Strategic Human Resource Management - Dissertation Example

Strategic Human Resource Management 2009 Strategic Human Resource Management Introduction Strategic human resource management is the key driving force of successful business in the modern world. The rapid shift from a product-oriented business strategy to a customer-focused and knowledge-based one has become the core tendency in modern business and non-business organizations (Nelson, Quick, & Campbell 2004). The importance of reasonable and balanced Human Resource Management (SHRM) for sustainable development and success of business organisations was illustrated by a series of studies starting from the pioneering efforts of Frederick Winslow Taylor (1911) and George Elton Mayo (1933) and to the modern generation of organisational scientists. The concept of modern HRM emerged almost fifty years ago and incorporated a wide range of previous studies and findings revealed by many researchers involved in the area of organisational studies. For example, in the beginning of the last century a number of theorists and practitioners took efforts to elaborate a comprehensive theory that would properly explain human behaviour in organisational context. As Alan Price (2000) notes, the basic principles of modern human resource management practices “...have not come out of nowhere” (p. 62): its emergence in the modern form has been preceded by a long and complex history of attempts to understand the laws and logic that regulate human behaviour in the workplace. However, 1981 is often mentioned as the official birth-year of modern HRM practices. It was then that Harvard Business School introduced a course that served as “…a blueprint for global proliferation of human resource planning and management principles” (Price, 2000: 64). Although the value of appropriate strategic HRM for improvement of organisational performance has been emphasized by multiple credible studies and publications, many experts and practitioners still feel sceptical toward validity of HRM principles claiming that it is nothing more but a set of vague principles or reinterpretation of well-known motivation theories that add little value to business organisations (Beardwell, Claydon, & Holden, 2003). Although the debate about the impact and value of strategic HRM for organisations is still ongoing, the evidence discovered up to date clearly suggests that it is more than a set of theoretical principles of questionable application. Main Discussion The set of principles underlying modern strategic HRM relies on a synthesis of notions, ideas and concepts elaborated by representatives of two major organisational theories: the so-called ‘hard side’ and ‘soft side’. Former is often associated with the American schools of management represented by Frederick Taylor who justified the principles of scientific management while the latter is associated with Elton Mayo’ school of ‘human relations’. Frederick Taylor was among the first researchers to provide a serious theoretical basis for management of organisations. He assumed that material side was not the foremost motivation of the employees and argued that personnel should be properly managed in order to improve effectiveness of labour. Consequently, Taylor brought forth a policy of stick and carrot based on the idea of punishments for poor performance and reward and appraisal for high performance efficiency. The Taylorian model rests upon the belief that the average employee is lazy, ignorant and passive and incorporates the following principles of management: Ceaseless monitoring of each employee’s performance through the system of supervisors, inspectors, quantity-surveyor, etc; Monitoring of workshops performance; Promotion of stimulating and competitive organisational culture which may provide excessive control over the employees (Taylor, 1911) Taylorian model of organisational management remained popular until the second half of the last century when the ‘soft side’ approach started to gain popularity (Quinn, 1988). One of the most known attempts to revise the Taylorian scientific management was undertaken by Elton Mayo. During his longitudinal Hawthorne experiments Mayo discovered that material reward was not the best motivator for people. Instead, he found out that social nature of employees should be taken into consideration and argued that employees’ performance efficiency would improve if they receive positive feedbacks from the management. Other essential findings of Mayo included the following: (1) personnel’s need for communication, (2) existence of informal groups and (3) group morale (Gillespie et al, 1993). The war between these major paradigms helped identify the most important factors that contributed to increasing importance of HRM in modern organisational environment. The “hard side” approach embodied the attitudes which had been dominating organisational cultures of western organisations over the first half of 20th century. In those days people were considered to be nothing more but a mere organisational resource similar to, for example, machines. Consequently, any improvement of organisational productivity could be achieved only through pressure on the employees and rigid control and monitoring. While such view of strong and healthy organisational culture might be of practical use in the stable environment of those days, it has definitely turned outdated in the modern highly turbulent environment. Competitive successes of Japanese companies following the principles soft side (Z-approach) in 1970s-1980s have emphasized attention in the US and Europe on group-work, team identification and loyalty, group-consciousness, decision-emerging process, and outlined the value of employees’ participation in organisational development. As a result, hard side has been gradually replaced by a more participative management strategies and practices that adequately considered the value of employees. Such participatory management practices better fit the demands of the global economy as they provide the optimal way to create essential flexibility and worker commitment (Markowitz, 1996). Consequently, the past three decades saw a dramatic change in the manner in which people are managed, promoted and stimulated at workplace. Strategic HRM has already become the primary area of interest in terms of assessing and improving organisational efficiency and marketability. Growing competitiveness in the market forces modern companies increasingly rely on skilled and motivated personnel then on technologies and products. In a situation when company’s past success does not provide a password to cloudless future organisations need to rely on stable assets and first of all on human resources The importance of strategic HRM has already been recognised by virtually any company which follows western standards of business. Within the framework of modern organisational theories performance of an organisation depends not only on hard and dedicated work of its personnel, but also on the ‘human side of employees that includes, inter alia, competences, motivation, attitudes, communication and other variables. From this perspective strategic HRM is deservedly considered to be “...the core of company’s general efficiency and the basis for effective management” (Gunnigle, Morley, & Kelly, 2002: 12). Despite visible simplicity emphasized by the sceptics, the area of strategic HRM is exceptionally complex due to potentially unpredictable nature of human resources. If a company fails to properly and effectively manage its human resources in the right areas of the business, at the right time and at the right cost, serious inefficiencies are likely to arise creating considerable operational difficulties and likely business failure (Beardwell, Claydon, & Holden, 2003). And on the contrary, correctly designed and implemented strategic HRM program will inevitably add value to the organization. Modern strategic HRM is a general approach to the strategic management of human resources. In different contexts this approach varies depending on the intentions of the organisation regarding the direction of future development. The key concern of strategic HRM is long-term issues associated with every aspect of human resources. It can be defined as follows: “All those activities affecting the behaviour of individuals in their efforts to formulate and implement the strategic needs of business” (Schuler, 1992: 19) or “The pattern of planned human resource deployments and activities intended to enable the forms to achieve its goals (Wright & McMahan, 1992: 342). A good insight into the value of HR related programs is provided by Schuler (1990). He emphasizes that the HR function had an opportunity to shift from being an “employee advocate” (associated with personnel management) to a “member of the management team”. Schuler’s (1990) view was that this required HR professionals to be concerned with the bottom line, profits, organisational effectiveness and business survival. In other words, human resource issues should be addressed as business issues. Storey (2001) believes that emergence of HRM contributed greatly to an ever-greatest since industrial revolution shift in the principles of management. HRM encouraged both managers and employees to get rid of traditional patterns of interaction, outdated ideas of motivation, stereotypes, assessment and appraisal. Managers as well stop being the mentors and executioners and turned to be the members of business teams. Introduction of HRM principle has made modern companies more competitive, dynamic and people-friendly that consequently influenced their efficiency and marketability. Storey also argues that HRM caused what was subsequently called “a new managerialism” (p. 18) – a new look on organisation, the ways it functions and succeeds and the way its employees work. Strategic HRM can include numerous HR strategies based on different principles, but these strategies can not be equated to strategic HRM which is an overall framework used to design and effectively deliver individual strategies. One of the main tasks of strategic HRM is to determine how management of human resources within the organisation affects organisational performance (Boxall, & Purcell, 2003). While human resource management in a simplified meaning of this term is concerned with managing human resources of the organisation, the aim of strategic HRM is to manage human resources in the way to align human resources, organisational goals, policies and actions. Modern strategic HRM is a serious system of management which has broad objectives across the whole organisation and incorporates multiple principles such as selection and recruitment, assessment, adaptation, motivation and dismissal, and others (Storey, 2001; Beardwell, Claydon, & Holden, 2003). It is a paradigm that helps modern organisations improve their performance through focusing on its personnel and more effective utilization of human resources. History of modern organisations provides us with several examples of how different companies attempted to use HRM practices in order to achieve competitive advantage in the market. HRM strategy at IBM Corporation Up to now IBM remains amongst the world leading companies in the field of hardware, software and services. It was one of the first companies to understand the vitality of HRM in modern business environment. The first strategies of HRM in IBM date back to early 1980s and company’s success over subsequent years demonstrated that those strategies were correct. Tom Watson Sr., IBM’s legendary CEO expressed the major principle of the company: fair attitudes to personnel and fair rewarding (Rogers, 1986; Scoble, 2005). This idea is realised in various elements of IBM’s HRM strategy IBM invests around 5% of its payroll in education, training and assessment of its employees. Company’s personnel is encouraged to develop own professional skills and expertise not only in their business area but also in a variety of other jobs. About a third of IBM’s employees are trained or educated at company’s expenses. Besides, all company’s employees have a direct access to on-line database of IBM. The company has developed its own system of assessment that includes the following: skill planning needs assessment, professional skills assessment, and individual education plans, etc. In order to assess professional skills of its employees IBM has developed a complex scheme that includes assessment centres, tactical tanks, 360 degree assessment and other comprehensive methods and tools. Assessment sessions held annually serve the fundaments for employees’ promotion or education. Dislike many other companies assessment in IBM is not a punishment; instead, its rather a source of information necessary for both the employees and HR managers. It is also noteworthy that no one in IBM is exempted from assessment, also including CEO and executive managers as assessment is also an important tool of identification of strong and weak points and looking for the methods of their effective management or training (Rogers, 1986; Scoble, 2005). IBM has a designed system of non-material rewards that ranges from compliments to rewarding letters, from promotion to new titles. Each time an employee exceeds his norm he/she becomes a member of “Club 100%”; this event is widely covered in company’s press and intranet and the membership in this club is extremely respected by the colleagues. The best ten percent of the employees become the members of the “golden circle” and their achievements are propagated in all IBM branches globally. The members of “golden circle” usually receive invitations to the restaurants and concerts, get the opportunity to have a dinner with company’s senior executives and CEO, receive free trips to exotic places, like Bermudas or Bahamas. The members of “golden circle” are lionized and treated as VIP persons (Rogers, 1986; Scoble, 2005). HRM strategy at Tieto-X Tieto-X (Ixonos since 2007) was an ICT company founded in 1995 by a group of initiative young people. The company started to develop rapidly soon turning into one of the leading European companies in the area of IT technologies and industrial hardware. However, serious problems overwhelmed the company in the beginning of this millennium. It is likely that many of those problems were caused by very imprudent strategic HRM policy implemented by the company (Wikstrom, 2004). The company designed a strategy to rectify the situation by addressing the major problems identified it its operation. That strategy listed the most essential problems that threatened the company’s sustainability as well as provided appropriate solutions for them. Even superficial analysis of these problems and solutions clearly shows how insufficient attention to strategic HRM undermined market positions of Tiety-X. Over the 1990s Tieto-X purchased several relatively smaller IT companies. The integration produced a situation when several distinct organizational cultures collided within Tieto-X. Such mixture of different cultures, norms and people’s values caused misunderstanding in the development of total concept and vision of ready products and business strategies. Only in winter of year 2000 four other companies were merged by Tieto-X adding over ninety employees (Wickstrom, 2004). However, due to imprudent HRM strategy those employees remained carriers of different organisational. No appropriate adjustment of HRM was made and the process of changing the relationships between the old and new employees became extremely painful. As Nelson (2004) reports, many companies challenged by turbulent environment considered empowerment of employees to be a good move in terms of strategic HRM. Tieto-X tried to follow the same pathway but largely failed in doing so. For example, managerial staff of the company suggested employees to develop their own vision of company’s policy towards the customers. Eventually, the company was divided into several special business units each focusing on its own partnership strategy. In fact, this change has sufficiently disintegrated the company as far as different organizational cultures and absence of ultimate strategy caused growing conflicts between the branches (Wickstrom, 2004). And finally, the “drain” of knowledge-based skillful and loyal employees has become another plague of a Tieto-X company. Loss of the most valuable employees has undermined company’s confidence and made a negative influence on its’ marketability and market position. As a result, the company has displaced in the rating of Finnish most successful companies loosing its place to the new and more aggressive organizations (Wickstrom, 2004). Besides, the company also faced serious difficulties with selection and recruitment of new personnel. Evidently, the most serious drawback of Tieto-X was that excessive focus on the technical aspect of operation made the managers forget about the HRM aspect of the planned change (Wickstrom, 2004). Thus, the list of potential HRM changes might have included the following steps: 1. Motivating personnel through putting clear objectives and perspectives of a company. This measure would help creation of loyal personnel that wouldn’t leave the company in a tight situation. In fact, employees have witnessed decline of their value in managers’ esteem that wasn’t to be in any case as personnel is a primary worth of a company. 2. Serious organizational changes, as known, couldn’t be achieved without a change of company’s culture and psychological climate. In Tieto-X case these aspects weren’t estimated either. First of all, keeping in mind that company had engaged the employees from the merged companies it would have been necessary to unite all workers around an ultimate goal of a company. In fact, the managers didn’t implement this change and the company was dissociated in questions of people’s unity and identification. From social psychological perspective it’s known that identification is a core factor that influences company’s effectiveness and solidarity in general. At the same time, the mistake of managers’ team was that they didn’t take efforts to integrate new workers in the company’s social structure and make them fully aware about the company’s policy and objectives. 3. Creation of clear recruitment, promotion and assessment criteria similar to those implement by IBM might be useful too. Conclusion Evidently, effective implementation of strategic HRM programmes and practices is probably the key factor in ensuring the competitive advantage of companies over competitors in the modern market. The example of IBM that has been one of the pioneers in human resource management with its HRM strategy developed already in 1980s clearly shows how the strategic approach which focuses on selection, motivation and development of employees contributes to the company’s long-term success in the market. This helps IBM to be one of the leaders on the global market, promotes company’s marketability and competitiveness in terms of globally challenging business. On the other hand, failure to follow the HRM principles in strategic planning of the company’s future is likely to result in much less motivated and effective personnel and seriously undermine the company’s market position and value. Effective strategic HRM is the key to better organisational performance. In other words, the concept of strategic HRM covers many aspects of organisational functioning and involves the elements of psychology, sociology, economy, marketing and even anthropology (Schuler, 1992). From organisational perspective strategic HRM management is an umbrella term which includes long-time development of a company (1), definition a step-by-step tactics of strategic objectives’ achievement (2), organisational planning (3), human research management (4) etc. In fact, strategic management includes both internal (organisational) and external (market’s) factors that influence company’s development. The aim of strategic HRM management hence, is to accommodate a company to the changing and tight market and establish a strong unity of people (a team) within company’s structure and achieve its competitive advantage. Modern business is first of all a competition of human resources. Excessive control diminishes people’s initiative, their level of creativity as well as openness to the new ideas and tendencies. Lack of employees’ initiative and people’s poor adaptation to the demands of environment may result in bankruptcy of a company. Hence, unconstrained demands on people, act as barriers to organisational and personal adaptation and change. Therewith, only correct and up to date human resource management strategy incorporating the principles of development, stimulation, adaptation and promotion of people is the warranty of success in the modern business environment. References Beardwell, I., Claydon, T., & Holden, L. 2003, Human Resource Management: A Contemporary Approach (4th Edition), Financial Times Management. Boxall, P. and Purcell, J. 2003, Strategy and human resource management, Basingstoke: Palgrave Macmillan. Gillespie, R., Galambos, L., & Gallmam, R. 1993, Manufacturing Knowledge: A History of the Hawthorne Experiments (Studies in Economic History and Policy: USA in the Twentieth Century), Cambridge University Press. Gunnigle, P., Morley, M. & Kelly, J. 2002, “Human Resource Management, Employee Relations and the Labour Market”, Employee Relations: The International Journal, Vol. 24, No. 4: 371-460. Mayo, G. E., 1933, The Human Problems of an Industrialised Civilization, New York: Macmillan Markowitz, L. 1996, “Employee Participation at the Workplace: Capitalist Control or Worker Freedom?” Critical Sociology, Vol. 22, No. 2: 89-103. Nelson, D., Quick, L. & Campbell, J. 2004, Organizational Behavior: Foundations, Realities, and Challenges (4th ed.), Oklahoma State University. Price, A. 2000, Human Resource Management in a Business Context, International Thomson Business Press. Quinn, R. E. 1988, Beyond Rational Management: Mastering the Paradoxes and Competing Demands of High Performance, San Francisco: Jossey-Bass. Rogers, B., 1986, The IBM Way, New York: Harper and Row Schuler, R. S. 1990, “Repositioning the human resource function: transformation: or demise?” Academy of Management Executive, Vol. 4, No. 3: 49-60. Schuler, R.S. 1992, “Strategic human resource management: linking people with the needs of the business”, Organizational Dynamics, Vol. 21, No. 1, pp. 18-32. 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