Different Approaches to Strategic Human Resource Management - Literature review Example

Different approaches to strategic human resource management Executive Summary Human Resource Management has evolved significantly over recent decades with an increasing emphasis on contributing to business goals and achieving a competitive advantage through a more strategic approach. Earlier, personnel departments were responsible for the utilization of employees to meet organizational goals. Personnel Management in organizations was transformed to Human Resource Management (HRM) with the evolution of scientific management principles. The introduction of globalization and the subsequent growth of cross cultural business made a further name change in the employee management department. Now, instead of HRM, Strategic HRM is prominent in the organizational world. Employees are the backbone of any organization. Even though an organization has many other resources, human resources are the most important ones. All the other organizational resources such as machines, money and materials, need the supervision from human resources for proper utilization or mobilization. This paper evaluates different approaches in strategic human resource management (SHRM) and describes the positioning of SHRM in contemporary context. Introduction According to Bratton & Gold (2012), “Labour is not a commodity. It is people in work organizations who sets overall strategies and goals, design work systems, produce goods and services, monitor quality, allocate financial resources and market the product and services” (p.8). Even though an organization has many internal and external resources, none of them has the ability to act independently except the human resources. In other words, all the organizational resources can be mobilized properly only under the control of human resources. There is nothing wrong in saying that HR can make or break an organization. Boddy (2008) defines Human Resource Management (HRM) as “the effective use of human resources in order to enhance organizational performance” (p.354). Because of globalization, majority of the prominent companies are currently operating cross culturally. Outsourcing and offshoring like modern business principles were evolved out as a result of globalization. Exploitation of cheap labor is vital for an organization for staying competitive in the market. Moreover, diverse workforce is common in most of the modern organizations. Management of diverse workforce necessitates restructuring or modifications of many of the existing HRM principles. Instead of HRM, SHRM is common in most of the modern organizations. According to Bratton (N.d.), “Strategic human resource management is the process of linking the human resource function with the strategic objectives of the organization in order to improve performance”(p.37). The ability to stay competitive determines the success and failures of modern organizations. The way of doing business in the past and present are entirely different. SHRM helps organizations to formulate strategies suitable for the changing principles in the organizational world. Different approaches and models are prevailing in the organizational world with respect to the implementation of SHRM. Different approaches in strategic human resource management (SHRM) According to Bratton (N.d.), “Strategic HRM’ is an outcome: ‘as organizational systems designed to achieve sustainable competitive advantage through people’” (p.46). For example, plenty of American companies are currently struggling in international market, not because of the poor quality of the products they produced, but because of the huge price of these products compared to the prices of products from competitors. It should not be forgotten that America is a country in which manpower cost is extremely high. On the other hand, China and India are countries in which manpower cost is extremely low. Nobody has any doubt about the technological dominance of American companies. However, expensive labor preventing American companies from competing effectively in the global market. Currently, plenty of American companies offshored their business to China like cheap labor oriented countries as a strategy to reduce the prices of their product and to increase their competitive power. For example, Apple, Yahoo and Microsoft like companies already established business units in China, even though China has huge differences with America in terms of politics. Plenty of Americans are currently working in the Chinese units of these companies along with Chinese people. Since Chinese culture is extremely different from American culture, it is necessary to train or empower American employees with respect to Chinese culture. SHRM performs all these duties and helps the companies to increase their competitive power. “SHRM is viewed as a process by many people; ‘the process of linking HR practices to business strategy” (Bratton, N.d., p.46). Earlier, HR managers were not much bothered about the business strategies of the organization. They were keen only in the effective utilization of the human resources. Business strategies were formulated by the top management and HR had no role in such things. However, SHRM has many roles even in the formulation of business strategies. In fact modern companies seek the opinions of HR managers before proposing certain business strategies. Ultimately, the employees are responsible for the success and failures of any business strategies. Even well planned business strategies may fail if the employees show reluctance in implementing it. Under such circumstances, it is vital for organizations to take employees in confidence before the implementation of any business strategies. For example, change management principles are implemented in many organizations as part of the improvement organizational efficiency, productivity and competitive power. Employees often resist changes because of their pre-conceived notion that change is implemented only for the exploitation of the employees. It is the duty of SHRM to eradicate such misconceptions about the change management principles among the employees. SHRM should convince the employees that the intended change management principles are mutually beneficial. “The assumption that SHRM is a strategically driven management process points to its international potentialities. The employment relationship is shaped by national systems of employment legislation and the cultural contexts in which it operates” (Bratton N.d., p.61). International business is growing day by day because of globalization. Moreover, exchange of workforce is also common nowadays. Majority of the international companies have diverse workforce. Management of diverse workforce is extremely is difficult compared to the management of single cultural workforce. For example, Muslim employees like to have weekly off on Fridays whereas Christians like to have it on Sundays. Such contrasting interests often bring conflicts in organizations which are operating in multicultural environment. Moreover, complaints about racial discrimination, stereotyping, gender inequalities, unfairness in promotions, communication problems etc may arise more in the multicultural organizations. It is the duty of SHRM to find way to tackle all these problems. If a manager of an Asian enterprise wants to initiate a SHRM system, he should make it absolutely include the following four points: (1) Create an efficient way of communication. (2) Launch an education campaign to help the employees to deal with international business. (3) Introduce different cultures and customs to the staff so that they can understand some activities of western business. (4) Institute a feedback system in which employees are ready to feed back the progress of the business so that decision makers can make decision as soon as possible (Jianxin & Zhengping, N.d. p.12). Asian culture is entirely different from American or European culture. The ways of doing business in Asia are different from the way of doing business in America or Europe. Communication channels; including verbal and nonverbal, are different in Asia and in America or Europe. For example, Americans and Europeans usually communicate through English language whereas each Asian country has their own local language. In India, Hindi is the national language whereas in China, Mandarin is the national language. Same way, Americans and Europeans shake hands to mark their respect towards others whereas Chinese people bow their head in front of others to mark their respect. Indians on the other hand, hold their hands together in a particular manner and say “Namasthe” to mark their respect towards others. In short, communication channels are different for different people and it is the duty of SHRM to train the employees to master the communication channels of others while an organization operates cross culturally. “In recent years, there has been much interest in the notion of “best practice” human resource management. Sometimes, it is referred as ‘high performance work systems’ or ‘high commitment’ HRM” (Marchington, & Wilkinson, 2005, p.72). The ultimate aim of any models of HRM is to improve the performances of the employees and thereby improve the performance of the organization. Better performing employees are always an asset whereas under performing employees are big liabilities to an organization. Therefore the success of SHRM lies in the reducing the number of underperforming employees and increasing the number of outstanding performers. Some employees like their jobs whereas others dislike their jobs. It is the duty of SHRM to motivate underperformers with the help of suitable strategies. Strategic integration is necessary for the effective handling of extremely diverse employees. “Strategic integration is defined as the ability of organizations to integrate HRM issues into their strategic plans”(Beardwell, & Claydon, 2007, p.9). Rewards may motivate some employees whereas punishment is required for other employees to raise their standard of performance. SHRM should take the cases of all the employees on an individual basis and formulate motivation strategies for each employee. Positioning of SHRM in contemporary context Organizations in the past were reluctant in providing some key positions to women employees. Such organizations had an illusion that women employees may not have the same mental power and decision making abilities as that of the male employees. Therefore, women got mainly clerical and secretarial jobs in the past. Management or executive positions were reserved primarily for the male candidates. The arrival of SHRM has rewritten all such preconceived notions or illusions. Nowadays, it is an accepted fact that Women can excel better than men in managerial positions. In India, the ruling UPA coalition front is led by a lady; Sonia Gandhi whereas Indian parliament (Loksabha) speaker is another lady; Meera Kumar. Until recent times, Prathibha Patil was India’s president. “Historically, India has been a male dominated society. Yet, in the past two decades or so, social change has opened the possibility for women to attain managerial roles in corporate India” (Perspectives on Women in Management in India, p.1). Same way, Hillary Clinton was the Secretary of States in America, until recent times. It should be noted that Pepsi like big companies have currently women CEO’s. The March 2009 report, Women CEOs of the Fortune 1000, published by Catalyst (the U.S. firm working to expand opportunities for women and business), identifies the women CEOs of the Fortune 500 and 1000 companies. Of the Fortune 500 companies, 15 CEOs are women, including one Indian woman, Indra K. Nooyi, PepsiCo, Inc. (#59). Of the Fortune 501-1000, there are nine women CEOs (Perspectives on Women in Management in India, p.2). In short, SHRM was successful in removing many of the traditions, myths and illusions associated with the organizational world. “A number of studies have shown that results of training affect overall performance of an organization such as productivity, turnover rate, absence rate and organization commitment etc” (Lin et al. 2011, p.927). Many of the organizations in the past were keen only in the recruitment of the employees. Such organizations thought that remuneration is the only factor which motivates the employees to deliver the goods. However, the entry of SHRM has rewritten many of such myths. Along with remuneration, modern employees are particular about the work culture, reputation of the organization, management styles, work life balancing etc. For example, Apple Inc. is the most valuable technology company in the world at present. They are second biggest in the world in terms of market capitalization. However, employee turnover rate in Apple Inc. is extremely high compared to that in other organizations. This is because of the autocratic management styles in Apple Company. Apple has the habit of asking employees to stay back for overtime works on a regular basis. Mackay (2008) pointed out that “In situations where pressures to work longer hours are higher, employees feel overloaded and likely to experience greater dissatisfaction with their jobs which may result in higher stress and fatigue, and greater work—life imbalance” (p.38). Apple has less belief in work life balancing. Moreover, Apple managers often say that the company is particular about employability rather than employment security. All these factors are causing higher turnover rate in Apple Company. The failure of SHRM in Apple Inc. is evident from the above descriptions. Peace of mind is essential for the employees to concentrate properly in their work. When organizations ask stay back on a regular basis, employees may not get enough time for socializing with friends and family members. Socializing is necessary for employees to shed some of their job stress and attend the duties with a fresh mind on the next day. “Decisions about human resources policies should take their cue from and explicit alignment of the competitive environment, business strategy and HRM” (Bratton & Gold, 2012, p.25). Apple failed to do so and is facing lot of problems with respect to the retention of the employees. Along with, recruitment, retention is an important HR function. Strategically, it is not good for an organization to lose experienced employees to competitors. Employees coming out from an organization definitely can provide vital information about the business policies and strategies of his previous organization to his new employer. According to Nankervis & Debra (1995), “Organizations need to utilize their human resources effectively to provide high quality service to their customers, to improve productivity and hence profitability”(p.507).SHRM is responsible for the effective utilization of the employees. The right employee at the right place at the right time will always bring benefits to the organization. On the other hand, even smarter employees may fail to deliver the goods if they were placed at wrong positions. SHRM is responsible for the allocation of jobs. “It is an accepted fact that retention and productivity of workers are the function of their motivation level” (Lord, 2002, p.3). An employee will develop motivation for works only when he gets enough remuneration and other working conditions. Modern employees are particular about the reputation of the organization they are working for. Sustainable business practices, commitment to environment, and corporate social responsibility are some of the factors which increase the reputation of an organization at present. According to Nohria et al, (2008) “the four drives that underline motivation are; the drive to acquire, the drive to bond, the drive to comprehend and the drive to defend”(p.3-4). All these drives are attainable only when the SHRM performs its duties well. “The most effective means of managing people will vary from organization to organization and is dependent on organizational context” (Beardwell, & Claydon, 2007, p.8). The HR strategies successful in one organization need not be successful in another organization even if the second organization operates in the same place. For example, Yahoo and Google are two prominent American companies which have similar lines of business. These two companies have established business units in China few years before. However, Google forced to withdraw from China recently because of China’s policies with respect to censoring of information. On the other hand, Yahoo has no problem in continuing in China. In other words, business philosophies of Yahoo and Google are entirely different. Such differences in business philosophies may often reflect on HRM strategies also. Conclusions Strategic human resource management is getting popularity in the modern business world because of its vital role in increasing the competitive power of an organization. Business concepts and philosophies were changed a lot in the recent past because of the introduction of globalization. Moreover, scientific business management principles are getting more popularity in the organizational world at present. Therefore, new HRM strategies became inevitable for the effective management of human resources. Majority of the modern organizations operate internationally at present. Moreover, diversity in workforce brings new challenges to HRM. It is easy to manage a single cultural workforce; but it is difficult to manage a multicultural workforce because of its contrasting needs. SHRM helps organizations to identify the needs and settle the conflicts of a diverse workforce. HR strategies successful in one organization need not be successful in another organization. This is because of the fact that different organizations operate in different environment and culture. SHRM helped organizations to avoid illusions and superstitions in the organizational world. The arrival of women at top positions is an example of this. In short, SHRM helped organizations to improve competitive power and enhance productivity. References Boddy, D. 2008. Management: An Introduction, 4th Edition, Harlow, FT Prentice Hall Beardwell, J & Claydon, T. 2007. Human resource management: a contemporary approach. Publisher: Financial Times/ Prentice Hall; 5 edition (30 Jan 2007) Bratton, J & Gold, J. 2012. Human resource management: theory & practice Publisher: Palgrave Macmillan; Fifth Edition, New Edition, 5th Edition (July 17, 2012) Bratton, J. N.d. Strategic human resource management. [Online] Available at: http://www.palgrave.com/business/brattonandgold/docs/bgcha02.pdf [Accessed 11 March 2013] Jianxin, Y& Zhengping, L. N.d. Strategic Human Resource Management of Asian Enterprises in The Process of Internationalization. [Online] Available at: http://jgxy.usx.edu.cn/DAOM/071_JianxinYou.pdf [Accessed 11 March 2013] Lin Y., Chen S., & Chuang H. 2011. The Effect of Organizational Commitment on Employee Reactions to Educational Training: An Evaluation using the Kirkpatrick Four-level Model. International Journal of Management Vol. 28 No. 3 Part 2 Sept 2011 Lord R.L. 2002. Traditional motivational theories and older engineers. 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