Human Resource Management's Structure Choices Versus Market Structure - Case Study Example

HRM’s structure choices versus market structure Table of Content Introduction 2 HRM and strategic choices 3 Recommendations 8 Conclusion 8 Bibliography 10 Executive summary Purpose: The key aim of this report is to examine whether Human Resource Managers (HRM) have a strategic choice given that Human Resource Management depends on strategic management and strategic management depends on markets. In addition to this, it will provide four recommendations on how Human Resource Management can align itself with strategic management by reflecting on HRM’S administrative, one-way, two-way and integrative linkage. Scope- This report will focus on examining HRM’s structure choices versus market structure. It will also provide recommendations on how HRM can align itself with strategic management. Methodology- The findings of this study will be based on the critical review of relevant literatures such as books, journal and articles. Findings - To some extent strategic choices can be determined by market structures and strategies adapted can also influence structures. However, it is possible for HRM to make strategic choices that are not necessarily influenced by market structures (Saias & Hall, 1980). Recommendations – The report recccomends that HRM can align itself with strategic management by going beyond its administrative duties and expanding into the organization’s strategy. Introduction This report seeks to examine whether Human Resource Managers (HRM) have a strategic choice given that Human Resource Management depends on strategic management and strategic management depends on markets. In addition to this, it will provide four recommendations on how Human Resource Management can align itself with strategic management by reflecting on HRM’S administrative, one-way, two-way and integrative linkage. Over the years researchers have shown increased interests in examining the relationship between the structures and the strategy of organizations. For most researchers, there is a close link between structure, strategy and environment that business or organizations operate in (Saias & Hall, 1980). According to Hyman (1987), market structures determine the strategic choices made by managements. Based on Hyman’s sentiments, it is worth questioning whether Human Resource Managers can have a strategic choice when Human Resource Management depends on strategic management and strategic management depends on the markets. Conversely, Chandler (1962) argues that structure follows strategy. Saias & Hall (1980), further note that whereas organizations may build the structure of an organization, in practice it is these structures that later on constraint the strategic choices that the management of organizations make. HRM and strategic choices Hyman’s sentiments that market structures determine the strategic choices made by managements raise questions on whether Human Resource Managers can have a strategic choice when Human Resource Management depends on strategic management and strategic management depends on the markets. Basically, Hyman implies that market structures are what influence the strategic choices made by Human Resource Managers. To some extent Hyman’s sentiments are plausible. Hyman’s sentiments are typified in how modern day organizations operate. Over time, most organizations have realigned their strategic goals and practices in order to respond to the pressure in the markets and so as to effectively maintain their competitive edge in the market. A good example is the McDonald’s Corporation. The McDonald’s corporation is a multinational company that specializes in the provision of fast food products. The company has for a long time been the world’s largest restaurant and fast food chain with restaurants in over 100 countries (Vignali 2001). The strategic choices made by the company are often dependent on market structures. Given the fact that the company operates in various parts of the world, the company has been forced to strategically adapt to market structures of local regions so as to maintain its competitive edge in the global market. For instance, in some countries the company has changed its product line and remodelled its retail space so as to appeal to the local market. Similarly, McDonald’s HRM practices and strategic choices are influenced by market structures. As a multinational company, the company has to comply with regulations and policies of the local regions that it operates in. The company also has to align its strategic choices to the market structures of the local regions that it operates in. As a result, much of the company’s strategic choices are influenced by market structures (Daft 2005; Han 2008). This validates Hyman’s sentiments that market structures determine the strategic choices made by managements (Hyman 1987). In contrast to the sentiments of Hyman, Chandler argues that structure follows strategy. Chandler substantiated his argument based on four case studies on multinational companies that dominated American industries in the 1920’s. In his study, Chandler observes that the automobile manufacturer General Motors, the retailer Sears Roebuck, the chemical company Du Pont and the energy company Standard Oil of New Jersey managed diversification and growth strategy by employing the revolutionary multi-division form (M-form). M-form is a type of organizational structure whereby the organization is divided into various semi-autonomous units that are controlled and guided by a central strategic plan. This organizational innovation was first adapted by multinational companies based in the United States in the 1920’s. Despite the fact that M-form was implemented differently in each organization, Chandler established that the need to restructure these organizations came as a result of strategic shift caused by new technologies and changes in the market. The M-form particularly emerged and evolved as a result of developments in the communication and transportation industries thus creating the opportunity to manage across space and time (Chandler 1962). According to Chandler, corporate strategy involves the determination of long-term objectives and goals, the adoption of action plan and the allocation of resources that are needed to achieve the set objectives and goals. He further defines structure as an organization’s design through which strategy can be administered. Chandler argues that strategies used by the organization’s mentioned above, brought about new administrative problems which required a reorganization of the company’s structures so as to successfully implement new strategies. He accentuates that new organizational forms are mainly a derivative of strategy. Therefore, according to Chandler structure follows strategy. On the other hand, Saias & Hall (1980) observes that whereas organizations may build the structure of an organization, in practice it is these structures that later on constraint the strategic choices that the management of organizations make. Saias and Hall note that following the work of Chandler (1962) the link between structure and strategy has been subjected to various empirical and conceptual studies. The main aim of some of these studies is to establish the direct and indirect association from strategy to structure. The direct associations are where the structure can be described by the nature and diversity of markets and products of the organization. Indirect associations are where the structures are determined by the characteristics of the technology used, by the nature of and variations in the environment. Saias and Hall further allude to the sentiments of Chandler when he states that “strategic growth comes as a result of awareness of needs and opportunities developed by changing population, technology and income. Therefore, new strategies require a refashioned structure so as to promote efficiency.” (Chandler 1962: 15). Chandler further accentuates that, “Unless structure follows strategy there is bound to be inefficiency” (Chandler 1962: 314). In reference to the sentiments of Chandler (1962), Saias and Hall establish that often times, organizations try to meet market and structural demands without realising that they have adopted a new strategy. Therefore, they conclude that strategy grows out of structure. From the sentiments highlighted in this paper, it is therefore evident that to some extent strategic choices can be influenced by market structures and strategies adapted can also influence structure. Nevertheless, it is possible for HRM to make strategic choices that are not necessarily influenced by market structures (Saias & Hall, 1980). How HRM can align itself with strategic management? Aligning HRM and strategic management is an essential endeavour for organizations. Research studies show a strong link between HRM and performance therefore, HRM plays a potential role in supporting strategic management and enhancing an organization’s competitive advantage. (Wright, Smart, McMahan, 1995). It is essential for organizations to adapt a new outlook on HRM (Becker & Huselid, 2001). The alignment between HRM and strategic management requires the expansion of HRM beyond an administrative function. Focus should be directed towards how HRM can support the organization in its endeavors of strategic planning and implementation. Therefore, the first step in aligning HRM with strategic management is to acknowledge that HRM and its practices are a strategic asset rather than a traditional administrative function. The top management should support role of HRM by accepting their initiatives on strategic planning (Becker & Huselid, 2001). Secondly HRM systems should be developed in line with the organization’s strategic plans or goals. In order to effectively align HRM with strategic management, HRM should first be organized such that it can be involved in the organization’s strategic planning. Thus HRM should ensure that its human resource asset is efficiently aligned with the strategy that has been developed by the organization. Third, it is important for HRM to go beyond its administrative duties and expand into the organization’s strategy. Lastly, in order for HRM to align itself with strategic management it is essential to increase the competencies of HRM personnel. The competencies of HRM personnel can be enhanced by building their financial skills, business knowledge and consulting skills. In addition to this, the use of new technologies can help to increase their competencies. By increasing the competencies of the HRM personal, the HRM department will enhance its credibility and become integrated into a strategic role. When HRM goes beyond its conventional administrative role, it can bring about significant impacts to the organizations value (Galford, 1998; Frangos, 2002). Recommendations Organizations should adapt a new outlook on HRM by acknowledging that HRM and its practices are a strategic asset rather than a traditional administrative function (Becker & Huselid, 2001). HRM systems should be developed in line with the organization’s strategic plans and goals. HRM should go beyond its administrative duties and expand into the organization’s strategy. Organizations should increase the competencies of HRM personnel by enabling them to use new technologies and by building their financial skills, business knowledge and consulting skills. In addition to this, the use of new technologies (Galford, 1998; Frangos, 2002). Conclusion This report has examined whether Human Resource Managers (HRM) have a strategic choice given that Human Resource Management depends on strategic management and strategic management depends on markets. The findings of this report show that to some extent strategic choices can be determined by market structures and strategies adapted can also influence structure. However, it is possible for HRM to make strategic choices that are not necessarily influenced by market structures (Saias & Hall, 1980). In addition to this report has how HRM can align itself with strategic management. Through a review of various literatures it was established that HRM can align itself with strategic management by going beyond its administrative duties and expand into the organization’s strategy. Bibliography Becker, B. & Huselid, M., 2001, The Strategic Impact of HR. Harvard Business School Publishing, Balanced Scorecard, May – June 2001. Chandler, D. , 1962, Strategy and Structure: Chapters in the History of the American Industrial Enterprise, MIT Press, Cambridge, MA. Daft, R., 2005, Organization Theory and Design, 8th edition, Cengage Learning, London. Frangos, C., 2002, Aligning Human Capital with Business Strategy: Perspective from Thought Leaders. Harvard Business School, Balanced Scorecard, May – June 2002 pp. 11-13. Galford, R. 1998. Why Doesn’t This HR Department Get Any Respect? Harvard Business Review, March – April, 1998, pp. 24-26 Han, J., 2008, The Business strategy of McDonalds, International Journal of Business and Management Vol 2, No.11, pp. 72-74. Hyman, R., 1987, 'Strategy or structure? Capital, labour and control’. Work, Employment and Society, 1, l, 25-55 Saias, M. & Hall, D. (1980). Strategy follows structure! Strategic Management Journal, Vol 1, 149-163. Vignali, C., 2001, McDonald’s “think global act local”- the marketing mix, British Food Journal , vol.103, no. 2, pp. 97-111. Read More