized as early as 1970s in the United States. This further emerged as new era, referred to as the strategic human resource management. However, the process of integration of corporate strategic planning with HRM in various horizontal and vertical functions faced many challenges. Productivity challenges faced in lieu of global markets and competition posed challenge as the competitive advantage was closely linked with human resource management. Secondly, the widespread downsizing, restructuring and redesigning of organizations resulting in stiff hierarchy and control of employees. Thirdly, human resource strategies to manage highly diverse workforce of the future was a challenge as the corporate strategy did not encompass the aspect of strategic change (Ferris, G.R, Rosen, S.D & Barnum, D.T 1995; p.31). In conclusion, Karen Legge’s (1995) argument based on the complexity and extent of integration of corporate strategy with human resource management practices stands strong, with very less evidence or no widespread evidence supporting the philosophy of strategic human resource management. In addition, literature on integration of strategy and HRM suggests very little agreement on aspect of operationalizing strategy into theory of HRM. Thus, HRM and the strategic ‘fit’ of HRM are two different entities; achieving the latter requires a more sophisticated approach. References Books Armstrong, M. (2000) Strategic Human Resource Management: A Guide to Action. Edition 2. Published by Kogan Page Publishers. http://books.google.co.in/books?id=qMmc_89e-l4C&printsec=frontcover&dq=Strategic+Human+REsourse+management#PPA13,M1 Armstrong, M. Strategic HRM: the key to improved business performance. Published by CIPD Publishing, 2002. http://books.google.co.in/books?id=zXG_lJ8BrMwC&pg=PA8&lpg=PA8&dq=Matching+model+Strategic+HRM&source=bl&ots=GLPMIu2dJ0&sig=K2SCIQ8HCy4f96LyUv9Y21yRTmo&hl=en&ei=u7H9SZaFE4qCkQWmwf2DBQ&sa=X&oi=book_result&ct=result&resnum=3#PPA49,M1 Brewster, C and Larsen, H.H. (2000) Human resource management in Northern Europe: trends, dilemmas, and strategy. Published by Wiley-Blackwell. http://books.google.co.in/books?id=zZ5jHgJDny0C&pg=PA45&lpg=PA45&dq=strategy+integration+with+HRM&source=bl&ots=wUqiJEJ6Xt&sig=A9jlM-tyt7bgMHOK0TtuTCsA1m0&hl=en&ei=oYpUSrD-C4TU7AP15JnYBw&sa=X&oi=book_result&ct=result&resnum=4 Bryson, J. M. (2004). Strategic planning for public and nonprofit organizations: a guide to strengthening and sustaining organizational achievement. Edition 3. Published by John Wiley and Sons. http://books.google.co.in/books?id=gJxu_4FVieMC&pg=PA220&dq=BRYSON+2004#PPA8,M1 Brunstein, I. (1995). Human resource management in Western Europe. Published by Walter de Gruyter. http://books.google.co.in/books?id=9KqF1lGIsYsC&pg=PA150&dq=strategic+integration+HRM Ferris, G.R, Rosen, S.D and Barnum, D.T. (1995). Handbook of human resource management. Wiley-Blackwell Publishers. http://books.google.co.in/books?id=yoserOqCGA0C&pg=PA31&lpg=PA31&dq=widespread+integration+of+strategy+and+HRM&source=bl&ots=kD0OQj08c5&sig=ZTmMIqDPxO3QQ3IywEQ95WG3jjc&hl=en&ei=g8lVSvH1IKTk6gPUjI3YDw&sa=X&oi=book_result&ct=result&resnum=1 Hendry, C. (1995). Human resource management: a strategic approach to employment. Published by Butterworth-Heinemann. http://books.google.co.in/books?id=PuZpdDgSne0C&pg=PA64&dq=conclusion+integration+of+strategy+and+HRM Legge, K. (1995). Human Resource Management: Rhetorics and Realities. Macmillan Business Publishers. http://books.google.co.in/books?id=VndIHQAACAAJ&dq=Human+resource+management+Rhetorics+and+realities&source=gbs_book_other_versions_r&cad=3 Mabey, C, Salaman, G and Storey, J. (1998). Human resource management: a strategic introduction. Published by Wiley-Blackwell. http://books.google.co.in/books?id=bnAiaXdzbRwC&pg=PA37&lpg=PA37&dq=widespread+integration+of+strategy+and+HRM&source=bl&ots=Nb_bz2R6qz&sig=1hu8nwHiDGD9HAfTRKksf13AQ_8&hl=en&ei=g8lVSvH1IKTk6gPUjI3YDw&sa=X&oi=book_result&ct=result&resnum=9 Ohmae, K. (1995). The New era of Eurocapitalism. In The evolving global economy: making sense of the new world order. Published by Harvard Business School. http://books.google.co.in/books?id=GDS7AAAAIAAJ&q=The+evolving+global+economy+the+new+era+of+eurocapitalism&dq=The+evolving+global+economy+the+new+era+of+eurocapitalism Price, A. (2007). Human Resource Management in a Business Context. Edition 3. Published by Cengage Learning EMEA. http://books.google.co.in/books?id=Gdp4FcmqXqwC&pg=PA253&lpg=PA253&dq=integration+of+strategy+and+HRM&source=bl&ots=PyNEHCccCp&sig=VpWgmH2QIHmFBYzDBqEUNMpS7t0&hl=en&ei=5vJSSqr8B4fq6APZm-nEBw&sa=X&oi=book_result&ct=result&resnum=9 Schuler, R.S and Jackson, S.E. (1999) Strategic human resource management. Published by Wiley-Blackwell. http://books.google.co.in/books?id=q6bqmL2iGmcC&pg=PA156&dq=Human+resource+management+Rhetorics+and+realities&lr= Storey, J. (2007) Human Resource Management: a critical text. Edition 3. Published by Cengage Learning EMEA. http://books.google.co.in/books?id=TmsExMtSWB8C&pg=PA57&dq=issues+with+Strategic+HRM Thompson, J.L. (1993). Strategic management: awareness and change. Edition 2. Taylor & Francis. http://books.google.co.in/books?id=ecIOAAAAQAAJ&pg=PA168&lpg=PA168&dq=Times+100+companies+strategic+management&source=bl&ots=it4Q7zlKxC&sig=jSgW-lPIo6MpPz_BhG4ix3pwaRo&hl=en&ei=vflRSqrJMoXq7AOatYiRBA&sa=X&oi=book_result&ct=result&resnum=2 Journals Andersen, K.K. et al., (2005). The impact of strategic and development of HR practices on firm performance: some evidence from Australia. Department of Management working paper series. ISSN 1327-5216. http://www.buseco.monash.edu.au/mgt/research/working-papers/2005/wp53-05.pdf Boxall, P. (1996). The strategic HRM Debate and the Resource-based view of the Firm. Human Resource Management Journal. Vol. 6 No.3. pp. 59-75. De’Silva, S. (1997). The changing focus of industrial relations and Human Resource Management. International Labour Organization. ACT/EMP Publications. http://www.ilo.org/public/english/dialogue/actemp/downloads/publications/srsirhrm.pdf Wyss, K.(2004) An approach to classifying human resources constraints to attaining health- related Millennium Development Goals. Human Resources for Health. Vol. 2:11. DOI:10.1186/1478-4491-2-11. http://www.pubmedcentral.nih.gov/picrender.fcgi?artid=471573&blobtype=pdf Read More