Strategic human resource management: case study
Strategic human resource management (SHRM) is a complex integration of human resource to the strategic management of the organization with the objective of achieving the organizations goals efficiently and effectively. SHRM is a process that requires understanding of the status of the firm, human resource available, and then placement of the right human resource personnel in the right position to achieve the strategic goals of the organization. This essay will seek to create a working SHRM plan for the stated case study by providing solution to the listed problems. The following will be tacked in the essay; the practical aspects of SHRM, the balanced scorecard approach, then provide a summary on how to move the organization forward. This will be achieved through review of relevant literature.
According to Purcell & Kinnie (2007), there are different ways of achieving the integration of human resource and the strategic objectives of the organization. Some of the theories available include the best fit, the best practice, and the resource based view (RBV).
The best fit theory according to Hodge et al, (2003) is a contingency model that is designed based on internal and external environment of the business. This model links the HR strategy to the existing environment, the pressures, and the demands of the organization. For the best fit theory to work in meeting the needs of the organization, it requires flexibility and professionalism in the HR strategy. This theory categorizes organizations into three major groups; the defenders, the prospectors, and the analyzers.
These classifications are developed based on HR practices that are required for the various categories. Defenders are those organizations producing limited goods in a narrow product-market. Prospectors produce goods based on market opportunities and needs, while analyzers combine the aspects of both defenders and prospectors (Davila et al, 2007). For defenders to remain active they need innovation to improve on the existing products while on the other hand, prospectors need active innovation to satisfy the existing market opportunity.
The best fit theory requires that any organization align its human resource to fit its operations. For the defenders, because their market environment is stable, they need for example, innovation, but only to remain at the top of the market by delivering on customer satisfaction (Millmore et al. 2007). On the other hand, prospectors because they are in a highly dynamic market environment, they need to strategize their human resource for aggressive innovation. In addition to innovation, the human resource relationship structures in these classifications differ. For example, in defender organization, human resource relationship can be vertical and horizontal, but in prospector organization, competitive structure is most appropriate.
Best practice theory on the other hand entails the employment of several practices that are considered best and they contributed to the improvement of the organizations performance. In best practice theory, there are no contingency models as characteristic of the best fit model. The practices in use as well as the changes in practice are not determined depending on the market environment rather, they are “universal prescription”. The determination of the implementation of any practice is based on wisdom, according to Wright et al, (2001).
The best practice theory requires advancement in knowledge management. This can be through knowledge management literature, through partnership between organizations, and through employment of knowledgeable employees. In common market terms, this is referred to as experience. In situation where experience is deficient, best practice theory requires the use of common sense, and sensitivity to the organization.
Best practice theory aims at developing the employee and developing their commitment to the business with the goal being to improve the organizational performance with the ultimate goal of improving on competitive advantage. To achieve this, organizations using the best practice theory have firm human resource nurturing structures. Employees in these firms are very vital and valuable resources.
Some of the best practices used by organizations include; ensuring employee’s security of employment. Practices under this include formal contracts, equal employment opportunities, etc. Selective hiring to ensure the best-qualified candidate is selected for the vacant position. Qualification under the best practices theory is a combination of skills and experience. In addition, effective compensation strategies through wages or salaries, allowances, and rewards. Reduction in status terms to make the highest status not very different from the lowest rank in. Effective use of teams, which are has seen the shift from centralized control of organization to per based control.
For effective implementation of the best fit theory in the SHRM of an organization, it requires a process of analysis, strategizing, and evaluation (Jiang et al, 2012). The first step is stating the organizations goals and mission, values and management philosophy. These act as the drivers of what is to be done as well as the controllers because they provide the direction the organization should take.
The second step is to analysis the status and position of the organization. Before any new strategy can be implemented, it is essential that the current position be established. The various evaluations in this step include environmental analysis of the organization, scan of internal position, and external positions (Wright et al, 2001). Some of the aspects in this evaluation are the current human resource capabilities and the required skills, which help to determine the right course of action.
The third step is strategic formulation. Formulation is developing the way forward. Formulation involves determination of the various solutions and then strategic choice. The choices to be made are corporate, business, and functional (Salaman et al, 2005). For example, corporate choice maybe between hiring new human resource with the right required skills or training the existing human resource. In choice making, consideration has to be made on the opportunity cost among other factors.
Step four is strategic implementation of the choices. Implementation has to be done in the various aspects of the business including leadership, structure, control systems, and the human resource.
The fifth and last step is analysis of performance. The aspects analyzed include the strategy, operational and financial. Analysis determines the effectiveness of SHRM.
Lastly, the RBV is based on the idea that the organizations resources whether tangible, intangible, form a critical and important part when undertaking a strategic position. The assets included in this theory include cash, brand name, loyalty, assets, and research and development abilities. Internal resources rather than the environment drive RBV. In organization operating under RBV, the organization is viewed as a hub of abilities, powers, and achievement, which are integrated through strategic management to achieve competitive advantage.
Typically, the environment of on organization in relation to competitive advantage is viewed with two assumptions. The fist being that organizations in a given industry have similar resources that they control as well as the strategies they pursue. The second is that, resources can develop heterogeneity, but it is short lived because the resources are very mobile. This is the argument behind the best fit and best practices theories being not related on the organizational resources. The reason behind the argument being that, for ay two industries in a product-niche, it is impossible to create competitive advantage (Barney, 1995). However, the RBV assumes that firms in a niche industry can be heterogeneous in terms of the strategic resource they control therefore, heterogeneity can be long lasting and the firm is immobile, hence competitive advantage of two firms in an industry can compete.
The balanced score card is an approach to effectiveness that is based on four dimensions of performance. This is informed by the understanding that performance is a multidimensional aspect. To an organization to achieve effectiveness in performance, it must achieve financial performance, customer performance, internal operational performance, and innovation and learning performance (Campbell et al, 2012).
Financial performance is to measure shareholder success including revenue growth, profitability, economic value added, and ROI. It designing a balanced scored card, it is advised that the aspects chosen be towards establishing how to look for shareholders.
Internal operational performance measures productivity, and quality levels and cycling time. The measures included in this performance indicator are those that seek to establish where the organization can excel. Internal operational performance assesses the process involved in production.
Customer performance measures seek to establish the customer opinion of the organization. The aspects included in customer performance are market share, repeat sales, and customer satisfaction levels with the services and goods on offer.
Innovation and learning performance measures the growth of the organization. Learning and innovating are aspects of growth in an organization. This measurement seeks to establish the continual of success in the organization and it is achieved through analysis of people and infrastructure. The key aspects assessed include employee satisfaction, organizational innovation, intellectual capital, and employee development.
An effective balanced card should assess the organization current position as well as project on its future. This is done through the leading and lagging indicators (Hodge et al, 2003). Lagging indicators show the outcomes so far, while leading indicators are drivers to what will happen. For a well designed and effective balanced scorecard, some of the measurement aspects have to be related. For example, productivity, employee satisfaction, and product quality should be directly related to customer satisfaction and retention, which should be in turn related to market command share and financial performance.
Based on balanced scorecard details, it is possible to know where the business is from and where it is headed. This is possible as the balanced scorecard shows what has worked and what has not. In relation to strategic human resource management, the card will show which strategies of human resource management has worked in the past and those that have failed. Based on such details, it is possible to manage strategically human resource by implementing strategies, which have been proven to work or modify existing strategies for optimized performance.
For John to achieve the 20% growth as well as improve the business as required by the CEO, it is important that he adopt a SHRM plan. First, he needs to establish the competencies and capabilities available for the business. This is to be done through human resource evaluation. In addition to human resource management, evaluation of the business is important. This can be done through SWOT analysis. The SWOT analysis provides the strengths, the weaknesses, the opportunities, and the threats to the business (Purcell & Kinnie, 2007). Based on the SWOT analysis, the human resource has to be strategically integrated with the business to optimize the strengths, make use of the opportunities, strengthen the weaknesses, and eliminate the threats as much as possible.
For maximized implementation of strategic management, John has to select between choices for the right options for the business. The choices have to be made based on the HR evaluation and the business evaluation. The choices to be made in terms of HR are, does the business have at its disposal the right skills and experiences to achieve the set mission and goals. If not, can the existing HR be trained to develop the skills or is a recruitment drive required to get the right resource. The choice has also to be made based on the best practice to the business. For example, between training and hiring, which would be effective and the costs involved.
The next step for john is to implement the SHRM plan. To ensure effective and fast realization of the set goals and growth of the business, it is advised that John employ both best practice and best fit models. While the best fit model would require the business to operate as analyzers, the best practice model would require the right employee to be placed in the right position based on their skills and expertise.
To boost HR productivity, which is essential for the realization of the set goals, the right culture and environment should be created in the business. These can be created through adoption of the right structure. For example, the competitive structure would be right for to promote innovation and dedication to work. The right structure will determine how information flows in the business for effective communication between HR management and the rest of human resource (Millmore et al. 2007). in addition, introduction of a reward structure in the business would serve to motivate employees towards improved productivity.
With every implementation structure in place, the next will be to adopt an analysis strategy. This can be at employee level or at the business level or both. It is recommend that both employee and business evaluation strategies be adopted. At employee level, evaluation strategies include performance appraisal while at the business level the SWOT or balanced scorecard can be used.
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