1) Introduction Many organizations consider employees and people are the most important asset to the company. However, the policies, procedures and managerial practices they deploy are contradicting to that view. This will have tremendous impa impact ct on empl employ oyee ees’ s’ comm commitm itmen entt to orga organiz nizat atio ion n and and subs subseq eque uent ntly ly influence their motivation, productivity and performance in the organization. Ther Theref efor ore, e,
unde unders rsta tand ndin ing g
peop people le
mana manage gem ment ent
is
impo import rtan antt
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organi organizat zation ion to accomp accomplis lish h its missio mission, n, vision vision and goal. goal. Effect Effective ive human human resource management and implementation that aligns both employee and business needs is critical in achieving high performance organization. For example, one of key pillar of Siemen’s business strategy how the organization manages, develops and motivates its employees. Siemen believes people are like innovation and technology, which is an important source of company competitive advantage (Siemen, The Times 100, 2007). Strategic human resources management (SHRM) is to integrate and align organization’s business strategy with human resources (HR) management system (Miles and Snow 1984) i.e. to adapt, adjust HR practices and policies across levels in organization to effectively utilise human resources to achieve organi organizat zation ion’s ’s goals goals (Wrigh (Wrightt and McMaha McMahan n 1992; 1992; Schule Schulerr R 1992). 1992). HR policies and practices must be well fitted with business strategy to improve business performance (Michie and Sheehan 2005). HR scholars recognized that organizations’ performance would be enhanced if the HR practices and policies are set and matched with company’s vision, mission and business objectives (Lengnick-Hall, M.L. et. al 2009). Today’s dynamic and complex business environment signifies the need for an organi organizat zation ion to const constant antly ly evalua evaluate te their their environ environme ment nt both both intern internal al and external for challenges and opportunities, so that they can stay relevant with competitive business strategy for sustainable growth (Ramlall 2003). This is especially important when an organization is going through stage of defining (or redefining) redefining) its strategic strategic business business needs. needs. Business Business strategy strategy is a plan of action designed to achieve competitive advantage in market position (product,
price or technical leadership, margin/profitability, contraction or expansion etc.) that allows it to deliver superior value to customers and achieve superior relationships with suppliers and distributors. All these can only be achieved through an effective management of people. Today, practically all business issues involved people and all human resource issues impact on business (Walker, JW. 1994). Figure 1 showed the linking strategic business needs and strategic HRM activities (Schuler 1992) while Table 1 showed deployment of different HR strategies (policies & practices) with different business strategies.
Figure 1 : Linking strategic business needs and strategic HRM activities
Table 1 : Summary of different organization’s strategy and its HR policies and practices
2) The interaction between HRM policies and business
strategies Effective HRM policies are important in supporting business strategies (Figure 2). Many empirical studies have proven that HR practices and policies play a pivotal role in supporting business strategies hence realizing business objectives (Takeuchi, N. 2009; Sanz-Valle et al 1999; Wang et al 2001; Yeung and Bernma 1997; Pfeffer 1994). HR is needed to identify the type of skills and knowledge the employees need to carry out business strategy. Successful companies like 3M, Motorola and AT&T designed human resource strategy to help implement business strategy (Seibert et al 1995; Plevel et al 1994).
Figure 2. Conceptual Framework of studying SHRM (Wright & McMahan 1992)
HR policies provide guidelines for action on people-related business issues and HR programs and practices based on strategic needs (Schuler 1992). HR policies involve staff selection, recruitment and other staffing actions to make sure it matches available resources with required capabilities to enable strategic business implementation (Walker, JW. 1994). This will subsequently lead to deciding types of training, development, education, job-relatedlearning, performance management system and remuneration that are
required amongst individuals to help organization become more effective (Becker & Huselid, 1998; Walker, JW. 1994, Peck 1994, Lengnick-Hall, M.L. et. al 2009). Therefore, to ensure a successful implementation of the strategic business plan, HR policies are important as it determines how an organization will compete. InQpharm Staff Survey 2010 (Appendix B) reported that more than 50 percent of the employees thought that HR policies and management has to be aligned and linked with company’s business strategy to achieve its goals and objectives. As such, business leaders of InQpharm need to continually assess if appropriate expertise is available in the talent pool to accomplish the business strategies. It is conclusive that an integration of HR policies into organizational strategy provides support in implementing the strategic plan to achieve competitive advantage (Wofford, 2002).
There are different HR strategy models that have been proposed (Figure 3). The choice of HR strategy model is determined by variations in organizational form (size, structure, age of the organization), competitive edge and the stability of labor markets (Thompson and McHugh 2002).
Effective HR
strategy has to be consistent with an organization’s competitive strategy. For example, it is not wise to adopt Porterian cost-leadership strategy (Appendix C) with an HR strategy grounded in either resource-based or control-based model. Therefore, it’s again support the importance of linking business strategy with HRM policies in ensuring business performance.
Figure 3 Human Resource Strategy Models (Bratton, J. 2003)
2.1 Staffing – Recruitment and Retaining, Training and Development
Staffing is an important HR process that helps the company to recruit the right person with the right capability to the do the right work. This is important to ensure the success of the business (Walker JW. 1994). For example, in line with Air Asia corporate strategy, which is focus on innovation, Air Asia has overhauled its HR policies and practices that has resulted in fast turnover and became a profitable organization (Howell 2009). Air Asia looks for people who are fun and innovative. To attract the enthusiastic and innovative staff, Air Asia hires without prejudice against race and sex and take advantage on labour markets. Air Asia recruits female pilot crew and taps on the talent pool make up of female pilot. All the new staff in Air Asia are being constantly encouraged to unleash their creativity in different ways through the organization’s HR policies, procedures and communication platforms. Also, Air Asia practices open office concept to ensure all the staff have the
opportunities to contact with each other. This enhances innovative thinking and promotes ideas creation. On the other hand, Google has different hiring policy where Google looks for those who believe in teamwork (Schmidt and Varian, 2005) and work-life balance. Microsoft emphasizes on intelligence and smartness as key criteria for new staff recruitment (Stross 1996) while Southwest Airlines hires for attitudes rather than skills (Pate and Beaumont 2006). All these are aligned with each organization’s different business objectives.
For Minnesota Mining and Manufacturing Co. (3M), the HR policy involves recruiting high-quality individuals at the entry level. As such, 3M attracts fresh graduates and grooms new recruits to grow quickly within the organization. With this HR policy and practices in place, 3M trains and develops a workforce that is not only committed to the company but also high-performing, which is aligned with company’s vision and value i.e. to satisfy customers with superior service, quality and value (3M Company Brief 2010).
Southwest Airlines invest a lot on training and encourages cross-functional training (Pate and Beaumont 2006) while Pfizer spent 14% of payroll on training and development budget (Gavin 2002) and SIA provides every staff at least 11 days training each year (Chee et al 1993). This shows how these companies strategically aligned personal development plans via their people policies that are resource-based model.
2.2 Performance & Talent Management
Performance management systems are designed to ensure every employee performs the tasks at the expected level to support the strategic business objective (Ramlall 2003). InQpharm practices transparent communication to employees about what is expected of them (InQpharm Staff Survey 2010) has helped employees to perform well in supporting business needs.
Company applies resource-based HR policy pays attention on keeping their people to establish company’s competitive advantage. This is because staff turnover is not only involving cost of hiring and training replacements, high staff turnover also impacts on company’s performance as newcomers might need time to familiarize and acclimate to the company environment and also to pick up skills (Kacmar et al. 2006).
To stay competitive in the airlines industry, Air Asia knows the important to retain and manage its pool of talent, which is rare, difficult to imitate and costly to substitute (Barney & Wright 1998). Therefore, Air Asia practices promote from within and encourage professional growth within the company so that the staff is pleased, productive and always stay ahead the business competitors. Staff at all designations in Air Asia are given training and development opportunities to help them grow and ultimately benefits Air Asia when they become confident and competent in their role in growing the airline (Howell 2009).
In 2009/2010, staff turnover in InQpharm is much higher compared to year before (approximately 20%). This could be due to lack of career growth management that did not promise professional growth as 71% of the staff thought that InQpharm doesn’t practice promotion from within but hire senior people from outside the organization (InQpharm Staff Survey 2010). This shows the importance of promotion from within to promote trust and loyalty, improve morale amongst employees and retain them eventually. InQpharm should consider commitment HR strategy which focusing on internal development. This is important because the costs incur in recruiting and
training a new employee is considerably higher compared to promoting the existing employer who is familiar with company culture, business nature and may be fully productive in the new position within days. For 3M, a loyal and productive workforce is developed through paternalistic and commitment HR policies where 3M grows and retains their people and workforce. One of these programs gives opportunity to employees to find another position within the company. Through this policy, the employees are given a sense that they are valuable and important to the company (3M 2010).
SAS, the software powerhouse manage to keep staff turnover below 4% in the highly competitive software industry that normally has approximate 20% turn over (Leonard 1999). This has enabled a stable workforce in 3M that produced a new version of its data-mining software more economically and efficiently (Bolman and Deal 2008, Leonard 1999). In this case, SAS could have successfully applied integrative HRM model that is focus on internal development and reward-effort exchange.
2.3 Benefits and Rewards
According to Lawler 1990, reward system should be designed based on the strategic agenda of the organization. By understanding the organization positioning for now and for the future, HR policy can design the reward system to provide incentives to encourage and foster behaviour, attitude and to motivate staff to increase their performance. Attractive benefits also attract and keep good people in the organization to promote high-commitment (Osterman 1995). Laursen 2002 and Laursen & Foss 2003 propose that HRM practices that emphasizing on teamwork and performance related pay has created a huge impact on innovations. The incentive offered to staff that contributes to innovation has successfully instill company’s innovativeness (Souitaris 2002). Being the largest supplier of escalators worldwide, Schindler believes only highly motivated employees lead to satisfied customer.
Therefore, it promotes the use of bonuses and incentives to reward its employees to make sure the remuneration package stay competitive according to it organization positioning (Schindler Group Human Resource Policy 2010). Profit sharing, incentive plan implementations were found correlate
positively
with
the
speed
of
product
development
and
commercialization, product quality, customer satisfaction and sales growth (Kalleberg and Moody 1994, Banker and Lee 1996).
Unlike InQpharm, many staff responded that company’s benefits package is uncompetitive and benefits system was not designed to reward and retain its staff (InQpharm Staff Survey 2010). At the growing stage, InQpharm should consider applying fit and flexibility HR policies, which rewards staff at different organizational life cycle stage. InQpharm should practice this HR policy to attract right people and also at the same time rewards its existing staff for them to stay motivate. As a company that depends a lot on innovative ideas on marketing concept and product development, the reward-effort exchange policy is important to help company achieves its goal.
2.4 HRM policies creates competitive advantage and high performance work place (HPWP)
According to Becker and Huselid 1998, HR system is one of the very important components that helps an organization becomes more effective and achieves its unique competitive advantage. HRM policies and practices are no doubt affecting both employee-level and organization-level performance via their impact on employees’ skills, ability, knowledge and motivation (Arthur 1994; Gephart and Van Buren 1996; Guest 1997; Ichniowski and Shaw 1997). It is evident that HRM policies have implications for firm performance and thus create a unique competitive advantage that is difficult to replicate (Wright et al 1994; Guest 1987; Legge 1995). MacDuffie’s 1995 found that there was a statistically significant evidence supported that bundles of HR practices are positively related to performance of staff in terms of quality and productivity. Huselid 1995 also reported that organization that practices low employee
turnover has increased organization financial performance and productivity.
2.5 HRM policies and organization change and development
With increased global competition and rapid change arise from new technology and new competitor that shortened product life cycle, the ability for a company to change and adapt quickly is critical. Recently, the challenges face due to patent expiration and competition from generic drugs has caused Pfizer focusing on managing the external environment. Pfizer changed the HR hiring policy by implementing "just in time" approach i.e. hire only the talent as it needs it so that Pfizer can respond immediately to market changes. Before this, Pfizer used to plan for next 10 years and develop talent from within for which it believed it would need (Marquez 2007). This strategic talent management to develop employee based on competencies is in line with business strategy of Pfizer in responding to external business change.
In the General Electric revolution, many workout sessions were implemented for people to learn and redefine their jobs to be prepared for the challenges of the changing business environment. This organizational change processes were led by human resource staff, integrated with the business model and strategy (Tichy and Sherman 1993). This showed that HRM policies contribute to the smooth change of organization by converting as many change agents as possible led by HR staff.
On the other hand, according to InQpharm Staff Survey 2010, there are 50 percent of the staff are in opinion that company does not have proper system to respond to the changes in external environment and job description was not updated to reflect the changing need of business conditions. As InQpharm is fairly young organization, many underlying problems and operations issues have arisen due to its fast growing rate. In addition, there are some unforeseen circumstances on regulation and deregulation that might affect company’s operations. Therefore, it is crucial for InQpharm to employ the right
people to implement appropriate system to handle change effectively.
2.6 HRM and business strategies in globalization and de-globalization business world
Globalization represents the free flow of information technology and human resources across nations resulting a dynamic, rapid changing and competitive business environment. Globalization of business diffuses HRM practices from Western business to Asia countries such as Vietnam (Nguyen 2003) and China (Chiu 2003). HR policies and practices are increasingly affected by different cultures globally. The set of skills required to achieve success in a highly competitive global marketplace has changed and traditional pools of candidates hired and developed in the organization might no longer meeting the expectation of global organizations (Chen 2009). Therefore, it is critical for company to respond to the organizational strategic change in the globalization era through its competitive HR policies and practices since organization competitive advantage depend largely on its ability in exploiting human resources effectively.
On the other hand, Chen 2009 has recently highlighted the HR implication in upcoming de-globalization environment. According to Chen 2009, deglobalization would bring about an uncertain business environment (customer, supplier, product, competition and technology uncertainties) and causing shortage of
workforce,
especially the
skilled
employees.
Therefore,
organizational agility is imperative to deal with this uncertainty, which demands strategic flexibility and organizational learning ability. A continuous rethinking of current business strategic actions, organization structure, nature of uncertainties in business environment is needed to support organization change and adaptation. Concurrent with the HR activities that promote the new strategies, an organization would be able to compete in de-globalization environment. Figure 4 shows the implications for HR policies and practices in promoting agile organization.
Figure 4 implications for HR policies and practices in promoting agile organization in facing de-globalization business environment (Chen 2009)
3. Arguments on the appropriateness to link business strategies and
HRM policies
There are a few researchers questioned about the logical and linear relationship between organization business strategy and HRM strategy and policies (Monks & McMackin 2001). According to Legge 1995, aligning business strategy and HR strategy is not logic as managerial behaviour could be uncoordinated, fragmented and ad hoc. The interpretations and implementations
of
HR
practice
that
dominate
traditional
business
arrangements may be unfavorable to achieve a coherent and sound HR system. There are political aspects on highly competitive strategic decisionmaking process where managers tend to compete fiercely for resources, status and power (Purcel 1989). Therefore, due to this management milieu, strategies could cause changes in power relationships among managers that might affect effective business strategies implementation (Mintzberg et al 1998).
In addition, it is argued that contingency analysis that depend exclusively on external marketing strategies gives more focus on how a company is competing in the marketplace rather than how a company is being managed. This is directly affecting HR practices that disregard the internal operational strategies because to achieve competitiveness, it is hard to follow rigidly the HR policies and practices. For example, the strategy at Flowpack Engineering allows self-managed work teams via new technology to suits the competitive advantage of being flexible, customized product range and high quality (Bratton 1992). In this case, it doesn’t really make sense to follow what HR policies in staff-management.
Also, one strategic decision and action might at the same time undermine another strategic goal. For example, during recession, company strategy is to downsize and improve profitability. In this case, if HR strategy is fitting business strategy, it will lay off non-core employee and might create the feeling of insecurity and low morale among employees in the company. This then would not improve profitability as the low morale cause low performance and low output eventually.
4. Conclusion
To achieve the distinctive competitiveness of a company, it is important to align business strategy with HR strategy so that each employee’s competences is maintained or even improved. An organization not only needs to response to market development, but also to be proactive in order to set the market trend. In achieving this, HRM needs to ensure that it provides value that is unique and difficult to copy with appropriate system in place. Aligning HR strategy and business strategy have been proven to promote employee’s loyalty, trust, and ultimately enhance companies’ overall performance. However, it is critical to consider external conditions and internal ‘structural contradictions’ in the organization to ensure effective HRM
