Samsung Electronics HRM Strategy
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Purpose – The purpose of the paper is to describe how the understanding of the relationship between human resource management (HRM) and organizational effectiveness (OE) has evolved during the past three decades and to provide examples how firms are using HRM to improve their OE today by addressing several challenges that result from a broader stakeholder model. Design/methodology/approach – This paper reviews the past and current work on the relationship between HRM and OE.
Findings – This findings indicate that the relationship between HRM and OE is very different when comparing the past with the current work on the relationship between HRM and OE. A major reason for this is the current work on OE uses the multiple stakeholder model that accounts for many more stakeholders than the past work.
Practical implications – Human resource (HR) professionals have the opportunity to demonstrate many ways by which HRM can influence OE, and not just solely on the basis of firm profitability. Thus the use of the multiple stakeholder model today offers the HR professional and the HR profession many more opportunities to demonstrate their importance and impact. Originality/value – A systematic review and comparison of the past and current relationship between HRM and OE using the multiple stakeholder model have not been using both the viewpoints of both academics and practitioners.
Keywords Human resource management, Organizational effectiveness, Multiple stakeholders Paper type General review
Starting in the late 1970s and early 1980s, human resource management (HRM) professionals and academics started to more actively consider about how their work could contribute to the effectiveness (success) of their organizations ( Jackson et al., 2014). Following up on Michael Porter’s path-breaking insights about competitive strategy and competitive advantage in the early 1980s (Porter, 1980, 1985), we proposed an approach for linking HRM with organizational effectiveness (OE) that was grounded in an understanding of the employee behaviors needed to effectively implement alternative types of competitive strategies (Schuler and Jackson, 1987). Essentially we argued that a firm’s HRM practices should be designed with and grounded in an understanding of the specific employee behaviors required to successfully implement the firm’s particular competitive strategy. The objective of a firm’s HRM practices, we argued, is encouraging and supporting employee behaviors to drive successful strategy execution. As we recognized and acknowledged then, others had already begun to discuss the potential for HRM to contribute to OE, but our article was the first to describe the systemic relationships among HRM practices and specific approaches firms could use as they strive to gain competitive advantage.
That 1987 article may not have been the first article to discuss HRM using a strategic lens (i.e. looking at HRM’s role from an external perspective) rather than using the more familiar technical lens (i.e. looking from inside the human resource (HR) function outward), but it was one of the first ( Jackson et al., 2014; Gratton, 2000; Ulrich et al., 2013). At the core of our initial, earlier approach to strategic HRM were first, the development of a menu of HRM practice choices and second, the assertion that the choices a firm made among the different available HRM practices should reflect the specific behaviors required by the firm’s competitive strategy. In other words, HRM practices should not be chosen based on technical merits alone – they should be chosen to facilitate strategy implementation. We argued that particular competitive strategies – e.g., competing base on innovation, or competing based on cost, or competing by offering the best qualitydemand particular essential behaviors from employees; therefore, a strategic approach to HRM involves choosing HRM practices that encourage and support those essential behaviors.
The menu of HRM practices and the essential behaviors associated with each competitive strategy that we described in our 1987 article were grounded in research conducted at the time, and we provided case studies of firms that successfully pursued three basic competitive strategies. Each of the three strategies, namely, innovation, quality and cost, were described with a focus on the behaviors needed from employees in order to successfully implement each of those strategies. Then based upon a review of the research and practice at that time, we proposed HRM practices that would be appropriate for each of these competitive strategies. An in-depth analysis of three firms revealed good agreement between our proposed model and the practices that were actually being used in those focus companies. In other words, the proposed linkages were supported by our case studies.
But that was a long time ago. Enough time has passed since then that we can now look back and consider how that earlier model of strategic HRM has
evolved into today’s model of HRM and EO. As was true when we first proposed yesterday’s model, our new model is grounded in our analysis of a great deal of research done by academics as well as observations of HRM in firms worldwide (Zhao and Du, 2012; Huselid, 2011; Rucci et al., 1998; Huselid et al., 1997; Jiang et al., 2012; Purcell, 1995; Sparrow et al., 2010; Ulrich, 2011). Before describing our current model, however, we first briefly review the essential elements of our original model of the linkages between HRM and OE, for these elements are included in today’s model. Essential elements of yesterday’s strategic HRM model
There were four major elements of yesterday’s model: the competitive strategies, the required (or needed) employee behaviors associated with a strategy, the menus of HRM practices that can be used to align HRM with the firm’s strategy, and the proposed linkages between competitive strategies, selected HRM practices, and employee behaviors.
To illustrate our early model for linking HRM to OE, we used the competitive strategy framework proposed by Porter (1980, 1985) and modified it slightly to highlight the potential role of HRM in gaining competitive advantage. Thus we identified three major competitive strategies that firms use to gain competitive advantage: innovation, quality enhancement and cost reduction. To illustrate how HRM can support the innovation strategy for developing products and services that are distinctly different from those of competitors, we described the case of a small manufacturing firm called Frost Incorporated. To illustrate how HRM can support the quality enhancement strategy, we described the case of a single plant of Honda Motor Manufacturing of America. And to illustrate how HRM can support the cost reduction strategy whereby firms attempt to gain competitive advantage by being the lowest cost producer, we described the case of the UPS Corporation.
Employee role behaviors
Reflecting the dominant perspective on personnel management that pervaded research and practice three decades ago, our discussion focussed on using HRM as a tool for shaping employee behaviors. However, rather than emphasize the behaviors required by specific tasks and jobs, we focussed on role behaviors associated with each of the three competitive strategies. Role behaviors describe what is needed from employees who work with others in a social environment. Based upon a review of the literature at that time, we argued that the role behaviors needed from employees were a function of a firm’s competitive strategy. The several dimensions along which employees’ role behaviors could vary, included: degree of repetition, time span, degree of cooperation, concern for quality, quantity, and process, acceptance of responsibility, willingness to change, comfort with stability, breadth of skills used; and job involvement. These role behavior dimensions were the ones we believed were most likely to capture differences in the behaviors of employees working to implement the three major types of competitive strategies. HRM practice menus
Three decades ago, the idea that HRM practices could be treated as an integrated system was not yet well established. Instead, each functional specialty of HRM existed within its own silo. In general, at that time it was common for HRM professionals working within each functional specialty to make choices about the design of practices without fully considering interdependencies between functional areas. At that time, the focus of HRM professionals was ensuring that employees had the technical skills and knowledge required for specific jobs, and little attention was paid to the role behaviors that were required from all employees in order to successfully implement a particular competitive strategy. To draw attention to how HRM practices could be used to encourage and reinforce different sets of role behaviors, we offered the menus of HRM choices shown in Table I.
Finally, we proposed three sets of linkages that created the appropriate alignment between HRM practices and each of the three major competitive strategies, with our descriptions of required employee behaviors serving as the foundation for the linkages. Briefly, we described the following “ideal” three sets of linkages: .
Innovation strategy: the role behaviors required to successfully implement an innovation strategy include: a high degree of creative behavior; a longer term focus; a relatively high amount of cooperation; a moderate concern for quality and quantity; greater risk taking; and a high tolerance for ambiguity, uncertainty and failure. The HRM practices that encourage and support these role behaviors include job designs that require close interaction and coordination across individuals and teams, performance appraisals that reflect longer-term team achievements, job assignments to develop skills for a variety of other positions in the firm, relatively broad career paths, compensation practices that emphasize internal equity more than external equity and provide individuals with more choices about how they are compensated.
Cost reduction strategy: the role behaviors required to successfully implement a cost reduction strategy include: rather repetitive and predictable behaviors; a short-term focus, primarily individual-based job designs; modest concern for quality; high concern for quantity and results; low risk-taking and high degree of comfort with stability. The HRM practices that support these role behaviors include relatively fixed and stable job descriptions, narrowly designed jobs and career paths, short-term performance appraisals that are results oriented, minimal training and development, and market-based compensation.
Quality-enhancement strategy: the role behaviors required to successfully implement the quality-enhancement strategy include: relatively repetitive and predictable behavior; an intermediate- to longer-term perspective; modest amounts of cooperation; high concern for quality; modest concern for quantity; high concern for process; low risk-taking; and greater commitment to the firm.
The HRM practices that support these role behaviors include relatively fixed and stable job descriptions, high degrees of employee participation in decisions concerning one’s immediate work conditions and the job itself, a mix of individualand team-level criteria for selection and performance appraisals, relatively egalitarian treatment of employees, some employment security, and extensive and continuous training.
These proposed linkages between competitive strategies, required role behaviors and HRM practices were grounded in our review of scholarly research, a global survey of nearly 3,000 firms conducted in cooperation with IBM and Towers Perrin (2000), and in-depth case studies of three firms that each appeared to have a solid “bottom line” – that is, the three firms each had achieved some degree of OE using indicators such as profitability, growth and competitive advantage. At the time, these ideas seemed novel and a bit complicated. In hindsight, it is clear that our approach was much too simple. Today’s model of HRM with OE
So, how do things stand today? How have our ideas about how HRM can contribute to OE evolved since 1987? What does today’s model of HRM and OE look like? The major elements of our current model are shown in Figure 1. The old and new models share a fundamental similarity: both models position HRM practices at the center of a complex set of relationships between organizational conditions (such as business strategies), employees, and organizational outcomes (including bottom-line indicators of effectiveness). But today’s model is more expansive.
Whereas yesterday’s model focussed exclusively on competitive strategies as drivers of decisions, today’s model includes many additional aspects of a firm’s internal and external environments, for the evidence shows that environmental context shapes HRM practices in a variety ways ( Jackson and Schuler, 1995). Thus, today’s model is more contextual and less directly contingent. Just as important, today’s model recognizes the importance of addressing the concerns of a broad array of important stakeholders. Whereas yesterday’s model emphasized bottom-line indicators (e.g. financial performance) of OE, today’s model explicitly recognizes that effective organizations strive to achieve success on many more indicators (see all the outcomes for internal and external stakeholders shown in Figure 1).
Our reading of the literature since 1987 indicates that all of the components shown in Figure 1 are now being considered as essential to an understanding of HRM and OE ( Jackson et al., 2014; Guerci and Shani, 2013), and reflect parallel developments in the broad domain of strategic management (Ireland, 2013). Thus, today’s more comprehensive model of HRM and OE includes elements of the external global environment, the internal organizational environment, the HRM system and multiple stakeholders. We organize our discussion around these components and highlight the richness of the relationship between HRM and OE we experience today, and what this means for the HRM field.
Understanding and partnering with multiple stakeholders
As shown in Figure 1 and illustrated with the examples of firms such as Holcim, Honda and Hyundai, OE requires integrating HRM with all other aspects of the business, including R&D, operations, sales and marketing, distribution, service, etc. Besides understanding the full complexity of a firm’s internal context and working with all internal stakeholders, OE requires building, nurturing and sustaining relationships with a firm’s many external stakeholders, supply chain partners, joint venture partners, customers and community groups. Such relationships are developed through human interactions and built on interpersonal trust. Thus, the challenges of managing around and beyond the blurry boundaries of organizations creates many new opportunities for HRM to contribute to OE by prompting discussions around managing risk and the reputational consequences of a firm’s many interdependencies with various stakeholder groups (Sparrow and Miller, 2013).
Gathering, interpreting and using data
Partnering successfully with internal and external stakeholders often involves informing, and educating these partners about HRM-related issues and interpreting information through an HRM lens. Doing so effectively requires HRM to abreast of world events, everywhere and all the time. It means turning to all forms of media to see what is happening and thinking about the implications of what is happening. It involves gathering information from sources inside and outside the firm, evaluating it and acting on it.
As massive amounts of data become available from inside and outside the firm, the HRM implications must be interpreted and acted upon quickly and efficiently. Data analytics and digital technology make it easier to spot trends and experiment with new HRM approaches, but the ability to do so depends on ensuring that the available data is reliable, valid and useful to the decisions being made. Continuous improvements in all aspects of HRM are now expected. Playing the roles of gathering, interpreting and using data to demonstrate such improvements and their consequences for OE is perhaps HRM’s most exciting opportunity going forward. Balancing concerns of multiple stakeholders
After two decades of research investigating “strategic” HRM, we still have little understanding of how effective organizations use HRM systems to improve their financial performance while simultaneously addressing all of the major concerns of employees, customers, partner organizations and society. Nor do we yet know much about why some firms invest more to acquire and develop HRs, the conditions under which investment in formal HRM systems is worthwhile, or the dynamics that influence the relative salience of employees’ concerns, or any other stakeholder relative to the concerns of the other stakeholders. Thus, HRM professionals and scholars can play an important role in improving our understanding of HRM and OE by conducting research together to help reveal further understanding of these relationships. Conclusion
We have come a long way in our thinking about HRM with OE. Today, we are much more aware of the need to consider a broad array of indicators of OE that reflect the perspectives of a firm’s multiple internal and external stakeholders. The examples described in this paper provide just a glimpse of the many new challenges to be addressed by a modern HRM model, and their implications for HRM’s evolving roles.
Broadly speaking, today HRM is called upon to: find solutions that address the sometimes complementary and sometimes conflicting concerns of multiple stakeholders; achieve mutual gains when possible; and achieve a fair balance when mutual gains seem out of reach. Learning to meet these challenges effectively will help ensure that the HRM professional successfully seizes the many opportunities to make significant contributions to OE.
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