Importance of Strategic Human Resource Management

Introduction

As globalization takes place, rapid development and increasingly competitive market have become the immediate challenges for organizations. Surrounded by such environment, organizations should create business strategies to survive the challenges and sustain the competitive advantage. Beside developing on new products, new processes and expanding business to larger market, the investment on the biggest potential that most organizations recognize, human resource, has received more and more attentions. Nowadays, the most valuable resource in a organization is suggested to be the human resource. Human capital, the knowledge, experience and skills that individuals possessed are pivotal for the successful performance of the federal government’s missions (J.L. Perry, 1993). Similarly, other types of organizations have no exception, also treasure the values that individuals bring to the companies. Thus, the management of human resource is closely related to the success of organizational performances. in fact, as argued by many management scholars, human resource management is currently an important, perhaps the most important factor that determines the effectiveness of organization (Devanna, Fombrun, and Tichy, 1984; Schuler,1990). Strategic human resource management (SHRM), as a term first given from the USA, is of more interest recently. It is defined as the pattern through planning human resource deployments and activities such to enable an organization to achieve its goals (J.L. Perry, 1993). SHRM creates a link between the overall strategic business objectives and the human resource strategy and implementation (E. N. Caliskan, 2010). Thus, it is important to understand that how the organization manages its human resource and link to its business strategies have a significant impact on the improved organization’s performance.

Impact of human resource management

In order to explain the importance of SHRM to the success of organizational performance, the impact that human resource management has on the organizations should be examined first. There has been growing number of studies that indicated a positive relationship between human resource management and organizational performance (E.N. Caliskan, 2010). A research reported by Arthur in 1990 (M. Armstrong, 2006) gave data from 30 US strip mills used to assess how high-commitment strategy or a control strategy influenced labour efficiency and scrap rate. The results showed that firms with a high-commitment strategy was higher in both productivity and quality as comparing to those with a control strategy. In 1995, Huselid (M. Armstrong, 2006) did an analysis of the responses of 968 US firms regarding the use of high performance work practices, the development of synergies between them and alignment of these practices with the competitive strategy. The results showed that the impact of employee motivation is significant on productivity, and the impact of employee skills, motivation and organizational structures is also significant on the financial performance. Later Patterson et al. in 1997 (M. Armstrong, 2006) did a research to examine the link between business performance and organization culture as well as the use of some human resource practices. The results showed that human resource practices gave explanations to significant variations in profitability and productivity. Two of the practices were particularly important: (1) the acquisition and development of employee skills (2) job design which includes flexibility, responsibility, variety and the use of formal teams. The workplace employee relations survey conducted in 1998 also suggested a strong association existed between HRM and employee attitudes as well as workplace performance through the sample survey of 2000 workplaces and views of 28000 employees (E.N. Caliskan, 2010). Purcell et al. in 2003 (M. Armstrong, 2006) did a longitudinal study of 12 companies to establish the impacts of people management on organizational performance. As indicated, the most successful companies all had a clear vision and a set of integrated values such as embedded, enduring, collective, measured and managed. It was clearly evidenced that positive attitudes towards HR policies and practices, levels of satisfaction, motivation and commitment influenced operational performance.

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From the research results, we can easily conclude that effective HR practices have positive impacts on the overall performance of organizations. For suitable HR policies and processes to be applied, the firm’s performance will be substantial and sustainable. Regardless of what type of industry the organization is aiming at, the ultimate strategic goal of the chief is to maximize wealth of the shareholders. Financial performance depends largely on operational performance. This can be accounted as a function of its people, process and technology. Effective combination of such function requires people in the organization to be competent enough with adequate knowledge, skill and abilities. Such requirement is closed linked to certain HRM practices such as hiring selection, training of staff, work environment and performance assessment. These practices may enhance the competence of employees, thus improve the performance of organizations.

Impact of Strategic human resource management

The strategic base of HR practices has a great impact on improved performance. Firstly, in the strategy of hiring employees, HRM tends to attract, develop and retain high-quality people. By matching employees to the strategic and operational needs of the company, can improve the working efficiency. In addition, the talent management also has effective measures. Winning ‘war for talent’ is achieved by making sure that both present and future needs of talented and well-motivated people required by the organization are met. Baring in mind the most important strategy which is to create happiness within the workplace and make the organization a great place to work. This can inspire people to be more innovative and energetic in their work. As the employees’ happiness increases, their performance also improves, thus enhance the overall organizational performance. The job design, as mentioned in the past research, plays an important role in productivity. It is necessary to provide employees with stimulating and interesting work and give them autonomy and flexibility to complete their jobs. This can enhance job satisfaction of the employees, thus encourage higher performance and productivity (E.N. Caliskan, 2010). Training and initiating a learning culture within the organization can develop the level of competence of the workforce. Encouraging discretionary learning when individuals actively seek to acquire knowledge and skills that match with the objectives of the organizations. By creating a learning atmosphere in the workplace, employees would be more motivated and more competent to face the fast-paced and global challenges. From the case of Snowden, we noticed the importance of building cooperation trust among the employees. Adopting the strategy of increasing motivation, commitment and role engagement to encourage people to identify themselves with the core values of the organizations and to make them willingly contribute to achieve organizational goals. Last but not least, for high-performance management, a positive performance culture should be built to deliver the desired values from the shareholders. For more contribution made, the people should be awarded, in order to encourage him to keep it up and also motivate other employees to devote themselves strive for better performance.

As we discuss on how various HR strategies can be implemented to collaborate with business strategies to achieve higher performance of organizations, it is not hard to conclude that SHRM is the driver to improve organizational performance. Human resource, as a source of sustained competitive advantage, is worth being invested to increase the potential of an organization. So long as the people in the organizations are improved in both performance and attitude, the ultimate goal of the shareholder is approachable. The present linkage has given HR managers a clue on how to adopt various strategies onto HRM. These strategies do not only improve the human resource performance, most importantly, also directly affect the overall performance of the organization, thus, determine if or not the organization can achieve its goals.

Case study of Google Inc.

Backgroud

In order to understand the importance of SHRM in practical situation, we introduce the unique and outstanding organization : Google inc. in the following part. Certain SHRM practices within Google would be discussed to show how actively it is focused on managing its people and how this helps Google to achieve its goals.

Google inc., the biggest search engine known to the whole world has gained its success largely by the people, the googlers they have. This is a technological organization. Engineers are the main workforce of the organization. However, the HR department, or the POPS as themselves called, is the key factor which determines their past and present success, also perhaps the future as well. Under the lead of Bock, the POPS has helped Google to become the best employer in the US. It has been rated as the best place where people want to work for in the States. Let us see how Google succeeded over the years.

Successful examples of SHRM

Several years ago, there was a problem noticed by the POPS, that many female employees left the company. Although this IT based organization has mainly male employees, the role of female employees is as important as males. The problem was not about gender equality, but it has affected the bottom line. Regardless of gender, the market of the talents is very thin, fighting for the talented people determines the competence of Google with other organizations such as Apple, Facebook and so on. In addition, the departure of every employee will be inefficient because it will involve a costly and time-consuming recruiting process. Thus, the POPS investigated and researched until they realized it was a problem of happiness. At that time, the company offered an industry-standard maternity leave plan. As long as a female worker gave birth, she would have 12 weeks of paid time off, and only for those new parents in California offices. Those outside the state only got paid time off of 7 weeks. After they figured out the problem, in 2007, Bock announced new policy. New mothers would get 5 months off at full pay and full benefits, also they are allowed to manage the time on their own wish. If she likes, the mother could return as part time after her birth, and then take the balance back when the baby grows older. In addition, Google offered 7 weeks new-parent leave to every worker around the world. It may sound overly generous that this investment outweighs the benefits it brings to the organization. However, this policy was actually a win for the company that after it was carried out, the departures of new mothers had dropped down quickly by 50%. Being compensated by the savings in recruitment costs, the new policy does not cost Google any more money (F. Manjoo, 2013).

Google’s POPS does not only solve problems for new mothers. They concern about every little detail that the employees are involved. Surveys about the best way to manage a large firm were done a lot of times to the employees. The questions were such as do successful middle managers have certain skills in common- and can you teach those skills to unsuccessful managers? And say you want to give someone a rise-how should you do it in a way that maximizes his happiness? Should you give him a cash bonus? Stock? A raise? More time off? (F. Manjoo, 2013) Although some may argue that Google’s HR practices may not apply to all companies. Some of their findings such as how to improve interviews, will still be applicable to most of the firms. In the hiring process of Google, within the first few years, it required its candidates to endure many interviews. The interviewer was also played by all the staff currently in the company. The HR department thought this approach would help both current employees and prospective ones to be more competent and more capable. However, it slowed down the hiring process and became more and more ineffective on examining candidates’ true values. Later, they realized the problem and studied about the optimal number of interview times. It was found that 4 times interviews will yield the most effective hiring process. After fourth one, the results begin to turn negative. Google was able to correct their HR practices to demonstrate the most strategic HRM.

Besides these two major examples, Google POPS did way more. They investigated the way to increase employees’ paying. Whether paying a bonus of more or giving rise to monthly salary with less amount makes no difference to the firm, but the latter one can largely increases the level of happiness of the employees, thus encourage them more to work their best for the company. Even for cafeterias, besides providing free food, drinks and snacks, the size of the table was also concerned. The tables are long, so that workers who do not know each other will have to sit together to interact. The social coherence will improve teamwork spirit. In such a competitive and globalized environment, teamwork is especially important as diversity and combination of different powerful minds can create miracles and successes. In addition, the size of the plates were also considered to change to smaller size, so that the employees would have more healthy portions of food. In such ways, the employees do not just feel happy about the free services that they receive, they are also satisfied and motivated by the cares that the company shows to them. The learning atmosphere is also maintained well in Google. Googlers can enjoy free classes of dancing, training sessions and choose their interested projects. Such free and encouraging environment inspires the googlers to create more values to the company. It does not only improve the overall performance, but also brings benefits to the entire world as their internet business has already changed people’s life and will continue this mission.

Discussion on Google’s SHRM practices

Google’s POPS head Bock has revealed that the ultimate goal is to use Google’s experience to answer some important questions about workplace such as: are leaders born or made? Can individuals sustain high performance over their lifetimes? Google would eventually be able to figure out the answers and they believe that the unique luxury that they have as being a date-driven company with people who can do the math will assist them to achieve the goals. So far, Google has set many good examples for all other companies. Their successes in SHRM lead to greatly improved performance. Through the example of Google, other companies are able to see the importance of taking care of the human resource. The strategic management of people does not only enable better alignment of jobs, but also increases people’s happiness. As working professionals are happy about their jobs and workplaces, the development and civilization of the entire society will go to a higher level. The world would not only be economic based, but also more utilitarian and more humanitarians.

Conclusion

The report has illustrated the importance of HRM to organizational performance. Then SHRM, as a link to connect HRM to business strategies to achieve final organizational objectives can improve overall performance of the organization. Through the example of Google inc., we see how actively Google focused on SHRM. They also gained success in SHRM and also become the most successful search engine in the history. Their ultimate goal is not merely helping Google to achieve business goals through SHRM, but also collecting experience for other organizations on how to improve their employees’ happiness and welfare as well as achieve their business goals.

Reference

1. Devanna, M.A.,C. Fombrun, and N. Tichy. A Framework for Strategic Human Resource Management. Human Resource Management. New York: John Wiley. 1984.
2. E. N. Caliskan. The Impact of Strategic Human Resource Management on Organizational Performance. Journal of Naval Science and Engineering, 2010, Vol. 6, No. 2, pp 100-116.
3. F. Manjoo. The Happiness Machine, How Google became such a great place to work, 2013,retrieved from http://www.slate.com/articles/technology/technology/2013/01/google_people_operations_the_secrets_of_the_world_s_most_scientific_human.2.html
4. J. L. Perry. Strategic Human Resource Management. Transforming Federal Civil Service. Fall 1993. p 59-71.
5. M. Armstrong. Strategic Human Research Management: A Guide to Action. Kogan Page. London. p 73-74.