Human Resource Management Strategy Management Essay

2.0 INTRODUCTION

From a Strategic Human Resource Management perspective, an organisation’s human resource management strategy must be integrated with the business strategy to ensure that the human resource management practices add value to the organisation. This chapter introduces the 5 major human resource management practices known as Human Resource Planning, Recruitment and Selection, Training and Development, Performance Management and Effective Communication and how they are effective to organisation.

2.1 HUMAN RESOURCE MANAGEMENT

Definitions:

Human Resource Management is defined in terms of its proactive approach to manage people in the organisation. HRM recognises that people must be effectively managed if an organisation wants to achieve its objectives and thus be ahead of the rest.

According to John Bratton (2007) “Human Resource Management is a strategic approach to manage employment relations which emphasizes that leveraging people’s capabilities is critical to achieve competitive advantages, this being achieved through a distinctive set of integrated employment policies, programmes and practices.

Briscoe and Schuler (2004) said that Human resource management refers to all the dedicated activities that an organization uses to affect the behaviours of all the people who work for it.

Michael Armstrong (2001) describes Human Resource Management as:

“a strategic approach of acquiring, developing, managing and motivating an organization’s key resource – its people.”

Armstrong’s definition contains two important elements: ‘ strategic ‘ and ‘ key resource ‘.

In order to make an effective contribution, HRM must complement and advance strategic business objectives. How people are recruited, developed and motivated must, in itself, make a direct and visible impact on the success of the business. While the personnel management role is to service the decisions taken, the human resource management perspective suggest that managers are directly involved in strategic formulation. Human Resource Management is an integral part of strategic planning and management for growth, competitive gain, quality and improvement of bottom line performance. HRM implies an integration of corporate objectives and the objectives of HR function. There is thus a movement from peripheral staff role to mainstream business management, that is, in determining and modifying strategies of the organization.

HRM is also concerned with the ‘people’ dimension in management – people are viewed as the MOST IMPORTANT RESOURCE of the organization. For many companies, it is people who make things, take decisions and sell goods or services. The same people are responsible for the decline or failure as well as the success of businesses.

2.2 IMPACT OF HRM PRACTICES ON ORGANISATIONAL PERFORMANCE

HRM practices are very effective as it enhance the organisational performance.

In an award-winning study, Dr. Huselid (1994) has demonstrated that investment in progressive HR practices contributes to corporate profits.

Despite the rhetoric and developing conventional wisdom suggesting that investment in human resources can provide companies with a source of competitive advantage, little systematic research has been conducted on this topic. This situation gave Dr Huseild the motivation to complete one of the largest studies ever conducted linking data on HR management practices with objective measures of turnover productivity and corporate financial performance.

His study provides some of the most comprehensive evidence available to confirm the hypothesis that the use of progressive or sophisticated HR management practices has a substantial and positive impact on company performance. In a wide variety of companies representing diverse industries, he found that investment in such practices led to better financial performance, higher productivity and lower turnover. He has confidence in these results because they are consistent across several different measures of performance and have statistical corrections for selectivity and simultaneity.

2.3 ACTIVITIES PERFORMED BY THE HR DEPARTMENT

2.3.1 Human Resource Planning

Jeff Gold (2007) defined Human Resource Planning as the process of systematically forecasting the future demand and supply for employees and the deployment of their skills within the strategic objectives of the organisation. ‘People are the primary determinant of business performance’. If a firm’s people strategy is aligned with a consistent and complementary innovation strategy there is high probability of superior business performance.

According to Michael Armstrong (2001) “Human Resource Planning is the systematic and continuing process of analysing an organisation’s human resource needs under changing conditions and developing personnel policies appropriate to the longer term effectiveness of the organisation. It is an integral part of corporate planning and budgeting procedures since human resource costs and forecast both affect and are affected by longer terms corporate plans.

While performing HRP it is important for organisations to consider three key performance indicators known as:

Labour productivity

Absenteeism

Labour turnover

Labour Productivity

Labour productivity is continuously seen as the most important measure of how well an organisation is performing or how its employees are achieving the goals and objectives of the organisation. Labour productivity is calculated using this formula:

Labour productivity = Output per period

Number of employees per period

Absenteeism

Absenteeism is the number of workers who miss their work. It is possible to calculate the number of employees who are absent from work using this formula and it is very important to know number of absenteeism.

Absenteeism = Number of workers absent Ã- 100

Total number of workers

Labour Turnover

Labour turnover is a measure of the rate at which employees leave the organisation. When the labour turnover figure is high this reflects an inefficient human resource strategy. Therefore measures must be taken to solve this problem.

Labour turnover = Number of staff leaving per year

Average number of staff

When an organisation carries out HRP, it has the responsibility to determine how many people the organisation needs now and in the future. It also determines what knowledge, skills and abilities are needed to ensure that the organisation can both survive and prosper. Furthermore, it evaluates the knowledge, skills and abilities of the existing employees and determines how it will fill the gaps.

Key Objectives of HRP

Prevent overstaffing and understaffing

Ensure the organisation has the right employees with the right skills in the right place at the right time.

Ensure the organisation is responsive to changes in its environment

Provide direction and coherence to all HR activities and systems

Unite the perspectives of line and staff managers

2.3.2 Recruitment and Selection

Recruitment and Selection are two of the most important functions of personnel management. Recruitment precedes selection and helps in selecting the right candidates.

According to Gold.J (2007) Recruitment is the process of generating a pool of capable people to apply to an organisation for employment. Selection is the process by which managers and other use specific instruments to chose from a pool of applicants the person or persons most likely to succeed in the jobs, given management goals and legal requirement.

Anderson, A.H (1994) said that: The recruitment and selection process is concerned with identification, attracting and choosing suitable people to meet an organisation’s human resource requirements. They are integrated activities and ‘where recruitment stops and selection begins is a moot point’. Nevertheless, it is useful to try to differentiate between the two areas; Whitehill, A.M (1991) describe recruitment process as a positive one, ‘building a roster of potentially qualified applicants’, as opposed to the negative process of selection. So a useful definition of recruitment is ‘searching for and obtaining potential candidates in sufficient numbers and quality so that the organisation can select the most appropriate people to fill its job needs’ (Dowling and Schuler, 1990); whereas selection is more concerned with ‘predicting which candidates will make the most appropriate contribution to the organisation- now and in the future’ (Hackett, 1991).

According to Armstrong (2001), the overall aim of recruitment and selection process should be to obtain at minimum cost the number and quality of employees required to satisfy the human resource needs of the company. The three stages of recruitment and selection are:

Defining requirements: preparing job descriptions and specifications; deciding terms and conditions of employment;

Attracting candidates: reviewing and evaluating source of applicants inside and outside the company, advertising, using agencies and consultants;

Selecting candidates: shifting applications, interviewing, testing, assessing candidates, assessment centres, offering employment, obtaining references and preparing contracts of employment.

Defining requirements

The number and categories of people required should be specified in the recruitment programme, which is derived from the human resource plan. In addition, there will be demands for replacements or for new jobs to be filled, and these demands should be check to ensure that they are justified. Requirement for particular positions are set out in the form of job description and person specification.

Job Description

A job description sets out the basic details of the job, defining reporting relationships, the overall objectives of the job, the main activities or tasks carried out and any other special requirement or feathers.

Person Specifications

This is also known as a recruitment, personnel or job specification. A person specification is written by the firm and outlines the type of person the firm wants. It might contain the educational qualifications, previous experience, general intelligence, specialised skills, interests, personality and physical requirements and how you lookA person specification is used to match the right person to the job. It describes the desirable personal attributes of the job holder.

Attracting Candidates

Armstrong said that attracting candidates is firstly a matter of identifying, evaluating and using the most appropriate source of applicants. Therefore, the analysis of recruitment strengths and weaknesses concerned with matter such as the national or local reputation of the organisation, pay, employee benefits and working conditions, the intrinsic interest of the job, security of employment, opportunities for education and training, career prospects, and the location of the office or plant.

Source of candidates

Internal Candidates: some organisation with powerful equal opportunities policies insist that all internal candidates should apply for vacancies on the same footing as external candidates. If there are no people available within the organisation competent for the job then the main sources of obtaining the required candidates are via advertising, the internet, recommendation and outsourcing to consultants or agencies.

Selecting Candidates

According to Armstrong there are a number of selection methods available to an organisation and the following methods can be considered:

Interview

Biodata

Group methods

Personality assessment

The ability to effectively recruit and select good quality people stems from an organizational effort to hire the best people. This does not mean the most skilled or most accomplished. By creating the necessary awareness about your company, instilling the right company culture, and learning how to pick the best people, your company will begin to thrive and become a highly desirable place to work for employees.

Moreover, the key to successful recruitment is to ensure that the criteria of suitability are overt and relevant to the job itself. Once these criteria are agreed and shared it is possible to make more rational decisions about someone’s suitability for a job, based on evidence rather than ‘gut feeling’ or instinct. Effective recruitment and selection should not be about the luck of the draw. Systematic planning and preparation will increase the likelihood of taking on the right person. The key to effective recruitment is preparation: knowing the job and what is required of someone to perform it well. The costs of recruiting the wrong person can be significant. The cost of employing someone may be at least twice their salary when factors such as training, expenses and employer’s contributions to their pension are added.

Recruitment

Placement

Competence to perform present or future job requirement

Optimum match of talents with organisational needs

Understanding of company/departmental policies, procedures and benefits

New Employees

A small pool of qualified candidates

Training

Orientation

Selection

Initial screening

Recommendations, reference checks, application blanks, interviews

A pool of qualified candidates

Planning, operation, control

Specification of human resource requirements

Workforce/Planning

Specification of people/task requirements of job

Job analysis

Products

Activities

Steps

EMPLOYEE RECRUITMENT AND SELECTION PROCESS

Cognitive, work sample, or situational tests, personality inventories, polygraphs

Feedback regarding past and present job performance supervisor/ subordinate plans for the

future

Performance

Appraisal

Figure 1.1: Employee recruitment and selection process Source: WAYNE F.CASIO (2003) 6th edition Pg 202

2.3.3 Training and Development

Training

The Manpower Service Commission, which was set up by the 1973 Employment and Training Act until it was replaced in 1988, define training as

“A planned process to modify attitude, knowledge or skill behaviour through learning experience to achieve effective performance in an activity or range of activities. Its purpose, in the work situation, is to develop the abilities of the individual and to satisfy the current and future needs of the organization.”

Armstrong (2001) defined Training as ‘the formal and systematic modification of behaviour thought learning which occurs as a result of education, instruction, development and planned experience.

Development

Development implies a broader view of knowledge and skills acquisition than training. It lays more emphasis on career than job orientation; it is concern with employee potentials rather than with gaining immediate skill. It sees employees as adaptable resources.

Armstrong (2001) said that “Development is the modification of behaviour through experience. It provides for people to do better in existing jobs and prepares them for greater responsibility in the future. It builds on strength and helps to overcome weakness and ensure that organisation has the expertise it needs. Development operates at all levels in an organisation”

Effective Training and Development

Effective training and development can be beneficial to organisations in there following ways:

Effective training can be;

Minimize learning costs

Improve individual, team and corporate performance in terms of output, quality speed and overall productivity

Improve operational flexibility by extending the range of skills possessed by employees (multi-skilling)

Attract high-quality employees by offering them by learning and development opportunities, increasing their levels of competence and enhancing their skills, thus enabling them to obtain more job satisfaction to gain higher rewards and to progress within the organization.

Increase the commitment of employees by encouraging them to identify with the mission and objectives of the organization.

Help to manage change by increasing understanding of the reasons for change and providing people with the knowledge and skills they need to adjust to new situations.

Provide higher levels of service to customers

Identify training needsTHE PROCESS OF TRAINING

Define learning requirements

Evaluate training

Implement training

Plan training programmes

Locations

Facilities

Trainers

Techniques

Figure 1.2: The Process of Planned Training

Source: HRM practice Michael Armstrong 8th edition (2001)

Induction Training

It is one of the most important initial steps in the training process in the induction course. It has long been recognised that new employees often experience an induction crisis. The new work environment is often perceived by the new recruit as perplexing and even frightening. An unwelcoming or indifferent reception can ferment the view that it was a mistake to begin work there. HR or the Department Manager generally carries out induction when a new employee starts. It is often a two level thing, with some items carried out by a Mentor or the person training the new employee.

Generally, a good induction program will explain the company culture, clarify policies such as leave (sick, holiday and special), pay (how often and how – cash, cheque or direct deposit), breaks, hours of work and overtime policies, workplace Health & Safety overview, including first aid facilities and evacuation procedures, company hierarchy, and where the new staff member fits in, position description and general overview of their role (KPI’s, reporting structure, etc), amenities (lunch room, sick room, toilets) and also introduction to workmates.

Training Techniques

According to Armstrong (2001) there is a wide variety of training techniques that can be used. These can be divided into

On-the-job Techniques

These training techniques are practiced on a day-to-day basis or as a part of a specially tailored training programme. These includes demonstration, coaching, job rotation, planned experience and mentoring and other personal development activities

Off-the-job Techniques

These techniques are used in formal training courses away from the place of work. These includes lectures, talks, discussions, the discovery methods, case study, role playing, simulation, group exercise, team building, distance learning, outdoor learning and workshops.

On or Off-the-job Techniques

These training techniques include instruction, question and answer, action learning, assignment, project, guided reading, computer-based training, interactive video and video.

2.3.4 Performance Management

Performance management was defined by Gold (2007) “as a set of interconnected practices which are design to ensure that a person’s overall capabilities and potential are appraised, so that relevant goals can be set for work and development and, through assessment, data on work behaviour and performance can be collected and reviewed”.

Establishing an effective performance management system is a major challenge for most organizations. It has been a key topic in the human resources management literature for decades (Mohrman, Resnick-West and Lawler, 1989; Latham and Wexley, 1994). Recently, a great deal of attention has been focused on it. Perhaps the most important reason for this interest is the increased importance of human capital. Because work requires more knowledge and skills, organizations depend more and more on the performance of their human capital, and as a result are increasingly focused on how it is managed. Lawler, (2000) said that, in order to tie performance to rewards, the key to motivating performance, organizations need to have accurate measures of individual performance

Performance Appraisal is defined here as a formal., structured system of measuring, evaluating and influencing an employee’s job-related attributes, behaviours, and outcomes as well as level of absenteeism to discover how productive the employee is and whether he or she can perform as or more effectively in the future so that the employee, the organisation and society all benefit from it. Also performance appraisal is a systematic and objective way if judging the relative worth of an employee in the performance of his job. Performance appraisal methods are usually grouped under two categories, namely the traditional and modern methods. The traditional methods includes: Ranking methods, Paired comparison, Grading, Checklist methods, Critical incident methods, Confidential Report, Forced distribution and Group appraisal. The modern methods are Assessment centre, Appraisal by results or objectives, Behavioural Anchored Scales and 360 degree feedback.

Moreover, performance appraisal is the process whereby supervisors evaluate an employee’s performance to identify strength and areas of improvement. It provides an opportunity for the employees’ efforts to be recognised and thus improve their motivation. It also offers a chance for supervisors and staff to identify and agree on training needs as well as a basis for manager to assess the effectiveness of recruitment and hiring strategies. Most importantly, it assists employees and supervisors to adopt a new direction for better performance.

2.3.5 Effective Communication

According to Taffy Wagner (2009) Effective communication is a process through which the sender conveys a message that the receiver readily receives and understands. It is a two-way process instead of a one-way process.

Effective communication is a tool to maximise customer satisfaction and organisational success. A dictionary definition of communication is “The imparting or exchange of information, idea or feelings.” The management literature is replete with the virtues that effective communication plays in the life of organisation. Communication is, in fact, the lifeblood of organisation. Organisations need complete, coherent and efficient communication system in which information are channelled upward, downwards and laterally between managers and employees, as well as outward to customers, policymaker and relevant stakeholders. (Taylor. P and Thackway.B (1996)). Organisations function by means of the collective action of people, yet each individual is capable of taking independent action which may not be in line with policy or instructions, or may not be reported properly to other people who ought to know about it. Therefore, good communication is required to achieve coordinated results. Moreover, communication is the “lifeblood” of every organization. A vital means of attending to company concerns is through effective internal communication. Communication is the medium through which an organization accomplishes its goals. It leads to greater effectiveness, it keeps people in the picture by getting people involved with the organization and it helps to create better relationships and understanding between boss and subordinate, colleagues and people within the organization and outside it.

2.4 Empirical Review

Previous empirical research on the Effectiveness of HRM practices

Hoque (1999) explored HRM practices and a range of outcome variables from a sample of 209 hotels. The outcome measures were of two types: “human resource outcomes” and “performance outcomes”. He found that, amongst the quality enhancers, commitment, job satisfaction, quality of work, quality of service and financial performance, as perceived by the respondent, were all strongly related to the use of HRM practices.

Moreover, Hoque (2000) made another research and found that HRM practices to be adopted by the hotel industry based on the high commitment management, high involvement management and high performance work systems, and identified a bundle of HR practices for hotels covering the following issues terms and conditions of employment, recruitment and selection, training, job design, quality management, communication and consultation, and pay systems.

Hinkin and Tracey (2010) identified six categories of innovative HR practices used by hospitality and service companies as a culture of caring for employees and open communication; flexible scheduling to meet the needs of a changing workforce; innovative methods to attract, select, retain a loyal and competent workforce; training programmes viewed as investment in people emphasising career tracks and promotion from within; performance management systems aligned with organisational objectives; and compensation programmes reflecting the organisational values and linking pay to performance.

Moreover, Steven.J and Mayer (2008) identified some examples of research studies linking HRM Practices to Results:

• A study of 968 firms in 1998 representing all major industries demonstrated that firms with high performance practices achieved $27,044 more in sales, $18,641 more in market value, $3,814 more in profits on a per employee basis, and a 7% decrease in turnover.

• A subsequent study of 702 firms found even greater economic benefits, indicating an increase in shareholder wealth of $14,000 per employee.

• These results were not limited to USA firms. One example of similar results was a study of more than 100 German firms operating in 10 industrial sectors.

• A study launched in 1988 examined the survival rate of 136 financial companies. Five years later, 60% of the companies were still in existence. Further analysis revealed that with factors such as size, industry, and even profits statistically controlled both the value the firm placed on human resources and how the organization rewarded its people were significantly related to the probability of survival.

Table 1.1 Academic findings on relationship between HRM practices and labour competitive advantages

Authors

Findings

Snell and Dean (1992)

HR practices enhance the firm’s competitive position by creating superior human capital (skills, experience and

knowledge) that contribute to firm’s economic value

Swiercz and Spencer (1992)

HRM could be a valuable asset and tool of corporate strategy

Wright et al. (1994)

The correct mix of HR practices is necessary for maximum effectiveness of the HR capital pool

Pfeffer (1995)

There are interrelated practices that characterize companies who are effective in achieving competitive success through

people management

Boxall (1996)

By hiring and developing talented staff and synergizing their contribution within the firm’s resource bundle, HRM may lay the basis for a sustained competitive advantage

Boxall and Purcell (2000)

HR practices may build the human capital poor and stimulate human behaviour to create an advantage

O’Reilly and Pfeffer (2000)

Companies need cultures and systems where great people can actually use their results from almost everybody

Bontis and Fitz-enz (2002)

For senior managers to manage the dynamic changes of turbulent economic environments and filter the massive sources of information into knowledge (or, better yet, wisdom), an integrated perspective of human capital management plays a considerable role.

Chen et al. (2003)

HR activities are frequently acknowledged to play a central role in linking employee capabilities with the performance requirements of a firm.

Source: Vokic; N. Poloski (2008)

Table 1.2 demonstrated a summary of some of the HRM practices studies that were conducted by various researchers who talked about the effectiveness of HRM practices in labour competitive advantages.