Term Paper: Human Resources Management - Review of Theories

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Human Resources Management - Review of Theories

Importance of Human Resources Management to organizations

Strategic Human Resources Management and firm performance

Human Resources Management (HRM) and the Strategic Management Process (SMP)

Challenges and benefits of global Human Resource Management

HRM and Technology

Resources are limited: Creativity is unlimited."

These are the words and, most important, the belief, that POSCO, the world's second largest steel producer shares with all its employees and visitors arriving to its Pohang plant, situated far into the sea separating Japan and Korea. And these words are written on a huge sign spanning on six lanes of traffic, proclaiming the company's philosophy both in Korean and English. (Milkovich and Boudreau, 1997)

But this is not only the belief of POSCO, is the belief that many companies have started to share, at a global level, in the recent decades.

Even if plant and equipment, as well as financial assets are and will continue to be important and required resources by almost any organization, the human resources - the people these organizations have - start gaining an ever increasing role within companies. The people will be the ones designing and actually producing the goods and services a company offers to its clients, they will be the ones controlling the quality of their work, marketing the products and distribute the financial resources, as well as setting the overall organization's strategies and objectives... meaning - the people will have the same role as the sanguine system has in the human body. Therefore, it can be easily understood that a company that will not benefit from the presence of effective employees, will be confronted with serious challenges in achieving its objectives.

This paper will firstly introduce the theories regarding aiming at better understanding the human resources management and will continue discussing how strategic human resources management combined with company's strategic management can bring higher benefits to organizations. A short overview over global human resources and the application of technology in human resources management will be equally offered.

Human Resources Management - Review of Theories

The Human Resources Management (HRM), being the system of integrated decisions that define the employment relationship, will directly affect people's life and in the same time, the ability of employers to compete on the market, thus making the HR specific decisions to be among the most crucial and most difficult decisions that company's managers must make. and, a very important point is that these decisions must never be made separately, in isolation; they always must take into consideration the political, economic and cultural forces in societies. (Milkovich and Boudreau, 1997)

As an important work on the subject, the Jackson and Schuler's "Understanding Human Resource Management in the context of organizations and their environments" offers an overview of the most important theoretical perspectives that can be studied in order to understand the HRM.

Firstly, for a better understanding of their perspectives, in their perception the HRM will comprise (a) the specific HR practices as for instance recruitment, selection, training, and appraisal; (b) formal HR policies, that direct and to some extent constrain the development of certain practices; and - overarching HR philosophies, that conclude in the policies and practices developed by a certain organization.

In an ideal situation, these items would actually develop into a system that will attract, develop, motivate and retain the employees who can guarantee the effective operation and survival of the company or organization as well as its members.

The context of the HRM has both internal and external factors, affecting the efficient work of the system. The internal factors can be constituted by technology, size and structure of organization, life cycle stage of organization, business strategy, etc. The external contextual factors considered by Jackson and Schuler are composed by: the legal, political and social environments, labor market conditions, unionization, industry specific characteristics, and national culture.

Finally, the two writers summarize the eight perspectives relevant to the understanding of HRM as follows:

General Systems Theory - this theory started with the view of seeing the unit of analysis as a composite of interdependent parts, obtaining its inputs from the environment, transforming them during throughput, in order to produce the outputs that were being exchanged in the environment. Applied to the HRM, the skills and abilities will perform the role of input from environment. The behaviors of the employees will be considered throughput, and finally, the satisfaction and performance of employees will constitute the outputs.

Role Behavior Perspective - defines the roles as interdependent components making up an organization system. This new perspective will change the focus from individuals, to the focus on social systems that are characterized by several roles, several role senders and several role evaluators, and having at its base Katz and Kahn definition of role behaviors as "the recurring action of an individual, appropriately interrelated with the repetitive activities of others so as to yield a predictable outcome. This approach actually stipulates that HR practices need to elicit the behaviors of employees consistent with the strategies of the organization.

Institutional Theory - applied to HRM, this theory would suggest that both adoption of new HRM approaches as well as their rejection are explained by the context and organization will be finding itself. Thus, a company might adopt a certain HRM simply because others have done it, and might reject it if HRM activities will already have deep historical roots within the organization, and would only be understood if the past of the organization would be studied.

Resource Dependence Theory - focuses on resource exchanges as being the central feature of the relationship between an organization and its constituencies, therefore, organizations will gain power one over the other when they control valued resources. In this theory, the HRM processes and activities reflect the allocation of power within a system.

Human Capital Theory - assumes that all investments made to obtain productive behaviors from the employees (costs including motivation, training, retention, etc.) constitute in fact Human Capital investments that were made in anticipation of expected future returns.

Transaction Costs Theory - offers support in understanding how HRM activities are being used in order to attain a governance structure that will help the organization to manage the countless implicit and explicit agreements that exist between employers and employees.

Agency Theory - focuses on the existence of contracts between two parties: one (i.e. The principal) delegating work to another one (i.e. The agent) and the probable challenges that can appear in this relationship.

Resource-based Theory - combines both concepts of organizational economics and of strategic management. It leads to the idea that HRM significantly influences the organization's both human and organizational resources, which can help it in gaining and maintaining competitive advantage - the key to success for the organization. (Jackson and Schuler, 1995).

Importance of Human Resources Management to organizations

Today's competitive environment is characterized by fast-changing business and technological environments, dynamic strategies regarding finance, marketing, technology and information. These are all vital. Nevertheless, the right mix of HRM strategies will prove to be of more critical substance for a company in realizing the best business results.

HRM, as the process of reaching organizational objectives through the acquirement, development, retention and optimal use of the HR existent within the organization, has as it ultimate goal the development and full realization of every employee performance potential.

An ever increasing important determinant of one organization's effectiveness levels remains the planning for and managing of human resource, exactly as the business needs it. As organizations evolve, the more complex features of the environment within which they will operate automatically causes an increased level of dependency upon the people that constitute the organization. (Irudayam, 1996)

Every day more, highly differentiated and focussed skills are asked from the employees, as the technical, economical, political and socio-cultural environments are being characterised by more and more complex technologies.

Managers should therefore comprehend that significant factors that can emphasise the performance potential of every employee are based on well developed HR policies that, after assuring a customized selection process, will offer employees the possibility to learn, develop themselves, will manage retention and turnover, the compensation and benefits, and finally, will offer to the employees the critical tools to enable them to bring the competitive advantage to their company.

Strategic Human Resources Management and firm performance

As commented by Chang and Huang (2005), there have been various debates on whether a Strategic Human Resources Management (SHRM) is always positively related to firm performance or not. As part of this framework, the Universalistic perspective leads to the hypothesis that firms that will adopt SHRM practices will significantly outperform those that don't.

Authors that debated that SHRM actually has a positive influence on organization performance, assumed that SHRM could in fact help companies improve the cost benefits of their human resources, increase the level of innovation and revolution ability, promote efficiency of operating activities, increase organizational performance positive outcomes. (Chang and Huang, 2005)

As stated by the same authors, the most influential set of best practices… [END OF PREVIEW]

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