Module Code: ILP 303
Module Title: Strategic Human Resource Management
Date Due: 13 July 2009
Result: 35/100
Result: 35/100
1.0 Introduction
The purpose at this paper is to examine the extent to which Strategic Human Resource Management Theory and Practice can help organisations during periods of significant economic recessions.
According to Thomas (2009) "recession" is a word frequently used to illustrate modern economic downturns. Economic recession is a period of negative growth in a country’s economy (Capelle, 2009). Along with the National Bureau of Economic Research, economic recession is two following quarters of turn down in real Gross Domestic Product (GDP) so that the minimum length for a recession is by definition only six months (William, 2002).
According to Capelle (2009) the economic recession will cause the unemployment rate will increase, jobs opportunities decreases, the real estate market will stagnation or decline. Consistent with Thomas (2009) the economic recession also will cause the inflation, beside that the profit of investment, employment and corporate also will decrease.
The unemployment rate in the Euro zone and United States are more than 7 percent in the end of 2008, and it will be close to double-digit reductions in employment in 2009. The unemployment rates in the BRIC countries (According to Wilson, 2003 and Economic.com (2008) in economics, BRIC or BRIC is the acronym refers to the fast-growing developing economies of Brazil, Russia, India and China) and other emerging markets will also increase. The declining of the global labour market affects a wide range of industries and occupations. Workers face enormous job cuts. Beside that the managers and engineers who work in high-growth companies also confront growing uncertainty. Impelled by falling output and decreasing revenues, the managers of company have a strong temptation to divert attention from the global war for talent to reduce the labour force (Bartlett, 2009).
According to Cakar et al (2003) the human resources system is labour relations and personnel management perspectives under four human resource categories: which are the impact of staff, human resource flow, reward, and the system. A map shows the territory of the human resources management Human resources management is closely related to both the external environment (such as, stakeholder interests) and the internal organization (such as, situational factors).
Figure 1: Human Resource System
(Source: Cakar et al, 2003)
The internal environment and external environment also can influence employees’ performance. The enormous job cuts will let the employees feel worriment and it will affect their performance. Beside that the inflation, stagnation or decline in real estate market and other impact of economic recessions also will effect employees’ emotion and performance.
2.0 The Harvard model of human resource management
There are many model does can be used to solve the recession problem Bratton and Gold (2007) suggest five major models of Human Resource Management, there are
1. The Fombrum, Tichy and Devanna model of human resource management,
2. The Harvard model of human resource management,
3. The Guest model of human resource management,
4. The Warwick model of human resource management and
5. The Storey model of human resource management.
In this case, I will use The Harvard model of human resource management to solve the impact of economic recessions.
The Harvard model of human resource management is based on the belief that the problems of historical personnel management can be solved: When general management of staff development a viewpoint of how they wish to see employees participation and the development by enterprise, and what human resources management policies and practices that may achieve these goals. There is no a central philosophy or a strategic vision - which can only be provide to the general managers - human resource management is likely to remain a set of independent activities, each guideline by their own practice traditional (Armstrong, 2006).
The Harvard school suggested that HRM had two performance characteristics. There are line managers to accept more responsibility to ensure the competitiveness of the strategic adjustment and personnel policy and employees has the duty of setting policies that manage how employee activities are developed and implemented in ways that make them more mutually underpinning (Armstrong, 2006).
Consistent with Boxall (1992) the advantages of The Harvard model of human resource management are contains a series of recognition of the interests of stakeholders; recognizes the significance of ‘trade-offs’, either openly or unreservedly, between the interests of holder and those of employees as well as between various interest groups; expansion the background of human resources management, including 'the impact of staff, organization of work and issues related to the regulatory style; complete the wide-ranging implications on management's choice of strategy, suggesting the meshing of the mutually products of the market and the social cultural logic; emphasizes on strategic choice – it is not motivated by situational or environmental decision.
The analytical framework of the ‘Harvard model’ provided by Beer et al (1984) consists of six basic components:
1. Situational factors
2. Stakeholder interests
3. Human resource management policy choice
4. Human resource management outcome
5. Long-term consequences
6. A feedback loop through which the outputs flow directly into the organization and to the stakeholders.
Figure 2: The Harvard model of HRM
(Source: Beer et al (1984))
2.1 Situational factors
According to Beer et al (1984) the workforce characteristics, business strategy and conditions, management philosophy, labour market, unions, task technology and laws and societal values make up the internal and external environment. The situational factors can constraint the human resource management policy‘s formation. Human resource management policy also can influence the situational factors.
The workforce characteristics are the characteristics of the employees. The United States companies distinguish their worker according to blue-collar employees, white- collar employees, professionals and managers. The human resource management policies must design different policy for different employee groups, because of the characteristics of each employee groups are difference (Beer et al, 1984).
In a period of recession the professionals and manager will find a way to overcome the impact of recessions. The blue-collar employees and white-collar employees will worry of losing their job. Therefore, they will work harder and willing to have a reduced salary.
An organization’s business strategy must match with it competitive environment. For example, a manufacturing company stays in an environment which is highly competitive and the cost-effectiveness and production efficiency is its critical success factor, then the manufacturing company need to develop a business strategy which can encourage it employees to save and reduce cost (Beer et al, 1984).
Management philosophy is the expressed or impressed concept of a critical manager for the organization about what is the organization in society's role, how it should operate and how it should treat and handle their employees (Beer et al, 1984). According to Expressions of Soul.com (2003) when Roberto Goizueta became CEO of Coca-Cola Company in the last century 80's, he is faced with intense competition with Pepsi. Goizueta found out that the competitor of Coca-cola was not Pepsi, it was the water, tea, coffee, milk and fruit juices because it market share is bigger than Coca-cola. In order to get a larger share of that market, Goizueta put up vending machines at every street corner. Finally the market share of Coca-cola is bigger than Pepsi. This is an example of a strategic decision.
Labour market is about is that an organization can attract recruiters and the existing employees. If the employees discover that the salary, working place, chance of promotion, work safety and working conditions are attractive than other company then the organization can easily get recruiters to join in and retention rate of the new existing employees also will be very high. If an organization can not attract recruiters and retain existing employees it will face employee shortage (Beer et al, 1984).
Unions protect right of workers. Task technology is the enforcement tasks and arranges equipment way (Beer et al, 1984). Laws and societal values are different in every country. Therefore the human resource management policy and practice also will be different in every country (Beer et al, 1984). In the recession period the unions will became a barrier of an organization when the organization decide to reduce employees. Therefore, an organization needs to set a win-win strategy to satisfy the employees and unions, such as voluntary separation scheme. Organization generous severance packages for departing workers can reduce employee’s dissatisfaction emotion and strengthen organization’s image.
The other way to prevent the barriers of unions is do not let the employees set up their own trade unions. According to Beer et al (1984) the International Business Machines Corp provide good welfare to their employees, their employees is very satisfied therefore they do not set up their own trade unions because it is unnecessary. Therefore organization needs to treat their employees well in normal time especially the profit year let the employees have high commitment to the organization. The employees will be willing to share the good and bad with their organization when they have high commitment to the organization.
The situational factors can manipulate the management's choice of human resources management strategy. Logically, mutually human resource management academics and practitioners will be more familiar with contextual variables included in the model because it obeys the rules to the reality of what they know: ‘the employment relationship requires a fusion of business and societal expectations’ (Boxall, 1992). In the recession period the employers and employees can share the good and bad and find a way to solve overcome the impact of recessions to let the organization survive.
In spite of the positive options for human resources during the recession, very few companies are evading the fallout of what now rate as the worst global economic crisis since the Great Depression. Thus, even strong companies are reducing their work forces (Bartlett, 2009).
Consistent with Bartlett (2009) even the powerful companies can not avoid layoffs in the current economic recession. However, good management of the process of downsizing (for example, generous severance packages for departing workers) strengthen the company's image, thereby enhancing its ability to attract talent when the economy rebounds employees.
2.2 Stakeholder interests
In accordance with Beer et al, (1984) human resource management policy choices influence by stakeholder interests. The stakeholder includes the stakeholders, management, employee groups, government, community and unions. The organization must take care and balance all interest of all there parties. If not, the organization will face problems.
The organization needs to increase the organization value or organization share value to increase the shareholder interest (Arnold, 2007). The organization needs to pay rational rewards to managers and employees to protect their interests. Beside that the organization also need to fulfill the regulations which are set by the government, community and unions (Bratton and Gold, 2007).
According to Arnold (2007) if the organization fails to fulfill stakeholders’ interest, the stakeholders will withdraw investment from the organization. The organization will lose a lot of financial resources. Beside that the shareholders may be invest in other business. It will increase the loss of the company.
If the organization fails to fulfill management and employee groups’ interest, the management and employees will resign and land a better job. According to Bratton and Gold (2007) employees are a very important capacity of an organization because the quality of the employee will directly influence the performance of an organization. In order to prevent brain drain, organization need to do something to satisfy their employees especially the exceptional employees who are loyal to the organization.
If the organization fails to fulfill government, community and unions’ interest, the organization will be accused by them. The organization will face prosecution and punishment. Beside that it also will impact the reputation of the organization.
In 2008, Jerry Yang, the former CEO of Yahoo was dismissed by the shareholder because he did not accept Microsoft takeover of Yahoo. This decision affected the Yahoo share value to drop. It damaged interest of shareholders (wewill.cn, 2008).
2.3 Human resource management policy choices
The human resource management policy choices include employee influence, human resource flow, reward systems and work system. In relation to Beer et al, (1984) the human resource management policy choice will influence human resource outcomes. The policy options made by managers will influence employees’ competence and commitment.
The employee can influence the performance of the company. Therefore, the organization needs to maintain their employees’ job satisfaction and influence the performance. The policy of the organization will influence employee satisfaction. In order to put right people in right position and make sure every employee is competent to do the jobs, the organization needs to design the requirement to each position. Besides that, a good reward system and work system also can encourage employees work better (Bratton and Gold, 2007).
Human Resources Management policy choices emphasize that management's decisions and actions of human resources management are entirely understandable. The Harvard model describes the management as a real actor can make at least some degree of unique contribution and the organization of the environmental parameters, or influencing those parameters itself over time (Beer et al. 1984).
From the cases of Jerry Yang, the Yahoo former CEO shows that the manager and employees’ decision and competence can influence company performance (wewill.cn, 2008).
According to Bartlett (2009) investment in human capital is not likely to be a high priority of the company, its survival of the threatened by the global economic downturn. But for companies with strong balance sheets and convincing business models, the economic recession presents key opportunities to strengthen their human resource management capabilities and position them for the inevitable rebound.
Along with Bartlett (2009) the organization can use the off-season to staff career development and technical training program, which in order to enhance skills and to maintain morale during difficult. At the economic recession’s period also is the opportunity to hire talented person from the downsizing at weaker enterprises to increase the own organization’s human capital based on long-term growth.
An organization also can redefine and expand the purview of the powers and responsibilities of the good staff, allowing assessing the leadership potential of individuals who may eventually occupy the organizations carrying out their duties (Bartlett, 2009).
In economic recession period manager can promote cross-divisional and cross-functional collaboration, thereby enhancing the utilization of human resources, and encourage teamwork among employees who have previously little or no contact (Bartlett, 2009).
2.4 Human resource management outcomes
The human resource management outcomes include the commitment, competence, congruence and cost-effectiveness. The goal of human resource management outcome is to achieve cost-effectiveness. In order to achieve cost-effectiveness the employees of the organization must have high commitment to the organization. Beside that the employees also must have high competence and high congruence with their job and position.
If the employees have high commitment to the organization, they will be willing to share good and bad with their organization. In line with (Bratton and Gold (2007) organization avoid to get a wrong person in a wrong position, it means organization wish the employees have competence to handle their jobs. Beside that, organization also hopes the employees can congruence their position, it means the organization wish the personality of employee can match with their position. That is because the employees only can do a job very well and happy when they are competent and congruence to their job and position. Beside that, the sense of belonging of employees to the organization is also an important element.
Commitment increase not only will increase employee loyalty to the organization and increase performance. It also can enhance the personal self-worth, dignity, mental state and capacity. High commitment means the employees will voluntarily know and understand the option of manager and give valuable feedback (Beer et al. 1984).
The organization will benefit when technical and knowledge which the organization requires had the prompt supplies. Beside that employees also will get individual value and economic welfare's progression. High competence means the employees of the organization have many skills, beside that they also can change to new position and working perspective when environment needs (Beer et al. 1984).
If the congruence is low, the management will pay a high price for the time, money and the energy. Beside that, it also will cause low confidence and low communication between employees and the management (Beer et al, 1984).
According to Beer et al (1984) cost-effectiveness is the organization’s cost of human resource, such as salary, bonus and indirect cost (for example strike, personnel adjustment and dissatisfaction).
Consistent with Bratton and Gold (2007) the human resource outcomes are high staff commitment to organizational goals and high individual performance leading to a cost-effective product or services. The basic assumption is that employees have talents that are rarely taking full advantage at work, and they show a desire to demonstrate through work experience. Therefore, the human resource management model view that organizational design should be based on theoretical assumptions inherent to McGregor’s Theory Y.
From the cases of Jerry Yang, the Yahoo former CEO shows that a organization can not achieve cost-effectiveness if the manager or employees do not have high commitment, competence and congruence, this elements (wewill.cn, 2008).
2.5 Long-term consequences
The long term consequences differentiate between three levels: individual, organizational and societal. At the individual employee level the long-term productions include the psychosomatic compensations workers obtain in trade for efforts. Improve efficiency at the organizational level to ensure the survival of the organization. In turn, at the societal level, due to take full advantage of people at work, a number of society's objectives, such as employment and growth have been obtained.
According to Beer et al (1984) a good human resources management's result may bring individual well-being, the social well-being and the organization effectiveness obtains the encouraging result.
In the recession period, all the stakeholders stand together and worked to overcome the economic recession. Thus strengthen their relationship. Beside that the good policy that the organization uses will strengthen the image of the organization and strengthen the employees to company's confidence.
2.6 A feedback loop through which the outputs flow directly into the organization and to the stakeholders.
The last component of the Harvard model is the feedback loop. As we have already discussed at above, the situational factors impact human resources management policies and choices. The human resources management policies and choices can influence the human resource outcomes. The human resource outcomes influence the long-term consequences. In contrast, however, the long-term outputs can affect the situational factors, the interests of stakeholders and human resources management policies (Beer et al, 1984). Every human resource function should be integrated with one another.
It provides a useful analysis of basic feedback in human resources management. The model also includes the contents that are the analytical (that is, the situation factors, stakeholder, strategic choices into the level of) and normative (that is, concept of promise, competency and etc) (Boxall, 1992).
3.0 Conclusions
Form the above we can see that in period of economic recession The Harvard model of human resource management can help to solve many effect.
The Harvard model’s strength is the classification of inputs and outcomes at mutually organizational and societal level, creating the basis for an assessment of relative human resource management (Boxall, 1992). Beside that the advantages of The Harvard model of human resource management also include contains a series of recognition of the interests of stakeholders; recognizes the significance of ‘trade-offs’, either openly or unreservedly, between the interests of holder and those of employees as well as between various interest groups; expansion the background of human resources management, including 'the impact of staff, organization of work and issues related to the regulatory style; complete the wide-ranging implications on management's choice of strategy, suggesting the meshing of the mutually products of the market and the social cultural logic; and emphasizes on strategic choice – it is not motivated by situational or environmental decision.
According to Guest (1997) The Harvard model’s weakness is there is no theoretical basis for a coherent human resources management to measure the relationship between the inputs, results and performance.
4.0 Recommendations
The Harvard model of human resource management is very useful to solve the problem of economic recessions. Beside this model, we also can use other models, such as the other four models that Bratton and Gold (2007) suggest:
1. The Fombrum, Tichy and Devanna model of human resource management,
2. The Guest model of human resource management,
3. The Warwick model of human resource management and
4. The Storey model of human resource management.
Beside that, I will suggest use a system which calls Motivation Maps to support The Harvard model of human resource management. According to Istileulova (2009) Motivation Maps can better manage the companies’ personnel using the most efficient human resource management models in a time of economic recession.
Motivation Maps is a descriptive map of actions for each sector or sub-sector and a mini anti-crisis program that could be united into a strategic anti-crisis program of company. It descriptive the performance not only of the whole team, and also each individual innovation at all levels which give a positive synergy of energy and motivation, all the teams in the company (Istileulova, 2009).
According to Istileulova (2009) this system has seven advantages:
1. Top managers or company owners can see a fully transparent picture of the company's performance on one-two pages’ graphs and other web initiatives proposed and found the problem, which allows a top manager to make a decision soon. In addition, it become very effective in times of economic recession, due to the employee’s initiatives transparency which helps to use the people’s ideas and innovations based on the market, science and technological factors
2. as can be seen where exactly the areas for increasing profit, reduce costs or improve quality thank indicators, common to all departments, sub-sector, and who made this contributions in this area, which greatly inspired the staff. It also provides more opportunities for the motivation, such as bonuses or promotion of employees. If this system is used only for practical management without motivation of employees, the system of Motivation Maps in this case is becoming an Operations’ Maps.
3. It allows to reducing cost. Due to the quickly exposed weaknesses or losses at all levels and select those initiatives of employees which used to be concealed, because an initiative could be lost at the lowest sub-sector’s level due to bureaucracy.
4. Due to the lack of a clear strategy, from the top management, all staff are aware of their "little strategy" via introduced seven indicators and selection of three key indicators that are clear description and measurement. Then the owner or top manager of the strategic changes in key indicators can be re-considered out of seven available applied indicators and formal approval.
5. For duplication of indicators, the similar trends must be observed on chart. For some overlap of activities that is, that are becoming apparent in accordance with the application of this system, the business processes have to be re-considered via indicators and clearly explanation.
6. Such as the rearrangement of the company's structure, indicators can be easily adjusted to achieve it, and this human resources management system of Motivation Maps allows to measuring how the new organizational structure is effective by comparing the new outcome the outcome of indicator and the old ones. It demonstrates the effectiveness of the organizational structure due to the numerical measure of all indicators.
7. The system can make a cross-check and re-examine of the results at all levels of company comparing the trends.
In the absence of external funds, the top managers can always find the resource come from internal to reduce costs and see the new opportunity in the time of the economic recession based on the Motivation Maps human resource management system (Istileulova, 2009).
Because this model is very new I would still recommend the model established Harvard model to help to reduce the effect of economic recession.
References
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