Discuss about the Role of HR in Strategic Decision Making.
Human Resource department in any organization is often stereotyped as secondary or supportive in comparison to the other departments head such as finance and marketing. Their scope is kept limited to only hiring, recruiting and training. But in today’s era when every company is facing a cut throat competition, the major aspect which distinguishes an organization and gives them a competitive edge is their human capital. An organization designs strategies so that they can achieve their vision and be able to cope up with the fluctuations happening in the external environment. This can only be possible when they focus on their internal strengths. The biggest asset to any organization is the efficiency and capabilities of an employee working over there. In order to accomplish company’s goals and objectives it is very important that the HR plays on the forefront. HR has the responsibility of enhancing the competencies of every individual working in the organization in order to contribute in the long term growth of the organization productively.
Marks & Spencer and Walmart are the key rivals in the retail industry. Walmart specializes in providing consumer goods at a much lower price i.e. following a low cost strategy while on the other hand Marks & Spencer believes in providing a higher quality at a high price, thus following a price differentiation strategy in the retail industry. Cost leadership involves getting a competitive edge by way of bulk production and achieving economies of scale in operations. In differentiation it is not about volume but about quality and innovation. In order to maintain their status in the industry continuous R&D becomes a necessity (Brenner, 2016).
The impacts of these strategies on the organization’s HR policies are as follows-
Recruitment process of Marks & Spencer is external. They look for fresh and carrier oriented people in order to gain effectiveness in their operations. Whereas Walmart focuses mainly on internal recruitment as they follow a low cost strategy they don’t invest much in recruiting new talent.
The HR policy M&S follows is “Committed soldier strategy” in which fresh graduates and new entrants are hired with specialized skills in order to fit in the position. On the other hand Walmart follows “Loyal soldier strategy” in which focus is done on retaining existing employees and promoting them to a higher position.
M&S select candidates based on their skills and qualification required specifically for that particular vacant position .On the other hand Walmart recruits and hires people to be a dynamic task master. They have to perform not just a specific task rather they have to be multitasking. For example most of the store managers in Walmart were either cashier or sales person in the store (Marks and Spencer, 2017)
M&S focuses on providing intensive training techniques in order to gain an edge in their specific areas. Whereas Walmart provide training and orientation in many areas in order to be dynamic and be a great task master.
They are willing to invest in training as they believe every individual working with them should be efficient in their roles. Whereas Walmart who follows low cost strategy have to maintain their turnover so they don’t invest much in training rather they invest in creating their retail stores consumer friendly.
Walmart believes in cost benefit training in which best suitable training techniques are used also they have tied up with American Private University to support career development of their employees with minimum investment. M & S have created an e-learning program on its platform for various segments which requires a huge investment.
Performance appraisals are given on the basis of cooperation and competition in M&S whereas in Walmart performance appraisals are given on the basis of cooperation only.
M&S gave performance appraisals in the form of promotions, rewards and incentives such as store discounts, gift cards whereas in Walmart promotion oriented performance appraisals are given.
The reason for giving such attractive rewards are their price differentiation strategy, they earn on their quality and pay employees back in terms of such rewards whereas Walmart has to maintain their turnover from low cost products as a result they are not in a position to spend much (Thompson A., 2015)
Walmart’s human resources division focuses on providing minimum compensation packages to maintain their turnover whereas M&S compensation packages are purely performance and efficiency driven.
Walmart’s minimum hourly wage rate is around $10.00 which is just a bit more than the minimum which is $9.93. M&S on the other hand employees at M&S enjoys a decent compensation packages to ensure job satisfaction
In order to compensate their low compensation policy they provide employees with various health insurance plans and discount in lieu of compensation this helps to maintain employee’s retention in the organization. In M&S they are already providing good compensation packages along with attractive stock rewards to ensure employee retention (Walmart, 2017).
Starbucks: Starbucks is constantly facing price rise issue since Feb’ 2016 in the Arabica coffee bean which is their major supplier. Rather than increasing their price of the coffee they decided to sit back and not purchase coffee beans. Alternatively they focused on their food segment to cope up with the loss of profits.
Sony: Sony has practiced the stability strategy in their imaging product and video & sound segment. There is no as such future growth in these areas as Nikon and cannon are strong competitors so rather than investing high resources in innovation and development they are focusing on giving other value added features i.e. single lens reflex cameras and high resolution audio products to an existing market segment.
Nokia: Nokia was a dominant player in the mobile industry until android phones entered into the market and changed the wave, when people were switching from Symbian platform to android Nokia ignore the competition and followed a no change strategy. As a result Nokia fell hard in front of iPhone and Samsung and sold their business to Microsoft in the year 2013.
Starbucks: Starbucks in 2015 announced closing down their 23 bakery chains “La Boulange” all situated in California. They purchased French bakery chain in the year 2012 with an aim to diversify their food business and to compete with food giants like McDonald’s. Starbucks see La Boulange a threat to their long term sustainability and profitability.
Sony: In 2014 Sony laid off around 5000 by closing down their PC business which was operating under the brand name VAIO. Their laptops couldn’t compete with Dell and Hp who are the clear winners in the PC range. However they are still providing customer support service to the existing product users.
Nokia: In Feb, 2010 Nokia CEO Stephen Elopp declared retrenchment strategy to stabilize their financial position and to get into the competition again. Around 40,000 employees were laid off and it is considered as one of the biggest and important retrenchment in the history. After struggling for 3 years Nokia accepted defeat and was acquired by Microsoft (McGrath, 2016).
Starbucks: In Dec’2016, Starbucks have announced their growth strategy. By 2021 they aimed at opening around 12000 new stores across the world. They are also planning to open roasteries in Tokyo and shanghai in 2017 and other one in New York in 2018. They are also planning to open reserves stores in around mid-September in Seattle and Chicago in partnership with Italian food partner Princi. They have planned to open around 1000 of such store over a period of time (Team, 2016).
Sony: Sony has seen their gaming sector as key growth driver. Their new PlayStation 4 which had a concept of virtual reality took the video game market by storm. In future they aim at developing an innovative product for their target game lover audience and further expand the user base. Also they will invest in the R&D in the area of CMOS image sensors (Sony, 2015).
Nokia: In 2016 Nokia merged with French telecom equipment provider Alcatel-Lucent by purchasing its 76% shares. The focus is to enter into the marker segment of wireless equipment, internet routing products, old-fashioned fixed lines, cable and cloud software and to compete with Huawei Technologies Co. and Ericsson.
Yes, the above mission statement passes the person on a bus test. A good mission statement should reflect every dimension of the organization’s business. They also reveal companies target market segment and potential customer. Anyone can identify that this is an online book store, which aims to provide book lovers with quality and enjoyable online products and services (Miller, 2013).
No, this mission statement failed to qualify the person on a bus test. Though the statement is very attractive but it is giving a vague insight about the organization’s business. Also the objective and product to be offered is not specifies. Hence it fails the person on a bus test (Podolny, Saloner & Saloner, 2008).
Yes, the third mission statement passes the person on a bus test the reason being the mission statement provided is very precise and focused. It is reflecting the core values of the organization which is to protect environment and create awareness about the issues among people. Therefore it passes the person on a bus test (Papulovo, 2014).
Profitability retention- When company is adapting transformation business strategies such as growth they are already spending a lot of resources in terms of R&D, branding and advertisements etc. It also require skilled and technically able workforce so rather than investing more on acquiring new workforce HR team can go for talent management, which means focusing on retaining existing employees who have the potential to take company’s into new heights and hiring less new people, which will directly bring down the cost of hiring and training fresh people (Becker & Huselid, 2006).
Training- HR trains each and every individual in order to achieve organization goals in a strategic manner. Training can be done by internal sources which includes existing skilled and experienced employees who can provide mentoring and help or externals sources which includes seminars sessions, conferences etc.
Leadership- Implementation of a strategy is no easy task. Hard work and effort of each and every individual is required to put in a right direction, this can only be possible with the help of a leader. An effective leader aligns every individual’s effort into the correct path to achieve the planned goals. HR can identify the leadership capabilities and potential in an individual and engage them in a long term leadership development programs so that they are capable of combining each and every individual’s effort in coordination with the organization’s vision.
Innovation- In order to survive neck to neck competition innovation is the key driving force. A company cannot buy new ideas and innovation from third party to revive the old business. HR has a key role to play in hiring creative people who are able to think beyond the scope of usual and also giving them a creative work environment (Armstrong & Taylor, 2014).
Coordination and motivation: A strategy cannot be implemented effectively if it is not communicated well within every level of organization, so it is the best possible way to achieve desired objectives. By giving individuals performance appraisal, rewards and incentives etc. HR can ensure high employee retention rate.
Skills and qualification- HR people are only experienced in their field; they don’t have required knowledge for taking decisions regarding important aspect of sales, marketing and finance. This is the reason why top level managers don’t, involve HR people in their board room meetings (AON, 2017)
Financial Analysis- Designing a strategy for future requires an allocation of funds i.e. strategies should be financially so that the other operation of the organization does not get affected due to shortage of funds. HR can only go only suggest strategies without considering their financial aspect (Sisney, 2017).
Rigid nature- HR people are quite rigid when it comes to decision making. They for every problem find a solution in company’s policies. They are more procedure and policy oriented. Designing a strategy involves flexible thought process.
Foresightedness- Effective strategic decision making involves analyzing the present situation along with forecasting of the future. This has to be done by some professionals who are expert in this field.
Lack of support- Even if the HR personnel is skilled and patent, Lack of support shown by the top level authority in considering their suggestions is very common. The superiority complex in other managerial heads is a very big constraint in the growth of HR in the organization (Fulmer & Genson, 2006).
Conclusion
The report concludes on a note that no organization can survive a major strategic change without the help and support of Human Resource Department. HR role in any organization is not just limited to distributing salaries and fixing meeting but their main aim is to coordinate with the formulated future strategy and continuously motivating employees to skillfully help in achieving growth targets. They continuously monitor and review employee’s growth and provide them with necessary training required to work effectively. They also design reward and incentives schemes which not only motivate employees to deliver their best but also does not put burden on the pockets of the organization.
References
Armstrong, M. & Taylor, S., (2014). Armstrong’s handbook of human resource management practice (13th ed.). UK: Kogan page limited.
AON, (2017). Transforming HR: Becoming a Strategic Partner. Retrieved from https://www.aon.com/human-capital-consulting/thought-leadership/outsourcing/article_transforming_hr.jsp on 21 Jan, 2017.
Becker, E.B. & Huselid, A.M., (2006). Strategic Human Resources Management: Where Do We Go From Here? Retrieved from https://pdfs.semanticscholar.org/48f6/cd5a88e39aead3f60b7dccedbb46bf2ebf7e.pdf on 20 Jan, 2017.
Brenner, L., (2016). The Future of HR? It Isn’t What You Think. Retrieved from https://talentgrowthadvisors.com/images/uploads/The_Future_of_HR_Not_What_You_Think.pdf on 21 Jan, 2017.
Fulmer, M.R. & Genson, S., (2006). HR’s strategic partnership with line management. Retrived from https://gbr.pepperdine.edu/2010/08/hrs-strategic-partnership-with-line-management/ on 21 Jan, 2017.
General Motors, (2017). Retrieved from https://careers.gm.com/student-center.html on 21 Jan, 2017.
HBR, (2015). The call for a more strategic HR: how its leaders are stepping up to the plate. Retrieved from https://www.ey.com/Publication/vwLUAssets/ey-the-call-for-a-more-strategic-hr/$FILE/ey-the-call-for-a-more-strategic-hr.pdf on 21 Jan, 2017.
Marks and Spencer, (2017). Retrieved from https://careers.marksandspencer.com/why-work-here on 21 Jan, 2017.
McGrath, R., (2016). Can Nokia Reinvent Itself Again? Retrieved from https://hbr.org/2015/04/can-nokia-reinvent-itself-again on 20 Jan, 2017.
Miller, G. (2013). Business Strategy; Methods and Models. Retrieved from https://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.438.9418&rep=rep1&type=pdf on 20 Jan, 2017.
Papulovo, Z. (2014). The Significance of Vision and Mission Development for Enterprises in Slovak Republic. Journal of Economics, Business and Management, 2. Retrieved from https://www.joebm.com/papers/90-A00009.pdf on 20 Jan, 2017.
Podolny, J., Saloner, G., & Shepard, A. (2008). Strategic Management. US: Wiley.
Sisney, L., (2012). Why is HR still not a strategic partner? Retrieved on 21 Jan, 2017.
Sony (2015). Sony Mid-Term Corporate Strategy for FY2015 – FY2017. Retrieved from https://www.sony.net/SonyInfo/News/Press/201502/15-017E/ on 20 Jan, 2017.
Team, T. (2016). Starbucks’ Challenges And How It Can Overcome Them. Retrieved from https://www.forbes.com/sites/greatspeculations/2016/12/05/starbucks-challenges-and-how-it-can-overcome-them/#748e4d5071ed on 20 Jan, 2017.
Thompson, A., (2015). Walmart’s HRM: Compensation, Career Development. Retrieved from https://panmore.com/walmart-human-resource-management-compensation-career-development on 21 Jan, 2017.
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