In the epoch of various occurrences such as globalization, industrialization and technological advancement, the international workplace including its particular areas and systems is overly affected by the fundamental processes manifested and brought about by these occurrences. Among the observable area and system that was affected by such emerging conditions particularly in the business world are the human resources and its management. Initially, human resource management (HRM) is one of the most significant attribute of business organization. There are many useful applications of HRM in a profit or non-profit organization.
This paper provides answers to the question - why should human resource management be considered an issue of strategic importance? This essay also argues that HRM maintains an acceptable working environment, HRM regulates management and workforce relationship, HRM plays a great role in management planning, and HRM contributes to employee effectiveness and overall organizational performance and development. Also, it shows that effective implementation of HR functions is an important task that the management and HR managers as well as staff should consider and pay attention with.
The outline of this paper is as follows: the first section provides the conceptual definitions that guide this essay. It also provides a brief history of HRM. The next section outlines the main arguments. Also, related concepts and HR functions will follow. A concluding section collectively draws the central idea.
Human Resource Management (HRM)
According to Sims (2002), human resource management (HRM) is predominantly concerned with all the activities that contribute to successfully attracting, developing, motivating, and maintaining a high-performing workforce that result in organizational success. These are collective efforts in developing, enriching and maintaining of organizations’ capacity towards growth and development. It comprises of several processes, approaches, and programs for the improvement of the work force. The traditional characteristics of HRM include personnel managers who handle administrative tasks revolving around human resources planning; recruiting staff; job analysis; establishing performance review systems; wage, salary, and benefits administration; employee training; personnel record keeping; legislative compliance (affirmative action, EEO, etc.); and labor relations (Sims, 2002).
Sambrook (2000) has stated that the HRM plays a key role in leveraging the knowledge of the organization specifically the enhancement of the abilities and skill of the employees. According Hornsby and Kuratko (2005), the historical development of HRM is divided to six major periods:
1. Pre-1920: Production-centered
- major concern: to produce products as cheaply as possible
- almost no need for any HR function
- no need for skills for laborers but required to work at extended hours with low wages
- employees who could not endure are replaced immediately
- paternalistic approach of employers to employee
- provides housing and other services to ensure steady workforce
2. 1910 – 1930: The birth of HR function
- introduction of employee selection and training
- employees demand for works that are matched with their individual abilities
- psychological reform movements spurred changes in 1920’s – 30s
- implementation of management principles and World War I
- increase in demand for efficiency in production and work specialization
3. 1930 – 1960: The childhood of HR, a time of expanding responsibilities
- establishment of legislation pieces on how the employers treat their employees such as right for unions to exist, established ground rules for union-management relations, specified minimum wage, limited child labor, and guidelines on overtime pay
- increase of employees attention for skill enhancements and education
- shift of personnel philosophy of employers as a response to new legislations
- companies are more oriented to human relations focusing more on employee morale and job satisfaction.
4. 1960 -1980: HR as a Teenager, with increasing awareness of the value of employees
- employers worked for employee participation and redesigning of jobs for more interesting and challenging one
- employees are now considered valuable company resource
- change in the name of field from Personnel Management (PM) to Human Resource Management (HRM)
- Congress passed more laws against discrimination
5. 1980 – 2000: The maturing of the HR function and crisis management
- presented many new challenges to HR function
- employee displacement through downsizing brought about by renewed emphasis on training so that displaced workers can gain skills to make them employable in the changing market place
6. 2001 – to Date: Changing HR strategic direction; the importance of line managers
- strategic role of the HR professional evolution
- Professor David Ulrich of the University of Michigan recommends HR departments to consider outsourcing routine tasks as payroll, benefits administration, and temporary staffing to free up time for HR professionals to help line managers with more strategic duties.
The HRM process is the course of attracting, developing, and maintaining workforce. This is the readiness of an organization to meet the demands and expectations of the target market. There are three main HRM functions: attracting a quality workforce, developing a quality workforce, and maintaining a quality workforce (Schermerhorn, 2001). Traditionally, HRM is the helps the organizations in achieving the goals of the organization by hiring and maintaining efficient employees. According to Sims (2002), the following are some of the responsibilities of HRM:
Train the workforce to maintain competitiveness of the organization.
Develop and communicate industrial policies and procedures in line with legislation.
Involvement in grievance and disciplinary hearings.
Lead negotiations.
Implement termination and hiring procedures.
Assessment and management of organizational climate and employees relations.
Liaison with trade unions.
Implementation of outcomes of collective bargaining and negotiation.
Develop compensation strategies and polices in line with legislation and the organization’s business strategy.
Attach meaningful monetary values to posts in the organization ensuring that the organization’s compensation is in line with market forces.
Develop appropriate compensation systems for the organization.
Manage overall labor costs.
Provide current information regarding employees to be used in the decision-making process and measurement of HRM’s contribution to the organization.
The growth of HRM has led to more and more organizations spending more time, effort and money in developing their ‘human’ resources and management leadership necessary to create a working environment conducive to effective production and growth. This change in focus resulted to the evaluation of organizations through different frameworks, in a proposal to ascertain underlying factors which are common to all. This would explain the recurrence of certain features.
Human resource management has been a crucial element in an organization’s life since its beginning because it is considered as an important tool to maintain competitive advantage (Peters & Waterman, 1981; Sims, 2002). However, enhanced perspectives on HRM were developed in order to ensure maximum success for an organization and its performance. Numerous HRM topics, including human capital theory and human asset accounting can be seen in writings dating as far back as the 1970s (Price, 2004). However, its modern view initially gained its prestige in 1981 with its induction on the prestigious MBA course at Harvard Business School. The Harvard MBA provided a blueprint for many other courses throughout North America and the rest of the world, making its interpretation of HRM particularly influential. Simultaneously, other interpretations were being developed in Michigan and New York (Price 2004). Price also said that these thoughts broaden to other countries in the 1980s and 1990s, particularly Australia, New Zealand, parts of northern Europe - especially the UK, Ireland and Scandinavia - and also South and South-East Asia and South Africa. At the moment, the HRM approach is significant in several parts of the world.
For the next decade, the HRM will face both challenges and opportunities. The collaboration and integration of Total Quality Management (TQM) is an example. Jain and Murray (1990) contend that HRM will remain a reactive function responding only to problems when they arise. It is heavily controlled by “forces that effectively work against the adoption of many of the policies that have been advocated by leading personnel experts for decades” (p. 24). The next years to come will represent a challenging time for the HR function. Schuler (1990) figured out the challenge when he said the HR departments have a choice. Whether or not to continue to be simply functional specialists or the can reorient and redirect themselves and see HR issues as business issues and help line managers to solve them. Hornsby and Kuratko (2005) also added that owners and senior heads of flourishing firms need to empower their managers in performing HR functions in ways that the firm will achieve a sustainable competitive edge among the rest.
But still, the fact remains that HRM is to be considered an issue of strategic importance because of numerous reasons provided as arguments of this essay. Among these are: its role in maintaining an acceptable working environment, regulating management and workforce relationship, management strategic planning, and organizational performance and development.
HRM maintains an acceptable working environment
The achievement of corporate success can only be accomplished by people (Cascio, 1995). In an organization, competitiveness could be measured with the effective supervising of its people, capitalizing its expertise and the cleverness in meeting the company’s objectives and these factors would be all possible through the use of HRM. HRM should be part of a company’s strategy since it has proven its effectiveness in bringing the firm’s to the highest performance. This management is simply based on the principle that human resources are the most important investment to achieve business’ success. In line with this, it is necessary that the company handle its people based on models of HR management so as to help them in creating a successful environment.
Any organization, may it be profit oriented or non-profit, the most vital asset is its employees. And for these organizations to maximize their assets, they should manage the employees’ working condition with intelligence and efficiency (Ulrich, 1998). They must be allowed to be involved in making work-related decisions to further enhance the organizational structure (Delaney & Huselid, 1996). Furthermore, the structure of tasks among the employees strengthens the organizational performance (Wilson, 1989; Wilson & Rosenfeld, 1990). It is therefore necessary to understand the employees for the organization to be effective. The development, building, motivation, enhancement and enrichment of the employees of any organization largely depend on the leadership, mandate and vision of the organization (Rainey & Steinbauer, 1999).
With HRM and its functions, the management is able to identify the needs of the general workforce. HRM is the mechanism that addressed the concerns of management and labor force. HR functions links management and employees as key players for organizational performance. Thus, maintaining an acceptable working environment wherein senior management and subordinates are in unity in achieving a unified goal is apparent using HRM.
HRM regulates management and workforce relationship
The most vital asset of an organization is its employees. For these organizations to maximize their assets, they should handle the employees’ working condition with intelligence and efficiency (Ulrich, 1998). Therefore, it is necessary to understand the employees’ characteristics for the organization to be effective (Schneider, 1983). This could be done using the principles of HRM.
The HRM function is of particular importance in the post industrial economy (Bell, 1972; Schneider & Bowen, 1993). In this emerging system, the critical factor in production has shifted from machines and equipment to the "knowledge" worker (McGregor, 1991). That is, service has replaced production as the driving force in the economy, and the prominent way value is added through the expertise of knowledge workers and the ministrations of service providers. In systems like this, it becomes even more important to obtain and use the full talents of all employees in the organization. Thus, the skillful adoption and use of HRM policies becomes a significant lever through which to move and direct the performance of the organization.
Management relations are same vital aspects of maintaining harmonious relationship with the workforce. The role of HRM in bridging upper management and employee is crucial. HRM maintain the quality of work served by the employees through various policies that falls under quality management. Quality management is concerned with continuous improvement (Siegel, 1996). In these ways, the organization will continue discovering changes essential to the trends of the fast-pace world of business today for success and organizational growth. Management implements HR functions in several forms. For example, in terms of motivation, HR practice includes the concept of rewards, incentives, and compensation. According to Burke and Cooper (2004), when organizations value and reward people, those people are committed to performing well. As a result, the organization accomplishes more and it can then reward employees more and attracts and retain more talented employees. This leads to even higher organizational performance. This involves developing a variety of HRM practices that motivate people to peak performance with accompanying rewards. Staffs, in turn, are more committed to the organization and more responsible for their own behaviors (contribution, learning, development, etc.).
HRM practices can also influence levels of motivation through the use of performance appraisals, pay-for-performance incentives, and internal promotions systems based on merit (Brown, Sturman, & Simmering, 2003). HRM practices can also influence the design of work so that highly motivated and skilled employees can use what they know in performing their jobs (Wright & Boswell, 2002). Giving incentives on a favorable performance appraisal is an example of a positive reinforcement that will impact the attitudes and behavior of employees. This mechanism falls under performance management functions handled by HR managers.
However, there are some positive and negative consequences in giving incentives. Incentives work as a positive reinforcement when used as a motivational factor and reward system (Champion-Hughes, 2001). It motivates employee to work for a common goal. On the other hand, rewards and incentives insinuate competition among employees, thus, breaking the perspective of teamwork (Burke & Cooper, 2004). A compensation system that only rewards individual performance is not consistent with sustaining teamwork (Lublin, 1995) because the compensation system tells employees which behaviors will be rewarded and which will be punished (Salas et al., 2004). If the system strictly reinforces individualistic behavior, without any consideration for collaboration or collective goals, then teamwork behaviors will be inhibited.
In relation to the traditional system of incentives and incentives based on customer satisfaction in a variety of industry, the both possess similar operations. There is no significant difference in performance management except to the fact that they involve two different workforces but still working on one objective – company growth. The potential solution to a balance incentives or rewards management lies in the hand of an effective HR manager and efficient HR function. However, a lot of organizations began to significantly switch their people-managing policies and systematize them in new directions (Budhwar & Debrah, 2001). But still HRM serves as a standard regulation that works to the eventual understanding and unity of the upper management and the labor group. Thus, HR practices are directed to a strong, motivated, unified and competitive workforce.
HRM plays a great role in management strategic planning
Strategic planning consists of the process of defining objectives and developing strategies to reach those objectives. It has been stated that strategic marketing planning takes place in the context of corporate planning (Thomas & Gardner, 1985; Meek & Meek, 2003). This may be the case since strategic management is an organization-wide task. Corporate management is process of leading an organization by deploying and manipulating resources (e.g. labor). As such, strategic management, which includes strategic planning, takes place in the context of the corporate planning. This means that the whole organization is involved in the process particularly the human resources. Aside from investigating the weakness and strengths of the company, discovering employee dimensions is also and important aspect of strategic planning (Kotler & Andreasen, 1996; Hooley et al., 1998; 2001). Thus, strategic planning creates an avenue for future positive results in relation to the outside world as well as adaptation of potential programs and actions within a long-range planning process of the organization.
HRM practices especially those that fall under the idea of employee productivity like training, retention, and appraisal are vital elements of management strategic planning. With HRM, management can include human resources in the future endeavors of the organization. Recognizing the role of human resources in strategic management planning is similar to putting half the confidence to the workforce especially so that they are among the key participants in the implementation and achievement of such plans.
HRM contributes to organizational performance and development
Organization performance is always directed to growth and success of the company. It is the ultimate goal of a corporation to expand and maximize resources for its benefit and revenue accumulation. The success of organization could be accounted to effective and efficient HRM. Sims (2002) added that in the HRM process, the emphasis was to increase the personal needs of the organization and productivity of members. Now as the HR officer manages these tasks, the challenge on his or her part is to construct an organizational atmosphere in which each member of staff can grow and develop to his or her fullest extent.
As organizations seek to develop sources of competitive advantage, researchers and practitioners have looked to firms' human resources. Researches by Huselid (1995), MacDuffie (1995), Delery and Doty (1996), and others has demonstrated significant relationships between HR practices and organizational performance. This line of research has estimated that a one standard deviation increase in the use of "progressive" or "high performance" work practices can result in up to a 20% increase in firm performance (Becker & Gerhart, 1996; Gerhart, 1999).
Treating the employees as champions and as a significant aspect of the organization naturally results to other positive outcomes. One of which is the improvement of the overall organizational performance (Brewer & Selden, 2000). A number of empirical studies have concluded that HRM practices have a significant effect on the organization, which leads to high performance (Haltiwanger, Lane & Spletzer, 1999). One good example that identifies this relationship was the study conducted by Delaney and Huselid (1996). Utilizing 590 profit and non-profit-oriented firms, the researchers concluded that HRM practices like staffing selectivity and training are positively associated with organizational performance.
Organizational performance is achieved through HRM functions as they mold the employees as significant contributors to the firm. Having the appropriate skills that are honed to the maximum level, HRM practices will then lead to the attainment of various goals of the organization. From this relationship, it is then appropriate to conclude that the function of the HRM in a firm is not totally focused on hiring employees but in maintaining a workforce that will serve as a competitive advantage. Organization performance depends on the aspect of productivity and maximum contribution of every member to the company’s growth. The strategic process of HRM itself helps the organization in improving its performance. The mere presence of premeditated strategic HRM activities ensures the growth of company. Its success is also rooted on the ability of the HR officer to implement programs, process and directives gained from company employees’ profile, culture, and related demographics. There are new innovative propositions in strategic HRM. It helps human resources in bringing up the maximum performance they possess. For example, the reward process aims to align employees with organizational strategies by providing incentive to fully act in the company’s interests and perform at their maximum capacity over time (Stiles, Gratton, Hailey, & Truss, 1999). According to Dean and Snell (1993), rewards can be classified under three categories: performance contingent reward which reward performance output; job contingent rewards where pay is contingent on job classification and person contingent rewards where pay is dependent on the competencies of the person.
HRM has been shown and proven to be a predictor of organizational performance and development. The practices inherent to the process are indispensable attributes needed in implementing organizational policies as well as standards. All in all, the immeasurable advantages of HRM determine the success or even the failure of the organization.
Conclusion
The function of HRM is for the betterment of the organization’s working force. Thus, it must be considered an issue of strategic importance because it maintains an acceptable working environment, regulates management and workforce relationship, plays a critical role in management planning, and contributes to employee effectiveness and overall organizational performance and development. So, it is very essential for the HR managers and staff to concentrate on the features wherein special kind attention is needed. Everything changes and in order for organizations to go with the flow of current global business trends, they must be fully equipped with all the necessary factors affecting a satisfactory HRM system. As from the beginning of an employee up to the end of his/her service to the organization, the HRM function will always be directed to the purposes of holistic development to attain predetermined objectives. Therefore, HRM must always be deemed as strategically important factor of business management.
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