Strategic Management of Human Resource - Term Paper Example

Strategic Management of Human Resource Table of Contents Introduction 3 Defining SHRM 3 SHRM Activities 3 How Strategic HRM improves Business Performance 4 Measuring Performance of Organisation in Strategic Human Resource Management 5 A Simple Model of SHRM 7 Evolutionary Approaches to the Study of SHRM-Links between Theory and Practice 10 Conclusion 12 References 12 Bibliography 13 Introduction This project aims to determine whether Strategic Human Resource Management can bring about improvement in the performance of the organisation. In this context, this project gives a detailed explanation of the role of SHRM in measuring the performance level of the organisation. It is known that, for an organisation to succeed, strategies should not only be implemented at all levels but should also be inter-related with each other since they cannot function independently. Moreover, the human resource management practices and policies must fit into this strategy with its prevailing business conditions and also its competitive environment. A model of SHRM has been provided in the project to bring out the relationship between theory and practice. Defining SHRM This project aims to provide a suitable explanation to the concept of strategic human resource management (SHRM). Explanation is accompanied with analysis, and both together strive to define the term in this project. Appleby and Mavin have said that human resource is comprised of efforts, skills and capabilities contributed by people towards an organisation. It is perceived as an approach that manages people and seeks to attain competitive advantage with the help of a capable and committed workforce strategically (Armstrong, 2000, p.43). SHRM Activities HRM activities are closely associated with the work done by the HR office, although it is known that supervisors would have to bear the responsibilities of decisions taken by the HR department. Strategic human resource management are those activities that help to accomplish the company’s mission and measure the extent to which these activities contribute towards the company’s strategic goals. A number of line managers were interviewed and were asked to select that HR activity which they felt contributed towards goal accomplishments. Although they could not agree on a specific activity yet it was unanimously declared that it was impossible for the organisation to work towards its goals without the support of the HR. The most valuable contribution of this department was towards staffing and recruitment, employee development and employee relations. They were expecting more involvement and more innovative approach on the part of HR (Franklin, 1999, p.21). How Strategic HRM improves Business Performance Efforts have been made to bring about organisational improvement by implementing strategic human resource management. Extensive research has also been conducted to detect their results. Evidences show that the performance of USA and UK has improved after implementing this practice. Firstly, it is to be assessed how implementation of the practice can be taken forward. After this, an analysis of the various HR practices and policies that can have an impact on the performance of organisations should be done (Baron and Armstrong, 2002, p.203). Therefore consideration needs to be given to The manner in which policies and practices can be incorporated into the strategies of HR for creating an impact. The way in which integration can be attained. This accounts for vertical integration (association between Hr strategies and business strategies) and horizontal integration, which is referred to as ‘bundling’ The best way of implementing the strategic plans (Baron and Armstrong, 2002, p.204). In this regard, it should be relevant to business and its adoption of HR practices. This means Managers should make attempts to expand “progressive people management practices” (Baron and Armstrong, 2002, p.204) Managers should also maintain the simple principle of “the more the better” (Baron and Armstrong, 2002, p.204) because adopting a single practice in isolation is likely to bring about a small change. The best combination of practices is considered to be those that cater to the acquisition and development of skills, knowledge management, developing commitment, motivation and involvement. Most importantly, effective implementation of the practices is as important as the practices themselves. This implies the importance of management skills. Learning at every level should be considered a fundamental aspect in the process of people management (Baron and Armstrong, 2002, p.206). Measuring Performance of Organisation in Strategic Human Resource Management Figure 1: Diagram Showing SHRM Knowledge Claim (Wright & Rogers, 1998. p.5) McMahan and Wright in 1992 have defined SHRM as “the pattern of planned human resource deployments and activities intended to enable the firm to achieve its goals” (Wright & Rogers, 1998. p.9). Organisational performance is a dependant variable used in today’s organisation research. Yet, it is as vague and as ambiguous as it has been earlier. Till now organisational performance was limited to financial measures. Conceptually, it is the comparison between the values that firm creates with that of which the owners are supposed to receive from the firm (Wright & Rogers, 1998. p.9). The concept of measuring organisational performance through strategic HRM is a more recent development. The purpose of the study is to contribute towards the performance of organisations which increases the probability of attaining the goal. The goal is measured through financial performance of the firm. Reeves and Dyer (1995) has proposed four distinct types of measuring organisational performance. HR outcomes which comprises of job satisfaction, absenteeism and turnover. Organisational outcomes which relates to productivity, service and quality. Financial Accounting outcomes relating to profitability and ROA, and Capital market outcomes relating to stock prices, growth and returns. It was proposed that strategies in the field of HR were most likely to be influenced by human resource outcomes followed by financial, organisational and outcomes in the capital markets. In the model of strategic human resource management, outcomes can be demarcated at various hierarchical levels. Outcomes at any particular level influence the outcome at the next hierarchical level. The next part of the project gives a detailed description of the various types of measures of performance of firm that has been used by the models of strategic human resource management. A review of the measures gives rise to three basic questions. Firstly, the kind of measures that are being used should be considered. Secondly, the kind of measures that are related to the research aspects, such as levels of analysis or the information source. Thirdly, it also identifies the control variables to be used in the research (Wright & Rogers, 1998. p.10). A Simple Model of SHRM Figure 2: Diagram Showing the Model of strategic Human Resource Management (Source: Billsberry, Storey & Salaman, 2005, p.21) Figure 2 depicts the various components in the strategic human resource management. Human capital means the number of employees working in the firm at a certain given point of time. Researchers have focussed more on the requirement of developing a stock of human capital that has got a higher level of skills and abilities. The alternative focus is to attain a greater alignment between skills in the firm which are required from the strategic point of view. It is seen that the human capital stock can actually change with time overnight and needs constant monitoring in order to make them match with the strategic requirements of the firm. Another opinion has been emerging in this context. According to it, the behaviour of employees is an important aspect which remains independent of the field of SHRM. Apart from the skills of human capital, it shows that “employee behaviour recognises individuals as cognitive and emotional beings who possess free will” (Billsberry, Storey & Salaman, 2005, p.21). This free will guides them in making decisions regarding their actions and the behaviours they would like to be engaged in. This is an important issue although subtle. It is not known by the firm but humans know it. Organisations can have access to the stocks of human capital, but because of poorly designed activities and improper management of people, they are not able to deploy this capital to its full potential. MacDuffie (1995) has emphasised on the value of discretionary behaviour. Discretionary behaviour caters to the fact that under the given organisation, roles of the employees exhibiting discretion can have both positive and negative impact on the firm. For example, a person operating on a machine has the discretion to keep the machine running even after hearing the ‘ping’ until it breaks. He can even fix the machine immediately so that further damage is not made. Finally, concepts like Human Resource Practices and High Performance Work today has been replaced by a much broader concept called the system of people management. The term ‘system’ calls for the understanding of the various practices that have an impact on the employee’s performance. By using the term ‘people’ the focus shifts to those aspects which (Billsberry, Storey & Salaman, 2005, p.22) do not remain in the purview of HR practices, namely, communication, work design, leadership and culture and various other aspects which influences employee’s competencies, attitudes and cognitions. Effective people management systems evolve through the passage of time via unique paths. The components remain interdependent on each other which do not allow the competitors to copy easily. The most important aspect of the system is that it continues to create advantage for the firm with time. This becomes more essential because the employees keep moving in and out which causes the required behaviours to change due to changes in environment and other strategic contingencies. The system of people management helps firms to influence the pool of human capital and elicit the desired behaviour from the employees (Billsberry, Storey & Salaman, 2005, p.22). Evolutionary Approaches to the Study of SHRM-Links between Theory and Practice Population ecology ensures the firms that are structured in the best way are likely to adapt to the new and changing environment. The organisations that survive stand as the model to be followed by the future organisations. This creates a new species of organisations designed to meet the requirements of the new environment. Moreover, population ecology also focuses on the procedures and practices that the organisation develops as a result of changes in the environment. This implies that managerial decisions do not determine the demise or survival of a firm. Here, SHRM loses it importance and is considered as energy wastage. In this context, population ecology calls for more research in areas of decision making for both informal and formal organisations. The resource based view suggests that effective implementation of SHRM ensures that the needs of the employees matches with the strategic needs of the organisations, whereas population ecology speaks about internal growth process in organisations as the key to organisational success (Jackson & Schuler, 2009, p.63). Organisational learning is another basic component in SHRM. This perspective suggests that it is a more complex process than just learning through past experiences. This includes the process of trial and error, initiating discovery and diffusing knowledge. In fact too much reliance on past experiences is less likely to be successful. In order to gain competitive advantage in the market, organisations must make efforts to develop their capacity to absorb. This suggests that organisations have to learn to assign value to the new information and then assimilate and exploit this information. If organisations seek to attract best employees and retain them, they will have to focus on the development of mutual trust between employees and employers. Today this accounts for the key area of study in SHRM (Jackson & Schuler, 2009, p.64). Agency theory suggests that the lack of trust between participants in transaction causes agency problems. Agency theory is the name of the process in which the employer delegates responsibilities to agents or the employees under a contract. Existence of the contract cannot reduce the cost of transaction. Delegation leads to the problem of risk sharing. Thus, it is suggested that ‘control’ should be the most important issue concerning contemporary organisations. This calls for the system of monitoring control on the employees. The institutional theory has resulted in the open system of operation. It says the more an organisation relies on the internal ways of decision making that have been already established, the more difficulty will it face to cope with the surrounding environment and competition. It emphasises on the fact that relying on pre-existing and established solutions in order to face new challenges may prove to be ineffective. The institutional approach also says that organisations face extreme pressures to comply with the specific business practices prevailing in the industry. In this context SHRM suggests that organisations develop procedure suited for their own mode of operations and competency (Jackson & Schuler, 2009, p.68). The theory of resource dependence says that organisations remain externally controlled to a large extent and this causes external constraints on the actions and behaviours. To achieve success, organisations have to focus on optimizing their intangible assets. Organisations have to face challenges in recruiting and retaining employees. This increases the responsibilities of the HR department even further. With the weakening of position of employee unions, the HR department are faced with a more responsibilities (Jackson & Schuler, 2009, p.69). Post modernisation caters to those activities that support the views that have been silenced or have been traditionally marginalised. It focuses on the interrelationship between organisations and the society with special emphasis on the effects that organisations have on the public. Focus has shifted to the emotions prevailing in organisations. Studies have revealed that organisations may react like a child and give expressions similar to that of refusal, cooperation, aggression and dependence (Jackson & Schuler, 2009, p.70). Conclusion The project has thus attempted to divulge the manner in which implementation of strategic human resource management can improve the performance of the employees and the organisation as a whole. The project discusses SHRM in the light of various theories and analyses its outcome on the performance level of various organisations. A simple model has been shown in this regard along with the components of SHRM, the performance indicator. The role of SHRM goes beyond the boundaries of just recruiting and retaining employees. Its function is to align the strategic needs of the organisations with the requirement of employees. Its activities should be designed in alignment with these two objectives. Only then can one achieve organisational success. References Armstrong, M. 2000. Strategic human resource management: a guide to action. Kogan Page Publishers. Baron, A. & Armstrong, M. 2002. Strategic HRM: the key to improved business performance. CIPD Publishing. Billsberry, J., Storey, J. & Salaman, G. 2005. Strategic human resource management: theory and practice. SAGE. Franklin, B. 1999. Strategic Human Resource Management: Aligning with the Mission. US Office of Personnel Management. [Pdf]. Available at: http://www.opm.gov/studies/alignnet.pdf [Accessed on August 19, 2010]. Jackson, S. E. & Schuler, R. S. 2009. Strategic Human Resource Management, 2Nd Ed. Wiley-India. Wrights, P. M & Rogers, E. W. 1998. Measuring Organisational Performance in Strategic Human Resource Management: Looking beyond the Lamppost. [Pdf]. Available at: http://digitalcommons.ilr.cornell.edu/cgi/viewcontent.cgi?article=1134&context=cahrswp [Accessed on August 19, 2010]. Bibliography Cowling, A. & Lundy, O. 1996. Strategic human resource management. Routledge. Devanna, M. A., Tichy, N. M. Fombrun, C. J. 1984. Strategic human resource management. John Wiley and Sons. Gold, J. & Bratton, J. 2001. Human Resource Management: Theory and Practice. Routledge. Hendry, C. 1995. Human resource management: a strategic approach to employment. Butterworth-Heinemann. Ivansevich, J. M. 2008. Human Resource Management. Tata McGraw-Hill. Jackson, J. H. & Mathis, R. L. 2008. Human resource management. Cengage Learning. Kovach, K. A. 1996. Strategic human resource management. University Press of America. Read More