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The term human resource management has been used for the last ten to fifteen years however before that, the field was known as personnel management. According to Hall.R (1992) he made no differentiation between personnel management and HRM and saw that the latter as a modern expanded version of traditional personnel management due to technological change in the work environment and a shift in societal values. However Hackman, J R and Oldham, G R (1986) explained the differences between personnel management and HRM as to personnel management is considered as workforce-centred while HRM as resource-centred. Guest (1987) conception of HRM is not as an alternative to personnel management but as a particular form of personnel management which stressed the strategic issues of employee commitment, flexibility, quality and integration. Ian Beardwell & Len Holden (2001) defined HRM as a strategic and coherent approach to the management of organization's most valued assets - the employees who individually and collectively contribute to the achievement of the objectives of the business. In additional to that (Hall, D T (1984) viewed HRM as involving all management decisions that affect the relationship between the organization and its employees, moreover Jackson, S.E & Schuler (2003) considered HRM as a distinctive approach to employment management which seek to obtain competitive advantage through the deployment of a highly committed and skilled workforce.
This essay will critically evaluate the role human resource plays taking into consideration the changes in external environment factors in additional to that the essay analyse the HR practices which will help organizations gain sustainable competitive advantages through critical discussion and relevant examples will be given and finally conclusion and recommendations will be made.
Roles of HRM
For the past ten years organizations have more importance on human resource practitioners in additional to that HR is been considered as a value added source within organizations. Furthermore, according to (Ulrich, 1997) human resource department has been seen and viewed as major source for gaining competitive advantage against competitors in the market.
Understanding the Role of HR with the impact of external environment factors
According to John Bratton & Jeff Gold (2007), in the current business environment, organizations need to be constantly evaluating their internal and external environment for challenges and opportunities to remain competitive and to sustain growth. Changes within the society in Political, economic, social, and even psychological changes create significant impact on organizations. However there are many factors which are driving changes in organizations today like globalization, restructuring of organizations, the ever changing workforce mobility balancing the family work issues
(Diagram 1) external factors affecting HR roles
Source (Cyr, D.J. (1995)
Organization /human resource management
Acquisition of Employees role
According Laurie J. Mullins (2007),In an economy of increasing globalization and the struggle to create sustainable competitive advantages, organizations are continuously evaluating their strategies to ensure that they have the expertise needed to help achieve the mission of the organization However the economic challenges due to the consequences of the 9/11 terrorist attacks on the United States and credit crunch which started 2007 all over the world which continuously affects organizations on recruitment and selection strategies. Nevertheless, Julie Beardwell and Tim Claydon (2007) define selection as a "process of collecting and evaluating information about an individual in order to extend an offer of employment." On the other hand according to Guest, D E, Conway, N, Briner, R and Dickman, M (1996) they mentioned ways of measuring (cost per hire) meaning the importance of considering cost of acquiring employees he also added that in current business environment there rules and regulation which protects employees from unfair treatment by organization during recruitment and selection process, therefore HR plays big role in order to make sure the organization get the right people for available posts fairly without discrimination of any kind. (Guilford, J P (1967)
Mc Donald's corporation employ people from different backgrounds and from different parts of the world as to comply with rules and regulations of the government and avoiding discrimination of any kind in its recruitment strategy as can be seen below.
McDonald's recruitment structure. Source (www.mcdonalds.com)
Acquisition of new employees
Determining demand vs. supply of labor role
According to Laurie J Mullins (2002), HR plays a role the whole process developing practices that can improve employees performance and the process includes determining the number of employees needed for the organization to perform at is optimum, however since the 9/11 terrorists attacks and the credit crunch many organizations have been forced to reduce massive number of employees so as to cope with the struggling economy. The main challenge for HR is to make decisions on number of employees needed to be recruited or reduced to cope with the demand of products in the market without making loss for the organization.
Quantity. Source (Charman.A, 1999)
(In diagram3)According to (Charman. A, 1999) HR make plans on demand versus supply of labor needed by organization in order to meet the required output or quantity of products needed in the market however it is important for companies to make sure they maximize profit and cut down costs of labor.
Virgin Media is a good example as it plans to cut down about 2200 jobs by 2012 which is 15%of its total employees however according to chief executive (Neil Berkett) the company plans are due to HR forecast on the number of employees needed at this difficult time of recession and the changing customer needs in the market. (www.bbcnews/business)
HR role in supporting organization strategy or corporate strategy
According Michael, (2001) there have been change in the human resource role over the last ten years as HR functions were viewed as not that important for the organizations in additional they were subjected to merely as to administrative function however in nowadays economy the HR practices are considered very important by business partners and HR is given vital role through inclusion of HR leader in strategic business planning which involves on decisions and planning on how the organization will compete its rivals.
The questions regarding, what to produce? Where to produce? For whom to produce and how many to make (quantity of the products) are part of the organization planning process. However according to Michael Armstrong Forthcoming( 2010) he defined business strategy as the process by which organization mission and objectives are set as well as the process of which organization exploits its resources to achieve objectives , therefore HR is playing a big role in developing strategies in current business environment which is complex and dynamic the main aim here is to assess the talent pool in order to if there is appropriate expertise needed to accomplish the business strategies of the organization
According to Peter Boxall & John Purcell (2003), integrating HRM with the business strategy enables human resource to support and implement strategic plan to achieve competitive advantage for the organization by maximizing human capital and increasing labour efficiency which in turn can reduce cost and increase productivity and finally maximizing profit for the organization.
Goldman Sachs 2010 has won the second position for best employer to work for; however the vice chairman of Gold Sachs MR. Michael Sherwood said that the secret to success was due to good work done by HR in supporting the corporate strategy in every possible way and that the company could not have won without the role performed by HR in supporting the corporate strategy. (http://www2.goldmansachs.com)
Training and Development role
According to Becker, Huselid.M, &Ulrich.D (2001), they defined training and development as systematic approach of developing employees skills in order to increase efficiency of employees in performing their tasks however according to resent figures provided by (The United Kingdom Society for Training & Development) estimates that UK organizations are spending more than 10billion annually on employee training and development the main reason for this is that companies must integrate technology to companies strategies however for it has been proved that companies which provide training and development for its employees are winning the battle against competitors for having better skilled workforce and efficient labour which meet the demand of the customers and most importantly creates good reputation for the firm in the eyes of the public.
According to the manager of Morrison branch in Stoke Newington (MR. Terry Joseph) said that due to the training HR provided at his branch make the branch best seller among Morrison stores in 2008 since the employees have more skills and knowledge in performing their tasks however he mention few advantages of training as seen below.
Advantages of training
Increase in the employee's attitude towards their work.
The employees acquire knowledge and expertise in an area that would enable him/her to perform more effectively on the job.
Increase in the employee's performance.
Self-confidence. Training helps to improve the self-confidence of an employee. It enables him to approach and perform his job with enthusiasm.
Higher Earnings. Trained employees can perform better and thereby by earning more employees become more efficient.
Safety. Training helps an employee to use various safety devices. He can handle the machines safely and becomes less prone to accidents which can save organizations from legal actions.
Nando's is another good example of companies which provide better training to its employees as it won the national training awards in the UK 2009 in five of its schemes which are
New restaurant opening training
Working in management teams( team building)
Nando's induction training
Buddies system(buddies are staff who help to train new staff)
The company offers training programs to their employees and their suppliers of car parts so as to increase efficiency and meet the quality standards expected by customers.
HR Role in Organization Change and Development
According to Griffiths, D. and Williams, L. (1999), the impact of Global economic changes, customer changing needs migrants workforce, HR has the role in enabling the organization to adapt to the external and internal issues in which firm is currently facing and also issues that firm may face in the future. The pace of recent changes in technological development and economic trends like credit crunch makes change an inevitable feature of organizational life, however the competency expected form the human resource professionals therefore the ability to plan and implement the necessary changes in the organization for the purpose of improving performance depends upon the HR professionals .
Process of change
According to Gupta, A. and Govindarajan, V. (2002), there are many processes that can be used to undertake change some of the models include Kotler's eight-step strategy for change management which comprise of eight steps
Establish a sense ofÂ urgency: creating sense of agency in organization for change
Create the guidingÂ coalition: building strong leadership for change
Develop aÂ visionÂ and strategy: developing clear vision for change
CommunicateÂ the change vision: communicate the change to organization
EmpowerÂ employees for broad-based action: empowerment of employees
GenerateÂ short-term wins: creating reward for employees
ConsolidateÂ gains and produce more change: this is the time to change all activities that don't fit with change
AnchorÂ new approaches in theÂ culture
Harley and Davison Company
New technology in production: Using the Japanese production methods as a blueprint, Harley and Davidson HRM team instituted what they termed as the productivity triad to reduce costly inventory and increase consistency and quality. The new approach had three components (i) Employee involvement, (ii) use of just-in-time (JIT) inventory practices and (iii) statistical operator control (SOC) techniques however according to (Nolan and Kotha, 2007) These changes in the company encouraged workers to contribute in the decision-making process where it was essential participate in quality formed circles and were made directly accountable for improving motorcycle quality.
HR played big role in Ducati Company which had to change as the organization evolved, in 1990 after the company's IPO was released, the company started to transform itself from an informal organization to a formal one. They emphasized individual and organizational learning at all levels through its leadership Institute Program, it also worked on simplifying its structure through the creation of teams and well defined roles. For example, Ducati depends on teams to produce and support the product. The company also made changes to worker job descriptions and production process and eliminated jobs that did not add value to their products.
HR role in Organizational Behaviour & Theory
According to Michael Armstrong (2009) defined organization behaviour as actual study of how people feel, what people think and do within organizations in additional to that (Daft, 2001) added that the current economic conditions have led to increase in organizations turbulence and that has made it difficult for predicting the behaviour of organizations in different situations and good example is many people have lost their jobs and restricting of many organization due to credit crunch and terrorism. Today's economic conditions has led organizational behaviour and theory to be one of HR core roles and part of responsibility in which HR has to understand the needs of employees in additional in relation to the policies it makes and how any given policy or practice may affect the behaviours of the employees.
HR department in Argos stores have realised the importance of knowing organizational behaviour and have put strategy in place which is mainly to do providing seminars within the organization and enable people to learn for and be ready for any restructuring or any future changes. Michael Armstrong (2009)
Human resource practices
According to Guest, D E and Peccei, R (1994), in job analysis the main practice is to describe the nature of the job in relation to human requirements like experience needed to perform the task and skills required. In the end of job analysis there is job description which is entirely to do with the duties and activities involved in performing the specific task by the employees however, employees, managers depend on job description to get information sine the job description has great influence on job design
For companies like Apple job analysis is important to their efficiency in production and maintaining their quality standards and HR department always make sure the employees know exactly their duties and responsibility.
This is another practice of HR which is to do with recruitment and selection of workforce for the organization staffing includes Recruiting which is to do with attracting skilled and qualified candidates for filling vacancies and then selecting the most qualified applicants for hiring from among those attracted to the organization. HR have to develop methods that can be used by managers to select required for the given jobs. (Guest, D E and Horwood, R (1981)
Companies like Amazon and Starbucks, they develop budget to hire fulltime employees on annual basis and include certain amount of fund in that budget to hire part time staff throughout the year to handle the flow of the business (Guest, D E and Horwood, R (1981)
At Microsoft staffing is taken very seriously and according to the head of great managers at Microsoft (Gill Crowther) everything that HR is doing is geared to creating a good environment to attract the best candidates however in Microsoft they believes people are more important than other assets of the organization.(bbcnews.com)
According to Hall, R (1996), this is another practice of HR where its first step is to help newly recruited employees to adjust to their new jobs and also adjust to organization; it is a way to show new employees their new jobs aspects including their working hours and company rules and expectations. (Beatty, R.W. & Schneider, C E. (1997)
4Print limited: the printing company based in greater London in UK has good reputation for providing better orientation time to newly recruited employees by giving employees full information on what is expected of them regarding their duties, company culture, pay rate and working hours. Mr. Steve (the manager) said that through orientation practice his company is able to perform better than competitors since the employees are better equipped with information about their work so can perform their work efficiently.
According to D E, Michie, J, Sheehan, M and Conway, N (2000), This function monitors employee performance to ensure that it is at acceptable levels in additional to that the performance appraisal process involves evaluating individual's job performance and accountability nevertheless performance appraisal gives feedback to employees as a guide to future behaviours. Performance appraisal provides basis for pay and also disciplinary actions which might be taken against employees and it is necessary for performance improvements. D E, Michie, J, Sheehan, M and Conway, N (2000) D E, Michie, J, Sheehan, M and Conway, N (2000)
This company had a problem as an appraisal system was introduced and they called it employee evaluation system to weed out old workers. It affected 18,000 Ford salaried workers around the world in different grades and it was discriminated. This suit attracts diversity which caused race, gender and age discrimination. (www.bbcnews.com)
According to (D.Fombrun, N Tichy and M.A Devenna, (1998) Career development has developed as a result of the desire of many employees to grow in their jobs and to advance in their career. Career planning activities include assessing an individual employee's potential for growth and advancement in the organisation
Boston Consulting Group (BCG) they provide structure to ensure success and flexibility to accommodate the needs of employees by providing training to support employees and enable them to follow whatever path they choose in their careers; however the company operates in more than 65 countries around the world which gives more exposure for its employees who want to face different challenges in performing tasks in different countries around the world.
ARM ltd(Architecture for digital world limited), the company believes that the best people are the solution for innovation therefore career development has been given priority in order to stretch employees skills and help the company to compete strongly against competitors. The company provides variety of on the job and formal training opportunities which aim at developing employees; however these are some examples of learning resources available for to employees. (www.arm.com)
Higher education assistance
Team development sessions.
(Guest, D E, Michie, J, Sheehan, M and Metochi, M (2000b)
According to Dennis Nickson (2007), labour relations is interactions between organization and trade unions who represent employees in negotiating and discussing issues regarding employees wages, working conditions and other employees rights in their employment contracts.HR practice here is more to do with negotiating with this trade unions and resolving disputes and grievances for the betterment of both employees and organization, (Guzzo, R Aand Noonan, K A (1994)
British Airways and union
In the case of British Airways the argument way not that strong and was not acceptable, that has led to series of strikes action by the employees and this development had cost British Airway to lose millions of pound.
According to (Guion, R M (1993),this practice is concerned with recording employees information like forms of applications, personal history and references, health history and most important employment history, Other things to be recorded includes earnings and hours of work, absences, turnover. In today's working environment employees and organizations demands more in terms of their personnel records therefore that makes very important practice of HR. (Cyr, D.J. 1995)
Marks & Spencer have good reputation for being the able to have good records of its employees which enable the company to have good understanding of its employees and this enables them to allocate jobs better. (www.marksandspencer.com)
HR as source of competitive advantage
Michael Porter says ''that competitive strategy aims to establish a profitable and sustainable position against the forces that determine industrial competition" he added company can gain competitive advantage through three strategies .Haley, J (1999)
Cost Leadership: is a competitive strategy where the enterprises aim to become the low-cost leader in an industry. For any organisation to achieve low cost strategy it must able to achieve the follows: have access to cheap resource like labour, capital, employees; economic of scale; effective and efficient production plant; more sophisticated operations management techniques e.g. Just-in time (JIT)
HR practices to achieve cost leadership
Most common ways to cut HRM costs is to employ technology to replace some of the more expensive HR professional-delivered services (i.e., e-learning vs. in class training)
Low turnover of employees in order to have better customer retention (recruiting, selection, and training costs of a new employee)
Competence-knowledge, skills, and abilities an employee has that the job requires
Motivation-is the employee willing to exert the necessary effort to perform the job well
Work-related attitudes-is the employee satisfied with their job, committed to the organization, and act as a good corporate citizen
Toyota use HRM practices to increase the efficiency of production and thereby lower the cost. People express airline is a similar example of, a cost/efficient thrust.
Differentiation. This is another competitive strategy. In a differentiation strategy, a firm seeks to be unique in its industry along dimensions that are widely valued by buyers. Dennis Nickson (2007)
Hr practices for differentiation
Management of HR is less susceptible to imitation therefore competitive advantage achieved through HRM practices is likely to be more sustainable:
Competitors rarely have access to a firm's HRM practices
Even when practices are visible, their impact may not be as favorable by competitors due to interrelated system (i.e., incentive pay system may only work when used in conjunction with selection practices that favor hiring risk takers.
Mercedes Benz emphasises reliability and quality however Mercedes Benz firm can charge premium price
In the current economic conditions it is important to consider external factors when HR roles and practices are done, however organizations with good practices of HR can gain more advantages compared to its competitors as we have seen organizations like nandos who have won the investor in people prize just because of their good behaviours towards developing employees skills and the way they actually provide their employees with adequate skills which intern organizations can get more profits through increase of employees efficient and productivity.HR roles like acquisition of employees, determining demand and supply of workforce, the role they play in change of organization are all proven to be critical for the organization survival in today's economic conditions. In additional to that, most of the companies today have realised that in order to make more profit and be able to compete in the market there is a need to put more investment in people rather than machines because people are the main asset of organization, a good example is companies like Toyota who have actually put in place strategies for knowledge management within the organization so as to enable employees to share their knowledge and also share other people knowledge in order for them to gain competence in performing their tasks efficiently and this strategy is in the hands of HR department of Toyota company. Nevertheless other companies like Nissan have gone even further in recognising the importance of HR role in the organization as the company strategies must align with HR strategies.
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Terry(manager)Morrison Supermarkets Plc Supermarkets49Â Stamford Hill
Steve( manager) 4Print finishers ltd Unit 6, Northgate Industrial Park, Collier Row Rd, Romford, Essex RM5 2BG