Today the organisations operate in a very dynamic environment. The external and internal forces are constantly changing the rules of the game, to face these changes the organisations and businesses must develop new strategies to remain competitive. Changes in strategies determine the direction of each division within the firm including HRM. HRM plays a very vital role in all the operations of the organisation.
In recent years, HRM has changed profoundly and it will continue to change as the work needs of the organisations are constantly changing and becoming more complex. Organisations are recognising the need for a strategic approach to HRM. HR management can also offer competitive intelligence (like new incentive plans being used by competitors, data regarding customer complaints etc.) that may be helpful while giving shape to strategic plans.
HR function can also throw light on company’s internal strengths and weaknesses. IBM’s decision to buy Lotus was probably prompted in part by IBM’s conclusion that its own human resources were inadequate for the firm to reposition itself as an industry leader in networking systems. Some firms even develop their strategies based on their own HR- based competitive advantage. Software Majors, Wipro, TCS have not slowed down their recruitment efforts during the lean periods, pinning hopes on their own exceptionally talented employee teams. In fact, they have built their strategic and operating plans around outsourcing sourcing contracts from US, Europe, Japan and Germany-which would help them exploit the capabilities of their employees fully. HR has a great role to play in the execution of strategies.
Example: HDFC’s competitive strategy is to differentiate itself from its competitors by offering superior customer service at attractive rates (searching the right property, finishing legal formalities, offering expert advice while negotiating the deal, competitive lending rates, fast processing of applications, offering other financial products of HDFC at concessional rates, door-to-door service as per customers’ choice etc. (HDFC’s growth architecture, Business Today, Jan 6, 2001). Since the same basic services are offered by HDFC’s competitors such as LIC Housing Finance GIC Housing Finance, banks and private sector, players like Dewan Housing Finance, Ganesh Housing, Live Well Home, Peerless Abassan etc. HDFC’s workforce offers a crucial competitive advantage (highly committed, competent and customer-oriented workforce). HR can help strategy implementation in other ways. It can help the firm carry out restructuring and downsizing efforts without rubbing employees on the wrong side- say, through outpacing employees, linking rewards to performance, reducing welfare costs, and retraining employees. HR can also initiate systematic efforts to enhance skill levels of employees so that the firm can compete on quality.
Globalisation, deregulation and technological innovation have in recent times created the need for rather, faster and more competitive organisations. Under the circumstances, employee behaviour a]nd performance is often seen as the best bet to push competitors to a corner and enhance productivity and market share. HR practices build competitiveness because they allow for strategic implementation, create a capacity for change and instil strategic unity.
Strategic HRM Environment realises that people can make or break an organisation because all decisions made regarding finance, marketing operations or technology are made by an organisation’s people. So it accords the highest priority to managing people and tries to integrate all HR programmes and policies with the overall corporate strategy. It compels people at all levels to focus more on strategic issues rather than operational issues. More importantly, it believes that there is no best way to manage people in any given organisation. Even within a given industry, HR practices can vary extensively, from one organisation to another. Armed with such a flexible approach, Strategic HRM Environment tries to develop a consistent, aligned collecting of practices, programmes and policies to facilitate the achievement of the organisation’s strategic objectives.
The focus on managing people is more systematic with an understanding of the myriad factors that impact employees and the organisation and how to manage multiple relationships to ensure satisfaction at all levels of the organisation, Strategic HR is transformational in nature, in that it helps the people and the organisation to adopt, learn and act quickly. It will make sure that change initiatives that are focused on creating high-performance teams, reducing cycle time for innovation, or implementing new technology are defined, developed and delivered in a timely way.