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The aim of this assignment is to analyze the relationship between Strategic and Human resource management. It explores the developing role of HRM in providing a strategic dimension to an organization. This essay identifies a number of critical organizational behaviors in corporations that seek to inter-link its HRM practices with its strategy.
Company's Strategies should be formulated by considering the human resource aspects and the human resources should be managed based on the company's strategies. In fact, the consequences of liberalizations, privatization and globalization viz., competition, Quality, low cost, high speed in delivery, customization and customer relationship, made the CEOs of Various companies to include the human resource aspects in the strategic management process and manage the human resources based on the companies strategies. As such, strategic human resource management gained its significance in the post liberalization period. Now, human resource manager, in most of the companies, is a member of strategic management team. (Ref P. Subba Rao book)
Strategy (ref P. Subba Rao book)
Increasing the sales of Suzuki by 1lakh motor cycles in 2012 is one of the objectives of the company. It can be attained by increasing the fuel efficiency, reducing the price of the through reducing the production costs or by improving the design etc. Increasing the fuel efficiency or reducing the costs are the strategies.
Strategy, in simple terms, is a unified course of action to achieve the goal. Glueck defined the strategy as "Unified, comprehensive and integrated plan designed to ensure that the basic objectives of the enterprise are achieved"
Henry Mintzberg views that strategy need not be the outcome of rational planning. With this view, Mintzberg defines strategy as, "a pattern in a stream of decisions or actions" The pattern of decisions or actions is aimed at achieving the goals and objectives of the company.
Human resource management
The function within an organization that focuses on recruitment, management and providing direction for the people is known as Human resource management. It also deals with issues related to people such as hiring, compensation, employee motivation, performance management, safety, wellness, training, benefits, administration, communication and organizational development. HRM manages the relationship between the management and the employees. Whatever definition we use for defining HRM, It is all about people in organizations. No wonder, in some MNC's (Multinationals) HR managers are called People managers. Nowadays, HR manager or People manager is no longer seen doing the activities or work described in the traditional way. In fact, most organizations have different teams dealing with payroll, retention and staffing etc. The HR manager is responsible for managing employee fulfillment and realization of management objectives.
Difference between Strategic HRM and HRM
Human resource management is a strategic approach to the management of employees. As explained earlier, it mainly deals with the recruitment, compensation etc. There are no specific rules for HRM whereas in Strategic HRM, there are specific rules specified for specialized fields. SHRM mainly focuses on programs with long term objectives. Unlike the traditional HRM, Strategic management uses many strategic methods and systematic tools for increasing employee motivation and productivity. The strategic HRM represents the latest shift that explains how the continuing training and development of employees can directly contribute to wider performance and function of the firm. (See Delery and shaw, 2001; Mathis and Jackson, 1999). Armstrong (2006a) explains the above notion in a brief summary by stating that: "The Fundamental aim of strategic HRD is to enhance resource capability in accordance with the belief that the human capital of an organization is a major source of competitive advantage. It is therefore about ensuring that the right quality people are available to meet present and future needs. This is achieved by producing a coherent and comprehensive framework for developing people." Whereas HRM realizes the important contribution employees make to the life of the corporation but does not make a direct impact to its performance. SHRD argues how an organization where employees realize new opportunities of growth and where they are able to utilize new potential represents an interrelated link with the working of the organization and its performance. SHRM argues that the role of the employees should be managed and aligned to the wider corporate objective of its management.
Performance appraisal is a process of assessing the performance of an Employee compared to the standard/pre-determined level set by the organization according to its objectives. Performance appraisal indicates the level of desired performance by the employer, actual performance of the employee and the gap between these two. Performance appraisal is useful for deciding upon employee promotion, salary determination etc but recent developments in the human resources management indicate that performance appraisal is the basis for employee development. The basic objective of Performance appraisal is to take a measurable account of its employees with positive or negative performance so that the organization is able to have a better control over its operations and accordingly forecast work. Armstrong explains how "Performance management reviews provide the inputs required to create personal or team development plans, and to many people performance management is essentially a development process. Performance reviews can, however, produce data in the form of individual ratings, which may be used as the basis for performance-related pay decisions".
Performance appraisal can be of benefit if it is exercised in a positive way, even though measuring of performance is a positive way in detecting strengths and weaknesses of an employee such kind of exercises can be perceived as intimidating by the employees leading to issues like demotivation and lack of enthusiasm at work. According to Wiese and Buckley (1998) some of the advantages of a performance appraisal system are that "it facilitates organizational decisions such as rewards and recognitions, promotion/demotions, layoffs/recall and transfers. It may also assist managers in developing employees. It serves to assist individual employee's decisions regarding career choices and the subsequent direction of individual time and effort. Additionally, performance appraisals may increase employee commitment and satisfaction due to improvements in organizational communication". The exercise of PA systems play a very important role in organizations that seeks to integrate HRM with its strategy because of the belief that managing and assessing the performance of each employee has a direct relation with the performance of the corporation as a whole. It is a very essential process to understand and improve the employee's performance through HRD (Human Resource development). The process of HRD helps the employees to develop technical, behavioral knowledge, skills and abilities, beliefs and attitudes necessary to perform and attain future goals. Performance appraisal is the basis for HRD.
The question however arises what kind of performance will be appropriate to produce the required satisfaction amongst employees in order to get positive performance as well as point out areas of improvements when weaknesses are detected? Many authors support the argument across a wide spectrum that Performance appraisal systems, cannot in themselves, become a positive resource for improvement in the organization. Performance management system can be manipulated by the members of the organization. For example, the line manager can deliberately give low scores to an individual -- if the person has any personal grudges against him/her, to send a message to someone that they should consider leaving the organization to speed up termination. All of the above features indicate how people deploying the performance appraisal can use it in a number of ways and according to their interests.
Self-Managed Teams and High Performance work practices.
Self-Managed Teams are believed to contribute to an increase of input and efficiency and it has become a popular way of organizing an employees working environment. It said that by being self-managed, employees get a greater sense of responsibility which leads to a more innovative decision making and greater performance.
In using the work by Sirking (1993) Elmuti (1997) argues that "Self-Managed Teams programmes can produce greater satisfaction, reduced costs, faster and better decision making, improved pricing, and increased market share". Elmuti (1997) makes the distinction between two most popular approaches to self managed teams, namely a) work teams and b) problem solving teams. Elmuti (1997) argues that "A problem-solving team is similar to a taskforce in that it is formed for temporary purposes. While problem solving teams are temporary, work teams, which are used by two-thirds of US companies, tend to be permanent. Rather than attack specific problems, a work team does day to day work activities"
In addition to the above, the study of self-management has been an issue because of lack of appreciation from the management for the employees' contribution and decision making. The question remains of whether the hard work and commitment of the employee is evaluated and recognized by the organization.
From the above discussion, we understand that the use of Self-Managed teams can be a win-win situation, when the individual contribution to the organization is being recognized by exercising proper evaluation process. It can also be a loss-win situation for the employees when they do not get any profit from their innovative ideas which help the organization. At the same time, it can also be loss-win situation for the organization when the employees do not take advantage of their independence and become unproductive for the organization.
High Performance work practices.
The study of SHRM focuses on high performance work practices (HPWP) because it can lead to higher level of performance when implemented. De Waal (2007) argues that high performance organizations (HPO) share some certain characteristics like "strong financial results, satisfied customers and employees, high levels of individual initiative, productivity and innovation, aligned performance measurement and reward systems, and strong leadership".
There is not much difference between HPWP and HRM, In fact HPWP aims at strengthening specific set of relationship within HRM practices. "Huselid argues that certain criteria must exist if human resources are to be a source of competitive advantage: first, the individual performance significantly affects the organizations productivity; second, that the skills must be rare, and finally that the human capital is difficult to imitate".
Performance Management (PM), Learning and Change Management.
Performance Management system is the associated with measuring the employees performance against the criteria introduced by the management or from the discussion with the employee. Organizations operating in the service sector (e.g. Call Centre) often want to measure whether the employee initiated proper contact with the customer, whether all questions asked by the customer was answered in a professional manner resembling the values and principles of the organization. Authors argue that PM should not only point out the different targets to be met by the employee but also provide the necessary learning structures so employees are able to develop the right competencies to meet them. Kirkpatrick, (2006) also argues that "In an extensive study on performance reviews, researches at general electric came to the following conclusion: Implicit in performance appraisal programs are now structured and include two distinct objectives: 1) letting a person know where he or she stands via ratings and salary actions, and 2) Motivating him or her to improve" The learning or change management is about introducing employees to new or different knowledge areas that needs to be developed in order for them to meet their targets. Armstrong (2006b) rightly argues how: "Discussions takes place on ways in which the individual's role could be developed so that it becomes more challenging from the view point not only of new tasks to be accomplished but also need to acquire or extend knowledge and skills to carry out those tasks".
A-One bakery is one of the leading bakeries in the Indian Market. They have approx 800shops nationwide; it has been maintaining a reputation for freshness and quality for years now and because of this A-One has won a trust of many customers, overtime. Rolls, Samosa's, pastries, Cake, doughnuts and soft drinks are some of the products it deals with. There are many small shops and malls where A-One supplies its freshly made products hence due to the difficult logistics demand, employees play a critical role in the large selling and manufacturing targets. In order to achieve customer satisfaction one of the important activities of A-One is that it keeps a personal interaction with the customers at the time of selling despite the fact of distribution of products from the central bakery around the country. By examining the company's published information and report. It is clear that A-Ones envisaged expansion is achieved by not positioning the role of its employees at a strategic level. The company's function which is not perceived as critical is supported by the role of employees. The image of the corporation is improved by the involvement of the employees within the wider community. In addition to that, little information is provided by the company about the competencies and skills that might be needed by the employees in order for them to apply it in different dept's. Reference is made to different sections such as: - Marketing, purchasing, food/health and safety, finance, IT etc. Even though the above presentation of A-One bakeries treatment of its employees might not reflect the working of its staff environment, it is clear that the strategic importance on its people is not placed by the company. In contrast, the corporation emphasizes more on expansion of its products, marketing practices, opening or more stores worldwide and use of more robust advertising. The company would have positioned the areas of employee development, learning and training as more central to its growth.
Creating a more strategic HRM focus.
After examining a number of key areas constituting important strategic approach to HRM, It can be argued that A-One bakeries is able to incorporate some of the traditional practices in order to provide a more strategic edge to its recruitment and retention of employees. For identifying the areas of improvement and strengths, there can be a performance appraisal system introduced. More explicit areas of improvement within its HRM can be identified by the company that would be supplemented with the strategy to be committed in addressing the identified needs. Similar to the marketing and advertisements, a specific budget should be introduced for training and development of employees. There is absence of different forms of empowerment and involvement even though distinction is made by the company in regards to the working environment. Instead of following the traditional way of HRM, they could be rewarding the innovative role of its staff and how they have contributed towards the company's growth and current achievements. Despite of the recruitment of large number of employees, it can be surprising to know that the presentation of the targets by the company is loosely defined. A-One bakery might be serious about its performance targets and growth but they should communicate this clearly and explicitly to the current and future employees.
The aim of this assignment has been to analyze how an organization can achieve a connection a between its strategic and human resource management. This Essay argued that the changing role of HRM is an indication of the development of Strategic HRM as compromising a much more critical role than it did in the past. This essay identified four areas which are critical for developing a strategic approach to HRM and also provided a literature review on them. All of the above practices aim at providing a more explicitly measured as well as managed role and performance of the employees. The improvement of the corporation as a whole is believed to be a result of training and development of the employees. By examining the case of A-One bakery, this essay identifies how an organization does currently possess a strategic focus on its HRM practices. The employees are seemed to be treated as functional role providers translating into the manufacturing and selling practices. In order to develop a strategic focus to its HRM functions, A-One needs to be more committed towards training and development as it is an important perquisite to its wider corporate performance.