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The role of the human resources (HR) function has increased considerably in recent years with a number of the HR-related activities being considered as strategic activities. These activities provide for the increased role of the HR function in the management of the business leading to the term strategic HRM (human resources management) which defines the difference in approach and importance of the HR function. The concept of strategic HRM refers to HR activities that “facilitate strategic flexibility with the goal of reaching a dynamic fit and adequately answering the requests of the strategy of the organisation and the environment” (De Pablos & Lytras, 2008, p.50). This implies that the HR activities which could be considered as strategic HRM are the HR activities which directly impact the implementation of the strategy of the organisation including those which impact the strategic direction of the organisation. These activities are best seen through examples of HR activities in organisations which can be referenced as strategic HRM. The examples presented in this essay include the implementation of relevant training programmes to bring significant enhancement in a firm’s operational performance, the development of knowledge management in the organisation, and the development of overall talent level in the organisation. Each of these examples is discussed further.
The first example is the implementation of relevant training programmes to bring significant enhancement in a firm’s operational performance. The HR function has as part of its typical mandate the training of staff in an organisation. The development of staff and their continued growth in terms of professional and personal development is one of the main challenges of the HR function particularly in the recent period where increased competition in the market place has demanded greater skills and capabilities from personnel (Kaplan & Norton, 2004). For training and development activities to evolve from typical HR functional activities to strategic HRM initiatives, the actions need to have an underlying importance in support of the organisations’ operational activities.
The research of Pandey (2007) is important as it provides some examples in which the actions of the HR function in training and development of personnel were considered to be strategic HRM activities. In this research, the impact on the firm performance was noted with the enhancement of operational efficiencies of the organisations leading to competitive advantage versus other players in the market. The results of the research indicate that the Six Sigma intervention focusing on a case study organisation resulted in “processes which are the industrial best practices that synchronise with the socio-cultural system of the organisation and make it the differentiator, which is complemented with its alignment with the organisational way of functioning including the strategic intent of the firm, technical expertise of the workforce and organisational culture” which were all integrated in the Six Sigma approach and objective (Pandey, 2007, p.149). Clearly, in the case study of the research, the training initiative of the case study organisation was considered to be a strategic HRM activity given the impact of the process on the overall approach in the operations of the business. The main limitation of the study was that the scope was limited to one single case study organisation. In addition, the impact was not quantified and the cases study organisation was not identified given confidentiality considerations and it was just referred to as a multinational corporation in the financial services sector.
The research of Pandey (2007) did identify a number of other companies which pursued Six Sigma interventions which could be considered as strategic HRM initiatives given the scale of the impact of the actions. Linda (2004, cited in Pandey, 2007) noted that the HR function of Dow Chemical was able to generate US$3.2 million in positive financial impact for the organisation through the Six Sigma intervention initiative. In a separate example, Bhatnagar & Sharma (2004, cited in Pandey, 2007) noted that Ford had generated more than US$1 billion in savings from 2000 as a result of the firm’s Six Sigma intervention implemented by the HR function. In both these cases, the HR function pursued arguably strategic HR initiatives as the actions taken in relation to the training and education of the work force led to improved operational capabilities which enhanced the competitive position of the firms, and also generated significant financial benefits impacting the bottom line of the firms positively. In the hospitality industry, an example of a firm which incorporates strategic HRM in its activities is the Hilton Group which links strategic HRM to its improved business performance and the delivery of the ‘Hilton promise’ to its clients (Maxwell & Lyle, 2002).
The second example is in the development of knowledge management in the organisation. This is particularly helpful for organisations where knowledge is critical and is the main competence that differentiates an organisation from other players in the market. An example of a sector in which this is the case is the professional services sector. The research of Teo et al (2008) is important to consider as it noted the HR actions that impact the strategic position of the professional services firms. These were the HR initiatives which impact the skills, knowledge and capabilities of the staff in the organisation with a particular focus on the management of knowledge workers as this directly leads to the increased competitiveness of the professional services firms. It is the development of the human capital and its establishment as the key differentiator for the firms and its competitive advantage that distinguishes this particular action to be considered as strategic HRM. Youndt & Snell (2004) is also an important journal to consider as this shows the increased importance of human capital in the competitive advantage of organisations versus other tangible capital and assets that used to drive the competitiveness of organisations. The impact of human capital and its link to the firm’s performance has been noted in other research works as well (Teece, 2003; Hill et al, 2003). The limitation in the use of the research of Teo et al (2008) as a case study research for this essay is that it does not provide the specific names of the professional services firms included in the research.
The third example is the development of overall talent level in the organisation. The research of Sharma & Bhatnagar (2009) showed how the development of a talent management strategy is one of the key strategic HRM actions that have a significant impact on the performance of a firm. The talent management strategy can impact not only the talent level of the individual employees in the organisation but also the leadership in different levels of the organisation. The management of talent and the pipeline is a strategic HRM activity as it impacts the leadership pipeline of the organisation (Cogner & Fulmer, 2005). As with the previous two examples, this example of an HR activity leads to improved performance in the organisation. Talent management thus is a driver of the enhanced capability in the organisation and its improved operational and financial performance (Chugh & Bhatnagar, 2006).
The research works indicated for this example of the development of talent management in an organisation as a strategic HRM action show that this is considered to be a key activity that many organisations pursue. However, the research works have not named the specific organisations utilised in the research works and the case studies consistent with typical confidential studies. Nevertheless, it is clear that talent management is considered to be an important action for organisations and is one activity that is included in the category of strategic HRM initiatives. This is driven by the impact that the initiative has on the performance of the organisation as well as the resulting competitive position of the organisations which are implementing talent management strategies to develop the skills and capabilities of the personnel in the organisation. The talent management includes actions that develop the personnel in the organisation and also attracts and recruits other staff to the organisation in order to raise the overall talent level that exists in the organisation.
The examples are only some of the HR activities that could be considered as strategic HRM. The examples presented are not meant to be exhaustive as there are certainly a number of other actions that can define strategic HRM actions. The examples do show that there are a number of principles that underpin the activities initiated by the HR function in order for these activities to be considered as strategic HRM. The HR activities that are present in an organisation which can be termed strategic HRM activities are those which impact the competitive advantage of the organisation with the HR function driving the development of the initiative and managing the actions related to the initiative. These are also the activities which are part of the typical HRM function but which now involve a strategic aspect in terms of the actions taken particularly as these relate to and support the strategic actions of the organisation. Finally, these are also the activities which generate significant benefit to the organisation in terms of financial impact or development of skills and capabilities or personal which lead to enhanced competitiveness of the organisation. The examples presented provide an understanding of which HR activities can be part of strategic HRM and which of these activities can be meaningful enough to be considered as part of the concept of strategic HRM. Overall, the main guidance for the actions to be considered as strategic HRM is that the actions of the HR are linked to strategic decision making which impact the firm’s performance.
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