HRM in the Hotel Industry - Example

Strategic HRM and challenges of organizations HRM in the hotel industry Many businesses have entered into the globalization era which is mainly characterized with very competitive environment. The business environment they embedded encompasses challenges that impose on organizations. Many different business organizations are operating their businesses in various industries such as transportation industry, production industry, and so on. Among various industries, business organizations operating in the service industry faces more challenges than ever before. Among the challenges, most common faced include (1) unpredictable business environment, (2) managing diverse workforce, (3) dependence on the skills, abilities and knowledge of its employees, and (4) high turnover rates. First, the nature of business environment is not stable and it is unpredictable. Whatever factor in the environment changes, it has dramatic impacts on business operations in the short-term and long-term. For example, when there is was epidemic diseases such as bird flu spread news in a certain region, the occupancy rates of hotels in that region dropped sharply. In addition, the financial crisis that hit Asia in 1997 left many countries in Asia in 1997 with economic hardships and destruction in the form of bankruptcies and business closures, retrenchment, wage cuts and ultimately high employment. Many hospitality industry in the region suffered negative impacts on their businesses. Many faces to downside their businesses and even some of them faced with closures (Kamoche, 2003). Second, in the globalization era, many organizations are hiring diverse workforce. Managing diverse workforce has challenged many organizations especially in the hospitality industry. Different cultures, background, education, knowledge, and work experience of diverse workforce place challenges to management of business organizations. To effectively manage them, the management must adopt effective management practices. Third, the competitiveness in the business environment imposed organizations to provide quality services and attract customers or retain them to their services and products. In the hospitality industry, many organizations need to provide more premium quality services to their customers. This can be realized when the organizations recruit highly skilled staff. In addition, they need to invest in training and development programs aiming at developing skills, abilities and knowledge of their employees. This will result in employees who are able to deliver high-quality services to customers and viable. According to Go et al. (1994), another reason why organizations are facing unskilled labor in the industry is that many skilled labors have shifted their career from hospitality industry to other highly paid one as they have developed necessary skills and abilities. Fourth, high turnover is said to exist in the hospitality industry and it is regarded as workgroup norm and many employees enter the industry with the intention of working for minimum amount of time in any one organization (Iverson and Deery, 1997). However other researchers argue that many organizations in the hospitality industry lack induction, training and development which has significant contribution to the high turnover culture. This turnover culture was contributed by the HRM practices such as concentrating on costs reduction, enhancing managerial prerogative and preferring on short-term and part-time work (Wood, 1997; Hales, 1987). Therefore, organizations in the hospitality industry are facing challenges in their business environment. With the challenges, the organizations are facing more competition in the market. In order to compete, they need to provide more quality services and products to their customers. Such services and products can be realized with viable employees who possess high skills, abilities, knowledge. Therefore, effective human resources management practices will help minimize those challenges faced by organizations in the hospitality industry. Many organizations are adopting strategic human resource management (SHRM) which helps them minimize challenge and make them more competent in their business environments. According to Truss and Gratton (1994), many organizations in all levels in both public an private sectors are adopting strategic human resource management or linking of SHRM to their organizations’ strategic goals and objectives with an aim to improve their business performance and develop organizational cultures in order to foster innovation, flexibility during major recession in the mid-1990s in which they face highly competitive marketplace. Organizations are paving this way for making such changes in order to bring their human resources management functions in the forefront of their organizational transformation and survival as they never did before. The strategic human resources management was initiated in the works of 'Harvard Group' (Beer et al, 1984) and the 'Michigan/Columbia Group' (Fombrun et al, 1984). They laid foundations in the US in the early 1980s. At that time, there are many questions raised on the SHRM regarding their distinguishing features, relationships to business strategies, conceptualizations. They are still remained unsolved and many practitioners are disappointed unclear theoretical sophistication (Boxall, 1991). Nowadays, the conceptualization of strategic human resources management and their directions and linkages towards business strategies are made more clear (Truss and Gratton , 1994). Evolution of strategic human resource management In the outset, it is important to understand the term strategic human resources management and its process before discussing further on how it can help organizations minimize their challenges. When searching for the meaning of SHRM, it can be dated back to 1980s when there were literatures focusing on differences between human resource management and personnel management. According to Legge (1989), there were many debates going on the distinguish characteristics between human resource management and personnel management, at least literature reviews reveals and concedes that there are a number of ways that distinguish human resource management from personnel management. First, human resource management centers on the management team whereas personnel management pays much attention to the management and control of subordinates. Second, line managers play a critical role in coordinating with human resource manager toward achieving performance as well as profits, whereas personnel managers do not play any significant role in regard to such objective. Third, human resource management emphasizes management of organizational culture whereas personnel management does not pay attention to it. Therefore, HRM is regarded as more strategic than it is being a functional or routine task in organization. Fourth, the human resource management is viewed as more unitarist approach which is contrast with the collectivist approach which emphasizes on individual development and commitment (Guest, 1989; Storey, 1989; Sisson, 1989; Truss and Gratton, 1994). Fifth, the HRM regards people in organization as a “resource” and the decisions made by individuals assume a strategic significance in the broader context in the business organization (Storey, 1992 a; and McKinlay and Starkey, 1992). Many researchers (e.g. Storey, 1992a; Hendry et al., 1988; 41; Miles and Snow, 1984: 37; Evans, 1986: 155; Poole, 1990; and Truss and Gratton, 1994) suggest that the linkage between HR practices to the strategic aims of the business organizations are imperative and vital in human resources management process. Therefore, the concept of human resources management was evolved as a bridge between business strategies and the management of human resources (Butler et al., 1991; Lorange and Murphy, 1984; Lengnick-Hall and Lengnick-Hall, 1990; Boxall, 1991: 61). At the outset, how human resource management has made evolutions should be discussed. In the past the term human resource management (HRM) was known as personnel management. During the sixteen and seventeenth centuries, people were guided by a craft system and master craftsmen supervised work. When demand is high, they need to hire more apprentices to produce more products. In the nineteenth century when the industrial revolution stared, machines were introduced and high-quality products were produced (Anthony, Perrewe & Kaemar, 1996). Since the industrial revolution, organizations have faced three major people-related challenges—(1) managing sudden and massive increases in the workforce, (2) fighting workforce unionization, and (3) integrating diverse workforces including immigrants. Until 1950, the main duty of personnel departments was administration. From 1940s to 1950s, the personnel department’s main focus was to meet employee needs. Personnel departments in the corporate world were mainly concerned with coordination with unions about benefits, wages, recruitment, and labor relations. From 1960s to 1970s, personnel departments emphasize training and participative management. In 1980s, personnel management was shifted to human resource management and emphasizes their employees as valued resources. In 1990s, HRM is concerned with issues of downsizing, replacement of people by technology, recruitment of talent during labor shortages, and so on. In 2000 and beyond, the strategic human resource management (SHRM) has become widely accepted (see table 2.1). Table 2.1 Evolution of HRM Period HR Focus HR Activity Before 1890 Industrial technologies Disciplinary systems 1900-1910 Employee well-being Health & safety programs 1920s Task design / efficiency /Impact of workgroups on individual works Time and motion studies Employee and counseling and testing 1930s Union of workforce Passage of major labor laws Communication programs Anti-union campaigns Personnel becomes staff support to operational line unit functions 1940s Employee benefits and compensation Wage increase Cost-of-living adjustments Pension health & other benefits 1950s Employee relations Specialized personnel functions Training and development Separate divisions within personnel established: recruitment, labor relations, training, benefits, etc. 1960s Employee participation Employee involvement Management by objectives Quality circles, sensitive training 1970s Govenrment intervention Employee rights issues now regulated in areas of discrimination, equal opportunity, safety and health, and various benefits reforms 1980s Employee recognition Displacement Expanding/ enrichment of employee knowledge, skills, abilites, through: Job rotation Formation of integrated task teams Outplacement 1990s Changing demographics of workforce Technology Diversity programs Employee rights issues Global perspectives Information technology 2000 and beyond Strategic HR planning Source: Rothwell, Prescott, & Taylor (1998) Definition of Strategic Human Resource Management The term strategic human resource management (SHRM) can be defined as follows: “We define strategic human resource management as the pattern of planned human resource deployments and activities intended to enable an organization to achieve its goals (Wright and McMahan, 1992; 298).” The fact that the term strategic HRM has emerged at all would, however, indicate that there is some qualitative difference between HRM and SHRM. We should, perhaps, regard SHRM as the overarching concept that links the management and deployment of individuals within the organization to the business as a whole and its environment, while HRM could be viewed as an organizing activity that takes place under this umbrella. In this way, the essential features of SHRM can be summarized as follows: There is an explicit linkage of some kind between HR policy and practices and overall organizational strategic aims and the organizational environment. There is some organizing schema linking individual HR interventions so that they are mutually supportive. Much of the responsibility for the management of human resources is devolved down the line (Truss & Gratton, 1994). Strategic human resource management is defined as the linking of the HR function with strategic goals and objectives of the organization in order to improve business performance and develop organizational cultures that foster innovation and flexibility (Truss & Gratton, 1994; Tyson, 1997). The key idea behind overall strategic management is to coordinate all of the company’s resources, including human resources, in such a way that everything a company does contributes to carrying out its strategy (Anthony, Perrewe, & Kaemar, 1996, p.14). Organizations that have adopted SHRM will receive such benefits as (1) high job performance, (2) high problem solving, change, and innovation, (3) high cost-effectiveness, (4) low turnover, absence, grievances, and (5) attitude and behavior changes at the workplace (Guest, 1992; Storey, 1992). HRM Practices and Organizational Performance A descriptive model consisting of personnel, practices and outcomes concludes that personnel/HRM is engaged in an identifiable set of functions or practices that are administered on an organization-wide basis. The purpose of those practices is to enhance the effectiveness of employees and, subsequently, that of the organization as a whole. In a similar vein, Townley (1994) refers to HRM as a set of practices and techniques that influences firm performance. Combining these ideas with the resource-based concept provides us with the methodology of creating competitive advantage through human resources (Harel, Tzafrir and Baruch, 2003). The need to ascertain the combined influence of the various HRM activities on organizational outcomes has led scholars such as Delaney and Huselid (1996) and Delery and Doty (1996) to the conclusion that HRM practices should impact positively on organizational performance. In order to ascertain the impact of HRM practices on organizational performance, we modified the ideas of Schuster (1986). Thus, while they suggested the method of combining various HRM practices into a single measure, we proposed to separate them into distinct sets of associated practices (Harel, Tzafrir and Baruch, 2003). Barton and Delbridge (2004) suggest that the role of human resources (and thus HRM practices) in the determination of firm performance has been conceptualized through a variety of divergent theoretical frameworks (Jackson and Schuler, 1995). This, in itself, suggests that methodologically the absence of a widely accepted measure of ‘progressive’ or ‘high-performance’ HRM practices makes it difficult to compare findings across different studies. Barton and Delbridge, (2004) mention that twenty-seven different variables that have been used as proxies for high-performance work practices across just five independent studies. Nonetheless, Delaney and Huselid conclude that the literature can be characterized as ‘optimistic concerning the potential for progressive HRM practices to enhance the performance of employees and organizations’ (Becker and Gerhart ,1996: 950) Faulkner et al. (2002) defined as the range of policies which have strategic significance for the organization, and are used to facilitate integration, commitment, exibility and the quality of working life, as well as meeting broader business goals such as changing organizational values, structure, productivity and delivery mechanisms. Faulkner et al. (2002) claim that HRM policies and practices can offer three special control benefits: (1) Through training programmes, they can improve the employee’s ability to perform more effectively. (2) They can subtly spread the parent company’s culture, objectives and mission to the subsidiary. (3) They can help to develop a unique culture in the subsidiary or in an alliance. Performance appraisals in particular help the parent company to understand better the strengths and weaknesses of the personnel in its new subsidiary, and are another mechanism through which a parent company can develop positive dialogue with its new employees, and thereby foster the development of a new identity with the parent group Faulkner et al. (2002). Compensation and reward systems are important in attracting the right quality of recruits and in subsequently retaining them. Bonuses tied to performance and clear career development paths help to convince an employee that he/she is valued and their contribution is being noticed and appreciated Faulkner et al. (2002). How HRM activities can support and complement line management in providing a supportive climate and appropriate systems for organizational learning, both by the subsidiary and by the parent. It is conducted his research into Anglo-Japanese joint ventures, but the conclusions apply equally well to acquisitions. From looking at twenty-three such joint ventures, he concluded that a primary reason for poor performance was poorly designed and executed human resource management strategies. This resulted in failures of a parent company to communicate its strategic intent adequately to its staff; learning may be given a low priority, staffing may have a low HRM input resulting in low-quality staff or staff of widely varying abilities. A further area of neglect is frequently language and cross-cultural training, which can make so much positive difference to integration efforts. Furthermore, if the parent company does play a positive role in the HRM function, there is a danger that it will fragment, and a valuable control mechanism will be lost (Faulkner et al. , 2002). Key relationships in models of SHRM From an analysis of the literature on strategic human resource management, there appear to be five key aspects of the SHRM process that should be included in any model of SHRM. These are: - The external environment: which provides opportunities and constraints within which HRM must operate within the organization. - Business strategy: the overall strategic aims of the organization that both affect, and are affected by, the SHRM process. - The internal environment: the organizational context within which SHRM operates, including structure and culture. - Strategic human resource management: including both human resource strategy and individual practices. - Outcomes: some notion of the outcomes of the process of SHRM. There has been a great deal of debate within the literature on the nature of the interrelationship between these variables, and four questions appear to be especially significant: - How does the linkage between business strategy and HRS work? - What are the key intemal and extemal contextual variables that affert the design and implementation of human resource strategies? - What is the link between an articulated human resource strategy and specific HR interventions? - What is the relationship between HRS and particular outcomes, either at an individual or an organizational level? Each of these questions is addressed in turn, analyzing the major contributions of the literature to our understanding of how the process works. Internal contextual variables In addition to the external contextual variables, equally significant are factors internal to the organization that impact on the SHRM process. The hterature has identified two types of these internal variables: organization-level factors, such as culture and structure, and factors specific to the HR function. These internal variables have variously been referred to as the ‘inner context’ (Sparrow and Pettigrew, 1987), the 'internal environment' (Milkovich and Boudreau, 1991), or ‘cement’ (Guest, 1988). What they have in common, however, is that they are concerned with aspects internal to the organization that influence the relationship between strategy and human resource strategy. They include such elements as technology, culture, philosophy and management style, structure and the ‘dominant coalition’ (Milkovich and Boudreau, 1991; Lundberg, 1985). One of the most frequently referred to aspects of the internal environment is organizational culture (Bartlett and Ghoshal, 1989). This involves a 'shared vision' and a common understanding of organizational goals and values and is historically founded (Lundberg, 1985): Culture, whether organizational or national, is frequently defined as a set of taken-for-granted assumptions, expectations, or rules for being in the world . . . the culture concept emphasizes the shared cognitive approaches to reality that distinguish a given group from others. (Adler and Jelinek, 1986: 74) Tichy et al. (1982) similarly argue that management philosophy in terms of the nature of the psychological contract with employees is an important intervening variable. The type of culture an organization has can exert a strong influence on the nature of its strategy (e.g., defender, prospector or analyzer) and also on its chosen human resource strategy, as well as being influenced by them (Guest, 1988). One particularly important aspect of organizational culture is the nature and style of leadership (Lundberg, 1985). The concept of organizational power has also been described as significant to models of the SHRM process. For instance, Lundberg (1985) refers to the 'dominant coalition', or the most powerful group, usually the management operating team, whose needs and expectations of the HR department will help to shape their activities (Golden and Ramanujam, 1985; Szilagyi and Schweiger, 1984). In addition to these, other internal stakeholders, such as employee groups, managers, employees and professional staff, who hold a stake in the way human resources are managed in the organization, also influence SHRM (Freeman, 1985). Tsui (1988) refers to these as 'strategic constituents'. The needs and expectations of these groupings can often be in conflict with each other. Sparrow and Pettigrew (1987) argue that organizational structure is another significant feature of an organization's 'inner context' that influences HRS, and the characteristics of the HR department itself - for instance, the way in which it acquires and uses knowledge of the rest of the organization, the level of HR expertise, the nature of the HR expertise, the nature of the HR information system, the ability to identify and plan for the future and infrastructional linkages – are also significant (Golden and Ramanujam, 1985; Hendry and Pettigrew, 1990; Lundberg, 1985; Sisson and Scullion, 1985). Although the literature on contextual influences has highlighted a number of internal and extemal factors that affect the process of SHRM within organizations, the fact remains that no clear model has yet been put forward that explains exactly how these factors interlink with human resource strategy and business strategy. Challenges faced by human resources management Advances in information technology and their application to human resources management will enhance the challenges faced by human resources department in both public and private organizations. Human resources management functions include (1) planning, (2) recruitments, (3) staffing, (4) job design, (5) training/development, (6) appraisal, (7) communications, (8) compensation, (9) benefits, and (10) labor relations. When carrying out the functions of human resources management, on one hand, organizations face the challenges of (1) globalization, (2) technology, (3) managing change, (4) human capital, (5) responsiveness, and (6) cost containment. On the other hand, the human resources management is mainly concerned with employees in the matters of (1) background diversity, (2) age distribution, (3) gender issues, (4) educational levels, (5) privacy issues, (6) work attitudes, and (7) family concerns. First, many companies are seeking business opportunities globally. In US economy, it is found that more than 80% of companies, no matter how big is the size, is affected by international competition. Second, with the advances of information technology, organizations can store data, retrieve them, and use them in a wide verity of ways, from simple record keeping to controlling complex equipment. With employment of new high advanced technology, many business organizations will face decrease in number of jobs with lower skills level and increase in number of jobs with higher skills level. Third, managing changes such as total quality, downsizing, re-engineering, outsourcing, and the like are being made by organizations to modify the way they operate to be more successful. Some of these changes are reactive, while others are proactive and designed to take advantage of targeted opportunities. Fourth, human capital refers to knowledge, skills, and capabilities that may not show up a company’s balance sheet but nevertheless have tremendous impact on an organization’s performance. Fifth, to meet customer expectations, managers must focus on quality, innovation, variety, and responsiveness. Total quality management (TQM), for example, lays a solid ground for practices and principles that encourage and discipline employees to increase understanding needs of customer, and aiming for continuous improvement. Six, many organizations in service industry have to bear higher costs of labor which contribute to the highest portion of expenditures. Organizations have tried approaches such as downsizing, outsourcing, and employee leasing to reduce costs, particularly labor costs (Bohlander and Snell, 2004). Conclusion In conclusion, many organizations are operating their businesses in the competitive environment. They face fierce competitions in their respective industry. 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