Human Resource within Global Environment: Companies cannot do Without HRM and HRP to Gain Competitive Advantage Essay
While the advent of globalization has made the going tougher for companies, where they have been placed in a growing global competitive market right from the beginning of the 21st Century. The days of simple job tasks and market domination are clearly over, due to the shift from an industrial to a knowledge society, and accordingly the rise of human capital has created a challenging environment for the organizations to stay competitive.
The old concept of emphasizing on the financial capital and technology has already made their way for the new one, where human beings are now seen as the primary capital.
This atmosphere has prepared the deck for Human Resource Management (HRM). The importance of HRM is now felt higher than ever, as it is continuously proving itself as an invaluable tool for the companies to create and maintain competitive advantage, because it contains the much needed guidelines for managing humans, the most dynamic element in the organization. This radical change of focus has brought in a magical change in the mechanism of human resource management too – where it has been assigned the leading role in determining, organizing and implementing the intellectual and human capital, besides managing knowledge and e-commerce.
Consequently, modern trade and commerce now start with the prism of HRM, which counts modern employees as the most critical element in a firm’s success, thereby convincing the companies about the fact that “the key to a company’s economic success can be attributed to the effective management of its human resources” (Huselid, 1995).
No one can deny that organizational competitiveness mostly depends on the capabilities of employees, besides the ability of the company management to recruit promising hands, and their capability to train, develop, and manage that human resource. The individual brilliance of employees has implications for firm-level success, and this idea has always been prevalent among academics and practitioners for many years (Huselid, 1995). However, with the introduction of newer components like knowledge worker, digital communication and growing global economy, the companies are now looking for the best ways to manage human resources within organizations. Therefore this paper explores the key concepts of HRM and its current practice, before reaching its own conclusion.
While the seeds of HR coming into prominence had been germinating for quite sometime, the last two decades accelerated the process with a substantial increase in awareness concerning the value of human resources in business (Luoma, 2000). It was around this time the companies started realizing the fact that they must continuously improve the way they organize and manage themselves to become successful and to remain competitive, as Kontoghiorghes (2003) stated, “competitiveness will ultimately depend on their capability to configure people and design a system for optimal execution of strategy” (p.28).
Such realization was inevitable amid the weather of change, where issues like quantum leap in information and other technologies, globalization, skills gaps, new market demand and worker shortage etc. all gathered together to make the companies rethink about their ways and means to maintain their competitiveness, as adages like “without a well trained and well prepared labor force, businesses lose the ability to compete” (Laprade, 2005) started haunting them. It seemed like facing a revolutionary change where there several powerful change agents working in tandem to take the society in a completely new zone with new rules of sustenance and for that it demanded a whole new set of strategies to recruit, acquire, and develop employees that will ultimately add to the value of the organization (Luoma, 2000).
The new situation presented its new charter of demand where the employees must possess a wide variety of workplace skills and competencies that will allow them to work with advanced technologies and function amid high performing ambience. These skills may include: reading, writing, skills in mathematics, computer and software knowledge, problem solving, critical thinking, ability to participate in meetings, and report writing. And that was only part one – the new demand list also included organizations’ responsibility to constantly foster their employees to enhance their basic skill and knowledge requirements of the position, by including systems that could motivate and develop employees to perform their jobs to the best of their ability, and which could be converted into increasing state of competitive advantage and eventually, into financial success (Hatch and Dyer, 2004). Therefore, it is the enormity of demand that finally elevated the traditional human resource management from mere staffing assignment to a new world of activities, where the companies started considering it as the pivot of company’s success and prosperity. Under the changing atmosphere, the Human Resource Development (HRD) stemmed out as a ramified, vital branch of HRM, where it took charge of new major operations like individual asset identification, assessment of individual need towards formulating individual development plan for the employees. Yet that describes just one part of HRD, as it keeps in close touch of HRM to know about planning and change management, suggesting on recruitment and labor issues, while constantly supplying feedback to HRM (Figure – 1).
Figure – 1: Evolved state of HRM
One may interpret the evolution of HRM by considering it as an enlarged functionary part of the organizations that deals with recruitment and management of the employees besides extended assignments like providing right direction for them. However, that would be an understatement amid the modern global context, where HRM associates itself with every layer of function, like deciding the compensation package, evaluating performance of the employees, supplying motivation to them, monitoring their overall well-being and safety at workplace, identifying proper training for them, maintaining the channels of communication among all levels etc. It is this huge bulk of responsibility assigned to it has made HRM an integral part of the organizations.
Key Concepts of Past and Present
Past Management Theories:
HRM started very humbly by providing guidance and supervision for people management in the organization. Next it took charge of providing human resource, which would soon be followed by joining into the company’s strategic management process. However, those activities would evolve around the financial capital, where the subjects like ‘what could be the best possible personal contribution’ did not hold much significance. The traditional personnel management was not proactive, and banked more on shorter-term perspective (Rennie, 2003). An example from they past would explain the situation better – Adam Smith, the thinker of the 18th century and one of the earlier management theoretician, wrote sometime in 1776, “In every profession, the exertion of the greater part of those who exercise it is always in proportion to the necessity they are under in making the exertion” (Ali, 2007).
Clearly that was aimed toward emphasizing on cohesive human effort – which reflects the need for the time too – hard, untiring effort. Things were somewhat same even after hundred years, when Henry George in 1898, stated this disposition of man “to seek the satisfaction of their desires with the minimum of exertion is so universal and unfailing that it constitutes one of those invariable sequences that we denominate the laws of nature” (Ali, 2007).
Clearly the notions observed in those two thinkers statement don’t reflect anything concerning intellectual property and surely have no place in today’s world anyone can earn millions in minutes even while playing golf by virtue of one’s intellectual capital.
However things started moving in the 21st century, when many researchers started investigating the relationship between specific organizational variables and firm level performance, like when Carmeli and Tishler (2004) examined “intangible” sources of competitive advantage including management capabilities, human and organizational resources and skills, and the firm’s external reputation.
The idea of human capital as a factor in a firm’s financial performance has also gained the interest of researchers and is consistent with Barney’s (1991) Resource-Based View of organizations. When looking at organizations through a Resource-Based View (Barney, 1991), firms utilize their resources and capabilities to create a competitive advantage that ultimately results in superior value creation. Firm resources and skills are considered valuable when they aid the firm in formulating and implementing strategies that improve firm efficiency and/or the effectiveness. (Bharadwaj, 1993).
Barney and Wright (1998) argued that the firm’s most important asset in the race to achieve competitive advantage is the firm’s human resources. Barney’s (1991) “Resource-Based View” of the firm still provides an economic foundation for examining the role of human resources in firm competitive advantage. This view focuses on firm resources that can be sources of competitive advantage within the industry. Specifically, Barney (1991) suggests that the firm’s structure; human capital including the skills, judgment, and intelligence of the firm’s employees; and human resource management systems are sources of competitive advantage.
A number of researchers have used the Resource-Based View to investigate the role and impact of human resources and human resource management systems in organizations. Wright and McMahan (1992) contended that human resources can provide a unique source of competitive advantage that is difficult for competitors to imitate. This form of “human capital” can add to the organizational competitive advantage when four basic requirements are met:
(1) Employees must add value to the firm’s production processes, meaning that individual performance must matter;
(2) The skills the firm seeks must be rare and not easily obtainable by competitors;
(3) employees’ skills and knowledge must somehow be firm specific and not easily imitable.
The traditional perception about HRM gradually started mellowing in the transition, when HRM started fitting itself into the hub between management of workforce and the strategic force of the organization. It was from then on HRM started looking for long-term solutions for the organizations instead of short-term ones. With the advent of this new outlook, the companies started molding their company-culture according to their strategy, by reinforcing ideas, values and behaviors through HRM activities.
Present Management Theories
With the shift of capital from finance to human, in walked the issues like knowledge and intellectual property management, which earmarks the ‘coming of age’ phase of HRM. Armed with digital revolution, HRM started transforming the business world from around the last phase of 20th century – when the economy itself started evolving into a new avatar with microchip as its central dynamo. This state of affairs started converting all the previous concepts of business mechanism, save the lifestyle of humans, as the advent of Information Age wiped out the roadblocks of physical distance and made the world a global village. Thus new economy appeared with absolutely new features, which were earlier unknown, such as:
i) Global workforces with growing state of skills all around.
ii) Tremendous speed of transmission of data and plethora of options in dealing any subject.
iii) Abundant business opportunities through the scope of endless networking.
iv) Knowledge based economy, where intellectual capital can drive the value of products.
v) Democratized state of power, were an individual is empowered by the virtual Information Bank and one’s own network.
vi) A new kind of openness that advocates the recognition of free minds, free markets and free trade. In short, an open door for anyone to enter from anywhere.
vii) Success is no more dependent on financial capital.
viii) Boundless scope for an individual to create and sell any product all by one’s own, and to a high degree. This feature was a radical shift from the core concept of pre-Information Age, where the economy would revolve around “mass production, mass marketing and mass media” (Isaacson, 1997).
Challenge of HRM’s New Paradigm
The state of affairs described above is much like a sudden congregation of millions of horses rearing to go to any direction at any moment; and there is but little doubt that all the horses need guidance and direction. Right here modern HRM stepped in to manage the situation. This perhaps helps in imagining the enormity of the role of HRM in modern world, as well as its significance. Managing intellectual capital with ‘living strategy’ is actually tougher than managing the horses!
It was not that the intellectuals did not anticipate this situation. It was in the last lap of 20th century, they opined “Companies will set themselves apart in 21st century by how well they optimize the human-centeredness of their technology. The slogan ‘Our people are our most important asset’ will take on a deeper meaning, for it is the alertness and performance of an organization’s people that determines how effectively the organization uses all its other resources” (Moore-Ede, 1993:191).
It would be pertinent here to touch down the key elements of living strategy, which would help in understanding the current role and significance of HRM. The key elements of a living strategy (Gratton, 2000) are
a) Vision of business: Experience + Knowledge + Imagination.
b) Clear understanding of current capability: Who + What + When + Where + Why + How.
c) Cluster of people process levers: Recruitment/Selection + Performance objectives + Performance metrics + Reward/Recognition + Training.
It shows the gulf of difference between the ‘living strategy’ and the strategy of pre-digital era, where HRM was restricted in ‘people management with finance capital as an axis’. These elements of living strategy determines the role of HRM as well (Gratton, 2000), where HRM would
i) Take an active part in the process.
ii) Act as a facilitator.
iii) Encourage participation of all team members in brainstorming, masterminding and visioning sessions.
iv) Advocate for employees to ensure that their voices and concerns are taken care of.
v) Incorporate the skills of systemic thinking to mapping the relationships covering the entire gamut of business experience.
vi) Provide space to accommodate the behavioral changes and resources.
vii) Align the people process towards the business goal with a shared sense of meaning, etc.
This set of principles boil down to a subset of plain ideas, where the face of HRM looks like below:
Figure – 2 : Face of modern HRM
Here it would be appropriate to mention that HRM’s new role has added two new components besides human resources, and they are intellectual assets and intellectual property, where intellectual asset means knowledge in any form that belongs to they company and intellectual property means legally protected intellectual asset (say, a patent). Together these duo forms the ‘intellectual capital’, of which the guardian angel is HRM. But that’s just one side on the coin, because the other side is occupied by ‘Human Capital’, considered as the supreme asset among all in modern times, of which the recruiter, retainer, developer and manager is HRM.
The above said package of responsibilities of HRM is not limited by regional boundaries, and mentioning this would be enough to imagine the volume of it. Now, with these, HRM goes on to add another important job in its list – Knowledge Management.
According Jack Welch, Chairman, General Electric, “an organization’s ability to learn, and to translate that learning into action rapidly, is the ultimate competitive advantage”. This statement alone highlights the significance of this job of HRM, whose objective today stands at increasing institutional intelligence, or ‘Corporate IQ’ (Rennie, 2003).
All these show, how the theories grew over the years and how the differences in trends took place with time. In any case, there cannot be any direct comparison between the past and present of HRM, because the entire mechanism of HRM has taken a new route, which has been influenced by the new components of Information Age – elements like Internet, e-Commerce, Globalization or open market, open access to information, etc, which were not there in the scene before the advent of the digital media. Alongside, the social changes brought in by these new elements were also not there.
The shift in paradigm in HRM can be segmented by four situations, not necessarily occurring together or immediately after the occurrence of another.
i) When Personnel Management grew into HRM: It was a need-based shift, where the urge of expansion and sustenance had extended the horizon of HRM, by turning to collectivity rather than sticking on to individual. As for sustenance, the organizations needed long-term solutions to problems, and that too prompted this shift. In the later part, the shift of the capital from financial or physical assets to human capital consolidated this shift.
ii) When Information Age took over from Industrial Age: While the Industrial Age concentrated on physical labor, products and natural resources as its assets, The Information Age has chosen to focus on knowledge, information skills, communication and service. Alongside, the access to knowledge was thrown open to all.
iii) When Intellectual Capital replaced Financial Capital as the axis of organization: It ushered a completely new format of business concept, where the humans are placed in the place of capital with their knowledge and skill. This enabled people to sustain the competitive advantage of organization.
iv) When Globalization took over from Nationalization: The advent of digital era wiped off the global boundaries and added lightening speed to the communication system. This encouraged the business to expand beyond the regional boundaries to avail the huge opportunity of tapping the vast market.
The direct effects of such a shift in paradigm reflected in many areas, of which the most prominent ones are as below.
a) New concepts like intellectual capital, human capital and knowledge management came into being.
b) A newfound freedom engulfed the managerial proceedings.
c) Cultures like information sharing or learning came into being.
d) It empowered the employees more than ever.
e) It started generating competitive advantage from the employees.
From a simple perspective, it is the journey of civilization from agricultural revolution to digital revolution via industrial revolution has influenced the concept of the resources from time to time (like the money replacing grains as the mode of trade), where humans have rediscovered themselves as the prime capital in this digital age.
Present Day HRM at a Glance
According to Gates (2000:xxii,l) business is going to change more in the next ten years than it has in the last 50 years. These changes will occur because of the flow of digital information. The successful companies of the next decade will be the ones that use digital tools to reinvent the way they work. The rise of IT industry in the US alone in the tune of $866 billion (Rennie, 2003) even ten years back from now (1997) corroborates Bill Gate’s words.
There is no doubt that the new economy is constantly favoring three things – one, globalization, two, intangible potential like ideas, information and relationships, and three, inter-connectivity. Thus, the factors, which were considered significant in the sustenance and growth of economy, are no longer seen under same light. For example, time, place, money and physical assets – these elements are not as important today as they were in the pre-digital era. Thus the theories of business based on their contribution have become obsolete. Now the geography is not a matter of concern, nor there is any constraint regarding time, thanks to the virtual world, where the new drivers of the new economy are Internet, e-Commerce and Web lifestyle.
There is but little doubt that these factors have magically changed the outlook and lifestyle all around the globe, if not radically. Now anything can take place under any circumstance – this is not uncertainty, but a newfound flexibility – which enables everyone to participate in the business process of any magnitude.
Therefore, gone are the days of the ‘part-whole’ relationship of HRM and the organizations, where an executive could have come to full circle only by concentrating on the methodologies about interrelating the functional components of the organization, viz., production, distribution, product mix and human resources. HRM now has moved far, far ahead from the role of ‘firm-positioning’ to one of ‘global-positioning’ with branding, where it has only thing in common with its past, and that is, building the ‘competitive advantage’ of the organization. It is now the rise of the knowledge worker, which is customizing the nature of work and the to-do lists of the management.
Professionals here are no more valued in terms of physical presence or producing hard labor; it is the result at the end is what determining their worth. In this state of ‘perform or perish’ scene, one might think of a paradox here too – where the rise of the human at the core of business has forced humans themselves to be isolated in terms of intellectual abilities – because this rise would foster the growth of only who are deserving – undeniably, at the expense of those who are not endowed with high intellect! Thus, the concept of sharing the success has also taken a route with this newfound recognition of human abilities.
This aspect also earmarks a gray area in HRM, as how far it would go on the track of competitive advantage, or what could be the nature of applying it within the organization – because, in this new economy with humans at the helm of transaction, the concept of competitive advantage is bound to boil down to the competition among the peers. There is thus, a possibility of increase in the number of have-nots, while there is the premonition too for the privileged class – who might get isolated with their huge, contrasting amount of wealth. Thus this is nonetheless a great challenge for HRM on the following grounds:
i) It has to take care in educating the employees so that all gets the chance to manifest their potential to the best of their capacity;
ii) It has to ensure the prevention of corruption in the rank and file of the already privileged employees;
iii) It should not be influenced by any kind of bias or vested interest.
These challenges, in fact, add more to the significance of HRM, rather than to its role.
Organizational Outcomes with Improved HR
Job performance has long been of interest to organizations, business leaders, and managers. A number of studies have identified factors that affect job performance. These factors may include satisfaction, attitude, job structure, incentive pay, and job-related skill. Carmeli and Tischler (2004) reported a positive relationship between job autonomy, cognitive ability, job-related skill, role breadth and individual job performance. Investing in human resources may also play a key role in job performance. Consistent with human resource management practices, organizational support characterized by HR processes that demonstrate pride in employees, provide fair compensation, and look after the overall welfare and needs of the employees has a positive impact on job performance (Carmeli and Tischler, 2004).
To communicate the importance of investing in human resources and HR management practices to business leaders, it may help to demonstrate the relationship of human resources and organizational financial performance. However, there are conceptual and empirical measurement challenges inherent in examining individual human resource management practices on firm level-outcomes (Barney and Wright, 1998). First, firms do not use one single practice to manage their human resources. Most, if not all organizations use a collection of practices that represent the organization’s overall strategy. This collection, or system, of human resource management practices should be selected so they work synergistically to help implement the firm’s strategy (Choo and Bontis, 2002)
Many researchers have examined the link between specific individual human resource contributions, employee relations, and human resource management practices such as staff planning, job analysis, job design, recruitment selection, use of an internal labor market, training and development, performance appraisals, compensation, communication, employee involvement, and grievance procedures (Delaney & Huselid, 1996) on firm performance. Choo and Bontis (2002) suggest that in addition to the way an organization competes and where the organization competes, that the assets and skills of the business are the basis of competition and provide the foundation for sustainable competitive advantage. They theorized that organizations increased levels of human resource management practices will (a) increase motivation; (b) improve knowledge, skills, and abilities; (c) reduce shirking; (d) enhance retention; and (e) encourage non-performers to leave.
Other researchers suggest that human resource management practices can add to the sustained competitive advantage of the organization when they add value to production and produce rare skills that are not easily imitated by the competition or easily replaced by technology (Wright & MacMahan, 1992). Gowen and Tallon (2002) found that management and employee support were found to be critical for the implementation of all four levels of employee training: (a) problem solving skills, (b) leadership skills, (c) team-building skills, and (d) job skills. Additionally, Gowen and Tallon (2002) suggested that training plays an important role in firm success.
Hatch and Dyer (2004) studied the effect of positive employee relations on firm level competitive advantage and found a significantly positive link between organizations that have good employee relations and firm level performance. On the other hand, Huselid (1995) and Karami, Anoloui, and Cusworth (2004) studied impact of human resource management processes on firm performance. In a following study, Huselid, Jackson, and Schuler (1997) found positive associations between human resource management practices, such as training and staffing selectivity, and the perception of firm performance in for profit and not for profit organizations.
Karami, et al. (2004) examined the relationship between strategic human resource management and the sustained competitive advantage of electronic manufacturing firms and reported a positive relationship between core competencies and firm performance, company performance and product and service quality, HR effectiveness and the linkage between HR and business strategy, and HR involvement in the design and implementation of business strategies and organizational effectiveness. Karami, Anoloui, and Cusworth (2004) therefore suggest that the HR capabilities of a firm are considerable resources that may determine the competitive advantage of a firm, and increasing HR competencies and capabilities will lead to a firm’s success in achieving its goals and objectives in a competitive landscape.
One of the few studies that examined the entire human resource system was conducted at Wells Fargo Bank using largely proprietary tools termed PACA (People as a Competitive Advantage). In this study, Lawson and Hepp (2001) reported that PACA tools (competency models used for team member selection, management, and development, a proprietary 360 degree feedback and development process, learning tools developed to guide and improve management, newly designed HR policies and procedures, and a new performance appraisal process aligned with the Wells Fargo business system) and PACA management practices (workforce and business planning; competency based interviewing; leader-team member supervisory principles; identifying, developing, and implementing development plans; and improving the frequency and quality of team member communication relative to organizational goals, objectives, and work related decisions) had a positive and significant impact on employee commitment, return pn expenses (ROE), return on assets (ROA), and on the bank’s efficiency ratio (ER). These findings are consistent with other HR practice effects, but also offer a direct and independent relationship between human resource practices and organizational outcomes suggesting that effective human resource decisions that drive leadership and management practices can help ensure a unique and sustainable competitive advantage.
Applying HRP in Organization’s HRP
A basic chart of human resource policy (HRP) for any company might look like below:
Human Resource Policy of XYZ
Position, Duties, Responsibilities, Personal information, Job specification, Wage scale, Promotional Avenue, Police history,
Advertisement, Test, Interview, Agreement to Terms & Conditions.
Annual increments, Promotions on fulfilment of criterion, Medical and other benefits, facilities of Employee Cooperative, other permissible benefits from time to time.
Gratuity and other permissible benefits, Notice of three months in advance from either side in appropriate cases, No Objection certificate under satisfactory circumstance.
At the discretion of Administration
Annual Sports, Annual Cultural Meet, Seminars/Symposia
Table – 1
Now to implement this basic policy, HRM needs a customized roadmap, and for that matter it can utilize, High-Performance Work System, a new avatar of HRD.
HPWS in Brief
High Performance Work System, popularly known as HPWS is a specific combination of HR practices, work structures, and processes that maximizes employee knowledge, skill, commitment, and flexibility (Bohlander, 2004). It is understood that systems composed of many interrelated parts that complement one another to reach the goals of an organization, large or small. As for example, System design looks like below:
These are fed with Linkages to Strategy and Principles of High Involvement. Then the process is implemented and the outcome is observed in Organizational and in Employee levels. In short, this package of strategy aims “create an environment within an organization where the employee has greater involvement and responsibility” (Brown, 2006). According to the researchers, this new avatar of HRD started shaping up in the late twentieth century “amid the crunch period of United States manufacturing environment”, when it felt the heat of global competition and realized the need of rejuvenating their manufacturing process (Barnes, 2001). Thus, much in the mould of ‘necessity is the mother of inventions’, HPWS came into being with a set of fresh practicality based on the nuances of human behavior.
Underlying Principles of HPWS
HPWS started with three pillars at the outset, like involvement, training and incentives¸ before adding the fourth, support technology; to take off as a full fledged system. Overall it looks like below:
Figure – 4: Skeleton of HPWS
Components of HPWS
The first important component of HPWS, “Involvement”, stems from the idea of providing the employees an “increased opportunity to participate in decisions” (Barnes, 2001). This becomes possible by sharing information among the members of the organization. Thus HPWS emphasizes on creating a culture of information sharing, where the employees would share the information for the greater interest of the company.
Second component, “Training”, is visibly a thrust towards developing the knowledge and skill on the subjects employees deal with. Here HPWS prefers a culture of ‘on-site’ or ‘real-time’ training rather than theoretical knowledge, where the employees would be encouraged to apply new approaches or ideas and to enrich the knowledge bank itself. HPWS identifies that the jobs requiring little knowledge and skill are declining and the jobs requiring special skills or knowledge are increasing. This situation demands a constant flow of learning among the employees and HPWS advocates for that.
The third component of HPWS is “Rewards” or “Incentives”. HPWS points at the importance of aligning the goals of the employees with the goal of the organization by utilizing the reward system. It prescribes to connect the rewards to performance to make both the company and the employee mutually benefited.
The combination of the three in a free flowing manner creates an egalitarian work environment that eliminates the status and power differences, which in turn enhances collaboration and teamwork.
The fourth component is “Technology”, where HPWS wants exploit the advantage of modern technology to make the system further effective.
The Diagram below explains the basic structure of HPWS
Figure – 5
Critical analysis of HR Policies and Procedures
The HR policies and procedures of the company primarily evolve out of the needs of its departments, though the policies as a whole are expected to cover the needs of all other vital organs of the company. Accordingly HPWS works on two layers, viz., internal and external – where it ensures ‘Internal fit’ and ‘External fit’. Internal fit refers to the situation where all the internal elements of the work system complement and reinforce one another. In the case of External fit, it refers to the situation where the work system supports the organization’s goals and strategies. It looks like below (Figure – 6 & 7)
Figure – 6
Figure – 7
The above diagrams describe how HPWS works in an identifiable pattern, where it takes all affairs of the organization into consideration. Here the strategy works with three basic elements like Competitive Challenges, Company Values and Employee Concerns, which gathers inputs from the internal fit, that comprise of the elements like Leadership, Technologies, Work-flow Design and HR Practices, which work in tandem to produce inputs to external fit and to work on the feedbacks received from it, just like the external fit does. Alongside it takes the help of two methods of analysis, like SWOT (Strengths, Weaknesses, Opportunities and Threats) for internal analysis and PEST (Political/Legal Economic/Social and Technological Factors) analysis for external situation.
Basic Components of SWOT and PEST
State of Company brand in local and global market.
State of relationship with Employees.
State of growth.
Employee retention rate.
Usage of high technology.
Attitude of company towards improving overall benefit of employees, etc.
State of communication gap between departments
State of irregularity in resource management, selection and training.
State of interpersonal communication.
State of logistics in recruitment.
State of motivation.
State of team communication.
State of individual assessment.
Level of information sharing and idea exchange, etc.
State of global market.
Employee base from the perspective of competitive advantage.
Rapport of management with local and global market.
State of fund, etc.
Increasing state of competition.
Inadequate knowledge bank.
Slow production rate, etc.
POLITICAL / LEGAL FACTOR
State of political situation.
Approach of unions.
Legal standing of the company, etc.
State of regional economy.
Margin between expenditure and profit.
State of manpower and skill to meet global demand of production.
Scope of checking expenditure, etc.
State of social relations.
Alignment with the culture of the region, etc.
State of technology.
State of knowledge flow.
State of individual analysis, etc.
HPWS Plan Sheet:
Depending on the outcome of the above analyses, HPWS goes on to prepare a plan sheet for the company towards achieving its goal. Thus an imaginary plan sheet of HPWS looks like below:
Parameters of HPWS
Team decision making
Here it can be observed how HPWS emphasizes on Sharing Information, Knowledge Development, Performance-Reward Linkage and Egalitarianism. Accordingly, HR amid global perspective turns capable to meet the challenge of globalization and the companies get their returns in the following areas of operation:
The Impact of HPWS
1. Work Flow: Here the two categories of staff carry the workflow of the department, where both the categories would be helped to reach the egalitarian stage through unbroken flow of information sharing.
2. Staffing: HPWS would incorporate knowledge development by recruiting experts in modern technology and management, besides inducing the policy on team decision making among staff.
3. Training: Here HPWS identifies four areas of training with special emphases on knowledge development and team training, Keeping in mind the issues like differences between departments and recurrence of legal disputes due to lack of knowledge of handling debatable contents.
4. Compensation: Since there was no clear policy of compensation due to the lack of individual assessment or thrust in the required areas, HPWS would incorporate clear cut system of Incentive, Gainsharing, Profit Sharing and Skill-based Pay.
5. Leadership: Since motivation rolls from the apex of a body, the top rung of the company has to be kept motivated. Thus HPWS would include them in all of its parameters to make them aligned with the underlying principles of HPWS and HRM as a whole.
6. Technologies: In the case of technology, HPWS intents to utilize both human skill and creativity to enhance the knowledge base and fasten the production process besides enhancing communication among staff-members of the organization.
Recruitment and Selection Plan:
At the outset, HPWS creates a demand forecast plan that might look like below:
Keeping this chart in mind, HPWS takes off by
i) Making a compelling case for change linked to the company’s business strategy.
ii) Making it certain that senior and line managers own the change.
iii) Allocating sufficient resources and support for the change effort.
iv) Ensuring early and broad communication.
Alongside it incorporates a systematic analysis of the positions on the basis of the company requirement and would create a detailed job description for each post.
Process chart for the Plan
Internal Recruitment Plan
Evaluation of ability
Evaluation of attitude
Responsiveness to reward
External Recruitment Plan
Employee background; Viable
Responsiveness to reward
HPWS then ensures a reflection of its idea in the advertisement, while proceeding towards formulating an implementation schedule.
Initial research by HRD
Requires meetings with Company’s policy makers besides study and research.
Screening, Short listing and Interview by HRD
Screening, Short listing, Final Process
Process of employment
Accommodating prospective applicants
Employee Orientation by HRD
Imbibing company philosophy in the newly recruited employee.
The process of HPWS clearly show that it always keeps human resource as its axis of operation, which reflects the present standing of HR amid the global scene.
Choice of Selection Methods and Rationale
The possible benefits of HPWS can be all-round, touching every nook and corner of the organization. Accordingly, its outcome too turns out in the shape of employee benefits and organizational benefits. Not only in selection process, HPWS comes out as an effective tool in monitoring the efficacy of the same with its policy of applying process audit and evaluation where it prepares its questionnaire on various important issues that can affect HR.
1. Are employees truly working together?
2. Are employees getting the information they need to make empowered decisions?
3. Are training programs developing the knowledge and skills employees’ need?
4. Are employees being rewarded for good performance and useful suggestions?
5. Are employees treated fairly so that power differences are minimal?
1. Are desired behaviours being exhibited on the job?
2. Are quality, productivity, flexibility, and customer service objectives being met?
3. Are quality-of-life goals being achieved for employees?
4. Is the organization more competitive than in the past?
Human Resource from HPWS Perspective
1) He is Valuable
2) He is Rare
3) He is Organized
4) He is unparallel.
Perhaps the above four viewpoints clear the standpoint of HR amid global scene.
Starting its journey from Personnel Management, the Human Resource Management has walked a long way through the various bends of civilization, all the while evolving with time. However, it was not considered as something indispensable even in the mid-nineteenth century. But with the advent of digital communication and the rise of globalization, HRM has managed a quantum leap as the Information Age has created a plethora of opportunities in every direction and discipline. Naturally, this new circumstance has pushed HRM to evolve accordingly to carry out the new responsibilities like knowledge management or managing globalization of business. Now intense competitive forces amid global marketplace and a relative decrease in the availability of knowledgeable and skilled employees place compounding pressures on organizations to gain, maintain, and sustain a competitive advantage over competitors. Accordingly, the companies have realized the significance of HR and shifted their focus on it from other capitals. The findings from this study suggest that the observed shift from financial and technological capital to human resource capital is totally justified under the modern context and organizations that use human resource management practices to develop and maintain a highly skilled and motivated workforce will experience higher levels of job performance and firm performance. Human resource selection and management practices can be an integral part of a firm’s successful competitive strategy. For the effective fostering of HR, the companies can adopt HPWS, an HRM tool devoted towards developing HR.
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[This article deals with the need of drive and motivation to enhance the performance; it cites Adam Smith and Henry George to create the perspective of the discussion, where it substantiates the fact that human motivation is an integral part of raising performance. This too is an important element for HRM.]
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[The researcher probes the changed state of US manufacturing industry amid global condition and tracked the evolution of HRM, that proved instrumental in forming the newer HRM practices such as HPWS]
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[The researchers here examines the role of HRM within the framework of Value, Rareness, Imitibality and Organization to ascertain the aspects of HRM that can be instrumental in towards generating competitive advantage for the organizations. This study uses resource based view of competitive advantage with the belief that it would provide an economic foundation for examining the role of HR and thus focuses on Physical, Organizational and Human capitals of the organizations, which prove to be invaluable for HR researchers.]
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[This article analyses the conditions conducive to keep firm resources as a source of sustained competitive advantage for a firm, before identifying the significance of the managers’ role in understanding, explaining and utilizing the human resources of their respective firms by weighing the perceived potential of any firm that can generate competitive advantage – such as value, rareness, ability to imitate and substitutability.] Bharadwaj, Sundar G., P.R. Varadarajan and J. Fahy (1993). Sustainable competitive advantage in service industries: a conceptual model and research propositions. Journal of Marketing, 57 (Oct.), 83-99.
[This work deals with ways and means of achieving a sustainable competitive advantage (SCA) to enhance business performance. In the process the authors focus on the distinctive organizational skills and resources, which reflects HRM practice in a great way, where it proposes a conceptual model of SCA in service industries with the help of the essences gathered from various other studies in the fields like marketing, strategic management, and industrial organization economics.]
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[This study describes the relationship between HRM and knowledge management with the example of Daimler Chrystler’s plant, while explaining various facets of HRM practice.]
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[This article deals HRM at length, in the process defining HPWS, which is now considered as a nodal head of HRM practice]
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[This study deals with the components that can be instrumental in implementing HPWS, and defines their mechanism.]
Carmeli, A., & Tischler, A. (2004). The relationships between intangible organizational elements and organizational performance. Strategic Management Journal, 25, 1257-1278.
[It deals with intangible organizational elements, complementarities, organizational performance, and public sector organization. Accordingly, it explains the elements of HRM like managerial capabilities, human capital, labor relations, organizational culture, reputation of the organization, etc., which prove beneficial for other HRM researchers.]
Choo, C.W. and Bontis, N. (Eds.) (2002). The strategic management of intellectual capital and organizational knowledge. New York: Oxford University Press.
[The editors of this book have presented a collage of HRM issues from the perspective of strategic management, thereby proving to be a useful guide for the HRM researchers to delve deep in organizational science.]
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[This research article proves for-profit and nonprofit firms from the Nationals Organizations Survey towards substantiating the fact the there is a positive association between human resource management practices (training, stuffing selectivity) and measures towards performance. In the process it deals with progressive HRM to achieve improved state of competitiveness amid globalization. Accordingly, this article provides vital clues on HRM issues like employee participation, empowerment, job redesign, team based production systems, extensive employee training, and performance-contingent incentive compensations,]
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[This study aims to substantiate the perceived relationship between high-performance work systems (HPWS) and company performance, besides relating them to the organizational culture. Accordingly it distinguishes one HPWS that combines HRM practices like employee development, goal setting, etc., towards proving its point.]
Gates, B. 1999. Business @ the Speed of Thought – Succeeding in the Digital Economy. Penguin Books Ltd.
[This book highlights the future of digital era, where it would open endless opportunities of trade and commerce, besides changing the concepts of business.]
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[This study emphasizes on the impact of HR factors towards gaining competitive advantage of supply chain management (SCM) practices through surveys and analyses involving top manufacturing and service companies of America. It discusses the use of HRM program implementation to create a sustainable competitive advantage, before suggesting an interactive role of managerial and employee support to raise the effectiveness of employee training or to settle issues regarding the adverse effect of implementation barriers on the success of SCM practices.]
Gratton, L. 2000. Living Strategy – Putting People at the Heart of Corporate Purpose. Pearson Education Limited.
[This book emphasizes on the significance of human capital, besides informing about the significance of designing strategies for the benefit of HR, before justifying the shift of human capital in the place of financial capital.]
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[Making the semiconductor manufacturing industry as its base of research, this study highlights the uniqueness of human capital that highly impacts the company performance. Thus it emphasizes on careful selection of the same, besides its development through training and deployment, in other words, signifying the aspects of HRM practice in the companies.]
Huselid, M.A. (1995). The impact of human resource management practices on turnover, productivity , and corporate financial performance. Academy of Management Journal, 38, 635-672.
[As its title suggests, this study substantiates deep relationship between HPWS (an HRM practice) and better performance of the companies, where it undergoes an extensive survey of almost one thousand companies before reaching its inference. In the process it deals with the nuances of HPWS, which it considers as the best of HRM practices that provides tangible results.]
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[Here the researchers evaluate the impact of HR managers’ efficacy on the financial performance of the companies and substantiates deep link between them, which in other words, signify the importance of HRM practice in companies.]
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[This article probes the future of economy under the influence of the newer digital development.]
Karami, A., Analoui, F., & Cusworth, J. (2004). Strategic human resource management and resource-based approach: The evidence from the British manufacturing industry. Management Research, (27) 6, 50-69.
[Making electronic manufacturing industry its base, this study substantiates the fact that the increased state of core competency is an integral part of the success of the companies and for that matter HRM practice is the only tool, where it raises the organizational effectiveness.]
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[Taking an interdisciplinary route, this study substantiates the fact that investing in innovation and employee commitment, (important elements of HRM practice) puts the companies in advantageous position.]
Kubo, I., & Saka, A. (2002). An inquiry into the motivations of knowledge workers in the Japanese financial industry. Journal of Knowledge Management, 6, 262-271.
[Subjecting the Japanese financial industry, where knowledge base rules over and above anything, this study explores the important organizational issues like motivational needs and motivating factors, before identifying three motivating factors like monetary incentives, HR development and job autonomy as the major driving forces applicable in Japanese financial industry.]
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[The researcher as a former executive director of Kentucky Workforce Investment Board, probes HRM from various perspectives like globalization, technology, innovation, rapid rate of change, and organizational dynamics. It speaks about trends that are affecting the economy and workforce of the 21st century and the possible appropriate measures for it. It provides a compact lesson at the end that speaks about aligning workforce and education with economic development, building a stronger education channel of skilled workers, expanding opportunities for continuous learning process, building career avenues, strengthening the governance of workforce programs, etc., all of which contain elements of HRM and HRP.]
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[This article probes a regional project to determine the effect of an integrated group of HR practices and processes, naming it as “People As A Competitive Advantage”, or PACA, at Wells Fargo. Eventually it substantiates that effective HR decisions can win a unique competitive advantage even amid rapidly changing economic situations.]
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[This article aims to substantiate the fact that human resource development (HRD) can be a major contributor in achieving competitiveness, through the examples of theories, thereby highlighting the significance of SHRM]
Moore-Ede, M. (1993). The 24 Hour Society: The Risks, Costs and Challenges of a World that Never Stops. Judy Piatkis (Publishers) Ltd.
[This book probes towards protecting the needs of people amid fast-paced economy and weighs the risks involved when technological society outpaces human biology, before charting out its own solution for it.]
Porter, M. E. (1985). Competitive advantage: Creating and sustaining superior performance. New York: Free Press.
[The author describes how a firm can gain an advantage over its rivals, besides introducing the concept of the “value chain” that can help a company to gain competitive advantage. Accordingly it deals with little details of company proceedings, while describing how a firm can put the three generic competitive strategies of cost leadership, differentiation and focus into practice, besides maintaining its unique identity. An useful book to learn the tricks of SHRM]
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[This study probes the changing global state of trade and commerce and explores the fitting position of HRM professionals through researching both the background and the future implication of HRM.]
Wright, P.M. & McMahan, G.C. (1992). Theoretical perspectives for strategic human resource management. Journal of Management, 18, 295-320.
[This study attempts to develop theoretical framework of SHRM by discussing six theoretical models that are considered important in the field of HR practices, before discussing the implications of stronger theoretical approach to SHRM research and practice.]