Abstract
Human resource management/human resource (HRM/HR) refers to the practice of managing people in an organization in order to facilitate the achievement of an organization’s mission and reinforce its corporate culture. It can be implemented from either an administrative or strategic perspective. Administrative HR focuses primarily on daily processes and functions that contributed toward the attainment of goals. In contrast, strategic human resource management (SHRM) focuses on aligning employee competencies with organizational objectives through practices such as inclusion, development, culture advancement, and change management. It takes a more holistic approach that centers on people development. Strategic HR has several organizational, HR-related, capital market, and financial benefits that emanate from systems implemented to increase performance. Google is one of the companies that have implemented SHRM practices to grow exponentially and increase its market share without compromising its revenues and product quality.
Introduction
Human resource management (HRM) refers to the application of strategies within organizations in order to maximize output and gain a competitive advantage. Organizations pursue HRM in two main ways: administratively and strategically. Administrative HR involves the facilitation of duties such as hiring, employee training, and promotion, while strategic HR involves the leveraging of human capital in order to enhance organizational success. It is imperative for organizations to adopt strategic HR for several reasons: executive succession, competitive advantages, labor-cost efficiency, legal compliance, the maximization of time and resources, effective communication, and better decision-making. Studies have shown that people-centered organizations report higher performance and productivity compared with those that neglect their employees. Strategic HR is achieved through investing in employees, the creation of a strong organizational culture, and exemplary leadership. Google is highly successful primarily because of its transformational practices related to recruitment and management.
A Background on HR History
The history of HR can be traced back to the emergence of ancient civilizations. The emperors were required to rule cities, collect taxes, conquer new kingdoms, and protect their citizens. These tasks were unachievable without proper leadership, people management, and the delegation of duties. The successful application of HR began with the military. Modern human resource management began with the British Industrial Revolution in the 18th century (Wilton, 2016). The establishment of large factories necessitated the proper management of the workforce for increased productivity and performance. As a result, innovative people management practices were developed as many industries sought to produce goods quickly and cheaply (Wilton, 2016). Thousands of workers entered the industrial sector, worked for more than 16 hours daily, and presented a challenge to managers. Their performance and productivity were hinged primarily on their levels of satisfaction. In that regard, many factories developed programs whose aim was to enhance the comfort and satisfaction of employees (Wilton, 2016). On the other hand, the government introduced legislation to protect the rights of the employees and enhance their safety at work. Personnel Management was introduced during the dawn of the 20th century to address employee-related issues such as workplace safety. During World War II, armies created training programs for new recruits. In that regard, organizations copied the military model of productivity by creating a Training Department. Modern human resource management gained traction in the 1970s owing to the emergence of new technologies (Wilton, 2016). This period was characterized by the growth of multinational organizations and rapid globalization. Organizations transformed personnel departments in to human resource departments as a way to effectively manage the globalized workforce.
Strategic HR versus Administrative HR
Human resource has evolved immensely over the past century. For instance, in the 1930s, the organizational function was implemented as a way to administer employees and mitigate risk within the organization (Mello, 2014). However, as the workforce became more globalized due to new technologies, the HR responsibilities became more complex and demanding. Contemporary business environments require more input from HR beyond its original administrative role. As mentioned earlier, organizations that are people-centered experience higher levels of performance and productivity from employees than organizations that are more focused on the attainment of objectives and profits (Mello, 2014). Studies have shown that companies that realize their potential investment in their employees and culture through strategic and archetypal leadership.
Administrative HR includes daily organizational operations and processes that are important to the achievement of goals. In that regard, its primary focus is compliance with labor laws and company policies (Bailey, Mankin, Kelliher, & Garavan, 2018). On the contrary, strategic HR encompasses various practices and concepts that combine planning and HRM tenets in order to attain organizational objectives. It includes aspects such as values, corporate culture, structure, commitment, service quality, and the efficient utilization of resources (Mello, 2014). Strategic HR is highly beneficial to organizations. However, its application in contemporary business environments is not indicative of its importance. The effectiveness of strategic human resource management depends on the managers’ willingness to play the role of a strategic partner with regard to the creation and implementation of policies (Punnett, 2015). This approach can be applied in the execution of several HR functions, including hiring, employee rewards, and training. Many human resource managers dedicate the majority of company resources to the performance of administrative duties. This phenomenon has been attributed to limited resources and complex administrative demands (Punnett, 2015). Moreover, a lack of support by top management has been cited as a cause of the inadequate application of strategic HR.
The Importance of Becoming a More Strategic Partner
Strategic Human Resource Management (SHRM) aims to create and implement systems that increase organizational performance and productivity through the proper management of human capital. In that regard, becoming a more strategic partner has several benefits that can be grouped into various classes: organizational, HR-related, financial, and capital market outcomes (Mello, 2014). These benefits can only be achieved through the alignment of strategic HRM with the corporate strategy. A shift from operational to strategic HRM requires a complete transformation that involves a change in processes, responsibilities, and thinking. Some benefits of SHRM include better work culture, higher productivity, customer satisfaction and loyalty, efficient resource management, and increased job satisfaction. These outcomes result in improved financial performance and a stronger brand value.
Organizational Outcomes
Shifting from being primarily administrative and operational to becoming more strategic partners is important for organizations because of the need to create a competitive advantage and enhance sustainability. These goals can be achieved by hiring experienced, dedicated, and well-trained individuals who can increase organizational performance, provide quality customer service, and enhance the efficiency of business processes (Punnett, 2015). The major focus of HR managers is hiring people who possess great potential for professional growth and managing them for optimal output. Human capital is an invaluable resource. Therefore, companies should strive to empower employees in order to encourage innovation (Bailey et al., 2018). For instance, they should give them the freedom to make decisions so as to foster a feeling of control and enhance personal responsibility (Boxall & Purcell, 2016). Moreover, the feeling of being valued increases the employees’ likelihood to align their personal goals with those of the organization. Motivated employees who can bring change and make critical decisions produce high-quality products and services that are the major source of an organization’s competitive advantage (Bailey et al., 2018). Employee empowerment increases levels of satisfaction, collaboration, productivity, and commitment.
HR-Related Outcomes
One of the most important aspects of strategic HR is employee involvement in decision-making. Studies have shown that organizations that value employee participation in key business processes report higher levels of performance, productivity, and competitiveness (Punnett, 2015). In that regard, it is important for companies to invest in their employees through professional development and wellness programs. HR-related benefits of this approach include employee commitment, reduced absenteeism, low employee turnover, and increased job satisfaction (Boxall & Purcell, 2016). The aforementioned approaches to HRM approach employee performance differently. For instance, administrative and operational HR conducts reviews, implements reward programs for exceptional employees, and creates compensation packages. On the contrary, strategic HRM evaluates employees based on their competencies and provides recommendations for performance improvement (Punnett, 2015). This is a key strategy that successful companies use to retain highly competent people.
SHRM is more beneficial than traditional and administrative HR because it focuses on long-term business aspects such as corporate culture, employee commitment, talent development, and personnel management. Many organizations have held on to the administrative function because of the proclivity to assign all non-operational responsibilities to the HR department. Research has established that in order for an organization to act strategically, all non-operational duties must be reassigned from the HR department. The day-to-day responsibilities should be automatized or handled by other divisions within the organization. At Google, creativity is encouraged, and employees are rewarded for their failures. The company considers failing as a learning tool that is necessary for innovation and improvement. Their investment in employee happiness is evident from the numerous incentives that are offered at the workplace. Examples include free laundry, daycare, car washes, and free food. Trust and freedom to make great decisions are core values that contribute toward Google’s success. The company’s culture encourages employees to experiment and thinking creatively in finding solutions to complex problems.
At Google, the department responsible for recruitment and management (human resources) is referred to as “people operations.” (Bailey et al., 2018). This distances the company from administrative and operational management practices that are common in many organizations. The name signifies the company’s commitment to invest in its employees, who are its most valuable asset. Google views the department as a core component of the organization that plays a key role in the attainment of its mission. The company provides incentives that are aimed at developing and retaining employees who are competent enough to attain its long-term objectives (Bailey et al., 2018). SHRM has been pivotal in the development of an efficient working culture that has earned Google the award of the best employer several times.
Financial Outcomes
The relationship between the implementation of SHRM and financial performance is an important concept in today’s globalized business environment. As mentioned earlier, the main objective of SHRM is to increase the sustainability and competitiveness of an organization by creating systems that increase organizational performance (Punnett, 2015). Key aspects of SHRM are related to positive financial outcomes, including return on investment, higher profits, return on assets, and increased sales. For example, Google implements high-performance work practices to enhance its financial performance. These include compensation systems, employee training, and effective recruitment. These factors have a direct correlation with long-term measures of financial performance. Skills development instills into employees the competencies needed for the enhancement of organizational performance (Punnett, 2015). Strategic compensation is one of the ways used by firms to influence organizational performance. The strategy works because it motivates employee effort, attracts highly competent individuals, and lowers the rate of turnover. The freedom, growth opportunities, flexibility, and rewards that Google offers its employees motivate them to innovate, which translates to high-quality products and services as well as increased revenues (Bailey et al., 2018). Moreover, its management practices encourage efficient resource management. Strategic planning ensures that energy and resources are focused, and employees work toward common goals.
Capital Market Outcomes
SHRM has several capital market outcomes: organizational growth, increased stock price and an enlarged market share. These benefits can only be achieved when a company aligns its human resource management with its business strategy (Boxall & Purcell, 2016). For instance, Google’s search engine market share is estimated at 88.47 percent. The company’s dominance in various technology fields can be attributed to its culture of encouraging innovation and experimentation. Its SHRM practices have expanded its brand to the second most valuable brand in the world. Its people-centered culture plays an important role in the attraction and retention of talented people. In the past decade, with the introduction of new innovations, Google has enlarged its market share and grown its stock price immensely. For example, its share price has risen by 1,293% since its initial public offering in 2004. Its number of customers has increased exponentially because of its innovative technologies. Customer satisfaction is one of the drivers of organizational success because it increases brand value and creates a competitive advantage (Bailey et al., 2018). Organizations that provide quality products and services increase their revenues because of the high amount of average purchases, customer loyalty, lower promotional expenditure, the greater success of new products, and reduced-price sensitivity (Boxall & Purcell, 2016).
Conclusion
In an increasingly globalized and competitive business environment that is characterized by diversity, volatility, and shifting demographics, the adoption of strategic human resource management is inevitable. Practices such as planning, monitoring, employee development, training, the use of technology, and innovation are necessary for enhanced organizational sustainability. Administrative and operational HRM focuses on basic business functions that include hiring, employee compensation, and addressing matters related to employee welfare. On the contrary, strategic HRM deals primarily with talent management, workforce planning, and leadership development as well as training. It is imperative for strategic HR leaders to possess several important skills: organization engineering, change management, business expertise, and culture management. The benefits of shifting from administrative to strategic HRM include increased productivity, financial benefits, a higher market share, low rates of turnover, employee motivation and commitment, and competitive advantages. Many organizations are moving from administrative roles to more strategic roles in order to enhance organizational sustainability, innovation, competitiveness, productivity, and advance competitive advantage.
References
Bailey, C., Mankin, D., Kelliher, C., & Garavan, T. (2018). Strategic human resource management (2nd ed.). Oxford, United Kingdom: Oxford University Press.
Boxall, P., & Purcell, J. (2016). Strategy and human resource management (4th ed.). New York, NY: Palgrave Macmillan.
Mello, J. A. (2014). Strategic human resource management (4th ed.). New York, NY: Cengage Learning.
Punnett, B. J. (2015). International perspectives on organizational behavior and human resource management (2nd ed.). New York, NY: M. E. Sharpe.
Wilton, N. (2016). An introduction to human resource management. New York, NY: Sage Edge.