Discussion of SHRM and High Performance Human Resource Practices - Term Paper Example

Strategic Human Resource Management in Organizations Concerned with all aspects of an organisation that impact employee performances is human resource management. These aspects include pay, hiring and firing, benefits, administration and training (Armstrong and Baron, 2002). Human resources could as well provide safety procedure information, vacation or sick days and work incentives. Strategic human resource management (SHRM) is a subject that has constantly drawn debate from several commentators, academics and other quarters. It is a complex process whose definition and relationship with other business aspects such as strategy and planning is far from absolute, with writers taking varied stands on the subject. In spite of the rising popularity of SHRM, very few systematic evaluations that link it to performance have been conducted and numerous doubts abound related to its theoretical establishment. In view of the facts stated above, this paper aims at discussing SHRM, and high performance human resource (HP-HR) practices. More specifically, the paper will be biased towards the application of the two concepts in organizations and their associated impacts on work performance and productivity. Traditional HR Practices In order to effectively compete in the rapidly changing business environment, firms must constantly institute measures aimed at enhancing quality, reducing costs and differentiating their services and products. A closer look at the business environment reveals therefore that priorities have changed greatly. Instead of traditional functions such as compensation, appraisal and staffing, the HR now prioritizes flexible workforces, incentive compensation, employee empowerment, quality improvement practices, and team based job designs (Blyton & Turnball, 1994). These priorities are biased towards strategic and business goals as opposed to traditional HR functions. Traditionally, human resource practices have certain characteristics; salaries and wages are very loosely tied to performance, jobs are narrowly defined, layoffs are done during slack periods, there is tight supervision of employees, employees are little trained, and only limited screening is carried out for jobs that are non-managerial (Farnham, 2000). Today, many companies have adopted new human resource practices that take clearly different orientation towards the employee and their value within the organization (Laura, Derek & Stephen, 2008). These are collectively known as high performance human resource practices/systems. Strategic Human Resource Management Today, there is a common notion that an organization’s human resources could be an actual spring of competitive advantage as long as practices and policies of the management are properly integrated with its strategic objectives and goals. It is also believed by several authors that organizational performance is straightforwardly linked to strategic human resource management which is founded on human resource management principles. While based on the principles of HRM, strategic human resource management incorporates the strategy aspect (Laura, Derek & Stephen, 2008). Strategic human resource management involves proactively managing people or employees; it demands thinking and planning ahead of time with an aim of coming up with superior ways for the organization to meet its employees’ needs, and for employees to meet better the organization’s needs. Indeed according to Boxall and Purcell (2008), strategic HRM concerns itself with elucidating how organizational performance is influenced by human resource management. It also defines the behaviour of the organization and how it endeavours to adjust itself to its environment. In general, strategic human resource management has much to do with long–term macro-issues such as culture, commitment, structure, values, quality, and matching resources to the future needs of the company (Schuler, 1992). It encompasses a wide range of strategies aimed at improving and streamlining company performance. While the fact stated above is held, it must be noted that these strategies in themselves are not strategic HR management. Instead, strategic human resource management is the umbrella which determines the delivery and shape of every of these individual strategies. In other words, strategic human resource management is specifically applied by companies with an aim of meeting best their employees’ needs while simultaneously promoting the goals of the company (Storey, 2001). One vital aspect of strategic HR management is its focus on employee development. It is a process that begins the moment the company starts recruiting and interviewing potential employees. Interviewing techniques are in this respect improved purposefully to weed out recruits that may not meet the company’s standards. After hiring, new employees are often subjected to rigorous training and mentoring programs that help them speed up to the company’s ongoing projects, procedures, values and policies. This may be followed by continual training programs, regular assessments and coaching. These investments are all aimed at ensuring that the company consistently delivers quality products and services. Logically, this means that Strategic human resource management affects, at the business site, the way business is conducted – improving every aspect of the human resource right from the hiring process to employee training, discipline and assessment. The practice of strategic human resource management is based on the premise that when a company strives hard to meet its employees’ needs and thereby cultivates a work environment that is conducive, its productivity significantly increases. It has been argued by human resource specialists that the ability to, for employees’ needs, plan ahead of time may help improve the rate of doing work for skilled employees who opt to work for the company for a prolonged period of time (Storey, 2001). Maintaining high employee retention rates could help significantly reduce company costs such as those related to recruitments and training programs. The best way to do this according to some HR specialists is through strategic HR management. On the other hand, the company also has to consider what it can reasonably supply or offer. For example, small companies may not reasonably afford all benefit and training programs provided by larger companies. This however should not mean that smaller companies cannot engage in strategic human resource management. Peak performance rates can for example be achieved by offering specialized coaching and one-on-one assessments conducted by the company’s senior management as opposed to hiring the services of specialized (external) firms. In a small company, strategic human resource management may simply involve the manager or owner sparing a little time daily to observe, assess, and assist employees, and make periodical reviews. Large companies on the other hand may have a whole department dedicated to the development of the human resource. Business Strategy and Strategic Human Resource Management It is known that good business strategies always are informed by people-factors according to Armstrong and Baron (2002). In fact, one factor that drives reporting and evaluation of data related to human capital is the requirement for better information. It is this information that is then fed into the process of business strategy formulation. It would therefore be over simplistic to state that strategic HR management is derived from business strategy – these two must mutually be informative. The availability of knowledge and skills, and the manner in which employees are deployed, motivated and managed notably shapes business strategy. Today, it is not uncommon to find business strategies that are incorporated into and intricately linked with strategic human resource management. Such a strategy then defines how all resources within the firm are managed and utilized. Business strategy may also shape individual human resource strategies. For example, if the company intends to improve its customer service, this goal may be translated into performance improvement plans or training plans. Human Capital Management and Strategic HRM Some writers have argued that HCM (human capital management) and strategic human resource management is one and the same thing (Armstrong & Baron, 2002). This flows from the fact that the concepts both assume that employees rather than being costs, are actually assets to the organization. The two also focus on the vitality of adopting a strategic and integrated approach to people management – which ideally is a main concern of everyone with a stake in the organization; not just the human resource function. The human capital concept strengthens and complements the strategic human resource management concept; it does not in any way replace it. The two concepts may thus be regarded as elementary components in the people management process. They also form the foundation upon which human capital advantage may be achieved through a strategy based on the organization’s resources. SHRM could be viewed therefore as the framework that defines how reporting, evaluation and management processes are performed ensuring that they are both mutually reinforcing and iterative. Human capital on the other hand is shaped by SHRM, informs it but in no way replaces it. Impact of Strategic HR Management on Business Performance Many organizations regard the human resource as the most valued resource. Skills, abilities and knowledge have to be maximally used if value has to be created by the organization. More and more, investors and accountants have come to recognize and appreciate the long-term implications of the intangible value that lies in the organization’s employees (Schuler, 1992). Many a researcher has tried to gather evidence that relates strategic human resource management with improved work and/or business performance. CIPD and other organizations since the 1990s have conducted a number of research in this respect, their emphasis being on the vitality of ‘fit’ (Vere & Butler, 2007). This emphasis as held in view of the argument that organizational strategies and HR strategies must both be in harmony for the impact to be maximum. On skill development and around job design, all the researchers concluded that strategic HRM has an impact on work performance. CIPD work however noted that in sole, practices do not impact business performance (Vere & Butler, 2007). Practices can effectively create a set of highly motivated and highly skilled individuals (human capital) that have the opportunity to work or contribute somehow to the organization’s performance. This however would only benefit the organization if such individuals have, with their superiors, positive relationships with an environment that has strong values and is highly supportive. The above combination of factors then promotes discretionary behaviour – the willingness to exert extra effort or perform above minimum required level. The difference in organizational performance is significantly correlated to the level of discretionary behaviour. High Performance Work Systems/Practices High performance human resource practices may be defined as a set of closely related human resource practices including training and development, performance management and remuneration, high employee participation, communication, and staffing (Armstrong & Baron, 2002). High performance human resource practices are also labelled as high performance human resource management, high involvement work systems and high commitment work systems. As indicated above, high performance human resource work practices (HPWP) compass a whole range of measures aimed at increasing the productivity of the human capital in an organization. Fundamentally, the aim of (HPWS) high performance work systems is to empower employees to be able to make decisions, work under flexible conditions, be innovative, and improve their skills. One prominent feature in HP-HR plants is the generally broad communication link that exists between employees and management. By developing and implementing high performance work systems, organizations can make kaizen (continuous improvement) a norm in conducting business according to proponents of such practices. Some HPWPs include job rotation for flexibility, team orientation and improved team communication, careful screening of workers, incentive pay, continuous training, and maximized information flow in the horizontal direction (Schuler, 1992). In addition to these, employees’ ideas are fostered and always recognized as a way of raising productivity. Benefits of High Performance Work Systems Multiple high performance practices in the actual sense makes more successful decentralized decision making. It is noted by Reilly (2008) that using a combination of high performance human resource (HP-HR) methods make the payment of incentives more successful. Further, when the methods are used, multi-tasking becomes more successful as employees feel better recognized and compensated. According to Price (2004) in view of past research, use of alternative human resource practices in the steel industry, application of innovative HR practices led to a 6.7% increase in labour productivity. The same research revealed that an increase of 3.2% in labour productivity as a result of higher teamwork while 1.4% increase resulted from higher communication. Also, in his review of evidences from numerous surveys Price (2004) has noted that HP-HR led to higher returns for various organizations. These results were drawn from different sources including apparel manufacturing, non-luxury auto assembly, Metalworking and machine shops, scientists in pharmaceuticals, and customer service in communications. It is however noted that not all studies recorded positive results. High performance HR practices have commonly been implemented in organizations that engage in more complex production processes in which case such practices have greater scope for returns. HP-HR practices re in several ways beneficial to employees. Three major benefits however draw considerable attention (Schuler, 1992): First, employees’ social and human capital and by extension their market values significantly increase by the problem solving and technical training built into high performance work systems. Secondly, when high performance work systems are combined with representation from unions, employees tend to benefit from higher rewards. Some of these rewards are gotten through similar compensation practices or by mutual gain sharing. Finally, more than 70 percent of employees prefer to work under HPWS over either non-union systems or traditional union systems. It is noted that HP-HR practices raise both process and product innovation according to Legge (1995). Also, with these practices in place, trade unions do not, in their functions change the pace of innovation in an organization. Instead they could go a long way in fostering the implementation of HP-HR practices (Storey, 2001). Even though some studies have recorded mixed results with respect to high performance work practices, several others have confirmed the differences they cause in steel mills, parts and assembly plants, airlines, call centres, finishing lines, hospitals and health centres, banks, and high technology companies (Millmore, Lewis, & Saunders, 2007). NUMMI and Citibank Examples A number of examples may be used to show how effective HP-HR practices may be in improving company performance. One case in point is the New United Motor Manufacturing Incorporated (NUMMI) General Motors plant built in 1962 in Fremont CA. In its operations using traditional HR practices, several faults existed that eventually led to its closure in 1982 (Gomes-Casseres, 2009). Among these were poor product quality and high absenteeism. When NUMMI was later re-opened in 1983 as a joint venture between General Motors and Toyota 85 percent of former workers were recalled back to work. Several PH-HR practices were used to improve performance. These included training, decentralized decision making, higher job flexibility and a team-oriented approach to work. Later, the company improved to be rated, in the United States, among the most productive motor-vehicle plants (NUMMI, 2009). Human resource experts have suggested that the introduction and maintenance of HP-HR practices played a great role in making this achievement. Others have however considered this as a result, possibly, of shock of plant closure, new management and adoption of new methods of production. Yet another organization that has seen the benefits of HP-HR practices is Citibank –United States of America. The bank among other practices offers good remuneration packages to its employee – mainly based on their performances and contributions to the organization (Citibank, 2009). Innovations are greatly appreciated by the company and their originators are highly rewarded. The bank has also encouraged communication between its employees and management the result being better relationships worker and more efficient information flow. Further, the recruitment practices adopted by the bank have greatly improved with close screening of all potential employees regardless of position. This has ensured that the bank employs highly skilled staff who offer superior services and are easily trainable. Once employed, employees of the company undergo continuous trainings under well designed programs. While the company has greatly benefited from its HP-HR practices initiative, employees too have had their fair share of goodies. Employees enjoy more flexible working conditions; time is given for breaks which help relax the minds of employees and to get refreshed. This is in addition to the valuable technical and problem solving skills they learn through the company’s training programs. However, this has to be done with proper mind to facilitate the on going activities at the organisation. for example in Citibank United State, the employee are allowed to work for a given number of hours then go for break to relax their mind. This is thought to give the employee time to refresh them so that when they embark on their work, they perform more effectively compared to if they could be at the work station the whole day minus nay breaks in between. Employees of the company, according to recent findings, tend to be greatly motivated (Citibank, 2009). This has resulted in greater input at work and improved worker participation in decision making as has been reflected in the company’s increased productivity and profitability. In addition to these, compared to previous years, the company has recorded significant improvements in terms of customer service. Conclusion Essential in both small and large companies is strategic human resource management. It is important for all organizations to manage their employees within a coherent and well planned framework that reflects the organization’s strategy. This can be done by ensuring that the different aspects of employee management mutually reinforce one another in developing the behaviour s and performance necessary for the organization’s success. HP-HR has impacted efficiency outcomes such as equipment reliability and worker productivity. Also quality outcomes like customer service, patient mortality and manufacturing quality have shown that these practices play a great role in work improvement. Profitability, financial productivity and numerous other performance outcomes have similarly confirmed the above fact. Generally, by meeting employees’ needs in a manner that also benefits the company also goes a long way in improving staff members’ quality. In fact, employees, employers, customers, and shareholders can all benefit simultaneously from HR practices that enhance human capital, social capital and worker motivation across the entire range of industries. In other words, taking the stride to provide workers with necessary tools for quality work performance is worth the company’s input. What must be realised however is that the practices may not be implemented anyhow; they must be tailored to specific work settings and industries in order to be effective. References Armstrong M and Baron A. 2002 Strategic HRM: the key to improved business performance, Chartered Institute of Personnel and Development, London. Blyton, P. & Turnball, P. 1994 The Dynamic of Employee Relation, Palgrave, London. Boxall P. & Purcell J. 2008 Strategy and human resource management (2nd ed), Basingstoke: Palgrave Macmillan. Citibank 2009 Citibank, N.A., viewed15th November, 2009 http://www.citibank.com/citi/corporate/history/citibank.htm Farnham, D. 2000 Employee Relations in Context, CIPD, London. Gomes-Casseres B. 2009 Nummi: What Toyota Learned and GM Didnt, viewed15th November, 2009 http://blogs.harvardbusiness.org/now-new-next/2009/09/nummi-what-toyota-learned.html Laura H, Derek T & Stephen T. 2008 Human Resource Management (7th ed.), Prentice Hall Harlow FT. Legge K. 1995 Human Resource Management Rhetoric’s & Realities, Basingstoke Palgrave, Houndmills. Price, A. 2004 Human Resource Management in Business Context, International Thomson Business Press, London. Millmore, M., Lewis, P. and Saunders, M. 2007 Strategic human resource management: contemporary issues. Harlow: Financial Times/Prentice Hall. NUMMI 2009 Overview, viewed 15th November, 2009 http://company.monster.com/motor/ Reilly, P. 2008 ‘Strategic HR? Ask yourself the questions’, HR Director, No 44, February. pp12-14, 16-17. Schuler R. S. 1992 ‘Strategic human resource management: linking people with the needs of the business’, Organizational Dynamics. Vol 21, No 1. pp18-32. Storey J. 2001 Human Resource Management: A Critical Text, Thomson Learning, London. Vere D. and Butler L. 2007 Fit for business: transforming HR. Research into practice, Chartered Institute of Personnel and Development, London. Read More