Strategic Human Resource Management Issues - Essay Example

Running head: human resources management Human Resources Management Provide a brief literature review of the nature and function of strategic HRM (including, for example, strategic HRM models such as those developed by Schuler and Jackson [1987], and Miles and Snow [1984]) Strategic human resource management (SHRM) practices have enhanced company’s growth and profitability with its integration with business purposes. This field has received much attention in the recent years exclusively in the areas of the traditional HRM, organizational behavior and industrial relations. The concept of SHRM has been introduced to address many of limitations of the conventional HRM practices, and works on the philosophy of integration of HR strategy with business strategy. Achieving strategic integration is one of the policies described in the Harvard model by David Guest (1987, 1989a, 1989b, 1991) and it is the ability of the organization to integrate HRM issues into its strategic plans, ensure that the various aspects of HRM cohere, and provide for the line managers to incorporate an HRM prospective into their decision making (Armstrong, M 2000; p 13). Wright and McMahan (1992: 298) define SHRM as “the pattern of planned human resource deployments and activities intended to enable an organization to achieve its goals”. Schuler and Jackson (1987) have quoted few examples of HR strategies associated with a few strategic outcomes associated with achieving competitive advantage for organizations to achieve, such as cost reduction, quality enhancement and Innovation. For example, strategic practices to achieve Quality Enhancement would require good recruitment and selection, comprehensive induction programmes, empowerment and high discretion jobs, high levels of training and development, harmonization, highly competitive pay and benefits packages, and a key role of performance appraisal. The integration or strategic-fit model is regarded central to the concept of strategic HRM. This is also referred to as the matching model. According to this model, the HR strategy should be an integral part of the business strategy contributing to the business planning process. The strategic integration happens in two ways, the vertical and the horizontal. The HR strategy aligned to the business strategy is referred to as the vertical integration, and the integration between different elements of the people strategy is referred to as the horizontal strategy (Shields, 2007). The SHRM version of Miles and Snow model (1984) suggests that organizations follow generic strategy and then develop a structure and HRM practices in line with the generic strategy. In their model, they define four main generic strategies, namely, defender, prospector, analyzer and reactor. This model adopts implementation-focused approach which means employee behaviors needed for these generic strategies are looked for or cultivated. For instance, in the defender group, organizations opt to remain relatively stable and limit themselves to specific segment; have competitive pricing; minimize risks through centralized control, formality and hierarchy. Prospectors look for new markets through constant scanning and adopt high risk strategies through flexible approaches, decentralized control, and adopt a informal organizational culture. Analyzers seek minimizing risks and maximizing opportunities for profit; these structures are flexible and stable, adopt both standardized and flexible ways of working wherever appropriate. Reactors tend to adopt a responsive approach depending upon external and internal changes (Lundy & Cowling, 1996). 2. Using Porter’s model of competitive strategies AND De Ceiri’s directional strategies, analyse and categorise both case study companies’ business strategies. Include an explanation of your categorisations. The two automotive parts manufacturing companies NewCentury Inc and CarCo, deal with manufacturing of car safety equipment and general automotive parts, respectively; and are multinational organizations operating in collaboration with major automotive companies. Based on their product line, customers, and location both the companies follow different business strategies. The business strategy of NewCentury Inc. (Option 2 Case Study, 2009; p.3) is to produce high quality, cost effective, pioneering and environment friendly automotive safety systems through highly skilled and educated people. NewCentury Inc.’s approach explicitly indicates a widespread integration of strategy and HRM through different management practices. The business strategy adopted by NewCentury can be compared with Michael Porter’s (1980) competitive strategies model (cited by Ramesh, 2000) by preparing to combat the five competitive forces, namely, market competition, new product innovation, ensuring client satisfaction in terms of quality and competitive pricing, building supply chain and sustaining competitive edge in the market. The strategy of low cost and product differentiation through innovation and quality provides great competitive advantage to the firm. Thirdly, competitive strategies of employing best and educated people, encouraging innovation, and product differentiation help in NewCentury’s sustained growth. The business strategy of CarCo focuses on sustaining its presence in the market by responding to the competition amidst various external and internal organizational changes. CarCo’s mission statement, ‘To be a service and quality-focused globally competitive supplier, to the local vehicle assemblers whilst continuing our growth in export markets,’ (Option 2 Case Study, 2009; p.14) indicates global integration with local responsiveness. Although this strategy points at Schuler et al.’s (1993) integrative framework, a detailed study of the firm’s performance and its determining factors closely resembles De Cieri and Dowling’s (1999) framework of endogenous and exogenous factors (cited by Scullion & Paauwe, 2004). 3. Discuss and analyze the roles of the HR function in the case study organizations, using Ulrich and Brockman’s (2005) to assess the extent to which these roles are operational and strategic. Integration of strategy and HRM involves various dimensions, broadly categorized into two: integration of HRM with organizational strategies that can be achieved through direct participation of HR heads in the decision making process. Secondly, strategic orientation of HR functions and operational areas through indirect involvement of HR personnel in goal-oriented organizational decision. Another method of achieving the integration is through change of organizational expectations, for example, norms, rules or programs; this would require implementation of specific HR policies and practices (Brewster & Larsen, 2000). An overall integration of strategy with HRM requires high competence in terms of knowledge, skills, abilities and personality. More often, these qualities are sought for in leaders and managers; however, research indicated specific and critical competencies from HR professionals who can make a significant impact on the company’s overall business. Research conducted by Ulrich et al. (1995) emphasizes the importance HR competencies have on performance of the company and contribution to its associates. This research, popularly known as the Michigan’s HR Competency Research, concluded three main HR competencies, knowledge of business, delivery of HR practices, and ability to manage change (Becker, Huselid and Ulrich, 2001). Practical implications of HR competencies are very evident in NewCentury Inc, which can be seen based on the organizational transformation pioneered by the CEO, Harley Davis and his executive team. The first transformation occurred in the work practices that reinforced diversity and value of its human capital, both of them directly yielding higher organizational performance and employee satisfaction, as evidenced. This context aptly fits Legge’s (1989) assertion that integration of HR policies with strategic business planning can help in bringing about appropriate organizational change (cited in Armstrong, & Baron, 2002). NewCentury Inc’s practice of shared-value approach is based on values such as trust, openness, integrity, teamwork, equity and fairness, equal opportunity, participation, consultation, communication and accountability; also, these values fit the strong leadership at the top that gets percolated to the bottom (Option 2 Case Study, 2009; p.3). As HR Director also exhibits these values and leadership qualities, it encourages motivation and guidance towards the right path. The main challenge for NewCentury Inc was the organizational change brought about by joining of new CEO. Any change at workplace, whether structural, procedural, technological or financial, in order to improve the situation or for better business results entails more efforts than planning the change and its implementation; its failure can be disastrous to the organization or business and/or to the people associated with the change and the organization, which includes all stakeholders, i.e. employees, customers, and all shareholders. In case of CarCo, implications of HR interventions in its rough phase were seen in the form of training on the job, training in new roles for managers and supervisors by introducing the support role culture, and training needs analysis. Consequently, the company adopted effective quality practices and enhanced workers’ skills in terms of problem-solving and performance. However, CarCo achieved these objectives only after a substantial loss of business, employees and customers (Option 2 Case Study, 2009; p.15). Effective performance measurement, integration of strategy with HRM, health work practices, organizational structure, work practices and culture are a few spheres that HR professionals could have influenced if they had the knowledge, adopted appropriate HR and effective change management processes. Strategic HRM usually entails long-term goal achievement and is linked to the interests of senior management team because strategic planning, decision making and implementation are usually executed at that level. This process can entail differing interests and outlooks of life and can lead to a serious failure of communication. Also, in the absence of strategically planned change, these strategic decisions may get disturbed due to the historic role of independent actions that existed between the staff and management. Also, integration of strategy into HRM can be difficult for the personnel specialists who lack strategic skills needed to contribute to their organization’s effectiveness. SHRM entails complex activities that are beyond the responsibilities of personnel or HRM managers and extend to all aspects of managing people. This means, it includes the social and economic context of management of internal and external environments impacting the organization and its people. On these lines, Karen Legge argued that ‘evidence shows that the integration of strategy and HRM is at best a lengthy, complex and iterative process and, at worst, that there is little evidence to suggest that widespread integration is achieved” (1995, p.124). 4. Outline the following HR policies, practices and initiatives that both companies have introduced to achieve their strategic business objectives, AND explain how they differ between the two companies. Job design: The job design at NewCentury was according to the client’s requirement. All team leaders worked closely with the clients in order to obtain feedback. Performance measurement metrics were clearly defined. Every employee’s training requirements and succession plans were prepared. Work was assigned to workers based on their competencies, and all employees were assessed accurately for minimum required competencies. In addition to this, the company employed lean manufacturing approaches and Just-in-Time inventory systems to produce high quality products at minimum costs. CarCo introduced similar concepts of job design that included lean methodology and Total Quality Control program as a strategy to achieve its objectives. Further, ‘code of ethics’ were formulated which defined specific ways of working and behavior. Employees were empowered to take critical decisions and worked in self-directed team system. The lean methods adopted continuous improvement through waste reduction, just-in-time, standardization of work stations and usage of visual controls. With reduction in levels of management, employees were trained to take up vertical and horizontal responsibilities. The main difference between both the companies job design is in organizations systems and structure. Although both worked in teams, the number of levels were reduced in CarCo and self-directed teams were formed. From a client perspective, the working methods in NewCentury was according to the corresponding client, whereas CarCo adopted almost uniform approach through lean methods. Thirdly, CarCo did not emphasize competency-based work allocation, which NewCentury followed. Human resource development: NewCentury focused on recruiting educated and skilled workers on permanent roles. To meet fluctuating work pressures, it also employed contracted workers who were encouraged to perform better, in order to be absorbed into the company. This manner, NewCentury encouraged good performance and commitment, besides saving recruitment and training costs. It also provided career growth for employees within the company. Extensive skill and process training programs, Technical and Further Education (TAFE) programs, traineeships, on-the-job training, and internal workshops, to scholarships and study assistance were a part of learning and development initiatives. Other programs include equal opportunity for men and women, and work life balance initiatives in terms of paid leaves, flexible working time, maternity and paternity leaves, etc were employed. CarCo’s initiatives towards HRD included introduction of ‘code of ethics,’ communication strategies like toolbox, empowerment practices to enhance motivation and commitment, accredited training programs related to job and skills, incentives for acquiring new skills through training programs, and rewards and recognition programs. Besides these, reduced bureaucracy and improved working conditions were also provided. Notably, work pressure management was better in NewCentury owing to their excellent HR strategies that were well integrated with corporate strategy; this is something that was introduced at a later point in CarCo through training initiatives, ‘code of ethics,’ reduction in hierarchy and formation of self-directed teams, job enrichment and enlargement practices, empowerment, employment security, incentive systems, and occupational health and safety policies; most of these were practiced in NewCentury also. HR and leadership played a significant role in the transformation process of NewCentury, which did not happen for a long time in CarCo. Performance management: NewCentury Inc. adopted sound performance measurement system and clearly identified metrics on which performance was measured. Strategic objectives of the organization were translated to measurable objectives, in a top-down fashion. Performance recognition was in the form of rewards and promotion. The landmark performance management practices include self-assessment approach and benchmarking methodology. Its main objectives of sustainable growth, customer focus, employer of choice, world class manufacturing, and social responsibility were made measurable based on key performance indicators, which helped in tracking performance against goals. Performance management at CarCo was not defined as a part of its business strategy and did not have any specific system to measure productivity and quality of its employees. However, introduction of lean methods increased employees’ commitment towards higher productivity and quality, thereby increasing work pressure that was further enhanced due to employees leaving the organization. Only one measurable target introduced by the Production manager included a target of 5% drop in scrap rate as a part of the lean method. This target was only benchmarked against budget allocation, and not translated to performance objectives or any measurement system (Option 2 Case Study, 2009; p. 25). Recruitment and selection for NewCentury (without comparison to CarCo) Recruitment and selection for NewCentury happens line with the company’s mission, values, business strategy and HR strategy. Recruitment and selection for NewCentury is based on skills and competencies required for a specific job. Competencies for every job are well-defined and people are recruited according to these competencies. Selection of candidates is based also on other attributes such as attitude, communication, and ownership of responsibility. Referring to Ulrich and Brockbank’s (1995) research on impact of HR competencies on performance of the firm, it can be inferred that knowledge of business determines performance of an individual. NewCentury specifically focused on high competence for enhanced performance. Therefore, additional training programs ranging from short courses, Technical and Further Education (TAFE) programs, traineeships, on-the-job training, and internal workshops, to scholarships and study assistance were provided to the employees. In addition, in an attempt to promote diversity, it employed more women at all levels by adopting various initiatives for rewarding and providing work-life balance. Overall, the initiatives and measures adopted by NewCentury were aimed at employing the best people for the job. Employee exit for CarCo (without comparison to NewCentury): Employee exit for CarCo was not a very healthy sign for two reasons. Firstly, clients withdrawing or ending their contracts resulted in lesser work, and therefore employees were asked to leave. As evidenced in 1996, the workforce was about 250 people; in 1998 this figure was down to 185. By 2003 only 96 employees remained of whom 60 were production staff (including team leaders), and production support staff including maintenance, engineering, quality, and planning included 26 people (Option 2 Case Study, 2009; p. 14). Another reason for employee exit at CarCo was associated with the work practice changes that brought about lean manufacturing methods as a part of which number and levels of managers on site were being reduced. This transition experienced much resistance from many skilled employees who eventually left CarCo. Other changes into the system included accurate performance measurement system and higher expectations in terms of productivity and quality; these methods increased commitment expectations which further led to employees leaving the company. Schein identified four types of fears associated with change: fear of temporary incompetence to the new situation; fear of punishment for incompetence; fear of loss of personal identity; fear of loss of group membership (cited by Cameron & Green, 2004). All of these reasons could have contributed to employees leaving CarCo. 5. Using either Schuler and Jackson’s or Miles and Snow’s framework, AND drawing upon the literature, explain whether you think the companies’ HR practices addressed in question 4 above are appropriate for the organization’s business objectives. You must draw upon literature and research specific to these HR practices in your discussion. Integration of HR practices with corporate strategy entails conceptual and practice-oriented approaches that can convert human resources to sustainable competitive advantages to the firm (Miles & Snow, 1984; Schuler & Jackson, 1987). However, this is a highly complicated phenomenon and cannot be defined on absolute terms, a probably reason for its competitive advantage that firms can rely on, through effective and appropriate HR practices. Through its vertical and horizontal integration through a systematic planning, Sparrow and Braun (2007) argued that although SHRM helps organization in achieving its goals, its integration with organizational life cycles requires descriptive approach rather than predictive; these models also have limitation in explaining how a multinational organization can implement varying international policies and practices while also accounting for the contingencies of multiple host countries (Schuler & Jackson, 1999). Barney asserts that a sustained competitive advantage exists only after efforts to replicate that advantage have ceased (cited Wright & McMahan, 1999). Applying this perspective to human resources was the central theme of SHRM. Schuler and Jackson (1987) advocated harnessing the behavioral aspects of human resources to achieve competitive advantage. This is exemplified by NewCentury’s HR practices and indicate a strong link between employee behavior and organizational performance. The different employment practices adopted by this company constantly ensure to extract the best from employees and control their behaviors. However, the attitudes and behaviors required differ based on organizational goals and strategies. For example, NewCentury’s objective of sustaining competitiveness in the market required high performance in terms productivity, quality and cost measures; hence, its recruitment and selection strategies, work design, employment benefits, and performance measurement systems were aligned to deliver high customer satisfaction and sustainable business. The work design specifically corresponded with specific customer segments to deliver expected quality, thereby minimize loss of productivity through potential waste, rework and added costs. Initially CarCo had adopted their own work design which did not yield results as expected by its customers. When this caused loss of business, CarCo’s goal was to retain its existing customers, for which it changed working patterns to lean methods that required higher commitment from its employees. This change in expectations of employee behavior leading to much resistance indicates that either the HR practices did not match the new organizational goals and strategies or failed to control employee behaviors. Adoption of Schuler and Jacksons (1987) model for linking HRM practices with competitive strategies from a behavioral perspective were reinforced by Porters (1980) competitive strategies of innovative production, high quality, and cost effective measures at NewCentury. Barney’s (1991) concept of sustaining competitive advantage was thoroughly adopted by NewCentury in the form of their product differentiation strategy that provided high quality innovative products to its customers. In the context of resource-based view, Wright and McMahan (1992, cited by Schuler and Jackson 1999; p.54) stated, ‘competitive advantage can only occur in situations of firm resource heterogeneity and firm resource immobility, and it is these assumptions that serve to differentiate the resource-based model from the traditional strategic management model. Firm resource heterogeneity refers to the resources of a firm (i.e., physical capital, human capital, and organizational capital) and how different these resources are across firms.’ NewCentury’s performance strategy aimed at achieving objectives of sustainable growth, customer focus, employer of choice, world class manufacturing, and social responsibility add value to their competitive advantage. Based on this framework, CarCo did not exhibit any specific practices that could help in achieving a competitive advantage. However, the rationale used by CarCo were in line with implementation of competitive strategies. For example, role behaviors such as more repetitive and less innovative behavior, minimum risk taking and resistance to change in some way helped the company to sustain for some time. Owing to the external factors of high competition and changing customer demands led to failure of these strategies, and resulted in loss of business for CarCo. Another reason for CarCo’s inflexible methods is its cost reduction strategy, which also required repetitive behavior, short-term focus, autonomous activity, high concern for quantity and quality along with low risk taking (Wright & McMahan, 1992). These strategies were employed by CarCo at a later point, as demanded by the situation. 6. The case studies indicate that both companies experienced substantially different competitive outcomes. What do you think explains these differing outcomes? The competitive outcomes achieved by NewCentury directly point to the competitive strategies it adopted, in terms of human resources, technology, and customers. Firstly, in the context of human resources, the company’s recruitment and selection policy included employing educated and skilled people; enhancing employee commitment and motivation through reward and recognition system and through support from effective leadership, employment benefits policies in the form of competitive wages, learning and growth opportunities through training and promotions provided greater employment security; other employment benefits included work life balance through leaves, maternity benefits, flexible and part time working hours, etc. From a technology perspective, NewCentury adopted the best technology as demanded or expected by its customers in order to provide expected quality and quantity of products. It also adopted the best industry methods of production that saved production costs, improved quality of production and quality of working conditions. All these strategies resulted in ‘a flexible and change ready organization, with a strategic orientation to its people management, underpinned by strong values of high trust and high performance, knowledge management, innovation and creativity, are well positioned to meet the challenges head on.’ (Option 2 Case Study, p.10) On the other side, CarCo’s strategies in terms of production systems included adoption strategies to sustain its business. For example, adoption of lean methodology helped in achieving cost-reduction objective that was absolutely necessary for the company’s continuity. The learning and development methods through training programs, work restructuring through self-automated teams, work practices through empowerment resulted in increased commitment from significant portion of employees in spite of high employee turnover that resulted from resistance to change. Other work practices such as communication practices and information sharing methods improved transparency with management and resulted in identification of key performance indicators. This also gained governmental support in the form of grants to implement changes in work practices. In addition, other competitive outcomes were improved employment security, increased external opportunities backed up by training programs offered by CarCo, and incentive programs. These differing outcomes can be attributed to factors including leadership, commitment, openness to change, and insight of the future. A strong ground for these factors can be laid through alignment of HR practices with organizational strategies, which was ideally followed in NewCentury to a greater extent than in CarCo. References Books: Armstrong, M. (2000) Strategic Human Resource Management: A Guide to Action. Edition 2. London: Kogan Page Publishers. Armstrong, M and Baron, A. (2002). Strategic HRM: the key to improved business performance. Great Britain: CIPD Becker, B.E, Huselid, M.A and Ulrich, D. (2001). The HR scorecard: linking people, strategy, and performance. U.S.A: Harvard Business Press. Brewster, C and Larsen, H.H. (2000) Human resource management in Northern Europe: trends, dilemmas, and strategy. U.K: Wiley-Blackwell. Cameron, E and Green, M. (2004). Making sense of change management: a complete guide to the models, tools & techniques of organizational change. London: Kogan Page Publishers. Legge, K. (1995). Human Resource Management: Rhetorics and Realities. 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Journal of Management, 18 (2): 295-320. Schuler, R.S and Jackson, S.E. (1987) ‘Linking competitive strategies with human resource management practices.’ Published by: Academy of Management, Vol 1, No. 3. (August) pp. 207-219. Ulrich, D, Brockbank, W, Yeung, A and Lake, D. (1995). Human resource competencies: An empirical assessment. Human Resource Management, 34:4, 473 – 495. Case Study: Option 2 Case Study: NewCentury Inc and CarCo. Read More