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Strategic Organizations Decision

Critically evaluate the evidence that HRM is now an integral part of strategic level decision making within organizations.

There have been many predictions for the future role of the HR department, its role, function and size. The predominant tenor of such calls has been for the HR function to be more strategic and to create value within organizations (Gunter, 2006. P.49). HR functions have traditionally come under fire because of their perceived unresponsiveness, their administrative rather than strategic focus and their perceived nature as cost centres rather than wealth creation centres (Truss et al., 2002). In the face of growing internationalization of organizations, the HR function is seen to be a key subunit in the development of capability and the coordination of practice (Ferner, 1997)

But, as Pucik (1997:321) argues, ‘paradoxically, in spite of the value adding opportunities for HR contribution to competitive advantage driven by the demands of businesses in many companies today the HR function is still perceived not as a full partner’. This statement is further supported by the work of Sheehan.K (2005), which reportedly stresses that HR was not fully involved in central decision-making process.

Her work also reveals that in few organizations although HR was invited to be a part of the decisions making committee, he is necessarily not an integral part of the strategic planning process. But the work of Sheehan is limited to only 13 ‘Best practice’ firms only; if this is the case in so called best practice firms then we can imagine the situation in other organizations.

The strategic HRM model proposed by Sheehan.k has few implications for instance if we consider the CEO commitment, HR reporting directly to CEO, it sounds good on paper but is it questionable whether it is possible in real life or not. Again it depends on the relationship between HR and CEO. What if the relationship between HR and CEO does not exist? What if the CEO doesn’t support the HR? It is crucial for the CEO to support HR and in real life it might be possible in only a few organizations.

How can we achieve Top management commitment to HR initiatives and corporate culture commitment to HR initiatives? Again it needs to be led by the CEO and these initiatives must be incorporated in though out the entire company which is quite a challenging thing. Sheehan.K (2003) also proposed that there should be an increase in line management HR responsibilities which was also proposed by Ulrich (1997), again this has a lot of implications like resistance from line managers and resistance from HR.

A good deal of research has shown HRM’s importance to business performance (Gunter, 2006. P.49) but the influence of the HR department within the organization has been less evident. A number of scholars have argued that a shift towards greater strategic presence has emerged, however, with an emphasis away from traditional auditing and back-office record keeping, to embrace work on the management teams of businesses, involvement in change and organizational design (Ulrich, 1997). However, as ‘most assessments of HR roles are wanna be statements made by HR people who “wanna-be” involved, respected and admired by their client’ (Conor & Ulrich, 2000).

Though evidence has been collected to show that HR departments are becoming more strategic around the world, research remains patchy. HR has been perceived by top line executives as ‘advocates’ and by shop floor workers as ‘Managements stooge’ (Ulrich, 1997). According to Ulrich (1997), the old myth is that HR is HR’s job, but in order for an HR to think strategically and be strategic it needs to delegate work to the line managers.

At first sight this appears reasonably good, but on further reflection there are few implications in this approach, for example there may be resistance from the line managers because line managers are more concerned to get the ‘product out of the doors’ and might not have time to think about this HR issues. Other implication is that line managers may fail to understand the benefits of delegating these new responsibilities to them, they might think it is an extra burden to them and might not perform effectively.

Lack of interest and time, inconsistent in making decisions and lack of integration might be some of the issues in devolving HR responsibilities to line manager (Torrington and Hall, 2008). It is not easy to implement an HR strategy, its time consuming and hard to implement an HR strategy so again this is one of the problem in devolving HR responsibilities to line manager.

There might also be some sort of resistance from HR from delegating their work to line managers (Ulrich, 1997). The HR might think that the line managers may not have the knowledge and capability to deal with these complicated issues. There may be a practical solution for this problem like giving some sort of training to the line managers and making them understand the importance of delegating these responsibilities to them, but again this in turn will might lead to increase of and usage of time and money.

The line manager might think that this not my job and might also think that if I do his job who will do my job and what will the HR do? It is also notable that line managers have a limited knowledge of organizations goals and strategy and thus it is not acceptable for HR to delegate his work to them. But on the other hand there are few advantages in this approach, line managers have a very good understanding of the job requirements and they are in a better position to execute some of the HR responsibilities. It will also improve the relationship between employee and line manager (Torrington and Hall, 2008).

Many organizations do say that employees are their greatest asset; however, when coming to HR, he is viewed as a cost centre and is often not invited to have a seat on board where senior executives discuss budgeting, planning and strategic goals. So, in order to gain a seat on the board where the important decisions are made and to protect itself from being outsourced, HR needs to make the decision makers understand the value they bring within an organization.

It is evident that HR wants to become a part of strategic level decision making and become more strategic, but a lot depends on issues such as power and influence. It is evident that power is in the hands of other departments other than HR department. And it is also evident that the decision makers in the organization are more concerned for the other departments than HR department. It is not sufficient for HRM policies to be fundamentally good. If they continue at the planning stage and do not take financial and communal realities into adequate consideration, their authority is most likely to remain minimal. The success of HRM depends profoundly on how their implementation process is performed.

According to Caldwell (2004), HR specialists are not only unable to contribute to strategic business decision making but are also unable to protect the boundaries of their specialist expertise from encroachment by other management functions. Armstrong (1995) also supports this view, arguing that financial control systems dominate British companies to the extent that accountants, by taking over processes such as performance-related pay, threaten the continued existence of the HR function.

The Workplace Industrial/Employee Relations Surveys (1980, 1984, 1990 and 1998) show that in organizations where the HR function has a main board presence, this is often undertaken by another director holding a broader portfolio. These surveys show ‘any representation’ of the HR function on boards of directors at 71% in 1990 and 64% in 1998 compared to ‘specialist representation’ at 47% and 36%, respectively.

The 2004 survey, however, did not provide exact comparative information but did report that 61% of managers in private-sector workplaces with a head office in the UK claimed an HR representation on the top governing board of the organization. That many non-HR directors have a responsibility for HR strategy formation at the board level is seen as reflecting HR’s absence from strategic decision-making forums.

A lot of surveys are done in the past and recent days to find out the involvement of HR in the strategic decision making and the position of HR within an organization and the findings are given in the Appendix.1, Now looking at each of the surveys and their findings we can see some problems in them, for example if we consider the survey and findings of Marsh which was done in 1970, now this survey is of course outdated, and it was done at the time where HR is seen as personnel.

The survey may seem to be valid for only one business sector which is engineering companies only, this study would have been better if it had included all sectors of businesses in it.. So it is not advisable to take in to consideration this data for the evaluation of HR position on the board. The CLIRS survey reported that only 30% of companies employing 1,000 or more employees had an HR presence on their board, now even this survey is a little bit outdated as it is carried out in 1993 and things have been rapidly changing in the organizations since then.

It is interesting to compare the findings of the Work Place Employment Relations Survey’s which were conducted in 1990 and 2000; the survey conducted in 1990 revealed that 47% of HRDs are on main board but where as in 2000 the number has decreased to 36%. This is an interesting finding in a decade it was expected that the number would rise but instead it declined. The same organization when conducted a survey in 2006 also revealed the same thing that the participation of HR managers were relatively less in strategic business plan in 2004 than in 1998.

So we can see that there is a pattern emerging and there is been a continuous decline in the participation of HR in strategic planning. My reservations are to do with the argument that the survey findings of 2006 are over-generalised. There might be one valid reason for the decline in the no. of HR managers participating in the strategic planning in the board which is that in a decade the no. Of organizations might be doubled or tripled and hence this might have impacted the results of the survey.

Legge (1978) argued that senior management policy makers excluded personnel from the company planning process. According to Tyson & Fell (1986), Storey (1992), Sisson (1994) and Tyson (1995) personnel/HR has little influence in strategic business decision making.

According to Purcell & Ahlstrand (1994), Work place industrial relation survey (1984), CLIRS report (1993) HRM function was third order and downstream from the locus of strategic business decision formulation, again this information is a little bit outdated as things have been changing at a rapid pace during these years and business environments are also changed. Guest et al. (2001), Cladwell (2004) and Guest & King (2004) concluded that HR plays limited role in strategic business decision making. According to Cladwell (2004), HRDs offered strategic advice to HR, but this occurred only at the implementation stage.

Business credibility of the HR manager is also very important along with a supportive company culture as well as CEO occurred in making sure of line management support for the HR. An HR manager therefore has to look and develop the culture in order to make changes. Without support from all corners, an HR manager is likely not to achieve the desired goals and changes.

The Hr has to speak the language of Line Managers and understand the business and needs to delegate to them. This ensures that HR becomes a strategic party of the board’s decision making process and a cornerstone and radar for the CEO.

When we speak about the life-cycle stages, matching the stage of the firms development means aligning HR strategy to the business strategies appropriate at each stage of the life cycle of the business – start up, maturity, decline, regeneration (Armstrong & Baron, 2002). From this it is obvious that the strategies of the business will change and this also means that HR strategies will also change at each stage of the life cycle model.

In the past for the effective growth of the company organizations used to heavily depend upon the sales, marketing, and R&D functions only, but these days’ organizations are looking at the HR for the same. The study by Galang and Ferris (1997), which examined 242 organizations, concluded that symbolic actions such as espousing values and norms similar to those of senior management and being the embodiment of social values within the firm predicted greater HR departmental power and greater access to organizational resources. ‘Hence, merely being present in an organization is not enough; taking an active role may differentiate the more influential HR departments from those who enjoy less power’.

The recent survey conducted by the Charted Institute of Personnel Management and Development (CIPD, 2003) titled ‘Where are we, where we’re heading’, revealed that a one third of the survey respondents supported the business partner model and said that it is the way forward if the HR was to become more actively involved in the strategic formulation process. But on the other hand this model of business partnership which was proposed by Ulrich in 1997 was rejected.

Why is that it is now being prescribed? Well again the answer lies in the survey respondents, the seniority level of HR professionals involved in the survey was unclear. It was also not clear whether the respondents were of senior executive management level. And from the sample it is also evident that the survey is dominated by those respondents who were aspiring to get to the top. So we can observe that it is a little bit biased one and the sample size is not a representative.

According to Torrington and Hall (2008), the work of HR has been outsourced, even the specialist aspects of HR are also being outsourced, and the main reason identified by them for this outsourcing is the cost factor. These days we can find specialist organizations which can do bits and parts of HR functions for a less cost which influences the organizations to outsource HR functions. But on the other hand there are few implications in outsourcing the HR functions like it requires some time to establish a connection with the service provider, costs savings are not immediate (Torrington and Hall, 2008).

It is also evident that these organizations can not match the quality of the specialist HR. Though these days the HR functions are being outsourced, many UK firms seems to be resisting this outsourcing as mentioned by Torrington and Hall as it may be due to the fear of loss of control and personal touch. If the organizations outsource HR then they don’t have control over those functions and they have to accept it as it is done. Not only these but there are a lot of implications on outsourcing HR functions like loss of skill, knowledge, employee morale and damage to long term morale (Cooke et al. 2005). It is obvious that the firms from outside cannot improve any employee morale from outside, for this we need a in house specialist HR function.

The business environment these days is highly unstable and heavily competitive, and hence any business operation or function which does not add any value to the organization will not be acceptable. So it is evident that there is a need for the HR to develop expertise and needs to assist the organization by adding value for the long term objectives. These days’ organizations are considering HR function as more strategic role in optimizing performance through sufficient staffing, training and talent management.

Many HR functions have begun to play a strategic role in guiding succession management, knowledge retention. Now HR acts as a back bone for the organization providing a lot of functions such as man power, T&D, etc. Organizations these days have recognized the importance the HR and the value added by the HR and have brought back the HR back in-house (Torrington and Hall, 2008).

There is a need for HR to create a culture within an organization which promotes the organizations values and instils a feeling of pride and passion in employees. These days HR is not only dealing with people, but it is also adding value in the planning stage through its understanding of people. Thus HR is expected to study employment trends, benchmark practices, analyze the impact of existing HR processes, policies and practices, and work with the business to enable growth and performance.

HR must make sure that he is empowering his employees so that they can work with a free mind. It is also required by the HR to make sure that his employees are growing because an organization is known for its workforce. And finally the major challenge for an HR these days is to consider the complete organization as one entity and if there is any need of change then it should be done at one go all over. HR needs to play an important role in collaborating with the business in order to develop and achieve workforce strategy to meet the organizations objectives.

References

Armstrong, P. (1995). ‘Accountancy and human resource management’, in J. Storey (ed.), Human Resource Management: A Critical Text, London: Routledge.

Beatty, R. & C. Schneider. 1997, New HR roles to impact organizational performance: from partners to players, Human resource management, 36: 29-37

Bennet,N., D.Ketchen & E. Schultz, 1998. An examination of factors associated with the integration of human resource management and strategic decision making. Human resource management. 37: 3-16.

Becker, B., M. Huselid, P. Pickus & M.F. Spratt. 1997. Human resources as a source of shareholders value: Research and recommendations. In D. Ulrich, M. R. Locey and G. Lake (Eds.), Tomorrow's HR Management: 320-27, Newyork: Wiley. Cited in Günter, K. (2006). Handbook of research in international human resource management: 49-60.

Cathy Sheehan (2005),  "A model for HRM strategic integration",  Personnel Review,  Vol.34,  No. 2

Caldwell, R. (2004). ‘Rhetoric, facts and self fulfilling prophecies: exploring practitioners’ perceptions of progress implementing HRM’. Industrial Relations Journal, 35: 3, 196–215.

Chartered Institute of Personnel and Development (CIPD) (2003). HR Survey: Where We Are, Were We Are Heading, London: CIPD.

Derek Torrington, Laura Hall, Stephen Taylor (2008). Human resource management. 7^th ed, Harlow : Financial Times Prentice Hall.

Ferner.A 1997. 'Country of Origin Effects and Human Resource Management in Multinational Companies', Human Resource Management Journal, 7, 1, 19-37.

Guest, D., King, Z., Conway, N., Michie, J. and Sheehan-Quinn, M. (2001). Voices from the Boardroom, London: Chartered Institute of Personnel and Development.

Guest, D. and King, Z. (2004). ‘Power, innovation and problem solving: the personnel managers three steps to heaven?’ Journal of Management Studies, 41: 3, 401–423.

Galang.M.C. & Ferris, 1997. Human resource department power and influence through symbolic action. Human Relation. 50(11): 1403-26.

Günter, K. (2006). Handbook of research in international human resource management.

Legge, K. (1978). Power, Innovation and Problem Solving in Personnel Management, London: McGraw-Hill.

Marsh, A.I. (1970). ‘The staffing of industrial relations management in the engineering industry’. Industrial Relations Journal, 1: 2, 14–24.

Millward, N., Bryson, A. and Forth, J. (2000). All Change at Work, London: Routledge

Peffer, J. 1994, Competitive advantage through people. Boston, MA: Harvard university press.

Pucik, V. (1997). Human resources in the future: an obstacle or a champion of globalization? Cited in D. Ulrich, M. R. Locey and G. Lake (Eds.), Tomorrow's HR Management: 320-27, Newyork: Wiley.

Schuler, R. 1990, Repositioning the human resource function: Transformation or demise? Academy of Management Executive , 4: 49-60.

Storey, J. (1992). Developments in the Management of Human Resources, Oxford: Blackwell.

Sisson, K. (ed.) (1994). Personnel Management, 2nd edn, Oxford: Blackwell.

Truss C.; Gratton L.; Hope-Hailey V.; Stiles P.; Zaleska J. Paying the piper: choice and constraint in changing HR functional roles. Human Resource Management Journal, Volume 12, Number 2, 1 April 2002, pp. 39-63(25).

Tyson, S. and Fell, A. (1986). Evaluating the Personnel Function, London: Hutchinson Education.

Tyson, S. (1995) Human Resource Strategy, London: Pitman Publishing.

Ulrich, D. 1997. Human resource champions. Boston, MA: Harvard university press.

http://www.expresscomputeronline.com/20071022/technologylife01.shtml

Marsh (1970)9% of sample organizations had a specialist personnel director on the main board.

CLIRS (1993)30% organization employing 1000 or more employees had an HR presence on their boards of directors. Given that HR function did not participate in making strategic business decisions.

Millward et al.,36% of HRD on main boards in 2000

47% on main boards in 1990.

WPR survey (2006)HR managers were relatively less involved in the participation of strategic business plans in 2004 than in 1998.

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