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Strategic Human Resource Management
(Excerpts from CCH on line manual for student use only)

Structure and strategic management

While organisation structure is affected by the environment in which the organisation operates,
it will also have to complement the organisation's strategic plans and goals. An organisation
needs to maintain a ``fit'' between its structure and strategies and the environment.

Strategic management of an organisation involves the following three functions:

       identifying business opportunities for the organisation in both the short term and the
        long term;
       developing organisational strengths which meet the requirements for success offered by
        those opportunities; and
       setting aside the resources (including human resources) necessary to develop the
        strengths required to carry out those future strategies while at the same time ensuring
        that the day-to-day operations of the business continue efficiently.

According to popular marketing theory, an organisation should attempt to identify an attractive
business opportunity or ``niche'' in which it can compete, in other words something about the
organisation's products or services which makes it unique and distances the organisation from
its competitors. The environment in which the organisation operates will determine what
opportunities there are and what is required to capitalise upon them to compete effectively.
However, the environment, particularly a complex environment, is continually changing and
will affect the business ``niche''. In turn, organisation structure and processes may need to
change in order for the organisation to adapt to environmental changes. Therefore the need for
strategic planning — to maintain organisation strengths to protect it in the future — will
continue. Once a ``niche'' is firmly established, the emphasis will turn more towards maintaining
it by anticipating changes in the environment which pose a threat to it.

The organisation structure may be seen as the means by which an organisation achieves an
alignment between its external environment and internal resources. The structure must in turn
be aligned with the various strategic settings and plans within the organisation. Note also that
the strategic plans must have taken into account the current and future availability of the
resources necessary to carry them out. Organisation strategies may be diverse within the one
firm, for example where there are a number of divisions exposed to separate and different types
of environment. Also, resources allocated to the divisions may be subject to the overall
corporate strategic planning function.

The nature of strategic planning is such that it may need to change quite frequently in response
to changes in the environment. However, it may be difficult to make major changes to the
organisation structure quickly, because major disruptive effects on business and employees
may result. Thus it can be seen that strategic management is also affected by the structure
currently in place. It is still possible to make small changes rapidly or change individual sections
of an organisation. This is one reason why many organisations eventually consist of a
combination of different structural types rather than adhering to the one type throughout.

Strategic Human Resource Management Bankstown TAFE Semester 2, 2011

Having an ``inappropriate'' organisation structure does not automatically mean that the firm
will fail to operate effectively. Conversely, having the ``correct'' structure does not guarantee the
organisation's success.

One means of relating organisation structure to strategic planning is by the use of two separate
``structures'' — a strategic structure and an operating structure. This approach means that
some managers in the organisation have to wear two hats — one for strategic planning (as part
of a team) and the other as the manager of their operational section. It enables adaptive
strategies to be developed more freely, based on changes in the environment but with fewer
restrictions caused by institutional considerations and vested interests.

Budgets and other methods of allocating resources need to distinguish which resources are
strategic and which are operational. Strategic resources are discretionary when seen in the
context of current operations

Key differences between personnel management and human resources management
  Table: Key differences between personnel management and human resources management

Personnel Management                                   Human Resources Management
• Functional                                           • Strategic
• Short-term focus                                     • Long-term focus
• Maintenance                                          • Development
• Policies and programs                                • Whole organisation
• Rules and procedures                                 • Values and mission
• Conflict institutionalised                           • Teamwork emphasised

Overall, the change from personnel management to human resources management might be
described as a shift from administering the parts to managing the whole. In a sense, personnel
management is primarily concerned with the needs of people, whereas human resources
management concentrates on the business needs of the organisation, in the confident belief that
an organisation must be strong and successful if it is to meet the needs of its people.

We do not need to resolve that debate here. But we should recognise there is a debate, and that
it has significant implications for the future role of the personnel or human resources
practitioner, and for the way organisations choose to organise this key aspect of their

Relatively few organisations — and, therefore, relatively few chief executives and other senior
managers — give careful and systematic thought to their requirements or expectations for the
human resources function. While they frequently describe people as the organisation's most
important asset, the truth is most organisations regard their human resources as a cost of doing
business, rather than an investment in the future. Inevitably, for these organisations, the real
role for human resources is to minimise the costs of employing people, not to maximise the
return on that investment.

In other words, the personnel department is seen as an administrative and maintenance
function, rather than a strategic and developmental partner in the management of the business.
Of course, practitioners who wish to take on the business partner role will need, in most cases,

Strategic Human Resource Management Bankstown TAFE Semester 2, 2011

to shift their skills and knowledge base away from that of the traditional, functional specialist:
they will need to know as much about the business, and be as able to contribute to its
management, as any of their colleagues in senior management.

A key problem for personnel people is they lack the respect of their colleagues. According to a
European Association for Personnel Management report (1992), personnel and human
resources people lack business knowledge, and lack credibility within their organisations
because they lack business experience.

A survey in Great Britain (Allen, 1991) showed that around half of all line managers believe
personnel staff have the technical expertise, and the skills in human and interpersonal relations,
to help line managers do their jobs. But fewer than one in five of those same line managers
believe personnel staff have a good overall understanding of the business, as well as the ability
to support the organisation and its managers.

There is a need to recognise that human resources management is too important to be left just
to human resources managers.

Increasingly, the management of the organisation's human resources requires the attention and
the skills of all the managers of the organisation, especially those at the top. Indeed, there are
some who argue managing human resources is the only real management role for the future:
that the traditional management functions of finance, information systems, production and
operations are best left to technical and functional specialists.

Effective human resources management is the key to business success for two main reasons.

       Employment costs are a significant part of the operating expenses of an organisation, as
        high as 80% of operating costs for organisations in the service sector.
       People — and the skills and services they offer customers — are increasingly the
        competitive edge or advantage for many organisations. This is true for service
        companies and, in a global product marketplace, it is more and more the case for
        manufacturing companies as well.

Two key changes are needed.

       Human resources managers will have to accept that they are business manager first, and
        human resources specialists second. That has implications for their perception of the
        human resources role, for they will have to see themselves as being aligned closely with
        the interests of the organisation. It has implications also for the way they behave in the
        organisation, because they must now be seen clearly as part of management, rather than
        as a mediator between management and workers. It has implications for the training
        and development of human resources managers: they will need to widen their
        knowledge and skills from a traditionally functional base to a wider understanding of
        business and management generally.
       The second key change needed for human resources managers to become business
        partners does not actually involve human resource managers, although it affects them.
        Line managers will have to be given, and accept, the responsibility for managing people.
        It will no longer be possible or appropriate for them to refer their ``people problems'' to
        the personnel department: they must be willing to recognise that managing people and
        their performance is the key focus of the management role, and they must have the skills
        they need for this crucial role.

Strategic Human Resource Management Bankstown TAFE Semester 2, 2011

HR Strategy and Workforce Planning

A strategic approach to human resources (HR) management means, that HR managers need to
consider all the activities they undertake in relation to the organisation’s goals and values.
Human resources tasks — whether that be related to recruitment, training, performance
appraisals or policy development — are undertaken with a view to how they contribute
towards the aims of the organisation. Workforce planning is the first and broadest task that HR
managers need to tackle in furthering the organisation’s mission and strategies, so it is treated
here in this section, along with how HR managers deal more generally with strategic issues.

Changing roles of HR practitioners

CCH changed the title of their service service from Personnel Management to Human Resources
Management in 1993.

The formal human resources function began in the late 19th century with the role of welfare
officers in a number of major organisations primarily in the UK. Some of these organisations
were owned by Quakers — eg Rowntrees and Cadburys in the confectionery industry — and
they believed in treating people holistically and humanely. They were also some of the first to
work on the assumption that if you looked after people then they would give you a return, in
loyalty and hard work. Such companies pioneered benefits such as holiday units for employees,
meals at work and health clinics in the 1880s and 1890s.

In Australia welfare officers were often the first ``personnel'' presence in organisations. One of
the first was in the 1930s at Hestia, the women's undergarments manufacturer.

The next major thrust in the profession came from Taylorism, with its emphasis on job design,
paralleled with the rise of industrial psychology (eg using psychological tests for selection
purposes). Learning and motivational theories also started to broaden out the possibilities for
organisations in the 1920s and 1930s. Personnel officers began to be appointed from the 1920s
to 1940s. They had partly a welfare role, partly an industrial relations role and partly a very
basic personnel administration role. Up until the mid-1960s the theme of the profession was
personnel administration. The role was operational, peripheral, supportive and generally

In the 1960s and 1970s a number of personnel practitioners and academics began seeing two
pathways for personnel, eg in 1967 Dalton McFarland wrote an article about the high and low
roads in personnel. The low road was personnel administration, which was essentially
operational management techniques, records and procedures, etc. The high road was equally as
valid but it was more about policy — personnel policy — and involvement in the wider
management of the enterprise.

At the same time, a number of writers, primarily in the United States, started to move from
personnel management and human relations to this concept of human resources. Ray Miles of
the University of California argued that managers needed to think of people as an organisation's
primary resource, as an asset that needed to be developed and managed, and as a major source
of its potential competitive advantage.

The concept of human resources originated in the United States and the British have been mixed
in their acceptance of it. A number of UK writers have been critical of it. Their primary argument
has been that HR management is more a concept in the minds of academics than a reality in

Strategic Human Resource Management Bankstown TAFE Semester 2, 2011

Criticism of terminology

There was, and still is, a lot of criticism of the term ``human resources''. It is seen as a very
impersonal term, implying the treatment of people as a commodity. The proponents of it meant
however that people should be managed as an asset that can be nurtured and enhanced, rather
than disposed of as and when no longer needed.

In the present day, there has been some justified cynicism about the use of the term ``human
resources'', as there has been a perception that some organisations have in fact been treating
their people as commodities, particularly when downsizing. The trade union movement became
very critical of the concept of human resources because of this, seeing it as a very impersonal
capitalistic view. It is unfortunate that the term human resources can have multiple
connotations. When the profession can demonstrate that ``human resources'' has some positive
outcomes then the negative connotations may disappear. However, the label is far less
important than the substance of what managers and professionals achieve. The reality is that in
many organisations, salaries and associated costs can account for 70% to 80% of expenditure.
The issue at stake is whether these resources and associated costs are being managed
effectively. A recent title to emerge is employee engagement officer/specialist

Directions for the HR role

In one sense, the HR agenda has not changed very much since the early 1990s. It is still
understood generally to include workforce planning and job design, recruitment and selection,
induction, training and development, performance management, remuneration, occupational
health and safety, equal employment opportunity and anti-discrimination, other issues relating
to legal compliance and workforce well-being, and dealing with terminations.

What is at issue is who carries out these functions, and whether HR practitioners fit into the
organisational structure at a strategic level or at an operational level. One debate revolves
around whether a discrete HR department is needed at all. Some organisations have taken the
bold step of abolishing the HR department and developing line manager skills to address
traditional HR tasks.

This is consistent with the argument that HR should focus on people management rather than
business strategy (Rudman, 2003). In practice, the abolition model is likely to undergo a
transition into a HR consultancy model and/or a HR outsourcing model, as organisations find
line managers themselves want to devolve some functions elsewhere (eg recruitment) and they
need support to deal with other functions.

Another approach is to transform the HR role by appointing line managers — perhaps on a
rotational basis — to take care of it. This has been effected at Fairfax Holdings (Toten, 2003).
The intent was to integrate HR into everyday operations management, bringing a solid
knowledge of business operations to HR issues.

This strategy is opposed by many HR professionals, who believe HR requires a range of
competencies that most line managers are unlikely to have. HR managers are required to
institute initiatives with implications for organisational change:

   leading the process of workforce planning;
   ensuring a safe and healthy workplace;
   building relationships between people in the organisation;
   fostering individual development of employees;

Strategic Human Resource Management Bankstown TAFE Semester 2, 2011

   managing HR functions; and
   developing organisational leaders.

In fulfilling these tasks effectively, HR makes a unique contribution to organisational
effectiveness. Kramar (2003) argues there is a valid and important role for HR professionals "to
convince senior managers that HR contributes to the success of the organisation by:

   explaining the impact of people issues on the adoption of particular strategies;
    suggesting areas of strength in the organisation around which strategy could be developed;
    explaining the impact of HR initiatives on the achievement of organisational objectives and
    assessing the costs and benefits of particular HR initiatives for the organisation; and
    explaining the impact of legislation on the management of people."

Key roles for HR in the current organisational and business environment thus include:

   developing policies and processes that suit the needs of the organisation and the line
    managers whom they support;
   communicating and promoting these policies and processes across the organisation so their
    value is recognised and understood;
   working with line managers to improve their effectiveness, which includes assisting them to
    recognise people management issues;
   coordinating HR initiatives across the organisation, especially when some HR functions are
    carried out by line managers;
   gathering, hosting and making available a database of information that assists line managers
    in carrying out people management (eg managing employee performance, coaching,
    communicating in teams); and
   explaining the implications of legislation on people management practices.

HR professionals need to have certain knowledge and competencies in order to carry out these
tasks effectively. Their knowledge is organised around three major aspects of HR:

   Contributing to employees' fulfilment of the organisation's mission and business strategies;
   Ensuring the organisation and its people comply with the law; and
   Protecting and fostering employee well-being.

The fact there are three identifiable aspects of HR, and that they can conflict with each other at
times, drives the conclusion that HR professionals have a key role to play as guardians and
clarifiers of organisational values. As Ann Sherry observed as Group Executive of People and
Performance at Westpac Bank (Sherry, 2003):

``Being people focused means putting people goals alongside business goals. Organisational
values need to be clear and well articulated, and involve and respect people. These values create
the culture that recognises people as individuals with diverse human needs and not just as
economic agents of the corporation. The values drive the organisational will to develop the
company's people and policy practices.''

The knowledge and competencies the HR professional needs to fulfil this threefold role include:

   understanding employees' motivations;
   knowing how to define and assess worker competencies, attitudes and values;
   skills in listening to and communicating with a wide range of stakeholders, from workers to
    senior executives;

Strategic Human Resource Management Bankstown TAFE Semester 2, 2011

   ability to design and implement policies and processes;
   understanding of legal issues that affect the workforce and the workplace;
   appreciation of business imperatives and their HR implications;
   commitment to employee development and well-being.

These competencies are not possessed as a matter of course. They require study and
experience. The starting point for HR is that people are not always rational. Their behaviour is
influenced by emotional, social and political needs. HR competency could be defined as the
ability, through an understanding of people, to enable other people in the organisation to
achieve improvements in the productivity and harmony of the organisation.

The outcomes of effective HR are qualities like improved employee productivity, higher morale
and satisfaction, loyalty and retention, the development of managers' skills, and greater
innovation. The evaluation of the competency of HR professionals is ultimately based on
whether these qualities are improved and sustained.

What is at issue is who will carry out the various functions that work towards these goals. The
possibilities include a mixture of line managers, HR professionals fulfilling a largely consultative
role, and external parties who carry out specific functions such as recruitment. Organisations
are already experimenting with different variations of these options and will no doubt continue
to do so.

HR Manager and strategy

Who is involved in the strategy-making process? It depends on the nature of the strategic
planning process. If strategic planning is highly formalised, then it is usually the province of
senior executives, supported by a planning team, and the roles of other managers are firmly
circumscribed. However, the era of large teams dedicated to planning was laid to rest by the end
of the 1980s.

As organisations have become flatter, with fewer layers of management, the level of upward
feedback about front-line events has increased, and information about marketplace shifts is
more likely to be fed into the recurrent planning process. On the other hand, an environment of
trust is required if workers are to be encouraged to report difficulties as well as successes.

Workers' willingness to communicate to management about factors that affect the
organisation's ongoing success is influenced by:

   routine ways workers behave towards each other, governed by the organisational culture;
   perceptions of what is important, mediated by incentives and rewards, promotions, training
    programs and performance targets;
   symbolic aspects such as titles, offices, cars and use of language;
   control systems for production, expenditure and productivity;
   power structures and allocation of resources; and
   stories about significant organisational events and actions.

Perhaps significantly, most literature on strategic planning deals with the steps of the process
but says little about the persons who may be engaged in this activity. This fact should alert HR
managers to the organisation's existing paradigms about how things get done and whether
people are motivated to contribute to strategy-making.

Strategic Human Resource Management Bankstown TAFE Semester 2, 2011


        1. Workforce planning should be integrated with corporate or business planning, to
        avoid any semblance of a ``stand-alone'' personnel system whose goals or criteria are
        not related to the organisation's needs.

        2. The overall system must incorporate business objectives and organisational
        conditions. Policies must be shaped by strategic and operational plans. Workforce
        planning must be perceived as a business system, with benefits and direction provided
        for the organisation as a whole, rather than just the personnel function. In other words,
        workforce planning must be driven by the demands of the organisation, not the
        priorities or power base of one section of it.

        3. Workforce programs and policies should be integrated with each other, so that all
        workforce planning activities work towards achieving the organisation's objectives.

        4. Workforce programs and policies should be flexible enough to accommodate changing
        priorities, new environmental conditions, the impact of technology and various other
        changes. It should be easy to update them. Finally, they should possess a ``what if''

        5. Planning data should be provided for the business as a whole, not just for workforce
        planning programs, so that data for the latter can be related to business plans.

        6. Use of information systems technology should allow assessment of strategic and
        operational demand. Programs such as career development and succession planning
        should not only be complementary, but also owe their design objectives to the demands
        of long-range strategic and short-term operational goals.

        7. Planning should include qualitative factors as well as numbers and bottom-line
        results, such as the core mission and the ability of the performance
        assessment/management system to produce future managers.

        8. It is important to attempt to merge individual employee commitment and the
        organisation's goals. The goals and aspirations of employees should always be taken
        into account, particularly in career planning programs.

Strategic Human Resource Management Bankstown TAFE Semester 2, 2011

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