Strategic Human Resource Management - Essay Example

Strategic Human Resource Management The core substance of the report is to discuss why organisations should adopt strategic approaches for conquering the challenges posed by a highly competitive business environment which is has become even more challenging due to the global recession. The report is concerned about the trend which is observed in present day Organisations that are focusing on the survival rather than their growth and development. Organisations collapsed due to economic slowdown have alerted the existing ones regarding their survival in the highly uncertain environment where survival has became a tough matter of subject. The report discusses about the after-effects of the economic recession which has made many Organisations to perform various changes within their business operations from reducing their business resources and cost incurring sources to minimize their cost and raised their savings rate. The decision of focusing more on survival than growth has accompanied numerous disadvantages which are faced by the Organisations. Introduction According to Schuler (1992) “all those activities affecting the behaviour of individuals in their efforts to formulate and implement the strategic needs of the business” is known to be as Strategic human resource management. It has also been advocated as “the pattern of planned human resource deployments and activities intended to enable the firm to achieve its goals” by Wright & McMohan (1992). The strategic human resource management has been identified as a significant part of the organisational core strategy due to its concern for the entire organisational functions and their respective policies and plans (Armstrong, 2000). Organisations such as IBM, Intel, and GE are some of these companies which have considered their human resources as an important part of the organisational strategy formulation. Organisations such as Xerox, Chase Manhattan Bank, and General Foods are some of the organisations which consider their human resource as a component of the organisational plan (Bratton & Gold, 2001). It remains a debatable issue whether; SHRM should be used as a cost cutting tool to lay off employees during economic crises. This has become a reiterative topic of discussion in academic as well as corporate circles owing to the recent global recession because many of the strongest organisations, and not to mention a myriad of small and midsized firms, have considerably downsized their employee base in the aftermath of the economic slowdown. Though the reason was to save costs, but keeping in mind the fact employees are their most precious assets, the organisations should use SHRM through unexplored avenues in order to use it as a survival tool that will aim at protecting the interests of both the firm and its employees. The economic movements across the world have shown some worst phases to the business world and have touched all of its aspects. Especially the human resource management of organisation have been greatly influenced by these economic turmoils. Major effect of the slowdown made the Organisations to downsize their workforce for reducing the financial burden over the organisations. Apart from human resource the Organisations have shown concern for other aspects also which directed them to think of survival rather than growth. The adverse economic condition engulfed many small and medium sized Organisations which had less backup to face tough conditions. The basic requirement of the Organisations i.e. financial stability has become major concern for them which had profound collateral damage over the related organizational dimensions and its environment. Challenges for SHRM The core concept of strategic human resource management in based on the research based views of the organisations. It is also believed that the diffused nature of human resource management throughout the organisational structure including all of its dimensions has been considered to be effective in strategy formulation. Due to its presence in all of the organisational parts it is much helpful in considering the views of all of the organisational people rather than being limited to the visions of managerial and executive level people. In this respect the strategic human resource management is also found to be related to the survival of the organisations which has also been assessed empirically. Though it has been analyzed through the studies that human resource management can be one of the most significant contributors to the strategic success of the organisations not all of the companies have agreed to such kind of approach due to which it is found missing in those organisations. Being adopted a strategic approach towards the human resource management by the organisations they utilize their efforts in developing their knowledge base through effective acquisition and management of talent within the organisation (Lawler & Mohrman, 2003). Organisations such as Coca Cola, Procter & Gamble, and many other European brands which have their business expanded across the globe, perform the activities of global staffing through which they acquire region specific talents and utilizes their potential into the business operations of the organisation. Some other significant challenges which organisations face during their expansion of business operations and developing global human resource of the organisation are the variations in the law, policies, culture and language of the different business locations, and the political factors which also has an impact on the business operations of the organisations. Managing the health and safety of the employees, providing them with proper compensation, and maintaining the global employee relationship activities are also found to be a challenging aspect of the human resource management which require a strategic approach from the organisational people. Providing the employment opportunities without any biasness and partiality by the global organisations has also been effective in improving the human resource of the organisations (Anonymous-a, 2008). Adopting the strategic approach towards the human resource management have also found challenging consequences when organisations fail in selecting the right strategy for the right condition. The wrong selection of strategy could produce irrelevant and confusing outcomes which could distract organisations from their desired organisational goals and objectives. This wrong selection of strategy leads to confuse the organisational members and ultimately they also find difficulties in predicting the future human resource trends which could emerge in near future (Hunter, 1995). SHRM in Present Business Environment The strategic human resource managements’ effectiveness is assessed on the basis of the support which it offers to the organisations during adverse conditions of variable forms. The organisational approach in the present business environment has tended to adaptability towards the changes which are taking place frequently. The rigidity of the human resource policies gets lowered due to the strategic human resource management which also adds the concept of change management and adapts the organisational human resource policies as per the demands of the business environment (Schuler & Jackson, 2007). The strategic human resource management considers the human resource of an organisation as a group of systems which requires the macroscopic view rather than the microscopic view towards the human resource of the organisation and their contribution to the success of the organisation. It does not adopt the individual level of practice which could be done through the leadership approaches. Rather it asks for practices which have something more than the presence of leadership approach. The strategic approach to the human resource classifies the organisations into categories as high-commitment by Walton (1985) while Lawler (1986) has advocated another category of high-involvement and Osterman (1994) designated another category of high performance. These are the three classified types of workplaces according to the strategic human resource management. Organisations adopt their respective approaches among the above classified types of the organisations. It has also been advocated that the organisations utilizes their strategic approach in three different conditions with different intentions which could be related to growth, stability, and defence from the losing the market shares. Organisations sometimes adopt a mixed form of all the three identified approaches in their respective conditions (Hunter, 1995). The theoretical aspects of strategic hum resource management have a set of organisational perspectives which varies from exogenous to endogenous organisational factors where exogenous factors represent the factors which are external to the organisations and the endogenous factors include the internal factors which are present within the organisations. It also has perspectives which includes the perspectives suggested by the authors such as institutional theory proposed by Meyer and Rowan (1977), theory based on the dependence on the resources by Pfeffer and Cohen (1984), transaction cost theory proposed by Williamson (1981), theory based on the strategic choices proposed by Child (1972), and the theory based on the resource based views suggested by Penrose (1959). The resource based theory is more inclined towards the resource based views adopted by the organisational members (Stahl & Björkman, 2006). Present Day organisations and SHRM The involvement of strategic management into the human resource management of organisations have became more prominent in the recent past times due to continuous increase in the competition level among organisations in all of its aspects. Under the act of involving strategic approach towards the human resource management asks for the alignment of human resource of the organisation with that of the organisational strategy which in return supports them accomplishing their organisational goals and objectives (U.S. Office of Personnel Management, 1999). It is related to the integration of the decision making in terms of organisational people and the decision making related to the result which the organisation is desired to obtain (Storey, 2007). By forming strict systems for the financial activities such as accounting management system, project appraisal system and the systems which are concerned with the capacity building organisations have enhanced their control capabilities (Schuler & Jackson, 2008). Present day organisational members also face short term pressures due to the business environment which has impact on the human resource management of the organisations. The impact can be identified into two different categories which have both formal as well as informal objectives. The formal objectives are understood by the present day managers through the performance objectives of the organisations. The other informal way of understanding the objective have been found to been identified by the mangers through the instruction provided to them by their seniors and superiors (Gratton, 1999). SHRM as a Survival Tool A recent survey of HR professionals have revealed that retrenchment will be the buzzword for quite some time as the organisations are finding it increasingly difficult to cope with the aftershock of the global economic crisis. Among a wide range of strategic measures that the organisations have found useful, the poll suggests that five measures are most likely to be taken globally. These are discussed below: 1. Organisations will cut their budgets as a routine practice in order to counter the financial crunch. This is a corporate measure which ensues from strategic financial planning and is not subject to criticism as long as the employees are not affected due to this. 2. As an interesting strategic move, firms may loosen their employee retention methods and actually allow attrition to take place. This will reduce the employee base and save organisational spending without affecting organisational goodwill. 3. Hiring or recruitment drives may be frozen in order to limit the employee intake. Generally a strong employee base speaks of organisational solidarity and competent employee related policies, but at a response to a stringent economical environment, organisations may think of survival and take less manpower on board. This is a healthy practice if the management maintains its policies concerning the compensation and benefits of the reduced workforce. 4. Few organisations have expressed that they will think of freezing wages and cutting bonuses as appropriate cost cutting measures in a crisis situation. This step is valid owing to the fact that the employees will have to sacrifice a portion of their compensation but will not lose their jobs. 5. In a striking contrast with the extensive media reports on lay off, the poll has suggested that it will be the last alternative which organisations will resort to for the purpose of survival, if recession continues (Anonymous-b, 2009). It is clear from the findings mentioned above that the primary objective of SHRM is to make the best use of human resource in optimizing the productivity and profitability of the organisation and hence this discipline aims at retaining the employees as long as the financial health of the organisation permits. Under circumstances of acute financial crisis it becomes difficult retain employees as the fixed overhead of salaries and wages becomes a burden for the organisation and it is only then that a lay off decision has to be taken. Economic uncertainties impacting Organisational activities The economic uncertainties have impacted almost all of the aspects of the present day Organisations including its planning and controlling processes for different resources possessed by them. Considering the human resource management of the Organisations in the phase of economic uncertainty many of the human resource management functions have been affected by the economic scarcity. Organisations have reduced their investment levels for the purpose of training and development with curbing their recruitment activities. Apart from the human resource activities Organisations have also observed changes into their strategic planning process and their decision making system. The strategic planning aspect of present day Organisations have influenced in terms of their point of focus which remained at growth and expansion prior to the economic slowdown. As an after-effect of the slowdown the Organisations have started focusing more on the capital and financial issues to safeguard themselves from financial crises which are the fundamental resource of the Organisations. The risk taking ability of the organization shave reduced drastically which is mainly due to the poor performance of several big corporations such as Lehman Brothers, Merrill Lynch, and Bear Stearns due to financial crises (Wood, 2010). Organisations have taken lessons fro these incidents which indicated them to give more importance to the financial stability of the organization which will support Organisations in economic scarcity. Role of business planning in uncertain environment Organisations operating in the highly competitive and uncertain environment perform their planning part more carefully as this seems to be only way to escape from the economic scarcity. Through a successful business planning approach Organisations gains numerous ideas about their goals and the ways to achieve them. The planning process also considers the past and present external and internal environment of the organisation which makes them capable of predicting the future (Bevers et al., 2003). Organisations based on their predictions prepare themselves to face the challenges of the business world in near future. The significant role of business planning is that it makes an organisation proactive facilitating them with a competitive edge against their competitors and resistance against the uncertain economic environment. Survival in uncertain environment The term survival in the context of Organisations and the uncertain business environment describes the way which supports Organisations to exist in adverse circumstances. It signifies the existence of the business entities performing their operations in most efficient way to achieve their desired level of performances in extreme conditions. Organisations adopt various ways to ensure their survival and a long term life of their business operations. Most effective way of ensuring the survival Organisations are required to identify and adapt themselves according to the change. Preference of survival rather than growth Organisations of present day business environment have become more conscious for their survival than to grow their business. The major reason behind the change of preference is the uncertain economic environment of the world economy which caused many large Organisations to shut down their business due to financial crisis. Bankruptcy of Lehman Brothers is one of the significant examples of economic slowdown which mainly occurred due to financial crunch faced by the company (Lehman-website, n.d.). The economic uncertainties have forced present day Organisations to think of survival than growth which has significantly impacted the Organisations in terms of their resources as well as performance. Organisations are eagerly looking for alternatives through which they can ensure their survival in this highly uncertain environment. Under this initiative the companies are exploring all of the areas of its operations to make their firm grip into the market and have a long term life of their operations. Organisations have shown more interest towards the change management concepts which have proved to be effective for preparing Organisations to meet the future challenges. Drawbacks of survival approach Present day Organisations are facing two distinct problems which have brought them under condition of dilemma with selecting any one of the two options. Presently Organisations are worried about their survival than thinking of their growth where the question for survival is dominating over the other one (Anonymous-d, 2009). Organisations adopting measures for survival have overseen many crucial aspects which are internal to the organisation. These ignored aspects have paid for the ignorance which resulted into high attrition rate and job hopping of the employees. Organisations frequently making changes to resist the economic challenges have made their employees to suffer due to which they preferred to switch jobs resulting into higher attrition rates. Higher rate of attrition has its major impact on the human resource department of an organization causing it to form temporary structures. The human resource of Organisations have become temporary due to high attrition rate and lowered level of employee loyalty (Bertrand, 2010). Present day organisations are more inclined towards the creation of capital to fight the adverse and uncertain economic phases. In the run for capital creation organisations are loosing their valuable workforce which they have left uncared. Many Organisations after the event of economic recession have focused on the capital than the workforce and their loyalty which they have shown for the organization (Anonymous-e, 2008). The human capitals of the organisations are getting affected due to the creation of capital for the organisation. Organisations have also been questioned on their corporate governance polices to show their flow of fund and profit values by the employees who were left untreated by the company with a valid reason of financial crisis. The overall impact of the activities is going to create a very bad and negative image of the organisations in the global market. Conclusion Present day Organisations are more concerned for their financial capabilities to meet the highly competitive and uncertain business environment. Organisations should perform their business planning by providing equal importance to the survival as well as their growth. Thinking of only survival might bring stagnation to the business performances of the Organisations. So Organisations adopting survival strategy should also focus equally on their growth prospect so that they can have a balanced approach towards their desired goals and objectives. Challenges could be of various types and can generate from different sources. So Organisations are required to identify those sources and characterize the problems which could support them preparing themselves to face those challenges. Recommendations Today most of the Organisations are found to be engaged in preparation to ensure their existence. As it was seen in the case of Air National which got privatized by the government of Britain as a result of which the company faced all of sudden increase in the competitive forces due to other private companies in airline industry. The company also lost the political strengths and influences which acted as substantial support to Air National (Bratton & Gold, 2001). During this adverse business condition the organization initially worked for its survival but parallel to that it also considered its growth which it achieved through the strategic approaches. To meet the technological challenges raised by the business environment Organisations could adopt approaches of SHRM under which they can develop their workforce by providing substantial training and skill development support (Delbridge, Gratton, & Johnson, 2006). As strategic HRM interventions, organisations should design their recruitment policy in a way that best suits crisis control. Organisations should try and find skilled and competent candidates for critical positions (Anonymous-c, n.d.) so that additional cost of training and development can be saved. The management should also ensure that the employee base it is left with post downsizing consist of the most competent, efficient and talented employees. As these employees are rich with experience, targeted programs will be sufficient for their need based training and development. On account of being small scale, these programs will also be economical. It is equally important to recruit and/ or retain employees who are capable of multitasking. References Anonymous-a. 2008. Human Resource Management Global Human Resource Management. [Online] Available at: http://bc.inter.edu/facultad/ialvarado/BADM%203330/presentaciones%20Mondy/Chapter%2014.ppt [Accessed on January 28, 2010]. 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