Term Paper on "Strategic Management of Human Resources"

Term Paper 6 pages (2174 words) Sources: 1+

[EXCERPT] . . . .

Strategic Management of Human Resources

Why is reward management potentially so problematic for Strategic Human Resource Management?

In order to get an accurate image of the problems that reward management poses to strategic human resources management (HRM), a profounder understanding of the latter concept is needed.

Strategic HRM is a relatively recent trend which has ceased to view people as simple resources that are handled apart from the company's objectives and which integrates them in the overall business strategy. This major shift heavily relies on the conclusion that intangible assets are the ones which make the difference nowadays. Among these, the most prominent are the human resources who are capable of shaping a corporation's trajectory in a positive or negative manner depending on the skill with which they are handled (http://www.cipd.co.uk/subjects/corpstrtgy/general/strathrm.htm?IsSrchRes=1).

Consequently, as S.R. de Silva (1998) pointed out in her article, HRM has commuted from employee welfare to obtaining the best productivity from personnel.

In other words, strategic HRM correlates the management of people with the corporate strategy. This relationship is a mutual one because the HR policies and actions derive from the business strategy while the skills, knowledge, motivation of employees also have a great impact in terms of shaping the company's course of action (http://www.cipd.co.uk/subjects/corpstrtgy/general/strathrm.htm?IsSrchRes=1).

In conclusion, if we resort to an analogy between an organization and the human body, we could say that strategic HRM subordinates human resources to major corporate goals in the same way in which arms or legs move according to what brain dictates. This coherence between managing employees and attaining objectives results in an increased product or service market value, and, implicitly, in a competitive advantage. Therefore, for achieving its aims, the HR strategy should be designed according to the business's nature and structure (De Silva, 1998) and should permanently pay attention to changes which occur among corporate goals in order to timely adapt to the new requirements.

Yet, however optimistic this integrative approach may sound, there are certain elements which hinder such vision from being applied. One of these impediments refers to rewards which are difficult to correlate with the company's goals out of several reasons that are discussed below.

First of all, tailoring rewards according to the staff's personal traits and organizational objectives is very delicate when diversified enterprises are involved. These may operate within several markets and may provide various products and services. Consequently, each segment has specific objectives for whose accomplishment human resources need to be stimulated in different ways (De Silva, 1998). For instance, if an organization comprises both a division of ground handling services at the airport and a chain of travel agencies, it could decide to reward the employees belonging to the first branch by offering trainings aimed at improving the quality of customer service while opting for a variable commission depending on the amount of touristic packages sold, for the second one. Thus, when objectives are different, the reward system must comply with discrepancies. This means that an organization can't design a unique system for compensating its employees because if it happens to do so, it will surely hinder the organization from reaching its goals.

Secondly, there are situations when the hard nature of HRM encompassing a rational, quantitative perspective on handling employees is more necessary than its soft nature encouraging communication, motivation and leadership. This results in a contradiction between strategic HRM and the principles of rewarding employees by resorting to non-financial incentives like trainings, career opportunity, recognition and appreciation. At this chapter, S.R. de Silva (1998) invokes the case of an organization which is compelled to reduce its labor costs if it wishes to survive or increase its performance. One alternative for obtaining this result could consist of lay-offs targeting employees who don't have the skills or knowledge of their colleagues. This would obviously be at odds with the reward system's requirements which endorse trainings for reaching the full potential of an individual.

Still, this dilemma is solved by two assertions. The first one claims that the development of employees is possible only when the organization is a successful one. This implies that if cutting off labor costs is a must for ensuring a company's success, then such measure will be applied because this is the only way to provide a healthy, motivating work environment for the remaining employees (De Silva, 1998).

The second assertion aimed at solving this contradiction states that reduced labor costs can be achieved through greater "involvement, training, and commitment" (De Silva, 1998) especially when the business nature allows it (e.g. The case of mass production companies).

Thirdly, the flexibility of the reward system is another issue which conditions the achievement of a company's objectives. It is unanimously accepted that nowadays the organizational environment is very complex and dynamic and that corporations must comply with these changes in order to 'stay alive'. Therefore, these adaptations to the environmental requirements could be held back by the reward system. For instance, if a company seizes an opportunity which claims quality instead of quantity, this should accordingly modify its pay and reward system. Otherwise, there could be a huge gap between what CEO says about quality and what staff is encouraged to do (http://www.accel-team.com/human_resources/hrm_08.html).In this context, one of the most famous examples provided by the economic literature refers to Sears, Roebuck and Co., an enterprise which offered a commission to its mechanics proportionally to the number of clients whose problems they managed to solve. Because of such incentive, employees tried to make customers return by not appropriately fixing their problems. When managers took notice of the clients' complaints, they stated that quality should be the top priority for Sears's mechanics but didn't do anything to ban the commission mentioned above. Therefore, given the contradiction between objectives and rewards, employees continued to perform in the same manner.

Although history is rich in similar examples, flexibility seems to continue being an essential problem. When CIPD's 2006 reward management survey asked respondents to rate the flexibility of their reward systems on a scale from 1 (inflexible) to 4 (flexible), public sector organizations obtained an average of 2.61 while the private sector received an average of 3.18 (http://www.cipd.co.uk/pressoffice/_articles/pr_09022006.htm?IsSrchRes=1).Thus, most organizations maintain this gap between rewards and objectives despite claiming to embrace a strategic HRM approach.

To conclude with, one could state that the reward system is problematic to strategic HRM because the latter implies continually adapting to environmental changes, an aspect which requires keeping rewards up-to-date.

2) in what ways can organizations integrate reward management into the HRM strategy?

According to the version posted on www.accel-team.com (http://www.accel-team.com/human_resources/hrm_08.html),the HRM strategy comprises seven major steps.

The first one consists of getting 'the big picture'. This means that, in order to deliver a pertinent strategy, the HR department should take a close look at the company's objectives and overall business strategy. Thus, it will identify the core activities and the implications that these have on employees.

The second phase refers to defining a mission statement. Even though this is regarded as idealistic and unnecessary by most people, it has an extremely important role because it shows people why their contribution is needed. In other words, they can't engage in a competition without knowing what the stake is.

The third stage outlines the importance of carrying out a SWOT analysis of the organization. Thus, the HR department must detect the strengths and weaknesses of the corporation and the opportunities and threats existing in the external environment. This way, it can determine what skills and rewards are needed for motivating employees to give a hand at remediating weak points and fighting against menaces.

The fourth step consists of a thorough HR analysis. In this context, the main elements that should be touched upon are culture, organization, people, HR systems (COPS) and the gap between the desired position and the real one.

The fifth phase focuses on detecting critical people issues in order to identify the efforts and resources required. For achieving this objective, the HR manager must take notice of the key problems which highly impact the company's strategy and must also establish a top priority list.

The sixth phase is dedicated to developing solutions. In order to identify pertinent alternatives, the HR manager must go beyond appearances and delve into the real causes of issues even if this requires much more effort than sticking to the obvious aspects. After such detailed analysis, managers should divide the plan into several broad objectives. Besides other targets like management development, employee selection and recruitment, manpower planning and so forth, a significant part is played by designing the appropriate reward system. In order to achieve this, a reward strategy should be drawn out.

First of all, we should mention that it is compulsory for such a strategy to be clearly specified in writing for being easily understood and communicated. This document will act as a landmark in terms of evaluating performance as mangers will know what outcomes or behaviors to measure and employees will know what rewards to expect. This total transparency will… READ MORE

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