Strategic Human Resource Management in Organizations - Term Paper Example

 Strategic Human Resource Management in Organizations Abstract Strategic human resource management is a process in which efficient management of human resources would be facilitated with an overall objective of enhancing organizational efficiency (Price, 2004). The enhancement of productivity of any organization would be facilitated through utilization of human resources effectively and strategically. With the changes in the world in the form of globalization and liberalization, the element of competition increased tremendously and the business enterprises have to compete with global pace. There have been several instances where the firms which enjoyed superior status in the earlier period had to vanish due to the element of competition resulted from the phenomenon of globalization. This requires them to formulate strategic human resource management strategies so that they can come up with innovative products that compete well with other market players. However, this requires the inculcation of team work, dynamic leadership, structure, style, skill upgradation and other important parameters like creativity and ecological consciousness. Team work is essential for bringing more accuracy of the final product and in infusing the feeling of coherence and attachment. Dynamic leadership assists in providing able guidance and efficient monitoring of the key operations of any organization. Moreover, it results in continuous motivation of the employees. Ideal structure and upgradation of advanced skills also aim in enhancing the overall efficiency of the organization. The strategic business management helps in infusing all these elements in to the organizational structure and strategies and hence contributes tremendously to organizational productivity. Strategic business management is a complex process which is continuous in nature and it gets evolved constantly and hence increases the industrial output significantly. Moreover, the use of upward communication processes facilitate two way communication process as part of strategic human resource management. Seven key factors play vital role in enhancing the organizational efficiency according to the McKinsey 7S frame work which explains the positive role of strategic business management. Introduction Globalization has brought significant changes in socio-economic scenario of all the developing and developed nations of the world. It has brought both positive and negative changes together. It has led to the infusion of high level of competition among the enterprises and they have to come up with some innovative products and strategies to survive in the market. This has created a remarkable space for the strategic human resource management to operate and aid the enterprises in emerging as winner in global competition. Strategic human resource management is defined as a complex process which is continuous in nature and it gets evolved constantly (Torrington et al., 2008). It is also dynamic in nature and hence its meaning is interpreted differently by various people depending upon the situation and location. Strategic HRM can also be interpreted as a general approach for effective management of human resources in accordance with the objectives of the organization for future direction (Storey, 2001). It should serve the purpose of both short term and long term objectives of the organizations in which it will be applied. It broadly covers diversified issues of the business enterprise like macro-concerns about structure, quality, style, culture, values and commitment required for better future prospects. It is also defined as a dynamic mechanism involving several activities which influence the behavior of individuals in their efforts to formulate and implement the strategic needs of business (Schuler, 1992). It is also defined as the pattern of planned human resource deployments and activities with an objective to enable the enterprises to achieve its goals (Wright and Mcmahan, 1992). Strategic human resource management also aims in development of management principles that organizations in efficiently managing their human resources consistent with the needs of both the organization and the diversified stakeholders linking the organization to the society (Schuler and Jackson, 1999). Human resource management is highly effective in successful performance of organizations. This is mainly due to the positive impact created by the human management on the machinery utilization and product quality. The advanced trainings given to the staff members on regular intervals under human resource programme would facilitate the technical knowledge upgradation and enhanced practical knowledge of the staff in unforeseen situations. This would reduce the element of risk in running nay business organization or firm and hence increases the organizational efficiency tremendously. How strategic human resource management helps in organizational efficiency Several research works on strategic human resource management revealed that it contributed tremendously to the growth rate of any organization. Various components of strategic resource management evolved over a period of time. Let us analyze the positive role of strategic human resource management in enhancing the efficiency of business enterprises by the following studies. Dyer and Holder (1998) discussed about the strategic human resource management at organisational level with accurate focus and strong framework. The organizational level planning and strategies facilitate decisions about key goals, major policies and the allocation of resources. The key focus would be made to prioritize the people’s needs for enhancing the organizational effectiveness. Similarly, the strategic human resource management concentrates on strong framework which must be broad, integrative, contingency based and synergistic in nature. In addition, the attention must be paid to effective measurement of individual and organizational performances. It should properly direct the managers on what to measure, how to measure and how to document and report the measurements of the outcomes of the organization. It also concentrates on enhancing the value creation from the people which in turn would facilitate the organizational efficiency. Various strategies of human resource management like organizational design, innovation and enterprise, empowerment, total quality management (TQM) and business process reengineering (BPR), downsizing and team work are required for effective organizational efficiency. Let us analyze one by one here. Organizational design is very crucial for any business enterprise as it facilitates convenient flow of activities and efficient decision making processes. It explains the nature of management functionaries and workers of all groups i.e. technical and non technical man power. It also decides the size of the production based on the initial investment capacity and market demand for the commodities under production. Innovation and enterprise are the most important factors that exert tremendous positive influence on the organizational efficiency. Innovation is a process of developing new ideas for production of commodities with new design and end value. It is most important process which is to be encouraged by strategic human resource management so the good quality product can be produced and it also gives a clear competitive edge over other organizations. The sustainability is one of the most important parameters that play crucial role in long term establishment and success of any business enterprise. The element of sustainability is mainly contributed by the successful organizational structure and design and its ability to make adjustments according to the changes in market demand over a period of time. In other words, the empowerment of any firm in developing strategies to meet the production and marketing demands is very important that helps in ensuring the sustainability of business firm. Total quality management and business process reengineering aim at enhancing the quality of the products by bringing desirable changes in strategies from top to bottom. Similarly, the downsizing of the firm is basically targeted to reduce the non productive elements and concentrate on most important factors of production so that the economic efficiency of the firm would be highest. This also allows higher flexibility to managers in resisting the financial recession in national and international markets. Lastly, the concept of team work is very important component of strategic human resource development process as it combines and integrates all the different strategies required for production of quality goods at a higher magnitude and for effective marketing for earning remarkable profits by the business enterprise. The positive changes in economic growth of developed countries like USA also led to some challenges in the form of labor shortage (Konrad and Deckup, 2001). This was experienced when productivity gain coupled with technological innovation fueled expansion of the US economy during the 1990sThis compelled the US organizations to initiate the strategic human resource management in the form of creative recruitment and retention practices and to employ workers from non-traditional sources, leading to a more diverse workforce. HR professionals realized for updating their technological skills and developing systems for managing organizations more efficiently. This called for the strategic business management tools to be operated in US organizations. No doubt, the implementation of strategic human resource management practices created competitive advantage for firms by successfully by selecting high performance work system and by providing an effective set of incentives to employees. The use of upward communication processes facilitate two way communication process between employee and management where genuine feed back can be obtained (Farnham, 2000). Emphasis must be given to speak up programmes, suggestion schemes, attitude surveys, conference and seminars, problem solving groups for higher organizational efficiency. The McKinsey 7S model is one of the most important tools that can be applied as part of strategic human resource management which would certainly enhance the organizational efficiency (Mindtools, 2009). Several times it was proved that the productivity of business firm gets negatively affected due to lack of coordination among different wings of the company and lack of coherence in ideology. This happens due to absence of team work and collaborative thinking. Hence the role of the McKinsey 7S framework is to identify these constraints of the company and evolving strategies to remove the bottlenecks and to make every component of the organization work towards the achievement of goals and values. Its main aim is to improve the performance of a company, to examine the likely effects of future changes in the market supply and demand for its commodities and to determine how best to implement a future business strategy. The following seven key factors play vital role in enhancing the organizational efficiency according to the McKinsey 7S frame work. Strategy : It is nothing but the plan that is devised to maintain and build competitive advantage over the competition. With out proper strategy it wouldn’t be possible for any business enterprise to produce a challenging product and to capture the evolving market. The product evolved must be an innovative one and must suit to the changing needs and tastes of the customers. It requires the thorough study of the market conditions and prediction of future demand and supply factors for getting preparedness about the production size and man power recruitment. The strategy must be well defined and it must be intended to achieve the objectives of the organization. In addition to dealing with the customer preferences and competitive elements, it must come up with an environmental friendly technology so that the pollution hazards can be minimized. Structure: It explains about the way the organization is structured and personnel linkages in different wings of the organization. It provides lot of coordination among the employees with a final goal of enhancing the product quality and organizational efficiency. It also explains the way in which the company employee team is structured or categorized and who reports to whom. It also gives us a picture about the hierarchy, nature of decision making process (centralized or decentralized) and nature of communication processes (explicit or implicit). Systems: It provides detailed picture about the daily activities and procedures that staff members follow in performing their job. It also explains about the main systems that run the organization like financial and HR systems as well as communications and document storage. The systems of any company must include the components of monitoring and evaluation along with the internal rules and processes for enhancing the organizational efficiency. Shared Values: They basically include the core values and their extent of strength and building the corporate/team culture. Style: It is mainly concerned with the analysis of extent of participation of the management / leadership. Its another important aim is to study the effectiveness of leadership and team of workers in the organization. It also deals with the study of extent of competitiveness and cooperativeness among the employees of the organization. Staff: It deals with the nature of the employees and their general capabilities. It will give an idea on the specific specializations that are represented within the team and the recruitment of new specialized persons to meet the future demands. Skills: They deal with the nature of the actual skills and competencies of the employees working for the company. Its main objective is to identify the skills gaps and to suggest the ideal training programmes for the staff members for upgrading their skills foe enhancing the organizational efficiency. The importance of strategic human resource management was highly felt with the emergence of a new generation of workers characterized by decreased company loyalty and increased expectations on various aspects of work life (Wan and Ong, 2002). Moreover, emphasis on knowledge-based competition has accelerated the importance of human capital and hence the strategic role of the human resource management (HRM) function in any organization. It was revealed that a positive relationship between various aspects of a company’s strategic HRM policies/practices and its HR performance was present. The study reveals that these two aspects of organizational performance may be affected by different HRM components. It also explained how proper management of human capital contributes for competitive advantage of business enterprises compared to mother firms in the market. Lessons learnt from experiences of PepsiCo Ltd, USA, Whirl pool, USA and The Euro Disney, France and their comparison The impact of strategic human resource management in enhancing the efficiency of PepsiCo Ltd, USA, Whirl pool, USA and The Euro Disney, France was compared in terms of global staffing policies. Understanding about the nature of global staffing policies and human resource orientations is significant in evolving strategic business management and enhancing organizational efficiency (Karadjova-Stoev and Mujtaba, 2009). Under strategic human resource management plans, global experts often follow any one of the four effective staffing orientations which in general can be integrated well into their day-to-day operations (Mujtaba, 2007). They include ethnocentric, polycentric, regiocentric, and geocentric management orientations. Ethnocentric orientation is nothing but the staff orientation targeted to the individuals who are home country centered. It concentrates on the cultural differences of people living in different countries and strategies have to be formulated based on their cultural traits. Several times, any strategic that works out well in one country may not work successfully in another country due to cultural differences among the employees and hence ethnocentric orientation plays significant role in reducing the cultural barriers and in enhancing the organizational efficiency. In poly centric orientation, the emphasis is given to host country centric approach. The managers with polycentric approach have a general feeling that the foreign market is complex and hence it becomes too difficult to understand making them host country centered. Though it is considered to be easier and safer its main disadvantage of this approach is that the managers fail to much about other cultures. One good example for this approach is Pepsi Cola in USA which prefers joint ventures in other countries like India. Pepsi Cola always preferred to have host country centred approach to recruit the middle management functionaries i.e. polycentric orientation. This is because of the advantage of higher penetration in to the local market through recruitment of functionaries from host nations. It preferred to have ethnocentric orientation as far as the top management is concerned. Regiocentric orientation is when the individual is focused on regional headquarters or regional basis. In this orientation, the company in general feels that the regional managers are best able to organize operations within the region. This strategy works out well when the strong coordination would be facilitated with in any single geographical region. Similarly, in the geocentric orientation, the individual is world centred and local centred. Here the management style is interdependent. The best example for this orientation is Whirlpool company having its wide establishment in USA where the manufacturing and design is done and it has several affiliates in other nations like Brazil. Hence depending upon the need of the hour and situation, the organization may select one of these four orientations and can even shift from one to another orientation for enhancing the organizational efficiency. The lack of proper strategic human resource management strategies may negatively affect the organizational efficiency as it was found in case of the Euro Disney, France (Keegan, 2002). Several lessons can be learnt from the example of the Euro Disney in terms of human resource responsibilities like cultural differences, labor laws and foreign risks. The Euro Disney made some strategic mistakes in choosing managers for foreign establishments. It gave us a lesson on stressing much on geocentric orientation rather than ethnocentric approach. Another important lesson is that the success of any project in one or two countries need not guarantee that the same project will be successful in another country. This is due to the cultural differences in different nations. The provision of cultural awareness and sensitivity training is compulsory for the managers at top level if they are recruited in foreign nation, other wise emphasis must be given to recruitment of managers at top level from the host country. In addition to this, the formula for success for any global firm should be to think globally and act locally and to evolve diversified and most innovative products in the market to have an edge in global competition. Conclusion Overall, the strategic human resource management plays significant role in enhancing the organizational efficiency. With the advent of globalization and liberalization, the element of competition increased tremendously and the business enterprises would get significant benefit in increasing their competition skills due to implementation of strategic human resource management. This would certainly help the business enterprises in producing and designing new products with diversity in use through innovative techniques. Moreover, strategic business management develops and integrates the concepts of team work, dynamic leadership, structure, style, skill upgradation and other important parameters like creativity and ecological consciousness and hence enhances the organizational productivity tremendously. It also makes best use of upward communication processes which in turn would facilitate two way communication process. The McKinsey 7S frame work explains the positive role of strategic business management in enhancing the efficiency of business enterprises. Several lessons related to the strategic human resource management can be learnt from the experiences of some important international business houses like PepsiCo Ltd, USA and Euro Disney, France. References Beardwell, I & Holden, L 2004, ‘Human Resource Management: A contemporary approach’, FT Prentice Hall, London. 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