Strategic Human Resource Management and Organizational Performance

Strategic Human Resource Management and Organizational Performance

SHRM and Employee Performance

According to Becker & Gerhart (1996) there have been some trends in the field of strategic human resource management (SHRM) in the past few years. First and foremost, people have made great efforts to prove the connection between human resource management practices and corporate performance. Gree,r(2001) emphasizes that most strategic human resource management models believe that Strategic Human Resources function has an implementation role. Becker and Huselid ( 2010) argues that HRM could be one aspect of comprehensive approach of Strategic Management , rather than a collection of tools and techniques. The development of various strategic methods has been increasingly used as an integral part of the organization and has established a link between the human resources strategy and the business strategy, which helps the organization to achieve its stated goals, thereby improving personnel capabilities (Reddy ,2013). Greer, (2001) further explains that competitive strategies require different human resource practices and different role behaviors. The role behaviors needed of employees throughout an organization provide a rationale for the linkage between competitive strategies and human resource practices.  

According to Yoon and Theye, (2002)  In the process of creating effective HR practices and strategies organization face challenges but creating such effective strategies enhances the organizational effectiveness and helps in resolving issues and problems within the organization. Reddy, ( 2013) sated there is a link developed between HR strategy and business strategy which helps organization’s to achieve their set objectives thus building people capabilities. Ladika, (2006) explains that Formulation of new policies and changes to the existing policies are done in line with the business plan, business model, market trends, best practices of benchmarked companies, suggestions, employee feedback through communication meetings and through Employee Satisfaction Surveys. It is true that the incorporation of HR policies and strategies with the organization’s strategy not only improves organizational performance but also employee performance( Reddy 2013).

The below figure 1:0 clearly explains that if the HR strategies in right place both the Employer and Employee are well satisfied.

Figure 1:0 HR Strategy and Performance

Source: (Wright,2004)

Ultimately, HR strategy has the most significant impact on what employees actually do on the job. Wright, (2004) gives some examples of strategy on the job scenario, if the strategy focuses on customer service, for example, it will affect things like whether employees are friendly and helpful, whether they give the right answers and solve customers’ problems. If the strategy is about efficiency, it will encourage employees to look for ways to lower costs or operate more efficiently. Do they engage in cost-saving behavior or waste time and money? The bottom line is that what employees actually do will decide how well the business strategy is executed. HR strategies and practice play an important role in developing good organizational structure which therefore results in better organizational and employee performance. Organizations must plan and implement effective training goals and should look for the final achievements(Reddy ,2013).

 SHRM impacts on organizational performance

Armstrong,( 2006) explains that the assumption of human resource management practice is that people are the key resources of an organization, and organizational performance depends largely on them. Therefore, if an appropriate range of human resources policies and processes are effectively formulated and implemented, then human resources will have a significant impact on company performance.

In the figure 1:1 ,  Guest et al (2000b) explains  that  business strategy of a firm has go along with the correct   HR strategies thrives performance   of an organization.

Figure:1:1  the relationship between HRM and performance

Source : Guest et al (2000b)

There  is a clear example of Delta Air lines post 1994 , from Clear Skies to crash landing.
In the 1970s and 1980s, Delta Air Lines became the premier U.S. airline for customer service with a culture of “southern hospitality” and employees who went above and beyond the call of duty (Wright, 2004).

Wright, (2004) further explains that , Before 1994, as seen  Delta’s HR strategy was perfectly aligned with its business strategy so that HR practices built employees’ skills and motivation to make the business work.   In 1994, after two straight years of record financial losses,  the company  rolled out a new strategy called “Leadership 7.5” which supposed reduce cost.

 In Delta’s new HR strategy:

      •  Training dollars were cut.

      •  Experienced employees were laid off and replaced with contingent employees.

      •  Delta put fewer flight attendants on each flight and fewer mechanics at the gates.

      •  Pay was frozen or cut for just about all employee groups.

On the other hand there are few more examples that can be studied  where strategic Human Resources Management  and business strategy of the firms have gained positive results.  One of them is that in the UK the study by West and Patterson (1997) indicated that HR practices could account for 19 per cent of the variation between firms in changes in profitability and 18 per cent of the variation in changes in productivity. Once again, the complementarity of HR practices was held to be significant.

Figure 1:2 Delta Air Lines Post 1994 business model

Source : (Wright:2004)

According to Armstrong, ( 2009 )any theory about the impact of HRM on organizational performance must be based on three propositions:

1. That HR practices can make a direct impact on employee characteristics such as engagement, commitment, motivation and skill. 
2. If employees have these characteristics it is probably that organizational performance in terms of productivity, quality and the delivery of high levels of customer service will improve.
3. If such aspects of organizational performance improve,the financial results achieved by the organization will improve.
   

   
   

               

References

Armstrong, M (2009) A Hand Book of Human Resources Management Practice, 11^th Edition.

Armstrong, M.(2006) Strategic Human Resource Management a guide to action 3rd Edition.

Becker, B. & Gerhart, B. (1996). The impact of human resource management on organizational performance: Progress and prospects. Academy of Management Journal, 39(4), 779–801.

Becker, B. E., & Huselid, M. A. (2006). Strategic Human Resource Management and job design : Narrowing the devide. Journal of Organizational Behavior J. Organiz. Behav. 31, 379–388 (2010).

Charles.R.G (2001) Strategic Human Resources Management , 2^nd edition.

REDDY. A ( 2013 )  A study on impact of HR  strategies on employee performance in Abu Dhabi distribution company . International journal of social science & interdisciplinary research vol.2 (1), January (2013).

Yoon, J. & Thye, S. (2002). A dual process model of organizational commitment: job satisfaction and organizational support. Work and Occupations, 29, 97-124.

West, M. and Patterson, M. (1997) The Impact of People Management Practices on Business Performance. IPD Research paper No. 22. London: IPD.

Wright P.M ( 2004 ) Human Resources Strategy : Adapting to the age of Globalization, Effective Practice Guidelines (2004 )by SHRM Foundation.