THE STRATEGIC NATURE OF HRM

Meaning of Strategy:

Strategy is a course of action or a long term plan. Organizational Strategy means organization’s long term plan about how it will deploy its resources and how it will outperform competitors by serving customer better than the competitors.

Strategy Levels:

Scholarly literature on Strategic management identifies three main levels of strategies.

Corporate level strategy sets the direction for whole organization

Business Unit or Divisional level strategy is about planning at specific division or strategic business unit level

Functional Strategy is about the planning of specific functions such as HRM, Marketing, Finance and Research and Development.

Corporate level strategy guides the divisional level strategy and the divisional level strategy guides each functional level strategy however in some cases it become reverse means functional strategies are set first and then they guide divisional strategies and corporate strategy.

                                                   Source: Strategy Levels by Tahir 2012

  Strategic HRM Process:

The process of Strategic HRM begins with the strategy formulation for the whole organization. Once strategy is being formulated it guides HRM practices and policies. Strategic Human Resource Management means designing such HR practices and policies which result in specific behavior and skills. Such behavior and skills are important for organization to achieve its strategic objectives.  In simple words Strategic HRM means achieving competitive advantage through your people. For example if organization is competing on Cost basis then HR practices should be designed in such a way that it result in a more cost conscious employees. Similarly if Organization is competing on Differentiation then HR practices should aim to increase employee’s creativity, innovation and risk taking.  

 Source: Strategic HRM Process by Tahir 2012

 

Some Strategic HRM model suggest that HR Practices should be matched with organization’s or Industry’s life cycle. Summing up the debate it simply means that HR Practices and policies are guided by the overall strategy and are aimed to achieve required competencies and behavior and once these competencies and behavior are achieved, they become source of competitive advantage because it is difficult for competitor to copy.

HR Manager’s Strategic Role:

If organization want to achieve its strategic objectives, it is important that HR manager should be involved in strategy formulation process. Many organizations fail to achieve their strategic objectives because of the low involvement of HR managers in strategy formulation process. The failure mainly occurs because employees are not ready to implement strategic changes or there is mismatch between their competencies and organization’s strategy. This gap can only be filled by involving HR Manager in Strategy formulation process. The strategic role of HRM requires HR Managers to play an active role in strategy formulation, continuous lobbying, designing HR practices which support business strategies and being proactive to any changes  in the environment internally as well as externally.

IMPORTANCE OF HRM (HUMAN RESOURCE MANAGEMENT)

Mostly in classroom or training session the most repetitive question you been asked is 'What is the importance of HRM'. Similarly in most small to medium scale organizations top managers or owners do not give attention to HR issues. This article will discuss the importance of HRM and thus tries to answer this fundamental question. These content will also help to convince your boss to give attention to people issues.

Source: Importance of HRM by Tahir 2012

Hiring Right Person:

Its important for organization to select or hire right people, if organization hire wrong people such as criminals, low performers, thiefs, etc this will seriously effect organization's relation with its customers and other major stakeholders thus resulting in poor performance or even winding up of the business.

Hiring becomes more important when you are selecting someone for managerial role or even top managers. Top management set the direction for organization and middle and lower level management implement the top management's plan. Therefore if organization select wrong managers then it can result in setting wrong direction and thus can fail eventually. So if organization have good HR system in place it can result in effective hiring.

Turnover Issues:

Many organization experience high turnover, by turnover it means that number or percentage of employees who leave the organization during a specific time period. If organization adopt good HRM practices, it can result in lowering turnover however If organization do not have good HRM practices it is most likely result in higher turnover. Higher turnover cost the organization because it takes time and money (Recruitment and Selection cost) to replace those who leave the organization. New people also can not perform on their full capacity from day 1, it take them some time to adjust and understand the job requirement thus during all this time their productivity is lower than average. Similarly organization also has to pay for the training cost to train new employees which is another direct cost. Moreover if your employees leave the organization, they also take valuable knowledge and experiences with them which they gained during the job  and similarly they take away their relationships and important contact (also called Social Capital) which reduce organization's ability to get some contract or getting some crucial jobs done. Therefore it is wise to have sound HR practices which result in lower turnover and thus these above mentioned problems can be avoided.

Effective Utilization of Employees:

Many poor performing organization perform badly not because they do not have talented staff but just becuase they can not take full advantage of their talented staff. A good HRM system in organizaition create a good structure and culture which provide employees the right authority, power and atmosphere where their skills can be effectively utilized.

Compliance with Legislation:

Every year saveral thousand grieved employees file their case in the court/ attorney becuase they believe that they have been mistreated such as unequal opportunities, unequal pay, unequal promotions, unfair dismissals, injuries at workplace, sexual and racial harassment and so on. If organization have sound HR practices and policies, it result in lowering these incidents and cases by ensuring the compliance with law. This not only create a better image of organization in society but also reduce the expenses because organization do not have to pay heavy fines or lawyer's fee. 

Health and Safety Issues:

Every year several thousand employees around the work get injured or died at workplace. Organizations have to pay heavy compensations to these employees and their families. Besides the financial loss this is also a loss of life or some parts of body which has serious consequences on employee's life. If organization have a good HR department or manager along with good HR system and policies thus organization can reduce such accidents and improve the health and safety of its employees.

Managing Change:

Business environment is changing rapidly with huge changes in technology and processes along with fierce competition. In this fast changing environment only those organization can survive who have ability to keep up with such change. To manage this change organization should have good HR system in place becuase its the organization's people who recognize, plan, implement and evaluate such changes in the environment.

Major's Stakeholders Satisfaction:

Organization has many stakeholders including Shareholders, Employees, Management, Customer, Community, Government and Society at large. If organization have good HR practices in place it can result in greater satisfaction to all its major stakeholders. Shareholders are happy because they get higher return on their investment and more sustainable growth, Employees are happy because they get better career and training opportunities and higher pay and satisfaction, Management is happy because they get better results of their strategy, Customers are happy because they get better customer service along with better products, Community is happy because if organization grow it result in greater jobs and thus enhance people's prosperity, Government is happy because of tax collection and lower level of unemployment, and finally society is happy because jobs, profitability and growth of organization and individuals reduce social crimes.