From the past, people issue was not the main issue that concerned the organizations, economic development was the main concern. People often viewed as cost rather than assets. The role of HR functions generally played as administrator for the organizations rather than strategic partner. Most researchers' emphasized HR professionals must play a more strategic role to be able to align towards the organization's business strategies. It is HR professionals' responsibility that they could provide the best people, offer the best working environment for employees, and create effective performance appraisal system which could align to the organizations' strategies. HR involvement and Recruitment and selection will be critical for HR strategy align to business strategy.
Intense competition, both locally and internationally, caused by globalization has given new scope of human resource management. Terpstra (1996, p.16) indicates that companies downsize, "delayer" and try to boost productivity with fewer people who know more, do more, change more and interact more. Therefore, investing in the development of these valued resources make sense.
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Today, human resource management has revolved into an invasive approach to the management of employment in wide range of market economies. Only if the HRM policy is integrated with the strategic business planning and organizational culture, human resource is identified as a source of competitive advantage for the organization (Beer, Spector, Lawrence, Quinn, Mills, & Walton, 1985). Excellent human resource management involves recruiting the right employees that best fit with the organization needs, identify their core competencies and further provide necessary training and supervision to capitalize the resources.
A strategy is a course of action. Strategic human resource management formulates and executes HR systems that contribute to employee competencies and behaviours which are required by organization in order to achieve its strategic aims. Efficient human resource management is essential in maximizing overall quality of human capital throughout the organization, and set a benchmark against which today's HR practitioners can compare the structure, content, and efficiency and effectiveness of their system.
2.0 Literature Review
Unlike Personnel Management (PM), human resource management, which concerns with values, practices and policies, plays an essential role in an organization strategic planning and execution in order to make a decisive impact on the organisation's overall performance. Therefore, prior to proceed with discussion on steps that HR function should manage and develop people in a way that would support the strategic aims of the organisation, it is vital to understand several issues such as strategy, business policy and strategic human resource management.Â
Human resource management is defined as a process in coordinating human resources in a way that should help the company in meeting their vision, mission and goals in the most efficient and effective way. HR practitioners therefore have to ensure that each HR activities performed would add value to the organization.
Most of the HRM models affirm that the human resources are valuable assets which award organizations with competitive advantage (Legge, 1995). By contrast, according to Storey (1992), the difficult version of HRM emphasizes the calculative, quantitative and strategic management aspects of managing the workforce in a balanced way.
Human resource strategies refer to the particular human resource management continuous action, which requires constant revision, taken by companies to achieve its aims. Alignment between human resource strategies with business aims involve four essential steps, which are business strategy formulation, identification of required employees behaviour in achieving organizational intended outcome in helping organization to achieve its strategic goals, strategic formulation of human resource strategic policies in shaping of intended behaviours and lastly, development of performance evaluation measurement.
Recognition of employees as the source of organization competitive advantage has results in an emergence of the notion known as strategic human resource management (Snell, Youndt and Wright, 1996). In addition, Schuler (1989) defined strategic human resource management as "All those activities affecting the actions of individuals in their efforts to put together and put into action the strategic needs of business" which further supported by Wright and Macmahan (1992) by describing SHRM as "The prototype of planned human resource deployments and activities anticipated to facilitate the forms to attain its goals".
The SHRM is therefore implying the strategic partnership of company's strategies formulation and implementation of these strategies by executing HR activities such as recruitment, selection, training and rewarding personnel so that they are horizontally fitting each other, thus maximising the favourable employee behavioural outcomes mentioned earlier (Becker & Huselid, 1998).
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Bamberger & Fiegenbaum (1996, as cited in Bamberger & Phiullips, 1991; Dyer & Holder, 1988 and Lengnick-Hall & Lengnick-Hall, 1988) have noted a potential 'reciprocal influence' between corporate strategy and HRM strategy. This has further supported by Bechet and Walker (1993, p. 6) who recognized the correlation between business and HRM strategies, signifying the complication of the situation rather than a simple rank ordering of managerial activities.
Procedure, which best accommodate broader strategic aims, need to be invented and implemented (Becker & Huselid, 1998). Brockbank (1999) has then proposed a model in which that contributes to the greatest competitive advantage, proposing that HRM can progress from an 'operationally reactive' function, through 'operationally proactive' and 'strategically reactive' to a 'strategically proactive' function.
One of the major debates in the notion of HRM is whether HRM is universally superior to traditional, bureaucratic practices or if, it is an employment system which should be dependent upon each organizational strategy and needs (Huselid, 1995). Attainment of competitive strategy is to differentiate from competitors which place the contingency model in a more superior position in regards with the "best practice" concept. This contingency model, which can only be sustained by adopting a rational, top down approach to the whole process of managing consistent with the 'design school' of strategic management scholarship (Linstead et al.., 2004), is, however, conflicting with the authoritarian advocacy of a single 'best practice' SHRM (Legge, 1995).
The emphasis on "best practices" and "benchmarking", which regards as the conventional view of HRM (Becker and Huselid, 1998), is supported by Purcell (2001) by indicating HRM as a set of unified practices as a particular managerial approach to labour management. This was further supported by Pfeffer (1994) by emphasizing the significance of setting a set of standardized HRM practices as the benchmark which should be desired by all the organization. This was however argued by Guest, Michie, Conway and Sheehan (2003) as a support for internal fit rather than external.
The statement of "internal fit" has been criticized in overlooking the complexity in people management (Boxer and Purcell, 2003). The main problems is that little attention paid on issues other than the four major areas; selection, training, appraisal and pay. For instance, issues such as employees' relation and other collective issues have been ignored which made it irrelevant in certain organization where string and active union representation exist.
One major problem with the application of "best practice" is concerned on the interest of stakeholders. Deciding whose interest to be prioritized is an issue in shaping the "best practice" as different stakeholders may have different goals and interest. For instance, "best practice" for an organization during recession is to downsize their company, reducing cost by dismissing large amount of employees. Interest of shareholders has been served but not employees that need to be laid off due to the organization decision.
Practitioners faced the two versions of SHRM are confused on whether HRM is about a "best" standardized activities which should be pursued by every organizations or is about human capital approach to people management.
In short, conventional SHRM literature presents two models of SHRM which are impossible to reconcile. Boxall and Purcell (2003) have then recognized the possibility in resolving the paradox between best practice and best fit by including the variable of an industry's stage of development. However, this proposition has yet to be widely accepted.
3.0 HRM and Strategic Integration within Business Policy
As mentioned earlier, SHRM is categorized into two main categories, "best practice", which includes Harvard Model that supports "one preferred and superior set of HR policy choices'' (Storey and Sisson, 1993, p. 53), as well as "best fit" where organizational could choose their preferred HRM approach base on their business conditions, namely, stage in the business life cycle, strategy-structure configuration and the business strategy being pursued.
As according to Legge (2005), integration of HRM and business policy is very much dependant on the perspective on strategy and strategy-making one adopt. Several approaches have been recommended in integrating business strategy with HRM policies where normative model has been identified as the most popular approach. It suggests that HR activities should 'fit' either the stage of development arrived at or the strategic orientation/ management style adopted in pursuing survival or growth.
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One of the popular contingency approaches is referring to the organizational life cycle. Different HR requirement is necessary to accommodate different priorities in different stage of the life cycle. For instance, an organization which is still at its start-up stage would need to attract best suitable skilled and competence employees. Training and development is needed upon identified the future skill requirement. Establishment of an organizational culture and employee's relations attitude is essential in the introductory stage as well.
However, according to the analysis carried out to investigate on contingency models mentioned, it could be seen that these approach tend to assumes classical rationalistic approach to strategy formulation and ignores other three approaches as this allows a simpler presentation of the model that assumes a top-down planning. Other than that, it also tends to ignore the general approach where organizational and societal culture of different stakeholders to be taken into consideration during the strategy formation stage. For instance, as for the business life cycle mentioned earlier, company is assume to move from one predictable stage to another in a sequential and recurring patterns. This is however not the case in reality as new technology, new competitors or any other factor may emerge in any industry at any point of time, and putting the company into a different growth path.
Another prominent contingency approaches suggested by Fombrun et al (1984) that seeks to link organizational structure and business strategy with HR strategy is referring to the five different organizational strategy/ structure combination, "ranging from single product businesses with functional structures, through diversified products strategies allied to multidivisional organizational forms and on to multiproduct companies operating globally" (Sisson and Storey, 2002). For instance, international organization focusing on multiproduct business selection methods is recommended to be more practical and organized with more objective methods used. HR activities such as appraisal system should be more remote and goal oriented where reward policies should be based on bonus oriented to ensure the superior performance based upon planned goals.
In addition, to consider the match between strategic orientation/management type and HRM policies, Schuler and Jackson (1987) suggested that the strategic orientation typology is based on the Porter's generic strategic in achieving competitive advantage under different industry condition. Further explained by Schuler and Jackson on the different Porter business strategy is the need of different intended behaviours by employees which in turn, required different HRM policies in relation to job design, appraisal system and development, reward system and labour-management relations and suggests that internal consistency within these areas, along with management values and assumptions regarding the management of people, represent the HRM philosophy of the organisation. For instance, organization which is concern on cost reduction would expect their employees to have a repetitive and predictable behaviour which is relatively fixed and allow little room for ambiguity while organization focusing on innovation would have to ensure that they have recruited innovative employees that are capable in providing creative ideas.
Three major philosophies has been identified in managing people which are "facilitation"', "accumulation'', and "utilisation" and has been reclassified by Dyer (1984) as inducement, investment, and involvement, respectively. "Accumulation" emphasized on longer-term approach to managing people, and accurately recruiting the right person to fit the organization needs, and further enhance their skills by providing them with adequate training and retain the employees by building long term relationship which in contrast with firms that adopt utilization strategy which assess employees performance on a short term basis, with lower pay and poorer job security. To obtain the balance between the two strategies, companies may choose to adopt facilitation strategies where the HRM practices are mostly midway between utilization strategy and accumulation strategy.
Miles and Snow (1984) have identified three effective types of strategic behaviour associated organizational characteristic and supportive HRM strategies. There are "defender'', "prospector" and "analyser". "Defender'' represents a stable product market strategy and requires an approach that builds human resources; "prospector" represents a more innovative approach which continuously search for new products and market opportunities and experimentation with potential responses to emerging environment trends. "Analyser" operates in two different type of product market domain where one is relatively stable and the other is changing market.
Different HRM approaches have different implications for policy choices. Miles and Snow (1984) suggested that "defender" company engage in little recruiting above entry level, and weeding out undesirable employees in the selection process and the qualified employees would then be provided with extensive training and skill development programmes. In contrast, the "prospector" company pays more attention on the initial recruitment to ensure the employees hired are competence enough so less training would be needed. As for analyser, companies should match all the HRM approaches to the nature of the product market as well as the product life cycle and then engage in either "make" their own HRM policies or "buy" HRM policies, depending on the appropriateness on different market domain.
4.0 Limitations (completed)
Several limitations have been recognized, ranges from the recommended model itself to the implementation issues. Firstly, this contingency model seems to focus on its external fit rather than internal fit where companies fail to take employees interest into account. This is further supported by Boxall and Purcell (2003), stating that companies "fail to recognize the need to align employees' interest with the firm or comply with prevailing social norms and legal requirements". This is one essential issue which required to be resolved instantly in order to ensure that satisfied employee to be acting positively towards the organization goals. Several actions could be taken to motivate employees to act accordingly, such as rewarding employees in emotional term of benefits such as compliment or in term of monetary reward such as pay increment.
In addition, theoretical assumption on competitive strategy is oversimplified which is again, not happening in the real business world. In order for a company to succeed in the intense competition, company would need to incorporate different strategies to outshine their company's reputation and performance. Company may tend to change their competitive strategy in order to adapt to the change of external environment. Therefore, HRM policies and activities should not be fixed based on any particular competitive strategy which has been identified but rather, HRM practitioners should consider on different factors and changes accordingly. Wright and Snell (1998) have further emphasized on the importance for contingent approaches to be designed with more flexibility which ensure its ability in coping with different mixes of competitive advantages.
HR professionals are responsible for the design and development of HRM practices in an organization, while line managers are responsible for the implementation of these practices on the operational work floor. The way that HRM practices, designed by HR professionals, are implemented by line managers, has become an important determinant of success or failure of those practices. The implementation of HRM practices by line managers is more salient for employee behaviour, motivation and satisfaction than the design of the HRM practices by HR professionals. Therefore, line managers play a critical role in influencing employee attitudes and behaviours by the way in which they translate the designed HRM practices in to practice, and can be vital in making the difference between low performing and high performing organizations (Hutchinson & Purcell, 2003).
Implementation of this strategic integration will no doubt encounter challenges which concerns how most HR managers and departments' failure to fulfill their newly assigned role. Huselid et al (1997) and Sparrow and Marchington (1998) both narrow down the reasons to their failure to understand the role's demands which broaden HR functions and inter-relate with that of other lines', along with the lack of confidence to do so.
In the meantime, a change in HR's role has not ultimately had similar changes to its practices. Horizontal alignment and fit of these practices are crucial to support the integration but remains difficult when such functions continue to be executed informally. This leads some of the respondents to feel that nothing has yet been done and to accept reality that the process was not taken seriously regardless of its known importance.
Apart from HRM's perspective, this treatment is similar in consideration of the priority accorded to these integration issues. Management at the board level inherently still regards functions relating to the organization's financial performance with greater emphasis. Such lack of support and commitment from the board in implementing the strategic integration merely supports Hazman's (1998) (as cited by Abang Othman, 2009) findings concerning HR managers' little influence on strategies.
Regardless of which, be it HRM's inability to impose itself or management's reluctance to accept and support such change, HR still lacks the ability to influence proceedings. Many grow frustrated over this failure as the illusion of HR's mere existence at the board level as a form of progress for strategic integration begins to fade. HR needs to represent and involve its interests appropriately whereas the management is required to show some form of commitment and support to the cause.
Other than that, assumptions made on the contingency approaches have been over simplistic by interrelating two variables, which are relatively unrealistic and inappropriate to apply to the complicated business world. Therefore, researchers conclude that there is a need find an equilibrium point between different variable and consider them as part of the interacting system which eventually results in superior organization performance with employees satisfaction.
5.0 Conclusion (completed)
A lot of researchers out there have identified the importance of alignment between HR function and business strategic aims in contributing towards the success for organizations by acting as a source of sustainable competitive advantage. HRM research has generally ignored the influence of strategy fit on the relationship between a firm's HRM effectiveness and labour productivity. Studies have also indicated the greater positive impact brought by the alignment of HRM strategy with business aims on organizational performance by contingency perspective, which is further supported by findings on several studies on the robustness of the strategic fit.
It is recommended for organization to look into several factors, such as the organization structure, environment and context, before adapting to any of the operating strategy. HRM strategy developed need to then aligned with the competitive strategy which allows a strategic fit that further enhance the HRM effectiveness and ultimately the business performance.