Developing People And High Performance Organisations: Individual Essay

FeedbackThis posting is an Individual Essay that I wrote in the subject Developing People And High Performance Organisations at La Trobe’s Graduate School of Management (GSM) in October 2010.

The question was  “Discuss the ways in which a strategic approach to HRD can play a strategic role within an organisation” which proved to be a huge challenge. Luckily two dear friends helped me along the way. Kama Knudsen assisted me with general structure and Ed Williams with proofreading and help me making it coherent. The question for the essay involves two ‘strategic’ – some of the most overused words in business lingo – which posed a big challenge in the correct usage of the terms. Ann Lawrence, the excellent lecturer, really liked my effort and gave me 30 out of 30 points. I think this is the first time I score full and it’s particularly nice to receive a nice assessment as this from a lecturer that I truly admire for knowledge and lecture delivery skills.

But this blog is not for boasting academic achievements (although I’m very pleased with the result). Instead, the intention is to assist other students of Human Resource Development students in their studies. If the essay has helped you then please leave a message for me.

In the majority of industries, the competitive environment is intensifying and organisations must continuously develop core competencies, resources and unique capabilities to enable them to compete effectively in today’s dynamic business environment. However, globalization in the form of amplified dissemination of technology and access to similar resources make traditional sources of competitive advantage easier to imitate, thus making it harder for organisations to differentiate themselves from the competition (Hitt, Ireland & Hoskisson, 2009; Løwendahl & Revang, 1998; Forster & Browne, 1996; Prahalad & Hamel, 1990). As the speed of change and level of uncertainty increase, strategic thinking becomes even more important (Mintzberg, 1994). Recognizing such challenges, organisations are increasingly emphasising human resources (HR) as their key source of competitive advantage (Hitt et al., 2009; Pilenzo, 2009; De Cieri, 2008; Barney & Wright, 1998). This focus is transforming the role of human resource management (HRM) from a reactive function, directed by the operational needs of the firm, to a strategic function wherein a systematic approach is taken towards the coordination of employee management that aims to be aligned with and conducive to accomplishing the organisation’s strategic objectives (De Cieri, 2008; Schuler & Jackson, 2007; Becker & Huselid, 2006; Delahaye, 2005; Salaman, Story & Billsberry, 2005; Boxall & Purcell, 2000). Following this approach all facets of HRM, especially human resource development (HRD), should be linked with an organisations’ overall strategy (Hitt et al., 2009; Torraco & Swanson, 1995).

Strategic HRM is when organisations make strategic choices in their human resource practices with targets of reaching the economic goals of their stakeholders, the satisfaction of employees, as well as their social legitimacy (Boxall & Purcell, 2000). To effectively align HRM with such strategies, organisations must assess how their current HRM practises, policies and initiatives are configured as well as how these are connected to and can add value towards achieving strategic objectives. They must also consider which HR practises and resources are critical to their organisation’s performance, identify the gaps between available and required human resources and determine HRM strategies to resolve these gaps and contribute to generating competitive advantage (Boxall & Purcell, 2000; Luoma, 2000a). Similar lines of thought are given by Tichy et al. (cited in Lewis & Heckman, 2006) defining strategic HRM as making the HR department aware of the organisation’s business strategy and structuring the HR practices to support these.

Many scholars have found that organisations increasingly rely on the effective management of human capital for organisational success. Through partaking in strategy development and understanding the resulting operational consequences, HRM can effectively align, design, and plan actions to best fit the goals and thereby better contribute to the organisation’s competitive abilities. By being conscious of the organisation’s human capital, ‘knowledge, education, skills and expertise’, HR executives can decide whether this capital will require enhanced abilities through training and development or via recruitment and selection of new employees (Clardy, 2008; De Cieri, 2008; Kazlauskaite & Buciuniene, 2008, p.80; Hatch & Dyer, 2004).

Knowledge available in an organisation’s human capital is possibly the most significant and can be the root of all competitive advantages (Hitt et al., 2009; Huda, Karim, Ahmed, 2007; Miller, Du Pont, Fera, Jeffrey, Mahon, Payer, & Starr, 1999; Holton & Yamkovenko, 2008) and the challenge for organisations should be to transform the implicit knowledge found in employees into explicit knowledge of the organisation (Bozbura, 2004).

Essentially, HRD is a function of strategic HRM expanded on for organisations that operate in a more complex and unpredictable environments (Delahaye, 2005). Further, the areas of strategic human resource planning (SHRP) and performance appraisal in strategic HRM are linked with HRD in that they overlap and complement each other (Delahaye, 2005). According to Stonehouse, Hamill, Campbell & Purdie (2004), human capital, as well as other resources, can be generated either inside the organisation or be acquired from external suppliers.

There are multiple definitions of HRD in the literature. Wimbiscus (1994) found early that the difficulty of a straightforward HRD definition and model originates in contributions to the subject from a wide range of scholars and researchers in areas such as industrial relations, psychology, education, engineering and management. More recent scholars narrow it down to three principal bases; the adult learning system, system theory and psychology and while important functions of HRD are workplace learning, employee development and general training and development (McGuire & Cseh, 2006). Graetz, Rimmer, Smith & Lawrence (2010) defines HRD along similar lines as the activities concerned with learning and improving the overall performance of its human resources and includes activities such as education, career management, organisational learning and training and development. Delaheye (2005) points out that the external environment is monitored by an organisation’s strategic plan and HRD must be guided by this which can be seen in the supply and needs of the local labour, legal and political situation in the external environment. Delahaye (2005) also discusses the need for monitoring the internal environment and that HRD executives need to keep an eye on an organisation’s quality control system, financial system, staff turnovers, sick-leave figures, safety reports, performance appraisal systems and overall managerial observations. These areas can provide HRD executives an early warning of areas that need attention (Delahaye, 2005). He describes HRD management consists of four stages; the investigation stage, the design stage, the implementation stage and the evaluation stage. The investigation stage is where the needs of the organisation are investigated and identified. After that comes the design stage which examines the aims, objectives and the content that needs to be learned. Third is the implementation stage consists of the actual management and coordination of the program and the conducting of structured or unstructured learning strategies. The final evaluation stage can utilize a range of different models to assess the extent and effectiveness of the planned learning (Delahaye, 2005).

Cappelli (2008) proposes that organisations apply a supply chain model to forecast its human resource demand. His model involves two approaches to address the uncertainty on the demand side by comparing buy versus make decisions and how to reduce risk in demand forecasting. Further, his model proposes two other approaches on the supply side where organisations should consider the return on investment in HR development while protecting this investment by generating internal opportunities to assure that the talent stays with the organisation (Cappelli, 2008). Farndale, Scullion & Sparrow (2010) and Benest (2008) add the strategic importance of retaining high-value employees.

There are also several definitions of strategic HRD found in the literature and there is, according to Clardy (2008b), a substantial difference in HRD and strategic HRD in that the latter is actively contributing to an organisation’s strategic planning and the protection and development of core competencies. Clardy (2008b) suggest the main roles for HRD in core competency management include informing the strategic planning process and identifying and protecting core competencies. Porter (1985 p47), in his famous value-creating activities, described HRD as a support function while recent scholars suggest HRD could be one of the strategic value creating activities (Clardy, 2008b; Luoma, 2000b).

The confusion and difficulty in defining HRD versus strategic HRD is the uncertain nature of strategy itself. Having HRD supporting an organisation’s plans or strategies doesn’t inherently make HRD strategic. Luoma (2000b) also finds strategic HRM complex and multidimensional therefore suggesting three distinct drivers for approaching HRD: need driven, opportunity driven and capability driven. Still, the HRD definitions and practices outlined earlier can be applied within an organisation so that they play a strategic role. This will be discussed by using models proposed by Schuler & Jackson (1987) and Miles & Snow (1984).

Schuler & Jackson (1987) propose that organisations can apply three basic strategies in order to gain a competitive advantage: an innovation strategy allowing the development of products and services that differ from their competitors, enhancing the quality of products or services, or through cost reduction. They describe an organisation’s HR management and development practices as one of the main contributors in achieving these strategies (Schuler & Jackson, 1987). An organisation can also apply a more pro-active role. For example, 3M using an innovation strategy would employ and/or develop employees that can bring innovations to the marketplace. This type of organisation needs an environment that not only allows for change but also seeks to create change (Garavan, 2007). Toyota give an example of a quality-driven strategy via continuous improvement on their products and services by utilizing an HRD program that enabled through methods such as internal quality groups. JetStar is a company driven by its cost-saving strategies and are successfully applying HRD on-the-job training contributing to operational productivity and efficiency (Garavan, 2007).

HRD can support these basic strategies through by applying different models or methods (Porter, 1985; Wimbiscus, 1994; Hagan, 1996; Luoma, 2000a; Delahaye, 2005; McGuire & Cseh, 2006; Clardy, 2008a; Graetz et al., 2010) or take a more proactive approach in jointly setting the organisation’s strategies (Miles & Snow, 1984; Torraco & Swanson, 1995; Garavan, 2007; Clardy, 2008b, Holton & Yamkovenko, 2008)

Miles & Snow (1984) and Torraco & Swanson (1995) saw the need for a more proactive rather than reactive stance of HR executives to be better equipped to reduce or eliminate the gap between emerging organisational strategies and structures which would make HR executives more valuable as leaders rather followers in these areas. Miles & Snow (1984) write about three basic strategies and characteristics of the organisation that follow these. The first is the defender strategy which operates in a rather narrow and stable market. This type of organisation would have highly skilled managers but with a narrow focus so that they rarely need to make major adjustments in their technology, structure or operation methods. The second type of strategy is found in organisations that create change and uncertainty in the marketplaces called them the prospectors. Prospectors innovate by developing new products and markets plus having management that is strong in these areas. The third category is the analysers. These organisations normally have one stable product or service with formalized and efficient structures. At the same time, the analysers watch their competitors for new ideas and try to adopt more promising ones (Miles & Snow, 1984).

As shown in Miles & Snow’s (1984) model, the strategy of an organisation will inform them which type of HRD is needed. As no organisation has unlimited resources, they will need to assess how to do this most effectively. Next, this essay will discuss the challenges of how to identify which people the organisation should invest in and how.

Lepak & Snell (2002) demonstrates that different organisations will have different and unique human capital thus building a model around employees’ strategic value and uniqueness. They recognized four different employee modes and linked them with a particular type of appropriate human resource configuration. The first category is for employees that possess both high strategic value and bring uniqueness to the organisation. They are categorized as knowledge-based core employees and fit into internal development and long-term commitment base configurations. The second category is for employees that possess high strategic value but are less unique. These employees are often promoted internally and while they have strategic value to the organisation, their skills are also easily transferable to other organisations. These employees fit with the productivity based configuration. In this type of organisation, employees do not receive much training or development. Contract workers fit in the third category, which are of neither strategic value nor bring any uniqueness to the organisation. These are the types of jobs that are most often contracted for short periods where internal training is limited and aims only to meet regulations. The fourth category is where employees possess some uniqueness but are not of much strategic value. These are categorized as the collaborative-based mode and are found in alliances or partnerships that are often commissioned (Lepak & Snell, 2002).

The purpose of applying a model such as the one proposed by Lepak & Snell (2002) is that it enables an organisation to identify who and how to invest in HRD. The importance of this is to effectively and efficiently maximize investment with their limited resources. According to the model proposed, organisations should invest more HRD effort in employees that fit the knowledge-based core empowering and involving such employees that will bring both strategic value and uniqueness to the organisation. Employees in productivity-based configurations are likely to bring value to customers but because such employee skills are easily transferable, organisations are less likely to invest as much in these employees compared with a knowledge-based configuration. In fact, because of the transferability and short time required to being productive, they suggest that these employees can just as well be recruited. Training and development related activities for contract workers would be mostly limited to rule compliance, regulations and procedures. As the uniqueness level in the alliance/partnerships employment mode and outcome is high and outcome the organisation is likely to invest much in the relationship itself while little or no HRD investment required (Lepak & Snell, 2002).

Having discussed the need for case for a strategic approach to HRD, how it can be implemented and whom the investments should be focus on; the essay will now look at some practical considerations before providing a conclusion.

As discussed earlier, HR executives will need a comprehensive understanding of strategic objectives and how they can contribute to the organisation’s strategies and goals. Ruona, Lynham & Chermack (2003) found that many executives struggle with identifying core competencies and the competitive advantage that HRD could bring to their organisation. Their research found four main challenges facing strategic HRD. Foremost is the importance of presence and recognition in organisations. They also point out that HRD is often absent in boardroom discussions and other leadership positions, which can be attributed to the perceived lack of relevancy, contribution and impact on strategy and bottom lines. Their research also showed that HRD practitioners were often unable to convince organisational leaders of the strategic value that their profession can bring as well as the inability to develop the methodologies required to integrate HRD management in organisations. Further, they their research found that HRD practitioners were unable to provide a workable return on investment model. The lack of a clear HRD identity was the largest attributor to the above challenges. When identifying stakeholders, it was found that HRD management has largely focused on large corporations and that practitioners wondered whether HRD could be expanded to work in communities, schools, nations and society in general. Finally, in their research, there were concerns about standards and professionalism in the field as well as questions were raised how to differentiate between good and bad practice, the theories and the practitioners themselves (Ruona et al., 2003). Therefore, if HR executives are unable to sell or convince top management of the concept of strategic HRM in general, and HRD in particular, then they will not likely be supported through resources, funding and legitimacy and therefore unable to effectively support the achievement of strategic objectives. HRD can be a great tool for motivating employees, thus adding further value to the competitiveness of the organisation (De Cieri, 2008; Delahaye, 2005). Likewise, as suggested by Collings & Mellahi (2009), organisations should not invest the same degree of HRD in all staff but rather focus HRD investment on unique and strategically important employees. If HRD is not fully or correctly utilized, it may have the opposite result such as demotivated staff or wasted resources. For example, organisations might skip the evaluation stage of an HRD program with the aim of reducing costs but if organisations forsake this important stage, according to Delahaye (2005) it will result in unawareness of the program’s intended effect.

A properly aligned strategic approach to HRD should play a strategic role within an organisation contributing advancement toward organisational objectives, overall competitive advantage and success. In fact, many scholars suggest that the knowledge available in an organisation’s human capital can be the root of all competitive advantage. This essay has discussed some basic strategies for achieving competitive advantage using HRD and the need for a proactive approach by HR executives. It has also outlined and discussed who to invest in and how to effectively make this investment. Some of the largest issues HRD is facing are the definition of HRD itself, the presence of HRD in top management discussions and how HRD initiatives can be measured for effectiveness. In conclusion, when an organisation can effectively identify and implement their human resource development needs according to their overall strategy, they are better equipped for success.


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