Role that HRM Plays within the Strategic Direction of an Organisation - Literature review Example

Name : xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Tutor :xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Title Role that HRM plays within the strategic direction of an organisation Institution : xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Date :xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx @ 2011 Role that HRM plays within the strategic direction of an organisation Introduction Human Resource Management (HRM) is arguably the most important function in the organization. It is the only one that has an effect on everyone, right from the top management to the lowest cadres. It also has the responsibility of managing what is usually the greatest form of expenditure within organizations, namely employee remuneration (Talwar 2006, p.12). Having a comprehensive HRM strategy therefore has a major role in driving towards the general strategic objectives and direction of an organisation. This paper discusses the role of HRM in determining the strategic direction of organisations. According to Zhao, Yuan & Guo (2011, p. 232) there is the need to always ensure a strategic alignment between HRM and the overall objectives of the organisation. In most cases, the costs that go into employee benefits and salaries constitute the single largest item in the budget. They vary from figures of 60% in manufacturing firms to about 85% in organisations that provide services. It is therefore necessary to formulate an HRM strategy which will enable the creation of a competitive edge for the firm within its market. Nkomo (1990, p. 387) notes that, strategic direction essentially involves courses of action which lead to the attainment of goals set out in the organisation’s strategy. In Mabey (1999, p. 54)’s view, it is an important element in ensuring competitive advantage. It involves a strategic process in which a firm understands and utilizes an internally developed shared and strategic direction. The process examines how dedicated the organisation is towards updating its strategic direction, and also ensures that decisions that are made remain founded on the strategic direction. It will therefore make sure that the strategies, missions and goals have an internal consistency and that new technologies that may be adopted are strategically directed. One of the most widely recognized roles of HRM is that of a strategic partner. In order to guarantee its viability and capacity to make a contribution, the function has to take up the role. In it, HRM makes a contribution to the creation and accomplishment of organisational objectives and business plans (Crook et al. 2011, p. 81). Talwar (2006, p.13) explains that effective HRM has an important role in the attainment of the general strategic objectives of an organisation. It also indicates that the department has a full understanding and supports the general direction that the organisation is taking. Having a comprehensive HR Strategy further provides support to other specific aspects within the finance, marketing, technology and operational departments. A HR strategy ensures the capturing of the human element of whatever the organisation hopes to achieve in its medium and long term plans. It ensures that there the right combination of people and skills within the organisation. It also provides for the best skill mix and ensures that employees have the appropriate behaviours, attitudes and development. Most organisations identify their people as being the basic source of market competitive advantage. Successful businesses are always identifying and adopting HRM practices and policies that can be able to sustain the advantage. Most significantly, they design their training, work and performance management systems in ways that facilitate the achievement of the overall organisational outcomes that are desired. Successful companies align and integrate HRM practices and policies so as to provide reinforcement to employee behaviors which best lead to the realizations of their leaders’ strategic intentions. The sets of practices and policies that together constitute the HRM system are the vital management tools for the communication and reinforcement of the leadership’s strategic intent (Becker & Huselid 2006, p. 898). Elmer (1995, p. 134) explains that HRM’s business objectives are created to promote the achievement of overall plans and objectives. A tactical HRM function is highly knowledgeable about creation of work systems within which everyone can contribute and succeed in. The strategic partnership has an impact on human resource services for instance job design, rewards, hiring, appraisal systems, strategic pay and recognition, career management, employee development and succession planning. However, Talwar (2006, p.31) observes that there are cases where organisational plans and strategies are developed without consideration of HRM’s input. This is wrong. The HR strategy has a major role to play in ensuring that the other aspects are effective. It provides for the clear articulation of various common themes that are necessary in the successful attainment of other strategies and plans. This is in addition to identifying various fundamental issues underlying processes which need to be taken care of by a business or organisation if it is to have committed, motivated and effective people within it. HRM identifies which of the strategies and plans is fundamental so that there is the development of clear plans that will address them in order for the organisation to attain its stated goals. They would include issues relating to succession planning, workforce planning, and employment equity. HR strategies typically show that the planning of the workforce’s issues makes it much easier for an organisation to meet its wider operational and strategic goals (Mabey 1999, p. 55). Nkomo (1990, p.387) recommends that in the setting of organisational strategic direction, it is usual for human resource policies to be aligned so that they support progress towards accomplishing the organisation’s vision, mission, strategies and goals. Any business' goals are usually the main elements of its HR strategy. So as to align HR and overall strategy, it therefore becomes necessary to assess whether its internal capabilities are able to lead to success in business goal achievement. Strategic direction involves much planning. This has to include HRM issues due to the significance of human input in any organization (Elmer 1995, p. 132). Talwar (2006, p.29) explains that People are like the lifeblood of any organisation. They constitute one of its most valuable and potent resources. For this reason, the extent to which they are effectively managed is crucial in the enhancement and sustenance of organisational performance, both in the short and long run. An organisation that does not make plans for its future will stand a less opportunity for surviving competition in the future. According to Elmer (1995, p. 132), planning in HRM involves the collection of information, setting out of objectives and decision-making that will facilitate the attaining of the organisation’s overall objectives. Knowing the number of staff, the skill pool available, the best way of utilizing the available human resources and retain them is an inevitable aspect of organisational planning hence strategic direction. An effective HRM function plays the role of a strategic partner to the top management. It ensures that its processes, policies and practices are in line with the organisation’s overall strategy. It facilitates the creation of capacity for the execution of the strategy. Most importantly, it ensures the minimization of the time used in the strategy’s implementation. Strategy is rarely formulated without considering human capital. A strategic plan cannot possibly succeed in the absence of a successful recruitment, development, management and deployment of employees (Becker & Huselid 2006, p. 899). HR has the responsibility of coming up with an appropriate human capital strategy at any given time. According to Nkomo (1990, p.388) such a strategy is a major determinant of organisational success. Almost all significant changes that may happen in business or market dynamics usually call for changes in organisational human capital strategy. A HR strategy may add value by making sure that in all of its affiliated plans, the organisation is able to factor in and plan for changes that may occur within the environment in general. This is especially if the changes may have major impacts on the organisation. For instance, cultural changes may impact on employment patterns in future. Changes in the legal framework relating to employment will also be an issue. This also applies to the adoption of new employee management strategies by competitors for instance the taking up of flexible working (Talwar 2006, p.31). The maximization of the efficiency and impact of human effort is among the cornerstones of any performance improvement strategy. The maximization is of benefit to both individuals and their organisations in general (Mabey 1999, p. 43). According to research relating to strategic HRM and applied psychology, appropriate investment in human capital can lead to both positive individual and organisation level outcomes in performance (Crook et al. 2011, p. 81). If the HRM function has a clear strategic direction, then the organisation is likely to become more productive and cost-efficient. It also usually makes a considerable positive difference in employee morale when workers are aware that decisions which affect their jobs are arrived at through proactive and thoughtful procedures rather than reactive moves (Elmer 1995, p. 133). In relation to the overall strategic direction, effective HRM leads to the minimization of financial wastage. This is mainly through the avoidance of excess personnel. For instance, if a company that could work with ninety staff has a hundred staff instead; this means that a tenth of the workforce is unnecessary. Similarly, having too much work assigned to few people can lead to employee stress hence lowered productivity in the long run. Matching employee numbers with tasks at hand is therefore important in determining organisational profits. According to Zhao et. al. (2011, p. 233), effective HRM will help in predicting future expenses and needs. The modern business environment is constantly evolving and with it, workforce needs change too. For instance, if there is a growth in need for labour at a certain future period, the local community may be expected to help supply it. However, if through analysis it is discovered that local demographics are incapable of supporting the situation, there might be need to bring in the staff from elsewhere. This is more time consuming and expensive, and its effects may be minimized through planning in advance. In employee hiring, having a well-planned HRM strategy helps in managing costs. This is because it is the function that makes plans for employees who may have to be replaced. It also identifies the number of employable people available and their needs before they can become a part of the organisation. Mabey (1999, p. 57) explains that HRM is the most involved in training employees for their respective jobs. It is not possible to achieve effective training when there is no plan, and this will definitely apply for the entire organisation. The plan is what will state the knowledge that needs to be passed on, the people who will impart the knowledge and the format in which training will take place. Effective HRM will make sure that all workers are trained well. This enhances competence hence an increased level of employee safety, reliability and productivity. Conclusion In conclusion, HRM is the organisational function that deals with the recruitment, managing and provision of direction to the people working in an organisation. It is a comprehensive and strategic way of managing workplace, culture, environments and employees. An effective HRM system will enable everyone to make an effective and productive contribution to the company’s overall direction and achieving of organisational objectives and goals. HRM adds value to the strategic use of the workforce. It is therefore a key element of strategic direction. Bibliography Becker, B and Huselid, M, 2006, Strategic Human Resources Management: Where Do We Go From Here? Journal of Management, Vol. 32: 898 – 925. Crook, T. Russell, Todd, S, Combs, J and Ketchen, D, 2011, Does Human Capital Matter? A Meta-analysis of the Relationship between Human Capital and Firm Performance, Journal of Applied Psychology, Vol. 96 (3). Elmer, B, 1995, Linking Corporate Business and Human Resource Planning: Strategic Issues and Concerns, Human Resource Planning, Vol. 8 (3):pp. 133-145. Mabey, C. and Storey, J, 1999, Human Resource Management: A Strategic Introduction, Blackwell Business: Malden. Nkomo, S, 1990, Human Resource Planning and Organisation Performance: An Exploratory Analysis, Strategic Management Journal, Vol. 8 (4): pp.387-392). Talwar, P., 2006, Human Resource Management, Isha Books: New Delhi. Zhao, P, Yuan, Y and Guo, Y., 2011, Brief Analysis on Human Resources Management in Modern Private Enterprises, Asian Social Science, Vol. 7 (3): pp. 232-236. Read More