Strategy and Human Resource Management

Strategy and Human Resource Management

A strategic HR Management is a pattern of decisions and actions that help employees to achieve higher performance levels. It is the process of bringing together the human resources of a company and linking it to the long-term objectives of the organization for an overall enhanced performance. It is a continuous process that has to be refined to suit the needs of every organization. It should take into account numerous external and internal factors such as the volatility of the external environment, the demand and supply conditions in the job market, availability of a talented and educated pool of workers, national Government policies and the diversity and backgrounds of the workers. These factors will largely decide the HR practices of an organization.

Globalization has proved to be more challenging for HR professionals because they have to formulate policies and strategies that will have a bearing on their diverse workforce. It is common for companies to have branches and subsidiaries all over the world and a blanket HR policy may not work well always. So, they have to come up with tailored HR policies in some instances and the choice of a global strategy or a customized one depends to a large extent on the organization, its operations and the nature of its workforce. Irrespective of the choice, this added dimension makes HR more complex and challenging on the whole.

HRM models

There are numerous Strategic HRM (SHRM) models that are followed by different organizations today. According to Bratton (2001), the process of strategic management can be divided into five major steps and they are:

The senior management identifies the goals of the organization and gives it a sense of direction.

The second step is an analysis of the organization's internal and external environment. A SWOT (Strengths, Weaknesses, Opportunities and Threats) assessment is a part of this process.

Based on the analysis, the next step is to come up with a strategy that will help the organization to reach its goals.

The implementation of the strategies constitutes the next step and this involves the use of different techniques to achieve the goals of the organization.

The final step is to evaluate the different strategies and make changes as and when needed.

Despite the HR model that is used by different organizations, the above mentioned processes are followed. A brief overview of the different SHRM models are discussed below:

Control-based model

In the control-based model, the management directs and controls the employee's role and performance. "According to this perspective, management structures and HR strategy are instruments and techniques to control all aspects of work to secure a high level of labour productivity and a corresponding level of profitability" (Bratton, 2001, p.50). This approach was based on the idea of performance and productivity by industrial sociologists who believed that close monitoring and constant pushing is needed for employees to perform better. The managers assign tasks, allocate the time and resources required for the completion of the task and monitors whether the employee completes it within the allotted time. The rewards are based on the performance of the employee and his or her completion of the allotted task.

Though it can be successful in boosting the performance of employees in the short run, this model offers little room for any form of creativity and thinking from employees and there is a high possibility for the employees to feel frustrated after a point of time. Moreover, control and hierarchy differs from organization to organization and this invariably leads to a lot of tensions between the employees and the management. The HR strategies that follow this model is likely to use monetary incentives as a way to motivate employees and help them to sustain a higher performance.

Resource-based model

The resource-based model, on the other hand, believes that employees are critical for the organization's growth and development and their knowledge, learning, creativity, understanding and culture can determine the future of the organization. According to Shields (2007, p.97), "The key to sustained competitive advantage lies in having a workforce equipped with organizationally specific knowledge, skills and abilities that are difficult if not impossible for competitors to either duplicate or poach." Also, a company can gain a sustained competitive advantage when it has human resources that are valuable, rare, difficult to imitate and are supported by the organization (VRIO).

This model is ideal for companies that operate in a rapidly changing environment because they always have to come up with new ideas and innovative ways to cope with the changes. It also makes the best use of the individual talents and uses them to the organization's advantage. The human resources feel recognized and happy and this motivates them to work harder, thereby leading to a higher performance.

Integrative model

Bamberger and Meshoulam (2000) integrate the control-based and resource-based models to come up with a new approach that combines the two. They believed that both the models constitute the ends of a spectrum and they came up with an approach that provided a mid-point for these two models. The two main pillars of this theory are acquisition and development and locus of control. The acquisition and development aspect is about providing the right training for employees within the organization so that their performance is superior. On the other hand, organizations can also buy high-quality talent from the labor market so that the overall performance of the company is high. Locus of control, on the other hand, is about monitoring employees by creating a sense of belonging and mutual trust and making the employees feel responsible for their own high performance. The HR strategies in this model will focus on creating the mutual trust so that performance comes automatically. The rewards are internal promotions that aim to help employees to stay with the company for longer periods of time.

There are four variations of this model and these can be viewed as the four quadrants with locus of control on the y-axis and the acquisition policy on the x-axis. The commitment HR strategy is based on high locus of control and internal acquisition and this strategy aims to empower employees and motivate them to work towards promotions and rewards. The traditional HR strategy follows an external acquisition policy with low locus of control and the collaborate strategy is about outsourcing work to external consultants and monitoring their performance based on their end result or outcome of their efforts. The final strategy is the paternalistic strategy which has a low locus of control and internal acquisitions. In this strategy, the company offers internal promotions for their compliance with the established processes and work tasks (Bratton, 2001). Bamberger and Mesoulam (2000) suggest that most North American companies follow the traditional or the commitment HR strategy.

Case studies

UC, Berkeley

The University of California, Berkeley is one of the top educational institutions in the world with the highest number of distinguished graduate programs in the U.S. Located in the San Francisco Bay Area, this institution offers more than 300 graduate and undergraduate degree programs across various disciplines.

Such a mammoth university requires a large number of teaching and non-teaching staff and many of these employees come from diverse backgrounds. According to the HR department at UC Berkeley, women constitute 60% of the workforce while non-whites account for 43% of its total employees. As an organization, UC Berkeley has to provide child care, health care, disability payments, flexible work schedules and so on.

To cope with this, the university lays down the skills and competencies required by employees to work effectively in a diverse environment and employees are recruited based on the presence of these skills. The HR department ensures that all its recruiters use good faith without any form of bias while recruiting minorities and women. Besides the skills required for the job, they also focus on the transferable skills and prior experience of the applicants. The interview process includes a diverse panel to eliminate bias and to have different perspectives of the applicants so that the right candidate can be identified unanimously. Finally, there is an understanding of the cultural differences so that everyone is cordial and respectful of others. This is a part of their organization's culture and this makes it easy for the university to cope with diversity (Human Resources at UC Berkeley, 2010).

This organization uses the integrative approach model and the HR strategies revolve around helping the employee to generate a mutual trust and understanding. Moreover, the employees are smoothly integrated into the organization and they become responsible for their performance. There is an overall sense of belonging with the university and it gives employees pride to be a part of UC Berkely. All this has a positive impact on their performance.

Novo Nordisk

Novo Nordisk is a company based in Denmark and is a world leader in diabetes care. It has international production facilities in seven countries around the world and has a global workforce of about 29,000 people. It also markets its products in 179 different countries, making it one of the top 100 companies in the world (Novo Nordisk Annual report, 2011). In 2004, it established its operations in Mexico to cash in on the high rate of diabetes in this country. Diabetes is responsible for 13 out of every 100 deaths in Mexico and Novo Nordisk expanded into this Latin American market. It also encompassed Mexico as part of its global campaign and its representatives went to schools and villages to spread awareness about the disease and the ways and means to cope with it.

The HR system that was implemented in Mexico was different from the one that existed in Denmark and this was mainly due to the differences in culture, work attitude of the people and national factors that have a profound impact on the employment benefits of the workers. For example, in Denmark, every worker gets to participate in the decision making process. This is a part of the Danish culture and comes from the long-standing democracy and freedom that has been a part of this society for many centuries. In Mexico, the same participative process did not have the same results because it took way too long for decision-making and some of the workers believed that they are better off following instructions rather than contributing to any important decisions of the company. Also, in Mexico, people are used to working under a boss who makes all the decisions for them and a boss will always remain the highest form of authority for the Mexican workers (Davilla, 2009).

Another significant difference was in regards to the freedom given to the employees. In Denmark, employees had flexible working hours and most of them had the option of working from home because of the superior technology available in Denmark like non-stop electricity and Internet connection. Mexico is still grappling with infrastructure problems and there are frequent power cuts and Internet outages and this significantly reduces the productivity of workers. Yet another aspect is the quality of life and the work-life balance that is available in the two societies. In Denmark, workers work for the stipulated eight hours a day and enjoy the rest of their leisure time with their family and friends. On the hand, Mexicans are used to working long hours that they hardly have any time for anything else other than work. So, Novo Nordisk had to come up with the challenging aspect of catering to the needs of its Mexican employees which was very different from the Danish culture and environment.

This difference in the national policies and infrastructure, culture and mindset of the workers in the two countries necessitated for a different HR policy for each country because a blanket HR policy encompassing the entire global workforce was expected to be a complete failure. So, Novo Nordisk was forced to modify its HR strategies and policies to meet these differences in Mexico.

The HR system of Novo Nordisk, Mexico incorporated a lot of its recruitment and training policies that were in vogue in Denmark and only altered a few aspects to meet the needs of their Mexican workforce. The staffing process started with an online psychological test and the interview consisted of a panel of experts who questioned the candidate without any form of bias or discrimination. After the selection, employees were given an orientation of the company's policies and they were given responsibility for their career growth and development. They were provided with the necessary on-the-job training and there was no discrimination or favoritism within the company. Many Mexicans are used to a fairly high degree of favoritism within the organization and this proved to be refreshing change for them. Also, employees were given the choice to move to any part of the company's worldwide operations (Davilla, 2009).

The reward system that has a direct impact on the HR-performance link was one of the most competitive in the Mexican labor market. Also, all employees had the right to have access to productivity bonus, irrespective of their position or hierarchy within the organization. In Mexico, it is rare for companies to have a bonus system and this motivated employees to work harder. Also, they have a sense of pride because they are working for a company that offers drugs to people with diabetes. There is a personal connection for most Mexican employees because they know at least one person suffering from diabetes and they feel that they are working toward making a positive difference in their life. Another HR-performance link for the Mexican employees is their higher quality of life that is offered by this firm. Novo Nordisk ensures that its employees have a healthy work-life balance and they are not asked to work for unreasonable works through the week. All these HR strategies have created a sense of pride and belonging among the employees and they want to contribute to the growth of their organization.

The HR model used in Novo Nordisk, Mexico is the integrative model developed by Bamberger and Meshoulam in 2000. The firm follows the commitment strategy where the locus of control is high and employees are held responsible for their actions and progress in the work environment. The acquisition aspect is internal, in the sense, the right employees are given a chance to move ahead by way of promotions and this also acts as a catalyst for the improved performance from employees.

However, there are problems associated with this approach. The organization makes it possible for their employees to move freely within the worldwide operations of Novo Nordisk. Let us assume for example that a bunch of Mexican employees want to move to Danish operations of the company and in such a case, they will have to follow the HR policies that are practiced in Denmark. This is likely to be different from the ones they are used to in Mexico and this can prove to be a challenge. The HR managers should take additional care to ensure that these employees fit into a different HR strategy and it continues to motivate them to deliver the same high performance. It is also important that the employees do not feel discriminated or neglected at any time because this will have a direct bearing on their performance.

The migration of Novo Nordisk employees from one country to another is a classic example of the challenge facing HR managers around the world today. While a global HR strategy may make it easy to implement policies especially when the workforce is diverse, it is also difficult to customize to meet the cultural differences and mindsets of people and societies around the world. On the other hand, having a strategy that works well only for a particular country restricts the migration of workers from one part of the company's operations to the other and requires additional interventions and policies to ensure that employees are always motivated. In this case, Novo Nordisk follows the second option where their HR policies are customized for each country and the HR personnel take care of their foreign employees and help them to fit into the new HR policy without having any negative influence on their performance.

IBM

International Business Machines (IBM) is a leader in the world of technology and sells a wide range of hardware, software and consulting solutions to individuals and businesses around the world. Founded in 1911 by Thomas Watson, this company has been ranked the seventh most profitable company in the U.S. In 2011 by the Fortune magazine. It has the most number of patents in the U.S. with nine research centers around the world (CNN Money, 2011).