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Managing human capital in organisations

I. Introduction

According to Storey (1995) Human Resources Management (HRM) is a great approach to employment management which tries to reach massive advantage through the strategic deployment of a highly committed workforce by using integrated array of culture, structural, and personnel techniques, whereby Personnel Management is a series of activities which enable people of hiring and developing employees in the organisation. It includes: job analysis, personnel needs, recruitment, training etc.

Strategic HRM can be defined as a general approach to the Strategic Management of Human Resources in accordance with the intentions of the organisation on the future direction it wants to take. It is concerned with longer-term people issues and macro-concerns about structure, quality, culture, values, commitment and matching resources to future need (Armstrong, 2002).

According to Hofstede (1984) culture is the collective programming of the mind which distinguishes the members of one category of people from another. It may be identified as ways of behaving, and ways of understanding, that are shared by a group of people.

II. Human Resource Management in organisations

2.1) Importance of HRM

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Organizational psychology describe successful companies as those that consider human capital as their most important asset. For this reason it is necessary to create management team that will deal with managing human capital in order to achieve success of the organization and competitive advantage over rivals. Therefore HR management team is responsible for attracting right talent to their organization, training and motivating and also compensating and developing employees.

2.2) Roles and responsibilities of HRM

HRM have several roles and responsibilities in organisations. HRM is being recognised as strategic partner in quality management, corporate planning, business operations and business profitability. Depending on size of organization HRM in small companies is connected with similar activities to all employees whereas in big and complex organizations HRM activities are separated into departments. In general HRMs responsibility can be distinguished between few Key Results Areas:

? Employment and Recruitment - this area of HRM will be responsible for interviewing, recruiting, testing and coordinating

? Training and Development. Key areas include: orientation, performance management, skills training and productivity enhancement

? Compensation. Main tasks are: job descriptions, job evaluations, executive compensation, incentive pay and wage and salary administration

? Benefits. That will include all areas of benefits relating to profit sharing, stock plans, retirement plans, insurances, vacation leave administration, etc.

? Employee Services relating to employee assistance programs, relocation or outplacement services

? Employee and Community Relations. This include: Attitude surveys, labour relations, publications, labour law compliance and discipline

? Personnel Records. This mainly include information system maintenance

? Health and Safety. All aspects of safety inspection, health, drug testing, wellness

? Strategic planning. This wide area will relate to forecasting, planning, international human resources, mergers and acquisitions.

III. Strategy in HRM

According to Chandler (1962) strategy is the determination of the basic long-term goals and objectives of an enterprise and adoption of courses of action and the allocating resources necessary for carrying out these goals. Strategy determines the direction in which the organization is going in relation to its environment in order to achieve competitive advantage.

Competitive advantage

Concept of competitive advantage primary formulated by Porter describes organization that acquired or developed an attribute or combination of attributes that allows it to outperform its competitors (Porter, 1985). These attributes include:

? Innovation by being a unique producer

? Quality by delivering high quality goods and services to customers

? Cost leadership by effective planning expenses

3.1) Strategic planning

Strategic planning by Armstrong (2000) is the process of identifying and executing the organizations strategic plan, by matching the companys capabilities with the demand on its environment. Other words strategic planning is to decide what business you are in now and which ones you want to be in a future. Strategic planning involve five steps: define current business and mission, perform internal and external audits, formulate new business and mission statements, translate mission into goals and formulate strategies to achieve strategic goals.

? Defining the Current Business and Mission

Organizations in order to trade must define products or services that will offer and also choose the terrain that will compete at. It may be certain geographical area or specific recipients.

Mission of the organization states who the company is, what it does and where its headed?

Example 1

Seiko and Rolex compete at watch market. However Seiko deliver relatively inexpensive but innovative watches. Rolex is known as producer of limited and high-priced quality watches.

Example 2

Fiat will offer cars for ordinary people whereas Ferrari focuses on wealthy clients.

Example 3

The School of Technology and Managements mission is to develop and deliver courses of contemporary relevance in the fields of management, business and information technology and to conduct research in associated areas, with a particular focus on small business management. Recipients of those services will be students and managers interested in improving their qualifications in economics related subjects.

Example 4

BBC mission is To enrich people's lives with programmes and services that inform, educate and entertain.

Example 5

Barclays Bank mission is to be an innovative, customer focused Group that delivers superb products and services, ensures excellent careers for our people and contributes positively to the communities in which we live and work.

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Some organisations do not have clearly defined mission however the sort of product or services that is offering is associated with group of companies offering similar product.

Example 6

Apple Inc do not have clearly defined mission, however is committed to bring the best personal computing experience to students, educators, creative professionals and consumers around the world through its innovative hardware, software and Internet offerings.

? Perform Internal and External Audits

Position of organization may be analyzed based on external and internal conditions. Common analysis used in this step is SWOT analyses that identifying company Strengths, Weaknesses, Opportunities and Threats.

Example 7

A Starbucks performed SWOT analysis in order to identify its current market position.


global coffee brand build upon reputation for fine products and services


majority cafes are located in the home US market what increases business risk


expansion to new global markets such as China and India

Threats: increases of the cost of coffee and dairy products

? Formulate new Business and Mission Statements

New Business and Mission Statements are formulated after performing SWOT analysis in order to recognise new products, terrain and how that product or service will differ from its competitors.

? Translate the Mission into Strategic Goals

In order to guide managerial action in regards to the new mission, the new goals must be identified in form of improving shareholders value or rates of return, building strong balance sheet etc.

? Formulate Strategies to Achieve the Strategic Goals

This introduce the way how organization moves from the position the business is now to the position the business will be in a future. This strategy is usually formulated in form of easily communicated phrase that resonate with employees.

Example 8

The essence of TESCO strategy is every little helps. Dells strategy is be direct.

3.2) Types of strategies

? Corporate strategy relates to organizations with several businesses and engaging three types of strategic planning.

Example 9

PepsiCo runs several businesses such as Pepsi (beverages), Frito-Lay (snacks) and Pizza Hut (restaurants). In PepsiCo management identify the portfolio of businesses and relation between them.

? Competitive strategy identifies ways how to make organization stronger and more competitive towards competitors.

Example 10

TESCO identifies how can be competitive towards Sainsburys by being closer to customer and offering cheaper products.

? Functional strategy recognises different departments in an organization and identifies roles of those departments in order to achieve competitive goals.

Example 11

Dells Sales Department supports plenty of Web activities. One of Dells strategic goals is to be direct and low-cost computer provider.

3.3) Linking strategies with HRM

Armstrong defined Strategic Human Resource Management (SHRM) as the link of human resources with strategic goals and objectives in order to improve business performance and develop organizational culture that foster innovation, flexibility and competitive advantage (G. Dessler, 2008). In an organisation SHRM means accepting and involving the HR function as a strategic partner in the formulation and implementation of the company's strategies through HR activities such as recruiting, selecting, training and rewarding personnel. Strategic human resource management focuses on human resource programs with long-term objectives. Instead of focusing on internal human resource issues, the focus is on addressing and solving problems that effect people management programs in the long run and often globally. Therefore the primary goal of strategic human resources is to increase employee productivity by focusing on business obstacles that occur outside of human resources. The primary actions of a strategic human resource manager are to identify key HR areas where strategies can be implemented in the long run to improve the overall employee motivation and productivity. Communication between HR and top management of the company is vital as without active participation no cooperation is possible.

IV. Culture

Edgar Schein (1985) defines culture as a set of shared, taken-for-granted assumptions that a group holds and that determines how it perceives, thinks about and reacts to its environment (ACCA, Paper F1). Schein also suggests that the culture of the organization is grounded in the founders basic beliefs, values and assumptions and embedded in organization over time.

Culture can be discussed in many different areas:

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? nation, religion or ethnic groups

? social class

? profession and occupation

? men versus woman

? a type of business (e.g. advertising culture)

? an organization (organizational culture)

4.1) Elements of culture

Schein describes three different elements of culture:

? observable behaviour

? values and believes

? Hidden assumptions

The iceberg concept of culture split culture between behaviour and attitudes and professed culture. Behaviour and attitudes is easy to manipulate and emphasize ways how the people act. Professes culture that is difficult to manipulate describe all beliefs and values.

4.2) Organisation culture

Wilkens (1983) defines organisation culture as the collection of traditions, values, policies, beliefs and attitudes that constitute a pervasive context for everything we do and think in organisation (P. Hawkins, 2006). In general organisational culture consists: how formal the organisational structure is, management style, the type of people employed, symbols, legends, corporate myths, attitudes to customer, quality, technology and risk.

Example 12

Corporate logos and trademarks are examples of symbols that make organisations unique and recognizable on market. Recently most popular brands within global market are: Apple, Sony, Ikea, Nokia, and Toyota.

Example 13

Microsoft encourages communication between employees by setting aside spaces for the purpose. This is an example of artefacts (ACCA, Paper F1 Accounting in Business, 2007)

4.2.1) Classifying organisation culture

Organisation culture is classified into types:

? Role culture where organisation is highly formalised, bound with regulations and paperwork and hierarchy dominate relations

Example 14

United States Department of Health and human Services issued rules and regulations how to help children recover from different types of disaster.

? Power culture have a single power source, which may individual or a corporate group. This type of organisation is able to adapt changes very quickly.

Example 15

Southern Co. American electric utilities company in which the CEO , David Ratcliffe, made 26,000 employees adopted the same values in form of unquestionable trust, superior performance and total commitment.

? Task culture preserves a strong sense of the basic mission of the organization and teamwork is the basis on which jobs are designed. There is no dominant or clear leader. A task culture clearly offers some benefits. Staff fees motivated because they are empowered to make decisions within their team, they will also feel valued because they may have been selected within that team and given the responsibility to bring the task to a successful end.

Example 16

NASA organise part of their culture around this concept and put together teams to oversee a mission.

? Person culture is focused to serve the interests of the individuals within an organisation.

These organisations are rare and usually small sized with few individuals working and doing all the work themselves

4.2.2) Influences on organisation culture

Various factors can influence on organisational culture:

? Founder organisational founder usually set up strong set of values and assumptions that company must follow. Even if he is retired or passed away the values are still important for organisation

Example 17

Harry Selfridge by opening his department store in 1909 set up few standards to make his business servicing customers better way than competitors. Some of those rules are still valid nowadays. The most famous one is: Customer is always right.

? Organisations history. Culture reflects the era when the organisation was founded. The effect of history can be determined by stories, rituals and symbolic behaviour.

Example 18

AIESEC International Students Organisation specialised in students exchange program in order to give them international experience provides vide range of trainings connected with fun education by singing and dancing called AIESECs dances or AIESECs songs.

? Leadership and management style. Organisations with strong organisational culture usually recruits and develop managers who easily conform to culture

Example 19

Google was one of the few companies that successfully blended management style with strong organizational culture. Google recruited people with diverse skills and qualities by attaching a lot of importance to academic excellence and experience in the business what made easier conform to organizations culture.

? The organisations environment in form of nations, regions, occupations and business types that have their own distinctive cultures

4.3) How organisation culture is shaped by HRM?

It is clear that HRM have significant role in shaping organisation culture. In general this can be split into three stages: pre-hire, selection and post-hire stage. Two first stages will relate to job designing and selecting appropriate employee to fit to the organisation. Post-hire stage is very crucial to make selected person work the company way and being as most efficient as possible. This will involve Human Resource Management to constant observation, apprising, training, developing and motivating individual.

By career-orientated appraisal management will not only apprise employee but also match the persons d development work.

Example 20

Toyota developed system where some employees rotate within factory in order to find the best development work for its employees.

Example 21

It was pointed out that Google had become too narrow in its recruitment by focusing only on the academic records and graduate ranks of the applicants rather than on experience. Many analysts feel that Google's zero per cent employee turnover rate during the dotcom boom, was a testament to its salubrious organizational culture. But not everyone was convinced that Google had got it right in terms of its work culture. They felt that company's culture was not set to manage its growth. A 12-hour working day had become norm at the company. Google's recruitment process was also criticized by analysts.

Also management may use job rotation to help employee develop more realistic picture of what he is good at and what possible future career move might be the best.

Example 22

Dow Chemical created career planning and development system for every job at Dow. Employees can review the competencies required for their own jobs and identify their own developmental needs (G. Dessler, 2008).

Coaching and Mentoring Coaching often provides positive feedback about employee contributions. At the same time, regular coaching brings performance issues to an employee's attention when they are minor, and assists the employee to correct them. Mentoring involve senior professionals and management to assist less experienced individuals to improve their performance and career progress.

Example 23

KPMG made an online mentoring program which includes job-sharing time off, flexible work schedules and community volunteer opportunities with pay and benefits (G. Dessler, 2008).

Example 24

Dow Chemical Co. has online based mentor system within company enabling employee to seek a mentor or create a list of potential mentors (G. Dessler, 2008)..

Very important influence on shaping organisation culture has also style of managing within organisation or problem solving of some projects. The most common method of problem solving is brainstorming. Brainstorming creates new ideas, solves problems, motivates and develops teams. Brainstorming motivates because it involves members of a team in bigger management issues, and it gets a team working together.

Example 25

Axion Design, a firm in San Anselmo, CA, used brainstorming sessions to discover how to integrate a large group of new employees into a 30-year-old company.

Self Directed Team Work (SDTW) is a group of people in a company, who combine different skills and talents to work without the usual managerial supervision toward a common purpose or goal. SDWT members use their company's mission statement to develop their purpose, which must be meaningful and beneficial to the company. Purposes might include problem solving, increasing sales and productivity, career training, and product improvement.

Example 26

AT&T -- Increased the quality of its operator service by 12 percent

Example 27

Federal Express -- Cut service errors by 13 percent.

Example 28

Johnson & Johnson -- Achieved inventory reductions of $6 million.

Example 29

Shenandoah Life Insurance -- Cut staffing needs, saving $200,000 per year, while handling a 33-percent greater volume of work.

Example 30

3M's Hutchinson facility -- Increased production gains by 300 percent

Total Quality Management is a participative system empowering all employees to take responsibility for improving quality within the organization. Instead of using traditional bureaucratic rule enforcement, TQM calls for a change in the corporate culture, where the new work climate has the following characteristics:

? An open, problem-solving atmosphere

? Participatory design making

? Trust among all employees (staff, line, workers, managers)

? A sense of ownership and responsibility for goal achievement and problems solving

? Self-motivation and self-control by all employees

HR managers are responsible for recruiting high-quality employees, the continual training and development of those employees, and the creation and maintenance of reward systems. By inspiring people to work well, creatively and productively the organisation may overcome competitive advantage.

Example 31

Penril DataComm is a Maryland designer and producer of data communications and equipment. Before embarking on TQM, defect rates were so high that the company was reworking or scrapping one third of everything it made. Applying TQM techniques resulted in an 81% decrease in defects, an 83% decrease in failures in the first three months of use, and a 73% decrease in first year warranty repairs.

V. Recommendation

The aim of every organisation is to improve constantly business in order to achieve competitive advantage over rivals. Successful achievement of those goals is part of Human Resource Management that has crucial influence on corporate employees and maintaining organisational culture. These are some recommendations that should be considered by organisation:

? In strategic planning process senior management should set up goals for Human Resource Department in relation to recruiting, selecting, training, motivating and rewarding personnel in long term basis. Satisfied employees reduce employment rotation and build cooperate culture within organisation.

? In recruitment process Human Resource Department should clearly specify what require from potential candidate and select the best optimum fit for organisation in mixture of qualifications and experience. Successful applicant should cooperate with already existing employees and be able to adopt corporate lifestyle

? Training and Development as major responsibility of Human Resource Management is important to motivate employees and increase their skills. Highly skilled and motivated employees improve business performance and develop organisational culture

? Methods of managing groups used in order to resolve problem must be optimised and efficient. Self Directed Team Work, if chosen, may bring mentioned before advantages for a company, however appropriate training must be delivered for all members of team what increase decision making process

? In case of Total Quality Management employees take responsibility for improving quality within the organisation. Properly implemented avoids counterproductive organisational infighting, however benefits may not be seen for several years and workers may be resistant to change

VI. Conclusion

In times of massive competition between organisations people are treated as major asset of the company. Therefore it is very important to set up department in form of Human Resources that will be responsible for attracting, managing, motivating and developing employees for the benefit of the organisation, building corporate rules and behaviours in form of organisational culture.

Nowadays organisation culture became very important aspect of many organisations. It is not only about rules, procedures, behaviours and beliefs but also how organisation organises itself in order to create competitive advantage over rivals.

Writing this report I understood that Human Resource Management and with strategic goals and objectives of any organisation is directly linked with corporate culture. Properly working SHRM significantly shapes morale of employees what improve business performance and foster innovation and flexibility in organisation.

I also understood that blending management style with strong organisation culture is one of the most difficult tasks for managers. Therefore some techniques or managing styles will always bring advantages or disadvantages for different companies. Linking strategies with Human Resource Management and further with corporate culture in organisations require extended knowledge of managers from different departments and constant observation of market in order to develop and be successful with own products and services.

VII. References

1. M. Armstrong, A. Baron, (2002), Strategic HRM: The Key to Improved Business Performance, Kogan Page Publisher

2. CH. Mabey, G. Salaman, J. Storey, (1998), Human Resource Management: A Strategic Introduction, Blackwell Publishers Ltd

3. G. Dessler, (2008), Human Resource Management, Pearson Education Inc., Prentice Hall

4. J. Bratton, J. Gold, (1999), Human Resource Management: Theory and Practice, Macmillan Press Ltd

5. Michael E. Porter, (1985), Competitive Advantage: Creating and Sustaining Superior Performance, Simon & Schuster Publishing















VIII. Bibliography

1. ACCA, Paper F1 Accountant in Business, 2007, BPP Learning Media Ltd, p.118

2. J. Storey, (1983), Managerial Prerogative and the Question of Control, Routledge & Kegan Paul Plc, p.84

3. M Armstrong, (1992), Strategies for Human Resource Management: A Total Business Approach, Kogan Page Publisher, p.192

4. P. Candance Deans, Kirk R. Karwan, (1994), Global Information systems and Technology: Focus on the organisation and its Functional Areas, Idea Group Publishing, p.496

5. P. Hawkins, Robin Shohet, (2006), Supervision in the Helping Professions, McGraw-Hill Education, p.194

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