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Is HRM in Crisis Essay Sample

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Is HRM in Crisis Essay Sample

The 1990’s saw a major change in the terms of the context and content of HRM. There are many views as to the most appropriate policies for the management of human resources effectively. Delayering has led to work empowerment and work intensification but at the same time has given rise to redundancy. The management of these seemingly opposite factors has led the practitioners and academics to sometimes use the term Crisis in an attempt to define the current state of the field and the need to develop a new thinking.

Crisis means to decide, a decisive moment or a turning point. We have to decide whether the decisions made today regarding the changes in the way HRM is practiced would lead to the betterment of the field or otherwise.

The field faces a challenging new agenda in the context of having handed significant power over to line managers within organizations that are finding it difficult to implement existing changes operating in an environment of much backward-looking and defensive thinking and analysis, and a political environment in which people say one thing, but behave in ways that say something else.

This is however a cynical view according to Sparrow and Marchington (HRM the new Agenda, 1998). They believe that saying that HRM is in crisis would be an overstatement. Most of the issues to be faced at the

millennium were apparent by the mid-1990’s. For example, in 1994 the US human resource planning society set up a state of the art (SOTA) to determine the major changes required for the millennium. The major changes to be required were in terms of internationalisation and globalisation. HR practises had to change to cope up with these major changes in the way of doing business all over the world. And These issues along with the structural changes to be made in terms of Total Quality management (TQM) and Business Process Re-engineering (BPR) and the need to build trust and confidence among the employees so that they trust the managers were also taken into consideration. The free flow of information all around the globe was another factor. Now, as we have entered the new millennium, these problems of the future have become the problems in hand and thus are considered very seriously. HR practitioners are facing the problems understood and analysed in the mid 1990’s. They are made to adapt to these changes, some of which, they think, are nave and contradictory. At this point, organisations have to address to a few questions relating to the new agenda of HRM:

* Do organisations address to the changes in employee behaviour due to these new policies or maintain the existing thinking?

* Should the communication between the employee and the organisation be pursues through institutional means or shall it be done through direct and individual dialogue?

* Which social model of HRM shall be pursued, American, European or a modified form?

Central Themes in HRM in the New Millenium:

After careful analysis, we have recognized three main concepts for which HR practitioners need to develop a greater understanding:

– What we want out of work, how we maintain a sense of individuality in a world where we either increasingly subsume our life to more intense employment, or face no employment at all

– Our relationships with other individuals in a work process that can be altered in terms of social interactions, time patterns and geographical location

– The co-operative and competitive links between different internal and external constituents of the organization in their new, more flexible, forms

– The relationships between key stakeholders and institutions such as governments, unions and managers

Unpleasant Truths and New Realities

These are the present problems that HR practitioners have to face:

Dealing with the changes in self-esteem, community and social identity is inescapably painful

Individual and the organization cannot resolve these issues themselves

A new social context is necessary

The HRM Movement

Reflecting the ‘human resources’ versus ‘resourceful humans’ critique of HRM, there has been an increasing tension between the human resource requirements of a flexible organization and the organization requirements of a flexible human resource

End of Jobs and the Redesign of Organization Coordination Systems

Two dimensions raise difficulties for HR practitioners:

– the shift away from the jobs-based systems to person-based systems; and

– radical changes in the location and nature of co-ordination within the organization structure

Rewards failure because pay systems do not reflect strategic thrusts towards quality, team working and competition based on time

A shift to person- as opposed to job-related performance management systems has become inevitable

New Psychological Contracts and the Refragmentation of HRM

New HRM structures and systems are needed to re-engage employees, rebuild trust, and to involve, motivate and empower them.

Changes to their job content cannot be introduced without parallel flexibilities in structure, information systems, rewards and so forth

Organizations seem to be seeking seven discrete but parallel flexibilities: numerical, functional, financial, temporal, geographical, organizational and cognitive

‘Representational learning’ (words, concepts, constructs and language) and ‘behavioral learning’ (changes in values and actual patterns of behavior) We fail to find ways of converting these words into substantive changes in behavior

Questions about the contribution and competence of HR practitioners or being better titled the ‘human remains department’

Three streams of investigation:

– a questioning of the technical validity of many central HRM tools and techniques;

– attempts to demonstrate a link between HRM practices and organizational performance; and

– a growing theoretical sophistication about the role of HRM as part of a resource-based understanding of organizational strategy

Increasing tension between the need for a ‘Wow factor’ (need for line managers to exclaim ‘Wow’ at first glance of the latest offering from the HR department!) and the requirement for ever-more sophisticated, detailed and complex techniques that actually work and provide solutions to complex organizational problems

There is a continued search for the business case that good people management is also good business management.

– Sophisticated tests for a relationship between ‘bundles’ of ‘high performance work practices’ and organizational performance

– Resource-based theory (RBT) and the attention now given to understanding how the platitude that ‘people are our source of competitive advantage’ has a basis in reality.

– Human resource strategists have to focus on the competency of the total pool of human capital within the organization, as this is now the resource that makes up competitive advantage

– Twin objectives of creating advantage through people and creating advantages for people.

Evolution Of HRM from Personnel Management

Let us first understand the difference that has been seen in defining the two concepts:

Traditional personnel management: concerns mostly issues related to industrial relations and administering employees

HRM: a strategic function concerned with consequences of all organizational decisions for human productivity and for the well-being of the entire work force. It is a distinctive approach to employment management which seeks to achieve competitive advantage through the strategic deployment of a highly committed and capable work force, using an integrated array of cultural, structural and personnel techniques.

Now let us see the changes in history that led to the development of HRM from the World War I

* The first formal personnel/HR departments were created in 1917/18 to deal with:

– Tight labor market

– High turnover

– Waste and inefficiency

– Widespread strikes

– Union growth

– Government intervention/takeover

1920’s Welfare Capitalism:

* Progressive employers sought to win workers’ cooperation and loyalty through positive HR practices such as:

– Above-market pay

– Job security

– Employee benefits

– Promotion from within

– Employee participation plans

1930’s: The great Depression

* The specter of bankruptcy forced companies to drastically reduce labor costs through wage cuts and layoffs

* Loose labor market made it far cheaper for employers to “motivate” workers through threats of layoffs than the promises of high wages and fair treatment

* The above led to the New Deal (Wagner Act in the US; various labor acts in Canada) and the unprecedented growth of unions

1940’s World War II

* The combination of wartime production demands, government wage-price controls, and the need to negotiate collective agreements forced many companies to expand their personnel staffs and systematize their HR practices

* Many companies developed for the first time such basic HR practices as job classification systems, hiring standards, uniform pay grades, and written disciplinary procedures

1960’s Group relations:

* The design of work itself (rather than facilitating worker communication and cooperation by creating groups) is the key to worker motivation

* Small groups become the key to eliciting worker extra effort

* Small groups and work design motivate workers by promoting self-actualization and making work more interesting and fulfilling

1970’s to 1980’s: Quality of Work Life

* Growing disaffection among workers with unchallenging jobs and heavy-handed management prompted managers to rethink the way work was organized and managed

* Moreover, several recessions, deregulation, and mounting foreign competition brought considerable pressures to bear on managers. Management learned that quality, not only cost, was a key to market success.

* New initiatives, such as self-managed work teams, increased the value of people to management, (hence the shift from the term “personnel management” to “HRM”) and opened the door to a new conceptualization of how work is organized and the role of HR specialists

HRM arrived in the UK in 1980’s as a fully formulates set of prescriptions that had been formulated at the Harvard Business School. Personnel management was much more popular in the UK than in the US. The first formulation to get widespread exposure was that of Fombrum, Tichy and Devanna (1984) who said that HRM had four major Functions:

* Selection

* Appraisal

* Development

* Reward

It was only different from personnel management in the sense that this was not administering employment; rather, it was deploying performers.

This concept was new and in the interest of pursuing the new ideas, HRM became the smart thing to do.

1990’s TQM and BPR:

* Trying to stay competitive, many companies took up TQM and reengineering.

* HR departments became more focused on serving external and internal customers, lowering costs through process improvements, and facilitating organizational change and organizational learning initiatives

Recent Developments:

* Strategic HR – companies became more focused on generating shareholder value, and they looked to HR departments to take more long-term, profit oriented perspective; HR is a source of competitive advantage

* New Technology – new technology allowed outsourcing of many activities and handling many administrative aspects of HR electronically; firms focus more on “core competencies”

* Diversity – HR were asked to reconcile the social demand that employment practices be open and inclusive with respect to diverse cultures and lifestyles and the need for high-performing, employees

* Globalization – Global trade and global capital mobility increased dramatically in the last two decades of the 20th century

* Deregulation – has resulted in declining unionization and wages in such industries as telecommunications and trucking

HRM and its Applicability as a strategic Tool for Competitive Advantage

When HRM is opted as a tool strategically, it is often referred to as strategic human resource management. This is an evolving concept and its considered to be highly useful in sustaining competitive advantage in the market.

To better understand the concept of strategic human resource management, let us look at the various views as to the definition of strategic human resource and the strategic management process.

“Strategic Human Resource refers to the over all direction of the organization wishes to pursue in achieving its objectives and considers any major people issues which affect or are affected by the strategic plan of the organization”.

As we enter the new millennium more and more companies are recognizing the importance of the managing their Human Resource as effectively as possible. Because of the importance of managing people effectively in the global context is so great, many companies are devoting a great deal more time, attention, skill and effort into doing it well. Academics and practitioners are doing more work than ever on understanding and advancing our knowledge of issues in and activities associated with managing Human resources within a global context. At the same time they are relating basics of the Human resource management with the context of the company. Within the global context, two of the areas of managing Human Resource have evolved : Comparative Human Resource Management and International Human Resource Management. Within the context of the company the area of Strategic Human Resource Management has evolved.

Human resource management is the basis for comparative human resource management, international human resource management and strategic human resource management

Human resource management is a vital function in organizations. It engages everyone and it take time. Managing human resources effectively requires that the special expertise of HR professionals in the HR department be used by, and in partnership with, line managers and other employees. It involves attending to the concerns of the moment while keeping a longer-term perspective in mind. It also involves continuously improving and changing activities that take time to put in place and produce results.

Human resource management includes (a) the people managing activities, policies, and practices that firms can use to compete effectively now, and (b) the many changing forces (e.g., new competitors, new technology, business restructuring, legal and social concerns) that organizations need to understand and respond to in order to ensure they are positioned to compete effectively over the longer term

Strategic Human Resource Management

There is a considerable debate about what ‘Strategic Human Resource Management’ (SHRM) actually means. There are many definitions, including:

‘A human resource system that is tailored to the demands of the business strategy’ (Miles and Snow 1984).

‘The pattern of planned human resource activities intended to enable an organization to achieve its goals’ (Wright and McMahan 1992).

Strategic Human Resource Management is largely about integration and adaptation (Schuler and Jackson, 1999). Its concern is to ensure that: (1) human resource management is fully integrated with the organization as articulated through its strategy and the strategic needs of the firm; (2) human resource practices are consistent both across policy areas and across hierarchies; and (3) human resource practices are adjusted, accepted and used by line managers and employees as part of their everyday work.

SHRM has many different components, including activities, policies and practices. The various statements also imply what SHRM does: it links, it integrates and it connects across levels in organizations. Implicitly or explicitly, its purpose is to more effectively utilize human resources vis–vis the strategic needs of the organization.

Organizations define (or redefine) their strategic business needs during times of turbulence. As such, these needs reflect management’s overall plan for survival, growth, adaptability and profitability. Internal characteristics (such as culture and the nature of the business) as well as external characteristics (such as the state of the economy and critical success factors in the industry) may well influence the definition of needs

Strategic Human Resource is a visionary management concerned with creating and conceptualising ideas of where the organisation is moving or should be moving.It is also a thought for the organisation how it is going to get there and what all it needs to do to achieve the goal.

The strategic management is a continuing process consisting of a sequence of activities :Strategy formation, Strategic planning, Implementation, Review, Updating

There are certain key concepts that are included in the formation of strategic formation they are

* Competitive advantage

* Distinctive Competence

* Critical Success factor

* Focus

* Synergy

* Resource allocation

The importance of having these Strategic formation is that to know the facts about the organisation to know how it is moving forward, we got to know what we have to survive in the competitive world, we got to know what we are expected to do in front of our competitors. we also got to know what advantage we have among our competitors.Becker and huselid (1998) provided the most detailed model offered to date. In essence this model suggests that business strategies drive the design of the Human resource system. The HR system directly impacts employee skills and motivation and the structure and design work. These factors influence employee behaviour which translates into improved operation performance.

The Strategic Management Process and its Implications for Human Resource Management

An organization is able to maintain competitive advantage only when it has a distinct advantage which makes it superior than its rivals. It is possible when the organization takes into account all the 5 m’s of which Man or human resource as it is called now, is the most important. It needs to identify the implications of its strategic decisions on the human resources in the organization and shall alter its plan so as to give a positive outcome in terms of job satisfaction and willingness to work towards the achievement of the organisational objective.

It is evident from the above discussion that strategic formulation, which takes into account the fact that the organization wishes to maintain the competitive advantage must take its human resources in to account at every stage of the strategy.

To conclude, it would be wise to say that HRM is an effective strategic tool for sustaining competitive advantage.

As far as the issue whether HRM is in crisis or not, all we can say that there are certain changes needed to be made in the way policies are to be formulated looking at the events of the new millennium and HR practitioners have to formulate policies that are flexible enough to cope with the changes that may or may not be predicted. As Sparrow and Marchington put it “HRM has always been in crisis for the past century and it would be very strange if things are not that way now. However, it helps to cope with the crisis if some of its dimensions are understood” ( HRM- The new Agenda ,1998)

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