Human Resource Management and Organizational Strategy

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Human Resource Management and Organizational Strategy

Organizations employ many types of resources to realize their strategies and achieve their goals. These resources include labor force, which is nowadays approached in a less mechanistic way and referred to as human resources or human capital. Towards the middle of the 20^th centuries, management scientists gradually came to understanding that people are the main asset of the organization, so at a certain level of organizations development, there emerges a need for ensuring all employees understand the companys strategy, act consistently and treat corporate interests as a priority at work. According to the Resource Dependency Theory, organizations, which experience the deficiency of resources, are likely to establish relationships with other enterprises to receive them and thus become dependent upon these actors of the business sphere (Ulrich & Barney, 1984). On the other hand, organizations seek to limit such relationships by diminishing their dependency and increasing the dependence of other actors upon their resources. This means, the basic organizational strategy and probably the sense of its development is the adjustment of the structure, management, and minor strategy to the overall course towards the decline of its dependence (Ulrich & Barney, 1984; Lee & Kim, 1999). Therefore, in its general context, human resources management allows curbing this dependency by preventing or slowing down the flow of employees. The present paper argues that human resources management should be a vital part of organizational strategy, as it makes a substantial contribution to the realization of each business units strategy, and discusses each specific aspect of this contribution.

First of all, to understand the role of HRM, it is important to take a short glimpse at the conditions under which this function was developing. In reality, the post-war Labour government of the 950s was committed to combating unemployment, and the respective agencies were greatly interested in the functioning of the labor market and labor relations between employers and employees. In the 1960s-1970s, there emerged a new challenge in the organizations, which can be categorized as diversity management. The series of regulations, setting equal opportunity, like the Equal Pay Act of 1970 and the Sex Discrimination Act of 1975, determined the need for turning these legislations into corporate practices. At that time, in industrial relations, there existed two forms of bargaining: the formal system of industry-level bargaining and the informal system of workplace or organizational bargaining (Bratton & Gold, 2001, p.10). As organizations were growing and seizing entire continents, the need for formalizing the latter form of negotiations increased as well, given the large number of employees, who sought to be treated equally and without any bias or prejudice. The broad scope of responsibilities, associated with corporate policy-making and policy-defining subsequently allowed functional separation of HRM into a relatively autonomous department (Bratton & Gold, 2001; Beardwell & Holden, 2003; Pfau and Kay, 2002).

Nowadays, there is a notable tendency for narrowing and deepening the field of professionalism in organizations, as companies increasingly more often need employees with education and experience in the concrete area of practice. As the market becomes diversified, companies objectives are becoming diversified and complicated. In this sense, HRM contributes to the realization of business strategy through development and successful implementation of high-performance work practices, particularly those concerned with the job and work design, flexible working, resourcing (recruitment, selection and talent management), employee development (increasing skills and extending the skills base), reward and giving employees a voice (Armstrong, 2006, p.24). Performing this task involves a wide range of responsibilities that include job analysis, human resource planning, selection and recruitment, performance appraisal, career planning, and professional development of employees. Job analysis defines a job through the concrete tasks and duties as well as qualifications and skills needed to succeed in this role. In this sense, human resource specialists examine the internal environment, looking for the responsibilities, looking for tasks and responsibilities, which are underrepresented, yet important in the organization (Armstrong, 2006). Human resource management as a function also implies consideration of staffing levels to meet projected demand. Decisions to add, reduce or reallocate staff is made accordingly (Tracey, 2004, p.59). Selection and recruitment refer to the processes of finding and choosing the candidate who would manage the assignments, indicated in the job design, most successfully. Candidate assessment consists of several stages, which include such practices as personality assessment, stressresistance evaluation, and analysis of the persons professional eligibility to the job. When these four tasks are completed, the company obtains an employee, which fits the expectations of the business unit this person is entering. Moreover, at the organizational level, the smoothly performing HRM department allows ensuring each employee receives an appropriate workload and the existing human capital is cost-effective so that each employee brings either direct or indirect profit. Furthermore, HRM functional department allows employees to maintain and enrich their professionalism by planning their professional growth and administering training and additional education. According to Pfau and Kay (2002), the provision of training and development are important tools in ensuring staff are equipped to provide the quality and type of service the organization is aiming to achieve. Examples of training and development activities include running in-house courses, setting up job rotations and mentor schemes (Pfau & Kay, 2002, p. 60). Regular updating of personnels skills and knowledge base is a response to the constantly changing business environment, which creates new difficulties and opportunities and makes it necessary for the organization to be flexible enough. HRMs tactics of adjusting employee skills to external demands make this flexibility possible. The usefulness of the corresponding HR practices was measured by Patterson and Thompson in two independent studies. Patterson examined the relationship between the overall business performance of the company and the use of HR-led job design, job planning, recruitment, and employee development and his study suggests that Hr practices explained significant variations in profitability and productivity (19 % and 18 % respectively) (Armstrong, 2006, p.122). Two HR practices were found particularly influential: 1) job design and formation of formal teams and 2) development of employee skills. Thompson, in turn, studied the effect of the implementation of practices like job rotation, teamwork, and sophisticated recruitment in more than 600 UK aerospace corporations. The results suggest that the variety of HR practices and the extent of their use is the major distinction between successful establishments and those with poor performance (Armstrong, 2006). However, the major critical notice to these two investigations is the failure of taking into consideration the other possible factors contributing to the firms success, e.g. well-defined and clearly communicated strategies of each business unit, strong PR strategy, and so forth. According to the contingency approach (Lee & Kim, 1999), HRM is sensitive to the statement and execution of the overall corporate strategy, so excellent performance and productivity might be associated with the order in all business units, which is not necessarily established by the HR function.

The second important contribution HRM does is the formulation, embedding and implementation of a clear vision, set of values and the related policies (Ulrich & Barney, 1984, p.472). This refers to the formalization of tacit bargaining practices underlying each organization and the creation of the ethics code, which regulates employee conduct. This set of ethics prescriptions and the related policies allows approaching each employees interests to the interests and goals of the firm so that the clash of interests is less likely. Importantly, this code also conveys to staff a message that business is merely a means to an end, and the ultimate goal of each business is enhancing society in a certain aspect, so organizational values are approached by sense to the societal moral maxims. As one can assume, HRM is a function that creates the human face of business. In the context of organizational strategy execution, this component of HRMs contribution allows making sure each worker or employee is protected from mistreatment or exploitation and has an opportunity to operate in the atmosphere of commitment to the companys norms and values. To a certain degree, this allows at least maintaining employee productivity and nurturing integrity, and satisfactory customer service (Bratton & Gold, 2001). The study by Guest, undertaken in the year 2000, examined the impact of corporate ethics and culture on a companys performance in more than 800 private service organizations. The results suggest that by setting up regulations of employee behavior at work, HRM increases personnels focus on their work and encourages employee commitment. As a result, the quality of customer service and customer support ( Armstrong, 2006). Consequently, as customer service improves, client loyalty and the companys profit increase.

One more important aspect in which HRM strategy is consistent with organizational strategy is the development of a positive psychological contract and means of increasing the motivation and commitment of employees (Bratton & Gold, 2001, p.19). Employee motivation refers to the staffs interest in the results of their work: Employee motivation is concerned with the internal will to achieve and work towards the organizational goals. Setting up conditions to enhance employee motivation is critical to the success of any organization, highly motivated staff tend to be more productive, have lower rates of absenteeism, turnover, and lateness (Bratton & Gold, 2001, p.20). Contemporary HR emphasizes the role of non-financial incentives like a friendly atmosphere, convenient workplace, healthy work/life balance, sense of pride in working for this company. Returning to the Resource Dependency theory of organization, one can assume that motivated employees are not likely to quit the job or leave the company for a better place. In the context of business strategy, human resources retention makes teams more solid, reliable and improved their internal coordination. A contemporary study suggests, for instance, that the period, when a newly hired middle chain manager is getting accustomed to their roles within the company costs 20, 000 -30, 00 pounds, whereas retaining experienced managers allows avoiding these expenditures ( Watson Wyatt Inc, 2004). However, this study fails to compare the cost of retention and motivation of experienced managers to the cost of new managers adjustment. Even non-financial incentives like boosting pride through corporate charity or providing additional leaves (either paid or unpaid) involve spending monetary resources. Unfortunately, the scope of studies that focus mainly on the cost-effectiveness of motivation practices is quite scarce, so the assumption that a corporate motivation package is helpful to an organization remains challengeable.

Another important role of HRM in the organization is the creation and implementation of a comprehensive performance appraisal system and consulting line managers about the specific HRM issues and practices (Beardwell & Holden, 2003). According to Pfau and Kay (2002), Performance management is the process of defining employee performance expectations, measuring, evaluating and recording performance relative to those expectations and providing feedback. This is a formal procedure between staff and their manager to evaluate employee performance. Performance appraisals are primarily focused on the achievement and development of skills (Pfau & Kay, 2002, p.62). Assessment of employee performance involves developing recommendations for line managers concerning the knowledge and skills employees need or will need to obtain. Importantly, performance appraisal refers to the managerial function of control, and HRM works in close cooperation with line managers in defining the strengths and weaknesses of a particular company members results. In the context of business strategy, as Watson Wyatts research suggests, organizations with clearly defined control strategies were characterized by higher product and service quality (Watson Wyatt, 2004). The researchers involved more than a hundred private companies but failed to include governmental agencies, which often need to deal with large queues of customers and visitors.

Finally, HRM provides relatively painless and quick change management. As organizations have a need for regularly matching their strategies and performance to the requirements of the environment, there might also appear a necessity of changing the companys structure or implementing certain additional policies (e.g. in case of mergers and acquisitions). Change management is composed of all above mentioned HRM practices, which might be revised and re-applied. The distinctive role HRM plays in change management is internal communications this department performs in order to provide a smooth transition to the new desirable form. In large firms, HRM-led change allows bringing the companys new expectations to each employee and training staff so that the new performance patterns are reinforced. Again, conscious and purposeful change management improves coordination between business strategy and employee contribution to the realization of new organizational goals. As a result, the HRM intervention decreases the period of stagnation or slowdown of organizations activity, associated with change gives the advantage of flexibility large market players often lack.

As one can conclude, due to the fact that the foundation of HR strategy is the overall strategy of the organization, human resource management is a tool of raising the power of people, whose productivity is a vital component of the companys success. As HRM function represents the authority of top management, HRM specialists can maintain a clear vision of the vector of the organizations movement and through a variety of practices, they help each employee keep and observe this course in their work.

Bibliography

Bratton, J. & Gold, J. 2001. Human resource management: Theory and practice. Routledge.
Tracey, W. 2004. The human resource glossary. CRC Press.
Beardwell, I. & Holden, L. 2003. Human resource management: A contemporary approach. Prentice Hall.
Watson Wyatt Inc. 2004. Human Capital Index: Human capital as a lead indicator of shareholder value. Watson Wyatt Publication.
Pfau, B. & Kay, I. 2002. The hidden human resources: Shareholder value. Optimize Magazine, 6, 57-64.
Armstrong, M. 2006. A handbook of human resource management practice. Kogan Page Publishers.
Ulrich, D. and Barney, J. (1984). Perspectives in organizations: Resource dependence, efficiency and population. Academy of Management Review, 9(3): 471-473.
Lee, J. and Kim, Y. (1999). Effect of partnership quality on IS outsourcing success: Conceptual framework and empirical validation. Journal of Management Information Systems, 15(4): 29-61.

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