Effective Use of Strategic HRM Principles and Practices - Coursework Example

Strategic Human Resource Management Introduction Strategic management planning is believed to be the driving force of successful business these days. This belief has been validated by multiple empirical studies from F. Taylor and E. Mayo (1946; 1949) and to the new generation of organisational scientists, such as D. McGregor (1964), F. Selznick (1957), and others. The rapid shift from a product-oriented business strategy to a customer-focused and knowledge-based one has become a primary drive of most sufficient strategic management plans in modern companies since industrial revolution (Nelson, 2004). Effectiveness of modern organisations could only be emphasized by means of necessary organisational changes determined, as Buchanan (2001) and Van de Ven (1995) believe, by purely organisational and external (market) challenges. Many researchers (Steven, 2003) also believe that primarily due to the inability of necessary and forehanded strategic management plans’ development such industrial and technological giants as Enron, Daewoo Motors, Pan American etc. lost their position in the world market (Deetz, 1996). The concept of strategic management covers many aspects of organisational functioning and involves the elements of psychology, sociology, economy, marketing and even anthropology (Balogun et al, 2003). From organisational perspective strategic management is an umbrella term which includes long-time development of a company (1), definition a step-by-step tactics of strategic objectives’ achievement (2), organisational planning (3), human research management (4) etc. In fact, strategic management includes both internal (organisational) and external (market’s) factors that influence company’s development. The aim of strategic management hence, is to accommodate a company to the changing and tight market and establish a strong unity of people (a team) within company’s structure and achieve its competitive advantage. Effective human resource management (HRM) is one of the key tools in achieving this goal. Over the past decades, the way in which people are managed, promoted and stimulated at workplace has become the primary field of interest in terms of assessing and improving organisational efficiency and marketability. Growing competitiveness in the market forces modern companies increasingly rely on skilled and motivated personnel then on technologies and products. In a situation when company’s past success does not provide a password to cloudless future organisations need to rely on stable assets and first of all on human resources. Increasing attention to human resources has recently called into being a new set of methods, principles and techniques known as Human Resource Management (HRM). The importance of HRM has already been recognised by virtually any company which follows western standards of business. Consequently, in modern organisational paradigm performance depends not only on hard and attenuating work of its personnel, but also on the “human side” of the employees, their competence, motivation, attitudes, communication and other variables with HRM being “...the core of company’s general efficiency and the basis for effective management” (Gunnigle, Morley, & Kelly, 2002: 12). In a similar vein Beardwell (2003: 15) believes that despite the visible simplicity, the area of HRM is exceptionally complex due to potentially unpredictable nature of human resources. If a company fails to properly and effectively manage its human resources in the right areas of the business, at the right time and at the right cost, serious inefficiencies are likely to arise creating considerable operational difficulties and likely business failure (Beardwell, 2003). Main Body Originally emerged in 1960s, the paradigm of HRM relied on previous researches and findings of organisational scientists. As Alan Price (2000: 62) states the concept of HRM “...hasn’t come out of nowhere” as there is a long history of attempts to achieve an understanding of human behaviour in the workplace. Throughout the whole XX century and even earlier both practitioners and scholars attempted to design the theories explaining human behaviour at work and the ways to raise its effectiveness. A number of organisational theories brought to life the principles of HRM in 1960s-1970s. Though many of modern HRM principles have been already developed by this time, the year of HRM “official birth” is 1981 when Harvard Business School introduced a course that served a blueprint for global spread of human resource planning and management (Price, 2000: 64). A good insight into the value of HR related programs is provided by Schuler (1990: 52-54). He emphasizes that the HR function had an opportunity to shift from being an “employee advocate” (associated with personnel management) to a “member of the management team”. Schuler’s (1990) view was that this required HR professionals to be concerned with the bottom line, profits, organisational effectiveness and business survival. In other words, human resource issues should be addressed as business issues. It is noteworthy that emergence of HRM chimed with decay of heavy industry and development of sophisticated IT business. Storey (2001: 18-34) believes that emergence of HRM contributed greatly to an ever-greatest since industrial revolution shift in the principles of management. HRM encouraged both managers and employees to get rid of traditional patterns of interaction, outdated ideas of motivation, stereotypes, assessment and appraisal. Managers as well stop being the mentors and executioners and turned to be the members of business teams. Introduction of HRM principle has made modern companies more competitive, dynamic and people-friendly that consequently influenced their efficiency and marketability. Storey (2001: 18) argues that HRM caused what was subsequently called “a new managerialism” – a new look on organisation, the ways it functions and succeeds and the way its employees work. Regardless of global recognition of HRM, many managers are still sceptical toward its principles believing that it is either a set of vague principles or a reinterpretation of well-known motivation theories. However, neither idea is true. HRM is not just a set of principles; instead it is an organisational science that helps to implement company’s general strategy in a most effective way. According to the most conventional definitions HRM is defined as a “system that is tailored to the demands of the business strategy” (Miles & Snow, 1984: 36-37); or “the pattern of planned activities intended to enable an organisation to achieve its goals” (Wright & McMahan, 1992: 343-345). The basic principles of modern HRM represent a synthesis of ideas taken from the two major approaches to organisational culture: hard side and soft side. The hard side approach is associated with the American schools of management, particularly with F. Taylor’s school of ‘scientific management’ and E. Mayo’s school of ‘human relations’. Frederick Taylor was among the first researchers to provide business practices with serious theoretical basis. Taylor assumed that material side is not the foremost motivation of the employees and personnel should be properly managed in order to improve effectiveness of labour. Consequently, he proposed the policy of stick and carrot based on the principles of punishments for poor performance and appraisals for better working efficiency. The Taylorian model is based upon the belief that the average employee is by default lazy, ignorant and passive and employs the following principles of organisational control over the employees: Ceaseless control over the work of each employee through organisation the system of supervisors, inspectors, quantity-surveyor, etc Control over the work of the workshops Promotion of stimulating and competitive organisational culture which may provide excessive control over the employees (Drucker, 1985) Over the 1930s, this ‘hard’ paradigm was gradually replaced by the ‘soft side’ approach (Quinn, 1988). Elton Mayo undertook one of the most known revisions of Taylor’s ideas. During his longitudinal Hawthorne experiments Mayo discovered that salary is not the best motivation for people. Instead, he found out that people are sociable by their nature and they work effectively if they receive positive feedbacks from the management. Other pivotal findings of Mayo were (1) personnel’s need for communication, (2) existence of informal groups and (3) group morale (Gillespie et al, 1993). Later on Mayo’s views were further elaborated by D. McGregor, W. Ouchi, J. Burns, M. Stalker, A. Maslow, and others. The war between these major paradigms highlighted the most important factors that contributed to increasing importance of HRM in modern organisational environment. The “hard side” approach embodied the attitudes which had been dominating domestic and international organisational culture over the first half of 20th century. In those days people were considered to be at the same level of organisational resources as machinery. Raise organisational productivity was to be achieved only through pressure on the employees and their permanent control. Such view of strong and healthy organisational culture might be acceptable in the stable environment of those days, but it is at odds with modern constantly changing organisational environment. Strict and rigid organisational culture diminishes company’s abilities to adapt and change facing external and internal challenges. Strict culture and excessive control also reduces creativity of the employees, their eagerness to innovate and accept new ideas and perspectives. The essence of this important consideration is perfectly explained by Collins and Porras (1994). They claim that the idea of strict culture is not at all irrelevant; moreover, it is often beneficial for modern business. However, today’s organisations, characterized by swiftly changing conditions need an organisational culture which is less pervasive, instructive and controlling, and doesn’t prescribe particular norms and behavioural patterns of the past. Competitive successes of Japanese companies following the principles soft side (Z-approach) in 1970s-1980s have emphasized attention in the US and Europe on group-work, team identification and loyalty, group-consciousness, decision-emerging process, and outlined the value of employees’ participation in organisational development. As a result, hard side has been dispersedly shifted by participative management strategies emphasizing the value of the employees and insisting on less control over their functions. It has been identified that participatory work strategies better fit the demands of the global economy as they provide the optimal way to create essential flexibility and worker commitment (Markowitz, 1996). Modern business is first of all a competition of human resources. Excessive control diminishes people’s initiative, their level of creativity as well as openness to the new ideas and tendencies. Lack of employees’ initiative and people’s poor adaptation to the demands of environment may result in bankruptcy of a company. Hence, unconstrained demands on people, act as barriers to organisational and personal adaptation and change. Therewith, only human resource management incorporating the principles of development, stimulation, adaptation and promotion of people is the warranty of success in the modern business environment. The increased importance of correct HRM approaches was highlighted by a series of important discoveries made by psychologists over the last decades of 20th century. They proved that people are not literally the same parts of organisational process as machines – the view which had been previously adopted by the School of scientific management. Instead, as the role of human personality was emphasized, it was widely recognized that employees work better when they are not excessively pressed or controlled (Drucker, 1985). Nowadays HRM is a serious system of management which has broad objectives across the whole organisation and incorporates multiple principles such as selection and recruitment, assessment, adaptation, motivation and dismissal, and others (Storey, 2001). It is a paradigm that helps modern organisations improve their performance through focusing on its personnel and more effective utilization of human resources. History of modern organisations provides us with several examples of how different companies attempted to use HRM practices in order to achieve competitive advantage in the market. HRM strategy at IBM Corporation IBM is the world leading IT hardware, software and services company headquartered in the US. IBM leads in the annual number of taken patent and the company that created the term “e-business”. IBM was among the first major players in the market that understood the vitality of effective strategic HRM in modern business environment. The first HRM strategies designed and implemented by IBM can be traced back to early 1980s, and many experts believe that these strategies have played the key role in the company’s recent success. As Rogers (1986: 212) believes IBM is the number one company in the world in terms of human resource management. This basic principle of the HRM approach implemented by IBM has been formulated by F.G. Rogers, IBM marketing executive manager: “we take care that our employees would not be frustrated and look for the ever-vanishing carrot” (p. 213). The strategy based on this principle includes several equally important components analysed below. 1. Recruitment of personnel in IBM IBM puts significant efforts to select and recruit best candidates available on the US and foreign markets. The strategy of recruitment in IBM is contextualized into the general strategy of the company aimed to create the professional and most effective team. IBM recruiting policy was designed in the early 1970 and relied on the following principle: to reach outstanding young people, who have potential for a challenging and fulfilling career (Rifkin, 1996). Pursuing this aim, IBM has established twenty six diversity centres throughout the world responsible for selection and recruitment of gifted young from all countries. IBM also practices internship for advanced college and university seniors many of whom are then recruited in the recruited staff. For this purpose, IBM has established Academic Initiative Student Opportunity System enabling students from accredited colleges and universities located worldwide to upload their CVs and motivation letters to a virtual career centre. These resumes and letters are then available to thousands of IBM clients and business partners in multiple states (Huub & Bondarouk, 2001). IBM also headhunts for the gifted specialists who already work in small and medium companies in the US, Europe and Asia. Rogers (1986) states that this method helps IBM both minimize its expenditures for personnel education and training, and get top-skilled employees with decent working experience. Rifkin (1996) concludes that due to the outlined attitudes to employees and the policy of recruitment the “leakage” of personnel in IBM is one of the least in the US – 5%. As the company invests dramatic efforts in selection and recruitment, it would be irrational to loose their potential. With this concern IBM has developed effective program of employees’ assessment, training and motivation. 2. Assessment and training in IBM IBM invests around 5% of its payroll in education, training and assessment of its employees. Company’s personnel is encouraged to develop own professional skills and expertise not only in their business area but also in a variety of other jobs. About a third of IBM’s employees are trained or educated at company’s expenses. Besides, all company’s employees have a direct access to on-line database of IBM. This database includes analysis of cases, provides specimen of decision making and problem solving. In the other words, it is a complex system of online professional education accessible from each workplace. Since 1996 and by 1999 IBM invested more than US $ 300 million in advances of its informational systems (Scoble, 2005). The company has developed its own system of assessment that includes the following: skill planning needs assessment, professional skills assessment, and individual education plans, etc. In order to assess professional skills of its employees IBM uses a complex scheme consisting of assessment centres, tactical tanks, 360 degree assessment and other methods. According to Rogers (1986: 234) assessment sessions held annually are very useful for employees’ promotion or education. By contrast with many other organisations assessment in IBM is not a punishment; instead, its rather a source of information necessary for both the employees and HR managers. It is also noteworthy that no one in IBM is exempted from assessment, also including CEO and executive managers as assessment is also an important tool of identification of strong and weak points and looking for the methods of their effective management or training (Rogers, 1986; Scoble, 2005). 3. Motivation of employees in IBM The policy of motivation in IBM can be subdivided into material (rewarding) and non-material elements. However, both elements are meant to achieve the same objective: making employees perform more effectively through loving their job and the company (Rogers, 1986: 233-235). IBM holds the leading positions in both aspects of motivation providing its employees with high salaries and reasonable rewards. As a result, only four to five percent of IBM employees leave the company to its competitors and the company typically overfulfils its goals (Rogers, 1986: 235). The rewarding system in IBM pursues the following objectives: Procuring the feeling of safety to the employees. The company believes that its employees must not worry about the material side and instead, they should focus on accomplishing their tasks in the company. IBM as well covers related expenditures of its employees (sick leaves, petrol and free pass), provides social insurances, and provides the system of other compensations and bonuses. Providing the powerful stimuli for the employees to succeed in the company. IBM tends not to recruit people whose primary concern is money. Instead, it looks for the people who want more than material side, particularly self development and creative work. Ensuring the bonuses for the most successful employees. These may be prizes, gifts, free travels, etc. It is important that this procedure is transparent and all employees are aware of the criteria for appraisal and rewarding (Rogers, 1986: 236-241). The company stimulates employees’ creativity. The best solutions of the employees are always praised. As a result, as Miles (1984: 40) observes, nowadays IBM has the world’s biggest “suggestions box” (a number of employees’ suggestion for production, business, and performance improvements) and the budget for rewards exceeds US $50 millions annually. Since 1980s IBM leads globally in a number of issued patents. Although material motivation is extremely important and its role should never be underestimated there are some performance related issues that can better be addressed via non-material stimuli. IBM has designed a system of immaterial rewards that ranges from compliments to rewarding letters, from promotion to new titles. Each time an employee exceeds his norm he/she becomes a member of “Club 100%”; this event is widely covered in company’s press and intranet and the membership in this club is extremely respected by the colleagues (Rogers, 1986; Scoble, 2005). The best ten percent of the employees become the members of the “golden circle” and their achievements are propagated in all IBM branches globally. The members of “golden circle” usually receive invitations to the restaurants and concerts, get the opportunity to have a dinner with company’s senior executives and CEO, receive free trips to exotic places, like Bermudas or Bahamas. The members of “golden circle” are lionized and treated as VIP persons (Scoble, 2005). The most gifted employees of IBM receive an opportunity to get a perfect education covered by the company. This is the double-aim HRM strategy that on the one hand raises the level of employees’ education and, on the other hand, motivates people to work more efficiently. Eventually, IBM annually promotes around thirteen percent of its employees and about third of all staff is moved into new positions (Scoble, 2005). Discussion The strategic HRM programme implemented in IBM Corp. is rather complex and covers most of the HR-related areas. However, as anything in this world it is not perfect and flawless: a number of researchers argue that some of its elements are unnecessary while others can be modified or eliminated. The recruitment and selection program used in IBM seems to be balanced and comprehensive. It allows the company to select the skilled people from different nations and give them the opportunity to work for IBM. It is the advantage of the company to select people not from the US only, but also from the other countries. However, the common problem of IBM’s recruitment/selection programme is that it targets rather on the present issues than on prospective needs of the company: it lacks strategic approach. The reason for this is that the program is based on a bit outdated HR methodology if compared with some new strategies of recruitment (Morrison, 1995). First of all, the company does not reach its ultimate target audience (gifted youth in different countries) through its recruitment centres. It happens due to a simple reason: these centres do not cover all target regions of the world and locate mainly in the US and Europe. The strategy of Procter and Gamble that has respective centres in all countries where it operates seems to provide more opportunities in terms of recruitment though no direct comparison has been performed up to date. IBM seems to fail in development of comprehensive adaptation strategy for its new employees, which in its turn is a significant part of recruitment/selection stage. Absence of effective adaptation strategy may sometimes undermine the effective recruitment and selection. Therefore, IBM may be facing the need to update the recruitment/selection programme for IBM make it more “friendly” to prospective employees and targeted rather on future needs of the company that on its present demands. The company invests dramatic amounts on assessment and training and seems to cover all possible aspects of HR policy in this area, including training of newly recruited personnel and assessment of the older employees. The overall program is so flawlessly designed that it may be difficult to identify the gaps in this aspect of HR policy. In fact, the assessment programme of IBM has been repeatedly used as a blueprint for manuals since the moment of its emergence (Griesemer, 1994: 18). At the same time, excessive individual assessment applied in IBM leads to derogation of the value of teams, deteriorates communication systems, as well as provides conflicts into the team (Gupta, 1999). Additionally, it brings into a company the elements of standardization that undermines creativity and initiative of the people as well as shift people on wrong aims (desire to cater bosses). Already in 1950s Peter Blau (1955) argued that assessment and introduction of excessively strict assessment criteria may undermine organisational effectiveness. It is important that IBM uses assessment for further promotion or empowerment of its employees and, respectively, does not regard the results as the fundaments for possible dismissal. It is as well noteworthy that while in many other companies employees may have some fear of assessment, as it may serve a reason for either a dismissal or demotion, assessment in IBM does not have this drawback. Material motivation (rewarding system) of IBM is based on clear and conventionally recognized principle – the achievements of employees are the subjects for material rewards. The rewarding system in IBM is generally based on Abraham Maslow’s (1998) classic hierarchy of people’s needs, particularly on their needs for safety and satisfaction of basic physiological needs. The described policy effectively satisfies these needs and stimulates employees’ aspirations for achievements. Though the type of rewarding system implemented in IBM is also used by other companies within the industry, the non-material motivation in IBM is indeed unique and very effective largely because it stresses the importance of creativity. In particular, it is based on the principle of reference groups. Its “Club 100%” and “Golden Circle” serve the groups of reference for IBM’s employees and, hence, stimulate them to work effectively in order to become the members of these groups. Respectively, the members of these clubs not only achieve the financial rewards, but also get social respect of their colleagues, chiefs and subordinates. However, some experts (O’Shaughnessy, 1976; Gupta, 1999) believe that non-material motivation based on competitiveness may often lead to surprisingly negative results. The reason is that competitiveness may lead to frustration and conflict between the associates instead of motivation of the personnel. O’Shaughnessy (1976) argues that many companies furthermore shift to collective work instead of individual competitiveness. Probably this approach will also be used in the next revision of IBM HRM strategy. Conclusion Modern HRM is a complex science based on psychology, social science and management which relies on the established organizational theories, psychological and sociological research, and management studies. Recent trends in the global business clearly show that effective use of HRM principles and practices is probably the key factor in ensuring the competitive advantage of companies over competitors in the modern market. The example of IBM that has been one of the pioneers in human resource management with its HRM strategy developed already in 1980s vividly demonstrates how the strategic approach which focuses on selection, motivation and development of employees contributes to the company’s long-term success in the market. This helps IBM to be one of the leaders on the global market, promotes company’s marketability and competitiveness in terms of globally challenging business. On the other hand, failure to follow the HRM principles in strategic planning of the company’s future is likely to result in much less motivated and effective personnel and seriously undermine the company’s positions. References Balogun, J. & Jenkins, M. 2003, “Re-conceiving Change management: A Knowledge-based Perspective”, European Management Journal, Vol. 21, No. 2: 247-257. Bennis, W. & Maslow, A. 1998, Maslow on Management, John Wiley & Sons Inc. Вlau P. 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