Strategic Human Resource Management - Coursework Example

Introduction As the development and reform of economy, work in the new economy have described as high knowledge intensity, web-based organizing, contacts through intranet, centers on the other side of the world and the integration of work design, technology and services delivered which require a wide variety of high-skilled employees to perform instead of unitary low-skilled workers based on mass production (Basel, 2010). As a result, the management of various workers has become increasingly important. Human Resource is regarded as a source of competitive advantage as it is one of the most valuable assets of the organization (Delery and Shaw, 2001). According to Boxall and Purcell (2003), organization that can manage their workers efficiently is a potential source for gaining competitive advantage and achieving organizational goals. Human resource management(HRM)is primarily concerned with management decisions referred to policies and practices that together shape the employment relationship towards individual, organizational and societal goals(Boselie, 2002). It is an activity for managing employee attitudes and behavior for creation, organizational success including financial performance and broader responsibility such as stakeholder management and combination of legislation and the employment relationship within the organization (Paauwe, 2004). It focuses on the exchange relationship between employee and organization (Paauwe, 2004). Strategic human resource management (SHRM) develops from this definition, but it paysextra attention on issues of linking HRM to the business strategy, alignment of the institutional context and HRM, the designing high-performance work systems (HPWSs) related to HRM, the fit between HR practice and adding value through good people management in an attempt to gain sustained competitive advantage (Delery and Doty, 1996). Some companies gain organizational success through managing people in underlying particular ways (Boselie, 2010). Such as Finish Nokia, the successful people management may play an important role (Boselie, 2010). More than 15 years of worldwide empirical research on the added value of HRM and performance in different sectors has shown that HRM mainly has a modest positive impact on performance (Purcell, 1999). The added value of HRM, also known as the HRM and performance debate mainly represents the responsibility of HRM on economic value creation and organizational financial performance development (Paauwe, 2004). A theory underlying the added value of HRM is the resource-based view of the firm, which states that sustained competitive advantage of an organization is determined by internal resources that are valuable, rare, inimitable and non-substitutable(Barney, 1991). For a further explanation of the relationship between HRM and organizational performance, a reversed approach has been proposed by Boselie(2010), which is called ‘human resource value chain’. HR value chain is a set of linkages between HR and desirable outcomes(Lee, 2010). There are four main stages when creating this value chain. The starting point is organization performance(e.g. profit, market share, market value, increase in sales, productivity, product quality, etc), which is reflected in organizations’ search for competitive advantage(Boselie, 2010). Competitive advantage is the relative stronger position of the organization when comparing to others in the same branch of industry or in the same region(Braselie, 2010).According to resource-based view(RBV), sustained competitive advantage of an organization is determined by internal resources that are valuable, rare, inimitable and non-substitutable(Barney, 1991). For example, the sustained competitive advantage of the world’s largest producer of home improvement products, the US Black & Decker company, is the valuable and inimitability basic electro motor (Basile, 2010). A hierarchical framework for determining potential organizational success through internal resource is called VRIO framework – value, rareness inimitability and organization (Barney and Wright, 1998). If the resources are valuable, rare and difficult to imitable but lack of organizational support, the combination of these three qualities may only bring temporary competitive advantage. For example, a company with introduction of a new product may occupy the majority market share for several years. However, when competitors begin to compete in the industry with introduction of their own products, the company may gradually lose their competitive advantage if a lack of organizational support exists. The long-term competitive advantage can only be achieved when the resources are valuable, rare, and inimitable and supported by organizations (Basile, 2010). Next stage is to find out the critical success factors that create competitive advantages. In the HR value chain, the competitive advantage is signified by ultimate business goals (Boxell and Purcell, 2003). According to Boxell and Purcell (2003), ultimate business goals of organization consist of two types of goals: creating and maintaining viability with adequate return to shareholders, striving for sustained competitive advantage. If the company cannot meet the first ultimate business goal, it may run the risk of bankruptcy. Only 5-10% of companies have the ability for striving for the second goal (Boxell and Purcell, 2003). The ultimate business goals are affected by critical HR goals (e.g. labour productivity) and critical non-HR goals. Critical non-HR goals may include market share, increase sales and so on, which is introduced because not all organizational successes are contributing to HRM. For example, a superb brand name, Apple, could bring enormous economic value for the company as a critical non-HR goal. Critical HR goals concentrate on three types and levels of outcome: labor productivity (cost effectiveness), organizational flexibility and social legitimacy and employment citizenship (Boxell and Purcell, 2003). The third step is to analyze HR outcomes in terms of attitude, behavior and cognitive factors that would positively affect the critical HR goals – cost effectiveness, flexibility and social legitimacy (Basile, 2010). Empirical evidences state that there exists a relevant relationship between outcome variables. For example, an employee who has higher motivation about the job often shows a higher commitment towards the company (Basile, 2010). HR outcomes include employee satisfaction, commitment, motivation, trust, loyalty, retention and turnover, absence due to illness and social climate between employees and managers (Paauwe and Richardson, 1997). There also has a significant relationship between HR outcomes and critical HR goals. For instance, employees who are highly motivated and committed are more productive and flexible because they are eager to learn different job skills through job rotation and willing to work overtime when comparing to employees who have shown a low degree of commitment and motivation (Basile, 2010). Furthermore, perceived excellent impression of the organization by employees may create a potential positive impact on the social legitimacy of an organization (Basile, 2010). In Guest’s opinion (1997), HR outcomes are closer related to actual HR practice than performance (e.g. Sale, profits and market share). Direct linkage between performance and HR practice may cause overestimation of the HR effect caused by other potential factors outside HRM influencing these outcomes (Basile, 2010). The final stage is to determine the HR practice that positively affects above HR outcome (Basile, 2010). HR practices can be divided into three types: intended HR practices, Actual HR practices and Perceived HR practices. Perceived HR practices can affect the HR outcomes directly. For instance, a positive impact on the performance appraisal and compensation of employees is highly related to their job motivation and commitment to the organization (Basile, 2010). According to Pfeffer’s‘seven best practices’, HR practices mainly include: Selective recruitment and selection, extensive training, performance-related pay(PRP), team working, information sharing and communication, reduction of status differences and employment security(Pfeffer, 1998). From a series of empirical studies, there has an indication that certain HR practices have a positive impact on performance. For example, satisfied rewards a PRP will increase product quality (Kalleberg and Moody, 1994), labor productivity (Lazear, 1996), employee motivation(Dowling and Richardson, 1997), organizational commitment and employee trust(Appelbaum et al., 2000). Employee autonomy, such as job planning and decision making, has a positive influence on job satisfaction (Wallace, 1995). In addition, empirical research on the HRM and performance debate over the past 15 years indicates HRM mainly has a modest positive impact on performance and in same cases (Purcell, 1999). The relationship between HRM and performance is both statistically significant and managerially relevant (Paauwe, 2007). To conclude, HRM practices can bring positive effect on organizational performance through two ways: directly and indirectly. Some HRM practices have a direct influence on employee performance. For example, Training and development of employees will direct increase the labor productivity. The second way is through the HR value chain. HRM practices lead to HRM outcomes that affect the performance of the organization (Paauwe and Richardson, 1997). A series of concepts and tools are used for creating this value chain. Furthermore, there has another suggestion that the performance of the organization will affect the HRM as well. For example, a high profit margin could make managers to invest more money in employees (Baselie, 2010). Another consideration is the effect of contextual factors, which include the type of industry, the organization’s size, age and history, capital intensity and the degree of unionization, but also include the employees’ background), has a significant effect on this value chain. An HPWS is a pack of particular HR practices that produce employee abilities related to knowledge and skills, employee motivation based on a sophisticated incentive structure, and employment opportunity to participate in decision making (Baslie, 2010). The relationship between HPWS and HRM is that HPWS is a collection of human resource management practices and processes that increases the productivity of an organization in the employee knowledge sector, skills commitment and ease of movement. Performance standards of an HPWS are closely linked to the success of HRM practices. The result of a poor performance of HPWS standards in an organization always results in underperforming human practices in an organization and this is witnessed on the reduction of productivity and loss of profits in an organization. HPWS is responsible for influencing the attitudes, behaviors and performance of employees hence when they not properly integrated into HR practices in an organization, then the success of the organization is limited as such elements like skill and motivation are not achieved by the organization from the employee’s department as they are not properly motivated in sectors of growth and satisfaction (Bach, 2005). For the HPWS to function effectively, the HR systems are always required to have an internal and external fit to ensure that all the components from both system supports and compliment each other. An example of such a scenario in an organization is that one cannot find an effective organization where the leadership team does not support the human resources practices. A tool that be used to support and compliment both systems is the tandem use of a well developed technology (Yuan, 2013). High performance work practice (HPWP) is defined as the use and application of different practices employed by human resource management to increase or motivate the performance of employees or organization in a given operational area. On the contrary, a High performance work systems (HPWS) can be described as a methodical approach to the organizational design with an aim of matching the organization to the laid down structures, systems and processes put in place to help in achieving the operational goals of a workable system (Armstrong & Armstrong, 2012). The five components of a high performance systems (HRWS) which are used to achieve specific organizational practices put in place by the management are the support of the top leadership of an organization. For High performance works systems to be effective to effective in an organization, various leaders who are responsible for different departments should support put in place by the system to help the organization achieve its goals. Secondly, empowerment of employees by placing focus on team based structures ensures that HRWS systems are properly integrated into an organization as different groups are used in achieving specific goals. Thirdly, innovative human resource management creates a room where HRWS are integrated in the operation an organization without experiencing any barriers in the already existing work structures. Fourthly, performance measures which are put in place to evaluate the success of the systems integrated into an organization. Lastly, knowledge management, which requires that all stakeholders in an organization are made aware of the existence and operation of the new systems integrated into the organization. Then AMO model is an abbreviation which stands A-ability, M-motivation and O-opportunity. The model is used to explain ways that can be used by different key individuals tasked with various roles in an organization to enhance the performance and wellbeing of employees working under them. In this context, the ability as used in the abbreviation is used to refer to the work practices and policies introduced in an organization to impart skills which can be used by employees to work in different departments or sectors of an organization. Motivation refers to ways or processes which can be used by employees to achieve efficiency and success in their various work departments. In addition, motivation strategies that can be used in this section involves extrinsic, intrinsic and trust factors. Lastly, the opportunity process in this model is based on giving employees working in an organization a sense of belonging, engagement and well being to increase their performance standards and efficiency within the organization (Barney, 1991). Positive performance management is vital in determining key human resource management practices and processes. High performance work practice leads to stable environment where relationship rich practices are promoted within an organization. The relationship-rich environments created by positive performance of HRM practices promote coaching and mentoring which at the end leads to high performance in different sectors of an organization. As all parties involved, employees and management are welcome to advise, counsel, feedback and support from anyone working in the organization (Boselie, Dietz & Boon, 2005). In addition, relationship-rich environment within the organization generates commitment from all key players involved in the organization leading to such elements like reduced turnover rates experienced by the organization because of a number of reasons. Secondly, positive performance on HRM practices empowers employees working under different departments to be taken into consideration by the management while key decisions which affects the daily operation of the organization. This narrows down to decentralization of authority on the part of the management as employees are entrusted and incorporated in the decision making process. Thirdly, positive performance on human resource practice promotes information sharing in an organization. This is extremely important, especially in the sector of power differences of the different departments present in an organization as it leads to the internationalization of goals in different departments leading to information sharing as all parties present have different goals to attain (Jackson, Schuler, & Werner,2012). A high performance work system draws the intention of an organization on the various aspects it plans to adopt to achieve competitive advantages through such methods like improvising the human resource department. A positive performance on a high-performance work system incorporates beneficial practices. In addition, it takes into consideration the roles played by employees, flexibility of employees to their different job description and innovations adopted by an organization. The success of a high performance work system with consideration to HR practices in use is always dependent on the quality and efficiency of the systems used (Rodgers, 1993). The positive performance of a high performance work system lays focuses on high involvement work practices which are central to human resource practice puts key emphasis on employee decision making power and information access in any operational organization. An example is that an organization which applies the elements of high work performance work systems like incorporating employees in the decision process are always bound to succeed as compared to those where employees are not provided with an opportunity to air their views and opinions as with regards to the operation of the organization (Ulrich, D., Goldsmith, M., & Carter, L. (2004). However, high performance work practices may lead to limited performance gains for smaller business.Most small businesses like manufacturing firms or new businesses which in most cases always display benefit of their performance compared to bigger organization may not accept HPWP because of the limited performance gain it poses on their operation. Secondly, it may lead to linkages with other organizations due to the economic benefit system of other emerging production processes of an organization. Thirdly, the system promotes labor management distrust. An example is that labor unions may be suspicious of the intended purpose of the system and speculate that its incorporation in an organization to be a ploy of reducing labor costs incurred by the organization in question (Bontis, 2002). Empowerment is an HR policy and practice that might help in fostering the behaviors of a high performance system. It fosters a sense of intrinsic motivation and positive work attitude when applied in an organization leading to productivity and efficiency in all sectors of the organization. It also enables employees in a given organization to understand the competitive position of the organization they are working on hence leads to a participatory system where all parties take part improve different HR and high performance work systems behavior. In addition, empowerment as a practice creates a positive work environment where all the stakeholders in an organization are welcoming and open to the change process as they feel that the organization is their second home (New York State School Of Industrial And Labor Relations., 1947). Conclusion In conclusion, most employers and organizations should note that despite the fact that there are numerous human resource strategies and tools for performance theories, they should first of all study both internal and external environment, not all environments are feasible for business operations. Adoption of efficient human resources practices and strategies is the key to maximize the performance of any functioning organization. In addition, all the stakeholders of an organization like the management, non-management staff, different line and level managers should provide a system which encourages a continuous improvement and success along with appropriate benefits. Moreover, for an effective performance of an organization, all elements of a human resource management practices and high performance work systems should work in harmony with each to encourage growth and efficiency in all sectors of the organization. Reference list: Armstrong, M., & Armstrong, M. (2012). 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