Author: Chariss GarciaDate: 25/01/2015STRATEGIC 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.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.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, 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 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%).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, 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 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 purposesWorse, 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 conflictHowever, 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 If handled in a cooperative manner, it can strengthen existing relationships and heighten morale Promotes awareness of self and others Enhances personal developmentLewicki 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):

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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