Importance of Human Resource Management in Creating Strategic Role in an Organisation - Example

Importance of human resource management in creating strategic role in an organisation Introduction The paper would discuss how important human resource (HR) management is in creating a strategic role within an organisation, especially focusing HR function as a role within multi-national corporations. The paper would focus on the need to create strategic HR policies for global companies by creating global talent management strategies. Finally, the paper would discuss the obstacles and challenges faced by contemporary HR function in the globalised economy. The main aim of the paper is to provide a comprehensive discussion how strategic the role is that of HR within an organisation. Strategic role of HR in an organisation In order to succeed, the contemporary organisations are dependent on the quality and contribution of the human capital considerably. The human capital is defined as a part of the company’s operational activities which utilises the resources and looks after the production. This in turn results in generating profits for the organisation, which is directly linked with the performance of the human capital and its efficiency in utilising the resources for maximum benefits. This also has far reaching impact on the goals of the organisation (Johnson 1996). In order to ensure that the human capital functions properly, the human resources need to play a strategic role within an organisation. It needs to perpetuate at all the levels of the company and integrate the goals of the organisation with personal development (Johnson 1996). With the growth in globalisation, the strategic role of HR management has also expanded rapidly (Novicevic & Harvey 2001; Scullion & Starkey 2000). Although, the corporate strategies of international companies as well as the HR strategies of these companies are being integrated in the recent years, the corporate HR function is still not being explored, especially while defining the HR function within a multinational corporation (MNC) and how it manages its talent worldwide. Therefore, this paper would attempt to understand the importance of creating HR function’s strategic role in MNCs by developing global talent management strategies. The need to create a strategic role for the HR functions in the MNCs has been felt not just because of the shortage of talents in the developed regions of North America and Europe, but also due to the shortage of professionals in the emerging markets, such as Brazil, India, Russia, and China, called as BRIC nations (Bhatnagar 2007). Further, despite the recent downturn in the economy, there would still be the requirement to supply talented professionals (Teagarden et al 2008). Although, the need to create efficient strategies to manage talent and implement these strategies in these emerging markets have been identified by most MNCs, still not much research has been conducted in this area (Sparrow & Budhwar 1997). Further, the demand of the organisations for skilled professionals is not matching with the current supply of the talent pool. These days the MNCs are looking for professionals who can be mobile, flexible as well as skilled to perform under pressure as well as multi-task effectively (Roberts, Kossek, & Ozekei, 1998). Such a condition is much more evident in emerging countries such as China and India, wherein the markets have seen recent boom in the economy and a large number of MNCs have set-up their operations in these countries. However, due to the sudden pace of development, most of these companies are not able to implement strategic HR practices (Lane & Pollner 2008). This has further resulted in unwanted hiring, higher attrition rates and mismatch of skills with the work function. In order to address these challenges, the MNCs and especially the HR function need to create innovative solutions and strategies to not only hire the right individual but also to retain the talent for a longer period of time. The HR function needs to create newer processes, tools and organisational abilities which would focus on specific functions such as sourcing, retaining and providing career advisory to the important talents within the organisation (Delahaye 2005). Such a situation provides major challenges as well as opportunities to the HR function to redefine itself and create strategic impact on the overall functioning of the organisation. However, in case the HR fails to achieve these goals and strategies, it may also result in the failure of the company to gain competitive advantage in the market and garner maximum profits (Cappelli 2008). Therefore, the HR function within an organisation, especially an MNC, should focus on creating core competencies, which can be transferred to multiple locations. However, these need to be constantly monitored and customised as per the practices and policies of a particular region. Further, the HR function should create an atmosphere of relevant corporate culture within the organisation, so that the needs of the global employees are also taken care of. However, in order to make global talent management a success, it is important to increasingly focus on sourcing for talents from the local market, which requires change in perspective towards searching for capability driven talent. Further, post the hiring, the HR should also ensure that a firm wide sharing of talent and capabilities are taking place in order to integrate, motivate and retain the talents (Delahaye 2005). In the recent years, companies have been witnessing a centralised approach towards talent management, although more at the regional level than at a global one (Collings et al 2008). However, it has also been argued that decentralised structures are also necessary to create more independent and strategic HR roles in the global companies (Scullion & Starkey, 2000). Although, such a decentralised structure might be difficult to realise, it has been found very effective in the regional level. Thus, HR can play a strategic role in an organisation, especially in an MNC to create a global culture and manage talent in a better manner throughout the organisation. Such a strategic role of the HR would help in identifying important positions within an organisaiton, developing a pool of talented professionals who can fill up these positions and creating a competitive advantage for the organisation. These benefits are discussed in detail in the sections below. Benefits of strategic HR The foremost benefit of strategic human resources management is to identify important talent positions within an organisation. In traditional companies, the job responsibilities of the employees were measured in terms of the skills, inputs, efforts of the employees as well as the working conditions provided by the organisation (Huselid et al. 2005). However, with the advent of globalisation, this outlook has changed completely and factors such as local culture, policies, people’s perceptions etc are also taken into consideration. However, it is also important to integrate the regional companies with the overall organisational strategy as well. In order to achieve this, the implementation of strategic HR would help organisations to find out about key talent that can bridge the gap between the companies at the regional and corporate levels. In order to identify these important positions, the HR would need to evaluate the talents based on potential outcome and potential contribution of these talents towards the overall progress of the organisation. However, the HR should also focus on the individual performance of these employees, especially while implementing strategic decisions (Huselid et al. 2005). Although, the HR might be able to identify roles that are important from the strategy point of view, it should be aware of the fact that such roles should not be standarised. The HR should just not focus on identifying employees for these positions on the basis of qualification and set performance matrix and providing them with standarised training, instead it should also try to create differentiation within these positions by customising them as per the regional requirements. Therefore, strategic implementation of HR would mean identifying various talent positions that would not just be standarised but are also flexible enough to incorporate the regional requirements (Delahaye 2005). Further, strategic HR would also help in identifying the talents that require minimal resources, training or management interventions. These talents are therefore, very valuable for any organisation as they create impact without being trained to do so (Boudreau and Ramstad 2005). Organisations often spend too much of resources in training people to acquire skills to take on the next level of responsibilities. However, often such trainings are not helpful and the organisation looses a lot of resources. Therefore, the HR can play a strategic role in identifying such talents that may not require any training and can fulfil these important positions without any investments on the part of the organisation (Boudreau and Ramstad 2007). In order to fulfil these strategic positions, the HR needs to create a pool of talented professionals, who can be asked to fill in these positions even in a short notice. After identifying the important talent positions in an organisation, the next step the HR employs is to create a pool of talent who can take up these positions. However, in order to create such a talent pool, the HR needs to implement strategies such as identifying talented employees on a proactive basis rather than adopting the reactive process. Thus, HR can not only strategically identify the key positions within an organisation, but can also create a pool of talents that may fill these positions as well (Delahaye 2005). It is also important to create a bridge between HR practice and organisational values, so that the performance of the organisation can be maximised. In the traditional companies, HR only focused on a very broad perspective about the organisation. However, with the increase in the number of MNCs, the focus has now shifted towards creating a more individualised and customised HR practice. This has resulted in implementing strategic solutions in the HR practice, which is helping the companies in creating a competitive advantage for itself, especially in the emerging markets (Lengnick-Hall, & Lengnick-Hall, Andrade, & Drake, 2009). Strategic HR helps in identifying the strategies adopted by the competitions with regards to their hiring, retention, training and appraisal aspects. Post the identification of these aspects, HR can put forth suggestions to create strategic orientations within the organisation by focusing on creating policies that emphasises more on developing the human capital (Boxall & Purcell, 2008). Obstacles and challenges However, playing a strategic role within an organisation for the HR practice may not be all that easy. There are various constraints and challenges that the HR practice may have to face, especially in the MNCs. For instance, the shortages of talented professionals have been the major constraint for the HR function (Scullion & Brewster, 2001). Such a shortage of talent has also resulted in decline in the growth of the companies at a global level. Therefore, the HR function require strategic policies to develop individual employees so that they are provided with competitive edge and are able to take on the next level with considerable ease (Lewis & Heckman, 2006). However, it is a difficult process to harness individual talents and often organisations are not able to continue such initiatives (Cappelli, 2008). Although, organisations have been able to identify the importance of the strategic role that HR can play in the growth of the organisations, there is still a lack of concrete policies with regards to providing strategic decision making powers to the HR functions (Sparrow & Balain, 2008). Further, due to the increase in global competition to hire skilled professionals, especially in MNCs and emerging markets, the HR has been facing pressure from the management as well. The organisations are increasingly demanding for hiring professionals with greater skills to manage global operations (Dickmann, Sparrow, & Brewster, 2008). However, the supply level for such talents is not as per the demand level. This is particularly true for countries such as the US (Cappelli, 2008) and emerging markets like India and China (Teagarden et al., 2008). Therefore, companies are initiating proactive hiring and training existing employees to upgrade them to the next level. However, such strategies mean more allocation of resources and time towards arresting attrition and retaining the relevant talent. This might be a difficult job to achieve due to increase in competitive hiring in the market. Summary Although, human resource has been identified as an important function that can play a strategic role in the development of an organisation, such a strategic role has not been studied in detail so far. The paper concludes that creating a strategic role for HR function is still at its nascent stage and requires significant advancements. It was found that strategic HR involves identifying the key talent positions within an organisation that would help the organisation to sustain in the market without investing too much into developing these positions. Further, strategic HR also looks after creating a pool of talent which can fill these key positions at a short notice. Finally, strategic HR is also required to create a function that is not only standarised in its approach but is also flexible enough to incorporate regional policies and culture. The overall function of strategic HR is to create an organisational value that would help in developing the organisation in the global level. The HR is also required to identify the potential talent within the organisation as well. These talents should be proactively recognised and given proper training and guidance to take on the next level. The HR should also focus on creating a talent pool that may be able to fulfill the important positions within the organisation. The HR should be able to create such mechanisms that can recognise high performing individuals who are also knowledgeable and capable enough to undertake important position in a global organisation. However, the HR function should also focus on retaining these talents within the organisation by suggesting various means to the management such as providing them with incentives and added benefits. The HR function should also carry out research regarding the policies followed by the competitors, so that the organisation can match up to the benefits and packages provided by the competitors. This paper has attempted to focus on the increasing importance of HR function in terms of the strategic role that it plays in the development of the organisation, especially on a global platform. Although, in order to undertake a strategic role, the HR function may face various challenges and constraints, but through an innovative outlook and development of new HR tools and process, the function would be able to succeed. The paper particularly focused on the HR function’s changing role in MNCs and in emerging markets such as China and India. 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