Content
. Preface
2. Fit between HR strategy and business strategy
3. Recruitment and Selection
4. Performance management
5. Conclusion
p. 3
p. 5
p. 9
p. 12
p. 15
Bibliography
p. 16
. Preface
Different people, at different times, have different perceptions of what human resource is about. However, HR is now increasingly being viewed as an important strategy needed to fulfil final corporate goals. As defined by Keenoy in 1990, HRM is a method of maximizing economic return from labour resource by integrating HRM into Business Strategy. And as defined by Storey in 1995, HRM is a distinctive approach to employment management which seeks to achieve competitive advantage through the strategic development of a highly committed and capable workforce, using an integrated array of cultural, structural and personnel techniques. These definitions definitely reveal the importance of HR strategy in achieving corporate goals.
As shown in illustration 1.1, corporate goals to be achieved, when associated with HR, should go through the process of HR management, which includes recruitment, selection and performance management.
Illustration 1.1 Interactive Framework between HRM and Business Strategy
The purpose of recruitment and selection is to attract sufficient proper candidates and then to select qualified and most suitable persons from candidates to match people to specific works. It is not possible to optimise the effectiveness of human resources, by whatever method, if there is a less than adequate match.
Performance management is then designed to motivate the selected people for better performance. Therefore, recruitment, selection and performance management are integrated together to form a driving force by which the organisation comes to the realisation of corporate goals. A poor HR management might lead to a destructive result.
This is, however, easier said than done. The importance of HR strategy will be discussed further. And the difficulties of achieving corporate goals the firms counter during the HR management will be analysed thereby for consideration.
2. Fit between HR strategy and business strategy
HRM shall be viewed as part of the strategic managerial function in the development of business policy, in which it plays both a determining and a contributory role.
HRM, with its strategic importance, needs to be considered by top management in the formulation of the corporate plan. HR managers are no longer viewed primarily as being in charge of simply performing a service function such as recruiting and selecting personnel. Today, they are expected to assume an active role in the strategic planning and decision making at the upper echelons of their organisations. There has been a growing need for HR managers to assume a broader role in overall organisational strategy. In short, "the HR function should be planned, organized, and evaluated on the basis of its contribution to the business."
Actually, the overall aim of HRM should be to make an effective contributing to the achievement of corporate goals.
As shown in a survey, seven in 10 HR departments operate with a documented HR strategy, of which almost all are explicitly linked to the organisation's business strategy. Almost all the organisations in the sample employ HR staff at managerial level. The survey shows that a number of companies are making efforts to transform HR from traditional administrative cost centre to dynamic strategic function.
HR's strategic role as corporate architect, as defined by Ulrich, surely indicates that the function needs to become more tightly integrated into the main body of the organisation, rather than less. Some companies have taken this to its logical conclusion by merging their strategic HR function with other key departments. Microsoft's former finance director in the UK, for example, has now become director of people, profits and strategy.
HR planning must be coordinated closely with the organisation's strategic and related planning functions. As a result, efforts in HRM are being directed toward providing more support for the achievement of organisation's operating goals. HRM directs employee efforts to meaningful activities contributing to achieve the corporate goals. That's why many of the most forward-looking CEOs are seeking top HR managers who can report directly to them and help them address key issues.
HR strategies shall be more closely integrated with business strategies, especially at the time to choose proper methods of recruitment and selection, and to ...
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HR planning must be coordinated closely with the organisation's strategic and related planning functions. As a result, efforts in HRM are being directed toward providing more support for the achievement of organisation's operating goals. HRM directs employee efforts to meaningful activities contributing to achieve the corporate goals. That's why many of the most forward-looking CEOs are seeking top HR managers who can report directly to them and help them address key issues.
HR strategies shall be more closely integrated with business strategies, especially at the time to choose proper methods of recruitment and selection, and to determine if people are available, internally or externally, to implement the business strategic plan.
However, the survey also suggests that HR departments do not have much time to devote to strategic activities. Overall, almost three-quarters allocate 20% or less of their time to strategic activities and just 8% allocate more than 40%. Administrative work still takes up the majority of the HR department's time. It seems that people, although come to emphasis the strategic importance of HR, on the other hand have to deal with lot of administrative trivia which greatly distracts HR department's focus from strategic activities.
Moreover, from the fact that just 18 members of the FTSE 100 have a HR director on the board and that people are the only major asset that listed companies can legitimately ignore in annual reports, HR is still being underestimated in the formulation of business strategies and the process of decision-making.
People are a strategic asset rather than a cost to business.
Human resources are viewed as the key source of sustained competitive advantage.
Miller defined strategic HRM as: "those decisions and actions which concern the management of employees at all levels in the business and which are related to the implementation of strategies directed towards creating and sustaining competitive advantage" (Miller, 1987:352).
"Competitiveness doesn't come out strategy alone," comments Ulrich. "That's only half of the game. Competitiveness also depends on whether you have the organisation you need to execute the strategy."
HR has always been critical to the success of any organisation. How effectively the organisation will achieve the strategic goals depends in large part upon how effective the HRM is in the organisation. People are the final chain of the organisation to execute the strategy. Efficient HRM shall lead to an efficient organisational structure which then will facilitate the implementation of strategy plan to achieve corporate goals. HR strategy shall be thus at centre of the organisation, defining its future direction and shaping the means of obtaining its goals.
Gratton argued that most corporate strategies - built around a combination of technology and capital - were dead because they failed to incorporate a human element. HRM, as well as technology, research & development, infrastructure, and finance etc., has been viewed as the core competence, by which the firms build up their competitive advantages.
Advantage can be powerfully derived from within the workforce, the adaptability of employees which permits the organisation strategic flexibility, and the commitment of employees to the organisation' business plans and goals.
It can be found that the largest slice of many companies' market capitalisation is held in intangibles - primarily, the talent, knowledge and teamwork of their staff. In high-tech companies like Nokia, the percentage was as high as 95 per cent; but even 'old economy' stalwarts like BP, despite its huge investments in oil platforms and exploration equipment, notched up a significant 74 per cent. In a matured successful company, Human Resources, as the unparallel advantage in relation to the newly developed companies, constitutes its sustainable competitive advantage.
However, due to the following problems, HR strategy may be underestimated for its importance in achieving corporate goals.
. Human resource competencies are highly context-specific. The competencies and commitment shown by people in one context may be completely worthless in another.
2. Despite continued efforts to link strategic HR management with bottom line profitability, no real connection has yet been proved.
3. HR should be seen much more in terms of creating a cultural climate and organisational framework in which success occurs, rather than as a direct cause of goals achievement. It's hard to get the immediate return on investment of HR strategy.
4. Those acting strategically tend to be individuals rather than teams. There is no solid track record of loads of people, doing loads of good things - and until there is, there will always be a sense of mystique attached to strategic HR.
3. Recruitment and Selection
Continued success is dependent on attracting and retaining high-quality individuals who can respond effectively to this dynamic environment.
There can be 'wrong' people, individuals who are not going to contribute to organizational success and who may even harm the organization. Hiring the 'right' people is of paramount importance and this is dependent on effective recruitment and selection procedures as shown below, which aim to select the 'right' individuals and reject the 'wrong' ones.
Illustration 2.1
The key stages of a systematic approach to recruitment and selection
However, there are many difficulties that we will face in the procedure of recruitment and selection. None of the techniques, irrespective of how well they are designed and administered, is capable of producing perfect selection decisions that predict with certainty who is or who is not bound to be a good performer in a particular role. (Marchington and Wilkinson, 1996: 119). Due to the rooted feature of human subjectivity of HRM, these difficulties are hard to overcome and therefore HRM sometime contribute little to the achievement of corporate goals.
> Recruitment and selection are mainly based on the assessment of the appraisee and judgement of the appraiser, both of which are heavily affected by their knowledge, selection skills, experience, bias, education background and personal preference etc. This to some extend results in subjectivity and uncertainty, which may work conversely to the achievement of corporate goals.
> Because candidates can improve performance levels by practicing, the assessment is more likely to evaluate the ability of being tested rather than to evaluate the true competence. Therefore, appraiser may have a great chance to select an appraisee with better performance in selection but with lower competence in actual work circumstance.
> No clear link demonstrated between behaviour and performance, no satisfactory method of arriving at the overall assessment rating and no good methods for assessing multiple personal skills or attributes show that currently the firms will very likely fail to find the suitable person to match to the specific jobs.
> Almost all selection techniques have their inherent limitations. Interviews are viewed to be overly subjective, prone to interviewer bias, and therefore unreliable predictors of future performance. Using assessment centre method may lead to a result with low validity. Cognitive tests may not differentiate much between the various candidates and may be biased against certain groups.
> The current state of recruitment and selection is complex because a variety of internal and external factors continue to influence the process. Thus, one will find differences in approaches not only between organisations but also within organisations depending on the level of vacancies and organizational requirements.
Take an example from my real life. My company majors in overseas building construction. A project manager for a residential housing project in Ethiopia was chosen through the procedure of recruitment and selection. His performance in this procedure proved quite good by using the method of interview, expertise test, and inspection on his past experience and references. However, three months later after his arrival, the project had to be suspended due to the poor quality, deferred program and tense relationship between the contractor and the client. And later on my company was severely criticized by the Minister of Construction for this project. Company reputation was heavily destroyed. The reasons we concluded are:
a. This person was recommended by one of the deputy general managers, therefore the appraisers tended, intentionally or unconsciously, to give a high rating for his performance.
b. With quite a lot of experience in selection, he had techniques to show his virtues and conceal his drawbacks, therefore to perform better.
c. Some necessary attributes which are crucial to the success of the project, such as the awareness of quality, inter-personal communication skills and commitment to the job, are hard to be weighed in the selection. Unfortunately, just his lack of these attributes, which were not explicitly assessed in the selection, gave the project a vital blow.
From this example, a conclusion can be drawn that recruitment and selection sometimes, like a double-edged sword, may hurt yourself if the process is not carefully organised and its drawbacks are not sufficiently estimated.
4. Performance management
Even on the assumption that we can find the suitable person to execute our business strategy, the uncertainty of achieving corporate goals still exists, if the employee doesn't effectively utilize his knowledge and abilities. Performance management is to appraise employee's performance and seek to motivate the employee accordingly. It's a necessary approach to maintain the form's productivity, although it's not always working efficiently. Appraisal systems have the capability to influence employee behaviour, thereby leading directly to improved organisational performance and to achieve corporate goals.
In actual practice, formal performance appraisal programs sometimes yield disappointing results, for a number of reasons.
> From the angle of the job and performance
* Job performance, in many cases, is not measurable.
* There are difficulties in setting objectives for certain types of job and activity.
* Performance appraisal programs sometimes may be viewed as an administrative burden so complicated and heavy that some firms are reluctant to carry out.
* An important principle of performance appraisal is that continuous feedback and employee coaching must be a positive daily activity. The annual or semi-annual performance review should simply be a logical extension of the day-to-day supervision process.
* In terms of the focus or level, at least three levels need to be considered: the individual job level; the group or department level; and the organization level. Smith (1994) argues that it is necessary to consider all three levels in developing a criterion measure of performance. Unfortunately, much research and practice does not follow the advice, but rather uses very limited measures of the criterion, namely supervisor ratings.
> From the angle of the persons involved.
* Managers may not be sufficiently skilled in conducting appraisal interviews.
* Organisational politics can introduce a bias even in fairly administered employee appraisals. For example, managers may distort ratings upward because they desire higher salaries for their employees or because higher subordinate ratings make them look good as managers.
* In terms of subjectivity, some ratings are subjective and prone to appraiser bias.
* The inherent subjectivity of the assessment process may lead to favouritism, bias and arbitrariness. If the appraiser judges the employee positively on one factor, he or she may give high ratings to all other areas of performance even though the appraisee's actual performance in these aspects may be weaker or unobserved. And vice versa, a negative rating in one aspect could lead to other performance factors being evaluated negatively. Problems of subjectivity are particularly evident when non-quantifiable criteria are being used for assessment purposes.
* The appraisers may find it difficult to identify and measure the distinct contribution of each individual especially when they constantly change the project or when individual contribution can't be separated from the contribution of whole team.
* There may be many external factors beyond the control of the individual employee that affect their performance, such as resources, processes, technology, corporate and HR strategy, working environment, external business context and management.
* If there is a long time span between appraisals, appraisers may place greater importance on more recent performance, thereby possibly ignoring incidents that had occurred earlier.
* A lack of time and resources may hinder appraiser in providing comprehensive and effective performance reviews and objective setting. Moreover, managers may perceive the appraisal process as a bureaucratic nuisance and form-filling exercise. This would be particularly evident in small companies.
5. Conclusion
Obviously, there is no doubt that organizations need to match their HR strategies to their business strategies so that it can be seen quite clearly that HR practices are contributing to the achievement of corporate goals.
However, as what we discussed above, the difficulties beyond control make this aim hard to achieve. Well designed HR strategy and organisation, with effective recruitment, selection and performance management system, is the basic and necessary premise of achieving corporate goals. Meanwhile, full consideration shall also be given to the deviation from expectation aroused in the process of recruitment, selection and performance management.
Bibliography
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1. Dave Day, 1989, "Performance Management Year-Round", Personnel 66, no.8, 43-45
2. Gareth Roberts, 1997, Recruitment and Selection - A Competency Approach
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