Strategic Human Resource Management Persuasive

1. BACKGROUND/SCENARIO

1.1 INTRODUCTION ON STRATEGIC HUMAN RESOURCE MANAGEMENT

Human Resource Management refers to the policies, practices and systems that influence employees’ behavior, attitudes and performance (Noe, Hollenbeck, Gerhart & Wright, 2012). People are considered as the most valuable resources of a firm or organization. In order for a firm to succeed and survive in the market, the firm needs the right personnel, at right place and time. The new generations of workers are seen as the ones with lesser loyalty to their companies and have more expectations for autonomy, self-development and greater involvement in company decision making. The importance of human capital had been accelerated by the increasing emphasis on knowledge-based competitiveness in the current turbulent environment. Careful management of the workers who has been considered as valuable resource calls for a strategic focus on human resource management (HRM) in the firm. In today’s competitive market, we hear and see that many organizations are engaging into strategic planning to survive and prosper. Besides that in human resource and management circles, we can hear a lot about Strategic Human Resource Management. But what exactly is Strategic Human Resource Management (SHRM), what are its key features and what is the difference between Strategic Human Resource Management and traditional human resource management?

Strategic Human Resource Management can be thought of as “the pattern of planned human resource deployments and activities intended to enable an organization to achieve its goals” (Noe, Hollenbeck, Gerhart & Wright, 2012). In other words, SHRM can also be said as the linking of human resources with strategic goals and objectives which improves business performance and develop organizational culture that foster innovation, flexibility and competitive advantage. Through SHRM, an organization accepts and involves the human resource functions in the formulation and implementation of the organization’s strategies through human resource activities such as recruiting, selecting, training and rewarding.

1.2 INTRODUCTION ON THE RESEARCH

1.2.1 PURPOSE OF RESEARCH

This research was done to investigate the relationship between strategic human resource management practices and organizational performance, which then looks at the implications of the findings for both managers and practitioners. The research was done in Singapore and it links to HRM practices and organizational performance in Singapore.

1.2.2 OBJECTIVE OF THE RESEARCH

The prime objective of this study was to determine the relationship between strategic HRM and firm performance. Besides that, the study was also used to see how each strategic HRM variables and bundle of the strategic HRM variables together affect firm’s performance.

1.2.3 HYPOTHESES

The following specific hypotheses were tested:
1. Extensive training is positively related to firm performance (financial and HR) 2. Selective staffing is positively related to firm performance. 3. Empowerment is positively related to firm performance. 4. Performance appraisal is positively related to firm performance. 5. Broad job design is positively related to firm performance. 6. Performance-based pay is positively related to firm performance. 7. A bundle of strategic HRM variables are positively related to firm performance.

2. EMPIRICAL PAST STUDIES ON SHRM

The emergence of studies related to strategic HRM was seen since two decades ago. In the 1990’s, the researches were attracted to the concept of bundling of human resource practices and had conducted numerous studies on it.

Ferris, Russ, Albanese and Martocchio had conducted a study on 2,236 firms from the United States construction industry to examine on how effective management of human resources can contribute to positive organizational performance. In their study, they have identified the roles played by three important organizational functions and activities on firm performance. First is the status and importance of HRM function, where they found that firms with HRM departments are generally high performers. The second one is the role of unions whereby firms that had higher percentage of their workforce unionized performs better than those with lower percentage. Finally is the strategic planning where firms performed better when they were engaged in formalized strategic planning.

Cutuher-Gershenfeld had classified labor-management relations into traditional, adversarial and transformational relations where he concluded that transformational labor relations are associated with higher level of organizational performance. This was based on his analysis across workgroups in the primary manufacturing facility for Xerox Corporation.

Arthur conducted a questionnaire on human resource managers from the United States steel mini-mills and found out that mills with “commitment” systems had higher productivity, lower scrap rates and lower employee turnover. It was found by Macduffie that innovative HR practices affect performance not individually but as a group. This means that a group of HR practices is needed to see a higher performance in a firm.

Huselid discovered that high performance work practices were associated with lower employee turnover, greater productivity and higher corporate financial performance. This finding can be related to what Arthur had discovered earlier with the “commitment” system. Later, Delaney and Huselid found positive association between HRM practices such as training and staffing selectivity, and perceptual firm performance measures. Then Huselid, Jackson and Schuler found out that large firms in United States are more proficient in their technical HRM capabilities than in their strategic HRM capabilities. Generally, all this studies had revealed a positive relationship between HRM practices and firm performance. 3. MEASUREMENTS

3.1 STRATEGIC HRM VARIABLES

In this research, six different variables were used to measure a firm’s strategic HRM system. These six variables were assessed using different criteria.
The first variable is extensive training which were assessed using six-item Likert-type scale. The six-item scale was used instead of five-item scale in order to get a more accurate result. Some of the items under training were amount of money spent on training, opportunities for training and systematically structured training processes.

The second variable is selective staffing which was assessed using five items adapted from Snell and Dean. These items captured aspects of staffing practices such as high selection criteria and amount of money spend on selection.

Next were the empowerment, performance appraisal, broad job design and finally performance-based pay. The scale measurements for these variables were adapted from Bae and Lawler. Empowerment was measured using eleven items. One of the items was permitting enough discretion in doing work. Performance appraisal was measured using five items, broad job design was measured using four items and performance-based pay was measured using five items.

3.2 ORGANIZATIONAL PERFORMANCE VARIABLES

The questionnaire was prepared based on eight items from Khandwalla. The eight items were segregated into two scales which was the financial performance and HR performance. Long run level of profitability, growth rate of sales or revenues and financial strength were classified under financial performance, whereby employee job satisfaction, employee commitment or loyalty, public image and goodwill, product (or service) quality and employee productivity were classified under HR performance.

The five control variables that were used was firm size which was measured as the sum of full time and part time workers, union status, industry, ownership type and country of origin for foreign firms. 3.3 THE SAMPLE

The study was done using a mail survey approach. The target group for this survey was person in charge of human resource department and a total 0f 2160 companies were targeted as the initial respondents. Each firm that was included in the survey had at least 50 full time employees. These companies are either private limited or public limited with at least two full years of operation.

The questionnaire was pretested by first administrating it to five human resource executives from Singapore-based companies. The issues assessed during the pilot test were face validity, instructions and statement clarity, questionnaire layout and length. Based on the respondents’ comments, some improvements were made to the questionnaire.

4. RESULTS

4.1 METHOD OF ANALYSIS

A factor analysis was conducted before the data was analyzed. Basically, the factor analysis is done to test the validity and reliability of the variables. In this case, the purpose was to reduce the number of statements representing the six HRM variables into a more manageable set. Through the factor analysis, the category “broad-job design” was discarded and replaced with team-based work. The earlier one was removed because all the variables that supposed to measure the factor did not load together.

Then the data was analyzed using two models of hierarchical regression. In the first model, the control variables were used as independent variables against firm performance. In the second model, various strategic HRM factors identified in the exploratory factor analysis stage were added to the model.

4.2 SURVEY RESPONDENTS

The survey respondents were from a total of 191 companies. The companies were from six different industries consisting of manufacturing, construction, commerce, transport and communication, financial and business services and other services. Majority of the respondents were from the manufacturing industry followed by other services and then commerce.

The companies are either local firms, Japan, United States, Europe or other Asia based countries. Among these various ownerships, majority of the respondents were from local firms, followed by Japan and United States based companies.

4.3 FINANCIAL PERFORMANCE

Financial performance here refers to the degrees to which the financial objectives being or has been accomplished. The training, selective staffing, empowerment and performance appraisal have a positive impact on the financial performance. These variables affect the financial performance individually and also as a bundle. Performance appraisal has the highest positive impact on financial performance followed by empowerment, selection and training. The team-based work and performance-based pay is not positively related to financial performance of a firm.

Performance appraisal is a formal system of review and evaluation of individual or teams’ task performance. Performance appraisal will motivate employees to maintain or improve their performance. They will tend to work more efficiently. Since employees are considered as valuable resource in a firm, their improvement will automatically bring more profit to the firm. This is one example on how performance appraisal can give positive impact on financial performance. Empowerment on the other hand gives chances to employees to use personal initiative and to participate in wide range of issues, including issues involving financial matters in the firm. Thus, this can lead to a better financial performance.

4.4 HR PERFORMANCE

All the six variables have a positive impact on the firm’s HR performance. Empowerment has the highest positive impact followed by training and selection. Empowerment gives the employees a motivation to engage in problem solving and decision making. With this they have self efficacy to perform the job. They would be able to identify a problem quicker and solve it in a better way. Besides that, empowerment also leads to multitasking. The employees would be able to do wide range of job and not too focused on one job. This will eventually lead to jobs being done faster and effectively.

Training on the other hand, will help to enhance and improve the competency and skill of an employee. This competency and skill will then lead to better organization performance.

5. CONCLUSIONS

This research indicates that the strategic HRM variables have positive effect on organizational outcome especially firm’s HR Performance. The variables that were tested in this research directly influences employees’ productivity, job satisfaction and commitment. This criterion then leads to a better organizational performance. We can also see from this research that certain variables affect the aspect of the performance more than the other. This shows that each variable has its own influence towards a firm’s performance. For example, HR performance was affected more by empowerment rather than performance appraisal. This is different in the case of financial performance where performance appraisal had the highest positive impact on financial performance. From this, we can say that effective implementation of strategic HRM variables will result in better organization performance. First, a firm should do a thorough study on their firm’s mission and objectives. Then they should decide on which of these strategic HRM variables should be focused and implemented to achieve the firm’s goals.

In this research, a number of limitations were identified. One of it is that this research consists of a relatively small sample size. There were only 191 companies who participated in this study, out of 2160 companies which were targeted. Besides that, this research has narrowed down its target group of companies by only looking into six types of industries. There is also an unbalanced breakdown of companies where foreign based company was dominated by Japan companies. The second limitation of this research is that there were no any investigations on how a firm’s organizational values affect the HRM strategy. Each firm differs in the sense of organizational value that they practice. Thus, these values might affect the organizational performance of a firm. Another drawback of this research is that it only focused on human resource executives to pretest the questionnaires. This could have lead to common-source bias

6. RECCOMENDATIONS

It is recommended to use more representative samples in the future studies. This means that the study should look into a broader range of industries and ownership rather than focusing only on certain industry types and ownership. With that, a more balanced breakdown of companies will exist. This will give a more accurate result. Besides that, the pilot test should not only consist of those from human resource but also from other jobs like managers and financial executives, to minimize the common source bias. Besides that, any future study should also use multiple channels of data collection. In this research, only one channel was used which was a mail survey approach. There are many other channels that can be used such as giving the questionnaire face to face or having an interview. Then we can compare the data collected by each channel. This will give more data to be analyzed. In future study, the possibility of HRM system as mediator variable between HRM values and organizational performance should be investigated. This means that the core values practiced by a firm should also be taken into consideration and should be linked to the variables of strategic HRM. This would show how the value affects the organizational performance.

REFERENCES

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