Human Resource Management Contribution To Organisational Success

The aim of SHRM is to ensure that an organisation has the skilled, committed and motivated employees it needs to achieve sustained competitive advantage. A number of strategies to achieve this objective have been developed. One strategy follows the resource-based theory which emphasises that investment in people adds to the value of the company by achieving a strategic fit between resource and opportunities to effectively deploy those resources to obtain added value. Another approach is the high-performance management one, whereby processes are developed in areas such as productivity, quality, customer service, growth and profitability through the people’s skills and enthusiasm within the organisation. Another model is the one of high-commitment, where there is a reduction in layers of management, increased flexibility of job descriptions, and a reliance on team working and disseminating information, leading to primarily self-regulated behaviour of the employees. There is also the high-involvement approach which engages employees views as partners in the organisation aiming to create a mutual understanding of what is to be achieved and managing people to ensure it is achieved (Armstrong 2006).

Holbeche (2009) in discussing SHRM theory states that it has evolved from two distinct conceptions of the link between employee motivation and behaviour and company-level performance outcomes. Researchers distinguish between ‘hard’ traditional HRM and ‘soft’, committeemen-focussed HRM. ‘Hard’ HRM reflects a contingency approach based on the assessment of the best way to manage people in order to achieve business goals in the light of contextual factors. This approach is founded on HRM seeking to improve efficiency by enforcing employee compliance by, for example, basing employee rewards on some measurable criteria. This approach suggests that for any particular organisational strategy there will be a matching HR strategy. In contrast, ‘soft’ HRM focuses on a high-commitment-high-performance approach to the management of people. Commitment approaches to HRM aim to shape attitudes by forging a psychological link between organisational and employee goals, emphasising the need for management to recognise employees as significant stakeholders in the company.

Increasingly, businesses are moving away from basic product manufacture and service and into more elaborate and complex activities which require the extensive use of information or ‘knowledge’. Strategic responses to the new ‘knowledge economy’ require new forms of training and learning and development is a core business of SHRM. The advent of electronic or e-learning has become increasingly relevant in a context where more and more workplaces are dominated to computer technology, improving the development of knowledge which can be applied to benefit the employee, customer and the organisation. BP offers a blend of e-learning and structured knowledge sharing services allowing individuals to self-manage their learning either on a self-initiated means of web-based training, with fully supported online learning, or informal e-learning through communication, information retrieval and peer cooperation (Harrison 2005).

SHRM has a role to play in ensuring that business planning and the planning of suitable employees match. Bohlander and Snell (2009) argue that strategic planning involves a set of procedures for making decisions about the organisation’s long-term goals and strategies. Human resource planning, by comparison is the process of anticipating and providing for the movement of people into, within, and out of an organisation. Overall its purpose is to help managers deploy their human resources as effectively as possible, where and when they are needed, in order to accomplish the organisation’s goals. SHRM combines strategy planning and HR planning and plays a leading role in human resources deployments and activities that enable an organisation to achieve its strategic goals.

There are cost benefits for an organisation which has strategic focus on human resource planning. Sims (2002) relates that SHRM planning can provide a number of direct and indirect benefits for an organisation. Benefits of SHRM planning include the fact that HRM costs may be lower because management can anticipate imbalances before they become unmanageable and expensive. More time is available to locate talent because needs are anticipated and identified before the actual staffing is required. Development of potential managers can be better planned.

Suitable HR policy development can aid the competitive position of a company. An organisation’s mission and values through their desired competitive strategy and can be supported by a set of SHRM policies and practices which drive the required employee behaviours in alignment with the business goals. This is illustrated by Southwest Airlines who utilise their organisational culture to competitive advantage. This involves an extensive selection process for hiring flight attendants whose profile fits. This includes casting type exercises where applicants are examined against a psychological profile that distinguishes outstanding flight attendants with a focus on customer satisfaction (Beardwell et al 2004).

Strategic involvement a forward-looking view of employee development and career planning is a time focussed approach. SHRM which focuses on organisational practices that lead to knowledge transfer and the creation of future solutions as opposed to practices which merely correct past errors. As an example a software development company is entirely reliant on its human capital, their knowledge and skills to generate profits. The SHRM strategy which focuses on how to recruit suitable staff, and enrich and share their knowledge base to meet client’s requirements will have a positive business impact (Swart et al 2005).

According to Torrington et al (2008), three theoretical approaches to SHRM can be identified. The first is based on the concept of the ‘one best way’ of managing human resources to improve business performance. The second focuses on the need to align employment policies and practices with those of business strategy so that the business will be successful. This approach is based on an assumption that different business strategies will require different types of HR strategies. A more recent approach is based on the perceived value of human capital. This focuses on the quality of human resources available to the organisation and their ability to learn and adapt more quickly than their competitors. The perceived importance of people as a business asset was emphasised by Barclays Group who were keen to demonstrate that their financial results were related to their people strategies ad improvements in staff satisfaction. This focus on human capital and competitive advantage is not applicable in all forms of employment, for example it is of little relevance for organisations in the public sector.

There are detractors who view the HR function as lacking in the necessary business knowledge to be accepted as a strategic partner. Many do not fully accept the involvement of SHRM in contributing to business success. Loosemore et al (2003) despite numerous studies into the nature of HRM and what it represents, it still remains a widely criticised and ambiguous concept. Most importantly, its contribution to organisational performance remains unclear and is not well understood. Critics allege that rather than adding value to the business through its strategic integration with managerial objectives, the reality is that SHRM can remain a disappointingly mechanistic function. They suggest that the theory of SHRM represents a false and unobtainable image for personnel managers to aspire to, because aligning so many competing needs within a single approach is bound to be problematic.

Brewster and Larsen (2000) argue that the central theme of SHRM is the link between organisational strategies and the HR function. The focus is on the place HRM has or does not have in the overall process of strategic decision making in the organisation. SHRM points towards a strategic orientation of the HR function and functional areas themselves. Here the focus is on the existence of HR strategies and on the strategic direction of core functional areas such as recruitment and selection, training and development, appraisal and compensation. Direct integration of SHRM requires the immediate participation of members of the HR department and /or HR issues in the formal or informal decision process at the strategic organisational level. Indirect integration emphasises that goal-oriented influencing of organisational decision makers that can shape the strategy processes. In European countries, personnel or HR specialists rarely reach the very highest positions in employing organisations which would enable them to make such a directly influencing contribution.

SHRM has a lack or metrics which could provide a meaningful record of their strategic contribution. Price (2007) questions the effectiveness of the human resources function as a strategic partner, citing the measurement of HR success as potentially faulty. One common approach is the use of the balanced scorecard which includes a range of HR measures as well as the traditional financial and other metrics such as time to hire, cost per hire, and percentage of appraisals completed. These metrics, while important are not the role of strategic partnership and reinforce the view of HR as an administrative function.

SHRM is not universally accepted in all cultures and this affects international firms in particular. Contractor (2002) discusses the joint venture experience of western companies in Japan. He relates that HR practice and competitive strategy of multinational companies in Japan showed clearly that the execution of a winning strategy in the Japanese market was often severely handicapped by the deficiencies in the human resource system. The capability gap between strategic requirements of the business and the support provided by the HRM system was evident independently of the products and industries where joint ventures were involved.

Dubrin (2008) argues that while business strategy addresses the financial priorities of the organisation by identifying what business the company should be in, product direction, profit targets and others, human resource planning addresses the question of what skills are needed for success of the business. Planning helps to identify the gaps between current employee competencies and behaviour and the competencies and behaviour needed in the organisations future. SHRM planning contributes by estimating how many people and with what abilities the company will need to create in the foreseeable future, for future turnover and those likely to remain long term. In addition SHRM plans the recruitment, selection and retirement or redundancy of employees, and once hired, the training and development needs to ensure a continued supply of people with the right skill sets.

SHRM can contribute to business success by focussing their efforts on development of people in line with a strategic analysis of the key influences on the present and future success of the organisation, the influence of threats and opportunities in the business environment and the competencies and strengths of the organisation. Strategic HR development (SHRD) in this situation includes analysis of current skill levels available within and external to the organisation which might affect current and future business goals. SHRD would consider the core competencies of the organisation in terms of human capabilities in existence or which might be developed, and how these might be deployed. Choice of strategic options open to the organisation in terms of products or services could be assessed against the ability of SHRD to recruit staff and train them to meet the requirements of the strategic options selected. (Wilson 2005).

An agile SHRM function which is in tune with the changing business environment is an asset to a company. Jackson et al (2008) argue that understanding the nature of the organisational and external environments is core to managing human resources strategically. To recruit the right people with the right competencies and to keep these people motivated to do their best work, managers and HR professionals alike need to understand the demands and nature of the business. A computer company that competes by continually offering innovative products and services is likely to manage people differently than a retailer that competes by offering low-cost goods or a manufacturer that competes by offering the best quality possible. Furthermore, each of these companies may change is approach to managing human resources as economic and social conditions change. An SHRM function which can deliver such flexibility can contribute especially in times of business change.

Armstrong (2000) relates that the concept of sustainable competitive advantage as formulated by Porter (1985) arises when a company creates value for its customers, selects markets in which it can excel and presents a moving target to its competitors by continually improving its position. According to Porter, three of the most important factors are innovation, quality and cost leadership. The ability to gain and retain competitive advantage is crucial to a business’s growth and profitability. However, Porter recognises that all these depend on the quality of an organisation’s human resources. An organisation’s HR strategies, policies and practices are a unique blend of processes, procedures, personalities, styles, capabilities and organisational culture. One of the keys to competitive advantage is the ability to differentiate what the business supplies to its customers from those supplied by its competitors. Such differentiation can be achieved by having higher-quality people than those competitors, by developing a nurturing the intellectual capital possessed by the business and by functioning as a ‘learning organisation’. The SHRM approach of focussing on changing attitudes and behaviour of employees in pursuit of competitive advantage successfully is borne out by a quote from the National Westminster Bank who stated that ‘in strategic terms our fundamental reason for being in this position is that in a competitive world it is acknowledged that products do not differentiate you and it’s easy to buy technology. What actually gives the bank the competitive edge is the people that serve the customers’.

Kew and Stredwick (2005) discuss the role of the HR function in company ethics. Corporate Social Responsibility (CSR) is increasingly a differentiating factor in some customer’s relationship with companies. The theory on ethics and CSR suggests that the ethical policy can only be meaningful if it permeates all the activities of the organisation, and if everyone within the organisation internalises it, rather than pay lip service to it. This suggests that HR in its role of helping to identify the values of the organisation has a clear contribution to make. HR has the experience with values, and is well placed to canvass opinions across a wide range of stakeholders to enable it to draw up a code of ethics. This ethical behaviour extends to the concept of the psychological contract (CIPD 2003b, pp18-19). This defines the implicit deal between employer and employees, as distinct from the formal deal contained in the contract of employment.

Conclusions

The contribution of SHRM to the success of an organisation is effective in a number of areas such as the newer knowledge industries where the concept of people as a business asset is foremost. However, there is little evidence that SHRM is effective at the basic level of actively participating in strategic formulation at board level. It is more involved in the implementation of strategic business decisions. There are sceptics as to the effectiveness of SHRM as a concept and as to the function’s ability to be a business partner. The rapidly changing business conditions means that types of employees required and their skills in aspects such as knowledge management has placed more emphasis on a strategic HR function. Successful SHRM is agile, has the ability to forward plan, recruit strategically, manage the balance of employees and develop by training and reward the competencies necessary for the modern business environment.