Integration of HR Strategy with Business Strategy Can Lead to Organizational Effectiveness - Essay Example

HRM Assignment Name Institution HRM Assignment How integration of HR strategy with business strategy can lead to organizational effectiveness In the past, majority of the organizations have been observing the Human Resources department to only perform only the administrative functions (Baker, 1999, p.54). In so doing, HR has been ignoring other functions such aligning human resource strategy with business strategy. The traditional role of the HR has isolated HR department with the rest of organization. However, Darwish and Sing (2013, p.675) stated that the new concept, SHRM has given HR departments more functions which entail flexible management and use of the human resources to realize the goals of the organization, and consequently assist it gain a competitive edge. Darwish and Singh (2013, p.675) posited that SHRM is certainly one of the significant concepts in management and business today. They went further to argue that if HRM is to contribute to the effectiveness of organizations, it needs to be strategic, and HR strategy needs to be integrated with business strategy. Therefore, this essay will discuss how integration of HR strategy with business strategy can lead to organizational effectiveness. To put this discussion into perspective, the essay will define describe both the functions of HRM and SHRM, and outline HR strategy and business strategy. The conventional functions of HRM have been covering an array of areas such as selection, recruitment, workforce planning, training and development, job analysis and design, benefits and compensation, and performance appraisal (Becker & Huselid, 2001). However, these are just normal functions of the HR which if not managed properly, the organization might just remain the same. The development of strategic human resource management has given HR a new life and calls for integration of HR strategies with business strategies for organizational effectiveness. In SHRM, human resource managers are urged to act as strategy architect who views employees as “strategic resources” which can be used to create competitive advantage (Werber & DeMarie, 2005, p.249). This is the first step to aligning HR strategies to business strategies. The competition in the market requires the organization forges ahead as one entity and formidable force. The reasoning implies that no single department is isolated from the rest such as the way it has been happening with human resource in the past. According to Robinson, Pearce and Mital (2008, p.63), business strategy is aimed at gaining competitive advantage; this mean the company is better in terms of growth and management of environmental factors. On the other hand, HR strategy is the strategic management of people in the organization to achieve desired goals (Stone, 2013). An alignment of the HR strategy and business strategy therefore results to effectiveness of organization. Most literatures does not separate business strategies and HR strategies but rather provides general strategies such as growth, retrenchment, stability, a mixture of retrenchment, growth and stability, and international strategies. These strategies look more of business strategies than HR strategies. Therefore, this essay provides that when HR resource functions are managed strategically, they can be used as HR strategies and be aligned with business strategies to attain organizational effectiveness (Fabi, Raymond & Lacoursière, 2009, p.17). Therefore, in addition to other few HR strategies like manufacturing and marketing that has been determined, we can have strategic human resource planning, strategic training, strategic job analysis and design, strategic performance evaluation and strategic compensation (Robinson, Pearce & Mital, 2008, p.34). Since it is the people who set strategies which give the organization an advantage over its competitors, Hill and ‎ Jones (2007) argued that managers has to embrace a strategic mindset in managing people. Strategy in this perspective means defining the direction where an organization aims to move and creating the framework or platform for the action to reach there (Stone, 2013). The employees who are also the stakeholders must be incorporated into the strategy since they are directly affected by the operations of the organization. Strategies are people-driven, and how people are managed determines the effectiveness of an organization (Teena & Sanjay, 2014). Therefore, HR department cannot separate itself from the rest of organization or just perform administrative functions but align its strategies with overall business strategies of the organization. For instance, the business strategy of the company might be retrenchment of some employees through downsizing, shutting of branch operations or re-engineering so as to reduce the cost of operation so as to increase profits (Hill & ‎ Jones, 2007). The strategy affects even the human resource department because they will get the complaints from the staff. In addition, it might affect the morale of the remaining employees. Aligning HR strategies with the business strategy will enable the HR department to know in advance about the planned retrenchment and communicate the matter earlier (Hill & ‎ Jones, 2007). Advance communication gives the employees’ time to prepare psychologically for retrenchment. Furthermore, it will reduce lawsuits on the organization. Other business strategies can be growth into international markets or stability (Stone, 2013). Growth strategies can be in form of mergers and acquisition, joint ventures or direct foreign investment. As a result of growth, some employees might be sent to work in other countries they are not a familiar with hence affecting their performance. An issue that manifests itself here is that HR strategies are more of internal environment (organizational focus) while business strategy focuses on external environment (external context) (Fabi, Raymond & Lacoursière, 2009, p.15). Therefore, for an organization to perform effectively, both internal and external environment must be aligned. If HR has not aligned their strategies with those of top managers, they would be deemed ineffective. In addition, the business strategy of the organization can be to ensure stability. The aim of stability strategy is to maintain status quo due to the fact that the company is performing well (Stone, 2013). The top management could be reasoning that for organization to continue with further growth they need to maintain the existing employees. Contrarily, HR could be thinking of hiring more experienced staff to consolidate the growth. The state of confusion could result due to no alignment between the HR strategy and business strategy. Fabi, Raymond and& Lacoursière, (2009, p.11) claimed that it is a confirmation that different forms of business strategies generate a need for a certain HR strategies. Therefore, it is vital HR create strategies that match the master business strategies of the organization to enable a suitable fit. The practice makes HR functions to support the general business strategies and goals of the organization (Werber & DeMar, 2005, p.257). When there is no strategic alignment, frustration, inefficiencies and confusion result. Strategic human resource planning can be aligned with business strategies to achieve effectiveness of organizations (Teena & Sanjay, 2014). Human resource planning is the practice of identifying the necessity and availability of Human resource to make the organization realize its goals. The necessity of HR planning is to decrease the considerable lead time which exist between job requirement and hiring a qualified individual to fill up such need. To match Strategic human resource planning with business strategy, the HR needs to understand the job market and how it can align the recruitment needs of the organization (Fabi, Raymond & Lacoursière, 2009, p.10). Understanding the recruitment needs makes human resource planners to bring the right and qualified individuals who can be integrated well into the structure and culture of the company. Other departments need to provide the job needs and requirement to the HR department for HR planners to tailor them into their ads (Stone, 2013). At the time of recruitment, Human Resource Department needs to look for the most suitable individuals that specifically match the job requirement and also versatile due to changes in the business environment (Brauns, 2013, p. 1407). Human resource planning is today seen a strategic process which has since rose just from traditional staffing and now leans towards succession planning. Therefore, it can be aligned with business strategies to handle various contingencies which then influence organizational operations success. Werber and DeMarie (2005, p.253) posited that strategic Human resource planning which is aligned with business strategic planning enhances talent management and succession planning of the human resource. In the process, the company will not lack expertise needed in different areas because they have planned well for talent management now and in future. It means there are always employees who can replace retrenched employees and those who have retired. In other words, talent channel is maintained (Stone, 2013). An organization can also align HR strategy and business strategy through strategic recruitment and selection (Teena & Sanjay, 2014). In normally cases, the major responsibility of hiring is to identify the right candidate for the job. In the past, recruitment has been seen as any other traditional role of HR with the focus of individual-job fit (Brauns, 2013, p. 1406). However, with entrenchment of the new concept SHRM, the focus has change to an individual-organization fit. In that way, the candidates are now picked against organization business strategy as opposed to job-specific requirement. Presently, selecting the right staff is certainly critical for the development of strategic SHRM system (Robinson, Pearce & Mital, 2008, p.15). Therefore, strategic recruitment can be described as the strategic alignment of recruitment with business goals in order that strategic needs of an organization be converted into a suitable recruitment specification. The situation, the alignment of an applicant’s goal and the business’s goal matches and create “best fit”. The effectiveness of the organization is created when recruited staffs understand the market and combine business strategies and his expertise to attain the set goals (Baker, 1999, p.57). Effectiveness of the organization can be attained by aligning strategic training with business strategies including such as growth (Stone, 2013). The companies which perform well are highly recognizing the role of training and development in improving the competitive advantage. Experts hold that Training and development becomes essential for the organization if its intention and value matches the business strategy. According to Brauns (2013, p.1406), training and development implies to the practice of impacting knowledge, competence and skills on people to be able to do a specific task. Major business challenges need that the HR departments thoughtfully research about their position in the market and determine knowledge, competence and skills required to be effective (Becker& Huselid, 2001). By understanding what the market needs, the HR can create strategic training which make employees competence of delivering based on the business strategy. Darwish and Singh (2013, p.683) stated that by align strategic training to business strategies, as opposed an HR-based, ad hoc one and unplanned training, it becomes business oriented training which its results can be measured based on sales and growth of the organization. For example, the HR strategy can be to training on cultural awareness after observing organization conflicts and high rate of turnover. On the other hand, business strategy can be to grow into foreign market to increase its competitive advantage (Baker, 1999, p.55). It is always the wish of companies to have employees who can adapt to the foreign markets so as to create organization successful. Aligning the HR strategy with business strategy based on the two perspectives can therefore reduce organization conflicts, rate of turnover and enhance organizational effectiveness (Werber & DeMarie, 2005, p.249). In conclusion, the research in this paper has proved that aligning HR strategies and business strategies are vital endeavor for all organizations. Researches strongly support the practice of alignment of the strategies, and argue that it creates competitive advantage to the organization. The essay has found out that alignment can be done in areas such as selection, recruitment, workforce planning, training and development, job analysis and design, benefits and compensation, and performance appraisal. The alignment creates the best fit for organization operates as one unit. In addition, the essay has found out the when the best fit between internal organization and external context is achieved the organization can create a favorable organization culture and structure which reduces the rate of employees turnover and conflicts. The essay therefore challenges contemporary managers to align HR strategies and business strategies if they want to effectively operate in international markets. References Baker, D. (1999). Strategic human resource management: performance, alignment, management. Librarian Career Development, 7 (5), 51 – 63. Brauns, M. (2013). .Aligning Strategic Human Resource Management to Human Resources, Performance and Reward. International Business & Economics Research Journal , 12(11), 1405-1410. Becker, B., & Huselid, M. (2001). The Strategic Impact of HR. Harvard Business School. Darwish, T.K., & Singh, S. (2013). Does strategic human resource involvement and devolvement enhance organizational performance? International Journal of Manpower 34(6), 674-692. Fabi, B., Raymond, L., & Lacoursière, R. (2009). Strategic alignment of HRM practices in manufacturing SMEs: a Gestalts perspective. Journal of Small Business and Enterprise Development, 16(1), 7 – 25. Hill, C & ‎ Jones, G. (2007). Strategic Management: An Integrated Approach. Oxford University Press. Robinson,R., Pearce,J., & Mital, A.(2008). Strategic Management: Formulation, Implementation and Control. New Delhi; McGraw Hill Education. Stone, R.J. (2013). Managing Human Resources (4th ed.). Milton, QLD: John Wiley & Sons (Australia), Ltd. ISBN 9780 730 30255 1. Teena, B & Sanjay, S. (2014). SHRM: alignment of HR function with business strategy. Strategic HR Review, 13(4/5). Werber,J.,& DeMarie,S. (2005). Aligning Strategic HRM and Person-Environment Fit. Human Resource Review 15, 247-267. Read More