HR Research Paper
The current business and economic environment is one that is filled with rapid changes and increasing demands to the organization. With the current globalization increasing international competition, organizations are forced to implement newer skills of achieving competitive advantage. One of the strategies used is adopting of Strategic Human Resource Management (SHRM) that has been hotly debated over the last decade. SHRM allows organizations to align the organizational goals and objectives to the human resource practices. It seeks to include the human resource in achieving these goals. The result has seen an improvement in the performance of organizations adopting SHRM. One of the main findings is that result-oriented rewards, training, and development have a bigger impact on the organizational performance.
HR Research Paper
In the rapidly changing economic environment, the human capital is an import source of competitive advantage for all organizations. Human resource is crucial in contributing to a sustained competitive advantage through retention and development of highly talented and competent employees with specialization. This is where strategic human resource management applies. It is in regard to the increasing competition among multinational organizations as well as from different countries that the past decade has seen an increased interest in Strategic Human Resource Management (Armstrong 242).
SHRM is defined as the branch within human resource that deals with linking the strategic goals of an organization to human resource functions with an aim of achieving high business performance, as well as the development of a good organizational culture that fosters flexibility and innovation to increase competitive advantage. According to Sinha, “SHRM means accepting and involving the HR function as a strategic partner in the formulation and implementation of the company’s strategies” (2013). This happens through use of human resource activities that include recruitment, selection, training, and rewarding of HR personnel. It is based on three principles, the first is that human capital is crucial in achieving competitive advantage (Noe and Raymond 56). The second is that people within an organization are responsible for implementing strategies, and finally on the principle that a systematic approach is necessary for defining and shaping the direction of the organization (Mello 45).
With the increasing global economy that brings about stiff competition, strategic HR has been viewed as the final competitive edge for many organizations especially those engaged in multinational businesses. It pertains how the human resource is managed to add value within an organization that differentiates it from other organizations within the market. It further concerns the recognition that organizational strategies would run a high risk if any human resource was not present to implement them such as having the right skills for the functions stipulated in the strategy. Therefore, it is vital to have the alignment of human resource to the organizational strategies considering that it is the responsibility of employees to implement the strategies.
The main question to ask is what impact on performance does strategic human resource management bring to the organization or how does it contribute to performance of the organization, which it aims at achieving.
Importance of the Study
As aforementioned, the last decade has witnessed the most rapid changes within the economic and business environment. With globalization continuing to influence all countries worldwide and the reduction in international barriers, competition has increased with an unstoppable pace. If organizations are to survive in this environment, a lot more than just the usual functions of the business and human resource have to change. The new evolving environment is characterized by the globalization, changing customer preferences, demands from investors, as well as continuously increasing competition worldwide. Therefore, competing within this environment, it is necessary for organizations to improve the performance by strategies such as cost reduction, providing innovative products, services, quality, as well as quick delivery to the market (Sims 41).
Additionally, many organizations have adopted strategic HR. This continues to be a heated topic in human resource. However, its evaluation has not received the same focus yet. It is crucial to have an evaluation of SHRM in order to indicate its validity. This research will find out whether SHRM improves organizational performance and in what areas as well as which practices within SHRM are more effective in terms of improving performance. A lot of theory about this topic has been provided. Yet, evaluation has been limited, and most of the organization may fail to capture a real life example of its power (Way and Johnson 12). Accordingly, it is important to answer this question to assert its value to all organizations and managers. According to Darwish, many authors consider strategic human resource management to be important to organizational performance and straightforward (2). He further asserts that lack of evaluations has continued to maintain doubts about its direct connection to organizational performance. It is only through answering the research question that the doubts can be eliminated or asserted.
Failure to continue changing according to the environment could mean the sinking of an organization despite the size. In recognition to this, many organizations have realized that strategic organizational functions are necessary to keep afloat the high rising tide of competition and economic changes. The move has been that most of the organizations are using a lot of money in developing strategies as well as developing the human resource in order to implement the strategies (Sims 41). This is in recognition that other competitive edges are becoming less and less powerful or effective in the new environment that focuses more on the customer. Therefore, it would be a significant loss if the investment in the strategic human resource fails to meet its main aim.
The study seeks to show the impact of strategic HR on the performance of the organization. It seeks to answer the question whether strategic HR increases positive performance of the organization. This is very important in illustrating the value of SHRM to the performance of an organization. Answering this question means providing a review of the success of strategic HR in order to give an insight whether it achieves what it seeks. This allows a reflective look at the current standing of SHRM from what it has achieved. With the findings on this question, it will be easy for the organization to make a conclusion about the importance of adopting SHRM. It will also indicate the value of adopting SHRM within the organization as well as what works and what does not.
Answering the question would help managers in determining whether strategic HR is worth investing. It will provide a past record of its performance in meeting its aim. Although many organizations have tried to implement it, not all have succeeded. The research will show some of the reasons that strategic HR fails or areas in which it might fail. This will be of great importance to managers in terms of making strategic HR decisions as well as formulation of HR strategies.
Dimba, in her research on the effect of strategic human resource management on performance, finds that among the strategic human resource practices carried out, training, development, and compensation have a strong impact on the performance of the organization (129). This indicates that SHRM has some effect on the performance of the organization, which all managers within any firm need to consider. With training and development, employees get chances to gain new experiences and skills, which they later direct towards the success of the organization. With compensation, employees are motivated and realize the value of their labor. This drives the employees to work even harder to have more compensation. This has shown to affect performance of the organization positively (Cooke 327).
In another research conducted by Caliskan, the recognition is made that the base for competitive advantage is changing from other factors such as products, technology, economies of scale, and protected markets amongst others to human resources. This recognition is vital in developing a competitive advantage for the organization. The research further recognizes that Strategic HRM focuses on the role played by human resource systems within the performance of the organization, with a concern of aligning human resource goals and objectives in order to realize competitive advantage. Many organizations have realized that good human resource management practices have the ability to influence performance in several areas such as quality, productivity, as well as financial performance.
Human capital or resource is a unique asset to every organization since it is an asset that cannot be duplicated (Lawler 54). The human resource provides unique skills to the organization where other workers from competing firms may not copy. Therefore, with development and training of the employee, it means providing them with skills specific to their organization that may not be found in any other. Human resources within the organization are also recognized as the main factor when it comes to differentiating between organizations or business enterprises. All assets within the organization except for human resource or the workforce are inert, which are also passive and require intervention of human skills in order to generate value from these assets. Therefore, the crucial factor to the maintenance of an organization’s competitive advantage as well as performance is through the productivity realized from the workforce upon working on the assets to realize value.
It would be hard to imitate the people in another organization to gain the same competitive advantage. Every workforce in every organization is unique and cannot be found in other competing firms. Therefore, gaining success through human capital would be a specific competitive advantage to the organization since its success is not visible like any other asset. Success that is realized from human resource is rooted in several factors such as the organizational culture, behavior of people, motivation, skills, as well as how this workforce is managed. Such tasks are hard to imitate considering that there are many more factors. Accordingly, investing in strategic human resource ensures the development of a workforce that cannot be easily imitated by a competing firm. Assets may be acquired and bought from the source unlike the workforce that requires training, experience, and development in order to gain the skills.
Akhtar, Ding, and Gloria, in their research on the impact of strategic human resource management on Chinese companies, reckon that in recognition of the uniqueness and inability of imitation by competitors, organizations have identified a number of SHRM practices that affect performance of a company (15). Some of the practices identified include training programs, internal career opportunities, career opportunities, performance-oriented rewards, security of job, participation, development and profit sharing. These strategies such as training and development help organizations in creating unique skills while others such as internal career opportunities give the employees a chance to climb the ladder instead of having to hire from outside, which helps in retaining employees. Others such as performance-oriented rewards motivate the employees to work harder towards achieving their set goals and objectives. These strategies aim at achieving the organizational goals and objectives through investing in the human resource, which is provided with the incentives to realize the goals that determine success within an organization (Akhtar, Ding, and Gloria 15).
Further, the research used questionnaires within three cities in China in order to get the best response. The results concerning strategic human resource are quite encouraging. The research was based on the seven practices identified for SHRM. Among them was the job description and performance-oriented rewards that scored quite higher marks (Collins and Clark 749). Others such as profit sharing, as well as job security, scored lower marks. Additionally, the results showed that correlation between the SHRM practices was high for job description and performance-oriented rewards while it was insignificant for profit sharing and job security. More over, the research realized some pattern where the performance of product or services was higher than financial performance. After a multiple regression analysis, the findings indicated that all the SHRM practices apart from profit sharing had a significant effect on the performance of products and services (Rogers, Edward and Patrick 1998). These results are similar to those found by Dimba that training and development had the biggest impact on organizational performance (129). This is the same in Chinese companies as indicated in this research. Although other factors play a role, training and development as well as performance-oriented rewards or result-oriented rewards had a significant impact on the overall performance of Chinese companies.
In a research about the impact of strategic HRM on Indians firms, it was found that there is a positive relationship between SHRM and organizational effectiveness (Ajit et al. 157). However, the universalistic theory of strategic HRM did not show any positive relationship with organizational performance in the Indian firms. This further asserts that SHRM has an impact in the performance of Indian firms.
In a research about the impact of SHRM on public organizations, it is recognized that SHRM enhances effectiveness and productivity within the organization. Findings from most of the research show that employing of internal ladders for career, participation, training programs, result-oriented appraisal, and defining of job to human resource enhances achievement of goals. All these practices fall under SHRM, showing its impact on organizational performance.
From the literature review, it is clear that SHRM has a positive relationship to organizational performance (Armstrong and Baron 24). Much of the literature and research conducted show that strategic human resource management enhances improvement of production and performance to organization especially in product and services. However, not all performance can be attributed to SHRM considering that it does not improve all sectors within the organization. It improves some of the sectors such as production and quality more than it does to financial performance. Therefore, it contributes and plays a crucial role in the improvement of organizational performance.
A finding realized in most of the literature consulted is that strategic human resource management adds a competitive advantage to the organization because of the unique nature of human resource. This is the only asset that is unique to an organization and one that cannot be easily imitated. With the economic and business environment changing, organizations need to build a competitive advantage on the last unique asset they got, which is human resource. Achieving a competitive advantage gives the organization a superior chance of capturing and performing better in its market. Although other competitive advantages exist, human resource has more power to build the advantage, as opposed to others such as protected markets and financial ability that are continuously weakening.
Another finding that has been evident in the literature review is training, development, and result-oriented rewards as the practices with the highest level of impact on the performance of the organization. Although there are several SHRM practices, these two have emerged top in terms of affecting the organizational performance (Nagaraj and Kamalanabhan 80). One reason is that training and development allow workers to gain new skills that are specific to the organization. These skills are used towards the achievement of the set goals and objective, creating unique skills within the organization. On the other hand, result-oriented appraisal and rewards encourage workers to work more toward achieving better results that will give them more compensation. With a well skilled and motivated workforce, productivity and quality improvement is achieved when the goals and objectives are realized. This is the vice versa when employees have limited skills, where quality of production is significantly reduced due to lack of skills, as well as increased wastage due to errors.
Further, training allows workers to attain new knowledge of the changing market. This knowledge is used to keep up with the changing environment as well as for innovation that increases the competitive advantage. In the current market, innovation and continuously evolving organizations are necessary for competitive advantage. Assets alone do not provide a competitive advantage. Rather, people within the organizations create this competitive advantage. Therefore, continuous development as well as training is necessary in order to provide better value for the assets while moving with the ever-increasing tide of change (Wright, Gardner and Moynihan 32).
Internal career opportunities that allow workers to climb the hierarchical ladder have also shown a significant impact on performance of the organization (Truss, David and Clare 361). This practice helps in retaining top talent instead of losing it to competitors that might offer higher positions to talented and skilled workers. Additionally, participation where workers are allowed to take part in the strategy formulation and goal setting enhances the relationship between workers and the organization where they feel as part of the organization as opposed to keeping them away from such issues. This allows workers to own goals and objectives, which they aim to achieve since they are part of them (Green et al. 566). Further, it enhances long-term commitment to the organization. Through investing in training and development, both workers and the organization are aware that they stand to reap benefits in the long-term.
It is clear that the seven identified SHRM practices have a positive impact on the organizational performance. However, not all will carry the same weight in contributing to organizational performance. Further, it is clear that different organizations will be affected by the practices in different ways, for instance, the Indian manufacturing firms organizational performance was not significantly affected by internal career opportunities. It would be particularly important for firms to find out the practices that would work for them as opposed to implementing all of them together, which could prove to be expensive for nothing. Some of the organizations did well with training and development while others did not. Therefore, firms should know what the organization needs. For instance, a company with training and development programs but realizing higher turn over than expected can try using internal career ladders that would allow its workforce a career opportunity (Salaman, Storey and Billsberry 243).
In order to improve organizational performance, organizations need to assess what weaknesses are within their firm. Some of the practices may not address all the weaknesses or problems within an organization that contribute to poor performance. Therefore, assessing what needs improvement most would allow the organization to focus human resource practices on the particular problem as opposed to tackling all problems from a general perspective.
Finally, different problems within the organization cannot be tackled within the same time. Therefore, managers should know the right time for tackling some of the issues, as well as when to implement some of the practices. For instance, it would be better to conduct training when expecting a new project in order to prepare workers. It would not make sense to train employees on some skills they may not use in the short-term. However, development should be continuous, unlike formal training. Development through supervisors that continue to instruct workers within their area of work could reduce the amount of formal training needed.
Conclusively, SHRM is an essential part of the organization especially in the rapidly changing market since it aligns organizational goals to human resource practice. This allows easier achievement of goals since workers become part of the organization where they are involved in majority of the operations. Organizations should adopt SHRM to gain a competitive advantage as well as to increase organizational performance through development and training of highly competent workers.
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