Strategic human resource management

Introduction

At present, human resources in a large number of organisations are viewed as a source of competitive advantage. There is greater acceptance that distinctive competencies are obtained through highly developed employee skills, distinctive organisational cultures, management processes and systems. Increasingly it is being recognized that competitive advantage can be obtained with a high quality workforce that enables organisations to compete on the basis of market responsiveness, product and service quality, differentiated products and technological innovation.

Strategic human resource management has been defined as ‘ the linking of human resources with strategic goals and objectives in order to improve business performance and develop organisational culture that foster innovation and flexibility’ (Siddharth Chaturvedi). Strategic HR means accepting the HR function as a strategic partner in the formulation of the company’s strategies as well as in the implementation of those strategies through HR activities such as recruiting, selecting, training and rewarding personnel. Whereas strategic HR recognizes HR’s partnership role in the strategizing process, the term HR Strategies refers to specific HR courses of action the company plans to pursue to achieve it’s aims.

Appendix 1 presents a model of Strategic HRM that accounts for both the fit and flexibility goals. The top half of the model depicts the fit component to the model, i.e., the means through which the firm seeks to fit HR practices, employee skills and employee behaviours to the immediate competitive needs of the firm as dictated by the strategy. The lower half of the model illustrates the flexibility component, which focuses on developing the organisational capability to respond to a variety of competitive needs other than those dictated by the current strategy (Patrick M. Wright; Scott A. Snell).

Literature Review:

A wide reading of research articles in strategic human resource management have been done in order to get a clear picture on its role being played in an organisation. The company which I have undertaken for this specific assignment is General motors. I will be comparing these articles with General motors wherever I think it is relevant.

David Baker, (1999), Strategic human resource management: performance, alignment, management, Library Career Development, 7(5), p. 51-63, MCB University Press.

This article looks at current trends in human resource management (HRM) and the relatively new concept of Strategic HRM (SHRM). David baker reviews recent management theory and considers its approach in a relevant practical scenario.

Jonathan Michie, Maura Sheehan, Business Strategy, Human Resources, Labour Market Flexibility, and Competitive Advantage.

This article contributes to the strategic human resource management literature by testing the universalistic, contingency and configurationally approaches against an original database. The article examines the relationship between strategy, human resource and use of flexible employment contracts, and the moderating effects of strategy with respect to HR, flexible labour, and organisational performance. The research also tells that HR is more likely to contribute to competitive success when introduced strategically as part of an integrated coherent package.

Terri Kabachnick, (1999), The Strategic Role of Human Resources, 11(1), Arthur Andersen Retailing Issues Letter.

The article by Terri Kabachnick, talks about the transformation of HR. It studies and understands certain evolving trends and based on that, it stresses that HR professionals can grow from their roles and become key leaders in helping their organisations prepare and manage their people power. General motors Human resource also took on a similar approach, resulting in progressive leadership. Thereby redefining their roles.

More articles were read for thorough understanding of strategic human resource management/development, and due to limitation of words, I have included them as reference.

Corporate Background

General Motors is a diversified automotive business with interests in locomotives, finance, communications services, and insurance. General Motors’ size is massive. Its manufacturing operations in over 50 countries produce 15% of the world's cars and trucks. GM has a gigantic global workforce of approximately 315,000 hourly and salaried employees. The business pays more than 465,000 pensions and touches 1.2 million lives with benefits in the United States alone.

Vision of General Motors

“GM’s vision is to be the world leader in transportation products and related services. We will earn our customers’ enthusiasm through continuous improvement driven by the integrity, teamwork, and innovation of GM people.”

Mission of General Motors

“G.M. is a multinational corporation engaged in socially responsible operations, worldwide. It is dedicated to provide products and services of such quality that our customers will receive superior value while our employees and business partners will share in our success and our stockholders will receive a sustained superior return on their investment.”

Objectives of General Motors

Become Profitable.
Satisfy customers with better products.
Grow the business in future years.

General Motors Global Strategy

General Motors adopted a new global strategy. It reviewed its priorities and started focusing on four key things. They are:

Leveraging our capabilities as a single GM global automotive unit
Driving for stretch results
Pursuing goals with a sense of urgency
Product success globally.

SWOT ANALYSIS of GENERAL MOTORS.

Strengths

Size and market share.
Technology Potential.
New Leadership.
Quality improvement and perception thereof.
Model acceptance has improved.
Benefits derived from a new ...

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Objectives of General Motors

Become Profitable.
Satisfy customers with better products.
Grow the business in future years.

General Motors Global Strategy

General Motors adopted a new global strategy. It reviewed its priorities and started focusing on four key things. They are:

Leveraging our capabilities as a single GM global automotive unit
Driving for stretch results
Pursuing goals with a sense of urgency
Product success globally.

SWOT ANALYSIS of GENERAL MOTORS.

Strengths

Size and market share.
Technology Potential.
New Leadership.
Quality improvement and perception thereof.
Model acceptance has improved.
Benefits derived from a new strategy structure approach and relationship.

Weaknesses

Failure to make technology work.
Too much vertical integration.
Bureaucratic culture.
Relationship with UAW.
Relationship of strategy to structure.
Product design problems-public acceptance and reduction of cycle time.
Market share and profitability.
Negative effects of downsizing.
Still much to learn about lean production-high cost producer.
Hughes Aircraft situation.

Opportunities

Use of knowledge gained from Saturn experience and Toyota (Nummi) Joint venture.
Expansion of their global presence – Their own European model operation as an example.
Continue to build on the new found customer confidence.
Changing consumer demand for new model types and styles – Expansion and leadership.

Threats

Domestic and foreign competition.
US federal Legislation and threats.
Consumer Lawsuits.
Foreign Legislation and regulation.
Declining value of Japanese Yen.

General Motors has been through some difficult times the past ten years or so and appears to have learned some hard lessons. Based on these lessons, General Motors has begun to adopt a strategy of restoring profitability to its North American operations, by aggressive marketing, redesigned products, adopting to new Human resource strategy and a profit rather than a market share goal.

Since this assignment is on strategic human resource management, I will be concentrating more on GM’s Functional Strategy in HR, which played a major role for GM’s success.

General Motors Human Resource Management

Most companies do not view the HR department as a strategic business partner or as an indispensable part of the organisation (Terri Kabachnick, 1999). By analysing executive assessments, they usually show merchandising, finance, or marketing in the top spot when each department’s value and contribution to the company’s success as perceived by the company are rated. HR inevitably ranks last, coupled with loss prevention.

Traditional HR departments within large, multi-national corporations tend to be powerless with the logistics of managing processes across many departments spanning multiple countries. In addition, GM, like other multi-nationals, has multiple HR groups - one at the corporate level and additional ones for each business unit within the corporation. These HR groups typically do not have a central repository of information and lack a coordinated communications infrastructure.

As a result, the HR processes of large, multi-national corporations generally are redundant and inefficient. In addition, the sheer number of third-party vendors used by an HR department to handle discrete functions makes management of the process challenging. By necessity, these departments predominantly have focused on administrative functions and typically don't have the time or the resources to devote to strategic planning. At the same time, many are facing a dramatic reduction in resources, and cost-cutting efforts primarily have focused on reducing staff, rather than re-engineering service delivery.

A Climate for Change:

While many businesses flourished during the boom years of the 1990s, GM, like other U.S.-based automakers, struggled to maintain the status quo. During those years, GM's market share continued to shrink as a steady stream of consumers bought cars from its Japanese, German and Korean competitors.

When Wagoner took over as president and chief executive officer of GM in 1998, he knew the company had to change its approach to manufacturing and selling cars or it would continue a downward spiral and eventually lose its place as the world's pre-eminent automaker. Wagoner set into motion an effort to reorganize and rebuild GM from the inside out. One of Wagoner's primary objectives was to refocus and revamp the company's HR department.

Wagoner thought HR is paramount to GM’s reorganisation effort. If they were to hire, train and keep the best workforce possible, then it must have the best and most up-to-date HR practices possible. While the change in HR is just one element of making GM a more globally focused and competitive company, it is a key element.

GM has always been a very siloed corporation with all of its different divisions functioning like separate companies. There have been numerous reorganisation efforts at GM, and most have not fared well, because of the turf battles and independent nature of GM's divisions. However, GM appears to be taking a different approach. Focusing on HR and making it a key element in the reorganisation effort, which GM has never really attempted before.

One real challenge has been the effects of change on one large organisation which has set itself to comfort,so to get GM's management team to completely buy into the strategic role for HR was a task in itself. Middle management, however, has been a different story, they were more resistant to change than their managers. But, the effort is under way, and senior-level executives are well aware that it is "an evolution not a revolution" and therefore will take some time. The key to making the evolution work, is to find the points of resistance and to try to make them understand the need for change. And if they continue to resist then personnel changes should be considered.as the cost is quite big to barter. I personally feel that the approach which GM adopted, provides a best fit to its work environment and structure.

General Motors HR Strategy: 3Ts

Earlier, in GM facilities, the HR administered in different ways. Each GM plant had its own HR department, and these departments operated independently. GM wanted to tear down the walls and build a strong global network of HR professionals within itself. It developed a new HR Strategy called the 3Ts.

The first "T" in "3Ts," or technology, is what GM focused on for the first part of this reorganisation. This emphasis on technology has helped HR to develop and retain talent, which is the second "T." The last part focuses on the transformation--or the third "T"--within GM. For the first time, the HR department had a consistent platform and set of goals with which to work. And many HR professionals within GM are seeing the effects of making their jobs more strategic and globally focused.

Technology

GM's use of technology to completely revamp its HR processes has become a model that other organisations of all sizes are now following. GM has focused its efforts on creating an effective and totally accessible corporate intranet. The company placed most of its HR-related activities online and transformed its four-year-old intranet site into an HR portal.

The portal is helping GM to achieve its goals of developing a web-savvy workforce, of improving its ability to communicate and collaborate with one another. The employee service center does this by cutting out HR as the middleman and allowing employees to directly modify their HR-related information. It really is freeing up their time to do more substantive work and really get involved with the planning and strategic aspects of their business.

Strategic Objectives of eHR at General Motors

Improve productivityfor all GM employees while increasing service and quality to HR customers.
Improve transaction accuracy, saving the company money (less re-work)
Give more control to employees across all demographics (salaried, hourly, retirees) and provide a tool for employee/retiree relationship management.
Do it fast (“GO FAST”)

Challenges Facing eHR at GM

Multiple of vendors delivering services to GM’s employees.
Multiple, disparate teams at GM
Pressure to “Go Fast”; respond to competitive tactics.
“Old Manufacturing Company” mindset of many kept letting us know “why we can’t do it.”

HR Business and Technology strategies at General Motors can be clearly explained by means of diagram (Refer Appendix 2).

Talent

In 1997, the company founded GM University, which is one of the largest corporate educational programs in the world. The university currently has 15 functional colleges charged with developing curricula tailored to the professional needs and challenges facing GM employees.

Most of the classes within GMU are lecture-based and in a traditional classroom format. But over the past couple of years, the focus has been to move most of the training courses online. GM also launched the first training program offered completely on the corporate intranet. The course is called "HR Skills for Success," and its launch demonstrates GM's dedication to improving the opportunities of its 3,000-plus HR professionals.

The new online course is required training for HR professionals who work at GM. The course is divided into three phases with the first phase being mandatory for the HR staff. The other phases are provided to HR professionals who want to increase their management skills.

Transformation

As the changes in HR begin to take hold, HR professionals throughout GM find that the focus of their jobs definitely has changed over the past two years. For the first time the company now has standard training programs that are used in every country and each GM facility. Prior to the change, GM's training programs varied widely from plant to plant and from country to country. It was quite confusing and hard to keep track of. The new system was much easier to work within. While it might vary some because countries like Germany and France do have different types of labor and workplace laws, the new system means everyone is really on the same page. And it has helped to improve the communications and interaction within the corporation and that's a welcome change.

Also the communication with GM's headquarters in Detroit opened up and now flows both ways across the Atlantic. Before the transition began, the headquarters would just tell its other plants what they wanted them to do and there was no real discussion about it. Now the GM headquartes actively ask its other plants for suggestions and seek their input. It definitely has been very empowering.This really is the most exciting and positive change that Gm’s employees have ever seen in the company.

General Motors Hr Strategy As A Means Of Competitive Advantage

In a time of economic slowdown and an increasingly competitive global market; to have a strategic advantage over the prevalent competition is a big question. General Motors is one company currently faced with that challenge.

In 2001, the company sold over 8.5 million cars and trucks in more than 200 countries. That is the equivalent of sixteen vehicles sold every minute around the clock in a year. In order to capitalize on past achievements and ensure continued success into the 21st century, GM has made the commitment to maintain innovation and improve productivity by focusing on the education and training of its employees.

By adopting to the new HR Strategy, the 2nd T of the 3Ts, Talent, it was able to provide its employees training and education.Training and professional development play an integral role in GM's business values. Consequently, as the company worked to launch an eMBA to make learning more accessible for salaried employees it knew it must find a strategic partner to deliver a quality program that would equip employees with the knowledge and skills required to continually develop and support the organisation's vision and its ability to achieve key business objectives. GM turned to The Thomson Corporation, a leading provider of corporate and professional learning solutions, to elevate learning to a more strategic level. GM wanted to link training to the driving concerns of the business. It believed that well-trained and competent employees are essential for business success.

As many as 86,000 GM executive, management, technical and professional employees are eligible to enroll in the eMBA program, provided by Thomson through GM University (GMU). Thomson offered GM employees access to Cardean University's totally online, award-winning eMBA curriculum, developed in collaboration with several of the world's most prestigious business schools including, Columbia Business School, The University of Chicago, Stanford University, Carnegie Melon, and the London School of Economics and Political Science. The program currently includes more than 150 courses covering topics in corporate finance, communications, marketing, leadership, economics and e-commerce among others. Employees must successfully complete fifteen online courses to earn an eMBA degree through the Thomson program.

By carefully considering the vision of their company and the positive effects of an integrated training strategy, GM is reaping the rewards that result from knowledgeable and empowered employees. It also believed that these strategies (the 3Ts) helped maintain a sustained competitive advantage (Refer Appendix 3).

Gm’s Market Share Through Implementation Of Hr Strategy

In the recent years General Motors market share had been steadily declining. The company which was once far ahead of its competitors was facing a crisis. In order to regain GM’s market share, a swot analysis was performed. On evaluating the results they adopted to a new strategy. The strategy was basically centred around the HR setup of the concern. This was the birth of the 3Ts, GM was able to coordinate, communicate and train its employees. It also established a good relationship with the dealers and suppliers. Maintaining good relationship with minority dealers was a part of GM’s Business Strategy. It had a relatively good marketshare in most of the countries.

Further on analysing GM’s market share through Boston consulting Group Matrix (BCG MATRIX), at present it was found that the market value and the Market share of General Motors is relatively high. Hence it can be classified under Star (Refer Appendix 4).

Conclusion

By following a successful strategy, General Motors has become more flexible to its employees, suppliers and dealers and has steadily begun to gain its market share. Apart from these strategies, based on PEST Analysis (Refer Appendix 5), in order to maintain its profitability in the world market, it should use a defensive strategy. But this does not means a passive strategy, because a well managed defensive struggle is offensive, trying to hold its dominant position in the market.

The better way to follow this strategy is using alliances and joint ventures, that provides new abilities and knowledge (some examples are: GM with Isuzu, Suzuki, Daewoo, Toyota; when GM wanted to learn quickly how to produce small cars).

Increasing importance of Strategic Human Resource Management in General Motors, for creating competitive advantage was given. This approach led to a best fit within and outside the company. The HR Strategy followed by GM had a huge welcome among the employees and executives.

My reflection towards this module

On careful analysis of the article that I have put forward, the importance of strategic human resource development has been discussed. As you have already seen how General Motors, a company that needed to change its declining market share adopted the 3Ts(HR Strategy). If the argument is on the issue of success on implementation of strategic HRM, it is quite clear with the effects of this principle, General Motors is having a face-lift. Instead of General Motors Focusing on its production, quality, marketing strategy and its suppliers, they have come to a conclusion on implementing SHRM. As they have realized, it is their employees who needed to change their outlook. By systematically bringing in a change through SHRM, I believe that General Motors that was headed for loosing more of their market share has begun to gain its once lost ground.

This principle of SHRM has worked for General Motors. But we cannot conclude that this is the universal law. I have come to understand that SHRM has to be customized based on the organisation as it could turnaround a company’s profitability. It could also lead to a confusion resulting in total chaos. So I would like to say that a careful study and understanding of the company’s culture, structure and attitude of employees have to be taken in each and every case, so that SHRM provides a best fit.

Strategic HRM has got a direct or indirect relationship with most of the modules that I have studied. HR is the backbone of any organisation, Each module is linked in someway and cannot be a part without the relationship with HR. Strategic HR is a technical role played to rescue and set a right a disfunctioning or malfunctioning part of the organisation by taking up a strategic leadership role. I find to my personal thinking, organisational behavior module have a close relationship as this involves people, their responsibilities in organisation linked with change.

In large multinational companies, which are following their own pattern, structure, and hierarchy; in time will face a very similar problem and as strategic HRM is being implemented, I feel their importance is relevant to keep an organisation steady in an ever-changing environment. More studies have to be carried out in order to facilitate the strategic HRM in all Organisations and universities, as it is more of a necessity than just a future requirement. Every organisation has to prepare to have its own SHRM with expert handling capabilities. As a student studying SHRM, one must be able to analyse where it can be implemented by having a thorough understanding of the organisation with respect to its culture and its structure. Thereby I would like to conclude that SHRM will play an important role in the near future, be it in a multinational company or even running a government.

Appendix 1

A Modal of SHRM

Appendix 2

HR Business and Technology Strategies at General Motors

Appendix 3

Appendix 4

BCG MATRIX

Appendix 5

PEST Analysis of General Motors

Political

Could lead to a threat from the government to break-up
Globalisation
EU legislation
Sustainability legislation
Impact of transport policy
Removal of block exemptions

Economic

Labour rates in Asia compared to US
Dollar strength vs. falling rate of Yen
Change in economy from manufacturing to service and from ‘old’ to ‘new’
Tendency towards global growth
Global firm

Social

Population changes (older, more single)
Social responsibilities
Reduction in number of low cost centres due to improvement in global living

standards

Technological

Growth of communication technology making 24/7 possible (3Ts)
Growth of internet
Recycled materials
New fuel cells

Additional Readings and References:

Clint Chadwick; Peter Cappelli, Alternative To Generic Strategy Typologies In Strategic Human Resource Management, The Wharton School, University of Pennsylvania.
David Baker, (1999), Strategic human resource management: performance, alignment, management, Library Career Development, 7(5), p. 51-63, MCB University Press.
General Motors’ recent success in going eHR, The Chally Focus e-journal.
General Motors: Transforming Human Resources, Root Learning Inc.
Helen L. De Cieri; Peter J. Dowling, (1998), The Tortuous Evolution of Strategic Human Resource Management in Multinational Enterprises, Department of Management Working Paper in Human Resource Management & Industrial Relations, Number 5, The University of Melbourne.
Jonathan Michie, Maura Sheehan, Business Strategy, Human Resources, Labour Market Flexibility, and Competitive Advantage.
Scott A. Snell; Patrick M. Wright, Toward a Unifying Framework for Exploring Fit and Flexibility in Strategic Human Resource Management, Centre for Advanced Human Resource Studies, Working Paper 97-13, Cornell University.
Siddharth Chaturvedi, Strategic Human Resource Management, .
Terri Kabachnick, (1999), The Strategic Role of Human Resources, 11(1), Arthur Andersen Retailing Issues Letter.
Teressa Addison, The Auto Industry.
GM Annual Reports 2001 & 2003.