Hrm is more important in current economic climate business essay


The main purpose of this essay is to examine how the existing or present economic situation which led to firms trying to beat each other in business has made the role of HRM significant in achieving business success. In evaluating this statement, Armstrong (2003) sees the main role of HRM in this present economic climate as being how to carefully devise a plan of action which will be used to achieve a goal, as well as the logical way through which business organisations can manage their employees through HRM so as to achieve business success. The author of this essay observed that in this current economic climate, countries such as the United States, United Kingdom etc. are recovering from depression and inflation which led to loss of so many jobs, and increased competition in the recruitment process, thereby making it possible for HRM functions to be more important in order to achieve business success (source: Survey of Global HR Challenges, 2005). While Pendleton (2011) argued that in the face of this current economic climate, if HRM functions are not properly implemented people will be losing good jobs with better pay due to downsizing in different organisations and start taking up jobs with lesser pay because economic climate will detect salary/pay to be received by employees. McKenna and Beech (2008) emphasise that these HRM functions include; recruitment which involves the proper advertisement of job so as to attract the proper/right applicants, then comes the selection of the best candidates among all the candidates that applied for the job, and proper training of the employee is said to add value to them and the work they do so as to bring about business organisation success and on the other hand, the employees will be rewarded accordingly for their contribution to the growth of the organisation.

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Armstrong (2003) further indicated that the main aim of HRM is to gain business success in an organisation through the people employed in that business organisation. Som (2008) implied that HRM functions will ensure that organisations attract, retain, motivate and also develop its human resources in accordance with the organisation's demand. Ulrich and Brockbank (2005) argued that HRM plays an important role in seeing that every business organisation achieves success through the proper implementation of its functions, and by applying those functions with the necessary information technology system such as the internet. Wachira (2010) suggested that HR managers ought to apply new technologies that will enable them communicate easily with other managers in the organisation so as to reduce the cost incurred during recruitment and also select the proper candidate for a particular job. Though in some developing countries, organisations may not have the technical capability to handle this type of recruitment and selection process and this will negatively affect such organisations (Source: CIPD survey report, 2007).

It is being argued that there are challenges encountered by HR managers in the day to day management of human resources in an organisation which may result from political, environmental, economic as well as social effects, and this is said to be because of the high level of responsibility bestowed on the HR manager in this current economic situation (source: Survey of global HR challenges, 2005). Jackson and Schuler (1995) sees these as external environmental pressures which can be positive or negative, such as tax exemptions and conducive business environment used to encourage local businesses and allow them to compete favourably in business with their counterpart from other countries so as to enable them retain their existing manpower/employees through their HRM functions or political instability/uprising which discourage foreign organisations/companies from investing in a country thereby creating unemployment, affecting business success and the country's economic growth negatively.

Brewster et al (2005) also argued that in most developed countries of the world such as United Kingdom, United states etc. HRM functions will definitely be affected by political, legal, and social environmental pressure/factors either positively or negatively. This is said to be due to the fact that every business organisation operates under the framework of the law in the environment where the business is located. For example, in Libya, international companies such as British Petroleum (BP) is being affected by political and social unrest in that country, this has affected the operation of so many other companies in Libya and on the other hand reduced business success and government revenue, while Japanese car manufacturing companies in United Kingdom are all doing well and achieving business success due to the favourable political, social and legal environment they established their organisation (source: BBC news, 22/02/2011). Som (2008) argued that the positive performance of an organisation in this current economic situation will depend mostly on HRM functions of staff selection, training/development and incentives/compensation.

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Beardwell and Holden (2001) observed that before now some changes took place in the economic situation of the United Kingdom (UK) in relation to how people are being employed to work, in compliment to what is obtainable in the United States (US). This is said to be caused by economic pressure existing at that period which resulted from increase in competition, recession, and emergence of new technology, which on the other hand created employment, increased employee training and development so as to enable them master the new technology, which will improve their skill and also enable the organisation achieve business success. Though Kinnie et al (2000) argued that the inability of HR managers to properly train its employees will lead to low productivity and low customer satisfaction which will also affect business success and employee relationship with the organisation negatively. Beardwell and Holden (2001) also emphasise that increased competition tried to change the old method of HR and this made it possible for organisations to develop a new method of employment that will be employer friendly/oriented. This policy helped in directing the method of recruitment and selection so as to employ the right people needed for the organisation to arrive at its business success. Although it is also observed that this method of employment will lead to unemployment because very few people with the required skills will be employed by the organisation.

Kulkarni (2008) implied that increased competition and globalisation has made it possible for most organisations to adopt uninterrupted learning and training of its employees through the human resource management department. This is said to enable the organisation to satisfy its employees and customers needs and on the other hand achieve business success. Notwithstanding the continuous learning and training adopted by most organisations, Varma (2008) argued that some organisations now concentrate more on what to gain from an employee without considering how to add value to such employee through training and development. It is then emphasised that an organisation's aim should be directed towards employee and customer satisfaction through purposeful HRM strategy implementation which will result to profit maximisation as well as business success for such organisation

McKenna and beach (2008) emphasized that at the beginning of the economic recession of the 1980's which changed the role of trade unions resulting to little or no strike action, made it possible for organisations to be able to change their staff with ease. This is not only said to be caused by unemployment and recession but also from the introduction of some new laws that reduced the power of trade unions by controlling strike action, which is said to have affected business success negatively because employees will not be motivated to give their best. It is being argued by Deen and Giri (2008) that employees are the biggest assets of an organisation and should be encouraged and motivated through the organisation's HRM activities/functions which can provide emotional support, training and development, financial rewards etc. that will make it possible for the employees to do their work with full commitment. This is argued to result to organisation's business success because the employees will feel valued and being cared for, thereby contributing positively to the organisation.

McKenna and Beech (2008) also noted that the weakness in the power of trade unions is said to signal the need for less elaborate process in "collective bargaining" and "conflict management", which also resulted in a faster way of negotiating settlement of wages. In addition to the foregoing, organisations were better positioned to make changes in work practices which resulted into an increase in productivity as well as a decrease in the number of people employed. Changes in the practice of HR were observed because of the large pool of available labour. A good example is said to be the emphasis being switched from recruitment to selection, which led to the selection of the right people for the job so as to achieve business success which will on the other hand increase unemployment because not every applicant will be selected.

It is being argued by McKenna and Beech (2008) that the reduced volume of negotiations which is based on "collective bargaining" between labour unions and human resource specialists, including the reduction in time committed to recruitment and selection, which helped to provide HRM with the opportunities to manage employee layoff programmes and enter into negotiations so as to bring about low wage settlements, and this is said not to favour employees because of the low wage they will be receiving and it will also discourage them from giving their best to the work they do. Goel (2008) emphasise that in this current economic situation, HRM will require a cybernetic scheme of information management so as to enable an organisation gather, store, examine and disseminate information that concerns the organisation's human resource management functions of recruitment and selection so as to help the organisation manage employee redundancy and negotiation programmes. Though, Goel (2008) also argued that without a good human resource management information system, an organisation will find it difficult to access information about its employees both old and new, as well as those seeking to work for the organisation. It is then said that an organisation will choose a HRM information system that will satisfy its information management needs if such an organisation wants to achieve business success.

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Davi (2008) contend that increased competition has made the role of HRM to be faced with challenges of handling management modification, managing organisational culture, dealing with leadership training and growth, measuring the strength of HRM and employee environment, designing employee engagement, dismissal as well as compensation. And to take care of these challenges, Pinnington and Edwards (2000) advised that HR managers should try and discover the main problems, analyse it and provide solutions to it through the use of HRM and performance strategies.

McKenna and Beech (2008) argued that in considering organisation of reasonable size, which implies a big organisation, it is possible to find a HRM function just as one would expect to see in a finance or marketing function where specialisation of duties exists and the management team tries as much as possible to achieve organisational goal/objective. While in the smaller organisation, it is said that the level of specialisation may not prevail because the HRM function is being performed by the manager who handles HRM matters. It is observed by the author that the big organisation where specialisation exists will tend to achieve more business success than the small organisation with no specialisation. Though, it is being argued by Bhattacharya (2008) that it will be improper for human resource department of any organisation whether big or small, to assure employees of retaining them in the organisation when such employees are being seen for example by the accounts department as a liability. Therefore, Pendleton (2011) emphasise that the HRM department should work hand-in-hand with other departments in the organisation so as to determine employees that can be classified as asset to the organisation and retain those employees because they will help the organisation in achieving business success.

According to McKenna and Beech (2008) human resource planning process is concerned with the function of matching organisational demand for quantity and quality of employees with the available supply. This demand is said to be derived from the current and forecast level of company operations, while the supply side is said to consist of human resources that is available both internally and externally. Foot and Hook (2005) observed that an organisation unmistakeably needs to be sure that they have the right staff so as to attain the needed level of competitiveness. These staff are said to be employed by the organisation through their recruitment process by assessing their internal human resource supply. This is said to involve a process through which an organisation takes into account the number of its employees as well as their duties and responsibilities, including their skills so as to enable the organisation compete favourably in order to achieve business success. McKenna and Beech (2008) argued that the internal supply consists of the exiting workforce and its potential to contribute to business success, which has been a target for systematisation in recent years. While the external supply is said to reside in the population outside the organisation and it is influenced by demographic trends, developments in education as well as competitive forces in the labour market, and this is said to be observed within the European Union (EU) where competition is common because every organisation want to achieve business success.

McKenna and Beech (2008) emphasise that prior to staff recruitment, job analysis is undertaken, and this is said to involve examining the work to be undertaken by a candidate which results in the preparation of a job description, which produces a specification about the attributes a suitable candidate will need so as to perform the job. McKenna and Beech (2008) also implied that a variety of techniques such as the application form, interviews, tests and assessment centres are all available in selecting the best candidates from a pool of applications. It is mentioned that a shortlist of applicants will be produced as a first step in the selection process which will then lead to training of the applicants, and it is concerned with establishing what type of training is required and to which applicant so as to add value to the candidates and also achieve business success as the candidates work for the organisation. It is further emphasised by Kulkarni (2008) that notwithstanding the benefits of organisation's recruitment, learning and training through HRM, employees are said to be faced with tension of accomplishing business goal/objective in this current economic climate than ever before. Also employees are said to be facing the problem of having to do more work as a result of the training given to them. Although, it is said that some organisations though their HRM can take care of these problems by conducting stress management seminars and training on how to cope with tension at the workplace (Pendleton, 2011).

Armstrong (2003) explained that HRM functions will bring about an integrated approach towards the development of human resource strategies or plans which will enable an organisation to achieve its goals thereby leading to success in the organisation's business, but when the strategy is not properly implemented the business may collapse. Organisation strategy according to Foot and Hook (2005) are said to function with those plans of action that an organisation makes so as to take care of future occurrences and these plans are targeted at answering the basic economic question of what to do as well as how to do it. Armstrong (2003) on the other hand sees strategic HRM function as an approach used in making decisions on the intentions and plans of the organisation as it concerns the employment relationship as well as the organisation's recruitment, training, development, performance management, reward and employee relations strategies, policies and practices, which if not properly implemented will result in business failure.

According to Nachimuthu (2008) increased competition in the face of the current economic climate has made it possible for organisations that share some business strategy in common to merger together and become one organisation so as to enable them achieve more business success. Nachimuthu (2008) further implied that HR plays a vital role when organisations want to go into merger and acquisition, and the HR function is said to involve retaining some of the existing employees that will be considered as asset to the organisation through the use of HRM strategies to carry out employee assessment that will select and integrate them into the new organisation. Foot and Hook (2005) also emphasise that in order to ensure success in the business of any organisation, HRM strategy must be incorporated in all other departments of an organisation such as finance department, sales department, marketing department etc. and they must work hand-in-hand with the human resource department in the aspect of recruitment, manpower development and training so as to achieve business success.

Not only is HR functions beneficial during merger and acquisition, but also it is being argued by Nachimuthu (2008) that when two organisations or more merge together, HRM will be faced with the problem of organisation's cultural integration, communication between employees, appraisal and selection of managers/leaders, keeping of valuable employees as well as how to carry out compensation and welfare program in the newly formed organisation. Though, it is emphasised by Pinnington and Edwards (2000) that these problems can be taken care of or solved through a well-planned and implemented HRM strategy which will involve selection of the right employees, performance, appraisal, development and rewards.

Hutchinson and Purcell (2003) noted that strategic HRM is functional through focusing on actions that differentiate a business organisation from its competitors. While on the other hand, Armstrong (2003) said that it develops a declaration of purpose which defines the means to achieve ends, and it is concerned with the long term allocation of significant company resources as well as matching those resources and capabilities to the external environment. Strategy is therefore said to serve as a perspective on the way in which critical issues or success factors can be addressed, and this strategic decisions is aimed at making a major and long-term impact on the behaviour and success of the organisation (Armstrong, 2003).

According to Armstrong (2003), when considering strategic HRM, it is said to be necessary to address the extent to which human resource strategic measures should take into account the interest of all the stakeholders in an organisation, employees in general, as well as the owners and management. Storeys (2007), argued that "soft strategic HRM" places more emphasize on how to manage people in terms of ensuring them employment security, training, development and work benefits etc. while "Hard Strategic HRM" on the other hand will consider the benefit to be derived by investing in human resources in the interest of the business achieving its business success. In this situation, a well-planned soft and hard strategic HRM will guarantee business success in the sense that organisational objectives/directions, its choice of employees and how they are managed will be considered (Legge, 2005).

Armstrong (2003) also emphasise that the rationale for strategic HRM is the perceived advantage of having an agreed as well as understood basis for developing approaches to people in the longer term, and this will enable an organisation achieve competitive advantage by allowing such an organisation to utilize its opportunities. On the other hand, Hamel and Prahalad (1998) argued that a firm cannot achieve competitive advantage unless the firm develop its human resource by training them so that they can learn more work techniques which they will use in working for the firm so as to beat their competitors. It is also said that one of the clear benefits that will arise from competitive advantage as a result of effective management of people is that such an advantage is hard to imitate by an organisation's competitors (Pendleton, 2011).

Organisation's strategies, policies and practices are said to be a unique blend of processes, procedures, personalities, styles, capabilities and organisational culture, which differentiates what the business organisation supplies to its customers from those supplied by its competitors and it is said to be achieved by having human resource strategies which ensures that the firm has higher quality people than its competitors (Armstrong, 2003). Organisation's challenges can be handled by redefining HRM strategies so as to sustain competitive advantage on investment in human resources, by so doing HR managers must have the core competence to deal with changes in economic situations, social effects and technology which affects the organisation by being able to discover important issues affecting the organisation and providing solutions through development and training (Source: Survey of global HR challenges, 2005).

It is being emphasised by Armstrong (2003) that the aim of a resource-based approach to HRM is to improve resource capability by achieving fit between resources and opportunities as well as obtaining added value from the effective deployment of resources. Cesyniene (2008) noted that recruitment process will definitely be challenging in some fields where there is existence of dearth skills in the labour market. Armstrong (2003) also observed that in line with the intellectual capital theory used to analyse HRM, the resource-based theory of HRM emphasise that investment in people adds to their value to the firm or organisation. Therefore the author understands that when an organisation invests in its employees by training them for example, they tend to add value to the organisation by working to achieve business success for that particular organisation. More so Boxall (2011) argued that it is by hiring and developing more talented staff and by extending their skills base that an organisation will achieve success in its business.

It has been observed that a resource-based strategy for HRM is therefore concerned with the enhancement of the intellectual capital of the firm/organisation, which implies that seeing a business firm in terms of what it is capable of doing may offer a more durable basis for strategy in HRM than considering the needs which the business seeks to satisfy (Armstrong, 2003). The author of this essay tends to emphasise that a business can achieve success if it has the strategic capabilities/or plans to compete favourably with others in the same line of business not minding the present economic situation. Cesyniene (2008) argued that the deficiency in the number of qualified workers as well as increase competition will make it possible for HR managers to change from "Hard" to "Soft" HRM which will put into consideration the needs of employees so as to sustain competitive advantage. While Kamoche (2000) explained that the basis of this resource capability approach to HR strategy will be the recognition of the available manpower in the organisation, which is claimed that it will develop and provide a single model for strategic HRM to function better. Although Jackson and Schuler (1995) also argued that in this situation, firms will try to gain competitive advantage by using human resources through development and training in order to add value to their employees so as to match the nature of the organisation's relationships with their customers and employees.

According to Armstrong (2003) the key feature of strategic HRM function is the concept of fit or integration, which is also known as "matching model". Malik (2009) explained that this matching model helps to bring about strategic integration in an organisation, by combining HRM strategic functions and organisation's strategy together and channelling them towards the same strategic direction in order to achieve business success when they are being implemented. Legge (2005) argued that organisation strategy and strategic HRM sometimes does not seem to be appropriate to each other's context. A good example can be seen in the downsizing exercise undertaken by some organisations during the last economic meltdown or recession which is not in contrast with human resource management strategy and it discouraged employees thereby bringing about poor performance of such an organisation (Pendleton, 2011).

Bowen and Ostroff (2004) argued that merely having good HRM policies is unlikely to be sufficient enough to motivate employees and derive organisational performance so as to achieve business success; hence there is the need to go beyond HRM content and consider HRM process. Fey (2000) suggested that organisations ought to concentrate on HRM patterns of employee development and training at all levels of its management and employees. McKenna and Beech (2008) implied that HRM functions must have the purpose of meeting organisational objectives which will lead to enhancing service provision to its customers, quality, profitability or efficiency of its services/goods. Though, Fey (2000) also argued that there is no relationship existing between HRM Practices and organisational performance in relation to employee training and development.

Therefore in this current economic climate, Hutchinson and Purcell (2003) observed that increased competition has really made the HRM functions more important to the success of business than ever before. This is said to be because of the fact that HRM now covers the activities of recruitment and employment which calls for the proper selection of those to be employed, manpower planning involving management of the available work force, employee training and management development resulting to coaching, training and guidance which add value to employees so as to support them on taking more responsibilities, organisational planning and development that helps to achieve organisation effectiveness, wage and salary administration through management and monitoring reward in the organisation and also recognising employee contribution, health and safety benefits and services which helps to maintain work-life balance by building a good working relationship between the organisation and the employee, union management relations and personnel research which may result to outsourcing so as to obtain service from an outside supplier either to train its employees or work for the organisation (Hutchinson and Purcell, 2003). By taking closer look at these HRM functions, Pinnington and Edwards (2000) stressed that there has been an increase on the functions given to the HR manager unlike before, and if these functions or responsibilities are well implemented by the HR manager, there will be a tendency in which the success of the business organisation will definitely be arrived at and the business organisation will grow in all ramification. But the author observed that in a situation where these functions are being neglected, business success may not be achieved and the business will suffer.