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Integration between human resource management and businesses strategy is amongst the most important demands that are put forward by modern day organisations. It is generally acknowledged that the development and deployment of corporate strategy with cooperation from human resource strategy is a difficult preposition. Some go even further by saying that its organisations’ human resource strategy that gives the ‘competitive advantage’. Marchington and Wilkinson (2008) argue that Human Resource Management is now often seen as the major factor differentiating between successful and unsuccessful organisations, more important than technology or finance in achieving competitive advantage. In UK the shift of industry from manufacturing to service has made it even more significant as most of the staff is in face-to-face contact with the customers, hence emphasizing the importance of human capital in routine operation of the organisation. Human resource strategy, particularly in last two decades has emerged as a corner stone strategy that has much of positive correlation with performance of the work force. In this paper, I will examine the linkage between the human resource strategy and how it helps performance in context of flexibility and innovation.
The relationship between strategic goals and objectives with Human resource is emerged in late twentieth century and is called Strategic Human Resource Management (SHRM). Strategic Human Resource Management may be defined as linking of HRM with strategic goals and objectives in order to improve organization performance and developing organizational culture that foster innovation and flexibility. SHRM involves developing and planning HR policies to achieve organizational goals and objectives. Association of HR system with the strategic goals and objectives of the organization has help organization to achieve required performance.
Innovation, by default, is a process by which an idea or invention is translated into a good or service or service for which people will pay. It involves deliberate application of information, imagination and initiative in delivering greater or different value. A business innovation applies to other things than its product only. It includes branding, customer satisfaction, employees’ satisfaction, costs, etc. is a type of organizational adoption that improves the effectiveness of organizational response to the changes in the internal and external environment. It is an idea to improve process, product, and service and develop management practices, strategies and new products. In the present competitive environment, it is very difficult for the organizations to keep their market share without constant innovation. In today’s business continuous development in innovation is the key strategy for the bright future of the organizations. HRM practices and policies improve the organization’s capacity to adopt innovation. HRM system and human capital are important organizational characteristics that enhance level of innovation.
HRM and Organizational Performance
Different studies show that HRM strategies contribute to organizational performance. Strategic management will act as a trigger to implementation of HRM strategy and these strategies will impact organizational performance. Most of the previous research has been reported positive link between Human Resource Management and organizational performance. According to Delaney and Huselid (1996), HRM strategies affect organizational performance through their impact on employee’s ability, skills and motivation.
Some studies emphasized the impact of some HRM policies separately such as training, compensation and performance management systems. McDonald and Smith (1995), reported that HRM policies impact positively on the performance of the organization. It is measured by the investment in HR planning, such as in employee development, hiring, labour and productivity. Later studies have a common idea that HR strategies improve the organization and employee performance due to the complementary relationship between these strategies.
The relationship between business strategy and human resource strategy
The relationship between business strategy and human resource strategy refers to the integration of factors and actors involved. In other words, what is relevant for human resource management is very much relevant for business and vice versa. Organisations differ according to their structure and the model of human resource management it uses but the linkage between two is of core importance. This issue has received a great deal of importance in last two decades, both in practice and literature. This is why often it is insisted that it is going to be always a cutting edge advantage for an organisation whether or not they have a human resource expert member in boards of directors.
The balance of debate keeps shifting as to whether or not a well-run and effectively managed (human resource perspective) organisation is likely to be high performing and financially successful corporate unit. Taking it on individual perspective, there is another important question that whether a good employer is likely to be a successful employer as far corporate side of business is concerned. Many maintain the notion, ‘organisations are only as good as their staff’ and other call people as the ‘most important asset’ for the business. Barney and Wright (1998) argue that a well trained and well-managed work force is instrumental in gaining competitive advantage.
Linkage between Human Resource Strategy and the overall Performance of Organisation
To further emphasize on the importance of a linkage between human resource strategy and the overall performance of organisation, following tabular format is used for the purpose of understanding.
Recruitment and Selection
Training and Development
Enhanced organizational performance
Performance appraisal and Reward strategies
Job design, Communication
Opportunity to participate
Career progression, Job security, Terms and condition and matters related to Employee relations.
HRM can play a significant role in organization performance. An organization may achieve its goals and objectives by adopting HRM practices. They introduced a new contribution of HRM to an organizations financial performance. The process perspective of HRM which is anchored in both resources based and institutional view of organization, it focuses on organizations past experience, social norms and current culture to organize its HR to execute market strategies (www.rphrm.curtin.edu.au).
HRM Strategies develop the conditions to achieve Strategic Goals and Objectives of the Organizations
HRM strategies develop the conditions to achieve strategic goals and objectives of the organizations by influencing employee behaviour. Bowen and Ostroff (2004), differentiate the features of the HRM system that will contribute the organizational performance. These features are content and process. Content refers to individual policies to achieve particular organizational objectives, such as promotion. Process refers to the design of the HRM system that allows employees to create desired response.
Delery and Doty (1996), differentiate three modes of theories in strategic HRM. These modes are universalistic, the contingent and the configurationally. Universalistic mode linked to best HRM policies and high performance work strategies. There is a linear relationship between HRM strategies and performance of the organization. The best HRM strategies can be successful and applied universally in all type of organizations. The best way to measure the performance of the organization is the measure of profit, sales and its shares in the market. Pfeiffer (1994), argued that to achieve high profit and productivity, the strategies of HRM like training, incentive pay, job security, promotion and skill development will be used.
Relationship between Dependent and Independent Variables
Contingency mode describes the link between dependent and independent variables. The relationship between these variable differ according to the age and size of the organization, unionization, technology and the location. Contingency arguments view potentially complex interaction between HRM variables and performance indicators. According to study of MacDuffie’s (1995), cofigurational view is represent in automobile industry, where the principle of inquiry configuration themselves as an ideal type. Arthur,s (1994), says that control and commitment HRM systems are based on the idea that closer an organizational HRM strategies resemble the correct prototypical system, the greater the performance gains. The correct HRM system forms a best strategy approach. A correct commitment HRM system represents by employee benefits, social activities, training, individual bonus, skill development, high wages and incentive payments. Arthur’s control and commitment system is used in USA steel mills, where the organizations have higher productivity score. This system has a positive effect on employee satisfaction.
Organizational Culture and HRM
Organizational culture is defined as a set of assumptions developed by a group of people to handle the problems of external adoption and internal integration. It is important to understand the implication of culture within the organization. Culture gives an organization a unique identity that distinguishes it from other organizations. All the organizations have its own unique values, perspective and standards which are known as its organizational culture. Organizational culture gives direction to the employees in the achievement of organizational goals and objectives. Organization culture is developed by the top management. Managers of the organizations introduced rules. These rules include employee’s behaviour, and the way of work to achieve organizational goals and objectives. Organizational culture usually remain stable but it can be changed and develop according to the organizational demands.
Wallach (1983), identified three types of corporate cultures:-
An Innovative culture is existing and active. It provides a workplace full of risks and challenges.
Bureaucratic culture considered as hierarchical. Work is systematic and organized in this culture. It is not attractive for ambitious and creative people. Employees are using different sources of knowledge for the development of new products.
A supportive culture is trusted, relationship oriented and collaborative. Supportive culture provides free environment and workplace. Employees in this culture are friendly and helpful to others.
HR practices have an important role in managing human resource and to enhance employees’ ability which develop a supportive organizational culture to achieve better outcomes. Many of previous studies showed that HRM have a positive effect on the culture and performance of the organization.
According to the studies of Huselid (1995), HRM practices had a greater effect on organizational outcomes when applied as coherent, than the sum of the individual effects from each practice separately. Delaney and Huselid (1996), described that the HRM practices are divided into two categories, employee’s ambition and employee’s abilities. The ability to learn and apply the knowledge and motivation incentive was to determine the organizations capability.
Organization future capabilities are strongly influenced by its knowledge. An organization with motivated and capable employees will not be effective in using its current abilities if it is not successful in building a supportive culture. DeLong and Fahey (2000), says that culture is the critical factor that influence knowledge creation. High tech organizations differ from manufacturing organizations with regard to their people management practices.
Organizations with effective HRM tends to link HRM with overall strategy in the organization. Organizations with effective HRM practices add all the strategies in the reinforcing or changing corporate culture. It is the responsibility of HRM to build stronger corporate culture that connects all the employees with managerial values. A strong organizational culture will be able to adopt changes according to future challenges in the environment due to flexibility. IBM faced these challenges and respond to the market changes from main frames to personalized computers. A strong corporate culture is given preference to a weak one in long run.
Innovation is defined as a new idea applied to improving a product, service or process, the development of new products, organization, process, management practices and strategies. Innovation is an important means of survival in the face of the dynamic nature of competitive environment. Cunha and Verhallen (1998), says that innovation is a form of organizational adoption that has been derived from some external forces such as globalization, technology development and buyer needs. Innovation is supported by an organizational culture.
Innovation includes new services rather than notation of the high technology. George and et al (2001), described that technological innovation becomes essential in responding to quick changes in high technology organizations. “Innovation deals with the new knowledge such as collecting information and turning it into new products or services”(www.rphrm.curtin.edu.au). Afuah (1998), says that innovation implies both organizational and economic changes. Innovation refers to using new knowledge and technology for the development of new product and services to customers. It is helpful to maintaining organizations profits and market share.
Administrative Innovation and Technical Innovation
Innovation has two features administrative innovation and technical innovation. Administrative innovation may or may not effect technical innovation. It related to administrative process and organizational structure, where as technical innovation deals with the development of new products or improving the existing services, process or product. Innovation is of two types, production innovation and process innovation. Production innovations deal with the production of new products and services to meet the needs of the market or customer. Process innovations are related to the elements introduced into an organization’s operations.
Organizational Culture and Innovation
Organizational cultures foster the innovation in an organization. According to the study of Nemeth (1997), innovation may require a culture that is very different and dramatically opposed to that which encourages loyalty, appropriate attitude and behaviour. A strong culture emphasized loyalty, uniformity and adherence to organization expectations would be advantages in the conditions of good management and creative leadership ideas. Flexibility and openness are useful for stimulating creative ideas. The organizations that attempt to foster innovation recognize the importance of being maverick. Organizational culture will lead to more organization innovation.
HRM and Innovation
HRM can play an important role to innovation through its processes. Huselid (1995), demonstrate that organizations that bundle HRM practices achieve superior performance. For organizations to remain innovative must become a way of life. Sustained innovation required stability and change. Ito (1995), finds that the development of new product or services a result of the practice to form teams and staff them with the personnel. Gupta and Singhal (1993), they found that the effective HRM can make an organization more creative and innovative. The success of the organization lies in the development of intellectual capital and new knowledge. Developing manager’s knowledge to understand how technology can change the organizational structure and product lifecycle. Organizations cannot achieve competitive advantage by using organic behaviour management without employee competencies. Management for creativity and innovation include the ability to constitute effective work group that represents a diversity of skills and made up of individual who trust communicate well with each other. HRM practices are related to organizations innovation.
Examples of Innovation and Flexibility
Swipe- in/Bio-metrics Attendance System
It was manual system of attendance in all the organization. But now- a-days mostly organizations has adopted the swipe-in or Bio-metrics system to making sure the attendance.
Lie detectors are also using in the appointment of executive recruitment.
Psycho-Numeric Test for Recruitment
Mostly organizations are using the Psycho-Numeric test for the recruitment.
E-Recruitment system is also a new innovation for the recruitment of the employees.
Assessment Centres are also a new thing in the process of recruitment.
The paternity leave was only for mothers up to one year but now it is six month for the fathers too.
Parents can take now up to three weeks parental leave for any reason related with child.
Before 1980-90, there was no concept of part-time work. Every employee has to work six days a week, twelve hours a day shift. But now labour Party has changed this rule into five days a week and eight hours a day shift and also give the permission of part-time.
Minimum Wage Rate
In past there was no concept of minimum wage rate but now there is minimum wage rate, i.e. £5.80 p/h.
Maximum Hours Per Week
Now there is no restriction of hours, every employee can do as much as hours they want to do.
Time for Further Studies
Now every employee has the right to take two years study leave if he has one year service.
Foregoing discussion in preview, the importance of human resource management cannot be undermined despite the size of the organisation. A critical review of most of the available literature reveals an ongoing tussle for claiming the core spot between human resources components and corporate factors. This discussion is like who comes first, chicken or the egg; nonetheless both are essentially indispensible. But the fact remains that if any organisation carries the true essence of moving forward in today’s unforgiveable competitive world, it necessarily needs to have the fatal tool of competitive advantage in its portfolio. And with the overhauling of labour market as well as rapidly changing organisational orientations between late 80s and 2010, there is no corporate survival than to resort to innovation, flexibility and well above average human resource practices. Having said that all, another extremely important factor is not be looked over, i.e. smooth gel between the corporate goals of the organisation and the human resource strategy. And a rigorous process of continuous innovation within this relation is that keeps any one organisation ahead of the crowd.
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