Introduction to Strategic HRM PDF

Introduction to Strategic Human Resource Management Defining Human Resource Management Human Resources (HR) is the department of an organization focused on managing the people that work for it, to achieve the organization’s mission, vision and goals. ˆ HR supports strategy with planning that hel...

Introduction to Strategic Human Resource Management Defining Human Resource Management Human Resources (HR) is the department of an organization focused on managing the people that work for it, to achieve the organization’s mission, vision and goals. ˆ HR supports strategy with planning that helps the organization meet long- term strategic objectives. ˆ HR professionals ensure that the organization has the employees it needs to succeed, and that those employees have a positive work environment. ˆ HR creates value by engaging in activities that cultivate the employee behaviors an organization needs to achieve its strategic goals.. Definition of HR The Big Book of HR defines human resources as “the function that is actively involved in setting strategy around the people who do the work that moves organizations toward the achievement of their missions, visions, and goals.” ˆ HR professionals and executives are advisors to leadership who develop strategic workforce plans aligned with the organization’s overall strategic plan ˆ Strategic HR planning ensures that the right people are on board so that the firm can meet its objectives. Introduction to Strategic Human Resource Management 1  HR’s Role Employees are the most valuable (and expensive) resource that any organization has, and they are behind every success that an organization achieves. The role of HR is to manage all the people-related aspects of the workplace, in particular: ˆ HR ensures that an organization has the talent—the right combination of skills, knowledge, aptitude and attitude—to achieve its strategic goals. ˆ HR practices aim to increase engagement and retain employees by providing a positive, safe and pleasant environment. ˆ HR ensures that employees have access to opportunities for development and that people have all the training and necessary resources to do their jobs effectively. Introduction to Strategic Human Resource Management 2  HR Functions The Key Functional Areas of HR ˆ Talent Management: HR must protect the financial interests of the organization while ensuring that employees have the resources they need to stay engaged and productive in a work environment that attracts and retains qualified people. ˆ Recruitment and Training: HR is responsible for finding, recruiting, screening, and training job applicants. ˆ Compensation: HR also handles compensation, incentives and and administers employee benefit programs.Incentives and rewards ˆ Administration: ƒ Compliance: HR ensures compliance with federal, state, and governmental laws and regulations and HR departments implement company policies and procedures. ƒ Safe Work Environment: HR professionals attend to employee concerns about labor relations, health and safety, and fairness. Introduction to Strategic Human Resource Management 3 HR activities in these functional areas include: Staffing Training & Compensation Compensation Development Workforce planning Employee training Motivation Safety and health Strategy Aligning Onboarding Wages and salary Employee relations Job analysis Management Job evaluation Labor relations development Recruitment Career development Pay and benefits Grievance Selection Performance Discipline Risk management evaluation Placement Succession planning Resource allocation Social security Transfer Payroll Welfare Promotion Bonus Record keeping Incentives Personnel audit SOURCE: Lumen Introduction to Strategic Human Resource Management 4 Introduction to Strategic Human Resource Management 5  The HR Department HR’s model and placement in an organization depends on the size, culture and strategic goals of the business. Common forms include: ˆ A Transactional HR Group provides support for day-to-day transactional activities using centralized call centers and outsourcing to provide HR services. ˆ A Corporate HR Group focuses on assisting top management in developing and explaining the personnel aspects of the company’s long-term strategic plan. ˆ An Embedded HR Unit features HR Business Partners who are HR professionals assigned to departments where they partner with line managers to meet departmental needs and achieve strategic goals. ˆ HR Centers of Expertise are specialized HR consulting units that provide assistance in areas like organizational change or Learning and Development. Introduction to Strategic Human Resource Management 6  HR Roles In smaller and growing organizations HR professionals often take on multiple roles ˆ HR Managers are the strategic leaders who oversee the department’s operations. They partner with leadership to align HR strategy with business goals, develop strategic HR plans and strategies, and ensure the effective execution of HR initiatives. ˆ HR Generalists serve as versatile HR practitioners, handling a wide range of responsibilities, from employee relations and benefits administration to performance management and talent development. ˆ HR Coordinators manage the entire employee lifecycle in small to smaller organizations. In larger organizations, their role is more specialized. ˆ HR Business Partners (HRBPs) act as strategic liaisons between HR and an organization’s business units. They collaborate directly with line managers to help the organization achieve its strategic goals and advise the company on implementing HR policies, practices, and processes. Introduction to Strategic Human Resource Management 7 In larger organizations, HR professionals specialize in specific HR functions like talent acquisition, learning and development or data analysis: ˆ HR Analysts collect, analyze, and report HR data. They use this data to provide recommendations to senior management on people-related issues and assist HR leadership in staffing or implementing new initiatives. ˆ Talent Acquisition Specialists find, attract, and hire qualified candidates. They focus on developing a strong talent pipeline and ensuring a smooth onboarding process for new hires. ˆ Diversity, Equity, Inclusion, and Belonging (DEIB) Officers promote equality and reduce discrimination in the workplace. They ensure equal treatment and access to services across the organization and develop the company culture and policies to increase employees’ sense of belonging and inclusion. ˆ Compensation and Benefits (C&B) Specialists manage employee compensation. They develop C&B initiatives, analyze C&B market trends, and assist HR Business Partners and managers in C&B-related issues. ˆ HR Data Scientists apply statistical theory and methods to collect, analyze, and summarize HR data. They use this data to make predictions and provide leaders with actionable recommendations on people-related issues. ˆ Learning and Development (L&D) Managers oversee the training and professional development of all employees. They develop and implement learning strategies, design training programs, assess training success, and manage the development of the HR team. Introduction to Strategic Human Resource Management 8 ˆ Chief Talent Officers are in charge of talent acquisition strategy, particularly for senior roles. They manage talent supply and demand based on an organization’s needs and workforce planning. ˆ Chief Wellness Officers take care of the overall physical, mental, and emotional well-being of employees. They develop well-being programs, create a workplace wellness culture, and communicate the importance of well-being. Introduction to Strategic Human Resource Management 9  Evolution of HR Management Current HR practice is built on over 100 years of evolution from guilds, through an era of personnel management to modern times where technologies are changing how companies are structured and how HR views work. ˆ Three main Foundational Theories emerged in the 20th century, known as the scientific, administrative and humanist schools of thought. ˆ New forces are shaping the business world and HR as hybrid and remote work forces emerge, HR practice is adapting to be more flexible and people-centered. Classic Foundational Theories Scientific Management This school of thought emerged in the early 1900’s with a view of workers as machines that could be optimized to improve their efficiency for greater output. Dr Frederick Taylor (1911) developed a method to analyze work and find the most efficient way to do tasks. His four principles of scientific management were: Use scientific analysis to determine task efficiency. ˆ Match workers to jobs based on capability and motivation, then train for efficiency ˆ Use instruction and supervision to ensure “best” methods for tasks ˆ Divide work between managers (planning, training) and workers (production) Introduction to Strategic Human Resource Management 10 Frank Gilbreth and his wife, Dr. Lillian Gilbreth (1909-1917) were engineers who tried to identify “the one best way” to perform any task. Using film to record, study and improve work processes, they documented work as a collection of individual motions called “therbligs” that could be optimized to increase production. They believed that happy, healthy workers led to greater profits so they asked companies that benefited from their methods to increase wages. Their management theory boiled down to: 1 Reduce the number of motions in a task. 2 Focus on the incremental study of motions and time. 3 Increase efficiency to increase both profit and worker satisfaction. Introduction to Strategic Human Resource Management 11 Administrative Management An alternative theory that emphasized the role of management practice on workplace productivity was developed by Henri Fayol, a mining executive. Hia management theory was called Fayolism, and he saw workers as people motivated by more than just money but his view was from the top down. Fayol proposed 14 principles of management in his 1916 book, Administration Industrielle et Générale (Industrial and General Administration) which correspond to the five elements of management that are still used today, although “command and control” are generally replaced with “leading and motivating” for the sake of political correctness. Henri Fayol’s 5 elements of management are: 1 Planning: Create an action plan. 2 Organizing: Provide resources and define responsibilities to carry out the plan. 3 Command: Implement the plan by leading and motivating personnel. 4 Coordination: Harmonize activities through communication to achieve success. 5 Control: Evaluate activities to ensure quality, take corrective action. Introduction to Strategic Human Resource Management 12 Behavioral Management A human-centric view of workers emerged in opposition to the “man as machine” approach of scientific management. Humanists saw workers as individuals with particular social needs, expectations and interests. Also known as Human Relations this school of thought explored the effect of motivation, and group dynamics, on efficiency and productivity. Elton Mayo, an Australian psychologist, conducted research at Western Electric’s factory in Hawthorne, Chicago in the late 1920s and early 1930s. He observed that employee performance is influenced by the work environment, co-workers, and innate ability. His work gave rise to the “Hawthorne Effect”, a term that describes how people change their behavior when they know they are being observed. Mayo’s Hawthorne experiments were designed to see if lighting changes affected productivity. He and his colleagues found that both increased and decreased lighting led to higher productivity than before the experiments. They concluded that the attention workers received, not the lighting, caused the increase. This has been interpreted in two ways: some argue that workers were motivated because managers cared about their work situation, while others believe workers worked harder because they were being observed. Even so, the Hawthorne experiments proved that money is not the only motivator for employees. Introduction to Strategic Human Resource Management 13 Mary Parker Follet (1918) was a Humanist who saw conflict as an opportunity for innovation and a chance to develop “integrated solutions” which she described as a “win-win” situation. She defined management as “the art of getting things done through people” and her book “The New State,” published in 1918, expressed her ideas on conflict resolution, participatory democracy and how society and personal identities form each other. Her impact on management theory was immense: ˆ She recognised the lateral processes within hierarchical organizations which led to the formation of matrix-style organizations, like DuPont ˆ The idea of the “authority of expertise,” that leaders should be defined by their expertise not their position in the hierarchy. ˆ She argued that managers did not need to manipulate workers but could instead empower them to achieve results. ˆ She said: “Neither working for someone nor paying someone’s wages ought to give you power over them.” ˆ She used the term “reciprocal relationships” to explain how individuals relate to others, and “followership” to describe the group power of goals shared by leaders and followers. ˆ She proposed a management style based on “transformative leadership” and the principle of “integration,” or non coercive power- sharing, which means empowering others (power with) rather than wielding power (power over). Introduction to Strategic Human Resource Management 14 Psychologist Abraham Maslow (1943) argued in “A theory of Human Motivation” that people are motivated by five categories of needs, especially those that are unmet. The bottom four levels are ”deficiency needs” that result in anxiety when not met, while the fifth level is a “growth need” because it enables self-actualization. Note: Motivation is dealt with in more detail in chapter 10 Introduction to Strategic Human Resource Management 15  Trends shaping HR The modern HR landscape is evolving in response to several key trends: ˆ Hybrid Workforce: The workforce now includes remote workers, freelancers, and gig workers alongside traditional full-time employees. ˆ People-Centered HR Policies: Organizations are prioritizing employee well-being and work-life balance, recognizing that human sustainability drives business success. ˆ Flexibility: Flexible work arrangements benefit both employees and employers, offering advantages like improved work-life balance and increased job satisfaction. ˆ Employee Wellness: There’s a growing emphasis on mental health and overall well-being in the workplace. ˆ Diversity, Equity, and Inclusion (DEI): DEI initiatives are becoming increasingly important. ˆ Employee Reskilling and Upskilling: HR leaders prioritize building critical skills and competencies within the workforce. ˆ Technology: AI and predictive analytics are transforming workforce management. ˆ Agile Business Practices: Organizations adopt agile methods to adapt to change, boost productivity, and meet customer needs. Introduction to Strategic Human Resource Management 16 Role and Importance of Strategic HR in Organizations Strategic HR goes further than routine employee management and administrative tasks to embrace the strategic vision of the organization by directing all HR activities to support strategic objectives and achieve long-term goals. ˆ Strategic HR has a comprehensive plan, aligned with organizational strategy, for people, policies and practice to work together to support a competitive strategy. ˆ Strategic HR practice ensures that employees with the necessary attitude, skills, or motivation are hired to achieve the organization’s strategic objectives. ˆ Strategic HR policies have numerous benefits like increased performance and productivity, enhanced employee engagement and better use of resources Introduction to Strategic Human Resource Management 17  Benefits of Strategic HR HR plays a strategic role in shaping an organization’s future by aligning HR practices with the core organizational values and business strategy. Bene ˆ Achieving Business Objectives: Strategic HR helps organizations attract, develop, and retain the talent they need to achieve their strategic goals. By understanding the organization’s direction, HR can develop targeted initiatives that support those goals with specific objectives ˆ Improved Performance: Strategic HR practices can lead to a more engaged and productive workforce. When employees understand how their work contributes to the organization’s success, they’re more likely to be motivated and satisfied in their roles. ˆ Reduced Costs: Strategic HR can help organizations save money by reducing turnover, improving recruitment efforts, and ensuring compliance with labor laws. ˆ Competitive Advantage: In today’s competitive job market, a strong employer brand and strategic HR practices can help organizations attract and retain top talent. This can give them a significant advantage over their competitors. ˆ Proactive Approach: Strategic HR allows organizations to be proactive in addressing future challenges, such as skills gaps or technological advancements. By anticipating future needs, HR can develop strategies to address them before they become problems. ˆ Better Decisions: Increased alignment between HR initiatives and business goals resulting in better HR decision-making based on data and analysis, enhanced employee engagement and motivation and a more valuable and effective strategy. Introduction to Strategic Human Resource Management 18  Agility vs Stability Armin Trost is a leading proponent of agile HR. In his book “Human Resources Strategies: Balancing Stability and Agility in Times of Digitization”, he argues that HR strategies need to find a balance between stability and agility to keep organizations relevant and competitive in the face of digitization and a complex, uncertain world. ˆ Stability is based on hierarchies and top-down management by command and control. It offers predictability but can lead to rigidity and stagnation. ˆ Agility promotes flexibility and innovation but it is unpredictable and can lead to instability and loss of control. Introduction to Strategic Human Resource Management 19 Balancing Stability and Agility in Times of Digitization Armin Trost contends that the traditional, hierarchical model of HR, while effective for stable environments, may not be suitable for the rapidly changing digital age. Instead, HR needs to shift its focus to enabling employees and teams to be more agile and adaptable. According to Trost “For HR this means moving away from hierarchical thinking, where we think of management in a top-down sense and we start with company purpose and then design policies and roll them out. We design jobs based on the mission, we find the people to fill these jobs, we train them so they fit into the predesigned organization so basically we treat it like a machine and we call this ‘having the right people at the right in the right places’.” Introduction to Strategic Human Resource Management 20 He outlines six possible roles for HR in the context of digitization ˆ Administrator: Optimizes existing HR processes through digital technology. ˆ Supporter: Provides employees and managers with electronic assistance for HR-related tasks. ˆ Companion: Supports the company with HR-related challenges during digital transformation. ˆ Creator: Uses digital technology to change the way employees work. ˆ Entrepreneur: Determines how the company should position itself in terms of products and partnerships during digital transformation. ˆ Enabler: Changes structural and cultural frameworks to strengthen competitiveness in the face of digitization. Trost focuses on the role of the enabler and focuses on the need for alternative approaches and solutions as companies transition to more agile models. Introduction to Strategic Human Resource Management 21  Stability VS Agility STABILITY AGILITY Key Features Hierarchical structure with Organizations prioritize flexibility, clear rules and “command and adaptability, and responsiveness. control” management. Decentralized decision-making Centralized decision-making distributes power to the frontline concentrated at the top levels of management. A culture of collaboration empowers employees to take Rigid structure with responsibility. clearly defined roles and responsibilities Flexible and adaptive processes encourage innovation and Rule-bound processes are responsiveness. focussed on control, efficiency and predictability. HR Practice HR enforces people-policies HR acts as an enabler, providing dictated by organizational support and resources to help strategy objectives. individuals and teams succeed. HR strategic planning HR Strategic planning is an proceeds in a linear way ongoing, iterative process that from a company’s mission adapts quickly to meet challenges.. statement. HR favors people-centered HR plans and controls practices, encouraging employees all aspects of people and teams to take ownership of management to align with their work and success. the organizational strategy Introduction to Strategic Human Resource Management 22 Values Prescriptiveness Adaptability Management and retention Inspiration and engagement Extrinsic rewards Intrinsic motivation Obligation Ambition Benefits Enables quick decision Increases employee satisfaction, implementation and commitment, and learning structured monitoring opportunities Provides a clear chain of Enables faster responses to market command changes and customer needs Reduces ambiguity and Fosters a culture of innovation and uncertainty collaboration Challenges Can slow operational Difficult to coordinate and control processes Requires a high level of trust and May result in lower employee open communication satisfaction and engagement May lead to inefficient decision- Limits adaptability and making processes innovation Introduction to Strategic Human Resource Management 23 How the two approaches manifest in key HR areas Recruitment Focussed on attracting Focussed on attracting permanent candidates candidates who bring diverse who fit the company’s perspectives. Hybrid workforces predetermined and outside freelancers play a requirements and culture. much bigger role Employer Branding The employer brand is The employer brand is co- carefully crafted and created with employees and controlled by the company. reflects the company’s values and mission. Talent Acquisition Relies on formal processes Uses a variety of methods, and assessments to identify including informal networks and and select candidates. referrals, to identify and attract The focus is on finding talent. The focus is on finding individuals who meet the individuals with potential for job’s specific requirements. growth and adaptability. Performance Sets clear objectives and Sets goals collaboratively and Management evaluates performance provides continuous feedback. against them. Formal Focused on team performance annual appraisals are and individual development. focussed on individual accountability. Introduction to Strategic Human Resource Management 24 Learning and Provides structured training Encourages continuous learning Development programs and focuses on and provides opportunities developing specific skills for self-directed development. and competencies. The Employees take ownership of company controls the their learning journey. learning process. Compensation Use a fixed salary structure Use a more flexible approach with clearly defined pay with broader pay bands. Reward grades and bands. Reward team performance and focus on individual performance and external competitiveness. focus on internal equity. Workforce Employees are managed in Employees work in fluid teams set departments according with less rigidly-defined roles on to predefined roles and work shorter-term projects, managed towards meeting the long- by different leaders with relevant term strategic objectives of expertise. the organization. Strategy Strategy flows from a Agile Strategy is not defined, mission statement and fixed and implemented, but is is defined, fixed and in a constant flow of definition, implemented with all levels realization, measurement, and and departments focussed adaptation. on long-term goals. Introduction to Strategic Human Resource Management 25  The Challenge The digital world demands agility, but organizations still need some stability to function effectively. Trost doesn’t advocate for complete abandonment of either concept. Instead, HR should strive for a strategic balance between the two, considering factors like the organization’s culture, goals, business model and market conditions. In Trost’s view, successful HR in a digital age requires: ˆ Shifting leadership styles: From directive to coaching and enabling ˆ Empowering employees: Granting them more autonomy and fostering a sense of ownership. ˆ Prioritizing learning and development: To keep up with the ever- changing digital landscape. Trost proposes that a successful HR strategy should ˆ Align with the company’s overall business purpose and strategic goals. ˆ Identify and focus on key areas that will most effectively address the company’s specific challenges. ˆ Be guided by an organization’s structure and leadership style when considering to lean more towards a hierarchical or agile approach ˆ Foster a culture of continuous learning and adaptation, allowing for failure and learning from mistakes. Introduction to Strategic Human Resource Management 26  More on Agility Organizations transitioning from stable to agile models often encounter challenges: ˆ Coordinating between departments can be difficult, especially when breaking down hierarchies. ˆ Employees and managers used to traditional structures may resist adapting to new ways of working. ˆ During crises, people may revert to familiar hierarchical behaviors, hindering agile adoption. ˆ Organizations might unintentionally recreate hierarchies within agile teams, undermining the transformation’s benefits. ˆ Well-intentioned agile initiatives can become overly bureaucratic and lose flexibility. ˆ Additionally, external regulations may conflict with agile principles, requiring careful navigation. Introduction to Strategic Human Resource Management 27 To overcome these challenges and successfully transition to agile models, companies can follow the Principles of Agile Transformation ˆ Agility Is Not an End in Itself: Agility should be seen as a means to achieve strategic goals, not as a goal in and of itself. ˆ Self-Critical Status Review and Realistic Expectations of the Future: Companies need to honestly assess their current state and set realistic expectations about the transformation process. ˆ The CEO Must Really Want it: Strong leadership and commitment from the top are essential for driving and sustaining the agile transformation. ˆ Coaching by Externals with Experience: External coaches with experience in agile transformations can provide valuable guidance and support. ˆ Agile Principles in Transformation: The transformation process itself should embody agile principles, such as iterative development, continuous feedback, and adaptability. Introduction to Strategic Human Resource Management 28  ˆ Personal Experience Instead of Only Theoretical Teaching: Employees and managers need to experience agile practices firsthand to fully understand and embrace them. ˆ One Stone at a Time: The transformation should be implemented gradually, focusing on small, manageable changes that build upon each other. ˆ Allowing Failure and Learning from it: Companies should create a safe environment where failure is seen as an opportunity for learning and improvement. ˆ Green Meadow as an Option: In some cases, it may be more effective to create a separate, agile unit within the company rather than trying to transform the entire organization at once. ˆ Be Bold, Be Right: Companies need to be courageous in their pursuit of agility, taking calculated risks and learning from their experiences. Source: Armin Trost “Human Resources Strategies: Balancing Stability and Agility in Times of Digitization” Introduction to Strategic Human Resource Management 29