Knowledge and Human Resource Management - Term Paper Example

 «Knowledge and Human Resource Management» Introduction: Human resource management is assuming a vital role in today’s globalized context, where knowledge management is an integral aspect of competitive advantage for an organization. The knowledge possessed by a firm is largely in the domain of expertise and experience possessed by the employees of the firm. Effectively managing the resources and knowledge that employees bring to the firm is the function of the human resource department of the firm. Research has also demonstrated the importance of human resources in the changing global environment and the link between human resources and organizational performance (Armstrong, 2003). The present day business scenario is characterized by rapid changes in the economic environment, largely brought about by the phenomenon of globalization and the deregulation of markets. Organizations have to survive and be profitable in a fiercely competitive product market, with changing customer and investor demands. This has necessitated a continual improvement in performance by reduction in costs, continuous innovation of products and services as well as improvements in productivity, quality of products and speed in getting these improved products into the market. Quality has increasingly become the major criterion that determines productivity, rather than a singular focus on costs which was the guiding principle earlier(Yanovitch, 2007) . The new organizational approach therefore, focuses on employee participation in decision making and a new set of human resource practices have evolved, focusing upon improvement in employee welfare through training, compensation and profit sharing, to motivate them in achieving this objective. People are increasingly being viewed as an organization’s most valuable resource. While it may not be difficult for competitor companies to imitate products that are produced by one Company, imitating the people/employees or replicating their skills is next to impossible. Knowledge and human resource management: The importance of creativity and innovation in the global marketplace which is fiercely competitive, explains why human resources are so important, because people are the ones who possess the necessary knowledge and skills required to come up with innovative solutions and human resources of one Company cannot be easily replicated by another Company. Firms must therefore, try to recruit and retain workers who possess the kind of knowledge and skills that can generate innovative solutions. In the knowledge economy, creativity and innovative ideas become the driving force, brain is more important than brawn and human capital …… becomes of paramount importance.(Warhurst, 2008:72). The knowledge and professional expertise that workers possess originally or upon having received some formal training related to their line of work is a valuable factor in granting a competitive advantage to a business (Potter 1999). Enhancement of professional knowledge of the employees through proper training helps change the workplace; and as a result, training and subsequent assessment play an important role in the identification of those employees an organization would seek to retain. Since knowledge contributes to the competitive advantage that a firm enjoys, improving the retention of knowledge workers will ensure that a firm can continue to benefit from the skills certain employees possess, without losing them to competitors. The Human resources department thus plays a significant role in ensuring that the competitive advantage a firm enjoys through its knowledge workers is preserved. According to Price (2004), human resource management is no more than a belief in people management, i.e, that human beings are a valuable resource in running a business and efficient usage of personnel exercising their expertise and creativity can help the organization to achieve its purposes. As opposed to this, Bach (2005) is of the view that human resource management is in fact unitarised, because it marginalizes the interests of employees and other stakeholders. According to Buchen (2006), HR professionals are described as those individuals who are in a leadership position, with the responsibility for recruitment and retention of employees, staff training and structuring of organizational strategy. Marrow (1993) has defined employee commitment as his or her desire to remain associated with the organization. But employee commitment is an area where more research is required, with more professionals, so that the studies possess more generalized validity (Carmeli and Freund, 2004). For instance, Chafolsky and Krishna (2009) have proposed a multidimensional approach to employee commitment that goes beyond traditionally accepted theories of extrinsic and intrinsic motivation. It combines the individual and psychological aspects of work motivation with the contextual and cultural factors influencing it. This suggests that cultural factors may also play a significant role in influencing employee commitment. This may be relevant in the context of Saudi Arabia. High employee turnover is one of the reasons for decreased organizational productivity. Between 1997 and 2000, employee turnover increased in all industries (Martel, 2002). In the case of skilled employees, one of the most commonly used methods used by employers to attract the best candidates to their firm is to offer good monetary rewards, such as high salaries, signing bonuses and attractive benefits (Pfeffer, 1998). Hewlett Packard has included compensation benefits such as banquets, stock options and personal computers for project leaders who demonstrate entrepreneurial behavior (Schuler and Macmillan, 1984: 249). On the other hand, flexible human resource policies and an inclusive culture constitute non monetary rewards that are likely to provide a higher motivation for employees to join an organization and to remain in it. According to Maslow’s Hierarchy of Needs Theory (1970), which is a five tier system, an individual has two kinds of needs – the lower order needs which are satisfied externally, such as physiological and safety needs, and the higher order needs which are satisfied internally such as social needs, esteem and self actualization needs. Herzberg argues that employees are more likely to be motivated by factors such as achievement and the work itself rather than simply money.(Herzberg 1968). According to Macmillan (1983), the gaining of competitive advantage involves an understanding of barriers to response, intelligence and infrastructure systems and requirements, general management challenges as well as extensive planning practices. Several companies have successfully achieved a competitive advantage through the restructuring of their human resource management systems, as pointed out by Schuler and Macmillan (1984). In the Bairnco Corporation, bonuses were linked to performance for top level executives and the company was able to almost double its sales from $270 million to $442 million in the short span of two years. In the case of Lincoln Electric, workers receive a share in the profits, which imbues workers with a high motivation to produce. Schuler and Macmillan (1984) also identify two specific HRM thrusts that could be useful to a firm. The first is a cost efficiency thrust, as in the case of Lincoln Electric mentioned above, where the efficiency of production is enhanced through the compensation system. The second is the differentiation thrust, in which HRM practices are used to improve efficiency of production with the ultimate aim of lowering product cost. One example of this is the case of PepsiCo, which provided management and merchandise training to its distributors, thereby gaining a competitive advantage in the market through a lowering of the cost of its product. As pointed out by Kransdorff (1996), while the advantages of frequent job turnovers are seem as bringing fresh creativity and new ideas to the organization, with the expertise of incoming employees compensating for those who are leaving, the reality is that the organization’s investment in the outgoing individual in the form of experience and knowledge possessed by that individual is suddenly lost. Employees are increasingly prone to change jobs, for example, British employees change employers an average of seven times during their lifetimes, with employees taking about 12 months to settle into their new jobs and become fully productive, which further shortens the effective working span of the average employee. Hence retaining its employees is in the interests of an organization. According to Fuller (2004), the way that an organization functions can influence employee decisions on whether or not to remain with it. If employees feel like outsiders, or inferior and unworthy, then it may have a negative impact upon the employees’ physical, psychological and spiritual well being and they are more likely to leave the organization. Human Resource management practices in Saudi Arabia: Saudi Arabia is the largest country in the Middle East, defining a cultural area which does not have precise borders. The Middle East has 65% of the world’s known oil reserves and Saudi Arabia is the leading exporter, i.e, 90%, of petroleum. Saudi Arabia has experienced strong economic growth since oil was discovered in the 1960s and 70s when oil was discovered, and because it is one of the richest nations in the Middle East, it is generally flooded with individuals seeking employment in the country (Budhwar and Mellahi, 2006:2). The Middle East countries also generally have dominant public sectors and under developed financial markets as well as high levels of restrictiveness in so far as trade is concerned. In most Middle eastern countries such as Saudi Arabia, democracy is not prevalent and the ruling regimes are sheikhdoms and traditional monarchies, which have resulted in a less than optimum usage of the wealth that these oil producing countries generally possess. Less information is available and fewer research studies have so far been carried out in the field of HRM in the Middle East. Some studies have examined women and management related issues, while others discuss the effectiveness of management related issues. Other studies have pointed out how most researchers have failed to understand Arab management styles and their impact upon cross cultural negotiation styles (Budhwar and Mellahi, 2006: 5-6). Most of the studies which have been carried out on the business context deal with the importance and influence of Arab culture in the business environment, business practices and styles. Since a large percentage of workers in Saudi Arabia are comprised of an expatriate population, attracted to the country by its high wages, the Saudi Government has recently introduced a policy in the year 1990, wherein it has sought to reduce the percentage of workers entering the country by 5%.(Barrientos and Madhi, 2003). The measure was introduced in order to provide employment to local Saudi male nationals and tackle the growing unemployment rates. The problem with this measure to Saudi-ize employment in the country is that most companies are unhappy with the measures, because in general hiring Saudi labor is more expensive for them. The Saudis do not appreciate manual labor, they generally tend to look down upon such forms of work. According to Rice (2004), “most Saudis subscribe to the mudir (manager) syndrome, which means that nothing less than a position of authority, status, and respect is honourable.” (Rice, 2004:67). Hence, human resource management practices in Saudi Arabia need to incorporate these two important aspects, i.e, (a) the need to hire local labour and (b) the need to deal with the perception among Saudis that lower level jobs are demeaning. Saudi Arabia has been identified as falling within an Arabic cluster that is hierarchal and primarily masculine, tending to functioning within groups and low on future orientation (Budhwar and Mellahi, 2006:6). As a result, any management or human resource theories that need to be applied in this region must take into account the Arab cultural context. Managerial skills and practices of the West that are imbibed by Arab students and managers may not necessarily be applicable in Saudi Arabia, as they are practiced in the West but may need to be modified and adapted so that they are also relevant within the Arab cultural context. Both micro and macro factors may interfere with the successful adaptation of Western practices in Arab countries, although they can provide some broad guidelines which can be adapted to suit the Arab environment. Western companies that want to be successful in the Arabic cluster must first develop an understanding of the culture, politics and the people of the region. These aspects create some problems in transfer of Western technologies to countries, because such technology is culturally biased in favor the developed countries. Human resource management in Japan: As opposed to Saudi Arabia, Begin (1997) is of the view that Japanese HRM practices may be among the best in the world. He carried out a study examining the HRM systems in six countries of the world and he placed Japan at the top end of the spectrum. This was also the finding in another study carried out by Pudelko (2006), who compared three HR systems, i.e, in Germany, USA and Japan. They also concluded that Japan was at the top of the spectrum and concluded that the socio economic context is very relevant and pertinent in the establishment of an effective HR system. Begin (1997) states that Japan is an example of a country that has flexible human resource practices with a lean production system while both the U.S. and the U.K. represent HRM systems that adhere to traditional bureaucratic systems of control and are characterized by mass production. Japan has been a strong nation from an economic standpoint; it is the world’s largest creditor nation. Employee participation is an important aspect of the Japanese system; one of the notable aspects of human resource management has been the principle of lifetime employment in a single company (www.pacificbridge.com). This means that an employee stays with one firm for the rest of his or her life and there is a respect for seniority. This arises in sharp contrast to the human resource systems in Saudi Arabia, where there is also a respect for seniority, but where employees are not prepared to function at the bottom rung of the corporate ladder and ascend slowly. Secondly, Japanese HRM systems are notable in that they provide significant amounts of training for their employees, because they have the assurance that those employees will remain with them for long periods of time (www.pacificbridge.com). As opposed to this, large amounts of training may not be relevant in Saudi Arabia, because local employees may not be interested in moving up from the bottom, while it may not be economical for firms to invest large amounts of money into training the largely expatriate working force that is likely to return to their own countries anyway. Another important aspect of the Japanese HR system is the emphasis on quality, which is also a part of every Japanese system that cannot be introduced as easily into other countries, because it is an inherent part of the work ethic in Japan, which has been in existence for a long time. The Kaizen system is aimed at increasing the productivity, quality and worker satisfaction at the grass roots level, and it is focused upon improving the overall process rather than merely being focused on the attainment of short term results (www.1000ventures.com). Under this system, every worker is encouraged to come up with ideas that would improve their job activity, environment or company processes. Since Japanese workers generally join a firm at a very young age and are committed to staying, growing and progressing with the same company, they tend to work harder and have higher levels of job satisfaction because their input – however small – is appreciated. Conclusions: On the basis of the above comparison, it may be noted that the attention being accorded to HR systems in Saudi Arabia is fairly recent, because the economy was predominantly centered around oil and expatriate workers. With the move of the Government to Saudi-ize the entire system and encourage more locals to become gainfully employed, the focus has shifted to the needs and concerns of these local workers. The reluctance of these workers to start working up from the lowest rungs due to their perception of such work as being demeaning, is a drawback in maintaining an effective system because it translates into inefficient performance at work. The Japanese system on the other hand, has been in place for many years and workers are already attuned towards starting at the lowest level and progressing up. Since employees in Japan also traditionally tend to stay with one company, there is a well established system of hierarchy in place and employees are geared towards respecting seniority. But employees in Saudi Arabia may not have the same levels of respect because of the disdain they have for lower levels of work and their belief that only employees at the higher or managerial levels are really to be respected. The Japanese system may also be superior to the HR system in Saudi Arabia because of the emphasis on quality. Employees are trained into kaizen systems from very early on and as a result, maintaining quality becomes a part of everything that they do. In the case of Saudi Arabia, most of the work is carried out by an expatriate, essentially transient working force which is not as emotionally committed or invested into their work. In Japan, the salaries paid are dependent upon the quality of the work of an employee and reward systems are well established. In Saudi Arabia on the other hand, being an oil rich country effectively means that most employees, especially expatriates with the requisite knowledge, receive high salaries anyway and their salaries are not as contingent upon actual performance. Moreover, since the local Saudis consider lower level work demeaning, they may seek managerial positions which come associated with perks while at the same time, not being prepared to put in the necessary levels of work required to ensure that quality levels are maintained. It may also be concluded that the contextual environment plays a significant role in determining the kind of HR systems that will be instituted within a particular country. In Saudi Arabia, the fragmented nature of the HR system arises largely out of the poor work ethic of the local Saudis and the reliance of the economy upon oil. On the other hand, in Japan, there is an emphasis on quality and relationships within the firms, as well as a respect for seniority, irrespective of the levels of salary that are being provided. While the emphasis in Saudi Arabia is the remuneration and reward systems, in Japan, the emphasis of employees is on the maintenance of quality. Similarly, while the focus of employers in Saudi Arabia is to bring in any employee, whether expatriate or not, who will perform the necessary duties, the focus in Japanese employers is to ensure that employees who work hard are well rewarded in proportion to the kind of work they put out. Thus, on the while, it appears that the Japanese HR systems are superior to those in Saudi Arabia and this may serve to explain why these HR systems are ranked at the top end of the spectrum. Bibliography: Armstrong, Michael, 2003. A handbook of human resource management practice, Kogan Page Publishers. Bach, Stephen, 2005. “Managing human resources: personnel management in transition”, Wiley Blackwell Publishers Barrientos, A., S Madhi, 2003. "Saudization and Employment in Saudi Arabia." Journal of Career Development International, 8(2): 70-77 Begin, James P, 1997. Dynamic Human resource Systems: Cross national Comparisons.New York: Walter de Gruyter Buchen, IH, 2006. “A new future for HR and HPT professionals”, Performance Management, 45(5):19-21 Budhwar, P. S and Mellahi, K., 2006. Managing Human resources in the Middle East, Routledge Carmeli, A and Freund, A, 2004. 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