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This study examines theoretically, the influence of the adoption of Strategic Human Resource Management (SHRM) practices to contribute to organizational success. The study, therefore, recommends amongst others that organizations should improve its integration of HRM practices into their overall operations and strategies and that employees be given adequate opportunities to participate in taking strategic as well as tactical decisions affecting their work environment.
For many years, there has been great curiosity in measuring performance and using the results in the financial aspect of the business. In today's complex competitive environment, firms need to be agile and flexible. One measure may not prove effective over the other.
Organizations cannot be rigid on one measure alone; this paper will ponder on the effectiveness of Strategic Human Resource Management. Even with the large number of literature on SHRM produced since the late 1990s, there is very little strong indication on the ways in which various types of HRM strategies and practices are molded in practice in most corporations and how their synergistic effects can influence on the accomplishment of set goals and objectives and affect the company's financial aspect.
Many organizations confront an unstable business condition. In order to develop and maintain competitive gain in this nature of environment, organizations must incessantly expand their organization performance. Progressively, organizations are distinguishing the capability of their human resources as a basis of unceasing competitive advantage. The rising awareness in measurement is further enthused by an increasing number of researches that demonstrates an optimistic relationship between human resource management and organizational performance. In a realm in which financial results are gauged, a letdown to measurement of human resource policy and practice application makes this to second-class status, oversight, neglect, and potential failure.
The individuals who make up an organization are thought-out to be one of the most important resources of an organization. How people are managed is becoming more important for the very reason that many other sources of competitive success are less influential than they used to. Conventional sources of success such as product or service and process technology, protected markets, economies of scale, etc. can still offer competitive influence but an organization's human resources are more essential for its sustainability.
Congruent to the understanding that human resources are essential to an organization, HRM function is also going up in organizational ladder. HRM endeavors to make sure that the organization finds and keeps the skilled, committed and positively motivated personnel it needs. It involves the main functions of HRM- recruitment and selection, training and development linked to the needs of the organization. SHRM stands for a fairly new transformation in the field of human resource management.
SHRM relates to its role on human resource management systems in organization performance, predominantly focusing on the position of human resources as a way of having competitive advantage. Organizations are now coming to accept that successful HR policies and practices may enhance performance in various areas such as productivity, quality and financial performance.
Methodology and Analysis
This practical research into matters encompassing the applicability of performance management theory in practice is based on a multiple embedded case study approach of performance management in relation with SHRM. This case study investigates the impact of SHRM in relation to the success of an organization but cannot verify that a well- designed and implemented PMS has a positive impact on organizational performance as this would have necessitated a longitudinal study approach which time constraints did not allow here. Although findings in multiple case studies cannot be generalized, this multiple case study approach is based from an opinionated point of view. It followed a review of the literature which enabled the researcher to explore further and then explain the issues surrounding performance management and the role of Strategic Human Resource Management in Organizational success.
Sources of Data
Observation of performance measurement/management practices at different organizations that took place throughout the research and the researcher's past experiences were also drawn upon.
A number of literatures from various sources and experts were examined and scrutinized to gather enough evidence in relation to this study.
Human Resource Management and Business Strategies
Human Resource Management
Human resource management (HRM) involves all management decisions and practices that directly affect or influence the people, or human resources, who work for the organization. HRM is strategy-focused, i.e., by itself it is strategic in nature. HRM at strategic level is SHRM. (Kazmi, 2002)
Figure 1. The Relationship Between HRM and Performance
Source: Michael Armstrong (2006). Strategic Human Resource Management: A Guide to
Action. Kogan Page. London. p. 75
Clearly, with the above figure, it shows that HR rarely has a direct effect on organization performance. This is predominantly true when the business sense of HR's effect involves that human HR drive organization performance because of its part to successful strategy implementation. HR practitioners (and line managers) need to identify that effective strategy implementation is the foundation of shareholder value and that effective strategy implementation is a method of transitional outcomes.
Strategic Human Resource Management
Strategic Human Resource Management (SHRM) indicates an interest with the ways in which HRM is critical to organizational effectiveness. (Miller 1987) defines Strategic Human Resource Management practice as the "decisions and actions, which concern the management of employees at all, levels in the business, and is related to the implementation of strategies directed towards sustaining competitive advantage". Companies are progressively becoming cognizant of the significance of linking the organization's human resource practices to strategy that steers to greater performance (Huselid 1995; Youndt et al. 1996; Delery and Doyt 1996). Ian Clark defines Strategic HRM that "centers on how organizations can improve their competitive performance by considering and utilizing their human resource more effectively."
Buyens and De Vos (1999) argue that in order for HR to be a strategic partner, HR managers should be involved in strategic decision making alongside other senior managers, providing greater opportunity to align HR goals, strategies, philosophies and practices with corporate objectives and the implementation of business strategy. This participation would include the affiliation of HR managers in the most senior management teams in the organization.
To attain strategic integration and alignment of HRM with business strategies, a documented HRM strategy would also be useful (Budhwar, 2000; Teo, 2002) as it can make more concrete the role and authority of HR managers in corporate decision making and increase capacity to cope with externalities such as a tight labor market (Cunningham and Deborah, 1995). Some empirical evidence from previous research indicates that the full impact of HR practices on organizational performance occurs when HR practices are strategically consistent and compatible with each other (Khatri, 1999).
Fundamental Role of Strategic Human Resource Management
SHRM impression is that human resources management is used to increase competitive advantage. SHRM practice is tied with business strategy.
SHRM elevates human resources management from micro level (individual personal level) to the macro level (business strategy level).
SHRM includes analysis of business and socio-political environment.
SHRM includes internal human resource analysis. HR professionals must analyze human resources against current and future business strategies and identify the gaps between them.
SHRM is intended to assist management in the best use of internal labor market. Hence an absolute requirement for analysis would be effective use of computer-based human resource information systems.
SHRM includes organizational analysis and design. Hence HR professionals had to provide management not only with analysis, but also organization-design recommendations.
SHRM is part of the business plan. Strategic HR considerations are more important than the traditional planning elements.
SHRM, A Catalyst for Organizational Success
In the past few years, there has been a considerable deal of study focusing on the relationship between Strategic Human Resource Management (SHRM) practices and organizational performance. SHRM can therefore, be used by organizations to develop this valuable capital. These studies have actually demonstrated that SHRM practices, either individually or as a system, are associated with higher levels of performance (see, Huselid 1995; Huang 1998; Dimba and K'Óbonyo 2009; Abdulkadir 2009).
Scholars in the field of SHRM have progressively depended on the resource-based view of the organization to elaborate the role of human resource practices in organization performance. Resource based view of strategy is that the strategic competence of an organization depends on its resource capacity, specially its distinct resources. Abstract studies on SHRM have recommended that procedures of HR practices may lead to greater organization performance and be foundations of continued competitive advantage because these procedures of practices are often unique, fundamentally vague, and emulation is quite gruesome. HR practices can improve organization performance when they are centrally associated with one another to oversee employees in a way that steers to competitive advantage. HR practices can develop value for an organization when the particular practices are associated to create significant resources or competencies.
Performance Management and its Implications
Performance management system and programs developed from it may not always improve performance and only such companies are among a minority of multi-national companies. Majority of managers and other employees agree that their performance management programs do not improve business results. A recent study conducted by McKinsey & Company suggests that only 30 percent of employees say they receive feedback of real value in improving their performance.
As a result enhanced performance management denotes a largely undiscovered opportunity to enhance company profitability. However, to harvest on these fruits of labor will require a modification of its direction, ownership and process, not simply changing the form or the rating scale.
The majority of performance management programs are pushed by the need to arrive at a rating used to influence the size of employee merit increases and, in some cases, incentive awards. As a result, many supervisors determine the amount of merit increase they believe is adequate to retain and reward employees, then use company guidelines to support it into a performance rating that justifies the desired increase.
Another common use is to make termination and promotion decisions. In fact, the bulk of the supervisor's effort is arriving at a judgment of performance. Employees, of course, are likely to dispute that judgment unless they are rated at a high performance level. Thus, the focus on improving individual performance is superseded by the focus on judging and rewarding. It also looks at the key actions and efforts necessary by each employee and his/her team to maximize company profit and satisfy customer needs. For managers, enhanced business literacy may entail a better understanding of company economics. Business literacy improvement is not just training. It requires that the employees take part and help lead the journey of discovery.
A repeated complaint of managers and other employees below the top executive level is that they lack clear company-wide strategies, goals and accurate measurements. As a result, they have insufficient information to set team and individual goals that align with the rest of the organization.
Conclusion and Recommendation
In conclusion to this study, the expectation and demand that HRM should be seen to provide a compelling impact to the business in the same way as any other department, is a driving force for change. This has placed greater demand on HR practitioners to be concerned more on profit than the welfare of the employees. From the view of the literature reviewed, the demands from the external environment of business have also shaped to a great extent the practice of performance management.
To remain relevant and strategically necessary, HR practitioners must keep on updating their skills and should not be complacent in confining themselves in the performance of their traditional roles but should, as a matter of necessity be ready to be a "jack of all trades; master of all".
Given that it is evidently understood from academic study that HR is a source of sustained competitive advantage (Porter 1995), while, conventionally, the expenses related with the development of HR strategy have been viewed as an operating expense, these expenditures would be better judged as an investment in capital assets.
The way an organization runs its HR has an important relationship with the organization's outcome, a disclosure that supports the resource-based view, where business competitiveness is connected, at least in part, to the investments in the organization's specific assets. Although studies generally reports positive numerical links between the greater implementation of HR practices and organization performance, it should also be put in mind that many other factors other than HR practices could affect organizational performance. It is also viable that there are difficult relationships between HR practices and other resources of the organization.
The causal relationship between HR and organizational performance will enable the HR managers to develop programs that will bring out better operational output to gain advanced organizational performance. It is therefore highly recommended to reflect on developing a system that enables, rather than prevents, improve the literacy on performance management create a positive impact to the organization's overall success and not failure. This is moving beyond measuring performance. Performance management has a long ascendency, and in all probability, a long road ahead.