The Effective Usage of HRM Principles - Essay Example

Human Resource Management 2007 Human Resource Management Introduction 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 organizational efficiency and marketability. Growing competitiveness in the market forces modern companies increasingly rely on skilled and motivated personnel then on pure technologies and products. In terms when company's past success does not serve a password to "cloudless future" businesses 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 Research Management (HRM). The importance of HRM has already been recognised by virtually any company which follows western standards of business. It is clear that its 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: "HRM is the core of company's general efficiency and the basis for effective management" (Gunnigle et al, 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, however, on previous researches and findings of organizational 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 organizational 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, organizational 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 later called "a new managerialism" - a new look on organization, the ways it functions and succeeds and the way its employees work. Regardless of global recognition of HRM, many managers are still sceptical to its principles believing that it is either a set of vague principles or a reinterpretation of well-known motivation theories. Neither of these assumptions is fully correct. HRM is not just a set of principles; it is an organizational 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 and Snow, 1984: 36-37); or "the pattern of planned activities intended to enable an organization to achieve its goals" (Wright and McMahan, 1992: 343-345). Apparently, HRM is also much more than a mere system or policy of motivation as it has wider objectives and incorporates multiple principles, i.e.: selection and recruitment, assessment, adaptation, motivation and dismissal (Storey, 2001). However, HRM should not be perceived as a panacea or placebo: it is the effective and working paradigm that helps a company to become more effective through focusing on its personnel and more effective utilization of human resources. Organisational history provides us with several examples of how different companies attempted to use HRM practices in order to achieve as motivated and effective workforce as possible. 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 is one of the world's biggest companies with 350.000 staff worldwide including the specialists in IT, sales, finances, human resources and law (Huub & Bondarouk, 2001). IBM is one of the first companies to understand the vitality of HRM in terms of modern business and use its principles in own business. The first strategies of HRM in IBM date back to early 1980s and company's recent success much relies on company's attitudes to its people. Since 1980s IBM is the number one company in the world in terms of human resource management (Rogers, 1986). Tom Watson Sr., IBM's legendary CEO expressed the major principle of the company: fair attitudes to personnel and fair rewarding (Rogers, 1986; Scoble, 2005). This idea is realised in various elements of IBM's HRM strategy. 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. 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 has developed a complex scheme that includes assessment centres, tactical tanks, 360 degree assessment and other comprehensive methods and tools. Assessment sessions held annually serve the fundaments for employees' promotion or education. Dislike many other companies 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 As well as in all companies, the policy of motivation in IBM includes material (rewarding) and non-material motivation of the employees. Regardless of differences in both policies they pursue the same end: making employees work more effectively through loving their job and the company (Rogers, 1986). Both in material and immaterial motivation IBM tends to be the leading company on its sector of the market providing people highest salaries and greatest rewards. As a result, only from four to five percent of employees leave the company to its competitors and the company always overachieves its objectives (Rogers, 1986). IBM has a designed system of non-material 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. 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 (Rogers, 1986; Scoble, 2005). HRM strategy at Tieto-X "Tieto-X", a company founded in 1995 by a group of initiative young people, initially won some popularity and success in the world market, but serious problems overwhelmed the company in the beginning of this decade. Much of the trouble occurred due to imprudent HRM policy implemented by the company (Wikstrom, 2004). As a result, the company was loosing its market positions, relationships between the employees and organizational branches became also very tight that, hence caused lack of attention to the customers due to internal problems as well described in other relative studies (Bhatia, 2004). The company designed a strategy to rectify the situation by addressing the major problems identified it its operation: 1. The company first of all faced the necessity of change in its main product, i.e.: Tieto-X operational system that, in multiple aspects has become out-of-dated and was often dissatisfying customers. 2. Before the crisis, Tieto-X had purchased several relatively smaller IT groups and integrated their collaborators to the own organizational structure. However, this integration has caused growing of various organizational cultures within Tieto-X. This mixture of different cultures, norms and people's values caused misunderstanding in the development of total concept and vision of ready products and business strategies. As a result, the company had to change the relationships between its old and new employees (1), managers (2) settle relationships between the branches (3) in order to develop a unique shared organizational culture necessary in company's survival in a tight Finnish IT market. The primary objective of this change was, hence, to unify the disperse concepts and outlooks that originated within the merged companies. 3. Tieto-X, as Wickstrom (2004) mentions, has faced multiple problems concerning its relationships with the customers that were caused by both technical and human factors. Due to the rapid growth the company, as it was declared, didn't have an integral database: all the client database was dispersed on different computers. The managers were describing the situation as a "real chaos" (Wickstrom, 2004). Besides, due to the company's growth, it was moreover difficult to suggest a unique personalized approach to each customer, though this very strategy had made Tieto-X one of the market's leaders several years ago. At that time a company was undergoing a period of its rapid success and seemed to forget of its customers. This model of company-customers interaction is described in the other case studies concerning organizational change (Yu, 2001, Nelson, 2004). The result of this policy was immediate: the clients preferred the relative products of the other companies that were more loyal to the customers. As a result, the necessity of this change lied in reconsideration of its general policy regarding the customers both on technical (operational) and interactions' levels. 4. Being pressed by the decline of demand in a local market, the managerial stuff has decided to implement a serious organizational change project to reunify the stuff and inspire them common identity feeling. The demand for this change was primarily determined by the fact, that in the winter of 2000 four other companies were merged by Tieto-X and over ninety employees, as it was reported (Wickstrom, 2004) joined the Tieto-X. At the same time, they remained the bearers of different cultures and had different outlooks concerning business. However, this change as Wickstrom (2004) reports wasn't implemented that appeared a serious obstacle in company's development. 5. As Nelson (2004) reports, in crisis times many companies consider empowerment of employees to be a working strategy. This change, though unsuccessfully, was also undertaken in Tieto-X. The top-managers suggested collaborators to develop their own vision of company's policy towards the customers. With this the company was divided into several special business units each focusing on its own partnership strategy. In fact, this change has sufficiently disintegrated the company as far as different organizational cultures, as said before (Wickstrom, 2004) and absence of ultimate strategy caused growing conflicts between the branches. 6. The "drain" of knowledge-based skillful and loyal employees has become another plague of a Tieto-X company. Loss of the most valuable employees has undermined company's confidence and made a negative influence on its' marketability and market position. As a result, the company has displaced in the rating of Finnish most successful companies loosing its place to the new and more aggressive organizations (Wickstrom, 2004). Besides, the company faced serious difficulties with selection and recruitment of new personnel. As the strategy of change implemented by Tieto-X to rectify the situation clearly shows, the most serious drawback of Tieto-X was that excessive focus on the technical aspect of operation made the managers forget about the HRM aspect of the planned change (Wickstrom, 2004). Thus, the list of potential HRM changes might have included the following steps: 1. Motivating personnel through putting clear objectives and perspectives of a company. This measure would help creation of loyal personnel that wouldn't leave the company in a tight situation. In fact, employees have witnessed decline of their value in managers' esteem that wasn't to be in any case as personnel is a primary worth of a company. 2. Serious organizational changes, as known, couldn't be achieved without a change of company's culture and psychological climate. In Tieto-X case these aspects weren't estimated either. First of all, keeping in mind that company had engaged the employees from the merged companies it would have been necessary to unite all workers around an ultimate goal of a company. In fact, the managers didn't implement this change and the company was dissociated in questions of people's unity and identification. From social psychological perspective it's known that identification is a core factor that influences company's effectiveness and solidarity in general. At the same time, the mistake of managers' team was that they didn't take efforts to integrate new workers in the company's social structure and make them fully aware about the company's policy and objectives. 3. Creation of clear recruitment, promotion and assessment criteria similar to those implement by IBM might be useful too. Conclusion Modern HRM is a complex science based on psychology, social science and management research 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 sustainable competitive advantage in the market. The example of IBM that has been one of the pioneers in human resource management vividly demonstrates how HR-centred approach in recruitment, assessment, training and motivation contributes to the company's 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 promoting the HR-centred approach is likely to result in much less motivated and effective personnel and seriously undermine the company's positions. Thus, the most serious drawback of Tieto-X was the company's failure to switch from a product-driven to customer-orientated organization. The value of Human Resource Management practices was severely underestimated as seen from Wickstrom's (2004) case study of Tieto-X: organizational change attempted by "Tieto-X" in an effort to restore its market positions focused primarily upon IT sphere of business while human factor was excluded from the list of necessary changes. This resulted in poor effectiveness of the attempted change and failure to restore the company's once strong market position. References Beardwell, I., T. Claydon, and L. Holden (2003). Human Resource Management: A Contemporary Approach (4th Edition). Financial Times Management. Bhatia, A. ( 1999). 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