The functions contained in Human Resources

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Recent researches show that the HR function continues to accept and adjust to the role of strategic partner. It is also evident from the research that an emerging challenge may be the management of the range of roles expected of the HR professional. While maintaining a strategic presence, for example, HR still needs to attend to traditional employee advocacy roles and act as the steward of the social contract. The issue of role diversity will become more prominent as Australia enters a period when organisations are dealing with major changes in the industrial relations environment. The increased devolution of the management of the employer-employee relationship to the level of the firm intensifies the focus on the HR professional's role as a key negotiator in the employer-employee relationship, a role that needs to be performed while maintaining strength and credibility as a strategic business partner. Ulrich adopts a position to resolve the dilemma by making the case that employee champions who understand the needs of employees and ensure that those needs are met will improve overall employee commitment, competence and therefore their contribution to business. Later he argues that resolution of the potential tension requires that 'both sides trust the HR professional to achieve a balance between the needs of these potentially competing stakeholders'. The emerging complexity of the IR environment in Australia, however, suggests that for the HR professional this may be more of a balancing challenge than has previously been the case. Furthermore, HR's responsibility to ensure that an equitable balance is maintained between the different stakeholders may become more difficult in cases where the assumption of common goals is not evident.

Contents 2

Introduction 3

Role of the HR department 4

HR and Organisational Strategy 9

Strategic Change in HRM 11

HR Contribution to Organisational Performance 13

Conclusion 14

References 16

Introduction

The recognition of human resource management (HRM) as a key source of competitive advantage provides professionals working in the human resources (HR) function with elevated organisational status. The acknowledgement of HR however presents professionals working in the area with a number of role changes and new challenges. For example, the creation of more central strategic roles for the HR function brings with it the expectation that it is not enough for HR to simply partner top management, it has to drive business success. In Australia, significant changes to the industrial relations legislation have also brought attention to the HR role. The decentralised employer-employee relationship that promotes direct dealings between employers and employees at the workplace level has further intensified the focus on the HR professional as a key stakeholder in the successful management of the employer-employee relationship (see, for example, Research evidence about the effects of the 'Work Choices' Bill 2005).

These demands on HR are set against changing workforce demographics which include a shortfall in skilled labour worldwide and indications that more people are leaving the workforce than joining it. The need for HR to add real strategic value to the bottom-line, closely manage the employee-employer relationship and deal with a diminishing workforce presents a challenging environment for those working within the HR function. Indeed Meisinger (2005) contends that in reply to the expectations of HRM, successful HR professionals require increasingly complex technical skills and personal strengths including competence, curiosity, courage and a sense of caring for people. The linkage between HRM and firm performance has dominated much of the debate within the HRM literature since the mid-1990s. Despite research conducted within the 'best practices' paradigm to uncover a generic set of high-performance or high commitment work practices and 'best fit' studies that focus on aligning HRM strategies to organisational strategies and contextual conditions to create superior firm performance, there is no agreed conceptualisation of how this relationship between HRM and firm performance actually works.

Role of the HR department

The widely cited Ulrich (1997) typology is a useful starting point. The typology defines people and process aspects of HR roles, and operational and strategic activities. The largest part of the corporate HR department role is the 'administrative expert', which is process orientated with a day-to-day, operational focus, based on the management of the firm infrastructure. The role contrasts with the other process-orientated role, 'strategic partner', which is future-focused, based on the strategic management of people and aligning HRM strategy with business strategy. The operationally focused, people-orientated role of 'employee champion', in which HR is responsible for listening and responding to employees, contrasts with the people-orientated strategic role of 'change agent', which focuses on managing organisational transformation and change.

Linking HR roles with organisational performance, Ulrich's (1997) model suggests that all four roles should be carried out simultaneously to improve firm performance. However, this is a prescriptive model and there is currently a scarcity of empirical evidence of how these roles are carried out. In his framework, Ulrich (1997) sets out a vision of an unproblematic, collaborative partnership between line managers, senior executives and the HR department. Apluralist perspective of competing stakeholder groups, not all of whom are united behind the corporate aim of increased competitive advantage, is not considered.

The most recent surveys of HR professionals have reported an increased emphasis on the strategic partner role. However, the ideal of HR professionals redirecting their energy and effort towards aligning HRM strategy with business strategy, and consequently away from employees to resolve role conflict, should be questioned. Ulrich (1997) highlighted that HR professionals must be both strategic and operational, yet the potential role conflict this could engender was not addressed. Critchley (2004) reported 'role ambiguity' and 'role conflict' within the HR profession because of the competing demands made upon it by senior managers and employees. There is thus a certain amount of conflict inherent in developing a strong link to organisational strategy, taking a long-term perspective, while trying to maintain an internal consultant role for line managers focusing on the short-term, reactive issues. As a consequence of the adoption of increasingly strategic roles for HR, much responsibility for people-focused HRM - such as the employee champion and change agent roles - is being devolved to line management.

Existing empirical research suggests, however, that there are also significant barriers preventing these managers from doing this work effectively, including the need to deliver short-term business results, a lack of time and training, and a lack of incentives given to them for fulfilment of this additional work. The HR department and line management together thus have a crucial role to play in stimulating appropriate employee behaviour on behalf of the firm.

In the context of the resource-based view of the firm, high firm performance is related to achieving sustained competitive advantage through internal resources. This can only be achieved when the resources available are valuable, rare, imperfectly imitable and imperfectly substitutable - such as an organisation's human capital. Human capital refers to employees in terms of their skill, experience and knowledge which have economic value to firms. A firm chooses to invest in the recruitment or development of employees to achieve the desired level of skill and knowledge (Ulrich, Smallwood, 2005). These attributes are necessary for employee behaviour to be in line with the firm's goals, hence enhancing productivity. This human capital is, however, transferable: employees are free to move between firms, and their contribution depends on their willingness to perform. Sustained competitive advantage thus lies in employees themselves, not in HRM practices, as these do not meet the criteria of value, rarity, inimitability and no substitutability. Therefore, the HR department needs to go beyond designing effective HRM policies and practices to ensure that these practices are implemented appropriately and are accepted by employees in order to achieve the intended results.

The strategic and environmental perspective represents the relationship between HRM and organisational strategy as well as the political, economic and cultural forces which affect them. They have interactive relationships. The human resource perspective provides a simple framework to show what the relationship should be between selection, appraisal, rewards and training and the effect on performance.

Guest's (1987) model involves seven policies for achieving the four main HR outcomes. According to Guest, these outcomes will lead to desirable organisational results. In this context it is similar to the Harvard model, but has seven categories instead of Harvard's four (Figure 1).

Figure 1.Harvard model of HRM

Guest's seven categories are broadly the same as Harvard's categories. For example, where the Harvard model has human resource flow, Guest has manpower flow and recruitment, selection and socialisation; where the Harvard model has work systems; Guest calls these organisational and job design. Both models have reward systems. Guest has three additional categories, which are policy formulation and management of change; employee appraisal, training and development; and communication systems.

Figure 2.Guest's model of HRM

HR and Organisational Strategy

The shift away from personnel to HRM has meant a change both in the structuring of people management initiatives and in who takes responsibility for these activities. It is expected for example that greater care now be taken to ensure that HRM policy supports business strategy and that HRM policy areas complement each other. It is also expected that HRM becomes an organisation- wide responsibility, with greater commitment and involvement from all levels of management.

The underlying approach to the employer- employee relationship further supports the notion of goal alignment between various stakeholders in the organisation. For the HR professional the transition away from a primarily administrative personnel function to a more strategic focus has meant a redesign of the nature and extent of the HR role. Ulrich (1997) has argued that the HR professional still has to offer expertise as an administrator and employee champion as well as change agent and now strategic business partner. He makes the point however that while personnel may have dealt with these roles previously to a greater or lesser extent, within a HRM approach there is a much clearer focus on how each of these roles 'add value' to the business. One outcome of the role change for HR is that the function is now expected to assume a more prominent position at the senior decision-making level and take a more proactive role in developing the organisation's people as a source of competitive advantage.

There has been some evidence of an uptake of a more strategic HR decision-making role, but there is still some doubt about the extent of the transition. Some studies reported that senior HR managers had, at that time, internalised key features of a HRM approach and largely moved away from the personnel mindset (Cappelli, 2005).

More recently researchers have reported evidence of the growing implementation of a HRM approach but suggest that there is considerable variation across organisations. These authors describe perceptions of HR's contribution to strategic outcomes as 'moderate' to 'fair' with evidence of remnants of the view of HRM as an administrative function. There is a lack of consensus therefore on the extent to which HR has actually taken on strategic responsibilities and this raises questions about the strategic content of the HR role: specifically, the extent to which HR professionals prioritise strategic policy development and the involvement of HR managers in the senior decision-making process (Cascio, 2005).

Strategic Change in HRM

A common theme within the human resource management (HRM) literature in recent years has been the take-up of "new style" HRM practices designed to achieve high levels of employee performance, flexibility and commitment. Here, human resource (HR) practices are placed in a much more direct relationship with organisational policy making and performance issues than traditional approaches to personnel management.

Warwick model (Hendry and Pettigrew, 1992) of HRM consists of inner and outer context and it places more emphasis on strategy. It is based on the Harvard model, but concentrates more on strategy (Figure 3). For example, the Harvard model has HRM policy choices which consist of employee influence, human resource flow, reward systems, work systems, and the Warwick model has HRM context, which consists of human resource flows, work systems, reward systems and employee relations. Both are the same.

The Harvard model has business strategy in situational factors, while the Warwick model has business strategy content and the Harvard model has task-technology in the situational factors part. The Warwick model has task-technology in inner context.

Figure 3.Warwick model of HRM

HR Contribution to Organisational Performance

In addition to considering the strategic positioning of the HR function, recent research also discusses attempts to measure the contribution of HRM to company performance. A strategic approach to HRM measurement adopts a broad approach, including the development of systems to measure the efficiency, effectiveness and impact of HRM. Efficiency metrics focus on the cost of an HRM practice, such as the administrative cost per employee of a training program, to determine the return on investment (ROI). Effectiveness measures aim to provide an indication of the fit between HRM programs and the organisation's business strategy, and the third type of measure focuses on the real impact of HRM programs and practices on organisational performance, by measuring the value added to an organisation by an HRM practice.

It is important to note that there are numerous pitfalls of measurement for HRM, such as measuring items that are easily available, or adopting a short-term focus. A key issue, raised is that HR functions often collect data on the first of the three types of measurement identified above, efficiency, but not on the impact of programs and practices on the business. While efficiency measures can be useful, they reveal little about the value added by HRM practices; they focus only on the cost. These measures do not address issues such as service quality and the impact of HR services on organisational effectiveness. The second type of measurement, effectiveness metrics, typically includes measures of the strategic skills and core competencies in the workforce. They assess outcomes such as whether HRM programs and practices have the intended effect on people. For example, an organisation might use an employee survey to measure the degree to which employees are satisfied with a training program focused on improving customer service behaviours. Measuring employee satisfaction with HRM programs however does not reveal whether the programs have had an impact on organisational performance. Accordingly, such measures are useful but still have some limitations. The third set of measures tries to go beyond simply showing that HR has reduced its administration costs and improved the quality of the service by measuring the ability of the HR function to show an impact of their activities on the bottom-line. For example, impact measures endeavour to demonstrate a link between training programs and tangible effects on the organisation's competitive advantage, such as reduced defects, increased production speed and improved service quality and retention rates following training programs.

Lawler, Levenson and Boudreau (2004) have argued that it is the set of impact metrics that assist in developing the strategic role for the HR function. An impact focus in the measurement system benefits the HR function by enabling it to move from subjective and intuitive measures to objective measures, to elevate the HR function to an equal footing with other functions, and to provide a valid justification for resource allocation. Thus the research question associated with the fourth area of the research investigates the kinds of HR metrics that are being used in Australian organisations and focuses on the third type of metric as this area provides the HR function with the greatest strategic leverage.

Conclusion

Recent researches show that the HR function continues to accept and adjust to the role of strategic partner. It was found, however, that the shift to a more strategic position for HR involves further challenges that include the development of business breadth in the HR career base, the need for improved HR metrics and a broader commitment to attraction and retention initiatives.

HR professionals have to be competent, not only in their own field, but in the broader area of business and they have to also have the courage to do the right thing when they are under great pressure to comply with short-term initiatives that may be forwarded by other senior managers. It may be the personal attributes of HR professionals, therefore, rather than their position in senior decision-making alone that add real value. In the face of these complex expectations, it is encouraging that Australian HR professionals report positive reactions to the changes that have occurred within the HR function in the last ten years and remain optimistic about their capacity to deal with the shifting ground that HR occupies.

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