BOLA: Business Strategy and HRM

Business Strategy and HRM

Resource-based theory would have it that, firms are collections of capabilities which must be matched with market needs. This is central to strategic management. The strategy of a firm is a match between what it can do (internal capabilities) and external relationships. Added value (a measure of the business's success) is created by competitive advantage based on distinctive capabilities. Few capabilities are distinctive, but effective systems of regulation and relationships within the firm that are based on mutual trust and committment is one area.

For personnel/HRM specialists to be valued members of the strategic manager group they must be able to offer expertise - value added - which will contribute to the development and implementation of the firm's strategic policies and programmes. If they contribute such expertise and if this is valued by the senior management of a firm - then personnel will be accepted into the strategic decision-making circle. This essentially is a membership and power/influence issue.

What does the firm need?

the right people
in the right place
at the right time
at the right cost.

The labour factor of production is a cost and the commercial, market-forces argument is that it must give value for money. Many propositions may now stem from such a position.

the firm grows and prospers with the people it has or it can get hold of these at the time it needs them
the behaviour of its members should not jeopardy the firm. Individuality is important but loose, unco-ordinated collections of individuals who just go their own way and do not support each other or demonstrate trust and loyalty - are unlike to work so well
people in the organisation must want to be members and want to perform for it with effort and creative ingenuity.
The organisation in return (part of the social and economic exchange) needs to value its members are their contribution. If it does not demonstrate such value - materially and socially - then members will become detached.

Strategy requires long-term goals, broad programmes and allocations designed to achieve these. Each programme represents a policy for action. Funds, assets and people must be allocated or assigned to programmes. Of course every time we employ someone - this has to be resourced.

Strategic plans are

typically informed by the organisation's mission and purposes - what those who own the business want to achieve. Owners can be sole proprietors, partners, majority shareholders, instititional shareholders, small shareholders. The stakeholder notion is important - for suppliers, collaborating firms, government, the local community and of course employees - are all stakeholders.
developed in response to the external and internal influences that the organisation finds itself subject to.

Exercise

So what then are examples of human resource strategies and programmes?

containment of trade union influence?
recruiting the best
keeping costs down. Becoming flexible and lean but empowering our crew with the best training, rewards and equipment to do the job
developing a culture within the organisation which enables each member to contribute creatively, competitively with their best effort and ability
becoming a learning organisation
training everyone to be competent in their present job at a level of mastery and to extend beyond this for continued occupational development - the future (but not so far intothe future that the firm wll never be able to take advantage of it!)
down-sizing. Changing the relationship between the organisation and those which provide it with services - buy in rather than employ our own
linking rewards to measured performances
staying clear of the pitfalls offered by employment law.
being an equal opportunities employer through our behaviour rather than imposed and expensive systems of control
make sure that when we employ people we do so in ways that are systematic, reliable, cost effective and properly administered
to be seen by our employees and others to be a good employer

How do you feel about these statements? Which ones are straight-forward? Which ones are contradictory?

HRM Contradictions and Dilemmas

Many influences are outside the control of an organisation's managers. Government may pass laws. A firm's products and services may be under pressure from international competition. The industry may be in decline. The economy may be in turmoil. Key staff may leave. Responses are however needed to meet these contingencies. The organisation has to cope/adapt to opportunites and threats if it is to retain its position and prosper. Thus we can speak of contingency management.

Assignment

How much of personnel management/HRM involves risk management at

the strategic level
the operational level?

HRM - a secondary consideration?

The business strategies which take precedence when boards of companies meet are:

finance
company competitiveness and positioning
product and market development

Matters relating to the labour force may be lower down on the agenda rather than being front running items - unless they are cost cutting items. Yet managers may endeavour to define HRM strategies particularly where there is a belief that investment in the quality and enthusiasm of the work force will add to competitiveness, quality and overall business performance.

The Form of HRM Strategies

- are represented by management's committments to objectives, policies and practices relating to the people they employ. The strategies (see Mintzberg for discussion of "strategy") may be

formally defined or informal
unwritten and exemplified by how "the management" speak and act.
volatile, subject to individual whim
set aside when the going gets rough or a new fashion emerges.

If HRM strategy is defined and documented this is likely to stem from deliberate analysis and a desire to make such policies/programmes integral to the realisation of goals defined by other strategies - financial, production, customer and marketing etc. With strong articulation of developmental, employment strategies the organisation emphasises that without these, the achievement of business objectives across all its strategic programmes may be vulnerable.

Assignment

If HRM specialists provide services to the organisation in each of the following areas

staff planning
recruitment
training and development
terms and conditions of employment, labour law administration and support
rewards policy management
industrial relations services
employee welfare and support services

What are the strategic contributions of each of these services? Give examples.

HRM and the Unitary Perspective

HRM committments are evident in recruitment methods, employee induction, boss-subordinate and team relationships, reward methods, training, job mentoring and concern for competence development and sharing of values. This glowing picture reflects the propositions of McGregor when he defined his Theory Y model of managerial action (integration of the needs of the individual with the needs of the organisation). The sentiments are clearly

unitary albeit that management must have the policies and practices in place that minimise the potential that exists for disruption and conflict (pluralism).
The HRM organisation is represented as a place of collaboration and harmony, team-working and joint commitment. Everybody is loyal, accepting of managerial vision and direction and working together to achieve the same ends.
even though a plurality of interests may show itself, managerial prerogative means that managers (the representatives of the owners) take charge and make the decisions. So unity (or containment) must be worked for and invested in. Management's right to manage requires
- professionalism,
- sensitivity to the needs of others
- a committment to ethical, socially proper behaviour.
Employees need to be invested in, informed, communicated with, consulted and morally involved in the business (empowered). They are not just members who are pushed into doing something they do not want to do.
a far-sighted employer will invest to enhance the employer-employee relationship. Employees want rewards - material and non-material - that satisfy.

These HRM propositions may cast light on decision-making, the characteristics of HRM policies and practice and their contradictions.

The Separated Employer

Of course an employer can have separated, possibly exploitative relationships with employees. A hire and fire approach is typical where an employer only employs casuals or treats employees as horse-power showing no interest in them as people. Such an employer might regard their obligation to employees as satisfied once they are paid (a cash nexus) and when minimum necessary conditions are provided and no more.

Assignment

In the light of HRM propositions, discuss the trend for keeping personnel services to a bare minimum and out-sourcing some services. What are the pros and cons of employing someone as an in-house resource as opposed to buying in the same services.

HRM Statements and Lip-service

Management's actions may belie what they say their HRM strategy is. The danger is that declarations about human resource intentions are only lip-service statements. Employees may see a disparity between what is said and managerial action/ inaction. Compare programmes promoting training and a participative company culture when in the same breath redundancies are anticipated associated with down-sizing.

Strategy and Tactics, Maintenance and Improvement

Strategic management involves ambiguity, the non-routine, complexity, organisation wide implications and significant rather than small-scale change. Circumstances are driven by environmental pressure, imposed changes and perceived positions.

Strategic needs must be analysed, objectives agreed and translated into everyday programmes which devolve to line managers for implementation. They must be communicated, resourced and controlled. Information systems are needed with staff involved and committed.

Yet if market turbulence and competitive forces are so intense, policy and programme forming and reforming can be so rapid as to make tactical and strategic levels confused. Having good feedback about progress of tactical (operational) programmes is essential. Programme results must be evaluated and components adjusted. As time frames become shorter, plans may only be half completed before a rehash or U-turn is needed. So the best strategies may be outlines only with objectives and specific programmes changing to fit operational circumstances.

A strategy (the game plan) will involve particular tactics - their form mostly represented by operational programmes and projects - DOING. Departmental arrangements and programmes of work are manifestation of tactics. Each business unit has its budget i.e. allocations of money and staff organised to secure day-by-day results.

Tactics can be maintenance tactics (keep the thing going) or improvement tactics. Maintenance - so that performance does not slide/atrophy - requires organising and resourcing. An operational unit may need to address a number of projects (tactics for improvement). A sales campaign, market research project, a training course or quality control programme are examples. A new operational unit may need to be established. Its project or projects represent tactics that contribute to the strategic objectives of the business.

One such programme to drive both maintenance (market entry strategy) and improvement (order-winning strategy) might be to secure ISO 9000 accreditation.

The ISO 9000 Organisation

In a smaller organisation, business and HRM strategy may be indistinguishable however for large and small organisations a commitment to quality may be defined by the corporate missionand implemented via ISO 9000 accreditation (the tactical programme).

Other tactics may be in support: employee training and communications, marketing promotions and investment in better working methods and equipment. The organisation may forego short-term profits and even seek further capital funds to secure ISO accreditation

The ISO requirements may spread through the firm as policy, procedure and controlling mechanisms. Even say-to day operations in the personnel section may be defined by ISO 9000 specifications of standards and procedures e.g. governing wage administration, delivery of training services, excellence in recruiting or staff communication and consultation.

Assignments

Explain the type of strategic concerns and objectives that may exist for human resource management in TWO of the following organisations. What form might strategic programmes of policy and action take (give examples).
- a small entrepreneurial business
- a UK owned multi-national
- a foreign owned multi-national with UK operations
- a secondary school
- a National Health hospital trust
- a local authority
Use annual reports and press articles to write a brief summary of the strategic development and current strategic position of a selected UK employing organisation from a human resource management perspective.