Introduction
Organisations are shifting towards the strategic management of their human resources to keep pace with the highly dynamic business environment. The traditional human resource management practices, including personnel management, are ineffective in the face of current speed, magnitude of change, and frequency that the organisational and business environment poses.
Thus, organisations are finding it critical to provide renewed attention towards the building, as well as strengthening of partnerships by designing strategic human resource coordination (Chiavenato, 2001, p. 17). A lot of emphasis is being placed on the maximisation of human capital in the wake of the current changes where the human resource practitioners are involving themselves more in strategic planning. The focus of HR practitioners is on improving the business and the development of their professional competencies.
Armstrong (2000, p. 11) points out that HRM has overly been a simplistic practice, having gaps between reality and rhetoric and containing many contradictions. The presence of these shortcomings has influenced organisations to seek for a transition from the traditional HRM practice to the strategic HRM. The HRM practice is in transition as it also seeks to increase its effectiveness. As Lengnick-Hall et al. (2009, p. 64) note, strategic HRM has mainly been conceptual in its focus since the 1980s.
The 1990s saw an increase in theoretical advances, including the introduction of resource-based view as the concept continued to receive more recognition and research. Other important accomplishments were also made in terms of the empirical research conducted during the period.
This chronology of events and studies shows how the strategic HRM concept has grown over time to replace the traditional HRM practice. Presently, broader HR perspectives have been established to help in determining the influence of the concept of strategic HRM on organisational performance.
As organisations insist on pursuing their strategic human resource management transformation, they train their aspirations on some major values that they hope to attain incrementally. These include formulating a business strategy as the main source of attaining competitive advantage, as well as formulating a management culture to embrace the belief.
It seeks to enhance operational excellence that focuses on client service for both the managers and individual employees and to deliver the resultant services at a lower cost. Additionally, strategic HRM targets to create managers with a full understanding of the human capital and the business implications of the business problems. This makes it easy for the access and modification of the HR system with the purpose of solving the problems arising.
This research seeks to analyse and offer comprehensive details concerning organisations and their addition of incremental values owing to their transition to strategic human resource management. In helping to achieve this objective, the research mainly bases its analysis on secondary sources of information, including text books, journals, and other relevant authored materials on the topic.
In particular, the research will expound on several organisational examples that have transformed their HRM practises from personnel management to strategic human resource management. These examples include Sears, Lucent, Quantum, and Herman Miller.
Critical Analysis
Addition of HR’s Incremental Value to an Organisation’s Performance
In the majority of firms, the wish to achieve sustainable competitive advantage is barricaded by aspects such as the economies of scale, access to capital, patent protection, and regulated competition (Hoffman, 2000, p. 1). However, an ensuing economic paradigm has provided an avenue for competitive advantage, challenging the conventional wisdom on strategy, HR’s relationship concerning firm performance, and the role of the organisation’s HR.
New trends on the global front, including globalisation, are piling many pressures and demands on firms to continuously innovate, adapt to their environment, and enhance their speed and efficiency to cope with the challenging situation. Firms, in retrospect, face the rising need to give more attention to strategic intellectual capital and increase their intellectual capital (Choy, 2007, p. 1).
Sears Transformation to Strategic HRM
Sears’ objective in adapting strategic HRM was to make its employees feel comfortable while working outside an environment that lacked the usual command and control (Murphy & Zandvakili, 2000, p. 93). The firm wanted its workforce to get accustomed to innovation and risk taking. Sears’ reasons for transforming included both external and internal business forces interplay, including competitors, customers, finance, culture, and employees.
Sears transformation in achieving strategic HRM has introduced a more elaborate balanced scorecard that clearly defines and empirically verifies the existing relationships (Neenan, 2008, p. 48).
The important relationships highlighted include sales associate behaviours, financial performance, and customer satisfaction. In other words, all managers who do not necessarily fall under HR need to be provided with a clearly articulated investment plan in human capital. This helps in influencing their buy-in on the broader HR role (Neenan, 2008, p. 48).
The company changed its reward approach, adopting intrinsic rewards as a means of motivating their workers more and dropping the extrinsic reward system. As Armstrong and Murlis (2004, p. 42) point out, the intrinsic reward approach is strategic, business-aligned, performance-driven, integrative, distinctive, and flexible.
There is a need for reward management to be bound with the business strategy owing to the critical aspect of reward management to the management of human resources. The traditional payment system that the firm used on its employees involved goal sharing, where the employees’ incentive pay was pegged on customers’ satisfaction.
Sears’ reward management scheme was also affected by the company’s communication efficiency with its employees. Communication was a major issue, given that Sears is a well established corporation that runs several branches countrywide and employs thousands of workers. The retailer experienced high turnover rates, thus calling for a more continual reorientation of the new employees that were hired (Salisbury, 2008, para 1).
Sears’ transformation has seen it mandate a multi-perspective system of appraisal for all its managers. The firm has established some of its critical strategic imperatives to include the transformation of the retailer into a suitable place to work in, a place favourable for shopping, as well as a place that is suitable for investing in (Thomas, 2012, p. 99).
Sears’ strategic HRM emphasizes on the achievement of behaviour consistencies to match with leadership competencies that sustain its 3C’s to achieve these objectives.
In setting performance objectives, individual employees are challenged to improve their “line of sight” pitting the individual employee or team behaviour, on the one hand, and the firm-level outcomes, on the other hand (Oliver, 2003, p. 18). Additionally, the performance objectives are prearranged like a treadmill, such that an employee who fails to improve finds himself or herself moving backwards.
Sales associates in the firm receive direct customer feedback to get a glimpse of the actual feeling from their own customers. The company has developed a strong commitment to compete with its industry rivals purely on customer service to ensure that it emerges as the best employer choice for its employees. The Sales Associates set up the quality of performance that drives the general customer service in the company (Business Wire, 2006, para 6).
Another critical value addition has been experienced in the area of employee development. The company has established its own university, Sears University, which serves more than 20,000 managers every year.
The institution also stresses on the employment of intact teams purposely to support knowledge sharing even after completing the program (Collins & Rainwater, 2005, p. 16). This program has been a great success for the company mainly due to the strong support that the senior management team has been offering towards funding the initiative.
Lucent’s Case of Strategic HRM
Customer service
The transformation towards achieving strategic HRM at Lucent has seen the company refocus attention towards improving customer service. The new HR structure of the firm has emphasized on client services on up to three levels. The levels include senior leaders, supervisors/coaches, and employees/retirees.
The HR Business Partner plays the critical linchpin role that creates value at Lucent. The arrangement is done strategically in a way that gives the senior business leaders an opportunity to work together with the HR leaders. The Business Partners are measured against client satisfaction objectives that strictly focus on the end results (PR Newswire, 2001, para 1). The delivery channels play a critical role in sustaining this, where the senior executives enjoy the exclusive rights during the declaration of the annual ultimate goals and objectives.
Like in the case of Sears, Lucent has also developed a strong commitment, especially within the senior management at the firm, to develop HR initiatives that constantly seek to develop solutions for the clients (Namuduri, 2006, p. 3). Through the adoption of this strategy, managers at the firm attend all staff meetings, including those that do not necessarily discuss HR issues.
This is done to enable the HR representatives to understand the business clearly. A team of up to 58 professionals drawn from the HR function, also referred to as the HR Accelerators, specifically work towards eliminating HR policies and practices that add no value for the firm and its shareholders.
A competency model was established within the firm’s framework in its plans to support Business Partner role in HR development. Lucent developed the competencies using both external benchmarking sources and internal reviews, which emphasise on areas that seek solutions for a particular question (Quandt, 2007, para 4). The firm seeks to determine the exact knowledge, commitments, and skills required to help the Business Partners in their quest to serve the expectations of their customers fully.
The main areas singled out included understanding the firm’s business, the business of its clients, and the HR business. The customer focus, personal impact, and management in a competitive and changing environment were also established as critical areas. By defining, acquiring, and leveraging resources, Lucent managed to implement HR solutions to offer solutions to the problems and challenges that the firm faced.
Strong pay-performance relationship
The strategic HRM at Lucent seeks to develop a strong relationship between pay and performance. This strategy targets to add value through rallying people within the organisation as the source of the company’s competitive advantage. Lucent has constantly focused on using stock options as a means of aligning its employees’ interests with the organisational objective of increasing the market value. The firm offered 100 options for each of its employees as “founders grants”. This was at the time when it went public (Walker, 2006, p. 18).
Quantum
Employee development
Quantum’s strategic HRM seeks to hire its employees based on the fundamental characteristics of the organisation that support and sustain organisational success. The firm relies heavily on operations and product development through teamwork. Applicants seeking for employment in the firm but unable to work in teams are never selected.
The main idea of the firm is the fact that working in teams or groups helps in supporting knowledge exchange between individuals. This, in turn, enhances the overall organisational quality level and performance (Manufacturing Close-Up, 2013, para 2).
Quantum’s strategy on HRM further extends to the selection of employees, where behaviour and competency are very critical. Emphasis on these two critical aspects is based on the premise that the firm increases its chances of producing if workers with the right behaviour and competency are acquired. The general principle held by the management is the fact that applicants who manage to survive the selection process of the company are in a better position to start at “merge speed” (Business Wire, 2002, para 3).
Performance management
Quantum has established a significant performance management system whose main objective is to integrate adequate competency models through the HR system of the organisation. The firm, as part of its performance management, has formulated up to nine critical Value Behaviours that the management places a lot of emphasis on.
However, a multi-step process that involves individuals’ multiple rankings is required because of its overreliance on team-based work formations. Ranking is done by other members of the team (Business Wire, 2002, para 4). The team leader and the business unit manager also provide their ratings of the group and its individuals to help come up with effective team compositions and general performance management.
Herman Miller, Inc.
Competitive advantage
Strategic HRM at Herman Miller has been designed in a way that helps the firm to achieve competitive advantage in the industry. Although strategic HR is a relatively new phenomenon, Herman Miller has pursued it for a significant period. The firm practice servant based leadership and employee advocacy as ways of influencing the overall competitive advantage (Walker, Bovet & Joseph, 2000, p. 1).
Employee participation is emphasised in the company and it is considered as both an obligation and an opportunity. Employees are trained extensively to equip them with ideas and knowledge on how to create value in the firm (Firooz, 2012, p. 675). To enable this to happen, the firm contemplates integrating the use of a Balanced Scorecard approach to act as Learning Maps.
The Scanlon plans and Employee Stock Option Plans, abbreviated as ESOP, have continuously been applied in the firm to enhance involvement during business literacy training. In addition to these frameworks, Herman Miller has adopted the Economic Value Added framework (EVA) to heighten business literacy training even further.
The company has introduced a formal course that lasts for two hours for all its employees. This offers an avenue through which concepts are passed on to the workers. In addition to the already existing courses, plans are also underway to introduce EVA301 whose main objective is to offer more advanced training.
A series of courses referred to as “train the trainer” are currently pursued at Herman Miller to empower team leaders. Their subsequent empowerment helps them and others in the organisation to offer teachings to the rest of the employees (Walker, Bovet & Joseph, 2000, p. 5).
The Transition from Personnel Management to Strategic Human Resource Management
Personnel management mainly focuses on operations, including recruitment, selection, as well as administrative functions. As opposed to strategic human resource managers, personnel managers are functional specialists who have little status or power (Bloisi, 2007, p. 12). Personnel managers mainly play the role of linking the employee and employer to articulate both their needs. Personnel management has been prominent in the past, with organisations practicing it to seek the achievement of their end objectives.
The organisational changes and transformation towards strategic HRM have been instigated by changing power balance, as well as the changing management concerns within the workplace (Redman & Wilkinson, 2006, p. 4). Trade union membership has been declining in the recent years, while concerns by the management have focused more on efficiency and productivity.
Organisations are also increasingly facing pressure to change and are in the process seeking ways of adjusting to the global competition through downsizing their workforce, de-layering, and decentralisation (Redman & Wilkinson, 2006, p. 4).
These changes have transformed firms into being more flexible, adopting continuous change programmes, and becoming flexible. This is the essence of strategic HRM, where focus is on performance management, process re-engineering, learning organisation, and culture change (Redman & Wilkinson, 2006, p. 7).
As Armstrong (2006, p. 19) notes, strategic HRM mainly emphasises on organisations attaining integration and strategic fit with their business strategy. Strategic HRM mainly focuses on organisational culture and commitment achievement because of the new changes in the business environment. It places more emphasis on line managers and their role as HR policy implementers (Armstrong, 2006, p. 19).
The holistic strategic HRM approach mainly deals with the organisation and its interests, as well as taking into consideration how important the individual employee interests are. The HR professionals seek to become business partners and not administrators in the firm. Their focus is to treat the employees as critical assets of the firm, but not as cost overheads (Armstrong 2006, p. 21).
Although strategic HRM can seek to initiate new business policies and practices, the implementation role is left to the line managers (Armstrong, 2006, p. 97). The organisation does not only stop at providing HR policies because strategic HRM is focused on improved organisational performance. Instead, the implementation process takes the central role.
Strategic HRM targets to achieve up to six critical objectives for the organisation, which include conceptualising interests, establishing the mission and vision statements, and determining structural, as well as functional roles. Additionally, it seeks to determine the managerial operatives and define the job descriptions, prepare the HR policy documents while placing emphasis on performance management, and managing the organisational culture.
Human Resource Management
The shift towards strategic HRM practice of the traditional personnel management has gone through the human resource management stage. Human resource management focuses more on the management and its needs in regard to the provision, as well as use of the human resources.
HRM promotes the undertaking of activities that deal with the human resources with other management members. It does not promote working between the management and the employees directly. Its main emphasis is on planning, monitoring and controlling, but not mediating (Torrington, Hall & Taylor, 2004, p. 23).
The main HRM role involves aligning structures and the human resources to achieve the organisation’s business structure and the planned scope. The concern is on the human aspect comprising the organisational structure. However, HRM differs from the strategic management of the human resources in the sense that the latter bases on the general organisational strategy. It also focuses on the strategies of the organisational units in existence. The operational management, therefore, develops the strategic plans aimed for the staff.
HRM is mainly characterised by favouring liberal principles and goals. It does not only refer to a typical worker who goes to his or her place of work and waits for payment at the end of it all. Instead, the worker matters a lot in the survival of the organisation and gets the treatment of a management subject.
The constant change, increase of competitiveness, rapid science and technology development, and the associated difficulties require that the management of an organisation should search constantly for solutions that are good and adequate. It is conclusive to point out that it is decisive to treat and manage human resources within the organisation. It gives importance to HRM, while seriously challenging those in charge.
The Strategic HRM Approach
Unlike personnel management practice, strategic HRM emphasises on the need for human resource planning. It involves determining the actual size of staff member that can help the organisation to meet its future needs and achieve a workforce whose composition has the necessary skills (McKenna & Beech, 2002, p. 117). Firms are targeting to achieve efficiency in their performance, while ensuring that the employees in the firm associate themselves fully with the organisation in their quest to maintain the right size of workforce.
Strategic HR planning seeks to acquire, utilise, improve, and retain the organisation’s human resources (Mullins, 2005, p. 797). Organisations are realising the importance of including HR planning as an integral component of the broader corporate planning. In this new framework, information plays an important role of determining the range of the plan, target dates, forecasting period, and the needed skills and occupations (Mullins, 2005, p. 797).
The organisation needs to carry out an analysis of the existing resources, undertake an estimation of the probable resources according to the target dates agreed, and factor in the current staff development, losses, and the external forces like labour availability and legislative change (Mullins, 2005, p. 799).
Forecasting of staff requirements is a critical aspect of strategic HRM. It helps in ensuring that the organisation attains its corporate objectives as per the scheduled dates. The management, nevertheless, must take several measures to offer the appropriate staffing resources required.
Overly, changes in the population trends have to be taken into account to include some considerations like the ageing of the workforce, the number of young people being absorbed directly from school, competition levels from other organisations, advancement in automation and information technology, and employment legislation (Mullins, 2005, p. 799).
Employee selection
Strategic HRM has seen the emergence of new techniques in employee selection. These techniques emphasise on efficiency and quality performance. The Credit Suisse process is among the new employee selection techniques that firms adopting strategic HRM practice employ.
As Marchington and Wilkinston (2005, p. 176) mention, strategic selection methods currently used by organisations include references, application forms, assessment centres, graphology, and work sampling. These techniques are all applied together because no single technique offers the perfect decisions that can address the issue of certainty (Marchington & Wilkinston, 2005, p. 176).
The transition of personnel management, therefore, has seen a multiple number of methods being preferred by managers. In this new practice, employers may confirm with the references after, or before the interviews.
The references are maintained as critical aspects of recruitment that inform the decision to employ a particular individual. The CIPD (2004, p. 2) indicates a collection of other selection techniques employed by organisations that have adopted strategic HRM, including the use of questionnaires and numeracy and literacy tests.
A combination of all these techniques during the selection process enhances the overall quality of employees selected because each of the methods has limitations. A more complimentary technique is used as an alternative to achieve a perfect judgement, the probable fit with the organisation’s culture (Jackson et al., 2008, p. 552).
Interviews
The strategic HRM shift has seen a majority of organisations adopt the use of interviews as the most common technique in the recruitment process (Bloisi, 2007, p. 147).
According to Bloisi, up to 68% of organisations consider the use of interviews, particularly the more structured interview types. These interviews are used as a determinant of the selected teams. Other organisations prefer the use of structured, panel interviewing (CIPD, 2005, p. 1). Additionally, behavioural questioning within the structured interviews is also used as a technique for determining the right employees.
Organisations are emphasising on acquiring individuals who are better placed in terms of their behaviours to serve it towards the achievement of the objectives. Organisations must ensure that they acquire the right employees because strategic HRM entails attaining efficiency and objectives within the stipulated time. Although individual skills are crucial in determining the selection decisions, employees must also be competent enough to fit into the organisation’s culture (Armstrong, 2006, p. 404).
Conclusion
The organisational transition from personnel management practice to strategic human resource management has been taking place since the 1980s. The business environment has been changing over the years, with the emergence of trends such as globalisation influencing the need for organisations to speed up their transition to strategic human resource management. Various challenges within the contemporary business environment make it inadequate for personnel management to achieve its intended goals and objectives effectively.
The external changes within the business environment comprise of increased competition, the need to satisfy customers’ needs accurately, advanced technology and techniques, and the intricate nature of the global economy. Organisations will be unable to create the needed competitive edge over their rivals, unless they shift to strategic human resource management.
Sears’ performance management target has seen it mandate a multi-perspective appraisal for its managers, where greater emphasis is placed on consistency of behaviours to match with its leadership competencies. The firm intends to train its managers to be actual leaders in its quest to make it a compelling place for customers to do their shopping and one where workers will get the attraction to work in.
Lucent’s strategic human resource management has seen Lucent focus on strong pay-performance relationship where it has increased stock options usage. From this strategy, the firm has succeeded in aligning the interests of its employees with the corporate goal of doubling the market value and overall performance. Further strategic management programs at Lucent have seen it increase service quality in every level of its operation.
The new HR structure of the firm has helped in providing and sustaining a model that emphasises services at three main levels, including individual employees, senior leaders, and supervisors.
Herman Miller, Inc., on its part, has strategically focused on pushing for a buy-in from the line managers to enhance people-based competitive strategy. The employees participate in the decision making process in the firm to facilitate ‘ownership’. The idea of the firm is to make employees more valuable by allowing them to fully participate in the crucial management role in decision-making.
The transition from personnel management to strategic human resource management has seen firms focus a lot of their attention on the selection procedures that they employ. The most important objective that the management seeks to attain is the creation of a workforce that fits perfectly within the cultural base of the organisation. The contemporary organisations are spending much of their resources in training workers to increase their ability to compete with others.
Employees who have their skills improved regularly increase the possibility of the organisation attaining its objective. Strategic management of the human resource has seen firms focus more attention on the selection of their employees, with more techniques being employed to ascertain the behaviour of the prospective employees. Individual behaviour is crucial even as organisations seek to achieve a cultural fit into the complex business environment.
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