Discuss the increasing importance of HRM in today’s businesses Essay

With the emergence of a highly dynamic global economic system, and with new competitors constantly arriving on the scene, businesses are constantly finding ways to increase efficiency and effectiveness to stay viable to meet present and future work demands. The Human Resource Management (â€Å"HRM†) function exercised effectively in many businesses has overtime proven to have significant impacts on business results, thus becoming increasingly influential in the formulation of business strategies. This paper seeks to discuss the increasing importance of HRM in today’s businesses, with a focus on the four key roles identified by Dave Ulrich (1993) that Human Resource (â€Å"HR†) managers of today should play to rise up to impending challenges, in response to the purpose of this assignment. This paper will also attempt to define and interpret existing HRM concepts and theories and to highlight their differences and respective roles in the shaping of today’s businesses. It will also draw some examples of good strategic HRM practices in some of today’s most successful global companies. In today’s businesses all around the world, the fundamental attributions for a business to thrive in an ever-changing and demanding society have drastically undergone an overhaul in recent years to suit and adapt to change. With vast advancements in technology and better infrastructure in place, businesses are able to operate more efficiently in today’s society than before. However, the most essential ingredient in all successful businesses is its people, or what is termed today as ‘human asset’. Good staff are the heart and blood of businesses, driving them to achieve strategic objectives and goals. With such realisation, the HRM function in a business has been identified as a key role in the sustenance of business success and how it can be better positioned to gain a competitive stance through the effective management of its people. To attempt to precisely define HRM will result in more confusion and contradiction, particularly due to the case of its constant comparison with Personnel Management (â€Å"PM†). Worthy to note, Noon (1994:23) states that though HRM is comparatively new to many countries, in the USA the HRM term has been used over fifty years as an alternative name for PM and that the two terms are synonymous. Pre 1980s, PM was largely viewed as the human face of management. Torrington and Hall (1991) puts forth that: Thus it can be seen that PM is more work-force-centred, directed primarily at the business’s employees; sourcing and training them, arranging for remuneration, defining management expectations, tending to employee’s work-related needs, dealing with their problems and seeking to modify management action, which tend to produce unhappy employees and unwelcomed responses. Such is the ‘hard’ approach of managing people, viewing an organization’s employees as a cost, which needs to be tightly budgeted. People under the PM system are viewed as resources in the same way as any other business resources, and thus, indisputable never totally identified with the management interests. Thus surfaces a â€Å"gap† between human resource and business strategies, with the management and employees mediating the needs of each to the other. Tichy, Fombrun and Devanna (1982) state that: It was during the 1980s that HRM took on a new meaning as it grew and broadened as it focused on strategic and business concerns according to Tichy et. al. (1984) and Freedman (1991). It was identified with a strategic approach, bridging the link of managing of people to the achievement of business objectives. HRM was becoming more influential across regions like South Africa and Australasia and soon, it found itself being integrated into the local business cultures. HRM took upon the role of strategically managing the utilization of human resources at its optimum level. It strived for a seamless link between business policies and HR policies, and looked upon employees as resources distinct from the other resources, striving for a more humanistic approach. Drawing on such ideas, Alan Price (2004) defines HRM in the new age as: As such, HRM is viewed as a more resource-centred approach directed primarily at managing the need for human capital. This could be attributed to the ‘soft’ approach of HRM, which view its employees as a core asset. Human capital is thus defined not only to include employees of the business, but also to encompass the management as a whole unit whose interests can only be enhanced through the inclination of effective and integrated overall management of all the business’ processes and units. Henry and Pettigrew support this belief that the strategic character of HRM is distinctive. HRM is said to be based on a management and business-oriented philosophy. This is perhaps the most significant point differentiating HRM from traditional personnel management in today’s organizations. With more upcoming challenges ahead in an unpredictable future working environment, businesses are shifting their paradigm to adopt the HRM approach for its flexibility and proven means of producing results in the long run. If HRM is going to rise to such challenges, Dave Ulrich (1993) identified a four-pronged approach that managers can undertake to make the transition successfully. They are to play the roles of: * Administrative expert Ulrich asserts that HR needs to add value by acting as a partner with line management. He notes â€Å"HR professionals add value to a business when they use their expertise to link internal organization and management practices to external business requirements.† He reckons that HR managers must be effective through their management so as to create value within the organization. * Employee champion Ulrich reckons that a good HR manager is one who is able to relate and meet the needs of employees, at the same time be their voice in the organization so as to provide assurance and seeking of new resources for their betterment. Jack Welch, CEO of General Electric (2001) formulated the â€Å"Boundaryless† concept in the company where he took ideas to the bottom line of his thriving organization. He successfully removed barriers within the organization functions, encouraged employees to voice out any new ideas they had and assigned managers who were committed to the sharing of these ideas with the board and realizing them. As a result, employees were not only rewarded and recognized, but gained much credit for contributing to the company, thus boosting levels of employee confidence and commitment. * Change Agent Ulrich points out that HR managers must be able to manage change, simultaneously acting as a catalyst for change. In the ever-changing global economy, change is inevitable in organizations where staying cost-effective to gain competitive advantage is of priority. Change is seen as a means of psyching the business up to possible uncertainties in the present and future environment. HR managers thus must be able to lead functional change and exert influence over the organization by being observant and responsive towards change to ensure that the business stays viable. They need to constantly monitor the organization to determine the need for change and implementing it successfully alongside organization objectives and values. Ulrich further states that the distinction between those who succeed and fail is â€Å"the ability to respond to the pace of change†. Bill Hewlett and David Packard who founded Hewlett Packard said of managing change and growth: * Strategic partner Ulrich states that HR managers should shoulder the role of being a strategic business partner in the translation of business objectives into action. They must thus be able to develop new ideas and contribute to the making of business decisions within the organization on top of effective people management. HRM is thus seen as part of an integrated and coherent function in the business process. Ulrich highlights the increasingly complex and paradoxical roles the HR professionals must perform to better understand HRM functions and to add value in the organization by helping line managers align strategies and processes with the business needs of the organization. Legge (1989) also provides that that HRM concentrates more on what is done to managers than what is done by manager to the employees. He also reinforces that there is a more proactive role for line managers and for top management to manage culture. Thus is the focus on the true effectiveness and value of the HRM function and if streamlining its processes and redefining HR manager relationships with line managers would define new competencies for HR managers. But is definitely sufficient to say that the role of HR is dramatically changing as how Ulrich (1993), Schuler (1990) and Walker (1992) have recognized it to be. The HR function has systematically gained prominence. Senior HR professionals have made the shift from just being just ‘another functioning role in the organization’ to being key members of the senior management team. Noble (1994) captures this transition by stating, â€Å"competition has taken human resources from the backwater to the boardroom.† Since then, several formal theoretical models of Human Resource Strategy have started to appear as early as 1984, which served as analytical views to better comprehend the development of HRM and are loosely regarded as representatives for the profession. Among them are: * Fombrun, Tichy and Devanna’s Matching Model It seeks to internally unify activities with the HR function and business strategy. It aims to achieve a ‘match’ or ‘fit’ between the two functions. It has its focus on work systems and job designs, making HRM seem to evolve in a social vacuum. * The Harvard Model Produced by Beer, Spector, Lawrence, Quinn Mills and Walton (1984), it provides a broad yet casual depiction of the determinants and consequences of the implementation of HR policies. In this model, situational factors together with stakeholder’s interests are taken into account to influence the formulation of HR policies and outcomes. It concentrates on high commitment as the ideal state of the work force. The Stakeholder theory in this context sets out to prove the varying degrees of influence and impact that stakeholders can have on the conduct and progress of the organization. The main aim is to commit and coordinate the interests of an organization’s stakeholders while directing the organization’s primary activities. * The Warwick Model An extension of the Harvard Model by Hendry and Pettigrew (1990), it emphasizes the importance of external and internal environmental impacts on HRM and is more oriented to the process of change. * Guest’s Model Guest (1989) adapted the Harvard Model by basing his analysis on the four HR outcomes, and developing these into four policy goals: commitment, flexibility strategic integration and quality. This prescriptive model seeks to see these goals as a coherent package that needs to be achieved for desired organization outcomes. * The Storey Model John Storey (1993) stated that â€Å"the ability to take, and implement a strategic view of the whole range of the personnel practices in relation to business activity as a whole† is the basic distinction between traditional personnel management and HRM. Storey’s theoretical model is based on conceptions on how organizations have been transformed from predominantly personnel/IR practices to HRM practices. These influential HRM Models serve as a means of developing strategies and formulation of policies to support current business infrastructure and provides a framework of current concept, assumptions and theories of HRM practices in the real world today. Ulrich (1993) asserts that HR needs to add value by acting as a partner with line management. He notes â€Å"HR professionals add value to a business when they use their expertise to link internal organization and management practices to external business requirements.† To assess HRM outcomes and to define its processes in this new day and age is subjected to numerous debates as to the use of the ideal method in the effective management of people. HRM is evolving in tune to the gradual yet subtle phasing out of traditional PM in most modern organizations today. It can thus be concluded aptly that a successful organization is nothing without good staff, emphasizing once again, the importance of good HRM practices in today’s businesses and the integral role it plays in the with regards to the management of an organization’s core asset – Its people.    REFERENCES Price, Alan. (2004), Human Resource Management in a Business Context, 2nd Edition, Thomson Learning. Stone, J. Raymond. (2002), human Resource Management, 4th Edition, John Wiley & Sons Australia, Ltd. Torrington, Derek. and Hall, Laura. (1998), Human Resource Management, 4th Edition, Prentice Hall Europe. Torrington, Derek. and Hall, Laura. (1991), Personnel Management: A New Approach, 2nd Edition, Prentice Hall. Ulrich, Dave. and Smallwood, Norm. (2003), Why the Bottom Line Isn’t!, John Wiley & Sons, Inc. Welch, Jack. with Byrne A, John. (2001), JACK: What I’ve learned leading a great company and great people, Headline Book Publishing Great Britain. MGW2430 Human Resource Management Averil Chan Si Wan (19603363)