Strategic management and other aspects of HRM - Research Paper Example

STRATEGIC MANAGEMENT AND OTHER ASPECTS OF HRM In the literature review, we focused on definitions and explanations of strategic management and human resource management. The objective of strategic management is to gain advantage in the competition. Strategic management also aims for strategic competitiveness which is attained the firm successfully formulates value creation. Some interesting subject related to this paper is the history of HRM, which was then handled by personnel management in the traditional sense. Functions and responsibilities were managed by a personnel department, until HRM evolved. Functions include recruitment, training, and managing human resource. One concept of strategic management and HRM is that the people are the organization’s greatest asset. The present trend in organizations is to look after the welfare of its employees and see to it that they are satisfied with their work in the workplace. I. Aims and Objectives This essay will look into the subject of Strategic Management to include other relevant aspects that organizations employ as they enter the age of globalization. Some other aspects of Human Resource Management, the definition, functions, and objectives are also discussed. II. Literature Review Organizations conduct strategic management for the purpose of gaining an advantage or competitive advantage in the industry. While in the process of implementing processes, the organization is doing strategic competitiveness. According to Hitt, Ireland, & Hoskisson (2009, p. 4), ‘Strategic competitiveness is achieved when a firm successfully formulates and implements a value-creating strategy. A strategy is an integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage’ (Hitt, Ireland, & Hoskisson, 2009, p. 4). The concept of strategic HRM is based on the important part of the HRM philosophy that emphasizes the strategic nature of HRM and the need to integrate HR strategy with the business strategy (Armstrong, 2000, p. 6) Strategic HRM is linking people to the strategies of the firm. Traditionally, personnel management took the functions of HRM. When functions and responsibilities multiplied to the fore due to various organizational and environmental factors, changes have to be incorporated in the organization. Human Resource Management has taken over the functions of Personnel Management. These functions range from recruitment to training to managing the personnel and their functions in an organization. In the UK, HRM emerged in the late 1980s, giving way to personnel management, during the time when stress on the integration of HR policies was needed. The people are the organization’s greatest asset, and human resource is to manage or take care of this special asset. If the people are working well in the organization, it means HRM is doing its job of looking over the employees. Human resource management is defined as “a strategic and coherent approach to the management of an organization’s most valued assets – the people working there who individually and collectively contribute to the achievement of its objectives” (Armstrong, 2006, p. 3). But Storey (1989) believes that HRM can be regarded as a ‘set of interrelated policies with an ideological and philosophical underpinning’. Storey suggests these following aspects that constitute the meaningful version of HRM: it is ‘a particular constellation of beliefs and assumptions; a strategic thrust informing decisions about people management; the central involvement of line managers; and a reliance upon a set of ‘levers’ to shape the employment relationship’ (Armstrong, 2006, p. 4). HRM is an umbrella term that encompasses subjects on practices such as recruitment, selection and appraisal; policies and philosophies of the organization (Jackson & Schuller, 1999, p. 4) To analyze Storey’s version, there is a stress on people management, from top to middle- and low-level employees. There is also division of labor in the handling of people in the workplace and in the field. Before, when people management was being handled by the personnel management, the personnel manager was under direct control of the CEO. Now, it still is under the CEO but HRM is being handled by its own Manager, and more of an independent department. In other words, it is the functions that have been concentrated in a department that makes it distinguished from the Personnel Department of old. Bratton’s (1999, p. 11) definition of HRM: “HRM emphasizes that employees are critical to achieving sustainable competitive advantage; that human resources practices need to be integrated with the corporate strategy, and that human resource specialists help organizational controllers to meet both efficiency and equity objectives.” Bratton’s definition stresses the objective of HRM – to maximize the human resource potentials, including their talents, skills, training, or areas of expertise for the strategic advancement of the organization. One of the first explicit statements of the HRM concept was made by the Michigan School (Fombrun et al, 1984, cited in Armstrong, 2006, p. 4), which ‘held that HR systems and the organization structure should be managed in a way that is congruent with organizational strategy.’ This was expressed through a cycle consisting of four processes or functions in organizations, which are: selection, appraisal, rewards, and, development and managing people Legge (1995, p. 33) says that personnel management is giving way to human resource management or to strategic human resource management. The evolution of the term or function is that it originated from personnel management or personnel department in some cases. Changes occur because organizations are becoming larger and more complex to handle, human resource management entered the scene. Human resource policies should be integrated with strategic business planning (Legge, 1989, cited in Armstrong, 2006, p. 13). But Sisson (1990) suggests that a feature increasingly associated with HRM is a stress on the integration of HR policies both with one another and with business planning more generally. Storey (1989) states that ‘a characteristic of HRM is its internally coherent approach’ (Armstrong 2006, p. 13). In the UK, HRM was first mentioned in some issues of Journal of Management Studies in 1987; the article was entitled ‘Managerial Strategy and Industrial Relations’, and a series of articles by Pettigrew, Hendry and Sparrow (Legge, 1995, p. 33). Another paper came out in January 1988, entitled Personnel Management, with a subtitle ‘The Magazine for Human Resource Professionals’. Storey (1995, p. 3) says that the first British book on human resource management was produced in the late 1980s entitled, New Perspectives on Human Resource Management. After that, the term became popular until it has become an important part of any organization. There is now the shift in language in the UK and the US, from personnel management to HRM, and this is against the background of changes in both product and labour markets, amidst new technologies and political ideologies (Legge, p. 34). HRM is the ‘new way’ (Storey, p. 4). HRM Paradigms There are two paradigms focusing on HRM. The universalist paradigm, which is dominant in the United States, is widely used elsewhere. This paradigm assumes that the purpose of the study of HRM, and in particular strategic human resource management, is to improve the way human resources are managed strategically within organizations (Harris et al., 2003, p. 6). In contrast, the contextual paradigm searches for an overall understanding of what is contextually unique and why. Many management researchers find the universalist paradigm ironically excludes much of the work of HR specialists in such areas as compliance, equal opportunities, trade union relationships and dealing with local government. This paradigm is not helpful in regions like Europe, where significant HR legislation and policy is enacted at European Union level as well as those of particular countries or sectors (Brewster et al, 1996, qtd. in Harris et al, 2003, p. 7). Armstrong (2006, p. 11) further states that HRM is diverse; strategic with an emphasis on integration; commitment-oriented; based on the belief that people should be treated as assets (human capital); unitarist rather than pluralist, individualistic rather than collective in its approach to employee relations; a management-driven activity – delivery of HRM is a line management responsibility; and focused on business values. On the other hand, Gold (1999, p. 167) distinguishes Human Resource Planning (HRP) from HRM. He says that HRP serves as the integrating link between strategic business planning and strategic HRM. HRP therefore is part of the HRM cycle. HRP specifies recruiting and selection goals, including the number and type of individuals to be employed. Appraisal affects HRP by giving information on individual performance and productivity, which can determine the number and type of employees needed to achieve strategic goals. HRP also specifies future job requirements. Human Resource, an important asset Human resource is the most important asset of the organization. In human resource, there are theories explained to us by a number of scholars. Theories on work include McGregor’s Theory X and Theory Y which explained the organizational change in the context of workers’ behavior in the workplace. Theory X assumes workers’ dislike for job or work: workers regard job as distasteful. Managers in companies that accept Theory X build a top-heavy organization with many levels of managers who are planning, deciding, and policing what everyone is doing (Fournies, 1999, p. 33); work was regarded as an obligation, or a punishment (Firth, 2002, p. 16). Employees would work for the monetary reward, and the higher the better. With the way people felt about work, the workplace was somewhat not conducive for creativity and advancement. On the other hand, Theory Y assumes that when people are motivated, they accomplish goals. Workers become productive when they are motivated: to be a part of the team, to be a part-owner of the organization, and to be creative in their work. Money is not an aim or an objective, and work becomes a part of life, not distasteful. Managers in organizations that accept Theory Y push information and responsibility downward, explaining to workers the reasons why things should be done, assuming they have an interest in doing them and a willingness to do them. Theory Y is treating employees as if they make a difference to the company because they will really make a difference to that company. Another form of management distinct from McGregor’s Theory X is the Open System which recognizes that humans are social actors with inherent strengths and weaknesses. This theory allows the individual to evolve according to the environmental forces. Other theories involve mathematical formulations such as that of Ludwig won Bertalanffy, that focused on cybernetics and the role of output-feedback-adjustment. Many believed the General Systems theory is the framework for other disciplines not just biology (Skyttner, 2001, p. 51). Working in a global marketplace affects all Human Resources processes and requires that they be fully aligned. Access to talent across national boundaries using an Internet-based job search sites vastly changes the recruitment process. (Ruddy and Anand, 2010, p. 550) In The World is Flat, Friedman (2005, p. 212) says: “It is the triple convergence – of new players, on a new playing field, developing new processes and habits for horizontal collaboration – that I believe is the most important force shaping global economics and politics in the early twenty-first century.” The organization should diagnose business symptoms related to the workforce. Some of the key questions that must be asked are: Can your workforce respond in a timely manner to shifting market and business conditions? Are you experiencing high turnover rates – especially in specific professions, functions, roles, or age, gender, or ethnic groups? Are you having trouble filling specific openings? Do you have difficulty identifying and effectively deploying talent? Do you know what the right mix of talent would be? An organization needs talents because it is these talents that can help in the organization’s survival. But talents are deteriorating in the world’s labor market (Avedon & Scholes, 2010, p. 73). Joyce (2010, p. 123) says that talents have to be retained but we have to overcome the challenges of acquiring talents in the organization. III. Research Methodology Our research methodology consists of research on books, magazines, periodicals, and the web. We also looked into the various studies and researches of authors and scholars on the subject strategic management and the broad area of HRM. HRM encompasses various topics and subjects that we have to narrow down the subject to strategic management. IV. Discussion Hitt et al (2009, p. 5) state that the purpose of strategic management is to gain advantage in the industry’s competition. The firm has to implement strategies that are said to be original, enabling it to be ahead of the competition. The product and service have to be unique and cannot be copied or imitated. The strategic management process involves commitments, actions, and decisions that the firm should implement in order to be ahead of the competition. There are various barriers to competition and these have to be taken into consideration (Hitt et al, 2009, p. 6). Among the things to consider in strategic management is globalization. Most firms have ventured or entered the process of globalization. In this new environment, some traditional processes may remain but governance and structural arrangements are different. Some differences include the structural set up: the top managers and their boards now assume functions different from traditional firms. The term globalization emerged as an offshoot of the high-technology tools that have sprung these past decades – computers, the internet, Information Technology. We can connect and conduct business with the rest of the world so easily. With just a computer with internet connection, indefinite access can be attained with co-partners anywhere and anytime. This is the twenty-first century, the age of digitization and fast paced communication. In globalization, firms are faced with more challenges and ambiguity but they have to cope and go with the flow of social and economic transformations. Inside the organization, structural reforms have to change. Globalization affects production and the many functions in the organization. But this also results in higher-quality goods and services. One example of a company that has introduced strategic management in its operation is Toyota. Toyota introduced the concept of reducing product variation to save costs and remove complexity. The Japanese concept of production introduced in Toyota is a model of strategic management. Toyota was only a small automaker competing with giants in the industry in Japan. Its success as a small business venture can be attributed to innovative measures introduced by its early founders and managers. It introduced the “Toyota Production System” which is a means of achieving mass production efficiencies with small production volumes. This is a method of applying continual improvement in their production (Lynch, 2008, p. 772). The Toyota method is also known as simplification while improving continuously along the way. In the Japanese concept, employees, even the low-rank employees, are very important to the company. They are a part of the team and their opinions matter much. Toyota provides an example of product reliability and superior customer service; that’s why their products are in demand even though they outsource much of the auto parts from other Asian countries. Toyota is a global organization with manufacturing plants in foreign markets such as the United States, Brazil, Mexico, while maintaining quality. (Hitt et al, 2009, p. 9) Conclusion Organizations are now more focused to systems and practices. Stakeholders and staff are enticed to commit to change, so that everyone becomes involved. The organizational set up is still vertical, restricting power and decision on the top, while involving CEOs on their corporate social responsibility and the care for the environment. Organizations are global, huge, with challenges that surpass beyond local borders. References Armstrong, M., 2006. A handbook of human resource management practice. London: Kogan Page Limited. Armstrong, M., 2000. Strategic human resource management: a guide to action. London: Kogan Page Limited. Avedon, M. J. & Scholes, G., 2010. Chapter 2: Building competitive advantage through integrated talent management. In R. Silzer and B. Dowell (Eds.) Strategy-driven talent management: a leadership imperative. San Francisco, CA: John Wiley & Sons. Bratton, J. , 1999. Human resource management phenomenon. In J. Bratton and J. Gold, Human resource management: theory and practice. London: MacMillian Press Ltd., pp. 3-8. Firth, D., 2002. Life and Work Express. United Kingdom: Capstone Publishing. Friedman, T. L., 2005. The World is Flat: A Brief History of the Twenty-First Century. The BestNotes.com. Fournies, F., 1999. Coaching for Improved Work Performance. New York: McGraw-Hill. Gold, J., 1999. Human resource planning. In J. Bratton and J. Gold, Human resource management: theory and practice. London: MacMillian Press Ltd., pp. 165-168. Harris, H., Brewster, C., and Sparrow, P., 2003. International Human Resource Management. London: Chartered Institute of Personnel and Development. Hitt, M. A., Ireland, R., and Hoskisson, R. E. (2009). Strategic management: Concepts and cases. OH, USA: South-Western Cengage Learning. Joyce, L., 2010. Pipeline: attracting and recruiting the best and brightest. In R. Silzer and B. Dowell (Eds.) Strategy-driven talent management: a leadership imperative. San Francisco, CA: John Wiley & Sons. Legge, K., 1995. HRM: rhetoric, reality and hidden agendas. In J. Storey, ed. Human resource management: a critical text. New York: Routledge, pp. 33-36. Ruddy, T. and Anand, P., 2010. Managing talent in global organizations. In R. Silzer and B. Dowell (Eds.) Strategy-driven talent management: a leadership imperative. San Francisco, CA: John Wiley & Sons. Skyttner, L., 2001. General Systems Theory: Ideas & Applications. London: World Scientific Publishing. Read More