Strategic Human Resource Management - Case Study Example

The following is a study of Human Resources Management (HRM) in a strategic context, where certain HRM strategies are implemented, which have consequences on the overall corporate strategy of any have given organisation, hence giving the HRM function the name strategic human resources management (SHRM) (Armstrong and Baron, 2002). The study focuses on how SHRM influences the overall performance of an organisation. The CIPD defines SHRM as, “all those activities affecting the behaviour of individuals in their efforts to formulate and implement the strategic needs of business” (2009). This may mean that SHRM has the ability to change the way things are done in an organisation, effectively changing an organisation’s culture (Schein, 2004; Robbins, 2003). However, individual HRM strategies in themselves may not be strategic HRM, where SHRM is the “overall framework which determines the shape and delivery of the individual strategies” (CIPD, 2009). Strategy exists in all organisations as it is concerned with defining the organisation’s behaviour and its existence in a given environment, where the role of SHRM is to explain how the human resources function influences organisational performance (Boxall and Purcell, 2003). Dyer and Holder (1998) give us the main features of SHRM, where SHRM at the organisational level is planned at the top, where decisions are made regarding goals, policies and allocation of resources; the focus of SHRM is then aimed at organisational effectiveness or better performance, where people are viewed as resources that need to be managed towards the achievement of strategic business goals; HR strategies are then seen as frameworks which are broad, integrative, unifying and contingency based, as they incorporate a whole lot of HR goals and activities which are designed to be in strategic fit with the environment (also see Mankin, 2009). This particular study will focus on the role of SHRM in multinational organisations (MNCs), where the HRM function becomes international (IHRM). IHRM is a relatively recent addition to the field of human resources, developed mainly because of the rapid pace at which businesses are getting internationalised as a result of globalisation (Scullion, 2001). Even though IHRM’s operations are based on the same parameters of domestic HRM, it is much more complex as it deals with sensitive cross-cultural issues and calls for proper education of the local behaviour in terms of culture, values, business practices, and employment laws of the host country of a subsidiary of any MNC (Torbiorn, 1997). Hence IHRM can be defined as, “the HRM issues and problems arising from the internationalisation of business, and the HRM strategies, policies and practices which firms pursue in response to the internationalisation of business” (Scullion, 1995 cited in Scullion and Linehan, 2005, pg4). The four parameters within the HRM function as defined by Fombrun et al are staffing, appraisal, rewards and development (1984), where each parameter can be taken as a strategy of the HRM function, working towards the overall strategy of the organisation. Each parameter is strategically designed towards better organisational performance. In the international context, this study will be focusing on the staffing strategies of MNC’s. Staffing in the international context takes many dimensions, as it deals with the processes of expatriation, where parent country nationals (PCN’s) are recruited, trained and transferred to a firm’s foreign locations. Expatriates are considered, “trustworthy employees sent abroad to represent the interests of the company” (Boyacilliger, 1990 & Nohria and Ghoshal, 1997 cited by Bonache et al, 2001). Even though many MNC’s still widely follow the practice of expatriation, many disadvantages have been identified over time as expatriation is a relatively expensive process of finding the right staff with the required competence levels of operating abroad, which includes the ability to study and understand the cultural differences, personalities and other features of diversity (see Hofstede, 1997; Dowling et al, 2008); recruitment of host country nationals (HCN’s), where a firm’s foreign subsidiary is operated by nationals of that country; and third country nationals (TCN’s), where individuals of a third country are recruited to work in a firm’s foreign location (Scullion, 2001; Torbiorn, 1997). The first two (PCN’s and HCN’s) however, are the most common options used by international staffing as they reflect the main challenge of ‘central versus local’ cultures in relation to the corporate and social culture of the parent company, and that of the host company of a foreign subsidiary, with the main dilemma being which of these cultures are to be used for the firm’s overseas operations (Dowling et al, 2008; Trompenaars and Hampden-Turner, 1997; Torbiorn, 1997). In the above context, this study will look at the examples of the Royal Dutch Shell Company and IKEA, who have excelled as multinational corporations in formulating international strategies within their HR functions, whilst not losing the core values on which they operate from their corporate centres. The SHRM role here is to ensure uniformity of vision and corporate objectives in the firm’s overseas operations. According to Cibin and Grant’s research on the Royal Dutch Shell Company (1996), the corporate centres in Britain and Netherlands had to drastically flatten the company’s organisational structure to ensure transparency and clear communication from the centres to the subsidiary channels, and also invest in recruiting HCN’s for their foreign operations to improve the overall performance of the organisation by meeting the legal and cultural demands of local operations. Although expatriation was initially the HR strategy used by the company, it proved unsuccessful as PCN’s were not sufficiently equipped with local knowledge, and this lead to misunderstandings and strife from the local workforce. Also, many expatriates have confessed that apart from their differences from the local workforces, their repatriation process was unsatisfactory in that they were not given tasks that were in line with their newly acquired overseas experience and their jobs became mundane, leading them to look elsewhere for employment. IKEA on the other hand has also incorporated the above staffing principles in their overseas operations. An investigation by Capell et al (2005) and Hollensen (2007) into IKEA’s recruitment websites in various countries of operation reveals that the corporation, which has been dubbed as a king in globalisation, uses the same basic values to attract local workforce in all these countries whilst not losing its Scandinavian origins by publishing pictures of a Swedish couple advertising their jobs on all these websites. This is an excellent example of corporate identity whilst promoting uniformity of vision and corporate goals, and using these goals to attract and recruit local talents that are best suited to the environment to achieve better organisational performance. Hollensen also says that a franchising contract authored centrally at IKEA controls all business processes in all stores in all countries of operation (2007). In IKEA’s corporate office’s own words, “We encourage an environment where people of different views, age, nationality, gender and ethnic background feel welcome. We believe that a diverse workforce will improve business results, strengthen our competitiveness and make IKEA a better place to work” (2006). Both the above examples highlight the staffing process to be of strategic importance, as it works towards achieving corporate objectives. The main strategic objective of any organisation is to achieve competitive advantage in their given market, and according to Keeley, “Competitive advantage in a global economy requires that a MNC be able to tap the talents of local HCN managers; to do this the MNC’s must be able to attract, retain and develop talented HCN managers” (2003). Keeley also argues that by not investing in HCN’s the organisation would not only lose valuable human resources but in some cases would also breach local anti-discriminatory laws. Both the above mentioned organisations, along with many other MNC’s seem to have realised the truth in Keeley’s arguments. In conclusion, Human Resources Management has now been classified as a strategic function of an organisation as it is involved in policy making towards achieving corporate goals, and organisations and academic authors tend to coin this as Strategic Human Resources Management (Brown, 2003). In light of the examples used in this study, it is clear that a strategic HR function, in this case staffing, can influence organisational performance, especially if it helps achieve competitive advantage. Although this may differ according to differing contexts, for example, on a domestic level, it may be advantageous for the organisation to employ staffing policies in line with domestic demographics. So in multicultural societies like Britain, it would be advantageous to recruit staffs that reflect multiculturalism, which also reflects the national culture of the country. Hence the argument that a strategic HR function can influence organisational performance is highly valid. Bibliography Armstrong, M and Baron, A. (2002) Strategic HRM: the key to improved business performance. Developing practice. CIPD: London Bonache, J., Suutari, V. And Brewster, C. (2001) ‘Expatriation: A Developing Research Agenda’, Thunderbird International Management Review, 43(1): 3-20 BOXALL, P. and PURCELL, J. (2003) Strategy and human resource management. Basingstoke: Palgrave Macmillan Boyacigiller, N. (1990) ‘The Role of Expatriates in the Management of Interdependence, Complexity and Risk in Multinational Corporation’, Journal of International Business Studies, 21(3): 357-81 Brown, P. (2003). “Seeking Success through Strategic Management Development”, Journal of European Industrial Training. 27/6: 292-303 Capell, K., Sains, A., Lindblad, C., Palmer, A. T., Bush, J., Roberts, D., & Hall, K. 2005. Ikea - How the Swedish Retailer became a global cult brand. BusinessWeek Cibin, R., and Grant, R.M. (1996). “Restructuring Among the World’s Largest Oil Majors”, British Journal of Management. December edition Dowling, P.J., Festing, M., and Engle, SR, A.D. (2008) International Human Resource Management. Thomas Learning: London Dyer, L. and Holder, G. 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Organisational Behaviour. Prentice Hall, New York Schein, E.H. (2004). Organisational Culture and Leadership. John Wiley & Sons, Inc, San Francisco Scullion, H. (1995) ‘International Human Resource Management’, Human Resource Management: A Critical Text. Routledge: London Scullion, H. (2001) ‘International Human Resource Management’, Human Resource Management. International Thompson: London Scullion, H. And Linehan, M. (2005). International Human Resource Management. Palgrave-Macmillan, New York Torbiorn, I. (1997) ‘Staffing for International Operations’, Human Resource Management Journal, 7(3): 42-51 Trompenaars, F., and Hampden-Turner, C. (1998) Riding the Waves of Culture: Understanding Diversity in Global Business. 2nd edn. McGraw-Hill: New York Online Resource(s) CIPD, 2009: http://www.cipd.co.uk/subjects/corpstrtgy/general/strathrm.htm (accessed on 26/02/2010) Read More