The process of Human Resources Management

Human resource management (HRM) is the process of obtaining, managing, and training human talents to achieve an organisation’s objectives. According to scribd.com, HRM is based on four basic principles. Firstly, human resources are the most valuable assets to an organisation and to manage the human talents effectively is the key to success. Next, an organisation is more likely to accomplish its objectives if the personnel policies and procedures of the organisation are closely related to its goals and strategies. Thirdly, the corporate culture and values in an organisation have a major effect on the accomplishment of excellence. Lastly, the function of HRM is to bring all the members in an organisation to get involved and work together with a set of common goals.

Human resource management (HRM) are attached to three meanings (scribd.com, 2010). Firstly, members in an organisation are the most important assets and therefore there is a need to invest time and effort to develop them so that the organisation’s objectives that are set can be achieved. Next, HRM focuses on introducing human values in an organisation as human resources are unique and cannot be treated like material resources. Finally, HRM do not only focus on each member in the organisation as individuals, but also the connection between the members with other units, departments, and the organisation as a whole.

The role of human resource management is to hire, manage, and develop the human talents in an organisation effectively so that the goals and objectives of an organisation can be achieved. HRM is therefore given responsibility in four major areas which are planning, staffing, employee development, and employee maintenance (scribd.com, 2010). According to Gaynor Borade in his article entitled “Functions of Human Resource Management”, the HRM department is accountable for executing resource strategies to create and maintaining a competitive advantage, recruiting a desirable workforce, managing human resources effectively to achieve organisational goals, and to develop a positive interaction between workers and departments so that the organisation as a whole can achieve successes.

Strategic HRM

Besides planning and managing human resources to achieve organisational goals, human resource management (HRM) is also closely related to strategic management. According to the online business dictionary, strategic management is the systematic analysis of the factors related to the external environment like customers and the internal environment such as the organisation itself to make positive changes in the current management system. In this ever changing environment, it is important for an organisation to change its systems and processes according to the external and internal environment to stay ahead of its competitors. Therefore, one of the aims of HRM is to give an organization a competitive edge. To do this, many HR managers combines strategic planning, a set of processes to set long-term organisational goals and methods to achieve them, and human resource planning (HRP), the strategic movement of human resources in an organisation to achieve organisational objectives (Snell & Bohlander, 2007). Synthesised together, the two elements together are known as strategic human resources management or SHRM. SHRM, which is a combination of strategic planning and HR planning, is best described as setting long-term organisational goals and the methods to effectively manage the human resources to achieve the organisational objectives. According to Margo Upson in his article called “What is Strategic Human Resource Management?”, SHRM requires thinking ahead, and planning ways for a company to better meet the needs of its employees, and for the employees to better meet the needs of the company.

According to Scott Snell and George Bohlander, the authors of “Human Resource Management”, human resource planning (HRP) and strategic planning are most effective when there is a reciprocal relationship between the two processes. Without a strategy plan, HR managers would not accomplish organisational goals; without a pool of human talents, a strategy plan would not succeed. Therefore, the mutual relationship between strategic planning and HR planning is very important in an organisation to accomplish its various objectives. There are a few steps to incorporate strategic planning and HRP. Firstly, the mission, vision, and values of an organisation must be identified (Snell & Bohlander, 2007). After that, the managers of the organisation would have to conduct an environmental scanning on both the external and the internal environment of the organisation (Snell & Bohlander, 2007). Next, managers would have to formulate and implement various strategies according to the organisational goals before evaluating the strategies used and implement changes to the strategies when changes in the environment occurs (Snell & Bohlander, 2007).

Every organisation, from the small home businesses to the large corporations like IBM and Microsoft has their own mission, vision, and values. It is one of the basic foundations before an organisation starts its businesses. Therefore, establishing the mission, vision, and values of an organisation is the first step in strategic planning, one of the elements of strategic human resource management (SHRM). A mission or mission statement is a clear representation of an organisation’s reason of existence. According to Business Resource Software, Inc, a mission statement should include socially meaningful and measurable criteria addressing concepts such as the moral or ethical position of the organisation, public image, the target market, products and services, the geographic domain and expectations of growth and profitability. For example, the mission statement of Air Asia, a Malaysia-based low-cost airline is as follows:

To be the best company to work for whereby employees are treated as part of a big family.

Create a globally recognized ASEAN brand.

To attain the lowest cost so that everyone can fly with AirAsia.

Maintain the highest quality product, embracing technology to reduce cost and enhance service levels.

The strategic vision, or a vision statement, on the other hand is a picture of the organization in the future. According to Susan Ward in her article called “Mission Statement”, the difference between a mission statement and a vision statement is that a mission statement focuses on a company’s present state while a vision statement focuses on a company’s future state. On the contrary, the core values of an organisation are the beliefs and principles that an organisation uses as a foundation in its various decision making processes (Snell & Bohlander, 2007). For instance, the core values of Microsoft are as follows:

We act with integrity and honesty.

We are passionate about our customers and partners, and about technology.

We are open and respectful with others and dedicated to making them better.

We are willing to take on big challenges and see them through.

We are self-critical, questioning, and committed to personal excellence and self-improvement.

We are accountable for commitments, results, and quality to customers, shareholders, partners, and employees.

After the mission, vision, and core values of an organisation have been established, an organisation would have to analyze the environment, both internally and externally. Since the external environment that either appears as an opportunity or as a threat can have a major impact on an organisation, accurate and meticulous analysis of the external environment is essential to give the organisation a competitive advantage. To do this, a thorough environmental scanning, the systematic monitoring of the major external forces that can influence the organisation is required (Snell & Bohlander, 2007). Although there are many external factors that can have a major impact on an organisation, the competitive environment such as customers and rival firms are the most common factors that affect an organisation. Customers are one of the most important stakeholders of an organisation because without customers, an organisation would not make profits. Therefore, many organisations strive to satisfy their target markets with unique products or high quality services that gives value to customers. For example, Air Asia with their tagline “Now Everyone Can Fly” provide airline services with low fares that gives them a competitive edge. While customers proved to be opportunities for organisations, rival firms on the other hand are threats to organisations. Therefore, organisations must identify its rival competitors in order to stay ahead of the competition. After the competitors have been identified, the organisation would have to make changes in its strategy and managing the human resources effectively according to the new strategy to stay ahead of its competitors.

Besides customers and rival firms, new entrants are also one of the factors in the competitive environment. When new companies enter an industry, it can change the “rules of the game” (Snell & Bohlander, 2007). For instance, when it seems like Malaysia Airlines is dominating the local airline industry here in Malaysia, Air Asia came into the industry by offering low fares airline tickets to various destinations around the world. In the example given, Air Asia has changed the rules of the game by offering low fares airline tickets to customers. This can have an impact on labor costs, productivity, skills required, and work design which are important considerations in both strategic planning and human resources planning (HRP) (Snell & Bohlander, 2007). In addition, substitutes are also one of the factors in the competitive environment. According to Scott Snell and George Bohlander, substitutes offer the same service or function as traditional firms, but through a different method. For example, smart phones are starting to act as substitutes to laptops which are once substitutes to the desktop computers. To further support the example, below is a quote from Nick Wingfield in his article entitled “Time to Leave the Laptop Behind”. Nick said: “For years, mobile workers have been ditching their desktop computers for laptops that they can take wherever they go. Now road warriors are starting to realize that they can get even more portability and lots of computing punch from smart phones” (Wingfield, 2009). Lastly, suppliers are also part of the competitive environment. An organisation does not stand on its own, but instead, organisations have suppliers to provide raw materials, information, or people. People or labor has a central role in both strategic planning and HRP and has direct implications for strategic human resource management (SHRM) (Snell & Bohlander, 2007). At an operational level, changes in labor supply directly influences hiring plans that must take into account the demographic composition of the population in the area where the organisation is located (Snell & Bohlander, 2007). On the other hand, from the strategic standpoint, the change in labor supply can limit the strategies available to firms (Snell & Bohlander, 2007). Therefore, organisations are always on the lookout for changes in the labor force supply using environmental scanning and information from the internet and published documents to make changes in their strategy to give them a competitive advantage.

After the external environment has been analysed, organisations then conduct analysis on the internal environment such as the organisations’ strengths and weaknesses. In the context of human resources planning (HRP) which is one of the elements of strategic human resources management (SHRM), internal analysis focuses especially on the “the three Cs” of the organisation which are culture, competencies, and composition (Snell & Bohlander, 2007). Since human talents are the most important resources for an organisation to gain a competitive edge against its competitors, organisations often conduct cultural audits to study the culture among its employees. According to ITAP International, cultural audits examine current practices, programs and processes to identify how culturally appropriate an organisation may be for multi-cultural or global audiences. The goal of cultural audit is to build employees’ loyalty and enhance their productivity, increase the client base adherence and attract more new clients, and thus driving the company’s overall competitive advantage (ITAP International, 2011). Cultural audit is very important for an organisation because it can assess the attitudes and beliefs of its employees and therefore make appropriate decisions in its business especially in HR planning.

The second “C” of the “three Cs” is competencies. Every successful organisation has its own core competencies that set itself apart from its rival competitors in the same industry. Core competencies, according to Net Industries, are the key activities and skills present within an organisation that provide the source of its competitive advantage. For example, McDonald’s core competencies are management efficiency and training (Snell & Bohlander, 2007). According to Scott Snell and George Bohlander, the two authors of “Human Resource Management”, organisations can achieve a sustained competitive advantage through people if they are able to meet the four criteria below. First, the resources that an organisation has must be valuable. Human talents in an organisation are a source of competitive advantage because they improve the efficiency of the organisation and work to achieve organisational goals. The value of the human resources increases when employees find ways to cut costs, provide something unique to customers, or some combination of the two (Snell & Bohlander, 2007). Second, the resources of the organisation have must be rare. Human resources are a source of competitive advantage because the set of skills and knowledge that each employee has are unique to each organisation. Therefore, many companies such as Microsoft and IBM hire and train their employees according to their strategy in order to gain a competitive edge. Next, the resources that the organisation has must be difficult to imitate. When an organisation has a pool of human resources that its competitors cannot imitate or hard to imitate, the organisation will surely be at an advantage position. Lastly, the resources that an organisation has must be organised. To meet this last criterion, the role of HR department is very important. The managers must foresee the future of the organisation and implement strategies to achieve the desired goal. At the same time, the HR department would have to organise and manage the human resources available to the organisation to be in line with the strategies that are set by the managers to achieve the target objectives.

Composition is the last “C” of the “three Cs”. Once the composition of the human resources in an organisation has been analysed, the managers can then make strategies that can help an organisation to achieve the target goals. To accomplish this, managers rely on human resource planning (HRP) to compare and contrast the different approaches to employment. There are four types of workers that an organisation usually employs (Snell & Bohlander, 2007). The first type of workers is core knowledge workers. This group of workers usually have a set of specific skills that are directly related to the organisation. Therefore, companies usually employ this type of workers for a long-term period and give them training so that the organisation’s objectives can be met. The second type of workers is traditional job-based workers. This type of workers is usually employed for a short-term basis as the skills of the workers are not so much valuable to the organisation such as salespeople. The third type of workers is contract labor. Clerks and accountants fall into this category. This type of employees is usually employed on a contract basis and the scope of their duties tends to be limited (Snell & Bohlander, 2007). The last type of workers is alliance partners. This group of employees has unique skills but the skills that they possess are not usually in line with the organisations’ strategy. Therefore, companies tend to build a long-term alliance with them and nurture an ongoing relationship focused on mutual learning (Snell & Bohlander, 2007).

Besides analysing the “three Cs”, managers must also forecast the demand and supply of labors. In this fast pace and ever changing environment, managers must make changes to the strategies according to the environment. To accommodate the change in strategy, managers must work hand in hand with the HR department as changes in the strategy may require additional workforces. Therefore, forecasting the demand and supply of labor is a critical element to put the organisation in an advantage position. There are two methods to forecast the demand for employees which are quantitative and qualitative approach. Quantitative approaches involve the use of statistical or mathematical techniques to forecast the demand for labor (Snell & Bohlander, 2007). Trend analysis is one of the most common techniques in quantitative approach. According to the online business dictionary, trend analysis is a method of time series data (information in sequence over time) analysis involving comparison of the same item over a significantly long period to detect the general pattern of relationship between associated factors or variables, and to project the future direction of this pattern. In qualitative approaches however, forecasting are done not by mathematical methods but by instinct and experiences. One of the widely used qualitative methods is management forecasts. According to Scott Snell and George Bohlander, the authors of “Human Resource Management”, management forecasts are the opinions or judgments of supervisors, department managers, and experts that are knowledgeable about the organisation’s future employment needs. Another familiar quantitative approach technique is the Delphi technique. According to Duncan Haughey, the Delphi technique involves a group of experts to exchange views, and each individual gives estimates and assumptions to a facilitator who reviews the data and issues a summary report.

Once the forecast demand for labor is known, an organisation must also forecast the supply of employees to ensure that there are sufficient numbers and types of workers available. Staffing tables and Markov analysis are widely used to analyse the internal supply of employees. According to the authors of “Human Resource Management”, Snell and Bohlander stated that staffing tables are graphic representations of all organisational jobs, along with the numbers of employees currently occupying those jobs. On the other hand, Markov analysis shows the percentage of employees who remain in each job from one year to the next, as well as the percentage of those who are promoted, demoted, or transferred, or exit the computing turnover and absenteeism rates (Snell & Bohlander, 2007). Unlike staffing tables and Markov analysis that are used to forecast the number of employees, skill inventories, on the other hand are used to identify the types of employees available. According to the online business dictionary, skills inventory are the listing of abilities, capacities, qualifications, and career goals of the employees to identify suitable candidates for internal recruitment or promotions. While the above data are gathered on the employees, the same data that are gathered on managers are called management inventories. By combining both skill inventories and management inventories, an organisation can create replacement charts. A replacement chart, according to Nicholas J. Mathys, is a human resource forecasting technique that describes a firm’s organisation structure in terms of individuals who occupy various managerial and professional positions. The replacement chart provides information on the current job performance and promotability of possible replacements and is usually used for succession planning, which is the process of identifying, developing, and tracking specific employees so that they may eventually assume higher-level positions in the organisation (Snell & Bohlander, 2007).

After the organisation had established their mission and vision, scanned the external and internal environment, and forecasted the supply and demand for labor, it is time for managers and HR departments to formulate strategies for the organisation to achieve its organisational goals. SWOT analysis, an investigation and comparison of the organisation’s strengths and weaknesses as well as the opportunities and threats that exists in the market serves as a reference for managers to formulate strategies for the organisation. In corporate strategy, firms decide where or which industry they will compete in the market (Snell & Bohlander, 2007). For example, Sony decided to focus only on selling electronic products such as televisions, digital cameras, and notebooks to name a few. On the other hand, companies like Wal-Mart sells a wide array of products ranging from apparels to electronics. As companies grow, they will usually choose to expand their product line-up or expand their business internationally. But to do the above two things, an organisation is usually hindered by three important factors. They are increased productivity, a greater number of employees, and developing or acquiring new skills (Snell & Bohlander, 2007). In order to overcome the limitations above, companies such as IBM contracted with other firms such as Microsoft to enter a new market while other companies such as General Electric Company or commonly known as GE diversified its products and services by investing heavily in human resources.

Besides growth and diversification, organisations also choose to merge or acquire other companies to expand beyond its original base in the market. For example, Google acquired Youtube in 2006 for $1.65 billion to provide a better, more comprehensive experience for users interested in uploading, watching and sharing videos, and to offer new opportunities for professional content owners to distribute their work to reach a vast new audience (Google Press Center, 2006). Although there are many mergers and acquisitions among companies, there are many that failed. To illustrate this, Hewlett-Packard Company (HP) and Compaq Computer Corporation (Compaq) announced their merger on September 4th 2001 (ICMR, 2006). However, in just two days after their announcement, HP and Compaq share prices declined by 21.5% and 15.7% respectively and together, the pair lost US$ 13 billion in market capitalization in just a couple of days (ICMR, 2006). There are a few reasons for mergers and acquisitions to fail such as conflict among the companies and cultural inconsistencies in the firms. Therefore, the role of HR department is vital to make sure mergers and acquisitions succeed.

In addition to mergers and acquisitions, companies also form strategic alliances and joint ventures with other firms. One popular example of this is Sony Ericsson. According to Thor Olavsrud in his article entitled “Sony, Ericsson Link Up for Joint Venture”, Japanese electronics giant Sony Corp. and Swedish telecom equipment maker Ericsson sealed a pact to merge their worldwide mobile phone businesses in an effort to unseat reigning mobile monarch Nokia and take on Motorola. Whether it is the growth and diversification strategy, mergers and acquisition, or forming strategic alliances and joint ventures, the HR department of an organisation plays a vital role in accessing the compatibility of cultures of the target firm and finding ways to overcome the HR problems that might occur so that whichever strategy that an organisation choose to take can work out in the long run.

While corporate strategy is where an organisation will compete in the market, business strategy on the other hand is how an organisation will compete against its rival competitors in the same industry to create value for customers (Snell & Bohlander, 2007). Value creation, therefore is the focal aim of all businesses. Value creation can be said as the final value of a product or services perceived by the consumers after weighing the benefits and costs of a product or a service (Snell & Bohlander, 2007). Therefore, to create the best value in the consumers’ minds, organisations either decrease the cost of a product or service, or increase the benefits of the product and services, or a combination of the two elements. To implement a low-cost strategy, managers must work with HR department to achieve successes. According to Scott and Bohlander in their book called “Human Resource Management”, many people thought that to achieve successes in the low-cost strategy, companies usually cut down the number of labors or cutting down the wages of the employees but it is not always the case. For example, Starbucks is often-recognized for paying high wages to its employees yet still able to sell its products at a very low price compared to its competitors in the same industry such as the Coffee Bean and Tea Leaf. This is because highly motivated employees can often work more efficiently, ensure a better quality, eliminate waste, and provide better services (Snell & Bohlander, 2007). Besides motivating the employees by paying high wages, organisations can also choose to outsource to other countries to cut down the labor costs. Many companies now outsource to China as it has one of the lowest labor costs in the world.

Although by implementing a low-cost strategy, an organisation usually can deliver products and services that are perceived as valuable to consumers, it does not always work. As Gordon Bethune, CEO of Continental Airlines, put it, “You can make a pizza so cheap that no one will buy it.” (Snell & Bohlander, 2007). In this case, it would be appropriate for an organisation to implement differentiation strategy. To do this, an organisation need to offer either products that have unique functions, provide excellent customer service, or to sell high quality products to consumers. For example, Apple offers products that catch the attention of tech-savvy consumers and at the same time provide excellent customer service to deliver values to customers that are unique to its competitors. To maximize the results of differentiation strategy, human resource management (HRM) plays an important role. For instance, Mc Donald’s is popular for providing speedy services to its consumers. Therefore, the HR department must make sure that the employees are motivated to provide satisfactory services to its customers and at the same time, to manage the employees effectively according to their different tasks so that the food can be served to the customers in the shortest amount of time.

Besides devising corporate strategies and business-level strategies, managers must also make sure that the strategies are disseminated and aligned to all the departments in the organisation especially the HR department as without the needed workforce, the strategies that are formulated cannot be carried out effectively. There are two types of fit to align the HR department with the devised strategies. The first is called the external fit or the external alignment. This type of alignment focuses on the connection between the business objectives and the major initiatives in HR (Snell & Bohlander, 2007). For example, if a company decides to implement a low-cost strategy, then the HR policies and practices need to reinforce the idea by reinforcing efficient and reliable behaviour, enhanced productivity, and so on; while on the other hand, if the company devised a differentiation strategy, then the HR policies and practices would be aligned to enable more creativity and flexibility (Snell & Bohlander, 2007). The second fit is called internal fit and it is used to ensure that the HR policies and practices are all aligned internally so that there would not be clashes among its practices. All the HR practices, from job designing, staffing, training, performance appraisal, to compensation all need to focus on the same workforce objectives such as efficiency or creativity (Snell & Bohlander, 2007). If both the two alignments are carried out successfully, an organisation can carry out its strategies effectively and at the same time, there would be no clashes or disharmony among its departments which is the key to success.

After the strategies are formulated and all the departments especially the HR department has been aligned, it is time for the organisation to carry out its strategies. During this process, the McKinsey 7-S framework is used effectively with human resources management (HRM) to determine the best way to implement the strategies that were created. The 7-S framework can be divided into both hard elements and soft elements. According to Mind Tools Ltd, the hard elements are easier to define or identify and management can directly influence them while the soft elements can be more difficult to describe, and are less tangible and are more influenced by culture. All the seven elements of the 7-S framework: structure, strategy, systems, shared values, style, skills, and staff are interdependent and are important for an organisation to achieve successes. The structure of an organisation is the framework for all the activities while strategy lays a plan where the organisation will head in the future (Snell & Bohlander, 2007). Systems are the formal and informal procedures that govern daily activities while style refers to the leadership approach of the managers and the way which employees present themselves to the outside world such as customers and suppliers (Snell & Bohlander, 2007). According to the online business dictionary, shared values are the explicit or implicit fundamental beliefs, concepts, and principles that underlie the culture of an organization, and which guide decisions and behaviour of its employees, management, and members. The remaining two Ss, skills and staff relate directly to the role of HR on reconciling human resources demanded and human resources available (Snell & Bohlander, 2007). To hire additional workforces to carry out various planned strategies, organisations have several staffing possibilities such as hiring full-time employees, having current employees to work overtime, recalling laid-off workers or use temporary employees (Snell & Bohlander, 2007). However, when there is a surplus of human resources or when the global economy calls for a reduction in the number of employees to cut costs, the HR department may restrict hiring, layoff or terminating employees.

After the strategies are being carried out, it is important for an organisation to evaluate and assess its performance. Benchmarking, the process of identifying various aspects of a company such as productivity or brand management, and then comparing the performance of the particular aspect with other companies in the same industry is therefore used to evaluate and assess how well the company performs in that aspect compared to other companies. Besides that, a Balanced Scorecard (BSC), according to the Balanced Scorecard Institute, is used to align business activities to the vision and strategy of the organization, improve internal and external communications, and monitor organization performance against strategic goals. The BSC acts as a performance measurement framework that helps managers translate strategic goals into operational objectives (Snell & Bohlander, 2007). Lastly, organisations commonly use HRP to increase the organisational capability, the ability of the organisation to continuously act and change according to the environment both externally and internally to achieve a competitive edge, which is one of the aims of human resource management (HRM) (Snell & Bohlander, 2007).

Conclusion

Strategic human resources management (SHRM) which consists of strategic planning and human resou rces planning (HRP) is significant for an organisation to stay ahead of the game and give the organisation a competitive edge. The first step of SHRM which is to establish a mission, vision, and values for an organisation serves as the foundation to all of the organisation’s business strategies and practices. Besides that, they also serve as the basis of the culture of the organisation. Once the foundation has been formed, the organisation will conduct an environmental scanning to determine the threats and opportunities that exist in the market. Then, the organisation will determine the internal strengths and weaknesses of the organisation by conducting an internal analysis based on “the three Cs” which are culture, competencies, and composition. In addition, the managers also forecast the supply and demand of employees available using various techniques such as the Delphi technique and Markov analysis. Next, the managers of the organisation will formulate various corporate, businesses, and functional strategies based on the results of the SWOT analysis on the organisation. After that, the managers will then determine the best way to implement the strategies based on the 7-S framework and take action to hire or layoff employees based on the situation of the organisation. Lastly, firms will evaluate and assess their performance and strive to increase their organisational capability by the use of successful HRP. Through the successful usage of SHRM, an organisation will not only have a handful of motivated human talents to work to achieve its organisational objectives and goals, but at the same time gain a competitive edge against its rival competitors that are competing in the same industry. Therefore, it is agreeable that one of the aims of human resources management (HRM) is to give an organization a competitive edge.