This is a business report on the strategic management of human resources of the AAC Company. The company is facing a lot of challenges in the field of human resource management. This situation has badly affected the growth and profitability of the business.
The company has failed to retain its staff with the organisation. The morale and trustworthiness of the organisation are also badly affected. In order to overcome these challenges, a strategic human resource plan is prepared for the company and this is expected to ensure successful human resource management. For the preparation of the plan, a detailed analysis of the human resource capability of the firm has been carried out through SWOT analysis. By changing the policy of human resource management, the company can ensure adequate business prosperity and growth in the market share of the industry.
Aviator Applications Corp. (ACC) is a major producer of adaptive computerised systems used in the aviation industry. As a high technology firm ACC requires efficient and experienced human capital for ensuring sustained business growth in the competitive industry. Human resources play a very important role in the growth of business of a firm, through functions and processes meant to retain the competitive edge and internal efficiency. The main functions of human resource management include training and development, performance appraisal, management development, organisation development, employee selection and recruitment, manpower planning, communication process, etc. “The HRM Function has to develop the management staff (and this is a direct responsibility of Human Resources and the top management) to work, manage and develop the employees in the organization correctly to ensure the organization healthiness.” (HRM functions in the organization 2008).
HRM strategy is an essential part of the overall business strategy of the organisation. Strategic human resource management has to ensure that the HRM activity is linked to the business goals and objectives.
Effective management of human resources leads to a competitive advantage for the business as it helps to gain technological superiority with efficiency and productivity improvement. The key driving forces of the ACC are technology, human resources, and the organisational competency. Human resource personnel has a key role in determining the business performance of the organisation. The company has plans to expand its business in Thailand and India over the next three years. For this purpose, along with technical experts, human resource experts are also required by the firm. Lack of efficient and well-experienced human resources is a major problem that is affecting the expansion program. In order to meet the requirements, the organisation is planning to procure adequate human capital through recruitment and training
The organisation is committed to building an efficient human resource team to achieve competency in the industry through improved operational efficiency and organisational performance. Employee development plans are also to be put in place for retaining the staff on a long-term basis. The organisation has to improve its HRM strategies at a level to face new millennium challenges.
SWOT Analysis of the organisation
In order to identify the key strengths and weaknesses associated with the management of the human resource of the organisation a SWOT analysis is carried out. It is explained below;
The organisation possesses competitive strength in terms of better organisational management. The technology-based approach of the organisation also provides a high level of technological strength to the firm. It is able to offer better wages to the skilled staff compared to the industry norms. The research and development department of the firm is capable of developing advanced cost-effective technologies for the aviation industry. Electrical engineers in the research and development department of the firm are efficient and talented. Some of the younger engineers appear to be future assets of the firm and they can be transformed into team leaders and section heads.
Human resource planning and policies are not considered as issues of high priority by the organisation. Due to this, employees are not happy and satisfied forcing many of them to leave the organisation. Career development plans for the employees are not assured in the organisation. This has led them to hold a view that there is little opportunity for career growth at AAC. No long-term training initiatives are provided by the company. The expansion program of the organisation is affected by the issue of lack of adequate human resources.
Opportunities in the external environment
Availability f human resource personnel is assured in the industry. Thus, the recruitment process will be facilitated. Through adequate human resource management techniques employee retention can be ensured by the organisation.
Skill shortages are the major threat faced by the organisation. Increased staff turnover is another major issue. Electrical engineers’ turnover has increased at an average of 30% over the past three years. They being the major contributor to the core research function; this has had a major effect on the overall performance of the company. Recruitment of new staff and their training is required by the organisation on a continual basis.
Human resource analysis
“Analysis of the gap between current capabilities and future needs forms the basis of a feedback loop which is a central aspect of emergent strategy and the strategic planning process.” (Gratton, Hailey & Stiles 1999, p.183).
The gap between the current capabilities and future needs of the AAC regarding its human resources is explained below.
Culture: The morale and trust of the organisational staff is not ensured by the organisation. Due to the absence of Improved SHRP and career development opportunities, the staff morale in the organisation is greatly reduced. This leads to decreased production efficiency and a high turnover rate of staff personnel.
Organisation: In the organisation, performance review and development programmes (PRD) are arranged for the human resource development. But it does not focus on the provision for dealing with the potential for future goals. No career paths or succession planning have been fixed. Lack of strategic human resource plan together with an absence of recognition for supervisors who develop their subordinates affected the manpower planning of the organisation. There exist some major problems with the methods and practises of HRM. This leads to a high turnover of certain key employees.
People: David Johnson and Andrew Stone, two electrical engineers and Patrick Swains (administrative manager) were the key managerial staff of the organisation. Overall responsibility of the firm is held by Patrick who also has the responsibility of the business and personnel management. David and Andre concentrated on marketing, sales and research and development. David Johnson is the director of R&D also. After the retirement of Patrick Swains, the remaining partners created two new positions; the Director of Human resources (DHR), and the Business Operations Manager. Paulene Steele is the newly appointed DHR who had experience as assistant human resource director in a large silicon chip corporation in southern California. David and Andrew are technically competent personnel but they are poor in dealing with the human resource issue. Due to these reasons, the profitability of the business is got diminished. The business growth of the firm is also badly affected.
Human resource systems
Employee selection and recruitment
Employee selection is the process of choosing the best person for a particular job. It is the process of dividing the applicants into two classes namely, those who are to be employed and those who are to be rejected. Selection is considered a negative process because the number of candidates rejected will be comparatively more than the selected persons. Recruitment is the process of searching for prospective employees and stimulating them to apply for jobs. It is a positive and simple process. “As a key element in most workforce plan, strategic recruiting initiatives play an important role in a company’s ability to carry out its competitive strategy.” (Essentials of strategy 2006, p.208).
The organization is planning to create a larger pool of applicants for the job. The recruitment and selection process in the organisation was also beset with a lot of defaults and mistakes. A review of the process reveals that the absence of centralised job description or person specification has failed in the staff recruitment process. Employee staff records system is also affected by defaults.
Employee training and development
Training is the act of increasing the knowledge and skills of an employee for doing a particular job. It is the process of imparting information and knowledge to employees. Training is a continuous process because there is no end to learning and a person has to learn continuously new technology, new patterns of behaviour and lifestyles. The term ‘development’ refers broadly to the nature and direction of change induced among employees through the process of training and education. Development means the growth of individuals in all respects. In practice, the term development is used in relation to the executives or managers. In the organisation in order to retain the employees, adequate training and skill development opportunities should be provided.
“Validation is described as the assessment or investigation of the training and development process used to achieve learning and change. The training /learning process itself is ‘validated’ to ensure that the specific objectives of both the training programme and those of the learner are met.” (Rae 1999, p.4).
OD is action-oriented. “It starts with a careful organization-wide analysis of the current situation and of the future requirements, and employs techniques of behavioural sciences such as behaviour modelling, sensitivity training and transactional analysis. Its objective is to enable the organization to adopt better to the fast-changing external environment of new markets, regulations, and technologies.” (Organizational development 2009),
Performance appraisal is the regular analysis of the employee within the organization. It aims to achieve higher productivity and it also analyses how an employee meets with the job specification. Job specification means a statement of employee’s characteristics and qualification required for the performance of duties and tasks comprising a specific job or function. The purpose of the performance appraisal is to provide pay increase and promotions. It helps to improve the performance of the employees and give an opportunity by which they can be rewarded or recognized for doing the job very well. It also helps to be a developmental experience for the employee and a teaching moment for the manager.
In order to sustain the global competency the turnover of the engineers has to be effectively restricted by the organisation. For this adequate system of payment should be formulated by the company. Results of Wage surveys reveal that AAC has paid much more than the industry average, i.e. about 8 to 10% more than the market wage rate. Along with the better wage payment, opportunities for career development also have to be arranged by the organisation.
In the liberalised business world, organisations are under greater pressure of requirements of changes at all managerial levels. In the human resource field, performance measurement and improvement policies have to be framed by the organisation. For this employee development is an essential tool. Along with the issues of expansion and diversification, human resource management also requires large-scale professionalism in their attitude and behaviour.
“Prepare forecasts of human resource requirements and plans for the acquisition, retention and effective utilisation of employees that ensure that the company’s need for human resource is met.” (Armstrong 2003, p.189).
Implementation and evaluation of the action plans
Strategic human resource management is an important concept in the present business situation. Efficient human resource is the most critical element in the business organisation. Through human resource management, firms are aiming to develop the competency and efficiency of the human capital of the organisation. For improving the productive contribution of the individuals in the organisation, an opportunity for achieving their societal and individual objectives has also to exist with the organisation. A well-defined HRM strategy should be framed by the organisation which will ensure acquisition, development, motivation and retention of efficient employees. The efficiency and effectiveness of the organisation can be improved by a well-established human resource policy.
The changing role of HRM
In contemporary business situations, the role of HRM is continuously changing and it has a greater contribution to the achievement of business objectives. In the HRM strategy, several steps are involved. It starts from the recruitment process and goes through relationship building. The HRM has the role of a strategic partner and a catalyst of change.
SHRM is the use of employees for the achievement of organisational competency.
n order to gain a competitive advantage against rival firms, support from the employees is essential. It involves the alignment of initiatives for the management of human resources towards the organisational objectives. (Ahluwalia 2007).
“SHRM is concerned with top management’s attention and approach to HRM as a critical strategic dimension affecting firm performance; which is the objective of this article. Strategic human resource management (SHRM) enhances productivity and the effectiveness of organizations.” (Kumar 2005).
SHRM is a complex process that gained greater acceptance among academic theorists. It is a concept in which the human resource management functions are integrated with the overall strategic planning of the organisation and its implementation. The human resources are directly linked with the physical, financial and technological capability of the organisation. The organisational policies and strategies relating to employee development are involved in the concept of SHRM. Development of skills, knowledge and abilities of the employees can be developed through training and other promotional activities.
“One important sense of international SHRM is to consider the internationalization or globalisation of key SHRM Decisions, particularly around decisions about the location of corporate activities, but also around global products and markets.” (Mabey, Salaman & Storey 1998, p.104).
SHRM is a general approach towards the application of strategic techniques in the human resource development. Employee development can be attained through training, long term strategies that have to be followed by the business for the human resource management is discussed in the SHRM concept. “An increasing consensus is emerging among researchers that employee behaviour is an important independent component of SHRM.” (Schuler & Jackson 2007, p. 80).
Approaches of the SHRM
An organisation attempts to integrate human resource activities with organisational performance measures. For business growth, adequate human resource policies are adopted by the firm. The performance level of human capital has a direct contribution to make towards the creation of the surplus of the business. For sustained business growth, along with the financial and advanced technological resources, human resources are also relevant. The management, motivation and deployment of human resources are reflected in the business growth.
The firm has to ensure adequate human resource for its expansion programs. For getting competency and professional excellence, the effective orientation of human resources is essential.
The SHRM “takes a proactive strategic approach to position the people in the organisation to maximize the firm’s competitive advantage.” (Analoui 2007, p.113).
Benefits of SHRM
Through the SHRM approach, the external opportunities and threats can be easily identified and analysed. A clearly focused business strategy can be framed through this approach. It will provide competitive intelligence to the company. Recruitment, training and motivation of the employees can be made through a systematic and planned approach. Issues relating to employee development can be easily and systematically solved through this approach. Internal strengths and weaknesses of the company can be identified and communicated. The customer expectations can be met properly by ensuring high proficiency in resource management and improved productivity. Business growth can be ensured through surplus.
“Successful organisations in the future must closely align their HRM strategies and programs (efforts) with the external opportunities, competitive strategies and their unique characteristics and core competence.” (Sims 2002, p.30).
Barriers of SHRM
Lack of co-operation at the bottom level of the organisation is the major challenge in the implementation process. It is possible that interdepartmental conflict can be aroused. The commitment of the top management is an essential factor that determines the successful implementation process; the absence of such support will lead to failure of the implementation process. Requirements of scarce resources are another constraining factor. “In SHRM possession raises the question of the legitimacy of a firm’s proportional claims over its staff and their skills.” (Schuler & Jackson 1999, p.101).
Retaining qualified and efficient staff with the organization is a crucial task of the organization in the keen competitive business conditions. For the retention of staff, the organization should be in a position to offer them better employment opportunities with better salaries. Low salaries, poor employment benefits, and limited opportunity for further career development will force employees to leave the organization. Continuity of staff is essential for maintaining the energy.
The retention of employees will benefit the relationship and morale of the employees. The Trust of the employees can be weakened by a large turnover. Leak out of the organizational history can negatively affect the organization. Staff members serving long-term in the organization will be an asset for any company. Responsibilities can be effectively handled by the members with long-term experience and thus they can occupy leadership positions. The staff continuity will help develop experienced staff members and thus organizational efficiency can be improved.
Challenges in the field of staff retention are becoming more complex with the increase in competition. Staff members have to be provided with adequate motivation through the offering of better employment opportunities for assuring their sustained interest. For retaining the staff the following methods can be adopted by the company:
- Linking of the staff with the organizational objectives: By connecting the staff with the organizational objectives, strong trust and morale can be developed. Their actions should be focused on the organizational objectives. Obsession towards the work has to be generated for increasing their commitment.
- Development of organizational relationship: In the company, the top-level management has to provide support for generating organizational relationships among the lower-level staff. Even though the work features may not be motivating, a better organizational environment will act as a motivational force for sustaining interest in the organization.
- Opportunity for leadership development: Individual capabilities of each staff have to be identified and adequate development programs have to be adopted by the firm. The needs and interests of the staff members have to be found out and adequate support has to be provided in the areas of growth and development. Shifting of the positions in the organization can be adopted by the company for better utilization of the key skills of the staff.
- Provision of responsibility: Mentorship programs can be arranged by the company for encouraging and supporting the staff members. It provides an opportunity for the staff to express their needs and interests and leadership qualities. This will improve the self-esteem of the staff and thus their efficiency and productivity could be improved.
- Promote leadership development: it is a key function of the organization. In case of work insufficiency, it will help to encourage the staff to co-operate with the organization.
The organization has to consider the staff as invaluable assets of the company and in order to fully utilize the strengths and abilities of the staff; the creation of a staff forum is an adaptable method. (Retaining staff n.d.).
In the AAC, the HR managers have to plan well and implement the HRM policies and decisions. More than relationship managers HR managers have to consider themselves as strategic resource managers. In the concept of Kossek the top management has to take an innovative and strategic approach to human resource management. By connecting the business strategy with the HR strategy, the human resource manager plays a greater role in organizational growth.
A talent pool has to be created for meeting the staff requirements. It will help meet the requirements of the human resources and their allocation in the proper manner. Recruitment and selection of the employees would be greatly facilitated through this approach. The resources of the host country will also have to be best exploited by the business firm.
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