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Human Resource Management, in simple, is a way of management that links people-related activities to the strategy of a business or organization, which at the same time satisfies individual needs and wants of employees. Over the years, Human Resource management went through lots of changes in its functions, roles, objectives, etc and, in the present day, it has reached a milestone from being just an administrative and operational management (personal management) to a strategic contributor (SHRM).
The purpose of this report is to critically analyze the importance for HR management to transform from being primarily administrative and operational to becoming a more strategic contributor.
The objectives of this report are to,
Explain What is Personal Management and what is Human Resource Management
Identify the factors which influenced the change
Explain The importance of shifting from Personal Management to SHRM
Present real world examples to prove the importance of the change
This report will be focusing on the secondary research materials such as Human resource books, business articles, online journals, professional web pages to provide explanations and real world examples for the reader, to support the argument.
Personnel Human Resource Management
Traditional HRM or Personnel HRM can be defined as "handling, directing, and controlling of individual employees rather than of employee as a group. It deals with individual relationships, including employees problems with management with employees as non-organized groups. It covers the acquisition andâ€¦." (Perfecto S. Sison,2009,p17)
Basically personnel HRM is considered as a traditional, routine, maintenance-oriented, administrative function which doesn't involve the higher level managers of the organization, and, maneuver at the operational level of an organization, performing tasks such as dealing with pay sheets, complying with employment law, and handling similar functions, etc. This mainly focuses on the individual person rather than the employees as whole and tries to satisfy the employees using wages, bonuses, compensations, simplified jobs, etc and to ultimately result in achieving organizational success.
As mentioned above, the functions of personnel HRM can be broadly classified as employment, development, compensation and employee relations, which involve only the lower level management of an organization, making it a separate function from the main management of the organization.
Strategic Human Resource Management
Strategic HRM focuses on aligning all the HR functions of an organization with the business strategy that the organization is currently based on. "SHRM is generally perceived as a distinctive approach to managing people which seeks to achieve competitive advantage through the strategic development of a highly committed and capable workforce (Appleby & Mavin (2000) s555).
SHRM is about managing the human capital of an organization in such a way as to achieve some type of competitive edge. Having not only a committed workforce, but also having a workforce that is highly trained for the job that must be performed achieves the competitive edge. Moving in this direction is where human resources become SHRM.
The starting point for SHRM, unlike the traditional HRM which starts from the people, starts from the organization's requirements and needs about having a suiatable workforce. Also SHRM involves not only the operational level managers, it involves higher level managers such as HR managers and it directly incorporates with the organization's strategy by formulating, implementing and evaluating company's strategies through human resource activities which may involve recruiting, selecting, rewarding and training company personnel.
The Below diagram shows how Human Resource Strategy matches the Organization strategy.
Managing human resources: personnel management in transition/ Â By Stephen Bach/4th edition
Blackwell bublishin, 2005
The above diagram suggests that modern HRM is not a separated function as it was in past, and clearly shows that it is interconnected with the strategy, culture, current situation, financial resources of the organization.
SHRM is focused on the contributions that the HR strategies could make to enhance organizational effectiveness, and how these strategic contributions are achieved and it involves designing and executing a set of internally constant policies and procedures to ensure that an organization's human capital contributes to the core business objectives and strategies.
Contrasting Personnel Management with Strategic HRM
Personnel management, from name itself suggests that, it is all about managing and developing the people and the skills employed. On the other hand, SHRM is focused on developing employee knowledge, abilities, talents, aptitudes, creative abilities, etc.
Personnel management is a more reactive way of managing HR because it only includes administrative tasks that are both routine and traditional only providing a response to demands and apprehends as they are presented. Where as SHRM is more proactive, involving continuous development of HR functions and policies for the purposes of improving a suitable workforce for the company, in present and for future needs.
Personnel management is often regarded as an independent function which typically the sole responsibility of the personnel department of an organization, where as SHRM is an integrated function which often involves all the managers of an organization in some manner to develop the skill sets and abilities of different employees in different departments to achieve a main goal of the entire organization.
Personnel Management creates high ambiguity in achieving goals and taking decisions as it's a separate function from the core management where as SHRM delivers less ambiguity as it is in line with the organization strategy and integrated with other functions of an organization.
Personnel management motivates employees through increased salaries, bonuses, compensations, simplified jobs etc, where as in SHRM, the motivation is gained through work groups, effective strategies for meeting challenges, and job creativity.
Transition from Traditional HR to SHRM
In the modern business world, the key for a successful business is to integrate all the functions of a business to make sure all departments and functions of the business flows in the same direction. To achieve that competency, the traditional HR managing system had to be transformed into a more integrated, top-management-involved, strategy oriented function, known as SHRM. Competition, Globalization, technological advancement, demographic factors are the most possible factors which influenced the change.
"When a firm is implementing a value creating strategy not simultaneously being implemented by any current or potential competitors, then it can be said the firm has a
competitive advantage" (Managing human resources: personnel management in transition/Â By Stephen Bach) SHRM system capabilities can contribute to sustainable competitive advantage because they 1) can help exploit opportunities and neutralize threats in a firm's environment, (2) are difficult to develop and therefore rare in the competitive environment, (3) are very difficult to imitate, and (4) cannot be easily displaced by strategically significant substitutes. Delta Air Lines, Southwest Air lines, Walmart are good examples for businesses which climbed to the top of the ladder using the competitive advantage.
Changing the Mind Set
Businesses have to completely change their mind set in the process of making personnel management into a more strategic partner. Personnel management's strong focus on administrative tasks and the inability to directly measure its impact on the outcome was the major down fall of personnel management, limiting its contribution to the business strategy. Therefore, Strategic HRM needed a completely different mind set, which focuses mainly on transformation using change management instead of focusing on administrative and operational activities.
If the business strategy of the organization is to spread the business in different geographic areas or in different cultural backgrounds, the business should use, not personnel management but SHRM to match the business strategy. Using the personnel management will disregard the fact that the employee should culturally match the job, should be equipped with appropriate language skills, match the required gender and the religion, to suit the area that he has to work, and it will only facilitate to achieve the HR strategies like recruiting cheaper people, having basic qualifications etc. This has a negative impact on the business as it cannot effectively serve their customers, so the business has to use SHRM in order to align the HR strategies with business strategies, to consecutively match the business that they are doing.
"IBM in Australia and New Zealand is made up of many different people from many different cultures and backgrounds. The common thread between us is our commitment to IBM's success in the marketplace and IBM's long-standing values and belief in inclusion" http://www-07.ibm.com/au/diversity/cultural_awareness_and_acceptance.html
Impact of Globalization
In order to grow and prosper many companies are seeking business opportunities in global market. This has affected the HRM management system as well. So globalization is the main component that would affect to the shift of THRM to SHRM. It is the integration of business activities across the geographical and organizational boundaries.
Coca Cola Company has 92,400 associates around the world live and work in the markets we serve -- more than 86 percent of them outside the U.S. In this geographically diverse environment, employees learn from each market and share those learning quickly. As a result, Coca Cola Company culture is ever more collaborative. From beverage concept and development to merchandising, our associates are sharing ideas across departments and markets in new ways. Consequently, Coca Cola Company associates are increasingly enthusiastic about their work and inspired to turn plans into action.
As the rapid change of technology, the companies have to change their human resource management system into more strategic approach. The strategic HRM along with technology; facilitates employees to improve their work life balance, creativity and productivity.
For example Motorola is extending human capabilities by providing integrated wireless communication and embedded electronic solutions for the individual, the work-team, the vehicle, and the home. Motorola is committed to providing technology that will increase employee productivity attract and retain key talent and help employees balance their professional and personal lives. Source; http://www.bc.edu/centers/cwf/research/highlights.html)
The recruitment goes high-tech in Vietnam; the service is an extension of the Labor Department's website (www.vieclamhanoi.net), where employees can access job information. It is said to be the Department's solution to ineffective and formulaic job fairs in Vietnam. The new service will make it faster and easier for employers and job seekers to connect.
As a start, the new online site has employment details from over 1,000 foreign and local companies in Hanoi, and will soon expand to 1,400. Within the first week of its launch, employers had connected with and hired nearly 1,300 job seekers through the service.
Current Role of SHRM
The business world today uses the SHRM methods and benefits thorough it very effectively. Some businesses focus on HR strategy more than the business strategy sometimes, and in some occasions the HR strategy becomes the business strategy as well.
Microsoft is a good example for the HR strategy to become the core business strategy as well. "A lot of what we do with the employee value proposition is just win in the marketplace. People want to know they're with a winning teamâ€¦. I tell Lisa still that in some senses our No. 1 HR strategy is our business strategy. When we're succeeding and winning and doing great stuff, success breeds success." Business week
The following diagram indicates how the Australian Government's Department of Education, Science and Training has executed their HR strategies to be align with the key organizational strategies. This resulted a positive outcome of the department's people management strategies in creating a motivated and engaged workforce and, through this, achieved a strong contribution to the delivery of business outcomes.
"An emphasis on strong leadership is a key strategic element for creating an environment of respect, support and development for all people in the department. In this way, the department has built and maintained a creative and engaged workforce able to deliver the government's growing and diverse education, science and training agenda."
During the recession back in 2008, Pepsi came up with a business strategy to cut their cost, and the HR strategy matched the business strategy by laying off employees. According to Pepsi Bottling Group's chairman and chief executive officer Eric Foss, Pepsi Bottling Group Inc is planned to slash about 3,150 jobs across US, Canada Europe and Mexico as part of its restructuring plan. This is expected to result in pre-tax savings of up to $160 million. "These moves will allow our business to better deal with the challenging macroeconomic conditions that currently exist, " http://www.newsweek.com/id/121095
Coca-Cola has proved that tailoring career development to suit high-potential employees can dramatically increase internal promotions and thereby save the company huge recruitment costs which was a major objective of the finance division to reduce the overall cost.
Personnel HRM is considered as a traditional, routine, administrative function which doesn't involve the strategic level of the organization, and, creates high ambiguity, tends to be more reactive and works as a separate unit apart from the organization.
strategic human resource management is a function which is focused on aligning the HR strategy with the overall business strategy to achieve organizational success and, is considered as a more proactive, integrated, and less ambiguous way of managing HR.
Factors such as competition, globalization, economy, demographic factors, improving technology caused the human resource management to change from Personnel management to Strategic HRM
Microsoft, IBM, Motorola, South West Airlines, Delta Air lines, Toyota are few examples for organizations who achieved business success through implementing SHRM in their organizations.
By critically analyzing all the factors in this report, it can be concluded that it was exceptionally important for the businesses to change their way of managing human resources from traditional HRM to Strategic HRM, in order to face the external factors effectively and lead their business into the top of the ladder.