Term Paper on "Strategic Management of Human Resources the Case"

Term Paper 10 pages (3084 words) Sources: 1+

[EXCERPT] . . . .

Strategic Management of Human Resources

The case study presents a particular process of organizational change in a specific organization - Macquarie Bank. The case study makes explicit the steps taken in order to manage change. It appears clear that - as Armstrong (2006) argued -usually a change process starts with an awareness of the need for change. An analysis of the situation and of the factors that triggered change should follow and then a preferred action can be identified and implemented. There are many types of change and it is important to understand them. Two important types of change have been identified (Armstrong 2006): strategic and operational. The operational change refers to the implementation of new systems, procedures, structures and technologies with impact upon the organization and its employees. Strategic change deals with "broad, long-term and organization-wide issues" (Armstrong 2006, p. 344). Such form of change involves moving to a future state defined in terms of strategic vision and objectives. It also includes such issues as growth, quality, innovation and values concerning people, customers and technology.

This type of business strategy focused on change is described in the case study. The case study reinforces the specifications of competitive positioning and strategic goals for achieving and maintaining competitive advantage and for product-market development. In what concerns the policies adopted, the case study is focused mainly on the HRM practices. What is to be noticed from the very beginning is the capacity of the firm to identify the environmental factors and the forces that suggest a change in the business approach is necessary to remain or become even more competitive. Another important thing that becomes clear even from the beginning is the capacity of the bank to mobilize and manage the resources necessary to provide an efficient action. It has been recognized by various authors that an effective strategic management requires a coherent and at the same time flexible fit between organizational capabilities and environmental context. The ideas of dynamic fit and interdependencies between the organization and the environment are core issues to any business strategy. Various models insist on one of these elements or on both in developing theoretic frameworks for the process of change in business organizations. (Wade 2006)

In the present case study the business strategy adopted by the bank in a changing business environment is that of diversification in order to adapt to the business environment. The diversification consisted of design and elaboration of new corporate services in order to enter other market segments that appeared profitable at that time. Moreover, the business strategy adopted permitted innovation by acquiring new areas of expertise into retail domestic banking, equity investments, property and leasing. The purpose of the business strategy was adaptation to the business environment and gaining a competitive advantage on the market. The business strategy of the bank has been designed to include both an horizontal and a vertical development. This is the reason why growth has been termed to encompass both development and acquisition.

The business strategy established and implemented on such terms has been a success because it took in consideration the structure, leadership and human resources processes as well. The acquisition of new market shares has been accompanied by a growth in products and in the number of employees. The greater size and complexity led in the end to problems of coordination and new internal structures and control systems need to be created. Such issues are of major importance since it is a certified fact that the strategy adopted needs to be compatible with the structure. The McKinsey model of the "seven S's" (1982) used as an organizational diagnostic tool as well reinforces the fact that the strategy, the organizational subsystems and leadership style should fit, should be compatible in order to be effective. For a diversification strategy the compatibility between the subsystems is essential. Many cases have become famous in business for failing to be successful as they adopted a diversification strategy (for instance by developing a new product) while the structure and other subsystems and leadership style were kept constant. Macquarie Bank has become successful by keeping constant awareness on the process of change. The outstanding performance has been supported by the adoption of diversified niche strategies inside a loosely coupled flexible organization.

When the organizational change suggested another great shift as a result of diversification, the bank entered a strategic planning process as the need of new "goals and values" became stringent. Mission and vision statements as key parts of the strategic planning process offered new opportunities of revising the goals and values of the organization. On such basis external control systems were substituted by internal control systems by creating highly autonomous profit centers and cross-functional synergies. The systematic communication by management across these centers became a dynamic force that supported the internal system of control. Under such circumstances the nature of the management style need to be reconsidered. The bank's staff acknowledged that such structure and subsystems are best supported by a consultative management style. The method adopted in order to consolidate this type of management style included the frequent use of the executive committee as a forum for discussion of major issues and decisions and the fact that the managing director shared the same open-plan office. However, when first line and middle level managers were asked how they perceived the bank's managerial style, they rated it as directive. It appears that contrary to people's desires to be consulted with respect to organizational strategies, in a forever changing environment a decisive leadership may prove more effective. However, such perceptions have not impacted negatively the flexible structure facilitated by short communication chains and collegial workforce culture.

The diversification strategy described above may be related to a more generic term - the transformational change (Armstrong 2006). The diversification strategy is a particular form of the transformational change. Transformational change is business-led in order to achieve greater efficacy. Transformational change is led from the inside of the organization, from the top. This shift from the external to the internal aspects of control may be noticed in the current case study. Moreover, in order to summarize the aspects related to the overall business strategy it is important to highlight that the process of change occurred in structure, processes and culture of the organization. The perception of the leadership style may be defined as shifting from a collaborative to a more authoritative one reflected in people's opinions.

With respect to the integration of business and HRM strategies, Armstrong (2006) noted that it is important to understand the direction in which the organization is going by taking a closer look of such aspects as:

The number required in relation to projected activity levels

The skills required on the basis of product/market developments and strategies to enhance quality or to reduce costs.

The impact of organizational restructuring as a result of diversification in this case

The plans for changing the culture of the organization in such areas indicating the need for people with different attitudes, beliefs and personal characteristics.

The concept of strategic human resources management (SHRM) needs to be discussed at this point of the discourse. SHRM has been defined as the process of correlating the human resource functions with the strategic objectives of the organization in order to improve performance. (Ahmed, Ullah & Uddin, 2006). The main characteristic of the business strategy or the main objective of the bank is flexibility promoted by a change strategy characterized as "participative evolution." Since flexibility is among the key factors that lead to success in a changing environment, the strategic human resources need to assume or at least consider this fact as a key point when developing human resources strategies. This approach is supported by the bank through the creation of a meritocracy - training the best people inside a flexible organizational environment. The SHRM is supported by the flat organizational structure, the emphasis placed on the skills development inside the organization and by the value assigned to team work.

The strategic human resources management process is viewed by some others as a process that links human capital to the strategic needs of the organization, while others view SHRM as an outcome, in which people assign the competitive advantage to the organization. The third approach in SHRM views considers strategic human resources management as a process of linking HRM practices to business strategy. This approach has been discussed briefly above. Considering these possible conceptualizations of SHRM it becomes clear that the Bank has laid the foundation in adopting a strategic approach to human resources management. The Bank takes into consideration the human capital in the process of change. This is obvious in the process of diversification when a greater number of employees became a necessity. Moreover, the quality is important as well and the Bank pays attention to skills development and specialization inside the organization. The Bank grows its own people, values their skills and is concerned with continuous professional development. The skills serve the tasks circumscribed by the… READ MORE

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