Human Resource Management can be defined as strategic and coherent approach to the management of an organization’s most valued assets – the people working there who individually and collectively contribute to the achievement of its objectives (Armstrong). Human Resource Management deals with any aspects of a business that affects employees such as pay, recruitment, benefits, training and administration. The human resource function is a collection of activities which help individual to settle down in an organization and perform to his fullest extent. In competitive terms, value is the worth of an individual or human capital. A firm is profitable if it has a collection of human capital that performs in creating a product. The value activities of Human Resource Management can be divided into two broad categories – primary activities and support activities. The primary activities in Human Resource value chain are – Recruitment process, settling in or familiarization process, on the job experience, performance management and career planning. The support activities are – Communication, Training and Management Development, Compensation (Lifestyle) Management and Facilities and Administration.
Organizations have started using Human Resource Management strategically and HRM is now termed as Strategic Human Resource Management. Strategic Human Resource Management is designed to help companies best meet the needs of their employees while promoting company goals. The role of HRM is changing and changing very fast to help the company achieve their objectives. The role is now shifting to strategic partners. Many HR functions have begun to play strategic role in guiding succession management, knowledge retention and other enterprise-wide initiatives, there is still plenty of opportunities for such functions to improve and transform. The purpose of this paper is to showcase the relationship between Human Resource Management and Organizational Strategy. Through three examples, I have portrayed the importance of HR in organizational strategy.
The corporate HR function sets the strategic tone and provides specialized knowledge and direction while HR generalists implement and adapt to fit the needs of specific business groups. For example, at Texas Instruments (TI) the leadership and HR have engaged in a strategic initiative aimed at reducing the costs of turnover and low morale resulting from expansion and contraction associated with the business cycle by using outsourced workers to provide a more flexible work force. (Genson)
Second example: Coopers & Lybrand (C&L), one of six worldwide professional service firms, was dedicated to client service. The company leaders believed that their advantage in the marketplace was their ability to anticipate and meet client needs more effectively than their competitors. At the same time, they know that their intellectual capital, represented by their employees’ competence and commitment, was their major resource for serving clients. Under the direction of Judith Rosenblum, vice chairman of learning, education and human resources, the company developed a strategy called Nexus to integrate the employee commitment and client-service initiatives. C&L based Nexus on two premises: (1) Our people are our customer’s most important asset (2) We want to be the employer of choice of employees our customers would choose. Rosenblum argued that a collaborative service firm meets professional requirements as a benchmark but does so collaboratively, so that both the engagement team and the client’s team share common values. Her work led to a series of cross-organization workshops in which C&L engagement team and the client team meet to identify common values and define behaviors that each can and should develop to serve the other; they then operationalize a new team structure that focused on creating unity across traditional boundaries. From these workshops, collaborative networks of resources have been created through which C&L employees become more committed to serving clients and clients are better able to use C&L employee’s talents. C&L is now known as Pricewaterhouse Cooper. In the above case, HR professionals acted as strategic partners. They were given the task of answering the question a strategic partner must answer: How do we create an organization to accomplish business objectives? (Ulrich)
Third example: In the case of Euro Disney, it is fair to say that initially Disney’s HR department failed in almost all aspects considering the lack of cultural awareness, and misunderstanding of the French laws and the traditions/habits of the French people. Euro Disney can be used as an example of what a company’s HR management should avoid doing and can be illustrative of the practices that should be considered in order for the strategic role of a company’s HR management to be well performed and the company’s strategy to be reached (Burgoyne, 1995). The study of the Euro Disney case is that a company’s HR management should be aligned with a company’s short- and long-term objectives if a company wants to successfully accomplish its mission and ensure a competitive advantage. In this aspect, in the contemporary business organization, HRM, instead of just being supportive, should play the role of a strategic partner in the formulation of the company’s strategies, as well as, in the implementation of those strategies through relevant human resource activities such as recruiting, selecting, training, and rewarding personnel. The provided example of Euro Disney is justification of the important role of HR as a strategic partner. It was the lack of HR strategic management that led to the numerous mistakes in the Euro Disney’s project development. Lack of awareness of the French culture, the French labor laws, the business risks, and the lack of training and assigning the right personnel were all factors that contributed to the failure of Walt Disney in Europe. The moral of the story is that if a company wants to be successful in today’s competitive and culturally diverse world, a company’s decisions should be carefully aligned with a company’s strategy. In this respect, if a company’s HR management is aligned with a company’s strategy, it holds the key to the company’s success in the host country. HR professionals increase the capacity of a business to execute its strategies and to execute them well. (Mujtaba)
Benefits of having a Strategic Approach to HR
- Facilitates development of high-quality workforce through focus on types of people and skills needed
- Facilitates cost-effective utilization of labor, particularly in service industries where labor is generally greatest cost
- Facilitates planning and assessment of environmental uncertainty, and adaptation of organization to external forces
- Successful SHRM efforts begin with identification of strategic needs
- Employee participation is critical to linking strategy and HR practices
- Strategic HR depends on systematic and analytical mindset
- Corporate HR departments can have impact on organization's efforts to launch strategic initiatives
The strategic role of a company’s HR department is to carefully research factors that might lead to a Company’s success or failure in a certain region and to make sure that it comprehends the laws, traditions, cultures, and people of a country in order for the problems that might occur to be minimized (Burgoyne, 1995). Companies work hard to meet the needs of its employees can cultivate a work atmosphere conducive to productivity and align organizational strategies. Human Resource Management is the best way to achieve this.