Current Global Economy Deterioration Presents Challenges And Opportunities For the Strategic Human Resource Management - Essay Example

Topic:  ‘Current global economy deterioration presents challenges and opportunities for the Strategic Human Resource Management’ Introduction Academic researchers as well as organizations have long debated about the scope and utility of their human resource departments. Traditionally, the functions of the human resource management have been confined to house-keeping, documentations, keeping employees records and overseeing the implementation of the human resources policies of the organization (Monks, 1992). This practice of treating the human resource function as a non-specialized one was based on the assumption that this department des not contribute directly to the generation of revenue as is the case with the sales and marketing departments. With the change in the business environment and increased competition as a result of globalization, the HR function moved in to take a more central and strategic position. As employees came to be valued as potential source of competitive advantage (Pfeffer, 1994), and the workforce became more diverse, HR moved in to do strategic planning in terms of resource planning and training and development (Schuler et al., 1992). The strategic role of the human resource management is even more highlighted in the context of the current global crisis. The global downturn in economy has led the organizations into downsizing their workforce, shutting down operations, withdrawing outsourcing and curbing budgets. The human resource management department has felt the brunt of the current economic gloom in terms of loss of employees, low employee morale, no budgets for training and development, and curbs on the use of organizational resources. However, the existing situation has offered the human resource managers with unique opportunities in terms of asserting its position as a strategic planner and to enhance its say in the overall implementation of the human resource policies regarding compensations and promotions. With the International Monetary Funds predicting that the global economy will see a growth, even if a small growth of 1.9 percent, in 2010 (AFP, 2009), it is expected that in the coming few years, we would have put this current crisis past us. This also provides he human resource management with an opportunity to transform the existing organizations into becoming more resilient and poised ready to reassert themselves when the crisis gets over. This paper will elaborate upon several of the threats and the opportunities that the strategic management practitioners are facing in the current global crisis. It will also explore the policies and the practices that the organizations may resort to in order to retain their survivability as well as competitiveness in the volatile business environment. Opportunities To the SHRM Strategic Human Resource Management as a Business Partner The current global financial crisis has shown the vulnerability of the organizational decision makers to greed and temptation. As can be seen from the case of Merrill Lynch, where compensations and rewards policy of the organization was one of the factors that led to its financial demise, the organization’s top level decision makers were carried away by the monetary rewards that they expected to receive (Norris, 2009). In Merrill Lynch and other financial organizations in the United States and European Union, the Human Resource function has little or no say in the matter of the amounts of compensations to be disbursed. These firms had policies that encouraged the employees to take excessive risks in the hope of getting high rewards. Even though, in most of the organizations that have been brought down due to the global crisis, human resource was given a strategic place as far as planning and recruitment were to be considered, there was still the need to treat human resource management as a business partner. Human resource management can work as a business partner instead of providing just strategic planning support. In this capacity of a business partner, HRM can work closely with the organizational leadership in provide strategic inputs in the overall human resource policy development and implementation (Armstrong & Baron, 2002). This also entails that the HRM manager assume added responsibility in deciding about the employees pay, bonuses or rewards packages as well as their training and development. By having human resources manager to report to the CEO of the organization, and giving him powers to veto certain employee-related decisions will ensure more effective utilization of the people resources. Strategic Human Resource Management for Preparing Organization for Future Upturn The economic downturn may have resulted in loss of jobs or lowering of compensations and created a discontented workforce for the organizations to deal with. This current state of affairs offers both challenges and opportunities to strategic human resource Management. It also offers HRM a great opportunity to groom the existing workforce to align itself with the changing business needs in the near future. With the economy expected to turn around in the coming years (AFP, 2009), it provides a valid case for the human resource managers to develop plans to gauge the skills and abilities needed by the workforce once that happens. This adds a further dimension to the role of the HR manager, who until now was confined to providing strategic planning for recruitment and selection or training needs of the organization. Due to the global crisis, and the future uncertainties, the human resource managers can assume a more visionary role where they are able to forecast the future requirement of skills for their employees. They also have the opportunity to work as change agents, to help change the organizational culture and to make their organizations more resilient (Herriot and Pemberton, 1995). Technology Challenges to the SHRM Budget Squeezes A major implication of the global financial and economic crisis has been the cut in financial spending of the organizations. The organizations caught up in the dwindling revenues and credit difficulties have resorted to curbing their expenditures on their employees. This places pressure on human resources which is tasked with the job of maintaining employee relationships (Marlow, 1997). It is challenging for human resource management to retaining employees and to keep them motivated to perform (Luttwak, 1998). In such a case there is a need that the HR and the Financial departments of the organization interact and cooperate so that the requirements of the HR be still met within the austerity measures promoted by the organization. Limiting the Role of the HRM manager The downturn in the economy has also led the organizations to downgrade their human resources and the HRM function itself, and hence threatens to limit the scope of the human resource managers. Due to the freeze on recruitment and training as well as the massive lay-offs by several organizations, it can be falsely assumed that the HRM function is redundant. This is because traditionally, hiring selection, training and development and keeping the employees motivated have been associated with the HRM departments as their core tasks. In the event that the above listed activities have completely stopped or slowed down, there may appear to be no need for the HRM department to continue in its present capacity. However, there is a need for the HR managers to meet this threat by providing strategic support to the organization in times of lay-offs and by maintaining peace and working towards maintaining employee relations (Marlow, 1997). The HR managers can help in formulating and dispensing policies in a more humane manner and with consideration for the employees. Pressure to Increase Productivity and contain Costs While on the one hand the organizations are restricting the HR budgets and placing curbs on the scope and utility of the human resource managers, on the other hand they expect the employees to perform at their maximum and generate unprecedented productivity. This is an added challenge for the HR managers as they have to perform their function under severely restricted budgets and have to get the employee feel motivated enough to perform at their best. In this situation, some of the things that the HR managers can do is to realign the employees attitudes towards the changed organizational goals. They can provide support to the employees in terms of advice and performance coaching as the limited budgets do not permit more training opportunities. Another cost-cutting-performance-enhancing practice that the HR managers can undertake is to identify high potential individuals and to train them for the future responsibilities. Conclusion The above discussion on the specific challenges and opportunities that strategic human resource management is facing in the event of the global financial crisis reveal that this is a time for the HRM function to reassert itself. It is needed that the HRM be given a more central and decision making position in the organizations vis-à-vis employee’s affairs, and that they be treated as strategic business partners and not merely as business support. Most of the challenges – like the need to work with immensely limited resources and budgets - are expected to be short term, though HRM can learn several useful lessons for emulating in the future. Further, the crisis offers several opportunities to increase the scope and importance of the HR function and the HR managers should make an active effort towards this. Reference: 1. AFP, 2009. “Global economic crisis far from over: IMF chief”, retrieved from: http://www.google.com/hostednews/afp/article/ALeqM5hDkFzKwWG71Shf3AlyIMgqSIFzTQ accessed on April 25, 2009 2. Armstrong, M and Baron, a. (2002) “Strategic HRM: The Key to Improved Business Performance. developing practice. London: Chartered Institute of Personnel and Development. 3. Herriot, P and C. Pemberton. (1996) “Contracting Career” Journal of Human Relations, Vol. 49, No. 6, 757-790 4. Luttwak, Edward, (1998). Turbo-Capitalism: Winners and Losers in the Global Economy. New York: HarperCollins Publishers. 5. Marlow, S. 1997. “The employment environment and smaller firms” Journal of International Journal of Entrepreneurial Behaviour & Research Volume: 3 Issue: 3 Page: 143 - 148 6. Monks, K. 1992. Personnel management practices: uniformity or diversity? Evidence from some Irish organisations, Irish Business and Administrative Research, 13, 74-86. 7. Pfeffer, Jeffrey (1994) Competitive advantage through people. California Management Review (Winter): 9-28 8. Schuler, R. S. (1989) "Scanning the Environment: Planning for Human Resource Management and Organizational Change", Human Resource Planning, 12 (4): 257-76. 9. Samoff, Joel, ed, (1994). Coping with Crisis: Austerity, Adjustment and Human Resources. London and Paris: Cassell. And United Nations Educational, Scientific and Cultural Organisation. 10. Norris, F. 2009. The New York Times, January 15, 2009. available online at http://norris.blogs.nytimes.com/2009/01/15/thain-earned-that-bonus/?scp=10&sq=tahn,%20CEO%20Merrill%20Lynch&st=cse Accessed on April 24, 2009 Read More