Human Resources Management Sector and Importance of a Firms Performance - Research Paper Example

1. Introduction The worsening of economic climate since 2008 has led many firms to take additional measures in order to protect their operational activities. The criteria used for choosing these measures have been identified in accordance with the role of each organizational sector to the overall firm performance. Human resources management sector is of vital importance for a firm’s performance; the needs of the specific sector are likely to be differentiated across the markets in accordance with the local culture but also the characteristics of the national economy. In this context, the human resource planning, flexibility and recruitment strategies applied on modern organizations had to be updated in order to face successfully the challenges set by global recession. The influence of global recession on these strategies is going to be analyzed in this study; examples of organizational initiatives will be also presented in order to make clearer the relationship between human resources policies and recession – as captured in real market conditions. 2. Human Resource Planning The effects of recession on human resource planning (HRP) used in modern organizations can be understood only if referring to the definition and the characteristics of the specific sector. In theory, HRP has been related with the targets – strategic goals set by the organization (Armstrong, 2000, 202); it has been also characterized as a set of practices for the management of a firm’s human resources (Beardwell et al., 2007, 158). In accordance with Bandt et al. (2002) HRP can be characterized as a ‘dynamic, backward thinking process conducted by both/ senior line managers and human resource professionals’ (Bandt et al., 2002, 4); in accordance with this view HRP is not affected by the recession since it is based on the cooperation, communication and mind abilities of the persons involved. From a different point of view, HRP is considered to be a method for identifying the needs of the organization and propose appropriate policies (Rothwell et al., 2003, 2). In this context, HRP can be strongly affected by a recession in the global or the local market. HRP is also characterized as ‘the process of anticipating and providing for the movement of people into, within, and out of an organization’ (Bohlander et al., 2009, 15). Through this view, HRP seems to be equally affected by the recession and the skills/ personal characteristics of employees within a particular organizational environment. The following examples could be used to highlight the potential interaction between recession and HRP: a) Tesco is a leading retailer in Britain – its presence worldwide is also important – the firm’s employees in Britain have been estimated to 280,000 – while 460,000 more people work for the firm’s branches worldwide. Before the recession the firm followed a well planned HR policy emphasizing on fair rewarding and motivation of employees; after the recession the firm keeps its HR policies – an example is the decision of firm to hire members of the families and friends of its employees for the Christmas period (The Times100, case study of Tesco, 2009, Tesco, official website, HR Magazine, November 2009), b) in the case of Scottish Power (Britain) the effects of recession on the firm’s HR policies cannot be denied. In fact, before the recession, the firm used to apply a HR plan based on the employees’ qualities (see firm’s HR website); after the recession, the hiring of employees is based on their willingness to be compensated with lower wages – foreign workers are therefore preferred (BBC News, 29 January 2009) 3. Flexibility Flexibility is a key component of successful human resource policies. The specific element can affect the performance of HR plans through two different approaches: the soft and the hard approach of HR management. In accordance with the former, ‘HRM emphasizes on employee commitment through extensive employee development, internal labour market and job security’ (Beardwell et al., 2007, 15). In the context of hard approach, HRM is depended strongly on flexibility, the variance of employees’ skills and the use of performance as a criterion for the level of employees’ payment (Beardwell et al., 2007, 15). Both approaches of HRM – as presented above – prove the dependency of HRM on a region’s – or the global community’s – economic climate; through these approaches, recession could strongly affect the effectiveness of HRM policies applied on modern organizations. Flexibility has been also characterized as being related with ‘work reorganization and reallocation’ (Reilly, 2001, 11). In accordance with Armstrong (2000, 202) flexibility is extremely valuable for HR managers offering them the chance to choose employees that best suit to a specific role – a view similar with that of Garuth et al. (1997, 232). Under conditions of recession, flexibility can be limited – even eliminated – if the specific decision is imposed by the need for the firm’s survival – there are also exceptions, like in the case of SAIL (Steel Authority of India Limited) that decided – recently – to give to its employees gold coins – despite the current recession in order to reward them for their efforts – the offer was made in the context of the firm’s Golden Jubilee (Indian Express, 4/2/2009). Currently the firm’s employees are estimated to 121,295 and its performance remains at high levels despite the world recession (SAIL, corporate website, 2009, Corporate Information, 2009, see graph presenting dividends and earnings) Before the recession, the company emphasized on its employees’ training and their fair rewarding– the specific organizational practice was not influenced by the recession – as the example mentioned above proves. The first page of the firm’s website highlights on the value of employees for the firm’s performance (SAIL, corporate website, 2009). On the contrary, the HR plans of Toyota, a well - known multinational firm, have been severely affected by the recession. Before the recession, the firm was characterized as a perfect example of a firm that emphasizes on the development of flexibility in the workplace - a phenomenon known as ‘Toyotaism’ (Leopold et al., 2005, 36). After the recession, a significant number of the firm’s employees were fired – 3,000 employees of the firm were fired in November of 2008 while in the period that followed the firing of employees was established as a plan to exit the crisis (International News, 2009, Business Line, 2009); another HR practice used by Toyota’s HR managers after the recession has been the reduction by 10% of the salary and the working hours (Sky News, 11 March 2009) 4. Recruitment Keeping the effectiveness of the recruitment process is a challenging task for most HR managers in modern organizations. Often, the needs of candidates are likely to be differentiated – in accordance with their family and social life and their personal views – a fact that can influence their aspects on work but also their commitment to a particular organization. Fitz-enz et al. (2002, 58) refer to the above issues; in accordance with these researchers the responsibilities in work can be considered to be second in the priorities of candidates – in this case, the success of the selection process can be put under risk. On the other hand, it is made clear that the success of the selection process can be directly related with the skills of HR managers participating in the relevant procedure. O’Neil et al. highlight the specific fact (1998, 27) adding that ‘any shortfall should be addressed by the firm through the recruitment process’. In this context, the recruitment process becomes the stage at which the appropriateness of employees for a specific position is evaluated; through this process the performance of a firm can be highly supported – by appointing the appropriate individuals to each position a firm would be able to face easier the challenges set by the recession. The recruitment process has many stages including the hiring, development and retention initiatives of a particular organization; the ability of firms to face the recession can be depended on their hiring or their firing criteria. An example is the case of Hyundai Motor Co that had to fire many of its employees in order to face the limitation of its profits in late 1990s (Center for Management Research, 2004) – a HR policy followed before the recession; However, in recent recession, the firm proved to be best prepared for the crisis; in fact, the firm’s performance was kept high despite the crisis (The New York Times, 2009); the firing of the firm’s employees after the recession has been limited at low levels – about 50 workers were fired by the firm’s branch in USA (Business Week, 2009). Overall, the firm’s recruitment process has been remained intact by the recession – compared to other firms in the market. Employees are still highly supported and motivated as before the recession (Hyundai Motor Co, Employees, 2009). The same assumptions were revealed through the examination of the recruitment practices of another firm, Lloyds TSB. After the recession, Lloyds TSB was proved to be extremely supportive to its employees; the firm’s HR managers introduced a series of measures in order to support the firm’s employees that face a disability problem (The Times100, case study of Lloyds, 2009). Before the recession, the firm’s recruitment plans were highly based on diversity in the workplace (Lloyds TSB, corporate website) 5. Conclusion In the context of a recession, organizational needs can be increased and the identification of appropriate strategies can become extremely difficult; the exit from the crisis may not be avoided. Flexibility can help a firm to be protected against the recession – however, the effectiveness of flexibility can be depended on certain criteria; an example is the view of Herriot (2001, 68) that flexibility can be valuable for a firm but only if it is expanded on all the HR policies applied on the particular firm. On the other hand, HRP and recruitment should be appropriately customized in order to meet the organizational needs, which are very likely to be affected by the recession. However, because the resources available for the development of HR plans during the recession may be limited, it is necessary that HR managers are able to appropriately prioritize the organizational needs and propose the measures which the firm can afford – taking into consideration the firm’s strategic goals but also its need for survival in the market. References Armstrong, M. (2000) Strategic human resource management: a guide to action. Kogan Page Publishers Bandt, A., Haines, S. (2002) Successful Strategic Human Resource Planning. Systems Thinking Press, 2002 Beardwell, J., Claydon, J., Claydon, T. (2007) Human resource management: a contemporary approach. Pearson Education Bohlander, G., Snell, S. (2009) Managing Human Resources. Cengage Learning, 2009 Capon, C. (2008) Understanding Strategic Management. Pearson Education Fitz-enz, J., Davison, B. (2002) How to measure human resources management. McGraw-Hill Professional, 2002 Garuth, D., Handlogten, G. (1997) Staffing the contemporary organization: a guide to planning, recruiting, and selecting for human resource professionals. Greenwood Publishing Group, 1997 Herriot, P. (2001) The employment relationship: a psychological perspective. Routledge Hunter, I., Saunders, J. (2007) Human resources outsourcing: solutions, suppliers, key processes and the current market: a case-study-based market review. Gower Publishing, Ltd. Leopold, J., Harris, L., Watson, T. (2005) The strategic managing of human resources. Pearson Education O’Neil, G., Kramar, R. (1998) Australian human resources management: current trends in management practice, Volume 2. Allen & Unwin Reilly, P. (2001) Flexibility at work: balancing the interests of employer and employee. Gower Publishing, Ltd. Rothwell, W., Kazanas, H. (2003) Planning and managing human resources: strategic planning for human resources management. 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