The direction of the economy is truly challenging ahead. As we evolve gracefully from new economy to k-economy, business leaders have recognised the dependence on how fast an organisation, can align itself to the general and task influence PEST-I (ie. Politics, Economy, Social, Technology and Internationalisation) environment in determining corporate survival. Either evolve with the economic perspective or be extinct. And Given the continual changes in the environment, businesses must be built around these turbulent conditions. Thus, a pivotal success factor for companies adapting to these changes begins within, the need for a strategic Human Resource (HR) department.
Feedbacks from CEOs of US based companies interviewed by HR Magazine (Leonard 1998) have reinforced the importance and the strategic role of HR Management (HRM). HRM has evolved in becoming a very important component of their company’s strategic planning processes. However, recent research has shown that most companies fail to execute Strategic HRM (SHRM) in unison with their organisation’s strategy successfully (Lee 2002). Behind this abysmal track record lies an undeniable fact that many companies continue to use traditional Personnel Management (PM) processes that are designed to run yesterdayТs organisations. Hence, it is easy to understand why SHRM is failing, and today’s line managers are becoming more frustrated with their HR departments.
Having now recognised the general and the task changing business environment, HRM must produce environmental fitting plans relating to a company’s objectives. It can no longer confine itself within the ambit of the company. Hence, the changing role of HRM does not only contribute to achieving competitive advantage, but a critical success competitive advantage factor itself in maximising shareholder’s return.
The Paradigm Shift of HRM
From a critical analysis of HRM, Guest (1987) suggests three ways in which HRM distinguishes itself from the traditional PM: retitling PM to capture the new fashion; to re-conceptualise and re-organise personnel roles, and the work of personnel departments; and to be as distinctively different in offering a new approach for management.
Vis-а-vis PM, HRM is concerned with: a long-term rather than a short-term perspective; the psychological contract based on commitment rather than compliance; a unitarian rather than a pluralist perspective; an organic rather than a bureaucratic structure; integration with line management rather than specialist or professional roles (Mullins 1996, p. 627).
Guest (1987) commented that the main dimensions of SHRM involves the goal of integration [i.e. if HR can be integrated into strategic plans, if HR policies cohere, if line managers have internalised the importance of HR and this is reflected in their behaviour and if employees identify with the company, then the company's strategic plans are likely to be more successfully implemented].
Legge (2001) detected three general differences between PM models and HRM models. Firstly, PM is often seen as a management activity aimed at non-managers. HRM not only emphasises the importance of employee development but also focuses particularly on development of the “management team”. Secondly, in PM, the role of line management is an expression of “all managers manage people” with most specialist personnel work still implemented within line management’s departments. HRM is vested in line managers as business partners responsible for the direction of all resources with personnel policies as an integral part of the pursuit of business strategy. Lastly, reiterating Guest (1987), PM was not fully integrated with the organisation development models and they were generally separated in the formal organisational sense. It is through an integrated and internally consistent set of SHRM policies, that the organisation’s core values can be achieved thus contributing to sustaining a leverage competitive advantage.
Herring (The Market-Valued Model: A New Paradigm for HR) postulated that the survival of HR hinges on the ability to shift to a new and different model of HR value. Besides the need to strategically partner themselves with operations, where knowing the business is a precursor, HR must refocus their attention on business problems rather than HR activities. HR must assess its impact on the business in terms of measurable results rather than in activity efficiencies and costs.
As HRM becomes more business oriented and strategically focused, four key roles for HR managers can now be identified (Stone 2002, p. 10). Firstly, according to Ulrich (1997), HRM becomes more business oriented and strategy focussed when HR managers play the strategic partner [i.e. SHRM] role; and has the ability to translate business strategy into action that can contribute to business decisions and goals.
Secondly, to become administrative experts [i.e. Management of Firm Infrastructure] HR professionals must be able to re-engineer HR activities and redesign work processes for the continuous improvement of organisational systems.
Thirdly, being employee champions [i.e. Management of Employee Contribution]. HRM must be able to relate to and meet the needs of the employees. This can be achieved, says Ulrich, by being the employeesТ voice in management discussions, by being fair and principled, by assuring employees that their concerns are looked into.
Lastly, the HR manager needs to act as a change agent [ie. Management of Transformation and Change], serving as a catalyst for change within the organisation. Managing change would then be an added portfolio.
Criticism of HRM
In a European survey catered towards the perception of HRMТs future (HR must change its role 1998); results showed a big split between HR professionals and line managers. There was a huge disconnect between how HR professionals saw themselves and how line managers perceive their work.
As there is a need for realignment of the HRM mindset within an organisation, changes must begin internally. However, it is disappointing to note that HR themselves have not taken the liberty to re-engineer themselves in accordance to the HR evolution. Majority of HR departments continue to spend up to 80% of its time on routine administrative activities. It is not surprising that many top managers still mistakenly regard HR as an administration function rather than a strategic partner (Lee 2002).
Ulrich (1998) says, success will be derived from the organisation’s ability to create and leverage organisation capabilities such as responsiveness to opportunity and market demand, agility to redesign and activate business process, developing learning capacities and optimising employee competence. Innovative human capital strategies and their successful implementation with measurable results are the new mandate for HRM functions in organisations. HRM can no longer be dependant on historical protocols.
It must also be made clear that the HRM function is a shared responsibility among top management, line managers and HR managers. HRM is not a dictating and enforcing role (Bacal 2000). The harder HR tries to dictate, the more resistance it receives. Bacal concludes that HR should look to providing frameworks, rather than details and seek continuous feedback.
It might be correct to say that HR at departmental level is the responsibility of the line manager with the HRM as adviser, Although the line managers need to involve in HR administrative matters like recruitment and appraisal etc, they are not in the appropriate position in managing SHRM and HR Planning at corporate level. They could involve in HR strategy implementation but not at the corporate-level HR strategy as they may lack of HR expertise skills and knowledge. Line managers at the operational makes HR decisions and plans according to short-term strategies. SHRM operates at the top level and makes longer term HRP and strategies with the senior management.
At organisation level, HR managers are the main executor of HR policies but acting in consultation with line managers (Mullins 1996, p. 632). The failure here lies with HRM where there is an incommunicado with the line managers. HRM have failed to recognise this important relationship. The incommunicado can be clearly justified, as HR’s inability to communicate and present its intentions has disgruntled the line management. Hence, HRТs inability to get their plans and programmes the right exposure is still seen as their biggest failure.
The role of employee champion to change probably has the least priority out of the 4 HR roles discussed. The HR professionals play an integral role in organisational success via his knowledge about and advocacy of people. This advocacy includes expertise in how to create a work environment in which employees will choose to be motivated, contributing and happy. Problems arise lies when companies are lack of proper channels for employees to provide input for management decisions that affects them. Being an employee champion, it requires an element of fairness in dealing and representing management to employees and vice versa. It is about being the medium for communication.
HRM itself must be governed with an open policy, accepting criticism for their SHRM policies by providing and developing channels for employee feedback. Such feedback must be analysed by the HR professionals and be acted upon. This will in turn ensure transparency of all employment practises (Lee 2002). HRM have yet achieved the maturity where transparency is regarded as a progression tool.
The failure of SHRM strategies like many companies, was not a result of the quality of the strategy, but impaired by the execution of the strategy implementation. A study of 275 portfolio manager reported the ability to execute strategy was more important than the quality of the strategy itself (Measures That Matter 1998). HR departments have failed in delivering successfully to various sectors within the organization, resulting in the lack of understanding of HRMТs commitment to the company.
A realignment of the SHRM mindset must take place with employees at all levels in the organisation before SHRM progress can be made. HRM in organisations today have to be reviewed critically as it lacks the resources and competencies to effectively execute any form of SHRM (Satkunasingham 2002).
HR professionals must take the initiative to spearhead changes required internally. The internal change will only be successful if they recognise the importance of its transformation from a traditional to a strategic component of any organisation. The need to re-engineer, to review the HR resource, and to identify the appropriate components required, to be integrated in congruent to the corporate objectives.
In these cases of the HR realignment, directive must come from the CEO and top HR executive in the company to redefine their roles. Ulrich (1998) says, this responsibility belongs to the CEO and to every line manager who works with the HR staff. Thus, converting the HRM function into a strategic partner has become a crucial management initiative for most companies (Badenhorst 2002).
The service delivery to line management has been extremely poor and fragmented, as contributed by HRТs administrative and clerical focus. Hence, to be seen as administrative experts is to realign their core competencies. The direction concerned must enable HRM to be significantly enhanced, a multiple service provider to line management and individual employees alike.
To achieve such objective, the element of HR Planning (HRP) is essential, as planning and allocation of resources is required to maximise returns of the department. HRP is pivotal, as HRM would need to identify investments required, and how it would utilise the minimal investments to gauge competitive advantage. An example would be the introduction of technological enablement [i.e. web based systems] of HR administration processes. With the implementation, HR will then portray a strategic management role for all third-party HR solution providers (Badenhorst 2002).
To further strengthen its position, HR professionals must take an initiative to gain a helicopter perspective of the businesses [i.e. in finance, marketing, production and R&D]. This is advisable as policies formulated by SHRM complements the companyТs organisation strategies and goals.
The HR Business Process Outsourcing (HRBPO) approach to re-invent the HRM function is unique as it views HR as a complete business process, consisting of people processes, technology and third-party providers. Ownership of the total HR administrative function should then be transferred to the HRBPO service provider (Badenhorst 2002). Bank of America, BP Amoco and many others have already taken up this challenge and implemented HRBPO strategies successfully.
With the administrative duties outsourced, HR professionals will have time to focus on SHRM and HRP in collaboration with senior management. This will provide a room needed to act as change agents. However, HR professionals must possess the competencies to be the catalyst of change. HRM will then be able to communicate, promote and market SHRM to the entire organisation.
An out of the box idea is for HRM to establish a market price for each of their employees using estimates of the compensation range that each of its employee could expect out in the real world. Davies (2000) postulates that a company should securitize its best and brightest workers and let them float on the market themselves. This will enable HR to prove itself as a powerful, wealth-creating driver that focuses on human capital. HR could then transform itself into a broker on the trading floor of the Human Capital Exchange.
It is important to monitor and measure the success of HRM. The industry itself has failed to recognise the need for evaluation. This is a significant failure. Several companies have begun to recognise this need to benchmark their positions. The Balanced Scorecard Mobil, CIGNA and AT&T was adopted as a performance measurement tool by these companies to help reveal a consistent pattern of achieving strategic focus and re-alignment.
The Balanced Scorecard makes a unique contribution by describing strategy in a consistent and insightful way. Before the development of strategy scorecards, HR managers had not an acceptable framework for describing SHRM. The simple act of describing SHRM via strategy maps and scorecards is an enormous breakthrough to aid SHRM implementation (Kaplan & Norton 2001).
It is important to note that Companies that have implemented SHRM [Pepsi, Aetna, and IBM] have shown an improvement in business results due to efficiency and effectiveness of productivity, performance and employee morale. Unfortunately, transforming HR from an administrative role to a more strategic one is a slow process. Many management teams still have trouble figuring out what it will actually take to transform HR into a strategic function (Connolly, Mardis & Down).
Hitherto, HRM centers have failed to deliver the “knowledge transfer” successfully to various sectors within an organization, resulting in the lack of understanding of HRM’s commitment to the company. As such, to be regarded as a “competitive advantage”, proper groundwork must be established, concreting the foundation for commuting the “knowledge transfer”.
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