Author: Chariss Garcia

Date: 25/01/2015

STRATEGIC HUMAN RESOURCE MANAGEMENT

People are the key to organisational success. Organisational success is expressed in
terms of contributing to competitive advantage (Brockbank, 1999; Ulrich, 1997), creating
value (Wright & Snell, 2005; Ulrich & Brockbank, 2005) and meeting performance financial
targets (Wright & Gardner, 2000). Since we are now moving towards a more global and
interconnected economies, organisations need to rethink their traditional ways of managing
people (Harris H, n.d.). Competition, globalisation, and continuous changes in markets and
technology are pushing for the evolution of human resource management (HRM) (Chen &
Hsieh, 2006). HRM is now shifting its focus on practices that affect human capital rather than
human capital itself (Wright & McMahan, 2011).
According to Ulrich (1995), traditional HR practitioners have four roles: strategic
partner, administrative expert, employee champion and change agent. As firms evolve, this
view of HR appears to be too simplistic to reflect HR practice in reality. For one, HR as a
strategic partner means that he is merely a liaison officer, who coordinates with line managers
of various departments in implementing HR policies and programs in line with the corporate
strategy. Employees have less contact with HR, and more contact with their line managers,
and service centres as source of administrative expertise (Kramar & Steane, 2012). Thus, the
role as strategic partner benefits line managers most and not employees. Second, HRs role as
administrative expert might conflict their role as strategic partner. Administrative role refers
to regular HR functions of hiring, training, appraising and paying people (De Guzman et al.,
2010). If there is no efficient HR infrastructure to facilitate this, administrative work will take
most of their time, leaving little attention to strategic tasks. In addition, strategic role can also
be in conflict with the role of being an employee champion. The former requires HR function
to cooperate with top management, which can alienate employees because interest of the top
management does not always cohere with the interest of the employees (Lemmergaard,
2009). Finally, being an employee champion can sometimes be a hindrance to being a change
agent. An example is when HR tries to implement a restructure within an organisation that
would result to a number of redundancies. This might trigger an outrage among employees
affected, so HR will need to think of a plan to minimise resistance to change.

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Author: Chariss Garcia

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To address the shortcomings of the model, Ulrich outlined the six competencies HR
professionals should possess to be able to carry out their tasks. These competencies are
(Kramar & Steane, 2012; Hollon 2012):

For HR to accomplish organisational success, it needs to implement various systems,

such as job design, staffing programs, learning and development, performance management,
and rewards and remuneration. Effectiveness of each program will depend how well they
target toward some strategic objective, such as influence on (1) employee knowledge, skills
and abilities, (2) employee motivation and effort; and (3) opportunities for employees to
contribute (Lepak et al., 2006).
First HR system is job design or job analysis. Job analysis is the process of gathering,
analysing and structuring information about the jobs components, characteristics, and job
requirements (Harvey, 1991). HR needs to ensure that roles of their staff meet the needs of
the employee and the organisation. Each job consists of a number of outcomes,
responsibilities, tasks and functions that are designed to achieve corporate or strategic
objectives (Nankervis et al., 2001, p.184). Changing government legislations, technological
innovations and market pressures prompts HR to constantly review job designs.
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Author: Chariss Garcia

Date: 25/01/2015

As noted by Chang and Kleiner (2002), job analyst is often perceived by others with
suspicion because his/her report could undermine an individuals status, relative pay, and
organisational position. Hence, it is important that due care is made in processing relevant
information gathered about the job. Principal measurement techniques used to determine the
relative importance of each job against another are the ranking system, point evaluation
plans, and factor comparison plans. Under the ranking system, a job is ranked against other
jobs without assigning point values. This method is simple, quick and inexpensive to
administer. However, inconsistencies often arise on this method because personal judgment is
used to evaluate the job which is often based on the jobs dominant characteristics.
Furthermore, the ranking system indicates that only on job is more difficult than another, but
not how much more difficult it is. Meanwhile, the point system identifies and selects various
factors that measure a job. The problem with this is the difficulty of selecting relevant factors,
of defining degrees for each factor and of assigning appropriate point values. Factor
comparison identifies a set of compensable factors relevant to the job and ranks them from
highest to lowest. It has two advantages: (1) it uses job-by-job comparison technique, and (2)
it does not involve semantic problems encountered in defining factor degrees. However, it
lacks definition so it is hard to explain its results to employees and/or supervisors (Chang &
Kleiner, 2002).
If job is found as critical for the organisation in pursuance of its strategic goals, then
job remains within the organisation; if not, a company can outsource it to reduce cost. Careful
selection of functions to be outsourced is necessary for the success of the outsourcing
decision. Caruth and Caruth (2010) argued that ancillary activities, routine activities,
activities containing the potential for achieving economies of scale and activities requiring
specialised knowledge can be outsourced by the company; whereas core functions requiring
specific organisational knowledge, high confidentiality and specific management decisions
should remain in-house. If carried out effectively, outsourcing will give the firm the following
benefits: increased focus on companys core functions, cost reductions, increased flexibility,
improved productivity, increased competitiveness, access to external skills and competencies,
risk sharing, improved quality (Tjader et al., 2010), access to new infrastructures and
technologies (Kremic, 2006), a fresh and innovative way to do business (Preston & Brohman,
2002), and time zone advantage (Salanta et al., 2011). Risks associated with outsourcing, on
the other hand, are selection of inappropriate supplier, loss of customers and/or opportunities,
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Author: Chariss Garcia

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high degree of uncertainty, low employee morale, potential conflict of interests, loss of
reputation if quality of service is compromised (Kremic, 2006), violations of outsourcing
contract, lack of communication leading to dysfunctions (Tsai et al., 2008).
An example of outsourcing turned sour, is Dell. It set up its first call centre in
Bangalore in 2001 and opened a subsequent one in Hyderabad in 2003. These call centres
handled technical support calls for two of its corporate computer lines: OptiPlex desktop and
Latitude notebook (Corcoran, 2004; Frauenheim, 2003). As a result of this outsourcing
decision, supply chain became fragmented and disintegrated (Mourdoukoutas, 2013).
Furthermore, customer satisfaction fell dramatically. In 2003, Texas Better Business Bureau
logged 3,726 complaints against Dell from consumers whereas its rival HP only recorded
1,362 complaints nationwide for that entire three-year period (Corcoran, 2004). Customers
complained of language difficulties, cultural rifts and delays in reaching senior technicians
when speaking to tech support personnel in India (Frauenheim, 2003). Customers were
frustrated because they cannot understand the accent of these people and they seemed
unwilling to depart from their script (Corcoran, 2004). Dell also came under fire due to job
losses in US (Frauenheim, 2003). As a result, Dell had to move back their large- and
medium- product support team to the US, while support for small-business consumer
accounts remained in India (Corcoran, 2004). Other notable outsourcing failures are Boeing
and IBM. Experiences of these companies teach us that outsourcing can be a valued source of
cost savings and competitive advantage, but due care must be given with the choice of
contractor and with the choice of functions that will be outsourced.
Next system is staffing program. Staffing includes the talent attraction (recruitment)
and selection. Both processes are dual in nature with employers seeking people who appear
fit to their corporate image, and employees seeking a company who match what they seek
employer of choice. A good recruiter should be able to reconcile the needs of the company
and the company being selected.
Recruitment is the process of locating and attracting a pool of suitable, qualified and
experienced people to apply for existing or anticipated roles within an organisation
(Nankervis et al., 2014, p. 224). Organisations apply different recruitment strategies
depending on the criteria for selection. HR may choose to attract talent from within via HR
Information Management System (HRIMS) and intranet, or attract external talent using
advertisements, recruitment agencies, educational institutions, employee referrals, executive
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Date: 25/01/2015

leasing and contracting, online talent attraction, and outsourcing talent attraction. Every
method has its pros and cons that a recruiter should be aware of. The recruiter must
determine the right mix of recruitment strategies he will employ in finding the
most appropriate candidate who will fill the job role. Nankervis et al. (2014)
provided this summary:

After recruitment, HR coordinates with line manager to identify the position title, job
demand (quantity), responsibilities, person specifications and competencies required.
Competency encompasses the behavioural attributes, knowledge and skills required for
successful performance of the role (Nankervis et al., 2011, p.194). Once recruiters have
identified the minimum requirements for the role, they then employ a variety of selection
methods depending on the job requirements. Sources of information about candidates include
application forms, checking references, medical examination, employment interviews and
employment tests. As per the survey conducted by Di Milia (2004), the following tools were
always in selection across all organisations: interviews (91%), reference checking (77%)
and application forms (60%). These tools were overwhelmingly preferred over personality
assessments (12%), cognitive tests (11%) and ACs (2%).
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Author: Chariss Garcia

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In selection, employers consider the can do factors (knowledge, skills and aptitudes)
and will do factors (motivation, interests and personality) to forecast the job performance of
the candidate (Nankervis et al., 2014, p. 268). The difficulty, length and complexity of the
selection process will depend on the criticality of the job being filled to the operations of the
business. It is important that companies recruit the right person for the job, right person for
the organisation and right for the environment (Sekiguchi, 2007), as the cost of getting it
wrong implies more expenses for the company. As what Guld (2007) argued, Good people
are hard to find, great people are much harder to replace.
An example of a company which has good recruitment culture is Citibank. Unlike its
competitors, Citibank employs proactive recruitment it hires people and keeps them under
their talent bank for unforeseen change in banking trend. They gave priority in recruiting
graduates with high IQ from USs top 40 universities, sponsored research funding and
organised college students to internships every year. This strategy proved to be helpful
especially after the 1990s wherein the finance sector experienced a drastic change where
there was a sudden surge of demand for marketing personnel. Since Citibank has been
keeping a talent pool of reserve employees, Citigroup was able to cope while other banks
stagnated (Liu, 2014).
Retention is facilitated by the interaction of HR systems, such as learning and
development, performance management and rewards and remuneration. The development of
human capital commence from the moment they enter the organisation. The main purpose of
retention is to prevent the loss of competent workforce. Replacing exiting employees is costly
to companies and destructive to their service delivery. Turnover can result to loss of business
patronage and relationships, probability that it jeopardise the realisation of organisational
goals, decreased innovation, delayed services, improper implementation of new programmes,
and degenerated productivity (Abassi and Hollman, 2000). It is therefore imperative for
management to reduce, to the minimum, the frequency at which employees leave, particularly
those that are crucial to its operations (Samuel & Chipunza, 2009).
To foster retention, company must ensure that employees are engaged with their
work. Tower Watson (2006) identified three elements that measure overall engagement levels.
These are heads, hands and heart. Head refers to the congruence of the employees interest
with the companys goals and values. Hand pertains to employees willingness to put in a
great deal of extra effort to help the company achieve its corporate goals. On the other hand,
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Author: Chariss Garcia

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heart is the emotional connection between the employee and the employer (i.e. employees
pride in being part of the organisation).
With the advent of technological changes, demographic changes and globalisation,
work has shifted from being labour intensive to capital (machine) intensive. People are being
valued less for their physical prowess, and valued more for their knowledge, skills and
technical expertise. Employees are required to demonstrate capabilities necessary to operate
new technologies and keep up with process innovations. Modern employee is now called as a
knowledge worker. Meisinger (2006) suggests that knowledge is a key characteristic of
todays working world where skills, experience and creativity in people, becomes the key
differentiator for many organisations in this global war for talent. Knowledge workers will
have to continually reinvent themselves to align to the business context and equip themselves
with high level of knowledge (both job specific and business acumen) to capitalise the
innovations happening around them (Drucker, 1994). Under the concept of human resource
development, it is the employers responsibility to place them in a venue where employees
can develop their careers in a way that will benefit both the organisation and the individual.
HR needs to create a learning culture that supports knowledge sharing and innovation. They
accomplish this by implementing orientations, induction programs and training programs
(both formal such as apprenticeship training and internships, and informal such as
mentoring). This is important as employees careers are repositories of knowledge which
will enrich individual, organisational and industry learning (Inkson & Arthur, 2001).
Employees are the main determinant whether the company can sustain innovations in the
long run, and thus organisational success.
To appraise improvement in employees competencies, HR implements performance
management system. Performance management allows the organisation to maintain, enhance
and utilise the productive potential of its staff. Effective performance review sets
performance criteria that are valid for each role; regular performance monitoring and
feedback; accurate assessment of performance against set criteria; provision of formal
feedback by an appropriately informed and trained reviewer; counselling for identified
performance deficiencies; and action planning to address deficiencies (Nankervis et al., 2014,
p. 334). Heneman and Leblanc (2002) recommend that organisations evaluate work of
employees on the following measures: strategic value (its effect on the key strategic needs of
the organisation), talent market value (value other organisations place on that work), and
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competency value (knowledge, skills, abilities and other attributes related to effective
employee performance). There are different performance review systems an organisation can
enforce, such as behaviourally anchored rating scale (BARS), management by objectives
(MBO), Balanced Scorecard and among others. Choice of performance review system is not
as important as its effective implementation. HR just needs to make sure that performance
management links employees performance to the organisations strategic plan.
If performance of staff is managed effectively by the management team, McDonald
and Smith (1995) suggest that people will outperform on a wide range of financial and
productivity measures compared to those companies without such programs. Unfortunately,
agency theory argues that employee (agent) will not always act in the best interest of the
employer (principal) (Jensen & Meckling, 1976). Nankervis et al. (2014, p. 354) identified
the following reasons why performance review fails:

Lack of top management support

Lack of job-relatedness standards
Rater bias due to organisational politics
Excessive paperwork
Use of program for conflicting purposes
Worse, disagreement about the results of performance review can lead to tension

between appraiser (usually manager) and employees. Deutsch et al. (1962) listed a number of
negative consequences of conflict, including:

Increased competition between the parties, which can hinder team cooperation
Heightened emotions such as anxiety, fear, irritation and frustration
Breakdown in communication
Bias towards or exclusion of others
Divergence from the core issue
Lack of flexibility
Escalation of conflict
However, the goal of organisational leadership is not to eliminate conflict, but to use it

to turn released energies to good advantage (Gibson & Hodgetts, 1985). It is important that
managers are trained to identify causes of conflict, ways to diagnose the conflict and methods
to cope with differences (Lippitt, 1982). If managed well, Tjosvold (1988) noted the
following benefits of conflict:

Heightens awareness of the issues among parties involved

Catalyst for organisational change

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Author: Chariss Garcia

Date: 25/01/2015

If handled in a cooperative manner, it can strengthen existing relationships and heighten

morale
Promotes awareness of self and others
Enhances personal development
Lewicki et al (1997) provided five different management styles in reaching a

resolution. Below is a figure explaining how each style leads to achievement of each partys
own desired outcomes:

Finally, rewards and recognition is a means employed by the organization to ensure

that their employees use their competencies for the achievement of the organisational goals.
Rewards align individual interest with business objectives, thus minimising agency problems.
Rewards and recognition are acknowledged by organisations as an important element in
motivating individual employees to do their best. As per Boyd and Salamin (2001),
compensation practices are generally determined by the organisations strategy and business
necessities. The greater the risk involved in the nature of work, the higher the reward granted
to the employee in order to offset this risk, attract and retain them in the organisation.
Rewards include a wide range of material and psychological possibilities. A holistic reward
management system pools financial rewards compatible with various non-financial rewards
(Nankervis et al., 2014, p. 428). Rewards can be broadly classified into extrinsic and intrinsic
rewards (Shields, 2007):

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Author: Chariss Garcia

Date: 25/01/2015

In a survey conducted by Glassdoor.com, employees ranked Google as the best

company to work for in terms of compensation. This includes monetary and non-monetary
benefits. In monetary terms, average salary for a product manager is $146,215 USD, while
the average salary for a software engineer is $127,315 USD. Non-monetary benefits include
the travel opportunities, study reimbursement, flexible working time and free legal aid
(Google, n.d.). A software engineer in Google was quoted as saying that the company really
takes care of them professionally and personally. It creates an environment where you will
never consider leaving the company (Bort, 2014).
To conclude, effectiveness of HR systems would depend on (1) how they employ,
develop and retain their best employees; (2) how well-prepared they are for change; and (3)
how they mould the company into a learning organisation (BCG, 2008). If people are
managed and developed well, the company can then rely on the competencies of their
employee to compete favourably even in difficult market conditions, and gain sustainable
competitive advantage in the industry it operates.

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Date: 25/01/2015

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