evolution and theories in aligning strategic human resource management with the corporate strategy

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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

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Page 1: Evolution and Theories in Aligning Strategic Human Resource Management with the Corporate Strategy

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)

Page 2: Evolution and Theories in Aligning Strategic Human Resource Management with the Corporate Strategy

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

Page 3: Evolution and Theories in Aligning Strategic Human Resource Management with the Corporate Strategy

LIST OF TABLES

Page

Table 1 – Comparison Between Traditional HRM and SHRM 2

Table 2 – Singapore Airlines and Samsung Electronics SHRM Activities 7

Page 4: Evolution and Theories in Aligning Strategic Human Resource Management with the Corporate Strategy

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.

Page 5: Evolution and Theories in Aligning Strategic Human Resource Management with the Corporate Strategy

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

Page 6: Evolution and Theories in Aligning Strategic Human Resource Management with the Corporate Strategy

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).

Page 7: Evolution and Theories in Aligning Strategic Human Resource Management with the Corporate Strategy

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):

Page 8: Evolution and Theories in Aligning Strategic Human Resource Management with the Corporate Strategy

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).

Page 9: Evolution and Theories in Aligning Strategic Human Resource Management with the Corporate Strategy

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

Page 10: Evolution and Theories in Aligning Strategic Human Resource Management with the Corporate Strategy

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).

Page 11: Evolution and Theories in Aligning Strategic Human Resource Management with the Corporate Strategy

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,

Page 12: Evolution and Theories in Aligning Strategic Human Resource Management with the Corporate Strategy

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

Page 13: Evolution and Theories in Aligning Strategic Human Resource Management with the Corporate Strategy

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.

Page 14: Evolution and Theories in Aligning Strategic Human Resource Management with the Corporate Strategy

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”

Page 15: Evolution and Theories in Aligning Strategic Human Resource Management with the Corporate Strategy

Reference List

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Barney, J., & Wright, P. (1998). On becoming a Strategic Partner: The Role of HUman Resources in Gaining Competitive Advantage. Human Resource Management, 31- - 46.

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Benedict, A. (2008). Hr's Evolving Role in Organizations and Its Impact on Business Strategy. Society for Human Resource Management.

Chong, M. (2007). The Role of Internal Communication and Training in Infusing Corporate Values and Delivering Brand Promise: Singapore Airlines' Experience. Coporate Reputation Review, 10.

Cruz, E. S. (2006, January 17). Traditional to Strategic HR Management. Business World, p. 4.

Dessler, G. (1999). Human Resource Management. PearsonVue Publications.

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Hur, C. (2012). Culture, Goal Oriented Leadership and a Fast Growing Organization: The Case of Samsung Electronics. Yanbian University of Science and Technology.

Johnson, D. (n.d.). Human Resource Competency. Retrieved January 27, 2013, from Michigan Ross School of Business: http://www.sitemaker.umich.edu/hrcs/executive_summary

Lawler, E. (2011, November 30). Human Resources - It's Time for a Reset. Retrieved January 24, 2013, from Forbes: http://www.forbes.com/sites/edwardlawler/2011/11/30/human-resources-its-time-for-a-reset/

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