Over time the importance of the value of human resources (HR) to its firm has increased. The management of human resources went from being operational to strategic, which are the two levels of HR, and from reactive to proactive. The HR field may organize its thinking about the past, present, and future around the framework that results from the combination of both proactive and reactive HR. Operational HR activities generally refer to the routing, day-to-day delivery of HR basics. The strategic level of HR activity is more difficult to explain and involves five criteria: Long term-whether the activity would add value in the distant future as opposed to the near future. ???Comprehensive-whether the activity involves the entire organization or individual departments or parts. ???Planned-whether the activity is thought out before it is done or if it is done on the spur of the moment. ???Integrated-whether it would bring other separated activities together. ???High value added-whether it focuses on business, financial and market success of not. The two approaches to the management of HR that would be discussed are strategically reactive and strategically proactive.
Reactive human resource management waits for problems to happen before something is done about it, e. g. waits for someone to quit before even thinking of a replacement or training for that replacement. Whereas proactive human resource management anticipates needs or problems and attempts prevent them. Both strategically proactive and strategically reactive HR are used to add value to an organization. In his book Strategic Human Resource Management, Mello explained the terms strategically reactive and strategically proactive as:
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Strategically reactive HR focuses on implementing the business strategy; that is, given a clearly formulated business strategy (e. g. , growth, new product, innovation, cycle reduction, new market entry), how can HR help support is successful implementation? Such activities include identifying and developing the technical knowledge, tactical skills, and business culture that are consistent with the demands of the business strategy. They may also include facilitating change management and organizing HR into service centers. (Mello, Jeffery A. , 2006, p. 238)
Strategically proactive HR focuses on creating future strategic alternatives. Such activities include creating a culture of innovation and creativity; identifying merger and acquisition possibilities and creating internal capabilities that continually track and align with the marketplace for products, markets and capital with their respective lead indicators. (Mello, Jeffery A. , 2006, p. 238) The process of what is strategy and how it should be developed can be outlined by two major models. The first model is the industrial organization model (I/O model).
This model argues that to develop the organization one must study the external environment which the organization is in and make a decision based on these conditions. This is reactive because the organization responds to threats or opportunities posed by the external environment. The other major model is the resourced-based model which is also called the resource-based view (RBV) of the firm. This model argues that the organization looks at its internal resources and what it is capable of, instead of the external environment, and makes its decision.
The resource based model is proactive in that there must be a plan to acquire or keep resources and also how these resources are used to add strategic value. The traditional image of HR professionals, whose primary task is to conduct transactions at the request of employees and managers, is gradually fading in favour of their integration into organizational management and the updating of their skills to improve the contribution they make. In other words, HR professionals are increasingly becoming full partners who play an active role in their organization’s strategic activities.
HR is no longer being defined as what it does but rather by what it delivers. A framework was developed by Ulrich that shows how HR has changed from concentrating on staffing and compensation and focuses and more on outcomes. This is shown below in Figure 1. Strategic PartnerChange Agent Administrative ExpertEmployee Champion FIGURE 1 Human resources are no longer being looked at as costs or liabilities but as assets to the organization that can not be easily duplicated and as a result is a source of competitive advantage. Business conditions now demands greater competitive advantage from HR agendas and processes.
HR needs to contribute strategic value against criteria from customer and capital markets and can do this by either being reactive or proactive. In its strategically reactive mode, HR assumes the existence of a business strategy and adds value by linking HR practices to the business strategy and by managing change. In its strategically proactive mode, HR creates competitive advantage by developing and encouraging cultures of creativity and innovation, by facilitating mergers and acquisitions, and by linking internal processes and structures with ongoing changes in the marketplace.
The avenues via which HR reactively and proactively add strategic value to an organization is different. There are three avenues through which strategic HR is reactive. The first is that HR must support the execution of tactics that drive the long term strategies. The presence of a business strategy and it operational tactics must be assumed in order for HR to be strategically reactive. HR must use this to figure out how many staff members they need, where to get these people from, if they would need training or not and how much training, and how is good work to be rewarded.
These drive long term strategies and HR are concerned with making the best decisions that would benefit the organization. In addition to giving tactical support, HR can also be linked to business strategy by creating a culture that is powerful and strategic and leads to the firm’s success also by ensuring that technical skills are known and practiced my employees. This linkage is done by following eight steps: 1. First the business unit for which the practices are being designed must be defined. It must be clear if the practices are being created for the entire organization or if it is for a sub-unit under the organization. . Key trends in the environment outside the firm must be specifically noted. This is because it was believed that the businesses strategy should be based on the external environment, also studying the environment could be very beneficial for the firms that have a business-based human resource. All trends must be considered. The trends that show both threats and opportunities ones, the one among competitors, customers and those in the rapidly changing field of technology must be closely looked at. 3. HR must identify the firm’s sources of competitive advantage and decide which is my important than the other.
Whether the company is choosing to compete on the basis of cost, convenience speed brand, quality and/or innovation must be identified. 4. Create the culture and technical skills that are needed to create and support the sources of competitive advantage that were identified before. 5. All unwanted cultural characteristics must be identified. 6. At this step the HR practices that are most likely create the desirable culture should be designed. 7. It is at the stage where an action plan for the HR process should be established. Responsibilities and resources are distributed. 8.
In the final step the means of measuring how effective the entire process will be is specified. Change management programs are the other set of activities that makes HR strategically reactive. Change Management is a structured approach to transitioning individuals, teams, and organizations from a current state to a desired future state. HR is required to use change management teams to help in the implementation of various processes throughout the firm. This is reactive because the steps to successful change are implemented after employees develop undesirable attitudes instead of preventing the development of such approaches.
Strategically proactive agendas include identifying portfolio requirements, selecting merger and acquisition candidate, creating institutional change capacity, building organization culture and radical innovation and identifying social trend that can be parlayed into product and services. The role Human Resource plays in creating strategic alternative is important in the strategically proactive approach to managing human resource. HR professionals are expected to enough about other areas in the organization so they can make valid contributions when these areas are bring discussed.
Also HR is required to define and create strategic alternatives. HR professionals must be able to use their knowledge obtained in other fields and HR assumption and logic to create business alternatives. Unlike strategically reactive the three avenues through which HR can be strategically proactive are: (1) creating the culture of activity and innovation, (2) being involved in the full breadth of mergers and acquisitions activities and (3) creating internal capabilities based on future external environmental requirements.
The more innovative the firm is the greater is the probability that it will bring new products or services on the market before its competitors. The firm would therefore have the opportunity to benefit from the temporary monopoly since it would be the only firm offering the product or service. In order to increase the probability of innovation taking place main decision makers must agree and decide that innovation is a desirable focus or agenda. Also everything that can hinder creativity, such as bureaucratic infrastructure, must be removed.
After these conditions are met the organization may now concentrate on building the infrastructure that maintains the following innovative ethos; communication, staffing, training and development, and measurement and awards. When there is a merger or acquisition HR also plays a strategically proactive role. In all for stages of the merger or acquisition process some form of the strategically proactive approach is required. The first phase has to do with understanding the firm’s portfolio and its requirements. In understanding the firm’s portfolio, what the firm is capable of must first be determined.
Here proactive action can be seen in that HR has to the capabilities or deficiencies that the organization may gain after the acquisition or merger. When two firms join to make one whether was by an acquisition or merger it is possible that both firms has clashing cultures that they take into the new company with them. In order to avoid the conflict this might course solutions are put in place before the merger or acquisition take place. Finally, Hr is strategically proactive when it links the organizations external market environment to factors internally.
Making employees happy that enjoys making people in the market place happy which would reap long term benefits. Organizations would not want employees that do not like making customers happy so they would not invest in these members unless they can be converted into wanting to make people happy. Also, ensuring that employees understand what takes place in both the external and internal environment can give the firm a competitive advantage. Employees are better able to anticipate change in the environment and can come up with solutions to this change, if it is negative, before the change takes place.