Chapter 1 Human Resource Management

Learning Objectives
• Explain what is meant by human resource management
• Understand the relationship between human resource management and management
• Describe the HR manager’s role
• Understand the human resource management activities performed in organisations
• Explain the meaning of strategy
• Explain the meaning of strategic human resource management
• Describe a strategic approach to human resource management
• Appreciate the strategic challenges facing human resource management

Chapter Outline
This chapter introduces the concept of Human Resource Management (HRM) and its role within
organisations. It is divided into several sections that describe the activities involved in HRM and the
relationship between HRM and an organisation’s business strategy. The material contained in this chapter
serves as the basis upon which the entire book is built.

What is Human Resource Management?

The focus of human resource management (HRM) is on managing people within the employer-employee
relationship. It involves the productive use of people in achieving the organisation's strategic business
objectives and the satisfaction of individual employee needs. HRM is a major contributor to the success of an
enterprise because it is in a key position 'to affect customers, business results and ultimately shareholder
value'. Ineffective HRM is a major barrier to employee satisfaction and organisation success.

HRM and Management

The purpose of HRM is to improve the productive contribution of people, and should therefore be related to
all other aspects of management. There are two basic approaches to HRM: instrumental HRM - (or hard)
approach that stresses the rational, quantitative and strategic aspects of managing human resources; and
humanistic HRM - (or soft) approach that emphasises the integration of HR policies and practices with
strategic business objectives, but recognises that competitive advantage is achieved by employees with
superior know-how, commitment, job satisfaction, adaptability and motivation.

The new role of HR Managers

As HRM becomes more business oriented and strategically focused, four key roles for HR managers can be
identified:

• strategic partner – a strategic partner role requires the ability to translate business strategy into action. This
role allows the HR manager to become part of the business team.

• administrative expert – to become administrative experts HR professionals must be able to: re-engineer HR
activities through the use of technology, rethinking and redesigning work processes and the continuous
improvement of all organisational processes; see HR as creating value; and measure HR results in terms of
efficiency (cost) and effectiveness (quality).

• employee champion – The HR professional must be able to relate to and meet the needs of employees.

• change agent – The HR manager needs to act as a change agent, serving as a catalyst for change within the
organisation; by leading change in the HR function and by developing problem-solving communication and
influence skills.
HRM Activities
HRM involves the acquisition, development, reward and motivation, maintenance and departure of an
organisation's human resources. To do this successfully HRM must do all of the following:

• Job analysis
• Human resource planning
• Employee recruitment
• Employee selection
• Performance appraisal
• Human resource development
• Career planning and development
• Compensation
• Benefits
• Industrial relations
• Health and safety programs
• Manage diversity

Strategy
What is strategy?
'Strategy defines the direction in which an organisation intends to move and establishes the framework for
action through which it intends to get there.' The purpose of strategy is to maintain a position of advantage by
capitalising on the strengths of an organisation and minimising its weaknesses. To do this, an organisation
must identify and analyse the threats and opportunities present in its external and internal environments.

What is strategic management?

Strategic management is the process whereby managers establish an organisation's long-term direction, set
specific performance objectives, develop strategies to achieve these objectives in the light of all the relevant
internal and external circumstances and undertake to execute the chosen action plans. The aims of strategic
management are to help the organisation to achieve a competitive advantage and to ensure long-term success
for the organisation.

Components of strategic management

Strategic management involves Strategy formulation - selecting an organisation's mission, or purpose, and
key objectives; analysing the organisation's internal and external environments; and selecting appropriate
business strategies, and Strategy implementation - designing an organisation's structure and control systems
and evaluating the selected strategy in achieving the organisation's key objectives.

Organisational mission and objectives - Mission statements are the operational, ethical and financial
guiding lights of companies. The organisation's mission provides the context and direction for the formulation
and evaluation of HRM objectives, strategies and action plans. The mission statement identifies why the
organisation exists and what its focus is.

Environmental analysis - This includes External environmental analysis which identifies strategic oppor-
tunities and threats, and analysis of the internal environment which aims to identify the organisation's
strengths and weaknesses.

Strategy selection - This involves generating a series of strategic options based on the organisation's
objectives and a comparison of its internal strengths and weaknesses and its external opportunities and
threats. Alternative strategies are evaluated to identify which one will best achieve the organisation's objec-
tives. The aim is to select the strategy that gives the best alignment or fit between the external and internal
environments.
Strategy implementation - It is critical for successful strategy implementation that employees accept the
changes demanded by the new or revised strategies. Similarly, an organisation's structure must be designed to
enhance the implementation of a strategy.

Performance evaluation - Management must decide how to monitor and measure performance so the
effectiveness of a strategy can be evaluated. This may involve a management by objectives (MBO) approach
- setting performance objectives, measuring performance, comparing actual performance with targeted
performance and taking any corrective action required.

Feedback - Strategic management is an ongoing process. The implementation of a strategy must be

monitored to determine the extent to which it is realising the organisation's major strategic objectives. It is
important to determine whether the strategy is being implemented as planned, and whether it is achieving the
desired results.

Conflict, politics and strategic change - Conflict and politics arise with strategic change. Agendas, conflict
over resources and the need for change may produce power struggles within the organisation. Managers
often have to make decisions and plan in rapidly changing environments, so it is important that they remain
focused on short and long-term objectives.

Types of strategies
Growth - An organisation can expand either through internally generated growth or through acquisitions,
mergers or joint venture. Growth may be concentrated on building existing strengths or on moving into new
or unrelated areas of business.
Retrenchment - The emphasis of retrenchment is on performance improvement by increasing productivity,
cost cutting, downsizing, re-engineering, and selling or shutting down business operations.
Stability - This is a neutral strategy that attempts to maintain the status quo by pursuing established business
objectives; and is often used when an organisation is performing well in a low-risk environment or when an
organisation needs to consolidate after a period of rapid growth or restructuring.
Combination - An organisation can pursue more than one strategy at the same time.

Choosing strategies
Different types of organisational strategies produce a need for particular HR strategies. It is important that
HR strategies accurately reflect an organisation's master business strategy to ensure an appropriate fit which
enables HR action plans to support the master strategy and the direction of the organisation.

Need for HR strategy

Increasing pressures have forced managers to critically rethink their approaches to HR management. Merging
business strategies and HRM activities has become a critical source of competitiveness for organisations.
Managers consequently must adopt a strategic mindset or way of looking at and thinking about the
management of people. HR managers have a responsibility to ensure that HRM is strategically aligned with
the organisation's overall business objectives.

Aims of HRM strategy

HRM strategies outline the organisation's people objectives and must be an integrated part of its overall
business strategy. They must focus on what line management sees as the main business issues. HRM activities
can then be clearly related to the direction of the business.

Strategic organisation and strategic HRM objectives

Organisations can improve their environment for success by making choices about HR planning, staffing
appraisal, compensation, training and development and labour relations that are consistent with and support
the corporate strategy. This means that HRM objectives, policies and plans must be integrated with the
organisation's strategic business objectives. HR objectives, policies and plans must be judged by how well
they help achieve the organisation's strategic business objectives.

Without such a strategic view, HRM will remain a set of independent activities, lacking in central purpose and
coherent structure. It will fail to optimise opportunities for the organisation's survival and growth. HR
managers have a significant role to play in developing and implementing corporate strategy, especially when it
is considered that the more effective HR becomes, the more competitive and differentiated the organisation
becomes.

Strategic HRM objectives and plans

Just, as strategic HRM objectives must be in harmony with the organisation's overall aims, HRM activity
plans must support the achievement of strategic HRM objectives. Strategic HRM objectives can be linked to
strategic organisational objectives such as:

• cost containment
• customer service
• social responsibility
• organisational effectiveness

All strategic HRM objectives and activities must be evaluated in terms of how they contribute to the
achievement of the organisation's strategic business objectives. This means that they must: be measurable,
include deadline dates for accomplishment, identify and involve the key stakeholders and HR customers to
ensure the necessary collaboration, and nominate the individual or parties responsible for implementation.

HRM policies
HRM policies are general statements that serve to guide decision making. As such, they direct the actions of
the HRM function towards achieving its strategic objectives. They typically serve three major purposes:

• to reassure employees that they will be treated fairly and objectively

• to help managers make quick and consistent decisions
• to give managers the confidence to resolve problems and to defend their decisions.

Strategic approach to HRM

HRM does not operate in a vacuum. It is influenced by factors and conditions that exist outside and inside the
organisation. An integral part of strategic HRM involves analysing environmental influences to identify those
factors that inhibit the organisation and those that help achieve its objectives. This can also identify those
positive and negative characteristics of HRM that help or hinder the achievement of strategic objectives.

If an organisation is to grow and remain competitive, its HR objectives and strategies must achieve the best
alignment or fit between external opportunities and threats and the internal strengths and weaknesses of the
organisation. Evaluation of outcomes provides feedback on HRM performance. This strategic approach
generates more informed and purposeful HR management. Organisations that adopt HRM strategies and
practices consistent with the demands of their internal and external environments outperform organisations
that adopt less well-matched strategies and practices.

Assessment of influences

External influences - The HR manager must identify those external influences that will impact on the organ-
isation and the management of its human resources. Some of the major influences include: Political, Legal,
Environmental, Technological, Cultural, Demographic, Social, Business, Economic, and Industrial relations
(employee relations or employment relations).
Internal influences - This involves an examination of factors that are found within the organisation such as
organisational mission or purpose, objectives and strategies, culture and structure.

Organisational culture - An organisation's psychological and social climate forms its culture. The culture
represents the values, beliefs, assumptions and symbols that define how the organisation conducts its
business. Organisational culture tells employees how things are done, what is important and what kind of
behaviour is rewarded. It is important for management to foster a culture that promotes the achievement of
the organisation's strategic business objectives.

The link between organisational culture and HRM is important. HRM activities contribute to the
development of an organisation's culture and provide it with a competitive edge by stimulating and reinforcing
the specific behaviours needed to achieve the organisation's strategic objectives.

Organisational structure - The effective implementation of an organisation's strategy requires management

to ensure that the organisation’s design helps achieve its strategic objectives. HRM is particularly concerned
with organizational structure because it can directly affect employee productivity and behaviour. This means
that the structure of an organisation has a powerful influence over how jobs are designed, how decisions are
made, how things get done and what type of employees are required for the organisation's success.

Evaluating HRM objectives, strategies and policies

HRM objectives, strategies and policies should be evaluated in terms of their contribution to achieving the
organisation's strategic objectives and satisfying employee needs. The following outcomes should be
considered when evaluating HRM strategies and policies: Commitment, Competence, Cost-effectiveness,
Congruence, Adaptability, Performance, Job satisfaction, Employee motivation, Trust.

The HRM challenge

If HR managers are to be involved in strategic planning and decision making, they need to be strategic
contributors. Recognition of the important role that HRM plays in all aspects of a business requires HR
professionals to improve their performance.

Summary
The present business climate requires HR managers to adopt a strategic approach, to be part of the top
management team, to be involved in corporate planning, to develop business know-how, to become
bottom-line oriented and to develop a vision for HRM. HRM activities such as job analysis, recruitment and
selection, and training and development must be part of a coordinated effort to improve the productive
contribution of people in meeting the organisation's strategic business objectives. Inability to do so means that
the organisation will ultimately stagnate and fail. The shift from an industrial society to an information society
presents Australia with the major challenge of improving its performance. Organisations must manage their
employees quite differently if they are to compete successfully in a world where human resources are the
competitive advantage. A revolution in management and HRM thinking is needed if the challenge is to be met.

REVIEW QUESTIONS

1 . The primary function of HRM is to develop a human organization that is going to win in the
marketplace. Do you agree or disagree? Why?

HRM is management, but management is more than HRM. HRM is that part of management dealing directly
with people, whereas management includes marketing, management information systems, production,
research and development, and accounting and finance. Because the purpose of HRM is to improve the
productive contribution of people, it is intimately related to all other aspects of management. Managers
manage people and the management of an organisation’s human resources is primarily a line or operating
management responsibility. However, the degree to which HRM activities are divided between line or
operating managers and the HRM manager (and his or her department) varies from organisation to
organisation.

2. The new mission of the HR manager may be described as 'change manager'. Do you agree or
disagree? Why?

There are two ways to approach this question. Firstly, the management of the increasing diversity of the
workforce means that the management of human resources is the management of change. Secondly, this
chapter has shown how the external and internal influences on organisational management are translated into
changed HRM practice. To be a human resource manager, one must be able to manage the impact of change
on the human resources of one’s organisation.

3. Why is HRM leadership in corporate strategy formulation and implementation critical?

Strategy formulation - selecting an organisation's mission, or purpose, and key objectives; analysing the
organisation's internal and external environments; and selecting appropriate business strategies. Strategy
implementation - designing an organisation's structure and control systems and evaluating the selected
strategy in achieving the organisation's key objectives.

Ever-increasing pressures have forced managers to critically rethink their approaches to HR management.
People and their current and potential contributions were often overlooked in the past. Merging business
strategies and HRM activities has become a critical source of competitiveness for organisations. Managers
consequently must adopt a strategic mindset or way of looking at and thinking about the management of
people. HR managers in turn have a responsibility to ensure that HRM is strategically aligned with the
organisation's overall business objectives. HR managers have access to a great deal of information about the
organisation’s current human resources and their capabilities. This information could be vital in assisting the
organisation to choose the most appropriate strategy.

4. Do you see any conflicts in the roles of the HR manager as a strategic partner, administrative
expert, employee champion and change agent? Why?

Roles are essentially complementary. People in HRM positions, or fulfilling HRM roles, must be able to play
out a number of roles. Therefore, these roles complement one another rather than being in conflict.

Strategic partner
‘HR professionals’, says Ulrich, ‘play a strategic partner role when they have the ability to translate business
strategy into action’. This facilitating role allows the HR manager to become part of the business team. To
achieve this, the HR managers must be able to ask appropriate questions and contribute to business decisions.
Consequently, the HR manager must develop business acumen, a customer orientation and an awareness of
the competition to be able to link business strategy to HR policies and practices. One practitioner notes that
‘We need to go outside our HR boxes and learn the business, the market, the unique roles in our organisation
and to think and operate as independent consultants from within’.

Administrative expert
According to Ulrich, to become administrative experts HR professionals must be able to re-engineer HR
activities through the use of technology, process engineering and total quality management; see HR as
creating value; and measure HR results in terms of efficiency (cost) and effectiveness (quality).

Employee champion
The HR professional must be able to relate to and meet the needs of employees. This can be achieved, says
Ulrich, by being the employees’ voice in management discussions, by being fair and principled, by assuring
employees that their concerns are being heard and by helping employees find new resources (for example,
learn how to set priorities, eliminate non-value added work, clarify goals, simplify complex processes,
become involved in decision making, increase commitments, share in economic gains and so on) that enable
them to successfully perform their jobs.

‘These activities’, says Ulrich, ‘will help employees to contribute more fully because they will have the
competence to do a good job and the commitment to do it right’. Nevertheless, the dual responsibility of
strategic business partner and employee champion can create tensions as the HR manager learns to balance
the demands of both.

Change agent
The HR manager needs to serve as a catalyst for change within the organisation. This can be achieved by
leading change in the HR function and by developing problem-solving communication and influence skills. In
short, the HR manager must know how to manage change.

The HR function must change: ‘It has to be transformed to deal creatively and pragmatically with emerging
challenges. By accomplishing new roles and acquiring new competencies, the HR function will become more
critical and strategic than ever before’, say Yeung, Brockband and Ulrich.

5. How does the external environment influence HRM within an organisation?

Figure 1.6 provides an insight into how a SWOT analysis can integrate the impact of the external environment
into the proactive thinking of the HRM function in organisations. The HR manager must identify those
external influences that will impact on the organisation and the management of its human resources. Some of
the major influences existing outside of the organisation include:

• political. Political ideologies regarding human resources can range from an interventionist approach —
where government regulation of HRM is comprehensive — to one of minimal involvement. Specifically,
political attitudes toward business, unions, management rights, strikes, secondary boycotts and enterprise
bargaining can differ markedly — federally, from state to state and internationally. Union relations with
the Federal Coalition government, for example, are less close than the business sector’s relationship with
the government, whereas union–government relations are distinctly closer in Labor states such as New
South Wales.
• legal. Laws and regulations regarding hours of work, holidays, equal employment, affirmative action,
sexual harassment, workers’ compensation, health and safety, fringe benefits and terminations clearly
impact on HRM. EEO, for example, has seen the creation of new jobs such as sex equity expert, gender
bias officer and harassment facilitator.
• environmental. Government and community concern regarding environmental issues — such as energy
conservation, workplace beautification and environmental pollution — directly or indirectly affects job
design, employee orientation and training, health and safety, industrial relations and the image of an
organisation as an employer.
• technological. The level of technological advancement and rate of technological change affect job design,
recruitment, selection, training, motivation, compensation, health and safety and industrial relations. The
boom in portable PCs has changed the nature of some jobs. Sales representatives using notebook
computers, for example, can now work from home and can spend more time selling instead of wasting
time commuting to the office. Similarly, computer networks are eroding traditional workplace hierarchies.
Networks allow junior employees to join online discussions with senior executives where they are judged
more on what they say than on where they sit on the corporate ladder.
• cultural. Historical background, ideologies, values, norms and language all influence employee views on
the role of HRM, EEO, job titles and specific aspects of HR such as job tasks and duties, education,
rewards and motivation and employee communications. Japanese, Australian and Filipino managers, for
example, are mostly likely to support the right to strike, while the least likely managers to approve are
Singaporeans, Thais and Taiwanese.
• demographic. The nature of human resources available to the organisation in terms of numbers,
geographical distribution, age, sex, literacy, skill and education levels of the population has an obvious
impact on HRM. Labour shortages and the declining quality of local graduates in Hong Kong, for
 example, have spurred organisations to automate, dramatically increase compensation and benefits, and
intensify their recruiting efforts overseas.
• social. Changing values and attitudes towards issues such as dress, work, minorities, unions,
management, social mobility, status, rewards, smoking, job security, quality of life, employee privacy, sex
roles and gay rights affect every aspect of HRM. Changing values and attitudes typically create new
challenges for the HR manager, for example: how to handle dual career couples in an interstate or
international transfer; whether benefits coverage should be extended to the partners of gay employees;
what to do about smoking in the workplace; and how to redefine the role of the individual in a
diminishing job market.
• business. The degree of competition, industry size, takeover and merger activity, industry characteristics,
the nature of customers and suppliers, the nature of shareholders and levels of activism and entry into
foreign markets are some of the factors which influence the acquisition, development, reward and
motivation, maintenance and departure of an organisation’s human resources. Industries such as
pharmaceuticals, consumer products, the media, banks, defence and telecommunications, for example, are
experiencing mega mergers in response to the globalisation of the world’s economy. Says one expert,
‘The brewers that are going to survive are the ones leading the consolidation and internationalisation of
the industry, not the ones following it. Foster’s and Lion Nathan can either play the game or wait to be
bought.’ The Chamber of Manufacturers of NSW found that 20 per cent of firms surveyed in the clothing
and footwear industry had moved their factories overseas and another 16 per cent were considering
similar moves. Pacific Dunlop has warned that if its factories cannot be made export oriented, they will
be closed. Barry Jackson, Managing Director of diversified manufacturing company Pacifica Group, says,
‘Our philosophy is very clear. We don’t go to Asia for cheap labour or an export base; we take proven
Australian products, systems and designs that we know will work and are tested, and we relocate them
into rapidly growing markets which Australia sure isn’t.’ The National Commission of Audit has found
that streamlining and outsourcing public service HR activities can save up to $250 million a year.
Consequently, downsizing, outsourcing, cost reduction and internationalisation are likely to remain
dominant in the future business strategies of Australian organisations.
• economic. Such factors as the level of economic activity, the unemployment rate, public versus private
ownership, the level of investment, the availability of credit, the degree of centralised economic planning,
the amount of debt and the level and type of taxes directly and indirectly influence recruitment, selection,
compensation and benefits, industrial relations, retrenchments and labour turnover. Eight of Australia’s
top export markets are now in Asia, generating demand for training in Asian languages, business cultures
and cross-cultural negotiation.
• industrial relations. Factors relating to industrial relations — such as the industrial relations climate, the
degree of unionisation, the existence of industrial tribunals, employee attitudes, employee commitment,
employee input and the quality of work life — affect issues such as job design, absenteeism, labour
turnover, industrial disputes, employee communications and pay rates. Unions, for example, often
influence HR practices, particularly in the areas of compensation, job security arrangements and working
conditions.

6. All managers are HR managers. Do you agree or disagree? Why?

Increasingly, the management of the employment relationship is something that all managers must take
responsibility for. There is a strong argument to be put that the ideal scenario is for organisations to have
only one or two people in a dedicated HRM position, and that all HRM functions be conducted by line
managers. Generally, there must be agreement with the statement above.

7. 'This decade, most organisations will be differentiated by talent, not technology.' Do you agree or
disagree? Why?

Student responses to this question may vary. However, some mention should be made of the fact that
technology can be copied easily, and may be frequently changed or up-dated in today’s business environment.
People, on the other hand, are unique. Organisations need to be able to recognise talent and find ways to
support employees as they continue to develop their potential. Ideally the organisation should find ways to
use employee talent in support of its goals and objectives.

8. People should be treated as people, not assets. Discuss.

Student responses to this question will vary. However, there should be some acknowledgement of the fact
that everybody is different. This results in the need to recognise, accept and embrace individual differences so
that the organisation is getting the best from its employees. While there are costs associated with staffing,
training, rewarding, and monitoring employee performance the contribution of employees to the organisation
goes beyond a financial return. Issues such as commitment, loyalty, company image, reputation, etc are
growing in importance; and these can not be measured in monetary or quantitative terms.

9. What is organisational culture? What is its relationship to corporate strategy? What is its
significance for HRM?

An organisation's psychological and social climate forms its culture. The culture represents the values,
beliefs, assumptions and symbols that define the way in which the organisation conducts its business. It tells
employees how things are done, what is important and what kind of behaviour is rewarded. It impacts on
employee behaviour, productivity and expectations. Finally, it distinguishes the organisation from other
organisations. Although there is no one "best" culture, there is a clear linkage between organisation culture
and organisation effectiveness. Organisations with strong positive cultures, for example, have a much better
chance of success than those with weak or negative cultures.

It is important therefore for management to foster a culture that promotes the achievement of the
organisation's objectives. Campbell's Soups strategic intent is to "beat the competition.... winning is what we
are all about". This is articulated by the Australian born CEO of Campbell's "If you don't want to compete, if
you don't like stretching, if you won't confront change and competition, I really don't think you are right for
the company". By employing "like minded" people, Campbell's is attempting to build its culture by strategic
selection. Companies such as IBM, Proctor and Gamble and Tandem Computers also assess job applicants
more in terms of how well they fit the culture than for their job related skills. These firms spend a great deal
of effort on selecting new employees, typically including both workers and managers in the screening process.

Similarly, an increasing number of firms are also shaping their organisation's culture through employee
orientation and training programs. McDonald's for example, trains all of its new employees in the dominant
values of "quality, service, cleanliness and value". Finally, organisations can use reward systems to shape
their cultures. Employees who fit the organisation's values can be rewarded more than those who do not.

The link between organisation culture and HRM is clear. HRM activities contribute to the development of an
organisation's culture and provide it with a competitive edge by stimulating and reinforcing the specific
behaviours needed to achieve the organisation's objectives. Hewlett-Packard’s core values emphasising a
belief in people, respect and dignity, recognition and performance for example demonstrably influence its
HRM objectives and strategies and make it one of the most successful companies in the USA. In contrast,
the big 4 Australian banks (Westpac, National Australia, ANZ and Commonwealth) have cultures which are
low on warmth, high on authority and low on team-work, employee commitment and concern for
performance. The performance of average employees, suggests Kabanoff, is not a key concern of top
management and consequently is not regarded as a significant factor contributing to overall performance.
Perhaps, not surprisingly, the performance of the major Australian banks was found to be deficient when
measured by international banking standards.

10. What are some of the barriers to introducing a strategic approach to HRM within an
organisation?

HRM does not operate in a vacuum. It is influenced by, and in turn influences, factors such as changes in
technology, laws, social values and economic conditions that exist outside the organisation, as well as internal
factors such as the organisation's objectives, strategy, culture and structure. The most significant barriers to
adopting a strategic approach to human resource management within an organsiation is that few HR
managers are involved in the strategic planning and decision-making; and are not viewed as strategic
contributors. Recognition of the important role that HRM plays in all aspects of a business (such as the
contribution of HR activities, and the implications of HR issues) requires HR professionals to improve their
performance.

DIAGNOSTIC MODEL
1. Identify and discuss the key influences from the diagnostic model (figure 1. 11) that have significance for
the setting of organisational and HRM objectives and strategies.

Students should identify Internal and External Influences and Organisation Purpose, Organisational
Objectives, Strategy, Structure, and Culture.

2. Explain the impact of a strategic HRM approach on the acquisition, development, reward and motivation,
maintenance and departure of an organisation's human resources.

If an organisation is to remain competitive and grow, its HR objectives and strategies must achieve the best
alignment or fit between external opportunities and threats and the internal strengths and weaknesses of the
organisation. The diagnostic model used in this book includes the assessing of internal and external
influences, the setting of objectives and the evaluation of performance. Evaluation of outcomes provides
feedback on the performance of HRM in the acquisition, development, reward and motivation, maintenance
and departure of the organisation's human resources. This strategic approach generates more informed and
purposeful HR management. The articulation of the organisation's purpose (ie. why it exists), its objectives
(what it wants to achieve and its strategies (how the objectives are to be achieved) provides direction for the
setting of HRM objectives and strategies. In turn, when applied to specific HRM activities such as
recruitment and selection the HR manager is given a clear indication as to what specific action plans are
required to support HRM and organisation objectives. Organisations that adopt HRM strategies and
practices consistent with the demands of their internal and external environments should outperform
organisations that adopt a set of strategies and practices that are less well matched.

3. Discuss the impact that HRM objectives and strategies may have on commitment, competence, cost-
effectiveness, congruence, adaptability, performance, job satisfaction, employee motivation and trust.

HRM strategies and policies should be evaluated in terms of their contribution to the achievement of the
organisation's objectives. Although research is not well developed in this area, the factors below should be
considered in evaluating HRM strategies and policies.

Commitment : To what extent do HRM policies enhance the commitment of people to their work and their
organisation? Increased commitment can result not only in more loyalty and better performance for the
organisation, but also in self-worth, dignity, psychological involvement, and identity for the individual.
Competence : To what extent do HRM policies attract, keep, and develop people with skills and knowledge
needed by the organisation and society, now and in the future? When needed skills and knowledge are
available at the right time, the organisation benefits and its employees experience an increased sense of
self-worth and economic wellbeing.
Cost effectiveness : What is the cost-effectiveness of a given policy in terms of wages, benefits, turnover,
absenteeism, strikes, and so on? Such costs can be considered for organisations, individuals and society as a
whole.
Congruence : What levels of congruence do HRM policies and practices generate or sustain between
management and employees, different employee groups, the organisation and community, employees and their
families, and within the individual? The lack of such congruence can be costly to management in terms of
time, money and energy, in terms of the resulting low levels of trust and common purpose, and in terms of
stress and other psychological problems it can create.
Adaptability : how adaptable are the organisation and its employees? What is their readiness for change?
Does the organisation exploit changes in its environment or does it just react? Are innovation and creativity
encouraged or stifled?
Performance : what is the level of performance of the organisation (eg. earnings per share, rate of growth
etc.) Is performance recognised and rewarded? To what extent do HRM policies contribute to the
organisation's profitability, growth and overall success? What is the level of employee productivity?

Soapbox
There are seldom clear answers to these questions. The idea is to stimulate debate as much as to determine
an answer.

Ethical Dilemma
A good investment?
Because this is an ethical dilemma, it would be foolhardy to propose clear-cut answers to the questions raised
after this case. It is true that giving business to governments with poor human rights records is difficult to
justify on moral grounds. However, it is also true that companies have to do it if their competition is doing it.
Not to do so would mean extinction. These issues are only resolved by unity, whether voluntary or imposed.
Companies and industries can unite voluntarily in the name of moral causes, but it more likely that they would
have to be sanctioned to achieve change in attitudes and actions. The sanctions against South Africa in the
1970s and 1980s are an example of how enforced unity achieved a change in the attitudes of governments in
another country.

Case Study
A matter of strategy
Exercise
Form into groups of three or four. Identify the key factors you will need to consider in formulating an HR
strategy for Global Mining. Develop strategic objectives in the areas of industrial relations, recruitment and
selection, training and development, and compensation and benefits. Identify potential problems that may
hinder the implementation of your new strategy. Suggest possible ways to overcome these challenges.

Strategy defines the direction in which an organisation intends to move and establishes the framework for
action through which it intends to get there. The new direction for Global Mining is to take HRM
considerations into their decision-making in future. The management must recognise that they cannot
determine a HR strategy separate from the organisational strategy. For example, a low-cost strategy would
be difficult to reconcile with the values espoused in the second half of the case. Those values are more
consistent with a developmental, high-efficiency strategy. The need for a HRM strategy is highlighted in this
case, more than the specifics of what the strategy should entail.

Ever-increasing pressures have forced managers to critically rethink their approaches to HR management.
People and their current and potential contributions were often overlooked in the past. Hilmer states, ‘As a
working nation, we are probably worse at obtaining constructive and enthusiastic contributions from the
people in our large organisations than most of the other nations with whom we trade and compete.’ Merging
business strategies and HRM activities has become a critical source of competitiveness for organisations.

Managers consequently must adopt a strategic mindset or way of looking at and thinking about the
management of people. HR managers in turn have a responsibility to ensure that HRM is strategically aligned
with the organisation’s overall business objectives. If an organisation makes a strategic decision to expand,
introduce new technology, reduce costs, improve quality or downsize, for example, HRM must support this
choice. Collins says, ‘A strategic approach manages people and their contributions such that they provide the
firm with a distinctive competitive advantage.’ A clear differentiator between the corporate winners and
losers in the twenty-first century will be the effectiveness of an organisation’s human resources. Improved
economic growth in Australia will occur only when substantial changes take place in the management of
human resources. ‘Employees, not minerals or luck, make or break an organisation’; this means ‘seeing the
work force as a source of strategic advantage, not just a cost to be minimised or avoided’. Hilmer, for
example, contends that new wealth will be created primarily in industries in which employee contributions are
central to the success of the business.