This report on Strategic Human Resource Management outlines its importance, purpose, its contribution to organizational effectiveness, a human resource management plan, indicators of performance of HR initiatives, their compliance with legal and regulatory frameworks, influence of corporate structure and corporate culture and lastly recommendations with case studies.
Strategic Human Resource Management is broadly speaking an amalgamation of Human Resource Management with the Strategy of an organization. Human Resource Management was an elevation of the Personnel Department that dealt only with recruitment and wages of employees to the management level. Lately the importance of human resource management as a key component of organizational strategy has been acknowledged and explored to benefit the short term and long term objectives of the organization.
This report highlights the importance, purpose, effectiveness and the means to monitor it. Lastly it outlines some measures to increase the effectiveness.
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Twenty one year old Walt Disney founded Walt Disney Company in Florida, USA in 1922. Now it has four theme parks, employs 50,000 people mostly in low paid service jobs, the highest number in any one site in the USA and attracts 30 million visitors every year. Besides, the company has film studio and cruise liners (Price, 2011).
Since the motto of Disney is to make customers happy it looks for positive attitudes in the promising applicants and then puts them through trainings after recruitment. It recruits from all over the world.
The HRM policy at Disney is still based on the three principles of its founding father:
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Hire people with best attitudes
Check them out for three months to see if they fit in their positions. If they do not then move them to another position rather than fire
Empower them so that they can surpass customer expectations and they keep coming. Employees are empowered even to meet monetary compensations when necessary even without referring to superiors (Johnson, 2011).
Human Resource Management Strategy
It was not until long ago when employees were regarded as an expendable resource. Personnel managers were given the job of recruiting employees and paying wages. They were not deemed fit to take part in strategic decisions made in boardroom by top managers. But things changed with the coming of the information and with that the knowledge age when brains of the employees came to be regarded as the most precious resource. Whereas even the top managers are preoccupied with short term productivity strategic management of human resource reaches far beyond to look at the long term objectives as well as cross department issues. The importance of the link between employee motivation and behaviour leading up to customer satisfaction and increase in shareholder dividend cannot be overstated (Morton 1999).
Modern CEOs who are concerned mainly with the political agenda of keeping shareholders happy and the organizational culture are focussing on the employees to that effect because it is their education, experience, training and skill that is inimitable and unique. Some of them regret that most board members are preoccupied only with the financial returns.
The pervasive downsizings of the 1990s taught organizations the need to take a long term perspectives of human resource management. With the dawn of the global recession companies started laying off employees at random to cut costs only to reemploy them as consultants. In the hustle and bustle High Potential (HiPo) employees too were left in the cold. They were quickly snapped up by competing companies with a sharper eye. The rounds of redundancies produced survivor guilt among the remaining employees that affected 70 per cent of them. Employees with high market appeal left in search of greener grass. Companies were reduced to deadwood with a core of underperforming anxious workforce. When economy recovers companies will have increased efficiency from less cost cuts. But efficiency reaches a plateau and then drops. Productivity is the result of improved process, technologies and workforce which have no limit. That is why it is imperative to retain HiPo workers. World's best companies like GE and GM keep changing job roles of employees to give them the taste of variety and earn their lifelong allegiance.
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Always on Time
Marked to Standard
The future of organizations points towards more strategic alliances where influencing, strategic and political skills of employees will have the most important value. There will be a higher trend towards outsourcing, contractors and flexible, part time workers. Companies at present will have to review their policies towards part timers whose commitment is not as deep as the full timers. Studies show that workers leave mostly for the 'turn off' attitudes of their managers. Organizations will have to learn to attract workers with support and direction.
Efficiency and productivity will no longer be enough to give companies the competitive edge. Innovation and creativity at all levels will be the key to survival in the least. Companies will have to contribute with the process of coming up with new products and services for which innovative and creative workers will have to be found and retained.
Globalization is pushing organizations to harness talent and knowledge. The power balance of employers and employees has taken a U turn. The really employable employees are beginning to dictate terms of employment. Present thinking stipulates that core competencies give a company competitive advantage - what it does best. But futurologists stress that with life span of knowledge shrinking with the rapid pace of technological breakthroughs core technical competencies will be replaced with cultural competencies. Companies should not only be satisfied with what it does best with present knowledge but acquire capability to create, innovate, adapt and change with fast moving customer preferences. Then it has to ask itself questions like how the competitive market will look like in terms of products, services and workforce five or ten years hence, what kind of human resource will be required to continually innovate new products and services and what kind of HR policies will be needed to nurture future workforce.
1.2 Purpose and Contribution of HRM to Organization Objectives
The purpose of human resource management is aptly defined by Ulrich and Lake (1990) who believe that for an organization HRM activities are a source for learning capabilities that help it capitalise on new opportunities. Broadly speaking it is through people or more specifically employees that an organization achieves success. Among many objectives HRM primarily aims at the following areas:
Organizational Effectiveness - HRM practices give organization core competencies that help it to gain a distinctive competitive edge in the market (Cappelli and Crocker-Hefter, 1996). Exhaustive research validates this assertion. Organizations practicing standard HRM practices show improved performance. Fundamentally standard HRM practices help foster the proper management and optimal use of human knowledge and talent and retention of employees which together increase organizational effectiveness. This in turn shapes Customer Retention Management (CRM) policies.
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Human Capital Management - Bontis et al, (1999) defines human capital as the combination of the education, trainings, experience and skills of employees. No other resource of an organization possesses these elements and it is these that create the impetus for continually learning, innovating and adapting for the sake of survival and growth in a dynamic market.
Knowledge Management - Scarborough et al. defines knowledge management as the process of capturing knowledge wherever it resides or creating it to enhance organizational learning.
Reward Management - Specific policies should be in place to reward employees in order to motivate them and earn their commitment.
Employee Relations - A congenial relationship should be created among the management, employees and unions.
Meeting Diverse Needs - Workers from diverse races, religions and cultures should be given equal opportunities.
Rhetoric and Reality - Sadly enough research shows that there still exists a big gap between rhetoric and reality. Reasons range from resource constraints and seemingly more important business priorities to lack of trust and resistance to change. Purcell et al. suggests that it is best to leave implementation to line managers.
Of the many objectives of a business the most obvious is making money at the end of the day. Financial performances in terms of profits are measured every quarter for the knowledge of the stakeholders, including lenders and shareholders. The viability of a business depends on its core competencies and competitive advantage. HRM policies that succeed in attracting the best talent available and retaining them win the day. Of course the talented recruits have to be given trainings to enable them to help achieve the company mission (IBM mission of making computers for businesses). The wages and other benefits, including a congenial working environment, have to be carefully traded off against company profits so that all the stakeholders are satisfied with their gains.
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Human Resource Planning
2.1 Business Factors that Underpin the Need to Plan Human Resources
Business factors comprise of internal and external factors. The most important internal factor is the core competency or whatever an organization does best like Toyota making cars. The human resource needs to be managed as regards selecting, recruiting, training on one hand and rewarding with wages and other benefits on the other hand to equip and retain them to build up the core competencies. External factors came to the fore with the rise of Japan and other emerging economies in the last twenty five years resulting in factory closures and layoffs. Reagonomics and Thatcherism led to free market and privatizations. All these external factors forced organizations to rethink human resource management policies.
2.2 Human Resource Requirements for a Specific Organization in a Specific Situation
Human resource requirements of Nokia, the world's longest reigning market leader in mobile phones, are worth looking at for lessons. A company created in 1967 Nokia revamped its strategies after upheavals in the mobile phone market in the nineties. The company, government and trade union collaborated for the reengineering.
At Nokia critical factors that lead to competitive advantage like high quality, productivity, creativity, innovation and social acceptance are first identified. Then the human resource elements that are required to produce these critical factors are identified. They are primarily motivation, commitment and job satisfaction. Lastly the HR practices that foster these are put into practice. At Nokia they are selective recruitment, exhaustive trainings, pay as per performance, career advancements and participation in decision making.
2.3 Human Resource Plan
2.3 Developing a Human Resource Plan for a Chosen Organization
An HRM plan is a document that sets out the programmes that will be taken up in the next few years in order to motivate employees to achieve the company mission.
Starbucks has been chosen here to give example of how it worked out its vision and objective.
Starbucks Mission, Vision and Objectives
Starbucks purchases and roasts whole coffee beans and sells coffee through its retail stores all over the world. Starbucks' vision is to be the world leader in serving the finest coffee and the most famous brand of a mug of coffee..
Developing A HRM Plan - A Step-by-Step Approach
The model for developing the HRM Plan is carried out through 5 steps. While these steps can apply to any department, the duration and complexity of each step varies from one department to another depending on the department's unique situation. The development of the HRM Plan can be facilitated either by an internal team or outside consultants. In either case, participation of top management and staff representatives is required to ensure the HRM Plan meets the needs of the department, is supported by both the management and staff, and can be implemented within the constraints of the department.
5 Steps in Developing a HRM Plan
1. Conduct a departmental strategic analysis: The results of this step are an understanding of the department's vision, mission, values; a strategic review of the department; and understanding of the challenges facing the department.
2. Identify strategic HR issues arising from the strategic analysis: Building on the results of step one, the outcome of this step is an analysis of the strategic HR issues facing the department.
3. Identify ongoing HR issues: In addition to the strategic HR issues identified in step two, the ongoing HR issues impacting the department's effectiveness must also be identified.
4. Prioritize the strategic and ongoing HR issues and determine actions: Once all the HR issues have been identified through steps two and three, they should be prioritized and key actions required in respect of each issue identified with input from the department's top management.
5. Draw up the HRM Plan: Once the department's top management has given their input into the HR priority issues and key actions to be taken in step four, the HRM Plan and its associated programmes are ready to be formulated.
There are three factors critical to the success of an HRM strategic plan:
The CEO underlines his commitment to the philosophy that people are the key to achieving the objectives of the organization
Linking the HRM programmes strategically to the mission, vision and objectives of the organization
Line Managers are authorised to own the HRM plan.
Most of change management strategies fail because they do not take full account of the impact of the changes on those people who are most affected by them.
Stakeholder analysis in steps:
Step 1.Identify stakeholders in Starbucks: Customers, suppliers, Buyers, Employees & Managers, Community, Government, and Media.
Step 2.Prioritise Stakeholder: Prioritize the stakeholders in Starbucks according to their involvement.
Step 3.Develop an engagement strategy: Starbucks brings together the commitments and individual duties through meetings, presentations, Group facilitation, Delegating, develop and share a change plan.
Step 4.Map their profile: Starbucks maps their profile according to their level of influence and level of interest.
Step 5.Optimise their support: Starbucks utilizes their resources in the best possible way.
Step 6.Monitor changes: Starbucks monitors changes as they come with demand of time.
Model for Developing the HRM Plan
The HRM Plan is built upon an understanding of the department's vision, mission, values, and strategic programmes and challenges. Developing the HRM Plan this way links the HRM programmes to business plans and helps prioritize HRM programmes according to business priorities.
The HRM Plan in Context both departments and the Civil Service Branch have a role to play in the development of HRM Plans.
Central Functions: To advise departments on the implementation of policies and on the development of their HRM Plans.
To develop the department's HRM Plan
Development of a human resource plan warrants a good deal of time and effort. But it pays dividends in terms of finding the right person for the right job at the right time. The plan once developed has to be reviewed annually to figure out how many more employees are needed and what additional skills have to be developed.
The process starts with reviewing and assessing the organization's need of employees followed by their job descriptions, recruiting and finally hiring. The job description and the employer's expectations from employees are contained in 'Employee Handbook'.
Firstly the recruitments of last year have to be reviewed; how many employees were recruited at what times and if any difficulties were encountered. These will help in the next year's planning.
The major problem that HR managers face is not having the qualified people at the right time. Short term needs for a year and long term needs for five to ten years if the production will be increased or decreased or if there is any expansion plan. The employee needs and the current workforce need to be matched.
The business owner himself has to assess his strengths and weaknesses as well and evaluate his business goals taking into account market conditions and succession planning inside the organization.
Needs of employees and current workforce can be matched by changing job descriptions, moving employees to different positions, succession or hiring new employees.
The next step is charting a job description for all employees from supervisory to entry level. This will detail the duties, skills and experience required and the salary and any training if required. Salary is the thorniest issue. Some companies initially offer a small salary with a promise to adjust it depending on how the employee works out. The best way is to fix a salary range. Experienced and capable applicants will aim for the top of the range. They would not bother to apply for an initial small salary.
Job descriptions must include benefits like housing, profit sharing and pension plans in amounts as the bright and the best candidates weigh them. An honest and accurate job description will prevent any future misunderstanding between the employer and the employee.
Employee handbook spells out the employer's expectation of the employee. However, the employee will also write his expectations of the job so that there is no communication gap between the understandings of each. It will also contain the regulatory requirements of both regarding such things as workplace safety, health and hygiene, insurance and pension plan.
Recruiting can be made by word of mouth, newspaper ad, recruiting agency or online. It is good to tell current employees of the recruitment. They may be knowing somebody suitable for the job and also they will feel a part of the operation. The cost and time of each method of recruitment has to be calculated. If 150 interviews have to be taken for a single job it is better to hire a recruiting agency that can screen candidates to a short list.
Three processes, interview, testing and reference, should precede hiring. Interview should not last for more than one hour. Questions, preferably open ended to allow the candidates to talk at length, should be set beforehand. The questions should centre around the candidate's skill, his knowledge of the job he has applied for and other qualifications like getting on with people, making decisions and taking on responsibilities.
Testing the candidate on the real job will help match his educational qualification and experience as stated in his resume with any additional training required. For example, an applicant for the job of a mechanic can be tested by disconnecting a part and asking him to identify the problem and correct it.
Finally before handing the appointment letter two work related and one personal reference should be checked.
2.4 How a Proper Human Resource Plan Contributes to Organizational Objectives
A good human resource plan contributes to increased market share, market value and profits. It also increases productivity and product quality resulting in customer satisfaction. With inflation and recession engulfing the whole world profits are being squeezed. Decreased profits are putting pressure on all the costs involved in production. A good human resource plan can help achieve higher output with the same or even less workforce. Increased demand of materials and consequently their spiralling costs are also putting pressure on companies to increase the productivity of workers. All these concerns added together have pushed a good human resource plan at the top of the agenda for strategic planning.
2.5 Human Resource Management Policies in Compliance with Legal and Regulatory Requirements
There are numerous regulations and laws concerning employment of which HR managers should be well abreast of and implement to avoid hefty fines and potential damage to company goodwill. For example there are laws regarding minimum wage and overtime payment, against discrimination on the basis of age, gender, sex, ethnicity while hiring and firing, right of employees to take up to twelve weeks of unpaid leave for medical or family reasons. There are also requirements for reporting and disclosing compensation and benefit packages.
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There should be an Employee Handbook articulating company policies and business methods. All the executives should be regularly briefed by the HR manager on the ramifications of legal and regulatory requirements. Periodic audits should be done on compliance and also on the frequent changes to the laws and regulations.
(Davis and Carnovali, 2010)
Reviewing Human Resource Management
3.1 Impact of Organizational Structure and Culture on Human Resource Management
Corporate structure and corporate culture along with mission and vision and business strategy constitutes internal factors which are under control of an organization.
Corporate structure or hierarchy determines how authorities are delegated and accountability established. It has a great influence on human resource management. For example the corporate structure will determine the grades in the hierarchy, how many employees will work under each manager and accordingly the recruitment policies and procedures will be formulated. After recruitment the compensation, training and promotion policies will have to be in line with the corporate structure.
Corporate culture embodies the tradition, beliefs, norms and shared values of an organization. Managers and staff wear blue pin stripe shirts in IBM. Technical personnel in NASA speak in jargons hardly intelligible to outsiders. Indeed the organizational culture shapes an organization's business and financial management as well. Entrants to job must be made aware of an organization's culture. Of late employees are being exposed to multi culture in order to equip them to work in the global environment by passing them through different technologies and geographic. They are also accorded an optimum work life balance for the continuity of a healthy life.
3.2 Monitoring of Human Resource Management by Performance Indicators
Benchmarking or comparing with the best in the industry is one of the approaches for monitoring HR performance. Benchmarking is a widely used tool for measuring performance and evaluating it with the best. World's most favourite airline uses benchmarking to measure its various activities, like for airport check in it benchmarks against Lufthansa, for minimum turnaround time it is KLM. The first step to proper benchmarking is the identification of those critical HR activities which are to be benchmarked. Then by comparison they can be calibrated and prioritised to meet the organizational objectives.
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Firstly cost and benefits of the common HR practices like recruitment. Trainings etc are analysed. Then the contribution of the bundle of HR practices towards innovation, quality products and services and low costs is ascertained. Finally an annual report is prepared linking various HR activities to organizational performance indicators like revenue, expenses and profits.
Staff turnover rate has to be measured and benchmarked to know the reason of turnover like poor selection, mismatch, lack of management support etc. Other important indicators are ratios of transfers to promotions, internal and external recruits, absenteeism and revenue per employee. HR activities which are not strategic to the subject organization or those which are comparable to the benchmarked organization need not be taken into account. If cost cutting and yet customer focus form the core strategy the rate of absenteeism is the HR factor to be considered. If the rate is say 4% over the last year and way above the benchmark measures should be taken to improve it. The key to identifying the HR elements to be benchmarked is to find out which workforce characteristics contribute most to creation of value at what costs, with what risks and over what time.
HRM at BA
4.1 HRM Improvements Recommended in the Spate of Continuing BA Crew Strikes
In November 2008 BA cut 1,700 jobs and asked three fourth of the cabin crew to accept a wage freeze for that year. The trade union rejected the offer even though BA pays its crew more than twice as much as its rivals. Therefore BA management thought that they have a right to impose the aforesaid changes. But the staff were not happy with the change in working conditions. BA management should have proposed alternative offers that suited the union but did not, thus causing the deadlock and adverse publicity in the media. BA also faced an enquiry from the government for having failed to handle its staff properly. It also lost £40 million in the process.
BA had experienced walkouts and strikes before also. But the management failed to wake up and prevent such acts by research and negotiation. It failed to undertake crisis management which entails introspection before, during and after a crisis.
BA can well use the PDCA (Plan, Do, Check, Act) cycle to plan a change, test it on a small scale, check the result, act if the result is fine, seek alternatives if not and repeat the cycle until a congenial collective bargaining is struck.
(Business Teacher, 2012)
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