evolution and theories in aligning strategic human resource management with the corporate strategy
TRANSCRIPT
HUMAN RESOURCE MANAGEMENT & ORGANIZATIONAL BEHAVIOUR
MASTER OF COMMERCE [January - March 2013]
Evolution and Theories in Aligning Strategic Human Resource Management with the Corporate Strategy
By:
Joyce – Ann Cruz Mayo [001CM712]
Lecturer: Dr. Monica Walet
Presented to
The Faculty of the Department of Business
Submitted: February 21, 2013
Word Count: 2488(Excluding Cover Page, Executive Summary, Table of Contents, Tables, & Reference List)
TABLE OF CONTENTS
Page
Executive Summary i
Table of Contents ii
List of Tables iii
1. Introduction 1
2. The Evolving Definition of Human Resource Management 1
3. Theories / Approaches in Aligning Corporate Strategy with SHRM 2
3.1 Matching Approach 3
3.2 Control-Based Approach 3
3.3 Resource Based Approach 3
3.4 Typological Perspective 3
4. Human Resource Management Strategies 3
4.1 Commitment Strategy 4
4.2 Compliance Strategy 4
4.3 Collaborative Strategy 4
4.4 Productive Strategy 4
5. Issues in Aligning HR Strategies with Business Strategies 4
6. Companies which Aligned SHRM with the Corporate Strategy 7
7. Conclusion 8
8. Recommendation 9
9. Reference List 10
LIST OF TABLES
Page
Table 1 – Comparison Between Traditional HRM and SHRM 2
Table 2 – Singapore Airlines and Samsung Electronics SHRM Activities 7
Executive Summary
The increasingly changing environment of the business sector led the evolution of human resource
management into strategic human resource management. Nowadays, companies are gradually
looking into human resource as an asset within the organization that can provide sustainable
competitive advantage. More than the human talent, it is believed that properly utilization of
talents, efficient managing of resources, identification of capabilities and integrating these factors
all together can create a synergy which would help achieve the organizational goals of the company.
This paper presents a brief discussion on the evolution of human resource and the different
approaches in human resource management, it also include issues most organizations fail to
recognise in aligning their human resource activities with its corporate goals. Through this firms
will look into their HR strategy as a vital instrument for integrating competencies within the
company and for pairing the capabilities of the employees with the corporate strategy that can
create an edge over the competitors.
1. Introduction
Organizations struggle to respond to the threats of globalization and technology by means of
upgrading their capabilities and altering their business practices and strategies. These changes are
implemented to create an establishment that is more flexible and adaptable to the demands of the
market atmospheres; the environment, the economy, competitors and the consumer (Ray, 2012).
Human resource management is a vital facet of an organization which has been the focus of debate
with regards to how integration or “fit” of business strategy will match its operational activities and
result to a more profitable and efficient organization (Seyyedjavadin & Zadeh, 2009).The traditional
perception of commerce in human resource management (HRM) does not require involvement or
does not influence the organization’s strategic business path (Vosburgh, 2005; Lawler, 2011). Most
organizations view the Human Resource Department (HRD) as an administrative operating unit
and disregard the opportunity to align it with the organization’s strategic plans.
Conversely, in today’s environment, human resource profession has evolved and continues to
change from traditional human resource to strategic human resource management (SHRM); HR
today performs numerous non-functional roles in the organization as it no longer operate just as an
administrative unit, instead, it has now a seat at the strategic planning table (Benedict, 2008).
2. The Evolving Definition of Human Resource Management
Early definition of HRM as summarized by Dessler (1999) stated that it is the rules and activities
involved in implementing human resources aspects of managing which includes recruiting,
screening, training and appraising talents. On the same book, it was described as a model of
personnel management concerning mobilization and development of personnel as part of the
organization’s resources for greater productivity. These conventional definitions of HR is applied
and confined within the human resource context without placing much consideration on the
external factors affecting or impacting a firm (Vosburgh, 2005). However, due to the rapid global,
political, economic, cultural and legal changes in various industries, the definition of HRM and how
organizations perceived its functions also changed (Benedict, 2008). According to Mathis and
Jackson (2006), we can define HRM as the system designed to ensure efficient and effective
utilization of human talents in an organization to meet its goal. Supporting this definition,
Hellriegel, Slocum, & Woodman (2009) termed SHRM as the process of analyzing and managing an
organizations’ human assets to guarantee satisfaction of the organization’s strategic objectives.
The table below summarizes how HRM moved towards SHRM as illustrated by Vosrburg (2005).
Comparison between Traditional HR and Strategic HR
Table 1 – Comparison between Traditional HR and SHRM
3. Theories / Approaches in Aligning Corporate Strategy with SHRM
Theories such as matching approach, control-based approach, resource based approach and
typological based approach are models which depicts link between HR capabilities, human resource
strategy and business strategy (Bamber and Philips, 1991).
3.1 The matching approach states that the internal strategy of the organization must be fit with
the competitive strategy; it suggests that HR should vertically integrate HR and business strategy
and horizontally integrate employee and the HR policy (Tyson, 1997). The flexibility and structure
of the firms depends on the growth of the organization and how employees are managed (Atkinson,
1984).
3.2 According to the control-based approach, HR activities and management configuration are
instruments that may be used to control work productivity and level of profitability, it focuses on
controlling and monitoring the workforce’s behaviour which serves as a basis in identifying various
HR strategies applicable for the organization (Seyyedjavadin & Zadeh, 2009).
3.3 Resource approach as stated by Barney & Wright (1998), recognizes human capital resources
as one of the vital strategic attributes that a firm may possess, particularly the key competencies of
each and every employee. Sustainable competitive advantage is achieved through thorough analysis
of capabilities and skills of the organization which competitors may find difficult to imitate (Barney,
1991). This approach utilises and develops key competencies of the organization; by efficiently
integrating the company’s asset with the competencies of the workforce, the employees effectively
becomes the competitive advantage through its contribution in maintaining and developing the
core capabilities of the company (Barney, Wright, 1998; Pfeffer, 1994).
3.4 The typological perspective was explained by Dyer and Holder (1998) through their example
of 3 HR strategies, inducement, investment and involvement as choices for which Senior Managers
can select in determining the best way to manage human resources. This approach according to
Bamberger & Meshoulam (2002) is interesting to academic because theoretical models give
scholars the capability to equate and differentiate various groups of HR strategy and activities and
extremely improve and investigate its theories.
4. Human Resource Management Strategies
Different HR strategy is required for various kinds of employees (Seyyedjavadin & Zadeh, 2009). In
the study of Lepak and Snell (2002), it was established that different types of employees requires
different types of employment relationship and it takes different types of strategies to manage
employees. Individually, these pool of people is not unique and can be imitated by competitors,
however, HR strategies can act as an organization’s core competency provided that their activities
are aligned and integrated in the management system of the company (Barney & Wright, 1998).
Below are the human resource strategies proposed by Leapak and Snell (1999):
4.1 Commitment Strategy – According to Rousseau (1995) workforce that focuses on long term
relations and internal development has high strategic value and high level of uniqueness, this
enables the employees to build knowledge that would be more valuable to the organization that its
competitors, resulting to experts providing valuable contributions in the organization.
4.2 Compliance Strategy – This strategy outsource administrative and peripheral functions by
using temporary staff, and the like, to enable the workforce to direct their development activities on
skills that may contribute to the organization’s competitive advantage (Tusi, 1995).
4.3 Collaborative Strategy – Employees who have low strategic value yet have high level of
uniqueness or firm specificity are great source of differentiation (Seyyedjavadin & Zadeh, 2009).
The goal of this strategy is to hone the employee’s value while sustaining their uniqueness; this is
best exercised through collaboration with other organizations or with other talents within the
origination. When collaboration is exercised, utilization of jointly unique skills results to specialized
outcome which can benefit both the employees and the company. It generates synergy without
incurring additional cost for the company.
4.4 Productive Strategy – Human capital acquisition is the focus of this strategy, employees with
high strategic value yet low uniqueness level are considered as generic employees and these
individuals are utilised for deploying skills for immediate contribution, this include creating
standardized jobs to facilitate rapid replacement of employee when one leaves the company
(Seyyedjavadin & Zadeh, 2009).
5. Issues in Aligning HR Strategies with Business Strategies
The radical transformations taking place in the organization and manpower has steered an
evolution of traditional HRM to SHRM (Cruz, 2006). Throughout the progression of the HR
profession, pressure between roles of being the “business leader” and the “employee advocate”
developed, HR must serve the needs of the business while simultaneously serving the needs of the
employees (Seyyedjavadin & Zadeh, 2009).
The question is, what does the upper management expect from HR, this problem does not have
enough evidence to be answered factually, however, based on the journal of HR Planning (2006)
entitled “HR Support for Corporate Boards”, it was concluded that most Boards and CEOs have
limited knowledge to what HR is about, as a result they tend to focus on areas and assign tasks in
which they are more comfortable and familiar (e.g. succession planning and compensation), from
their perspective this simply implies “HR meets our (people) needs”. However, HR is not just about
meeting the needs of the people, it drives change management, and this organizational resource has
human capital that aligns the line management in developing and integrating business strategies for
competitive advantage (Seyyedjavadin & Zadeh, 2009).
However, discussing the theories and approaches in aligning SHRM to the corporate strategy will be
more meaningful once the key issues faced by some organizations in integrating its HR practices
with the organizational goals/strategies are identified (Ulrich, 1997). The following are some
concerns faced by HR practitioners and the organization
Companies Excessively Focus on the Administrative Nature of HR
These administrative tasks are the organizational activities traditionally associated with HR,
such as, staffing, recruitment, performance appraisal and remuneration planning (Huselid,
Jackson & Schueler, 1997; Mathis & Jackson, 2006). Though it is the building block that
keeps things in order within the function of HR, once the basic administrative functions are
set, HR should expand into the strategic ground and create links between departments in
the company. Several successful companies outsource these administrative functions to
allow HR to focus more on value-added parts related to the organization and perform more
transformational roles in the organization (e.g. P&G, PepsiCo ) (Vosburgh, 2005).
Incompetent HR Professionals
Any good HR professional wants to improve and be better, this begins with a desire to
improve, followed by a clear understanding of what is needed to be improved (Lawler,
2011). In a study conducted by University of Michigan, School of Business, it was identified
that HR practitioners must master competencies that deal both with people and business,
rather than just focusing on people and its capabilities. Effective interpersonal relationships
and skills, great understanding of issues and deliverables, creating solutions that works, etc.
are some examples that modern HR practitioners should consider focusing on
(Seyyedjavadin & Zadeh, 2009).
HR Lacks Monetary Accountability
Galford (1998) emphasized that beyond the administrative functions of HR; there is no
strategic monetary accountability. Aside from the role of being an integrator, it is
fundamental that HR department can demonstrate its organizational value by measuring
the return of investment from the cost centre (Fitzenz & Frangos, 2002). What the HR
brings to the bottom line should be visible; once initiatives of the department are
measurable through profits it can now then be considered as a strategic contribution to the
organization, business is all about what’s inside the financial sheets (Norton, 2001).
Failure to Completely Align Departmental Goals with HR Activities
To create a whole greater than the sum of its parts, HR should be immersed with the overall
organizational strategy, it needs to create interaction between the company and its human
capital as well as be interdependent with the rest of the organization (Norton, 2001; Ray,
2011). This can be successfully done through talent management and placing the right
employees on the right seat or encourage transfer of learning through job rotations, HR
should explore how talent can be ignited within the organization (Gratton, 2007).
By failing to acknowledge key issues in integrating HR strategies with the corporate strategy, HR
practitioners would encounter difficulty in identifying the right theory/approach and would find it
challenging to implement HR strategies that would fit their organization, hence, there would be a
much higher need for companies to make use of more resources in trying to meet goals, thus,
incurring more cost (Vosburgh, 2005).
6. Companies which Integrated SHRM Activities with the Corporate
Strategy - Samsung Electronics and Singapore Airlines
Companies which aligned its organizational and corporate strategy and successfully integrated it
with its operational activities can place them in a better position compared to its competitors
within the industry (Bamberger & Philips, 1991).
Below are examples of companies which present how its HR activities are aligned and integrated to
its corporate goals:
Company Corporate Strategy Utilised the HR Strategies through the following HR Activities
Singapore Airlines
Dual Strategy: Differentiation and Cost Leadership Strategy
Developing staff holistically Hiring the right people, “culture fit” to save cost in training,
developing and hiring new employees Utilizes related diversification to reap cost synergies and
improve quality and enable transfer of learning Job rotation to lessens training cost and encourage faster
transfer of learning which improves response time and efficiency
Individualized development approach, employee can choose their own training courses for their own improvement
Samsung Electronics
Low Cost Differentiation(Innovation)
High investment in people to run the Research and Development department
Investment in employees global business skills Employee development through higher education training
(Socio and Techno MBA) Higher average salary than its competitors Use of performance based promotion Actively recruits foreign talents Well diversified pool of talent results to better ideas and
innovation Excellent Knowledge and Talent Management Established In-House colleges for its employees Incentive Program: Merit System rather than Seniority
System Extensive hiring procedure to ensure “culture and work fit”
Table 2 – SIA and Samsung SHRM Activities
SIA has consistently outperformed its competitors through its dual strategy – differentiation
through innovation and service excellence and cost leadership in its peer group (Heracleous &
Wirtz, 2009), and HR played a very important role in achieving the business strategy, SIA
recognized the importance of human capital, that it is the pool of people who would think,
implement and make its organizational goals a reality a reason why most of its corporate goals are
spearheaded by the HR Management Team.
Similar to SIA, Samsung Electronics recognized recruitment, talent acquisition, talent management
as their means of creating industry experts to fulfil their goals of becoming innovators in the field of
electronics (Hur, 2012). All of its departments have an HR expert which handles hiring,
compensation, training and the likes.
7. Conclusions
From the above reviewed literature reviews, we can conclude that uniqueness of human capital and
the strategic value it can contribute in the company together with the use of organizational data and
resources are important determinants in implementing strategic human resource. Strategy alone is
not sufficient to gain competitive advantage, matching of employee capabilities, resources and the
management of HR should be in perfect fit with the top management of the organization as a whole
to achieve competitive advantage and transforming SHRM as the core competency.
As the field of commerce becomes more complex, the role of human resource management becomes
more crucial in understanding, aligning and integrating HR activities within the organization.
Failure to identify and understand the critical crossroad where the opportunity for business
strategists and HR practitioners should meet to identify the needs of the organization will prevent
successful transformation of the company. In this case, to transform the HR to SHR, it must be
directed towards becoming an income generating department of the organization, this can be
achieved by providing a gateway for HR to have an in-depth understanding of the organizational
goals and by creating synergies that would help HR align each and every operating unit of the
organization. A perfect fit between capabilities and resources in an organization, a strong link
between human talent and management strategies, alignment of corporate objectives and HR
activities will lead the organization to a competitive advantage as workforce as its main tool.
8. Recommendations
The following activities/practices are recommended to be able to contribute to the overall objective
of the company and efficiently align corporate strategic goals with the SHR activities;
Organizations should create recruitment development programmes that would support
growth of the organization by pooling in world-class talent and leaders.
HR and leaders should be able to clearly identify capabilities and level of uniqueness of
employees to be able to create effective programmes that will continuously improve
capabilities and competencies of the workforce, creating experts which will help achieve
over-all success of the organization.
Human resource as a department should be involved in determining key organization and
industry issues and be adept in analysing current HR and business trends to be able to
create an HR programme which would be best suited for the company’s goals.
Organizations should bring about commitment to lifelong learning and ethical practice with
HR as its champion in nurturing a culture aligned with the organizational strategy. This
initiative will inculcate sense of responsibility to all employees included in the value chain.
Encourage information sharing and transfer of learning across all facets of the organization
if applicable, this will not only give employees a better understanding of how the total
operations of the company work, it will also save cost and time in training and retooling
employees for future succession plans, resignations, etc.
By effectively integrating these activities in the organization, HR will now have a much deeper
understanding and bigger role in achieving business goals. The organization as a whole will be
more capable in handling projects and be aware of each and every function within the
organization and respond to industry changes much easily. Cascading information and change
management would also be easy as from the hiring process down to the continuous
development, the organization is assured that there’s a “culture and job fit”
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