Managing the issues of human capital

Published: Last Edited:

This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

Nowadays in the majority of organisations, people are the prime asset. To create a value and getting maximum effect from staffs, companies should set up the knowledge, skills and abilities into organization. Corporates are constantly changing as a response to the business environment with each time being more demanding and competitive. Primary aim for companies is to become more flexible by following a successful strategy.

According to, Turner, Keegan & Hueman (2006:317), for an organisation to be effective and successful, the human resource management functions must be integrated into the various organisational strategy.

Human resources are defined as the pool of human capital under the firm's control in

a direct employment relationship, and HR practices are the organisational activities directed

at managing the pool of human capital and ensuring that the capital is employed towards the fulfilment of organisational goals (Wright et al., 1994).

There is one question here; how the company adapts to the change and how prompt it happens can assure its place within the game. Responsiveness, adaptability and flexibility are the key.

According to Gilbreath (2008), creating strong HRM policies requires creating a strong psychological environment in which employees can thrive.  Such an environment requires conducting stress audit, monitoring the work of the environment, matching people and work environment and using teams of employees and researchers to study the work environment. Gilbreath, B., (2008).

In this work, i will examine that how SHRM improve business performance, innovation and flexibility and what type of methods they use to reach their strategic goals. In addition, I will point at the key factors to create high performance in work places. And beside this, I will analyse the HRM function's role and importance in the organizations with examples that companies apply HRM strategies efficiently.


The HRM Function plays the role of the taking care of the human capital in the organization. The HRM Function is responsible for the processes, which allow the organization to stay competitive on the external market and internally efficient.

Generally, the role and responsibilities of the HRM Function are defined well in theory, but the reality can be different from the organization to the organization. The investments needed to keep the current staff and the competition on the market usually define the playground for the HRM Function.

The HRM Function is responsible for the following areas in the organization :


Compensation and Benefits

Performance Management



Leadership Development

Personal Administration

Legal Compliant Processes

In recent years, HRM interest has grown in the area employee's ability and performance. Among academics performance appraisal defined as a structured system of measuring, evaluating and influencing an employee's job related attributes, behaviours and outcomes to find out what level employee is presently performing on the job. (Kramer &macgraw&schuler 1997) that is: how productive the employees are and whether they can perform more effectively in the future it is a dynamic and multidimensional process (Latham & wexley 1981, Carroll & schneirer 1982)

According to Dessler (2005) performance appraisal is a key matter in the HRM because it helps to organizations about the employee with feedback, development and incentives required helping person eliminate performance deficiencies.

In twenties century explanation of performance appraisal has been extended new perspectives. Generally human resources managers say that measuring performance helps to get information about employee's requirement and qualification but since considering performance appraisal get an important part of HRM.

According to Heyel " it is the process of evaluating the performance and qualifications of the employees in terms of the requirements of the job for which is employed for purposes of administration including placement , selection for promotions ,providing financial rewards and other actions which require differential treatment among the members of groups as distinguished from actions affecting all members equally."


While the idea that appraisals should improve employee performance is already accepted and we know that it is not new. Many managers of companies establish their process in tree step. They are _ of setting goals, _ training employees, _appraising and rewarding them. During the period of process it calls performance management.

Generally performance management as a process that supporting to company's strategic aims. All these definitions conduct that performance appraisal takes a role in a process. Employee's goals and work are related to company's goal. That is why develops the employee's capabilities, and evaluates and rewards the person's effort also company's benefit in new vision of human resources management.


Performance management strategy is related with employee development. Purpose of performance management is developing employees who are effective in their work also seek to improve performance when employees are not performing as well as they should (Campbell, & Lee, 1988; Farh, et al., 1991) The feedback is a main point which given during the performance evaluation process identify, employees weaknesses as well as opportunities for skill development.

It is clear that the purposes of en effective performance management system are link employee activities with organisation's strategic goals, provide valid and useful information for administrative decisions about employees and give employees useful developmental feedback.


Strategic human resource management has been defined as " the linking of human

resources with strategic goals and objectives in order to improve business performance and develop organizational culture that foster innovation and flexibility ." ( Siddharth Chatuvedi)

Strategic Human Resource Management (SHRM) is one of the most powerful and influential ideas to have emerged in the field of business and management. It is also applied by some policy makers at have drawn upon the idea of SHRM to promote a high performance workplaces and human capital management.

Researchers in the field of strategic human resource management have emphasized that human resource (HR) practices may lead to higher firm performance and be sources of sustained competitive advantages (Wright, Dunford, & Snell, 2001).

SHRM affect how organizations are changed, and how they perform. It also affects how employees are treated, security of employment and the nature of employment. SHRM deals with organizational performance and systems of practices and HRM deals with a individual employee performance and individual HRM practices. The role of SHRM or HRM is to establish a system of HRM practices that transforms a firm's employees from commodities that provide negligible competitive advantage and middling work performance to human assets and sustaining the heightened work motivation, expanded job opportunities, and unique skills, knowledge and abilities. When a firm is planning to modify or make a progress of innovation, the best applied strategy is the research-based-review that will definitely be useful to the SHRM/HRM.

Theory Applied to the SHRM/HRM

The human resource management practices basically include the process of recruitment and retention. To provide the further understanding, the Grounded Theory will lead the SHRM/HRM to reach goal of employee recruitment and retention. The application of grounded theory provides the recruiters and human resource professionals to have a better understanding in the employment changes.

Application of Two Models

Guest Model of HRM

This type of model that was introduced by David Guest has six dimensions of analysis for HRM. It summarizes the HRM strategies, HRM practices, HRM outcomes, behavior outcomes, performance outcomes, and financial outcomes. The idea of this model is based on the fundamental elements of the HRM approach, such as commitment that have a direct relationship with valued business consequences.

Compensation and Rewards

This method might be use and also be more effective in the employment relationships, strategy, and management that can result for a better understanding on strategic human resource management systems. As a kind of motivational approach, employees can be more competitive.

Available at:


HR help to implement high performance work practices by creating a culture which is supportive of high performance, by influencing attitudes ( HR can help set up benchmarking visits to organizations which are achieving outstanding results through people), by designing and implementing HR processes which support the business strategy ( hr processes such as reward systems need to be aligned to the new ways of working).

There are a number of key characteristics of high performance to deliver high performance working as following above;

Employees are highly skilled

Employee motivation

Well designed jobs and roles fit together well them

Encouragement of innovative and creative behaviors

Self - directed work teams

Structures are well organised

Providing necessary resources and tools and physical environment

Making this happen requires two key elements are shown as;

Having talented and motivated workers

Creating an effective system through which people are recruited, developed and with well organized work

Key steps to have a high performance in workplaces

High performance in workplaces is adherent to putting the basics in place and transforming how work is done. Firstly, it is important to get the basics in place, as follows:

Selection: Selection is first and the most significant step in recruitment. There are number of methods choosing the best worker to gain your team. Using techniques such as physical and cognitive ability testing, talent based and group interviews can be shown as some of those.

Job Rotation: Many corporation is implementing job rotation strategy into their business. Job rotation provides to employees to across position in other departments which means being less specialized in positions. Therefore job rotation increases employee satisfaction, furthermore, working in different positions regularly cause to workers feel less boredom as well as obtains great task variety.

Encouragement of innovative and creative behaviour: This is one of the fundamental method which is implemented in work places to get high performance. There are many techniques to apply this method into organizations to reward personnel such as giving bonus and so on.

Leadership: Most leaders has lack of hierarchical approach in their management. This cause wasting time by communicating with people at all levels.

Work environment: It is necessary to ensure resources, tools, equipments and facilities to support high performance in working places and to provide workers what they need to do the job well.

Team-based working: In order to implement a team based approach to a company's organizational structure, firstly teams should have clear tasks and roles which match with team goals. This method is far more than individual works. Team based working ensure many advantages to companies such as reducing dublication of efforts, more innovative ideas, motivates colleagues, increase productivity, higher standard of performance and easier adaptation by added flexibility into corporation and so on.

Communication: One of the most vital criteria is to have open and honest communication with all personnel. It ensures more acceptable decisions and helps to avoid from mistakes. Beside this, good communication skills in the corporation is essential to make people to feel valued as they are and trusted

Participation: Not to being a participate of team is one of the major loss in many projects . Mostly companies are in false by not to let team members to being a participate in decisions. But it would change the capacity of the firm either as large or small. Whereas, making the whole project work better, they would provide open forums regularly and more over to get people involved in projects. Thus, to get better result would be inevitable.

Continuous innovation: High performing workplaces should keep continue to find new and efficient ways to gain their goals. They could reach that point by high quality communication and always looking for opportunities in environment. Leaders has liability in enable innovation is essential.


There are number of companies such as Starbuck's, Boeing, Wal-Mart, Samsung, Turkish Airlines and Bacardi-Martini are leaders in their industry and have been doing business successfully. During the research on their Human Resource Management (HRM), I have seen their successes are firmly related to their effective and efficient HRM strategies. There are many factors in common among these five companies' HRM strategies: devotion to employees' benefits, employee training, a diversified work environment, promotions and rewards system, friendly and healthy workplace and outsourcing opportunities.


Starbuck's business has been boosting year by year. For many people that have had Starbuck's coffee, they may notice that Starbuck's customer service is outstanding. Every customer is treated like a VIP and with high quality service. Starbuck's provides its management team and employees training to help them better understand its business process. Also, Starbuck's offers a wide range of job opportunities for people to develop their potential.


Boeing, world-famous airplane maker, provides the most advanced and diversified employees benefits. Boeing knows treating employees generously will bring more profits and competitive advantage.  In addition, Boeing provides a bright, clear career growth path for its employees, and it definitely raises workers confidence and efforts working at Boeing.


Wal-Mart is the largest private employer who has workers from different cultures, backgrounds, and ethics. Wal-Mart embraces diversity at all levels in its organization. It also has an Open Door Policy which every associate is encouraged to bring any suggestions to their supervisor. Wal-Mart's innovative and effective HRM strategies make it such a successful company.


Samsung's strategy can be described as an effort to consistently meet customers' needs across three critical dimensions-quality, time-to-volume, and being easy to do business with. The company is constantly changing and reinventing itself in support of these goals by design in Samsung's HR management systems. Recently the firm has collected some data about why people in high tech came to Samsung. It was found that "interesting work" and the quality of the work environment were key attributes. Samsung develop a lot of courses for Samsung staff to learn, and give them opportunities to go outside to learn. For instance, the design centre staff can go abroad or have chance to work with famous talents. Samsung has identified the development and maintenance of an Extraordinary Environment as a key driver in the implementation of its competitive strategy.


Turkish Airlines is one of the market leaders in the flight industry .The Company has got problems which include poor communication and lack of information flow between the various departments, headhunting of key staff members by competitors, weak organisational structure, weak reward strategy and organisational culture. To solve this issue, The Company has adopted a number of human resource management strategies. They have created a conductive environment, with more workers participation, career succession planning, career relevant training, performance reward systems, greater opportunities for higher roles, job satisfaction, trust and commitment to enhance employee commitment and satisfaction.


Bacardi-Martini is a renowned and reputable drinks manufacturer with the strongest success rates with regard to the survey conducted by 'The Sunday Times 100 Best Companies to Work For'. One of the main factors which fuels their success, and continues to drive the company are the productivity, accountability, creativity and teamwork.

The company readily recognises that its success will only continue if the staffs are committed, loyal and happy in their work. Thus, Bacardi's staff development approach is taken very seriously, and they go to ensure that the family atmosphere is used through the operations of the company. Examples of these benefits include free hot meals at the restaurant, private health care, life insurance, sports facilities, helplines and so on. All of these benefits are not only offered to the employee, but also the employee's family members or live-in partners.


This paper has examined the propositions of the SHRM perspectives of HR practices and

their contribution to sustainable competitive advantage. The link between HR practices and firm performance has been established. One of the primary conclusions from this study, there is not only one HRM strategy to apply into all type of organization. Defining a strategy makes the organizations to regard their own situations in that term, and consider on the firms goals, objectives and so on.

Through SHRM perspectives, organizations become more flexible to its employees, suppliers and dealers. In this paper, I analysed the key factors to have a high performance in work places which is relevant with that perspectives though. According to research, it has seen that HR practices lead higher corporation performance and competitive advantage in the market.

SHRM is the backbone of any organizations. It is necessity for organizations rather than just a future requirement. Thereby I would like to conclude that SHRM will play an important role in the near future, do it as a part of multinational company or even running a government.

List of References

Turner, R. Keegan, A & Hueman, M., (2006), Human Resource Management in a Project-Oriented Company. A Review. International Journal of Project Management 25 (2007) 315-323.

Wright, P. M., Dunford, B., & Snell, S. (2001). Human resources and the resource based

view of the firm. Journal of Management, 27, 701-721.

Dessler, G. (2005). Strategic human Resource Management

Wright, P.M., McMahan, G.C., McWilliams, A. (1994), "Human resources and sustained competitive advantage: a resource- based perspective", The International Journal of Human Resource Management

Gilbreath, B. (2008), "Creating career-conducive organizations: a primary intervention approach", Advances in Developing Human Resources

Kramer, R., McGraw, P., Schuler, R. (1997), Human Resource Management in Australia, 3rd ed., Longman, Melbourne, .