The challenges/difficulties faced by an organization seeking to provide strategic HRM
Strategic management is a process started at the level of the top management which gives an overall direction to an organization. It includes an organization’s mission, vision and objectives and the formulation of suitable strategies to achieve these objectives. Strategic Management is an ongoing process in that it evaluates the environment in which the organization is functioning, assesses the competition and then formulates a strategy which would best serve the organization’s objectives and does this at regular intervals to ensure that the organization is always operating using the best strategy possible.
Human Resource Management is the management of the most important asset of an organization, its employees. Various human resource management activities include staffing, compensation systems, training and development and performance appraisal. HRM is also about formulating and implementing policies related to human resource and managing other employee issues. In an organization, human resource management serves to provide the favorable environment needed to help the employees perform at their best.
Strategic Human Resource Management is about combining strategic management with human resource management. It is about using the human resource activities strategically to achieve organizational goals. According to Schuler, Strategic Human Resource Management is about linking the needs of the people with the strategic needs of the business. Strategic HRM is concerned with ensuring that “human resources management is fully integrated with the strategy and strategic needs of the firm” by ensuring that the HR practices are adopted by all the employees across the management. In order to be successful, Strategic HRM must address several components including policies, culture, values and practices.
The nature of modern business practices and the technological needs of modern practices pose numerous challenges to the successful implementation of Strategic HRM. When an organization adopts new technology, it becomes necessary to either hire new people or lay off some workers. Also, employees need to be trained to handle the new technology. While adoption of the new technology becomes a strategic need of the organization, a strategically aligned HRM will have to adjust to these changing needs. Increasingly organizations allow some employees to work from home. This poses another set of challenges to the HR department as they need to devise a clear performance measurement system to evaluate these employees. Other issues with such telecommuting include deciding which employees are offered this option, equipment expenses and handling managers who may not be comfortable with their direct report not being in the office. Also, with computers becoming omnipresent, HR has to decide what level of employee surveillance they should carry out through monitoring internet usage, emails, computer files, etc. Despite these challenges, technology also has its benefits. The use of technology has simplified many HR processes. With the HR personnel having to spend less time on traditional HR duties, they can spend more time on devising strategies and ensuring their implementation. Also, technology makes it easier to formulate and implement strategies across the entire organization.
Another challenge faced by the HR departments in the US is the graying of the workforce. An older workforce is both a challenge as well a strength for an organization. Older employees may resist change and this may make it difficult to implement HR strategies. Also, senior workers have higher wage and salary costs as well as healthcare costs. Despite these challenges, senior workers are more loyal to an organization and this is helpful for the long-term strategic planning of an organization. Also, senior workers have the broader industry knowledge and professional networks which can be used strategically for the betterment of the organization.
Other challenges for proper implementation of strategic HRM include non-traditional work relationships such as part-time workers, consultants and temporary employees. It can become very difficult to integrate such employees into the organization’s strategic goals. The increasing diversity of the workplace is another challenge since when people from vastly different backgrounds and origins work together, it can result in cultural clashes. On the other hand, this could also be an opportunity, since a diverse workforce could help bring global practices into the organization. A strategically oriented HR will have to tap these diverse experiences so as to formulate an HR strategy that is in line with the organization’s strategic needs.
Universalistic (“one best way”) and contingency (“If X, do this; if Y, do that”) approaches for strategic HRM
There are several approaches to implementing strategic HRM. One way is to formulate a universal strategy that could be used in all circumstances. The universalistic approach argues that some policies are always better than others and hence all organizations should adopt these policies. An example of this universalistic approach in strategic HRM is the training and skills development of employees. All organizations would benefit from constantly upgrading the skills of their employees since external environments are constantly changing and organizations whose employees are geared to keep up with these changes are more likely to succeed in the long run.
On the other hand, the contingency approach states that an organization’s HR policies should be consistent with the strategic positions adopted by other aspects of the organization. For example, an organization that is upgrading certain technology could choose to hire new employees or carry out extensive training of its existing employees. There is no right or wrong way of approaching this issue and the right approach would be determined by a number of factors that may be unique to the organization.
In my opinion, the contingency approach to strategic HRM provides a better way of effectively and strategically managing organizations. This is because the basic idea of strategic HRM is to align a company’s HR policies according to its mission, vision and overall objectives of an organization. The best practices of the universalistic approach, though recommended, may not necessarily work in all organizations. In the examples given above, the universalistic approach would always recommend training the existing employees so that they are able to handle the requirements of the new business. This policy would work if the existing employees are young and eager to learn. However, if the existing employees are nearing retirement, the training exercise may prove to be futile.
Another example is that the universalistic approach recommends giving incentives to get the best performance. However, incentives may not always work and some employees may misuse them. This is especially true in the case of unskilled workers who have low levels of loyalty to an organization. Under the circumstance, a strategically aligned HRM would have to come up with an alternate policy, in keeping with the company’s overall goals, to get the best performances from these employees.
The contingency approach allows the HRM flexibility to adjust their policies with the changing environment and according to the realities of their business. Even within an organization, offices located in different geographic locations would have to formulate their own strategic HR policies in keeping with the local culture. The one-size-fits-all approach of universalistic style does not allow the management to plan for contingencies, cultural differences and ground realities of the business. The contingency approach makes it easier for the HRM to align its policies with overall organizational strategies. It allows the management to adopt policies that would best help an organization to achieve its goals as opposed to blindly following the “best practices” which may not necessarily work in all organizations.
Connection of strategy to their staffing, training and development, performance management, or compensation systems
Training and development are one of the core HR functions which needs to be carried out by the HR department of most organizations in order to help the employees meet the latest challenges and keep up with latest in the technological advances. While the HR department of most organizations engages in training and development activities, they can achieve better results by making this system strategic. In order to do this, the HR department needs to ensure that all the employees are made aware of the HR policies. Next, the HRD must regularly carry out interviews with employees in managerial and supervisory roles to find out what are the training needs of the organization and how getting the employees trained in these skills would further the company’s overall objectives. During these interviews, it is important to assess that the stated developmental needs are strategically significant for the entire organization or for the specific business unit. Training which would help the employees jump from one business unit to another should be given higher preference.
Also, the HR department must identify the key employees which the organization would prefer to retain over the long term. While it is important to provide training to all the employees as and when needed, these key employees should be provided developmental training which would help both the employee and the organization in the long run. This strategy becomes especially important if the organization is planning to downsize. When employees lose their colleagues and friends due to lay-offs, it becomes the HR department’s responsibility to manage those who are left. One way to restore confidence and prepare the remaining employees for the new challenges is to provide the training which would help them satisfy their developmental needs.
Another HR function that can be similarly made strategic is the performance appraisal system. In order for the performance appraisal system to be effective, all the employees should know what kind of behavior and accomplishments will be rewarded and which ones to avoid. The HR department can do this by sending regular emails and posting notices to let the entire organization know about its current appraisal-related policies. Also, a 360-degree feedback system makes the lower-level employees feel more empowered and helps keep control of the managers at the higher level.
Performance must also be linked to how well an employee has met the organization’s objective. For example, if the goal of an organization is to provide exemplary customer service then customer feedback should be incorporated into the performance appraisal system. Similarly, if an organization’s goal is to maximize sales, then all activities which help increase sales must be rewarded. This appraisal system must also take into account the various function in different departments of the organization and reward accordingly.
How organizations can deal with equal employment opportunity (EEO) and affirmative action (AA) issues in a strategic manner
Affirmative Action (AA) refers to a policy that takes into account a person’s race, sex and national origin while making decisions so as to redress past discriminations. AA essentially goes against the concept of the meritocracy because it requires that organizations give preferential treatments to certain groups based on their sex or race. According to Glazer, this is important because if the African Americans are not given this preferential treatment, they may never be able to rise out of their poverty. Although Glazer gives good arguments in favor of AA, I do not support it since it means that African Americans who are not as qualified as other applicants will get preferentially recruited by organizations. The argument that African Americans will not be able to compete if they are not given this preferential treatment also not holds, since if such preferences have to be given it should be given a the elementary school levels so that they can compete with other people on equal ground. Giving such preferential treatment at the college or professional level is not fair to other candidates in the competition.
However, the law requires that organizations adhere to an equal employment opportunity (EEO) policy. So although a legal requirement, many meritorious candidates and employees may resent such a policy. The HR department must ensure that the policy is strategically ingrained into the organization’s philosophies to avoid employee issues. One way to do this is to identify those areas within the organization which require the skills of African Americans or women and recruit accordingly. Another way to strategically manage this HR problem is to carry out training and development sessions to better integrate African Americans into the company’s culture. Thus by following these management practices, organizations can fulfill their legal requirements while keeping the employees happy.
The essential features of both the Industrial Organization (I/O) and Resource-Based View (RBV) models of strategy
The Industrial Organization (I/O) model of strategy focuses primarily on the external environments of the organization. According to this model, it is the external environments that determine an organization’s rather than internal managers’ decisions. These external environments include demand for the organization’s products, substitutes, price, product durability, product quality, technology, government policies and a host of other factors. As these external factors change, an organization’s operating environments change and it must change its strategies accordingly to avoid the threats and exploit the opportunities presented by these changing external factors.
According to the I/O model, there are limited resources that are highly mobile between the competitors and all competing organizations have equal access to these resources. In order to be successful, an organization must either offer its products at a lower price than the competitors or differentiate its product so as to bring in a premium price. The I/O model suggests that an organization must first formulate a strategy and then go for resource acquisition based on these strategies.
The Resource-Based View (RBV) suggests that an organization should look internally to decide its strategy. This model emphasizes the need for an organization to formulate its strategy based on its internal resources and capabilities rather than the external conditions. The model states that organizations should identify their resource needs and then locate and acquire these resources. An organization’s resources are costly to imitate and non-substitutable. Also, there is not high mobility of the resources between the organizations once acquired they are retained. The RBV model states that it is an organization’s resources that drive its strategy (Mello, 2005).
Although the I/O model and RBV model present vastly opposing viewpoints, both these models have their merits. In order to be successful, an organization cannot ignore the external environmental factors. These factors decide the operating environment of an organization and they should be taken into consideration while formulating an organization’s strategy. At the same time, an organization must also be aware of its strengths and weaknesses and use them effectively to gain a strategic advantage. However, an organization’s strengths and weaknesses can be addressed and its core competencies can be modified to reflect the changing external environments. Also over time, the value of resources diminishes and eventually the competitors may come up with their own resources which may threaten the value of an organization’s resources. Hence the resource-based view, despite its merits, has several limitations. In the modern business environment, no organization can afford to look only internally to formulate its strategies. So the I/O model represents a better strategic model in modern times and more research needs to be carried out on this model for its application in strategic HRM.
Mello, J.A. (2005). Strategic Human Resource Management. 2nd ed. South-Western College.