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.

THE HISTORY / EVOLUTION OF HUMAN RESOURCE MANAGEMENT

Ancient People Management

The history of HRM can be traced back to early civilizations and even beyond. As the human beings evolved and started to live in small groups or tribes since then there started to emerge a division of labor for example who will be the tribal leader (Selection process), who will hunt and  cook the food (division of labor) and the trainer who will train younger tribal members about how to hunt, passing on important social skills and understanding the environment around (training and development). Similarly as human societies further developed(For example Indus civilization and Egyptian and Roman societies) it resulted in development of different occupations e.g. cobbler, farmer, traders and so on which further divide the work in society and increased specialization. The concept of slavery also started at this time.  Labor management at this time related to the issues of pay and  health and safety of slaves and employees. 

Modern People Management

Modern people management started to emerge during 17^th and 18^thcentury. Modern people management can be divided in to three stages including Industrial revolution, Human Relations movement and people as a competitive advantage. 

Time Frame	Main Era/ Philosophy towards People Management	Human Resource Role/ Person who Manage labor or People	Description
B.C. to 17th Century	Ancient People Management	Tribe Leader or elders, societal leaders and employer or master	Early practices of HRM such as selection of tribal leader, division of work in families and  society, ensuring health and safety of workers and slaves
18th and 19th Century	Industrial Revolution	Labor Officer	Mostly dealing with Employees benefits and welfare issues such as sick pay and small loans
1914-1939	Scientific Management and Rise of Trade Unions	Labor Manager	Dealing with both Trade unions and employees benefits. Negotiating with trade union on management behalf
1940-1980	Human Relation Movement and Rapid Industrialization	Personnel   Managers	Performing several complex functions such as compliance with labor laws, health and safety issues, employees benefits, trade unions management and employee relations
1980s - Onward	People as a source of competitive advantage- Rise of Services Economy and Knowledge workers	Human Resource Manager	The strategic nature of labor management with wide variety of function including effective relations with labor, benefits and welfare, legislative issues and employees development

 Industrial Revolution:

Before Industrial revolution most of the people/ craftsman used to work for themselves at small scale and usually in their own houses. With the development of Science which brought coal powered steam engine, railway system and other better machineries and tools lead to the Industrial revolution. This was the 18^th century when Europe started to move from Agriculture age to Industrial age which resulted in population migration from villages to nearby cities and towns where employment was available in these factories. In these factories a special role started to emerge named ‘Welfare Officer’. Their main job was to look after employees, visit their houses in case they get injured or fell sick and provision of some benefits including low interest loans and sick pay.

At the same time this revolution leads to huge differences or distances in societies because of widening gap between the employer and employees. Employer becomes richer and richer while employees started to realize the employer’s exploitation and their rights. To overcome their weaknesses employees started to join together and thus the concept of trade union/labor union emerged. The main objective of trade union/labor union was to protect the interest of labor and collectively negotiate with the management about issues such as higher pay, better working conditions and benefits such as holiday pays, overtime pay etc. With the rise of trade unions management also responded to this situation by replacing the old ‘Welfare Officer’ with  a new role in factories named ‘Labor Managers’. Their main job was to manage both the labor welfare activities as well as keeping the trade union under the management control to maintain smooth production. 

Human Relations Movement:

The Hawthorne Experiments carried on in Western Electric Company in Illinois which continued from 1924 to 1931 resulted in Human relations movement. The essence of Human relations movement was that human beings are human beings not just merely the workers, so if treated with respect and as a human along with good manager and employee relations it can lead to higher motivation and productivity.  A new role started to emerge after the Second World War 1945-1980 which was called ‘Personnel Manager’. They were merely replacing old Labor managers and Welfare officer but their duties did include the elements of old roles. Overall their job was to manage employee’s benefits and welfare, maintaining good employer and employee relations by managing trade union/labor unions effectively and managing all other administrative duties related to the management of people such as health and safety, protecting management interests, pay and ensuring compliance with legislation

People as a Source of Competitive Advantage:

 After 1980’s term ‘Personnel Manager’ started to be replaced by a new term’ Human Resource Managers’.  Basically after 1980’s most advanced economies such as America, Britons and other European countries shifted from Industrial era to Information era. With this shift most of their workers who used to be Industrial workers started to become knowledge workers or service workers. Now Industries started to move to other less developed countries where labor and raw material was cheaper and easily available. At this time most service sector organization such as blue chip companies, consumer electronics companies started to recognize that competitive advantage can be achieved by having a highly skilled and motivated employees. It is based on the assumption that if you have employees who have better knowledge, skills, abilities and attitudes and are highly motivated, then such organization can outperform their competitors or those organizations that have less developed staff. So now the role of HRM started to become strategic which means HR practices and policies are aimed to achieve competitive advantage for the organization by effectively managing its human resource.