Source:
E-mail dt.05.05.2014
Human
Resource Strategies Vs Competitive World
S.Shiny
Assistant Professor,
Sankara Institute of Management Science,
Saravanampatti,
Coimbatore, Tamilnadu, India
&
V.Divya
Assistant
Professor,
Sankara Institute of
Management Science,
Saravanampatti
Coimbatore, Tamilnadu, India
Abstract
The
purpose of this chapter is to discuss some of the main features and
developments in human resources (HR) strategy.
Human resource strategy is designed to
develop the skills, attitudes and behaviors among
staff that will help the organization meet its goals. Human resource strategy
consists of principles for managing the workforce through HR policies and
practices. It covers the various areas of human resources functions such as
recruitment, compensation, performance management, reward and recognition,
employee relations and training. HR strategy must be aligned with the
organization’s vision, mission and goals.
The HR function remains among the least influential in most
organizations, and competitive strategies have not typically been based on the
skills, capabilities, and behaviors of employees. In fact, as Snell, Youndt and Wright (1996:62) noted, in the past executives
have typically tried to “take human resources out of the strategy
equation--i.e., by substituting capital for labor where possible, and by
designing hierarchical organizations that separate those who think from those
who actually do the work.”
Keywords: HRM, Roles and
Responsibility, Competitive challenges and Advantages, New strategy,
Organizational practice
Introduction
In developing an HR strategy, the company must analyze the
characteristics of its industry, determine its competitive advantage, and
identify key processes and key people. Creating different strategies for all
groups of people in the organization may be necessary, depending on their
skills, knowledge and responsibilities. The strategy must look at the
organization's culture, structure, people and systems.
The
key principles of the Human Resources Strategy:
• Regards its
staff as its most valuable asset
• Recognizes
that staff play the definitive role in the learning experience of our students and the service to other
stakeholders including employers
• Recognizes the
importance of the relationship between good people management and the ultimate
performance of the College
• Recognizes the
importance of attracting and retaining effective, well-qualified and motivated
staff in relation to sustainable success of the organisations
Human Resource
Management
Human
resource management (HRM) refers to the policies, practices, and systems that
influence employees’ behavior, attitudes, and performance. Many companies refer
to HRM as involving “people practices.” Figure 1.1 emphasizes that there are
several important HRM practices. The strategy underlying these practices needs
to be considered to maximize their influence on company performance. As the
figure shows, HRM practices include analyzing and designing work, determining
human resource needs (HR planning), attracting potential employees
(recruiting), choosing employees (selection), teaching employees how to perform
their jobs and preparing them for the future (training and development),
rewarding employees (compensation), evaluating their performance (performance
management), and creating a positive work environment (employee relations). The
HRM practices discussed in this chapter’s opening highlighted how effective HRM
practices support business goals and objectives. That is, effective HRM
practices are strategic! Effective HRM has been shown to enhance company
performance by contributing to employee and customer satisfaction, innovation,
productivity, and development of a favorable reputation in the firm’s
community. The potential role of HRM in company performance has only recently
been recognized.
Competitive Challenges Influencing HRM
This Figure shows the top
high-need applied skills for employers. However, new entrants to the workplace
lack these and other skills needed for companies to compete in the global
economy. Several studies illustrate the skill deficit companies are
experiencing. A study by the Business Roundtable found that 62% of employers
report they are having difficulty finding qualified job applicants to fill job
openings. More than half indicated that at least 16% of their workforce has
skills gaps that adversely affect productivity. Similarly a study by a
consortium of Society for Human Resource Management, American Society for
Training and Development, The Conference Board, and Corporate Voices for
Working Families found that regardless of their education level only half the
companies surveyed rated new employees as adequately prepared for work.
Companies’ greatest basic skills needs were in reading, writing, and math.
How
HR can master strategy?
HR should play
a pivotal role in business strategy, particularly in organisations
that consider their people a key asset. But the way to the CEO’s heart involves
engaging with other business functions, talking their language and overcoming
some intrinsic barriers.
Take recent research by the CIPD, which finds nearly one in five (18%) business leaders is unaware of HR's contribution to business strategy, while a further 18% say senior HR people have no involvement in business strategy at all.
While HR's contribution to strategy may sometimes go unnoticed, 70% of CEOs want their HR directors to be a key player in strategic planning, according to a 2012 Economist Intelligence Unit study. HR's ability to influence wider business strategy is often at the heart of discussions about the function's purpose and potential.
For starters, can 'HR strategy' even be pinned down?
Mark Sandham, senior vice-president of organisational effectiveness and HR operations at media and information firm Thomson Reuters, believes it can. However, he prefers to define HR strategy as a "people strategy designed to enable business goals and objectives". "You can't create an HR strategy in isolation and keep it internally focused on HR activities and deliverables," he says. "Rather, you must understand where the business is heading, what kind of talent is needed, in what countries or for what customers, and at what cost. From there, you can develop a strategy around your people to help the business achieve its goals."Sandham says the days of HR being solely about implementing processes and managing employee relations are a thing of the past.
Competitive Advantage - Industry Perspective
From an industry
perspective (Wright, et al., 1994), Porter (1985) states that there are two
ways in which a business can gain competitive advantage over its competitors;
cost reduction or product differentiation. The cost reduction strategy involves
producing a similar quality product or service at a lower cost than
competitors; therefore provided they can command a similar price, they will
have a higher profit margin than competitors. The product differentiation
strategy on the other hand, involves producing a differentiated product to
competitors that is unique in a way that is of high value to consumers. By
being unique, they can command a higher price for the product; provided this
price margin is greater than the increased costs of producing the
differentiated product, they will receive a greater profit. Porter felt that
these two methods were mutually exclusive and that organisations must choose
one strategy in order to potentially gain competitive advantage because
differentiating a product usually involves higher costs. However, the opposite
is also true; in order to be the cost leader, they often need to forego some
differentiation in the product or service (Porter, 1985). The first criterion
for competitive advantage in an organisation is that the resources must be
valuable (Barney, 1995). However, how can an organisation’s resources –
particularly human resources - be accurately valued? (Priem and Butler, 2001). This is not in terms of
their salaries, but of the value that they provide for the organisation (Wright,
et al., 1994). Value is not something that can be assumed. The resources must
first be understood in relation to the specific market the organisation is
operating in (Barney, 2001), meaning the specific skills and capabilities each
person holds will provide more or less value depending on the market in which
the organisation operates. From there, value can be determined by whether or
not these skills and capabilities enable the organisation to exploit its
opportunities and reduce the effect of its threats and how the organisation
recognises and responds to these opportunities and threats in the changing
environment (Barney, 1995).
Corporate
Strategy
Corporate strategy refers to the overall strategy of an organization that is made up of multiple business units, operating in multiple markets. It determines how the corporation as a whole supports and enhances the value of the business units within it; and it answers the question, "How do we structure the overall business, so that all of its parts create more value together than they would individually?" Corporations can do this by building strong internal competences, by sharing technologies and resources between business units, by raising capital cost-effectively, by developing and nurturing a strong corporate brand, and so on. So, at this level of strategy, we're concerned with thinking about how the business units within the corporation should fit together, and understanding how resources should be deployed to create the greatest possible value. Tools like Porter's Generic Strategies, Boston Matrix, Etc. Will help with this type of high-level analysis and planning. The organization's design is another important strategic factor that needs to be considered at this level. How you structure your business, your people, and other resources – all of these affect competitive advantage and can support your strategic goals.
Types of HR Strategies
Because
all organizations are different, all HR strategies are different. There is no
such thing as a set of standard characteristics. Research into HR strategy
conducted by Armstrong and Long (1994) and Armstrong and Baron (2002) revealed
many variations. Some strategies are simply very general declarations of
intent. Others go into much more detail. But two basic types of HR strategies
can be identified. These are: 1)
overarching strategies; and 2) specific strategies relating to the
different aspects of human resource management.
Overarching HR strategies: Overarching
strategies describe the general intentions of the organization about how people
should be managed and developed and what steps should be taken to ensure that
the organization can attract and retain the people it needs and ensure so far
as possible that employees are committed, motivated and engaged. They are
likely to be expressed as broad-brush statements of aims and purpose, which set
the scene for more specific strategies. They are concerned with overall
organizational effectiveness – achieving human resource advantage by, as Boxall and Purcell (2003) point out, employing ‘better
people in organizations with better process’, developing high-performance work
processes and generally creating ‘a great place to work’.
The following are some examples of
overarching HR strategy statements:
AEGON: The Human Resources Integrated Approach aims to ensure that
from whatever angle staff now look at the elements of
pay management, performance, career development and reward, they are consistent
and linked.
B&Q: Enhance employee commitment and minimize the loss of
B&Q’s best people.* Position B&Q as one
of the best employers in the UK.
Egg:The major factor influencing HR strategy was the need to
attract, maintain and retain the right people to deliver it. The aim was to
introduce a system that complemented the business, that
reflected the way we wanted to treat our customers – treating our people the
same. What we would do for our customers we would also do for our people. We
wanted to make an impact on the culture – the way people do business.(HR Director)
GlaxoSmithKline:We want GSK to be a place where the best people do their best
work.
An insurance company:Without the people in this business we don’t have anything to
deliver. We are driven to getting the people issues right in order to deliver
the strategy. To a great extent it’s the people that create and implement the
strategy on behalf of the organization. We put people very much at the front of
our strategic thought process. If we have the right people, the right training,
the right qualifications and the right sort of culture then we can deliver our
strategy. We cannot do it otherwise.(Chief Executive)
Lands’ End: Based on the principle that staff who
are enjoying themselves, are being supported and developed, and who feel
fulfilled and respected at work, will provide the best service to
customers.
Pilkington Optronics:The business strategy defines what has to be done to achieve
success and that HR strategy must complement it, bearing in mind that one of
the critical success factors for the company is its ability to attract and
retain the best people. HR strategy must be in line with what is best in
industry.
A public utility: The only HR strategy you really need is the tangible
expression of values and the implementation of values… unless you get the human
resource values right you can forget all the rest.(Managing
Director)
A manufacturing company: The HR strategy is to stimulate changes on a broad front
aimed ultimately at achieving competitive advantage through the efforts of our
people. In an industry of fast followers, those who learn quickest will be the
winners.(HR Director)
A retail stores group: The biggest challenge will be to maintain [our] competitive
advantage and to do that we need to maintain and continue to attract very high calibre people. The key differentiator on anything any
company does is fundamentally the people, and I think that people tend to
forget that they are the most important asset. Money is easy to get hold of;
good people are not. All we do in terms of training and manpower planning is
directly linked to business improvement.
Criteria for an effective HR strategy
An
effective HR strategy is one that works in the sense that it achieves what it
sets out to achieve. In particular, it:
- will satisfy business needs;
-
be founded on detailed analysis and study, not just wishful thinking;
-
can be turned into actionable Programmes that
anticipate implementationrequirements and problems;
-
is coherent and integrated, being composed of components that fit with and
support each other;
- takes account of the needs of line managers and employees
generally as well as those of the organization and its other stakeholders. As Boxall and Purcell (2003)
emphasize: ‘HR planning should aim to meet theneeds
of the key stakeholder groups involved in people management in the firm.’
Conclusion
The
department and HR have to change in many ways. The rate of change is likely to
increase quickly and public and political expectations of service levels will
continue to rise. Human Resource Management focuses on matching the needs of the
business with the needs and development of employees. Tarmac depends on its
people because their skills contribute to achieving its business objectives.within Tarmac, every employee has a valuable
role to play. The emphasis is on helping individuals to work together.
Workforce planning is part of this strategic process, which looks at the
long-term needs across the organisations. Personal
development plans enable every individual to grow both professionally and
personally within the business. They also help Tarmac to create a distinct and
important competitive advantage through selecting and developing highly
motivated and skilled staff who are able to perform at
high levels.
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