Effective Strategic Human Resource Management Leads to Improvements in Organizational Performance Essay

Over the last centurary, Human Resource Management (HRM), the function within an organization that focuses on recruitment of, management of, and providing direction for the people who work in the organization and also performed by line managers (Heathfield), has exploded with interest and its prominence has increased greatly. However when used strategically it is the way it puts the needs of the organisation first and helps it achieve its goals and objectives by guiding it down the correct path.

Every organisation has goals and objectives to help it grow and better its organizational performance, which comprises of the actual output or results of an organization as measured against its intended outputs (or goals and objectives) (al, 2009). It is very common that the history of HRM is not known resulting in the knowledge of the subject not being too great and this is what will be looked at first.

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The running of Human Resources by managers of an organisation is one of the most fundamental parts of the job, the main goals of human resource management are often not very clear on a macro and micro scale and can be a particular within an organisation which can often lead people astray when looking at it from an outsiders point of view. The HR departments within an organisation can affect the way processes are run. This essay will look into the performance of organisations and whether effective HRM leads to improvements in it.

HRM has been shown to have had roots from the prehistoric times, where processes were developed to select tribal leaders, knowledge was also passed on from generation to generation about safety, health, hunting and gathering. In 2000 BC, scriptures have shown that the Greeks used apprenticeship schemes, to help find, develop and train the best people for specialised jobs such as being and artist or marble sculptor. In the latter part 1700’s AD the English industrial revolution began which with it changes and transformations in processes and practices of production.

Machined goods started replacing hand made goods and this saw the emergence of large factories. This brought about the onset of large scale production. As the industrial revolution was in full flow both in the USA and Britain, this brought led to the onset of many migrant workers looking for jobs which in turn resulted in a new line of managers who were in charge of the workers and were considered higher than them socially and on a business level. It was in this period that the gap between workers and management grew.

As the condition of the lower classes lifestyle went down and the deterioration became quite evident, there was a massive call out for effective HRM. In the beginning HRM focused on helping all these migrants adjust to the English/American way of life and eventually with all other aspects such as housing and healthcare. As employee power grew, so did the formation of unions in the 1790’s and as their power grew into the 1800s and 1900s so did their ability to influence “politics and diplomacy” (History Of Human Resource Management).

Most enterprises, in particular medium and large enterprises have a designated human resource or personnel team who look after the company’s workforce needs. The way companies manage their human resources can be subdivided in the views of managerial strategy, the “soft” and “hard” HRM approach (Truss et al, 1995, 1997, 1998). When a company is in its development phase and considered a small enterprise, as shown by Fig. 1, the director of the company is able to deal with all staff members on a personal level and assist them with all their needs thus doing all the necessary HR work.

As the company grows to the introduction, growth and maturity levels, the director has to focus their efforts more on leading the business and making decisions for the business’s future, examples include contracts (mergers, takeovers/acquisitions). The director or office manager will usually follow “Soft Human Resource Management” when the enterprise is small and really focus on the employees, this is because they need to and cannot afford the cost of not having an employee who is not on form. Fig. 1 (Business Studies)

When the employees are trained and developed, they can provide a competitive edge for the small company which is needed at that stage of the company’s lifecycle. More often than not, small companies do not have a strong financial backing and thus are pretty much forced into adopting a Soft HRM approach. When the company is small and has a strong, external financial backing, this can result in more of a hard HRM approach being adopted. Directors and managers in this case, will often see staff members as more of resource and an economic factor that must be controlled. (Liao, (2005)) quite rightly says that Hard HRM is a used when a company’s focus is on its strategy hence the reason it also goes by the name strategic HRM. Companies such as British Airways which followed a period of rapid growth, have been known for their Hard HRM approach as they have not been able to concentrate on their staff members but more so have had to focus on the company’s direction. An example of Soft HRM in the airline industry is South West Airlines. The Differences in the Human Resource Management of Airline Companies, 2010). When a company grows particularly quickly but still focuses its efforts on HRM and in particular Soft HRM, this is when a team of HR specialists are put together. HR management has a job which includes, the overall responsibility for recruitment, selection, appraisal, staff development and training, understanding and implementing employment legislation and welfare (Human Resources (HR) Management). HRM effects the company in many ways.

Firstly on a micro/internal scale, it helps the machine, what is the workforce, run effectively and keeps its well oiled. When there is need to get new staff, get rid of staff or deal with staff problems the HR department are there to do the job. As a result of the HR management taking care of the internal problems, it allows employees further up the corporate ladder to take care of problems that directly affect the organisations direction. The supermarket chain Sainsbury’s, was founded in 1869 by John James Sainsburys and his wife Mary Ann Sainsbury (144 years of history).

This supermarket chain, is a perfect example of a company that began as a small enterprise and despite rapid expansion in the Victorian era up until today, where it sits as the third largest supermarket chain behind Tesco’s and ASDA, has kept a very good human resource facility in all its stores and head office. Sainsbury’s put their HR department in the forefront of their stores and thereby use a Soft HRM approach where staff members are treated as humans as opposed to resources and a lot of time is invested in them.

Sainsbury’s make sure their staff are trained to very high levels before commencing with the work. It is a common stereotype to think that supermarket jobs just involve stacking shelves and moving stock around however when looking at it at a closer inspection, people soon come to realise that it is very high pressured environment where there is a constant demand from the customer and standards are expected to be impeccable at all times. The structure of the company follows Fig. 2, an order where there are teams, with team leaders and line managers in charge of each team.

There is a deputy store manager who deals with the line managers concerns and feeds them information from the store manager who is directly in communication with head office. There is also a strong link between the store manager and HR department. The purpose of the HR department in Sainsbury’s is to employ staff, train them and then deal with their concerns once employed. The HR department also provide a confidential role of support for the employees around the store. The Resource Based View in HRM, quite simply summarises the role of the HR department in Sainsbury’s.

There is not only the soft HRM approach but the HR department is seen as an asset to the company, constant appraisals and training leverage peoples knowledge and competences as a source of competitive advantage as opposed to something that “must” be done without any further outcome. Sainsbury’s do not only follow a “deja vu approach but vu jade approach”, they want to work on things that they “have encountered before” but they also want to work on things that they have “not encountered” before. Fig. 2 Organizational performance is quite a broad concept which has been linked to productivity, efficiency, effectiveness and competitiveness.

A major concern for some companies has been the labour productivity ever since Marx and Smiths contradicting views. Most companies look at labour productivity as to whether they are making profits or not. Within labour productivity comes the ratio of cost to output. In many developed countries output per worker is quite high but comes at the cost of wages that a company needs to pay its employees. As wages are the biggest costs companies face, this results in them always being reviewed and when the opportunity to lower wages for a certain reason approaches this is done immediately.

Major companies such as Nike are always doing market research to see whether they are able to reduce costs of production by improving them or making them more efficient. When the opportunity to produce goods at a lower cost arises, they jump at it immediately. This is the reason that major companies often produce their goods in other countries such as India and China. In these countries the cost of labour is very low and there is hardly any use of HRM. Workers are treated as pawns in a production game and have little to no statuary rights.

It is common place for firms to see organizational performance as being better with higher output and higher profits. As a result of greater efficiency, effectiveness and competitiveness comes higher outputs and therefore profits. Employees are people who are hired to provide services to a company on a regular basis in exchange for compensation and does not provide these services as an independent business (employee). They are perceived as being proactive rather than passive inputs into productive processes.

They are capable of development, worthy of trust and collaboration to be achieved through participation and informed choice (Michael Beer, 1984). Therefore there is a stress on commitment via communication, motivation and leadership (Storey, New Perspectives On Human Resource Managment, 1989) which if employees do commit will result in greater economic performance (Storey). Storey and Beer quite rightly mention that when an organization takes on employees, they do so with the purpose of integrating them and thus developing them into a mechanism that the company can utilize.

This is why companies often have a very rigorous selection process. They want to be confident that the person they take onboard will fit the company’s beliefs and values and will have the potential to in turn develop others into doing and achieving the same. This is the reason why in recent times the role of the HR manager has moved from securing employees to trying to win over their hearts and minds by creating broader job designs, increasing flexibility and involving them in affairs of the company (J.

F. , 1995). Further evidence from the five case studies carried out by (Cooke, 1999) which although carried out over ten years ago, has shown that 80% of the maintenance workers surveyed were not consulted with before the introduction of new equipment/technology which they then had to maintain afterwards. This shows that all too often that organizations fail to show what the employee has to offer. In summary, employees are the lifeblood of all organizations.

Strategic HRM has shown to have had its origins in prehistoric times and the times of the Ancient Greeks . Due to the Industrial Revolution, HRM was forced to the forefront of businesses in the economy and has evolved to become one of the most integral parts of business today. All companies use human resource techniques in one way or another. The small enterprise, that has just started, has to keep its staff motivated and trained in order to survive and so the director takes care of all situations that involve staff members.

As these small enterprises grow and directors have to pay more attention to the direction of the company, HR departments are thus formed. Although there have been many studies which have shown that job satisfaction and performance have close to no relation, recent research into HRM and performance (Guest and Hoque 1994) has found that there is a positive link between these. When a workforce is well motivated and enjoy what they are doing, they are very likely to yield a high result, which means profits for their organization.

HR departments and their managers have the sole purpose of looking after the workforce and their interests. They make sure that the workforce is running smoothly and efficiently and any chinks in the armor, what may be staff member problems, are rectified immediately. Companies like Sainsbury’s have picked up very early on, that HRM is very important and this is the reason as to why, with their growing and expansion, they have made sure that it is one of the departments that is at the forefront of the organization.

Other companies when starting out take HRM quite seriously as they have to, to survive, but it has shown that with rapid expansion HRM can be shunted to one side, which results in unhappy workforces and no drive to succeed as there could have been when the company first started. With limited evidence in terms of studies showing that HRM has worked directly to increase performance, it is difficult to back anything up with solid facts. However one thing is for certain that all organizations that have a serious HR infrastructure, have happy, well motivated and productive workforces and are performing very well.