THE IMPACT OF HUMAN RESOURCE MANAGEMENT ON BUSINESS EFFECTIVENESS: the organizational performance as measurement
THE IMPACT OF HUMAN RESOURCE MANAGEMENT ON BUSINESS EFFECTIVENESS: the organizational performance as measurement
Businesses today is highly on its competitive stages as (1995) described it a state of hypercompetition particularly that of top employees (2007). Alongside with various conditions like globalization, internationalization, and technical innovation and digitalization in global marketplace (2000;1998;1990;1990), all aspects of organizations are in some ways affected. Thus, it is necessary for people behind the world trade to complement with these current changes (2002; 1999;1997). Imagine a business environment without a centralized form of manpower? Who will do the job? Even the largest company in the world will not work without human intervention. Latest technological advancements will not guarantee success as to compare with what human beings can do ( 2003). This is what human resource management (HRM) role in an organization – proper implementation of company’s policy and strong working relation towards victory (2002). In every business to function, human work force is the fuel and performance counts. It is the measurement of employees’ capacity and productivity towards success.
The HRM process is the practice of attracting, developing, and maintaining workforce. This is the readiness of an organization to meet the demands and expectations of the target market. There are three main HRM functions: attracting a quality workforce, developing a quality workforce, and maintaining a quality workforce (2002;2001). It has been recognized that HRM is a crucial element in an organization’s life (2005) since its beginning because it is considered as an important tool to maintain competitive advantage ( 1990; 1981). In the strategic version of HRM, the functional duties of a HR manager remain significant. Certainly hiring, training, and providing pay and benefits to employees are essential tasks that must be accomplished in any organization. However, a lot of organizations are mounting latest structural and cultural prototypes to meet the competitive demands of their dynamic and often global marketplace. The truth that employees (or human resources) today can be a competitive advantage has led to the development of this new field known as strategic human resource management (SHRM). Strategic human resources management is defined as “the linking of HRM with strategic goals and objectives in order to improve business performance and develop organizational cultures that foster innovation and flexibility (1994). It is also “the pattern of planned human resource deployments and activities intended to enable an organization to achieve its goals” (1992). SHRM means accommodating the HRM job as a strategic collaborator in the formulation of the organization’s strategies and the performance of those strategies through HRM activities such as recruiting, selecting, training, and rewarding personnel.
In general, the HRM function is of particular importance in the postindustrial economy ( 1972; 1993). In this emerging system, the critical factor in production has shifted from machines and equipment to the "knowledge" worker (1991). Through HRM, it is presumed that everything will be systematic and orderly done. Thus, carefully planned and executed strategies are very essential to gain the ultimate goal of all - company growth. Nowadays, the success of organizations locally and internationally is increasingly perceived basing on efficient HRM. Effective HRM optimistically affects performance in organizations, both on large and small bases. Success is dependent on the proper management of all the assets in an organization especially the human workforce. Coppers & Lybrand (C&L) consider HRM and its development as their top priority. The administration is determined in hiring and retaining skilled and competent workers. Each worker should meet the demands of the highly competitive and growing business industry worldwide. Chairman and CEO says that the attraction and retention of people, which they consider as the highest intellectual capital is the critical objectives of C&L (2001).
The HRM function plays a great role in the execution of company’s goal (2006). As such, HRM must then be described through their function in the organization as well as the expected responsibility of the workers within that department. This is established by (2002) in their article wherein there is a clear regard for the role of culture in HRM including their description on how to be part of the ongoing process of developing the organization. It can then be concluded that the description for HRM can only be established through the fulfillment of their roles based on the needs and demands of the organization. Through effective implementation from the start up to the end, it will yield to higher employees’ productivity and increase of revenue. All HRM functions are deliberate and directed to the success of the organization. , chair and CEO of Right Management Consultants, Inc., has identified what administration officials require from lead professionals in terms of HR. He also added that to increase real value to a company, HR must relate to the organization’s overall strategy. When this approach is accomplished, affirmative changes can occur in talent management, leadership development, and organizational performance ( 2005).
The role of the HRD is to be able to ensure that the supervision of the workers will be based on the company culture and their goals for future improvement and continued development. This was discussed by (1996) wherein they reminded the readers that human resources must expect behavior, personality, and social roles to play important parts. It helped in shaping the workforce within the company and overall influencing the company to work towards their vision. It is through this that the HRD has their own power over the company and must integrate the goals of the company in their philosophy. The HRD is tasked in making sure that the workers that they hire have the same vision as the company and will also be able to contribute to the company. This, however, is the superficial tasks that are assigned to the HRD. In reality, the workers of the HRD are also tasked with several duties. (1995) has specified that these jobs are not only limited in ensuring that the workers have a firm grip on the company goal but also focuses on trust and harmony of the workers within the corporation. The HRD is also tasked with ensuring that balance of skills and development in the corporation while also maintaining the workers’ ability to socially interact with one another. Williams contended that blended skills of the workers is the key to the success of the company as it will help keep with the variety of ideas needed while still ensuring that the workers are not too differentiated from each other for them to continue getting along and keep the corporation smoothly running.
The impact of HRM is measured in various ways – directly and indirectly. The most obvious measurement of HRM, as most researches reported, is its relationship to employee productivity and overall organization performance and success. A number of empirical studies have concluded that HRM practices have a significant effect on the organization, which leads to high performance (1999). For instance, HRM policies and practices are connected in firm performance as seen in various early researches in such fields like HRM itself, industrial relations, industrial and organizational psychology (2006;1996;1996; 1995;1995; 1991; 1992;1990). This line of research has estimated that one standard deviation increase in the use of "progressive" or "high performance" work practices can result in up to a 20% increase in firm performance (1996; 1999). An organization’s human capital management philosophy must value the workforce as a key asset that will define an organization’s character and performance capacity (2001). (2002) stated that human capital is a critical factor that would either lead the organization to success or to failure. Now that the value of the workforce has been realized, human capital management is believed to be the critical link in a modern performance management program, which promotes a healthy employee relations agenda. According to (2000), the concern in a modern performance management program is on the achievement of the desired results or outcomes, measured by their impact and not by their quantity. Treating the employees as champions and as a significant aspect of the organization naturally results to other positive outcomes. One of which is the improvement of the overall organizational performance (2000).
In the current job market, private and public sectors are both engaged in “war for talents” as their concern is on the recruitment, development and retention of talented and bright employees (2002). In this regard, the organization must be able to utilize a strategy and management system that will enhance the performance of the business so as to outgrow its rivals (2004; 2000). The most vital asset of an organization is its employees. For these organizations to maximize their assets, they should handle the employees’ working condition with intelligence and efficiency (1998). They must be allowed to be involved in making work-related decisions to further enhance the organizational structure (1996). Furthermore, the structure of tasks among the employees strengthens the organizational performance (Wilson 1989). It is necessary to understand the employees’ characteristics for the organization to be effective ( 1983). The development, building, motivation, enhancement and enrichment of the employees of any organization largely depend on the leadership, mandate and vision of the organization (1999). However, a lot of organizations began to significantly switch their people-managing policies and systematize them in new directions (2001). In general, SHRM will help in the improvement of the organization performance.
The achievement of corporate success can only be accomplished by people (1995). Organization performance depends on the aspect of productivity and maximum contribution of every member to the company’s growth. The strategic process of HRM itself helps the organization in improving its performance. The mere presence of premeditated SHRM activities ensures the growth of company. Its success is also rooted on the ability of the HR officer to implement programs, process and directives gained from company employees’ profile, culture, and related demographics. There are new innovative propositions in SHRM. It helps the human resources in bringing up the maximum performance they possess. For example, the reward process aims to align employees with organizational strategies by providing incentive to fully act in the company’s interests and perform at their maximum capacity over time (1999). According to (1993), rewards can be classified under three categories: performance contingent reward which reward performance output; job contingent rewards where pay is contingent on job classification and person contingent rewards where pay is dependent on the competencies of the person.
Performance management, on the other hand, is assessed according to three theoretical categories of human resource management. The first is that performance management is viewed as a key integrative mechanism which connects individuals’ goals and responsibilities to the objectives of the business and integrating major interventions such as appraisal, rewards, training and development which encourages a strategic improvement within the company (1984;1984; 1992). The second category deals with performance management as the means to enhance organizational control over employees, constructing a consistent statement of managerial expectations which promotes a unified view of the company (1999). This is clearly a way of manifesting control over employees as it will keep track of actions of each individual. There was also an individual monitoring done using the performance appraisal information form as well as team-monitoring. The results of these are reported in comparison with forecasts which are regularly placed on notice boards in the forecast room. Lastly, performance management is an important driving force in determining valuable outputs such as employee loyalty. According to (1983), it is important for organizational success and strong organizational culture for employees to identify with the company in terms of values, goals and desired behaviors.
In the future, HRM will face both challenges and opportunities (2007; 1990). (1990) contend that HRM will remain a reactive function responding only to problems when they arise. It is heavily controlled by “forces that effectively work against the adoption of many of the policies that have been advocated by leading personnel experts for decades” (). Today’s multinational corporations are proving the decade of competition. Organizations are now faced with leaner structures and increased competition which in turn are generating a rapid pace of change in the workplace. The greatest barrier to adapting to continual change lies with the management of people rather than technology. Therefore, the knowledge and management of an organization’s human resources is pivotal to its responsiveness. In order to achieve this, the role of HRM needs to change from reactive to proactive. If HRM is to be used to an organization’s competitive advantage it needs to go beyond merely attracting and retaining good people. It should strive to gain a complete understanding of its workforce and develop organizational systems and processes that enable individuals to add value within a larger organizational unit (1989).
To measure and improve organization performance, it requires today’s managers to progressively more employ in three levels of strategic decision making: corporate, business, and functional. Each of these strategies in turn has an effect on the HRM function. Hence, outcome in the need for a strategic approach to HRM is positive. With this new-fangled view of SHRM, HRM personnel must work with other top managers to devise company strategy as well as implement it. In serving in their role as strategic partners, HRM personnel must recognize the actions they must take to associate HRM planning to the organization’s strategic plans. This understanding must also include an appreciation of the challenges and pitfalls of SHRM planning. Further, there is an increased requirement for managers and HRM personnel to assess the effectiveness of the HRM function and its function in serving the organization in accomplishing its strategic objectives. It is vital to reemphasize the value of the partnership between the HRM department and managers at all levels. The improvement of an organization performance depends on the people behind HRM whether or not it is SHRM or the traditional one. It is all on manager’s brilliant and effective implementation of the best and systematic human management policies and procedures. With the help of workforce, company’s success and business effectiveness is definite, viable and measurable.