Question:
• What are the key strengths and limitations of the two HR systems in the context of the workplace?
• How do the two HR management systems relate to the accomplishment of strategic goals? What assumptions are you basing these views on?
• Compare how the two HR management systems effectively contribute to the management of human capital to achieve the strategic goals of the organisation.
• How did the discussion in the forum contribute to your analysis? How can you use the information in your posts and the posts of others as evidence?
Strategic human resources management is a process that makes human resource strategies that are integrated with the firm’s business goals and contribute to the overall strategy of the organization. It is defined as the ‘means of aligning the management of human resources with the strategic content of the business’ (Walker, J.W., 1992). The integration can be vertical or horizontal. Vertical integration provides congruence between HR strategy and the business with the former supporting the accomplishment of the latter. And the horizontal integration works to make sure that the various human resource strategy elements fit together and support each other mutually (Armstrong, M., 1999). Though strategic human resource management system is an evolving system today, there are several issues pertaining to its practice.
Strategic human resource management basically is about the strategic role of human resources management in meeting the organizational objectives. Human Resources is firmly linked with the performance and effectiveness of a business. But the mechanisms through which the human resource practices influence organizational effectiveness were always questioned upon by critics. A lot of researches have been conducted upon the explaining the importance of human resource management in the performance of a business. The studies have mostly adopted a resource based view of the firm (Delery, J., 1998) which emphasizes that the firm’s competitive advantage is increased by the kind of resources it possesses. And this in turn emphasizes that human resources management definitely adds value to an organization since the human resource management practices are the main factors that a firm employs to produce or retain the necessary work force. The predominant focus of research on strategic human resource management is mostly on the horizontal and vertical fits.
Horizontal fit in strategic human resource management emphasizes the internal consistency of the HR practices with the basic assumption that for any particular policy to have maximum effect it is important that the other policies in effect are functioning as good. The complication in this theory is the absence of description about which internally consistent practices make up a system. There is no solid theoretical framework for choosing the HR practices. It was argued that there are several combinations of practices that will result in the same organizational outcomes (Delery, J., and Doty, D., 1996). For example, a firm needs to identify the human resource practices that would develop work force with high performance if they are to have advantage over their competitors. But any HR practice leads to multiple outcomes and multiple HR practices can be used to achieve the same outcome. This is a critical issue in strategic human resource management. In fact recent models of competency have provided researchers with a framework that helps creation of horizontal fit. In these models, a set of behavioural competencies are defined that are relevant to the business based on which human resource practices can be employed to ensure development of those behaviours in individuals. But in actual, a solution is yet to be reached in the issue of horizontal or internal fit. How it is developed and measured is an avenue that offers ample opportunities for future researchers to address.
An important discussion in strategic HRM is a synergistic relationship between the different HR practices. There are two basic forms of this synergistic relationship. The first describes how multiple practices can work together and promote each other’s effectiveness and that in turn enhances the organization’s effectiveness resulting in a positive outcome. This is termed a powerful connection by Becker et al. Another combination termed deadly connection is when the practices work against each other and the outcome is negative. It is therefore important in strategic human resource management to identify and measure HRM practices and systems while acknowledging these relationships among the practices (Becker, B., and Gerhart, B., 1996).
Another important issue in strategic HRM is the level of analysis. It is based on what level the human resource practices in a firm are measured. According to a framework proposed, it is important that the work force core for strategic goals be governed by a high performance work system. While this practice will gain the organization higher scores on their core work force, the issue with this approach is that the non-core work force may also have equal importance or greater weight. Therefore, while measuring the HR practices, closer attention must be paid to the level at which they are measured. Averaging the use of practices may denote that all the employees be it core or non-core groups are equally important. Organizations must use different human resource practices for different employee levels and groups. This suggests that for a particular job a particular HRM system is required. Focussing on human resource practices at different job levels in an organization would thus provide insight into how advantage over competition can be achieved using work force.
As discussed already there is no agreement about what practices constitute a coherent HRM system. It is also equally important to concentrate on the human resource policies along with the practices; the issue of construct definition. Development of theory would solve this problem. Strategic HR management has always been criticized for lack of theoretical foundation. But researches have proved that there are three different theoretical frameworks in the Strategic HRM; Universal, Contingency and Configuration theories (Delery, J., and Doty, D., 1996). The Universalistic theory demonstrates that some human resource practices are universally effective. Adoption of these practices by an organization will result in increased benefits. According to the Contingency theory, the effectiveness of human resource practices is contingent with the organizational strategy. Organizations must adopt HR strategies that are appropriate for its strategy to have higher effectiveness. And the configuration theory deals with the synergistic relationships between the practices.
Other research employs six theoretical models for discussing strategic human resource management; Behavioural perspective, cybernetic models, transaction/agency cost theory, institutional theory, resource-based view of the organization, and power/resource dependence models. These theories are useful for understanding strategic as well as non-strategic determinants of human resource practices (Wright, P., and McMahan, G.C., 1992). The behavioural perspective is concerned with how strategy, human resource behaviours and practices are interrelated. Cybernetic models and transaction cost models is concerned with the relationship amongst the HR practices, firm strategy and the HR capital pool and behaviours. The institutional theory and resource dependence theory concerns the effects of institutional and political factors on the human resource practices.
These theoretical frameworks are not without their limitations. But according to the critical analysis of strategic human resource management, most of the issues concerning the SHRM can be solved by developing a strong theoretical basis of management. Qualitative and quantitative comparison of two firms in the same industry and different performance levels could be constructed to aid in the construction of specific and general practices. It also helps in generalizing the process within a firm that drafts the principles and the process of successfully translating these principles in HR policies that are efficient. This line of research in strategic human resource management could help improve the way organizations are studied and managed (Colbert, B., 2004).
Using data from forty five business units and correlated human resource practices from the past, present and future operational practices, it was found that correlations with all operational measures were high and invariant. Further it was found that controlling the past and present performance almost eliminated the connection of human resource practices with that of the future. This provided strategic human resource management researchers cautionary evidence on making casual inferences on the relationship between HR practices and the performance of the organization (Wright, P., Snell, S., and Dyer, L., 2005).
Organization performance depends upon the how HR systems are measured. Performance in organization varies based on how near it is to the intended effect of human resources practices and what level it is aggregated. Analysis of strategic human resource management in emerging economies countries demonstrate that it is more likely that privately owned businesses will adopt this process than the public organizations. More focus is being paid on the implementation issues of strategic HR management in recent times. The business firms are recognizing that the intended and realized practices are different from one another and relying upon a set of stated principles will result in ineffective results. Also more attention is being focussed on strategic human resource management’s role in mergers and acquisitions. Understanding the human capital investment decision making process, understanding the difference between investments in core and non-core work force, and a better understanding of the diversity of work personnel and their effects on organization’s performance are contributing in understanding the strategic human resource management. The challenge is to fill the gap between knowledge that has been identified and break new ground (Lengnick-Hall, M., Lengnick-Hall, C., Andrade, L., and Drake, B., 2009).
The human resource management system can be most notably classified in two; traditional, operational and functional aspects comprising the micro or functional system and the strategic system. Complying with business strategy, dealing with mergers and acquisitions, downsizing, international human resource management formed the core of strategic HRM and selection, training, appraisal and compensation constituted the functional HRM (Fisher, 1989).
Strength of a Human Resource management lies in the effectiveness of HR policies in practice. The practices that are not efficiently working need to be regularly monitored and modified. The competitive advantage that an organization provides its employees in comparison to the opposition is an important factor that determines the strength of the Human Resource system. Skills and qualifications of the work force and placing right people at the right jobs contribute to a HRM’s strengths. In case of strategic HRM, one serious limitation is that the strategic fit is a very good idea but is very difficult in practice. Business strategy being translated into mutually supportive set of human resource practices doesn’t happen most of the times (Armstrong, M., 2006).
Human resources can offer competitive advantage and can be managed strategically. HRM practices differ between different organizations and countries. And researches show that the companies that employed the HR practices of other successful companies failed miserably emphasizing the need for each organization to develop their own HR practices and policies. These HRM practices indirectly affect operational performance through strategic goals. In accomplishing strategic goals of the organization, a human resource manager needs to develop an environment for the employees that is conducive and fosters employees’ loyalty to the firm (Ahmad, S. and Schroeder, R., 2003).
Globalization, de-regulation of markets, varying demands by the customers and investors and constant increase in market competition are becoming the norms for most organizations with the rapidly changing economic environment. The role of HR management can be crucial in improving performance in such an environment. Therefore, the human resources department and function must have as their primary focus a set of properly designed policies that support the organization’s strategic and operational goals. But simply instituting the best in class HR systems will not have the desired effect. A properly configures HR system will achieve the desired objective. The leadership of this strategic human resources systems’ role in organization also reflects in the competition for intellectual leadership in the area (Becker, B., and Gerhart, B., 1996).
Strategic human resource practices contribute to the strengthening of competitive advantage of a firm by enabling knowledge development as HR practices develop individual knowledge and skills along with developing the work force’s attitudes and behaviours. This along collective changes in human capital and organization environment is strong enough to influence organizational performance and in turn attaining the goals (Birdi, K., Clegg, C., Patterson, M., Robinson, A., Stride, C., Wall, T. and Wood, S., 2008). Functional human resource practices such as recruiting the right person for the right job; empowerment and training enhance employees’ knowledge of the company and help them exploit it. Also these three human resource practices interact positively with each other resulting in positive outcomes. The adoption of advance manufacturing technology, quality management, supply chain partnering etc. will independently enhance performance of the firm.
The foundation of a human resource department relies on human capital as the basic source of competitive advantage. The system is characterized by operational excellence and understanding by the HR managers the implications of human capital on the business and their ability to modify the system based on the requirements. The human resource management system that strives to improve an organization’s strategic infrastructure is an investment. According to the CFO of Coca Cola, a company’s phenomenal market value is largely attributable to its brands and management systems rather than any collection of tangible assets. The strategic importance of human capital has increased significantly owing to the rapid globalization, and the demands for constant innovation in products, the ability of the firm to adapt to the changing trends and its speed and efficiency.
The three important elements of value added HR functions include: A management culture and strategy that is supportive and appropriately aligned, human resources system characterized by professional and operational quality, and human resources executives and managers who are effective and human resources function that support the managers. It is proven that with the proper alignment of each of these things, businesses average twenty seven percentage higher gains. And to achieve this building an extraordinary environment at the work place is important. The environment must be characterized by ensuring the employees’ feel valued, achieving long term business success, ensuring employees’ feeling of pride in being associated with the firm, emphasizing a sense of camaraderie and team work, enabling opportunities for the employees’ to reach their personal and professional high points, making the environment fun and exciting.
A strong pay – performance relationship is also an important characteristic. It elicits a signal that right behaviours and higher performance will reflect on the employee’s pay check. Some examples of firms’ operational excellence by proper human capital management by HRMs are: Lucent Monitors report ninety nine percent data entry accuracy in their HRIS (Becker, B. and Huselid, M., 1999). Ninety percent of the customers using their employee services centre have their problems tackled on the first call; Sears indicates significant proficiency at handling higher volume demands efficiently; at Herman Miller, desire to combine HR with the organization’s business strategy has resulted in the adopting of worldwide shared services environment by them.
Defining of the competencies required is the first step in identifying proper human capital suitable for a particular role. These competencies are then integrated in recruiting and staffing, career development of the staffs and management of their performance. Adaptation of some of the best practices that lead to exceptional performance by organizations include: employment security, good pay, reduced status distinctions, decentralized decision making, selective hiring, extensive information sharing, and extensive training. And the ability to translate HR practices into high performance practices requires several roles by HR managers including: role as an administrative expert, employee champion, and strategic partner.
Conclusion
Strong human resource management systems can create environments with little ambiguity regarding strategic goals of the organization. Characteristics such as visibility of the HR processes, clarity of the information in the policies, acceptability of the practices, and consistency of the management in applying the policies to employees uniformly, effectiveness of the policies, internal consistency (horizontal fit) and intensity are the basics governing the strength of a human resource management. Organizations that attempt to copy HR policies and practices from successful organizations find those practices from the other firms did not give them the same advantageous results. Employee perception about the human resource practices plays a crucial role between human resource practices and strategic goals. Therefore it is important to manage human resource management practices that do not result in varied perceptions of the employees. The proper description of human resource management can thus help with a better understanding of the field of strategic human resource development and help formulate the human resource management policies that can impact positively on the performance of an organization.
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