Strategic Integration of Human Resources Management at PepsiCo - Case Study Example

Running head: human resources Research paper: Human Resources Why is it important for Human Resource Management to transform from being primarily administrative and operational to becoming more of a strategic partner? Name: Course: Date: Abstract Human resources management has evolved from a mere administrative function to strategic partner during last century. This research paper focuses on studying this evolution based on literature findings and by examining the contribution of strategic human resources management in the success of a specific business. For the present study, strategic integration of HRM at PepsiCo has been studied and key findings have been noted. Table of contents Topic Page No 1. Introduction 4 2. History and evolution of HRM 4 3. Findings: PepsiCo 5 4. Discussion 5 5. Conclusions 7 References Appendices Abbreviations 1. Introduction: Strategic human resources management has been embraced by organizations as the pathway to better performance and competitive advantage. Hence, many organizations strive to incorporate business strategy into HRM thereby giving it a strategic importance and perspective, especially from industrial relations and organizational behavior facets. This study focuses on understanding the evolution of HR function from basic administrative aspect to strategic integration as explained in literature and based on a specific organization’s adoption and contribution of strategic HRM before concluding with key findings. 2. History and evolution of HRM: Personnel management has moved from mere care-taking function to strategic partner during last few decades, although this trend started post World War II according to the CIPD factsheet (2014). Throughout literature, the most probable triggering factor to this transformation has been associated with Hawthorne’s experiments leading to a new perspective of understanding related to human relations, which were reinforced by various other studies as shown in Table 2.1 (Armstrong, 2012). Strategic integration of HR function has been the next step that intensified its role in helping organizations gain a competitive advantage (Ulrich, 1997). Ulrich (1997) highlighted the key roles and responsibilities of HR department thereby underpinning HR department’s role in managing human resources, company infrastructure, and managing change and transformation as well as managing performance of employees and thereby the organization (pls see fig 2.2). Specifically, Ulrich (1997) has identified that the HRM function in most of the successful organizations transformed from administrative function to more complex activities such as, strategic partner, employee advocate, change agent and administrative expert. Noe et al., (2007) point out many factors that could have triggered this transformation of HRM to strategic role such as challenges of sustainability and competition, changing expectations of customers, changes in markets, changes in economies etc. 3. Research findings: Owing to the factors highlighted by Noe et al., (2007), a classic example of this transformation that can be quoted is that of PepsiCo. Noe et al., (2007) point out that PepsiCo had failed to sustain its acquisition of Kentucky Fried Chicken, Taco Bell and Pizza Hut in 1980s due to lack of understanding of the new market as well as its workforce skills, which ultimately resulted in divestment of the fast-food units. However, PepsiCo managed to remain competitive by making some unique decisions related to their products, markets and HRM strategies. Daft (2008) identifies a case study on PepsiCo, which explains this company’s strategic HRM approach to a large extent. The main strategy that integrates its human resources worldwide with its business strategy involves its values and codes of conduct. PepsciCo embraced strategic HRM amidst a variety of challenges it was facing such as increasing competition, new entrants, inappropriate acquisition, retention of talent, etc, which eventually gave positive consequences (Ashwathappa & Dash, 2013). Its transformation to SHRM by dividing work in every aspect into four quadrants, identified by Ulrich (1997) in the human resource competency model, helped in developing strategies that contributed to company’s expansion as well as innovation. PepsiCo’s HR competency model for its HR managers identifies the following roles (Daft, 2008): 3.1 Strategic partner: This role is responsible for aligning HR strategy with business strategy of PepsiCo, which means HR strategies are formulated based on the business strategies specific to overall organizational business strategy while considering regional obligations related to markets, regulations, economies and cultures. For instance, in order to counter the challenge of higher employee turnover in recession-free emerging markets, PepsiCo has designed a new reward toolkit in accordance with the external factors such as country, economy, competitors etc; this integrated toolkit to increase retention has had good impact on PepsiCo in retaining their staff in the emerging markets (O’Donovan, 2013). 3.2 Change agent: As change agents, HR managers develop systems and processes to lead and facilitate changes that are triggered by market trends, acquisitions and mergers, or any other organizational changes. 3.3 Administrative functions: PepsiCo’s HR managers also manage basic HR functions related to compensation and benefits, communication, designing processes and procedures related to employee performance etc. 3.4 Employee champions: This function is responsible for driving employee satisfaction, commitment, engagement while collaborating with other functional managers in order to optimize employee contribution and efficiency. For instance, PepsiCo’s frontline associates are trained by managers from all levels to educate as well as improve skills required for improved performance. 4. Discussion: Strategic HRM approach has been extremely beneficial for organizations as this approach credits human resources as the main factors responsible for organizational success; this approach also provides a better knowledge of organizational strategies and goals to all stakeholders of the organization, thereby increasing their involvement and commitment. SHRM’s people-centricity makes employee motivation as a vital component of organizational functioning, and hence policies and procedures that are formed for achieving organizational strategies are also aligned with employee requirements. Strategic HRM actually links organizational/business strategies and employee actions through leadership, policies and practices, and execution. At PepsiCo, SHRM has not only integrated all HRM functions but also fragmented complex HR activities into simpler employee-focused practices that have further helped in achieving organizational goals and growth. Nevertheless, it has to be noted that strategic HRM focuses on long-term goals and most often involves senior management’s interests because all planning and decision-making is done at the senior management levels. Its long-term focus poses challenges in this rapidly changing business environment, which necessitates continuous review and renewal of policies and procedures also, which PepsiCo has been tackling with innovative and congruent practices as seen in their reward toolkit. 5. Conclusions: To conclude, evolution of HR function from mere administrative to strategic integration has certainly benefited organizations to the extent that it has now become the norm and the reason for organizational sustenance. Human relations perspective highlighted by various studies has indeed changed the way HR function is being viewed in the organizational realm. Further transformation of HRM to SHRM, as seen in the case of PepsiCo, has exemplified the need and significance of HRM. The core frontline human resources that is responsible for organization’s business continues to follow and benefit from HR strategies, practices and procedures irrespective of their interests and commitment. In order to motivate these frontline resources, strategic HRM focuses on creating motivational practices related to their compensation, performance evaluation, growth and promotions etc. Yet, dissatisfaction, low employee morale and commitment, employee turnover, low performance etc continue to face the organizations at every time, especially in the emerging markets for PepsiCo. Such challenges only mean that PepsiCo must continue to review their HR strategies and modify them according to the changing needs, which further intensify the need for strategic integration of HR function with other organizational functions on a continuous basis. In fact, its latest reward toolkit perfectly fits the example of review and renewal of strategies according to changing needs. Finally, strategic HRM also facilitates creation and implementation of new strategies that suit the changing needs. References Armstrong, M, (2012), Armstrongs Handbook of Human Resource Management Practice, 12th ed, London: Kogan Page. Ashwathappa, K and Dash, S, (2013), International Human Resource Management, 2nd ed, New Delhi: Tata McGraw-Hill. Daft, R.L. (2008). The New Era of Management. 2nd ed. Ohio: Thomson Higher Education. History of HR and the CIPD, (2014), CIPD Factsheet, cipd.co.uk, retrieved Feb 21, 2014 from http://www.cipd.co.uk/hr-resources/factsheets/history-hr-cipd.aspx O’Donovan, D. (2013, 2 May), PepsiCo designs reward toolkit for staff in emerging markets, Employee Benefits, retrieved Feb 22, 2014, http://www.employeebenefits.co.uk/international/pepsico-designs-reward-toolkit-for-staff-in-emerging-markets/101912.article Noe, R.A, Hollenbeck, J.R, Gerhart, B and Wright, P. M. (2007). Human Resource Management: Gaining a Competitive Advantage. New York: McGrawHill Irwin. Ulrich, D, (1997), Human Resource Champions: The Next Agenda for Adding Value and Delivering Results. Boston, MA: Harvard Business Press, p.24. Appendices Figure 2.1 Source adapted from: Armstrong, M, (2012) Armstrongs Handbook of Human Resource Management Practice, 12th ed, London: Kogan Page p.122. Figure 2.2 Source adapted from: Ulrich, D, (1997), Human Resource Champions: The Next Agenda for Adding Value and Delivering Results. Boston, MA: Harvard Business Press, p.24. Abbreviations 1. HR: Human Resources 2. HRM: Human Resources Management 3. SHRM: Strategic Human Resources Management Read More