Examining The Existing And Present Economic Situations


The main purpose of this essay is to examine how the existing or present economic situation which led to firms trying to beat or win each other in business has made the role of human resource management significant in achieving business success.

Armstrong (2003) sees the main role of human resource management in this present economic climate as being how to carefully devise a plan of action which will be used to achieve a goal, as well as the logical way through which business organisations can manage their employees so as to achieve business success. Therefore it is said that in this current economic climate, countries such as the United States, United Kingdom etc. are recovering from depression and inflation which led to loss of so many jobs, and increased competition in the recruitment process, thereby making it possible for human resource management functions to be more important in order to achieve business success. If HRM functions are not being implemented properly in this current economic climate, Ann observed during a lecture on the 11th day of march 2011 that in the face of this current economic climate, people will be leaving good jobs with better pay due to downsizing in different organisations and start taking up jobs with lesser pay because economic climate will detect salary/pay. McKenna and Beech (2008) explained that these human resource management functions include; recruitment which involves the proper advertisement of job so as to attract the proper or right applicants, then comes the selection of the best candidates among all the candidates that applied for the job, and proper training of the employee is said to add value to them and the work they do so as to bring about business organisation success and on the other hand, the employees will be rewarded accordingly for their contribution to the growth of the organisation.

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Armstrong (2003) further indicated that the main aim of human resource management is to gain business success in an organisation through the people employed in that business organisation. Ulrich and Brockbank (2005) argued that human resource management plays an important role in seeing that every business organisation achieves success through the proper implementation of its functions; already stated above, and by applying those functions with the necessary information technology system such as the internet. A typical example of this in my own opinion can be seen in a situation whereby internet system is being used to carry out recruitment and selection process in an organisation so as to reduce the cost incurred during recruitment and also select the proper candidate for a particular job. This will help in no small measure in bringing about business organisation success. Though in some developing countries like Nigeria some organisations may not have the technical capability to handle this type of recruitment and selection process and this will make those organisations to be slow in achieving business success.

Jackson and Schuler (1995) noted that in achieving business success in an organisation, there are some external environmental pressures that meditate against achieving business organisation success. Such external environmental pressures according to Jackson and Schuler (1995) maybe caused by political issues or pressure existing in that particular environment as well as legal and social issues or pressure existing in the area. Political pressure is said to relate to civil or government administration in that particular environment where the business is located. This may come in form of tax exemptions given to local manufacturers so as to encourage them and allow them to compete favourably in business with their counterpart from the developed world and this on the other hand will enable them retain their existing manpower or employees, as they will definitely remain in business due to the tax benefit granted to the company. Such can be seen in developing countries where I come from. Though on the other hand, this may discourage foreign organisations or companies from investing in such country thereby affecting the country's economic growth negatively. The legal environmental pressure include laws and regulations guiding the operation of business in that environment where the business is located, this may come in form of state or council environmental regulation or laws which may be in favour of the business organisation or sometimes affect the business negatively as the case may be. On the other hand, social environmental pressure relate to the interaction of people in the environment or the way in which people in group behave and interact with one another in the environment or society where the business is located. For example an uprising in political and social pressure can sometime cripple business activities in a country and thereby bringing to a stop the business and its success, such can be seen in a country like Libya as at the time of writing this essay, where many companies like British Petroleum (BP) have closed because of political instability in that country.

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Brewster et al (2005) argued that in most developed countries of the world such as United Kingdom, United states etc. human resource management will definitely be affected by political, legal, and social environmental pressure or factors either positively or negatively. This is due to the fact that every business organisation operates under the framework of the law in the environment where the business organisation is located. For example, in Libya for instance international companies such as British Petroleum (BP) is being affected by political and social unrest in that country, this has affected the operation of so many other companies in Libya and on the other hand reduced business success and government revenue. On the hand, Japanese car manufacturing companies in United Kingdom are all doing well and achieving business success due to the favourable political, social and legal environment they found their organisation. Jackson and Schuler (1995) also gave an example of the positive effect of external environmental pressure by stating that international Corporation have made business organisations to face some legal, political, and social pressure, for instance in some countries in Europe business organisations that come from the United States to establish their business or companies there are required to reserve some fund for staff or employee training and development so as to enable the employee or staff acquire the necessary skills needed for the success of the business organisation to be achieved.

Beardwell and Holden (2001) observed that before now some changes took place in the economic situation of the United Kingdom (UK) in relation to how people are being employed to work, in compliment to what is obtainable in the United States (US). This they said was due to the economic pressure existing at that period which resulted from increase in competition, recession, and emergence of new technology. This on the other hand created employment, increased employee training and development so as to enable them master the new technology, which will improve their skill and also enable the organisation achieve business success. Beardwell and Holden (2001) also explained that as at then in the US, government tried to change the old method of HR and this made it possible for organisations to develop a new method of employment that will be employer friendly/oriented. This policy helped in directing the method of recruitment and selection so as to employ the right people needed for the organisation to arrive at its business success. This method of employment will definitely lead to unemployment because very few people with the required skills will be employed by the organisation.

Hendry and Pettigrew (1990) argued that the restructuring of the economy saw a very fast decline in the former industries and a relative rise in the service sector as well as the new industries based on high technology products and services, many of which were said to be comparatively from the established patterns of what was sometimes referred to as the former industrial relations. Hendry and Pettigrew (1990) observed for example, in the United Kingdom, that these changes were seen as entrepreneurialism which was boosted by the Margaret Thatcher's government in the form of privatisation and anti-union legislation, in which Thatcher introduced laws/rules which the government used to fight labour unions. This was observed to make it possible for firms to introduce new labour practices and also changed the collective negotiation system being practiced before. This helped to reduce unemployment because it gave people the opportunity to be self-employed though it may reduce government revenue because the self-employed tend to declare low income tax.

McKenna and beach (2008) emphasized that at the beginning of the economic recession of the 1980's which changed the role of trade unions resulting to little or no strike action. This made it possible for organisations to be able to change their staff with ease. On the other hand, this was not only caused by unemployment and recession but also from the introduction of some new laws that reduced the power of trade unions by controlling strike action. In my own view, this will negatively affect business success because the employees will not be motivated to give their best.

McKenna and Beech (2008) also noted that the weakness in the power of trade unions is said to signal the need for less elaborate process in collective bargaining and conflict management, which also resulted in a faster way of negotiating settlement of wages. In addition to the foregoing, organisations were better positioned to make changes in work practices which resulted into an increase in productivity as well as a decrease in the number of people employed. Changes in the practice of HR were observed because of the large pool of available labour. A good example is the emphasis being switched from recruitment to selection, which led to the selection of the right people for the job so as to achieve business success and on other hand increase unemployment because not every applicant will be selected.

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It has been said by McKenna and Beech (2008) that the reduced volume of negotiations which is based on collective bargaining between labour unions and human resource specialists, including the reduction in time devoted to recruitment and selection, which helped to provide human resource management with the opportunities to manage employee layoff programmes and enter into negotiations so as to bring about low wage settlements, which in my opinion will not favour the employee because of the low wage they will be receiving and it will also discourage them from giving their best to the work they do.

Hunt (1992) considered the possibilities of the personnel management function changing in its emphasis by observing that during the 1980s the rise in human resource management started attracting the attention of personnel practitioners leading to a shift from the traditionally adversarial industrial relations of the 1970s towards achieving excellence in the organisation through a committed workforce. Hunt (1992) also argued that the reaction to individualism and unjustifiable greed of the 1980s made way for the spirit of consent and the value of teamwork which made core workers who are essential to the operation of the organisation to have high commitment in their job. Because they are expected to be flexible about the hours they work and to work above and beyond their job descriptions, this made wages to reflect the market rate rather than the rate determined by agreements with trade unions. Leading to increase in the number of part-time and fixed-term contract workers as a proportion of the total workforce, and there was a continuing preoccupation with the value of a strategic approach to human resource management as it relates to organisational success.

Hunt (1992) contend that changes observed in the developed countries in Europe had to be faced through improved working conditions, equitable remuneration for the employees, equal opportunities for all staff, ease of labour mobility, and union representation, access to information and workers' involvement in relation to knowledge management, as well as health and safety provisions for all employees. Therefore in this context, it is recognised that Europe provides a different socio-cultural and economic environment to that of the United States of America, where human resource management started and this could influence the type of human resource management being pursued by an organisation. Because without recognising these factors, an organisation may find it difficult to grow.

In the current economic climate, Hutchinson and Purcell (2003) observed that increased competition has really made the human resource management functions more important to the success of business than ever before. This they emphasized is due to the fact that human resource management now covers the activities of recruitment and employment which calls for the proper selection of those to be employed, manpower planning involving management of the available work force, employee training and management development resulting to coaching, training and guidance which add value to employees so as to support them on taking more responsibilities, organisational planning and development helps to achieve organisation effectiveness, wage and salary administration through management and monitoring reward in the organisation and also recognising employee contribution, health and safety benefits and services which helps to maintain work-life balance by building a good working relationship between the organisation and the employee, union management relations and personnel research which may result to outsourcing so as to obtain service from an outside supplier either to train its employees or work for the organisation. A closer look at these functions enables us to understand that there has been an increase on the functions given to the human resource manager unlike before, and if these functions or responsibilities are well implemented by the human resource manager there will be a tendency in which the success of the business organisation will definitely be arrived at and the business organisation will grow in all ramification. But in a situation where these functions are being neglected, business success may not be achieved and the business will suffer.

McKenna and Beech (2008) argued that in considering organisation of reasonable size, which implies a big organisation, it is possible to find a human resource management function just as one would expect to see in a finance or marketing function where specialisation of duties exist and the management team tries as much as possible to achieve organisational goal and or objective. While in the smaller organisation, the level of specialisation may not prevail because the human resource management function is being performed by the manager who handles human resource management matters. In my own understanding, the big organisation where specialisation exists will tend to achieve more business success.

According to McKenna and Beech (2008) human resource planning process is concerned with the function of matching organisational demand for quantity and quality of employees with the available supply. This demand they say is being derived from the current and forecast level of company operations, while the supply side is said to consist of human resources that is available both internally and externally. McKenna and Beech (2008) contend that the internal supply consists of the exiting workforce and its potential to contribute to business success, which has been a target for rationalisation in recent years. While the external supply they say resides in the population outside the organisation and it is influenced by demographic trends, developments in education as well as competitive forces in the labour market, for example they said is within the European Union (EU) where competition is common because every organisation want to achieve business success.

Foot and Hook (2005) observed that an organisation unmistakeably needs to be sure that they have the right staff so as to attain the needed level of competitiveness. These staff maybe employed by the organisation through their recruitment process by assessing their internal human resource supply. This according to them is said to be a process through which an organisation takes into account the number of its employees as well as their duties and responsibilities and their skills so as to enable the organisation compete favourably in order to achieve business success.

McKenna and Beech (2008) emphasise that prior to staff recruitment, job analysis is undertaken. This they said is a process whereby the work to be undertaken by an employee is closely examined which results in the preparation of a job description. Then a specification is produced about the attributes a suitable candidate will need so as to perform the job. McKenna and Hook (2008) implies that a variety of techniques such as the application form, interviews, tests and assessment centres are all available in selecting the best candidates from a pool of applications. They mentioned that a shortlist of applicants will be produced as a first step in the selection process which will then lead to training of the applicants, and it is concerned with establishing what type of training is required and to which applicant so as to add value to them and also achieve business success as they work for the organisation.

Armstrong (2003) in his book explained that human resource management functions will bring about an integrated approach towards the development of human resource strategies or plans which will enable an organisation to achieve its goals thereby leading to success in the organisation's business, but when the strategy is not properly implemented the business may collapse.

Organisation strategy according to Foot and Hook (2005) are said to function with those plans of action that an organisation makes so as to take care of future occurrences and these plans are targeted at answering the basic economic question of what to do as well as how to do it. Armstrong (2003) on the other hand sees strategic human resource management function as an approach used in making decisions on the intentions and plans of the organisation as it concerns the employment relationship as well as the organisation's recruitment, training, development, performance management, reward and employee relations strategies, policies and practices, which if not properly implemented will result in business failure.

Foot and Hook (2005) also emphasise that in order to ensure success in the business of any organisation, human resource management strategy must be incorporated in all other departments of an organisation such as finance department, sales department, marketing department etc. and they must work hand-in-hand with the human resource department in the aspect of recruitment, manpower development and training so as to achieve business success.

Strategic human resource management in the words of Hutchinson S. and Purcell J. (2003) functions by focusing on actions that differentiate the firm from its competitors. While on the other hand, Armstrong (2003) said that it develops a declaration of intent which defines the means to achieve ends, and it is concerned with the long term allocation of significant company resources as well as matching those resources and capabilities to the external environment. Strategy is therefore said to serve as a perspective on the way in which critical issues or success factors can be addressed, and this strategic decisions is aimed at making a major and long-term impact on the behaviour and success of the organisation.

According to Armstrong (2003), when considering strategic human resource management, it is said to be necessary to address the extent to which human resource strategic measures should take into account the interest of all the stakeholders in an organisation, employees in general, as well as the owners and management. Storeys (2007), observed that "soft strategic HRM" places more emphasize on how to manage people in terms of ensuring them employment security, training, development and work benefits etc. while "Hard Strategic HRM" on the other hand will consider the benefit to be derived by investing in human resources in the interest of the business achieving its business success. In this situation, a well-planned soft and hard strategic HRM will guarantee business success in the sense that organisational objectives/directions, its choice of employees and how they are managed will be considered (Legge, 2005).

Armstrong (2003) also emphasised that the rationale for strategic HRM is the perceived advantage of having an agreed as well as understood basis for developing approaches to people in the longer term. It has been suggested by Lengnick-Hall (1990) that underlying this rationale in a business is the concept of achieving competitive advantage through HRM which is the essence of competitive strategy. Therefore, it encompasses those capabilities, resources, relationships and decisions which allow an organisation to capitalize on opportunities in the marketplace and also avoid treats to its desired position (as cited by Armstrong, 2003)

Hamel and Prahalad (1998) implied that a firm can achieve competitive advantage if the firm develop its human resource by training them so that they can learn more work techniques which they will use in working for the firm so as to beat their competitors. Barney (1991) also contends that sustained competitive advantage stems from the acquisition and effective use of bundles of distinctive resources that competitors cannot imitate, for example, he pointed out that superior performance, productivity, flexibility, innovation, and the ability to deliver high levels of customer service cannot be easily imitated by competitors and therefore it will help an organisation achieve business success if it is being sustained over a long period. It is also said that one of the clear benefits that will arise from competitive advantage as a result of effective management of people is that such an advantage is hard to imitate by an organisation's competitors.

Armstrong (2003) also stated that an organisation's strategies, policies and practices are said to be a unique blend of processes, procedures, personalities, styles, capabilities and organisational culture. Therefore, one of the key competitive advantages of an organisation will be the ability to differentiate what the business supplies to its customers from those supplied by its competitors. Such differences can then be achieved by having human resource strategies which ensures that the firm has higher quality people than its competitors, then the unique intellectual capital possessed by the business will be developed and nurtured, a culture is also developed which encourages organisational learning and hence brings about success in business.

Armstrong (2003) emphasized that the aim of a resource-based approach to human resource management is to improve resource capability by achieving fit between resources and opportunities as well as obtaining added value from the effective deployment of resources. Armstrong (2003) also observed that in line with the intellectual capital theory used to analyse human resource management, the resource-based theory of human resource management emphasizes that investment in people adds to their value to the firm or organisation. Therefore when an organisation invests in its employees by training them for example, they tend to add value to the organisation by working to achieve business success for that particular organisation. Resource-based strategy, as Barney (1991) indicates, can develop strategic capability which its objective will be to have firms that will be better than their competitors. More so Boxall (2011) explained that it is by hiring and developing more talented staff and by extending their skills base that an organisation will achieve success in its business.

It has been observed that a resource-based strategy for human resource management is therefore concerned with the enhancement of the intellectual capital of the firm or organisation. Therefore, seeing a business firm in terms of what it is capable of doing may offer a more durable basis for strategy in human resource management than considering the needs which the business seeks to satisfy (Armstrong, 2003). In my opinion, a business can only achieve success if it has the strategic capabilities or plans to compete favourably with others in the same line of business.

Armstrong (2003) argued that a resource-capability approach will be concerned with the acquisition, development and retention of intellectual capital. Kamoche (2000) explained that the basis of this approach to HR strategic is the recognition of the "stock of know-how" in the organisation. He claimed that the resource-capability view of the firm is one that will develop and provide a single model for strategic HRM to function better. Schuler and Jackson (1995) also noted that in this situation, firms will try to gain competitive advantage by using human resources through development and training in order to add value to their employees so as to match the nature of the organisation's relationships with their customers and employees.

According to Armstrong (2003) the key feature of strategic human resource management function is the concept of fit or integration, which is also known as "matching model". Malik (2009) explained that this matching model helps to bring about strategic integration in an organisation, by combining human resource management strategic functions and organisation's strategy together and channelling them towards the same strategic direction in order to achieve business success when they are being implemented. Legge (2005) argued that organisation strategy and strategic human resource management sometimes does not seem to be appropriate to other's context. In my opinion, a good example can be seen in the downsizing exercise undertaken by some organisations, such as banks and other organisations in Nigeria, during the last economic meltdown or recession which is not in contrast with human resource management strategy and it discouraged employees thereby bringing about poor performance of such an organisation.

Bowen and Ostroff (2004) argued that it is clear when we consider both relational and transactional psychological contracts that merely having good human resource management policies is unlikely to be sufficient enough to motivate employees and derive organisational performance so as to achieve business success. Hence there is need to go beyond human resource management content and consider human resource management process.

Human resource management content is therefore observed by McKenna and Beech (2008) as those people oriented-policies and practices which have the purpose of meeting organisational objectives, for example, the strategic objectives of the organisation might relate to enhancing service provision to its customers, quality, profitability or efficiency of its services and/or goods.

However, in general terms Becker and Huselid (2000) have identified that the human resource management professionals are seen as "business partners" who share organisational goals and being part of the management decision-making team, human resource management services are provided to management efficiently and effectively, the competencies and knowledge of employees are central to how the company "adds value" for its customers, managers are focused on leadership and team-working is often prevalent, behaviours and outcomes are recognised and rewarded, individual and organisational goals are aligned, ideally the employer is seen as an "employer of choice" and hence can both get the best people and get the best out of people. These in general contribute to the achievement of strategic goals in human resource management and also guarantee business success in the organisation when they are effectively implemented.