The Developing of Effective HR Leadership

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Revolutionary change, increasing volatility, and the blurring of boundaries in the business world have resulted in an emphasis on the alignment of all functional activities of the organisation toward the achievement of strategic objectives. One consequence of this trend is that many have called for a new strategic role for the HR function. (Lemmergaard, 2009).

Human Resource (HR) is emerging as the key concept in assessing the competitive assets of organizations. HR managers and professionals, by virtue of their knowledge of human performance, are well positioned to exercise strategic leadership and contribute significantly to a firm's competitive advantage. This paradigm shift concerning the value of human resources will therefore create opportunities for the HR function to develop a more strategic role in a firm's operation (Lawler & Mohrman, 2003).

HR needs to play an active and guiding role in enabling a company to choose its people well, invest them with the proper responsibilities, support their growth and respect their needs in order to achieve an organization's strategic business objectives. This vital role requires competence in HR leaders that will create and sustain a flexible and adaptive workforce (Gomez-Mejia, 2001).

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Although many researchers have highlighted the importance of the HR roles (Bhatnagar & Sharma, 2005; Aitchison, 2007; Fegley, 2002) and HR competencies (Selmer & Chiu, 2004; Khatri,1999; Khatri & Budhwar, 2001; Ramlall, 2006) but most research have yet to prove any relationship of the two variables. Only a study by Pietersen & Engelbrecht (2005) which was carried out in South Africa shows that there is a positive relationship between business related competencies and strategic partner roles of the HR professionals. The two variables appear to be inter-related as both are very important factors that enable HR professionals to contribute to their organization's success.

2. Review of the Literature

Strategic Human Resource (HR) Roles

In the 1990s, an emphasis on strategy and the importance of HR systems began to emerge. Both researchers and practitioners began to recognize the impact of aligning HR practices with organizational strategy. HR has now emerged as a strategic paradigm in which individual HR functions, such as recruitment, selection, training, compensation, and performance appraisal, are closely aligned with each other and also with the overall strategy of the organization. This new approach of managing human resources has generated much interest among scholars.

The model of this research is linked to the Four-Roles Model first presented by Conner and Ulrich (1996), and later by Ulrich (1997). In the latter study, Ulrich's conceptual framework for the Four-Role Model consists of two main dimensions. The first reflects the continuum from an operational (present) focus to a strategic (future) focus, while the second reflects the conflicting demands of people and processes (Ulrich, 1997, Conner & Ulrich, 1996). Ulrich (1997) states that HR can help deliver organizational excellence by means of four methods. First, HR should become a partner with the management of the firm in helping with strategy execution. Second, HR should contribute expertise in the efficient and effective performance of work, so that costs are cut and quality is maintained. Third, HR should represent the concerns of the employees to senior management as well as working with employees to increase and ensure their ability to contribute to the organization through their competence and commitment. Finally, HR professionals should continually contribute to the process of change and help improve the organization's capacity to do so (Ulrich, 1997). Base on previous research, HR professionals are extremely lacking being a strategic partner and change agent (Conner & Ulrich, 1996; Choi & Wan Khairuzaman, 2008). These two roles are further elaborated as below :-

a) The Role of Strategic Partner

HR professionals become strategic partners by asking questions and designing HR practices that effectively and efficiently align themselves with the strategy of the business (Ulrich & Eichinger, 1998; Ulrich, 1997). In this capacity, HR professionals must be capable of identifying and implementing those practices that facilitate strategic business success. Ulrich (1997) defines strategic human resources as the process of linking HR practices to business strategy. That is to say, strategic HR is owned, directed, and used by line managers to make effective HR strategies happen. Strategic HR enables the transition from business strategy to organizational capability to HR practice (Ulrich & Eichinger, 1998; Ulrich, 1997).

b) The Role of Change Agent

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Kesler (2000) writes that the role of HR in driving changes varies among organization, but if the HR community does not strongly define the process and priorities of the change effort, it is not an effective player in the organization. More closely defined, the change agent role refers to helping the organization build a capacity for change (Conner & Ulrich, 1996). Indeed, Csoka (1995) reports that 65% of HR executives in a study of 314 large corporations believe that the role of change agent is important. Greene (2001) argues that, as it deals with the culture of an organization, HR is uniquely positioned to take responsibility for this role in the firm. Csoka (1995) further suggests that HR professionals can add significant value through the management of the change processes in an organization. Ehrlich (1997) adds that the human resource department must anticipate change and be knowledgeable in its implementation.

2.2 Competency Skills of HR Professionals

As one of the main barriers for HR professionals being able to a play more strategic role in an organization is their lack of certain competencies (Aitchison, 2007). In general, competency is defined as a personnel related concept referring to a set of behavioural dimensions of one's effective performance at work. Competencies refer to the knowledge, skills and behaviors demonstrated by individuals in the course of getting their work done. Competencies are used in many facets of human resource management, ranging from individual functions such as recruitment and performance management to organizational strategic planning and design of organizational structure and culture (Ulrich et.al 2008). Some authors suggest more precise definitions that describe competencies as the work-related personal attributes; knowledge, skills and values that individuals draw upon to do their work well (Selmer & Chiu, 2004). These elements, at the same time, are the factors that enable assessment, feedback, development and reward for individuals to take place (Kochanski, 1996).

In 2002, Michigan research team and its associated partners around the globe performed the Human Resource Competency Study (HRCS) research in four continents: North America, Latin America, Asia and Europe. In this survey, five domain factors emerged as making a difference in terms of performance. Anyway, only three of these competencies are measured in this research by the authors. These three competencies are strategic contribution, business knowledge and HR technology because all these competencies are shown to have related to HR role of strategic partner and change agent in previous studies (Huselid et al., 1997; Panayotopoulou & Papalexandris, 2004; Choi & Wan Khairuzzaman, 2008). The three competencies are further elaborated as below :-

a) Strategic Contribution

High-performing companies have HR professionals involved in the business at a strategic level. These HR professionals manage the culture, facilitate rapid change, and are involved in the strategic decision making and create market-driven connectivity of the operation (Boselie & Paauwe, 2004). These comprehensive HR competency studies were done in collaboration with SHRM and the University of Michigan Business School in 2003 .As mention above, Brockbank and Ulrich (2003) conducted the study that involved more than 27,000 HR professionals and line managers. Most notably, the strategic contribution of HRs accounted for 43 percent of the total impact on business performance in high-performing organizations (Brockbank & Ulrich, 2003). In this competency area, culture management, rapid change efforts, and a business partner role along with customer focus emerged as important factors for HR professionals, making their impact on their organizations' financial performance significant (Brockbank & Ulrich, 2003).

b) Business Knowledge

To become key players in the organisation, HR professionals must understand the business or industry of the company they serve. Key areas of knowledge include applied understanding of the integrated value chain (how the firm horizontally integrates) and the firm's value proposition (how the firm creates wealth). The labour factor, representing institutional constraints such as labour legislation, is the third factor that constitutes the domain of business knowledge (Boselie & Paauwe, 2004). Human resources professionals must understand how their business or agency operates. This includes the organization's strategy, how the organization makes money or achieves its primary purpose, its technological processes and organizational capabilities, etc. Therefore, HR professionals should develop their knowledge of such areas as finance, marketing, operations, and general management (Heisler, 2003).

c) HR Technology

HR professionals need to be able to leverage technology for HR practices and use e-HR/web-based channels to deliver value to their customers (Mukherjee, 2001). Mukherjee (2001) further argues that the pace of technological innovation will continue to accelerate. HR can take advantage of these changes by automating HR processes and becoming more effective in communicating with its internal /external customers. More importantly, by absorbing the latest technology, HR can project a forward looking image that will help it earn the respect of skeptical colleagues.

2.3 Relationship between HR Competencies and HR Roles

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There are limited studies about relationship between HR competencies and HR roles. Anyway, two recent survey done by society for Human Resource Management (2002) and HR Outsourcing Association (2007) which have been discussed earlier did give us some clue about the relationship of the two variables. These surveys identify that inability of the HR professionals to measure HR's direct impact on the bottom line and insufficient competencies of HR professionals are the main barriers for the HR professionals to contribute strategically to business objectives.

Huselid et al. (1997) identified professional competencies and business-related competencies as being important for effective HR management. Professional competencies comprise expertise and skills relevant to performing excellently within a traditional HR department. However, Huselid et al. (1997) argued that, although professional HR management competencies are necessary to ensure technical HR management effectiveness, professional competencies are not sufficient to play a strategic partner role. Therefore, business-related competencies are also important because they enable HR professional to understand how business considerations unique to an organization can create organization-specific HR management needs. Business-related competencies refer to amount of business skills and experience that staff members have outside their functional specialty. These competencies should determine HR roles especially facilitate the selection and implementation of HR management policies and practices that fit the unique characteristics of an organization.

Lawler and Mohrman (2003) studied the skills of HR managers who were in HR directors positions. Their findings support view that HR professionals who wanted to be strategic partners need an expert understanding of business strategy and ways to support its implementation. In addition, the study showed that the highest level of job satisfaction of HR professionals was experienced when utilizing traditional HR skills while the lowest level of satisfaction was found to be in exercising business partner skills.

In a research done among HR managers in New Zealand, Hunt and Boxall (1998) found that, while Human Resources Management qualifications and experience were deemed important to develop "trade skills", these were not sufficient in themselves to make a contribution at a strategic level. Broad qualifications and line management experience were widely valued to develop the "commercial orientation" deemed necessary to contribute at a strategic level.

Pietersen and Engelbrecht (2005) in the study about strategic partnership role of HR Managers in South Africa organizations found that there is a positive relationship between business related competencies and strategic partnership role among the HR managers. This is one of the few significant studies that have empirically tested the two said variables. In this study strategic partnership role was measured with items from the Ulrich and Conner's (Ulrich, 1997) Human Resources Role- Assessment Survey on Strategic Partner role. Professional and business-related competencies were measured with the Human Resource Competencies Scale developed by Huselid et.al. (1997). Business-related competencies which are measured are "line management experience", "implementation of techniques for scanning", "synthesizing and drawing conclusions from business data" and "implementation of monetary techniques for budgetary decision-making". A positive relationship was also found between these competencies and strategic partnership role in this study. This study support claim from Brockbank et al. (1997) that strategic contribution, business knowledge, and HR technology competencies are all pivotal to HR being effective business partners.

Panayotopoulou and Papalexandris (2004) using the competing values framework (CVF) describe HR roles are related to several specific competencies. Change agent role is related to competencies such as system analysis, organization change skills, consultation and facilitation. The strategic partner role is related to competencies such as general business skills, strategic analysis and strategic leadership.

Choi and Wan Khairuzzaman (2008) in the study on 32 HR professionals in Malaysia found that competency such as strategic contribution, business knowledge and HR technology are related to HR roles of strategic partner and change agent. However, this study also found that competency factors of strategic contribution such as culture management, market driven connectivity and strategic decision making have the lowest mean score of the respondents. These shows that HR professionals in Malaysia may be still very much focus in traditional roles.

Base on the literature above, the authors developed hypothesis and the researcher conceptual model (figure 1) as below :

H1: HR competencies (strategic contribution, Business knowledge & HR technology) are expected to be

positively related to HR role as Strategic Partner

H2: HR competencies (strategic contribution, Business knowledge & HR technology) are expected to be

positively related to HR role as Change agent

Independent Variables (HR Competencies) Dependent Variables (HR Roles)

a) Strategic Contribution

b) Business Knowledge

c) HR Technology

a) Strategic Partner

b) Change Agent

Figure 1: Research Conceptual Model

3. The Study

The purpose of this study is to attempt to understand better the relationship of Human Resource (HR) professional's competencies and roles in the manufacturing companies in Malaysia. In this research, the tool of Human Resource Competency Study (HRCS), which has been designed by Wayne Brockbank and Dave Ulrich (2002), will be used to assess HR competencies among the HR professionals. The tool of Ulrich HRM Four Roles Model, which has been designed by Dave Ulrich (1997), is used to assess HR roles among the HR professionals. It is hoped that by making this examination, we will be able to develop a realistic picture of the competencies of the HR professionals and the roles they plays in the manufacturing firms of Malaysia. The HR professional needed to endure and overcome many barriers to reach the ultimate goal of becoming a strategic partner in his or her organization. The study from Lawler and Mohrman (2003) confirms that HR department plays a major role in influencing business strategy only in cases where HR management is a full strategic partner. This finding suggests that the HR executive who understands business strategy is more likely to develop HR processes and systems to support the implementation of that strategy.

4. Research Methodology

Sample

The sample employed here consists of HR professionals from Malaysian manufacturing companies. All respondents work for manufacturing companies in the southernmost state of Malaysia, Johor. These industries were chosen because of their relatively large. The list of firms in the manufacturing sector was drawn from the FMM directory of Malaysian Manufacturers 2007. Out of the entire list in the directory, the research focused on a sample population in the Southern region of Malaysia (State of Johor). A total of about 307 firms were included in the list for this area. The total number of firms involve in this study are 89 respondents.

4.2 The Instrument

The data collection instrument used in this research is the a quantitative methodology with a survey instrument developed based on the three competency domains and 9 competency factors identified and adopted from the Human Resource Competency Study (HRSC) (Brockbank & Ulrich, 2003). A Likert scale was used on the questionnaire with the following ratings: 1-strongly disagree, 2-disagree, 3-moderately agree, 4-agree and 5-strongly agree. The respondent was asked how well they performed the competencies identified in the HRSC. A statement describing each competency factor is listed on the questionnaire.

The data collection instrument to be used in the first part of this research was developed by (Conner & Ulrich, 1996) in order to test the theoretical model of HR roles discussed in Conner and Ulrich (1996) and Ulrich (1997). The instrument used in this study is a survey design outlined by Ulrich (1997) and Conner and Ulrich (1996). The instrument is adopted for this research in extent of application of the two roles measured which are the roles of strategic partner and change agent.

The 20 items in the instrument were arranged in groups of two. Each set of two items had a common introductory piece and each of the four items that followed corresponded to one of the four roles. A Likert scale was used on the questionnaire with the following ratings: 1 = To very little extent, 2 = To little extent, 3 = To some extent, 4 = To a large extent, 5 = To a very large extent.

5. Data Analysis

Table 1 : Rank Order of Means of HR Competency Factors in Each Domain

Competency

Factors

Mean

Std. Deviation

Strategic

Culture management

3.15

0.95

Contribution 

Fast change

3.31

0.94

 

Strategic decision-making

3.16

0.78

 

Market driven connectivity

2.98

0.90

Business

Value chain knowledge

3.28

1.00

Knowledge 

Value proposition knowledge

3.39

0.87

 

Labor knowledge

4.00

0.92

HR Technology

User of technology to deliver HR services

3.38

0.81

 

Strategic HR technology

3.48

0.96

Based on competency factors in each domain, all strategic contribution factors score the lowest mean score in terms of mean ranking as shown in Table 1. This shows that HR professionals in the Malaysian manufacturing sector score lowest in culture management, market driven connectivity, strategic decision-making and fast change. This result is a concern because HR professionals should be able to identify and develop organisational cultures that help firms win the marketplace and successfully implement business strategies. If HR professionals are not able to facilitate change management processes and adapt to new change initiatives, they would have problems working with key individuals to ensure decisions are made quickly and that resources are aligned with desired changes (Brockbank & Ulrich, 2003).

Table 2 addresses the relationship between HR competencies and HR roles. Two hypotheses (H1 & H2) are developed. These hypothesis were analyzed by using Spearman's rho correlation testing.

Table 2: Relationship of HR Competencies and HR roles

Strategic

Change

SPEARMAN"S rho

Partner

Agent

Strategic Contribution

Correlation Coefficient

0.693**

0.740**

Sig. (2-tailed)

0.000

0.000

Business Knowledge

Correlation Coefficient

0.762**

0.720**

Sig. (2-tailed)

0.000

0.000

HR

Technology

Correlation Coefficient

0.640**

0.693**

Sig. (2-tailed)

0.000

0.000

**Correlation is significant at the 0.01 level (2-tailed).

*Correlation is significant at the 0.05 level (2-tailed).

Table 3 : Multiple regression analysis of HR Competencies on HR Roles (Strategic Partner &

Change Agent)

Dependent Variable

 

R

Adjusted

 

 

Collinearity

(HR Roles)

R

Square

R Square

F

Sig

Statistics

Strategic Partner

0.826

0.682

0.671

60.787

0.000

 

Change Agent

0.833

0.694

0.683

64.167

0.000

 

VIF range for predictors (Independent variables)

 

 

1.992 - 2.063

Predictors (Business related Competencies) : Strategic Contribution,Business knowledge, HR technology

H1 : HR competencies are expected to be positively related to HR role as Strategic Partner

As shown in Table 2, business-related competencies (strategic contribution, business knowledge and HR technology) have significant correlation with the strategic partner role. The strength of correlation is moderate between competencies of strategic contribution and role of strategic partner with Spearmen's rho value at 0.693 (p<0.01). The strength of correlation is also moderate between competencies of HR technology and role of strategic partner with Spearmen's rho value at 0.640 (p<0.01). However, there is a strong correlation between business knowledge and strategic partner with Spearmen's rho value of 0.762 (p<0.01). With the above result, this hypothesis (H1) is accepted.

Further analysis by using multiple regression is shown in Table 3. R value of 0.826 is obtained. This means there is a strong correlation among the independent and independent variables. The adjusted R square of 0.671 indicates that 67% of the variance can be predicted from the independent variables. The probability (p) value obtained is below 0.05 with the F value of 60.787. This concludes that the independent variables reliably predict the dependent variable. Base on the VIF value (<10) shown in Table 3, the issue of multicollinearity was resolved. In practice, VIF>10 would indicate a multicollinearity problem (Luchters & Chakrabarty, 2006; Hair et. al, 1998).

This result supports Pietersen's and Engelbrecht's (2005) study about strategic partnership role of HR Managers in South African organizations. Positive relationship was found between business related competencies and strategic partnership role among the HR managers. HR technology is an important competency in providing faster services in the application of HR practices. HR professionals can have access to the latest HR technology that can help them to ease their traditional administrative work.

H2 : HR competencies are expected to be positively related to HR role as Change agent

As shown in Table 2, HR competencies (strategic contribution, business knowledge and HR technology) have significant correlation with change agent role. The strength of correlation is strong between competencies of strategic contribution and role of change agent with Spearmen's rho value at 0.740(p<0.01). There is also a strong correlation between competency of business knowledge and change agent role with Spearmen's rho value of 0.720 (p<0.01). The strength of correlation is moderate between competencies of HR technology on role of change agent with Spearmen's rho value at 0.693 (p<0.01). With the above result, this hypothesis (H2) is accepted.

Further analysis by using multiple regression is shown in Table 3. R value of 0.833 is obtained. This means there is a strong correlation among the independent and independent variables. The adjusted R square of 0.683 indicates that 68% of the variance can be predicted from the independent variables. The probability (p) value obtained is below 0.05 with the F value of 64.167. This concludes that the independent variables reliably predict the dependent variable.

Baird and Meshoulam (1988) write that as an organization grows, its needs change and that by understanding how an organization changes, senior management and HR professionals can understand how HRM must change. Further, Baird and Meshoulam (1988) assert that human resource management effectiveness depends on its fit with the organization's stage of development and that, as the organization grows, HRM practices and procedures must initiate changes to meet those needs. Business-related competencies refer to amount of business skills and experience that staff members have outside their functional specialty that should determine HR roles and especially facilitate changes within the organization that fit the ever changing competitive environment. This result also support finding by Panayotopoulou & Papalexandris (2004) stressing that change agent role is related to competencies such as system analysis, organization change skills, consultation and facilitation.

6. Implication for Practice

Based on these empirical findings, this study has provided insights concerning the HR competencies and roles of a HR professional in the Malaysian manufacturing companies. HR professionals need to be proactive and flexible in their mind set. As a HR leader, they should not think that they play only a supportive role but also that their contributions can affect an organization performance. Competency such as culture management, market driven connectivity, strategic decision making, rapid adaptability, value-chain knowledge and HR technological know-how are lacking and are among the weakest abilities of a HR professionals in the Malaysian manufacturing sector.

Friedman (2007) argues that, due to the globalisation process, many organisations choose mergers and acquisitions as their growth strategy, and that human resource management plays a key role in ensuring strategic fit across borders. This further reinforces the contention that HR leaders will need to possess business-related competencies before they can be considered strategic partners. It will be an uphill struggle for HR professionals to deliver strategically without these competencies.

HR leaders need to be proactive with respect to their involvement in operations matters. This will enable them to understand more fully the operational issues and assist line managers by executing those relevant HR strategies that will improve the efficiency of the operation. HR leaders must continue to acquire knowledge of the firm's business, such as the key business disciplines, an understanding of the internal and external customers, knowledge of the competitors, the products, the technology and sources of competitive advantage.

As organisation come to understand the importance of HR technology and conduct comprehensive research into the possible investment in HR software that will best suit the organization's needs. All HR professionals must not only be competent in using HR systems but must also be capable of measuring the effectiveness of HR systems and practices. One significant finding in this study is that the competency of HR technology is significantly related to the strategic partner and change agent roles. This significantly diverges from the aforementioned hypotheses 3 and 4 that predict the competency of HR technology as related to administrative and employee champion roles. This suggests that HR technology is a competency that is closely linked with business-related competencies. As we have discussed earlier, this is quite understandable, since HR technology should assist in reducing administrative tasks for its professionals, and thus enable them to spend more time in strategy planning with the rest of the management team.

Furthermore, the latest HRIS is able to provide management with the valuable and current information needed for strategy planning (e.g. turnover trends, recruiting and hiring statistics, employee compensation and benefit costs and trends, employee demographic changes, etc.). However, additional systems and their procedures should be in place to safeguard information from being lost or accessed by unauthorized personnel. HR leaders, in consultation with other managers, should have exclusive authority over who will be allowed access to the HR information technology and to what degree (Brooks, 2009).

7. Implication for Research

The findings of this exploratory study are revealing, though simply indicative as they arise from a small sample of 89 HR professionals employed in manufacturing companies in the southern state in Malaysia. Therefore, the findings cannot be generalized to reflect all HR professionals in Malaysia. The number of respondents does not fully represent the thousands of HR managers employed by manufacturers in Malaysia. Further exploration is certainly needed to determine the extent to which these outcomes might reflect the respective job roles and competencies of HR professionals in different countries and different segments of the industry.

Further research in this area might include non-HR managers. Information from CEOs of a company for example could be obtained base upon their perceptions of the HR competencies of their HR manager. This information would be vital, especially when taking into account the gap in the perceptions of both HR managers and their CEOs. This type of research would help HR professional to look more perceptively into the possible expectations from their CEOs concerning their role as HR leaders.

7. Conclusion

The findings of this research show that HR leaders needed business related human resource competencies to become strategic partners in their organizations. The findings of this research show that HR professionals who lack of certain competencies also serves as a barrier to them becoming a well-integrated strategic partner. It is clearly seen in this study that business related HR competencies (strategic contribution, business knowledge and HR technology) are significantly related to strategic partner and change agent role. Therefore, HR leaders need to equip themselves with proper skills to enable them the play critical roles such as strategic partner and change agent in this modern era.