The significance of implementing HRM and how it impacts a

manufacturing firm

Sadia M. Rajput

2nd February 2015

A report submitted in fulfillment of the requirements for Course MBAN-690DE, Masters of

Business Administration in Management, University of Nicosia-online.

Introduction

This essay aims to convince top management of the importance of having a Human Resource

manager as a strategic partner for manufacturing firm, highlighting the significant impact of

strategic human resource management will have on the organizations performance once

implemented.

In order to achieve this, the following detailed human resource management (HRM) strategy will

be discussed in this order. Firstly, this report will provide a specific definition of strategic human

resource management (SHRM) and explain its role in the manufacturing firm by drawing from

Armstrong (#REF!). Secondly, it will go on to distinguish between the different types of SHRM

and demonstrate how HRM align with the organizations strategy. Furthermore, it will elaborate

how SHRM can impact the organizations performance by citing evidence from research conducted

in the HRM literature. This section priorities which SHRM issues are more significant to the firm

in this case study in order to provide relevant justification for HRM.

Thereafter, this paper will demonstrate how HRM can enable this organization to have a High

Performance Work System (HWPS), by addressing areas such as work design, job analysis,

recruitment, selection, training, development, retention, separation, performance management,

compensation, legal requirement and employee relations.

Bearing in mind that this sports apparel company is a multinational company, based in different

countries in the world, there is a necessity to discuss the challenges and opportunities the

manufacturing firm will be exposed to with regards to diversity, e-HRM, legal requirements and

an international HR strategy. This section will highlight how the organization can capitalize on

some of the opportunities it has and advise strategies to mitigate risks that may arise from

challenges.

Finally, this essay will conclude that having a human resource manager is favorable for the

manufacturing firm and the detailed human resource management strategy and human resource

practices outlined above will help improve the performance of the business provided that its

“performance is conditioned by an organizations strategic posture” (Youndt et al., 1996: 841).

HRM is the way in which an organization uses its human resources to realize its goals. It is argued

that, it is a “strategic and coherent approach to the management of an organizations most valued

assets – the people working there who individually and collectively contribute to the achievement

of its objectives” (Armstrong, 2006: 3). Armstrong (2006) further stresses that implementing a

strategy is necessary to ensures that the human resources have a ‘distinct capability’ and therefore

the firm is able to achieve ‘sustained competitive advantage’ (Armstrong, 2006: 21-22). The main

aim would be to ensure that the business has employees with the right skills, attitude and level of

commitment that will help the business be successful and more competitive.

SHRM is based on three propositions and these are; that the defining characteristic that sets a

business a part from its competitors, are the kind of people they employ, secondly, a strategy is

implemented by employees and thirdly, the way to implement a strategic plan, is through a

systematic approach (Armstrong, 2006: 29-30).

Moreover, SHRM can be viewed as the intention of a company to achieve certain business

objectives through human capital (Armstrong, 2006: 29). This intention is usually long term and

strives to use the company’s capacity to get ahead of its competitors. It stems from the

managements approach and the principles that the company is founded on. Therefore, SHRM

provides solutions on how to manage employees in a meaningful way that will be beneficial for

the business and its long term objectives.

Armstrong (2006) argues that there are two main approaches to HRM and these are the matching

model framework developed by the Michigan school and the Harvard framework developed by

the Harvard school. For the purpose of this report, the Harvard framework (HSF) will be outlined

and used to form the basis of how to approach HRM for the manufacturing firm. The founding

fathers of this framework Beer et al (1984) and later Boxall (1996) realized that, in the case of the

manufacturing firm it would be the line managers of the organization that need to develop a vision

of how they visualize their teams to contribute to achieving the businesses objectives as well as

decide which HR policies and practices need to be adopted. Therefore, the art of integrating the

managements’ vision for the company and having committed people to deliver that vision through

their day to day activities is the heart of SHRM (Armstrong, 2006: 10-13).

This will allow HRM to be integrated into the organizations culture, being accepted by all

stakeholders and thus be effective. Furthermore, the HSF has two distinct characteristics; the first

one being line managers taking ownership of ensuring that people adhere to policies and practices

so that the business can achieve its objectives and the second feature maintains that HR has the

responsibility of ensuring that they develop and device policies that take are benefit both the

employees and the organization (Boxall, 1996: 62). This framework has progressed the way HRM

is practiced placing emphasis on it being a management concern (Armstrong, 2006: 6). This

argument suggests that the organization can take ownership of managing its resources allowing

HR practices to be easily integrated.

Types of HRM strategies

This section will go on to discuss the different types of HRM strategies and how they align with

this manufacturing firm’s competitive business strategy. The role of SHRM is to ensure that an

organization is able to achieve its objectives through people. Guthrie (2001), in his paper argues

that there is evidence to suggest that an investment in employees will yield productivity in the

future. In order to critically examine the role of SRHM, this report will first assess the different

types of HR strategies in order to explain the relationship between HR practices and the

performance of an organization (Dunford et al., 2001).

There is a process involved in SHRM which requires the use of a vertical integration with the

businesses strategy as well as a horizontal integration with other HRM strategies (Armstrong,

2006: 30). It takes into consideration “broad organizational issues relating to structure and culture,

organizational effectiveness and performance, matching resources to future requirements, the

development of distinctive capabilities, knowledge management and change management”

(Armstrong, 2006: 30). Therefore, SHRM deals with all issues related to the stakeholders of the

organization and how they may be affected by the strategy of the organization or how they may

change the trajectory of the company achieving its long term goals (Armstrong, 2006: 30).

Armstrong (2006) has identified are two general types of HRM strategies; the overarching

strategies, which are general objectives and goals that set the tone for more specific strategies and

secondly, there are specific strategies for the organization that focus on different areas of HRM

(Armstrong: 2006, 38). Specific strategies are concerned with the following areas; talent

management i.e. being the employee of choice, continuous improvement which involves catering

for its employees to be innovative, knowledge management which involves extracting what the

employees have learned and enhancing their skills to improve the performance of the firm, learning

and development which deals with the training needs of the staff, rewards for staff, improve and

sustain the way a firm relates with its employee. For the purpose of this case study, this report will

examine a set of specific strategies that cover the areas mentioned above and recommend HR

practices that will assist the organization improve its performance.

The specific strategies that will be assessed are: knowledge management strategies, strategies that

enhance commitment from the employees, quality management strategies and finally customer

service strategies. These strategies will be most relevant to a manufacturing firm that is growing

and based in different countries around the world.

Knowledge management strategies

Armstrong (2006) argues that the objective of these strategies is to capitalize on the skills and

capabilities within the organization and put it to use where it will give the organization the biggest

payoff. The process acquiring and transferring knowledge between employees in the organization

is the basis of knowledge management (Armstrong, 2006: 106). In order to manage knowledge

that exists within an organization, there is a need to recognize that knowledge can stem from

different areas within the organization. It can exist in the form of skills that employees acquire on

the job, which is known as the personalization approach to knowledge management or it can be

stored in databases that the firm may have, known as the codification approach to knowledge

management (Armstrong, 2006: 107).

It is likely that both are applicable to the case study as the manufacturing firm is likely to have

both physical and human capital on site. In order to use the personalized knowledge, the firm can

set up training sessions that happen between one person and a group of employees that get shown

what the person with the skill knows. Personal contact is the only way that the knowledge can be

shared. For knowledge that is stored in a database, employees can assess it form computers

whenever they need access to it (Armstrong, 2006: 107). Therefore, in order for knowledge

management to be effective, the firm should adopt both approaches and it may make one a primary

approach or use both simultaneously.

It should be noted however that people have different learning capabilities and take to technology

differently. Each employee will be at their own stage of development and thus it is crucial to ensure

that everyone is firstly on par with each other and facilitate trainings for staff with gaps. Employees

should be encouraged to share knowledge and for those who do, they should be rewarded in order

to create an incentive for others. Armstrong (2006) argues that an open culture to sharing

knowledge will forester this strategy.

Commitment strategy

A commitment strategy involves “the development of communication, education and training

programmes” for employees and is deliberate about having initiatives that “increase involvement

and ‘ownership’, and the introduction of performance and reward management processes”

(Armstrong, 2006: 111). It is likely that employees feel a sense of devotion to an organization that

gives them the freedom to decide how to produce results and encourage innovative ideas about

how the company can achieve its goals (Armstrong, 2006: 110). Employees that know and

understand what is expected of them, how to carry out their duties and the different sport

equipment that the firm produces and sells, will always be motivated to give their best. Thus setting

up regular trainings, having information easily accessible will contribute the employee’s

commitment to the company.

In addition, creating a sense of ownership or a sense of belonging will reinforce the level of

commitment from an employee. The company should develop a strategy that encourages that

employees take part in some of the decisions taken by management. They could also sell shares to

employees at a discounted rate which will make them feel that they must do their best for the

company to perform well in order for them to benefit. Furthermore, if employees are performance

is measurable it is easy to reward those employees that are high performers and hence motivating

all employees to excel in their work (Armstrong, 2006: 112). This type of strategy would be most

beneficial in the production department as output per worker is measurable.

Quality management strategies

The essence of quality management is to ensure that the sports apparel that the company

manufactures is up to the standard the organization has set and that it will meet the customer’s

expectation (Armstrong, 2006: 114). Armstrong (2006) purports the importance of instilling the

value of attaining high quality within the organizations values as a foundation for managing quality

of products produced. This is essential because ensuring good quality products will be the each

individual’s responsibility.

In addition to this, there are specific quality management strategies available to manufacturing

firms to implement. The first one is known as Total Quality Management (TQM), a widely adopted

practice that involves planning for each process occurring when it is required. This will ensure that

resources are not wasted and customers get what they want in time. It is argued that this approach

is holistic in nature as it is part of the operations of the business and every employee is concerned

about the quality they produce (Armstrong, 2006: 114).

Customer service strategies

Customers are the one of the most significant stakeholders in an organization and are vital for the

survival of a business. Ensuring that they are happy, will have a direct impact on the success of

the business. In order for the customers to be happy, the employees delivering the service must

also be happy. Therefore, firms adopting customer service strategies must bear in mind that

employees are also equally significant stakeholders in the success of a business. This strategy is

focused on establishing a culture that focuses on customers, their needs, expectations and how to

meet them (Armstrong, 2006: 116). It may involve research of the kinds of need customers have

and training of staff to equip them with the necessary skills to deliver good customer service

(Armstrong, 2006: 116). The two departments that will be predominately affected in this case study

are the research and development department and the marketing department. It will also impact

the production department as the quality of goods and services produced may have an impact on

the customer’s satisfaction (Armstrong, 2006: 116).

Assessing the role SHRM with respect to organizational performance

This section will critically examine what the role of SHRM is with respect to the organizations

performance, drawing on previously researched success stories. The impact HR practices will have

on the organizations performance is a function of how well the HR strategy and the business

strategy are aligned.

There are multiple approaches that can help one assess the extent to which HR practices align with

business strategies and these are; resource-based strategy, strategic fit, high involvement

management, high commitment management and high performance management (Armstrong,

2006: 32-33). For the purpose of this report, it will draw on Boxall (1996) and the resource based

view and strategic fit as argued by Christiansen (2008) to establish how well business strategy and

HR practices align. Thereafter it will progress strategic behaviors a firm could adopt as argued

Miles and Snow (1994) to demonstrate the impact HRM will have on the organizations

performance.

The resource based strategy argues that in order for a firm to achieve sustained comparative

advantage is to achieve what Barney (1991) calls strategic capability. Strategic capability means

that the firm has the right resources matched to the right opportunities and derives additional value

from effectively allocating (Armstrong, 2006: 32). It can be argued that, all the attributes and

capabilities of the employees in an organization forms the human resource capabilities of that

organization. This argument is supported by Barney (1995) who states that the element of human

resources is made up of the “experience, knowledge, judgment, risk-taking propensity and wisdom

of individuals associated with the firm” (Barney, 1995: REFERENCE!)

Alternatively, Christiansen (2008) argues that the suitability of a firm’s strategy can be determined

by best fit i.e. matching of appropriate resources and aligning itself to its external environment and

all factors that may affect the firm. This is because this it is likely to have a positive impact on the

performance of the business. Therefore strategy can be seen as a configuration of the decision

making process to ensure that the firm achieves the intended alignment between its processes and

the external environment. The type of strategy adopted by the firm will have a direct impact on its

performance.

Miles and Snow (1994) went a step further and discovered that an organization has a specific

strategic behavior and this relates to the performance of the business. The authors identified that

an early tight fit, which is a strong alignment with the capability to adapt easily to changes in

external factors would lead to a high performance. Identifying a firm’s strategic behavior can be

extracted from assessing the firm’s previous stream of managerial decisions as argued by Miles

and Snow (1994). The authors argue that there are four types and a firm can fall into one of these;

defender, prospector, analyzer and reactor. The defender plays its safe by having a narrow product

range and focuses on obtaining economies of scale in the areas it can easily predict. It is a risk-

averse approach. On the other hand, the prospector is innovative, searching to enter new markets

and develop new products. The analyzer waits to assess what its competitors do and then follows

after seeing potential in what their competitors are doing. Lastly, the reactors are characterized

with nostalgia from past success and slow to catch on to change.

For a firm to perform well, Parnell and Wright (1993) argue that they should adopt the analysers

strategy, as this is a hybrid of the prospector and the defender strategy. This behavioral strategy

demonstrates the ability to be dynamic but have stability because they can respond to changes in

the external environment and are in a better position to make sound decisions. Therefore, the

manufacturing firm must develop managers to respond to changes in the market and make

decisions based on best practices in the industry that actually work.

Hence, based on this framework of identifying the main business strategy, the HR strategy will

help set up policies and processes that help the firm reach its desired objectives and support the

business strategy. Aligning the business strategy with the HR strategy for a firm that has the

analyzer behavior will involve the following practices to be adopted by the company and

implemented by HR.

This section will critically assess the role SHRM plays in promoting and improving the firm’s

performance. Performance can be measured in terms of growth in the following areas, bottom line,

output and shareholders return on investment Richard et al., (2009). For the purpose of this report

however, enhanced performance will be demonstrated by organization effectiveness. An effective

organization can be characterized by the following as argued by Pascale (1990); creating a

collaborative environment where there is cohesion between managers and employees and

recognizing that all employees have a role to play in terms of contributing to the direction the

company.

In order to evaluate the relationship between HRM and the firm’s performance, there is a need to

distinguish between the impacts physical capital will have on the firms performance versus the

contribution human capital will have on the manufacturing firm’s performance. In the late 80’s it

would be not come as a surprise as to why a manufacturing firm would be reluctant to have a

human resource manager. This is because it is likely that the firm would prefer to automate

processes and reduce its costs if it had machines in an attempt to be innovative and efficient.

Conventional wisdom would advise that in order for a firm to improve its operational performance,

they should replace people – human capital with machines- physical capital, and hence gain

competitive advantage. However, in a modern manufacturing firm that has sophisticated

technology, it would require committed, motivated and highly skilled employees. Yondt et al.,

(1996) point out that it makes perfect sense for a manufacturing firm to invest in human resource

management. This is because; the fundamental premise of human resource management argues

that people are the essence of sustained competitive advantage (Yondt et al., 1996: 840).

In order to comprehend the gravity of this premise, this report will distinguish between competitive

advantage and sustained competitive advantage. A simplistic economics definition of competitive

advantage is that the firm can produce a greater output with fewer resources, likely at a lower cost

as the firm is benefiting from economies of scale. This approach is too rigid as it does not take into

account the dynamics and complexities of people, their skill sets and their behavior. A company

enjoys a sustained competitive advantage if it is able to resources that no other firm can imitate.

Since people are the most unique factor of production it has to follow that managing them

effectively will give the manufacturing firm the edge it needs to sustain its success. Armstrong

(2006) therefore argues in favor of this view when he states that the most unique resource an

organization is its employees and hence finding the correct way to manage them, will have a direct

impact on the businesses long term success.

Achieving a High Performance Work System

A HPWS can only be achieved if the organizations top management is intentional about

incorporating specific practices in designing a methodical way for each person to carry out the

different tasks that comprise of their job, implementing an effective recruitment, selection and

training that will ensure that the organization is equipped with the necessary skills to propel the

organization forward, developing a culture within the organization that helps the organization keep

its skilled labor and finally to complying with legal requirements for the workers. The main job

for the human resource manager will be to ensure that it advises this client on the necessary action

it needs to take to ensure that it achieves its business objective. This section will draw on Steward

and Brown (2009) to explain how to achieve a HPWS.

Job analysis

Prior to any other activity, the HR manager will have to identify what kind of tasks make up a

particular job and how they should be performed. This process of collecting such information is

known job analysis. The main aim for job analysis is twofold. It ensures that there is efficiency in

producing output in terms of which functions are done together and which are done separately and

that the wellbeing of the employees carrying out the tasks are taken into consideration. There are

four methods of ascertaining how a job will be done; the mechanistic approach, the motivational

approach, the prudential approach and finally the biological approach.

The first approach designs the job so that the employee does it in the shortest period of time. It

looks at efficiency and would be appropriate for a production line. The motivational approach

focus on increasing the productivity of the job by making it enjoyable for the employee who does

it. This approach is likely to be beneficial for a marketing team. The perceptual approach designs

the job in a way that allows the employee to reduce the errors they make by simplifying the tasks.

Lastly the biological approach is meant to design a job that is less strenuous on the physical body

of the person, specifically labor intensive jobs.

Depending on the HR strategy and the organizations business objectives, the combination of the

mechanistic and motivational approaches are more likely to give the employee job satisfaction.

This in turn is likely to lead to higher productivity and thus increase the organizations performance

overall.

Work design

Secondly, the organization needs to have a strategic work design i.e. how each task will be

performed and who will do that task. In order for the work design to be strategic, it needs to

incorporate the right degree of autonomy and level of interdependence. An employee is said to

have autonomy if they are able to decide how they will perform their tasks (Stewart and Brown,

2009). This is beneficial for employees two types of employees, the first are those that have direct

contact with customers as they are likely to be responsive to immediate customer needs, in this

case the sales and marketing team. The other group would be employees in the research and

development department who need autonomy in order to be innovative (Stewart and Brown, 2009).

However, autonomy could have detrimental effects to employees on a production line whose

individual task are planned in advance and need to happen sequentially in order for the next

employee to carry out their.

This shortcoming brings us to the idea of interdependence which concerned with how the outcome

of one employees job influences the next. A firm should aim to achieve high level of

interdependence which keeps employees highly motivated. This level of interdependence may be

suitable for a team of managers that need to make strategic decisions. Depending on the HR

strategy, the combination of the level on interdependence and the degree of autonomy will vary

(Stewart and Brown, 2009). For example, if a firm has a HR cost strategy, they would opt for low

autonomy and lower interdependence with more repetitive tasks. On the other hand, higher levels

of autonomy go hand in hand with achieving high levels of innovation with h=a higher level of

interdependence (Stewart and Brown, 2009).

Recruitment and selection

Another crucial aspect that needs to be considered for the firm to achieve a HPWS, is that the

recruitment and selection strategy needs to be strategic. Recruitment is said to be effective and

strategic when the organization hires the right amount of people with the respective qualifications

required to fill the job position as argued by Stewart and Brown (2009). This means, depending

on the level of skills required for the particular job, the HR manager ought to ensure that the job

is advertised using the correct medium I order to reach the intended applicant. Steward and Brown

(2009) argue that a firm may want to hire someone with either broad skills or highly specialized

skills depending on their business strategy. The organization has an option of recruiting internally

or externally in both instances.

A firm that has a cost leadership HR strategy is likely to hire someone with a broader skill set,

which are necessary to successfully complete the job. It is more effective to hire someone internally

as the employee will already be well oriented with the culture of the organization (Steward and

Brown: 2009). However, if they opt to higher externally, they may benefit from incurring lower

cost, especially if these are entry level positions. They may have to incur extra training costs which

in the long run outweigh the benefits of an internal hire for broad skills.

On the other hand, if a firm is seeking to recruit someone with specific or highly specialized skills,

they are likely to benefit from hiring externally as this employee can provide a fresh perspective

on how to do things. In addition to that, it is unlikely that an organization will have a highly skilled

individual within the firm to fill in the job application and thus the firm will opt for external

recruitment.

Furthermore, the way the job is advertised, will determine the response the firm gets from potential

applicants. It is advisable to advertise realistically for internal recruits as they are already

accustomed to the company’s operations and process versus idealistic advertising of the job for

external recruits because firms are competing the same pool of resources and need to signal that

they are the employer of choice. Therefore it is clear to distinguish which HR strategy is

appropriate for the corresponding business strategy. It is not a one size fits all approach.

Retention and compensation

How well the job is designed and how the employees are recruited form part of the recruitment

strategy of an organization as these have a direct impact on whether the employee will be will to

contribute and stay in the organization. Armstrong (2006) also argues that if a firm conducts exit

interviews to ascertain why people leave, they can develop a strategy that helps retain the existing

employees. It is unlikely for employees to disclose the exact reason they may want to leave and

thus the firm may have to use the following strategies to retain their employees. The first will be

paying employees fairly as well as providing incentives, promotions and recognition when then

over perform. Secondly, providing employees with training opportunities to further develop their

skills will make them feel valued and thus is likely to contribute to their level of commitment to

the firm (Armstrong, 2006: 126-129)

Employee relations and legal issues

A HPWS would not be possible without company policies and guidelines with regards to an

employee’s rights in terms of fair treatment irrespective of age, gender, sexual orientations,

disability, religion and their safety at work. It is imperative that the manufacturing firm provides

equal opportunity to all its current and future employees and understands the consequences of not

doing so. For the case study, based in a number of different countries in the world, there needs to

be an international HR strategy to manage the diverse group of employees.

Every country has employment laws and occupational safety laws that protect employees from

exploitation by an employer. Complying with these laws is not only mandatory, but will help

strengthen the relations between the employees and employers at a professional level. To a certain

extent, it may also strengthen the commitment the employees have if they are treated fairly.

For instance, it is not advisable for the firm to advertise a job opportunity on the basis of arbitrary

characteristics of the applicant such as sexual orientation, race, physical appearance, ability or

gender. Thus the recruitment and selection has to be based on the ability of the applicant to be able

to perform the job successfully and in some instances the qualifications and skills they hold. In

addition, where an employee is using chemicals or risky jobs, they are expected to have protective

clothing in order to minimize the effects of being exposed to danger and where danger does occur,

the employer is also expected to compensate them at the companies expense.#

E-HRM

Marler and Fisher (2013) argue that e-HRM is a way of streamlining HRM practices and operations

with the use of technology. Compared to other HRM practices, this is relatively new in the field

of HRM. The aim is to provide efficiency and reduce costs an organization incurs for HR by using

web technology to deliver HR strategies and practices For the purpose of this case study, this

should be taken into consideration for future developments and enhancements of HRM after the

successful implementation of SHRM.

Conclusion

In conclusion, this essay has successfully demonstrated that it is imperative for the manufacturing

firm to have a human resource manager and implement SHRM in order for the organization to

grow effectively and become more successful. The report has examined the significance of

implementing HRM and how it impacts a manufacturing firm by firstly citing examples done by

researchers that have demonstrated a strong positive correlation between an effective HRM

strategy and the organizations performance. In addition, by carefully formulating a human resource

strategy and coming up with a detailed plan for achieving a HPWS for this manufacturing firm,

this report has aided the firm with practical guidelines that the firm can apply. Furthermore,

consideration has been given to the legal issues surrounding employment and employee relations

to ensure that the firm does not only comply, but becomes and employer of choice, all wound the

world. Finally this essay has highlighted e-HRM and how it will affect the manufacturing firm.

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