The abilities of people to cope with such environment define the success of any organization. Because of this, human resource function has become the integral part of the corporate strategic planning. Top executives are increasingly looking to HR to improve the bottom-line. In addition to staffing, recruiting and compensation, new value-added HR functions have evolved including career planning, training, organizational development and succession planning. Strategic Human Resource Management contributes not only to achievement of the motivated workforce, but also to the accomplishment of the company's long-term strategy and to competitive advantage.
The traditional roles of the Human Resource managers has changed from planning and recruiting, and today HR policies and practices influence the organizational performance. This new proactive approach to HRM is the shift from traditional view of personnel that focused on micro issues such as individual performance and satisfaction to the helping managers in maximizing the contribution of employees in achieving competitive advantage (Luthans 1998). Multinational organizations no longer rely on the technology or patents, but they utilize their people to create the competitive advantage. ...
Human Resource Management can build the organizational capacity and sustained competitive advantage. Organizations must be able to adapt to the changing environments and be ready to react to risks. "Any organization that wants to remain successful must continually assess and formulate new strategies to meet the needs of its customers (both internal and external) in more effective ways" (Luthans 1998). For example, if the organization is emphasizing the cost strategy, the changes in HRM activities will enable those strategies to become the major focus of organization. If particular, the multi-skilled employees and less expensive staff will help to meet the cost objectives. Without proper changes in HRM functions, organizational strategy might fail.
In addition to personnel administration, HR is supporting the company's competitive advantage by providing the talented employees AND helping the managers to strategically plan the functions of these employees within the company (Rowden 1999). Transformation of HR function into the strategic business partner positively affects the company's income. To ensure successful transformation, the overall company's business strategy should be clear. Human Resource Managers help to create customized strategic plans which do influence the effectives of the company's performance. In particular, the strategic HR manager ensures that employees understand their roles in mission accomplishment. This can be difficult to achieve in changing organization because of lack of stability and people leaving organization.
The top managers usually know very little about the human resource management and their knowledge is limited to maintaining employee records and avoiding staff