Cruciality Of Hrm In Strategic Formulation And Implementation

Businesses are increasingly looking at human resources as a unique asset that can provide sustained competitive advantage. The changes in the business environment with increasing globalisation, changing demographics of the workforce, increased focus on profitability through growth, technological changes, intellectual capital and the never-ending changes that businesses are undergoing, have led to increased importance of managing human resources (Devanna, Fombrum, & Tichy, 1981; Wright, 1998).

Strategy has always been considered a critical success factor in all areas of human

activity. This has been a dominant viewpoint in theory and practice, not only in business enterprises but also in areas such as military action and diplomacy, politics and

government, personal development and career. In all these areas, it is widely recognized

that "strategy matters". The argument of course holds for a good strategy, appropriate for

given conditions, which can render superior outcomes or can even overcome deficiencies? Due to resource disadvantage and difficult environmental conditions.

Everybody wishes to learn from successful examples in order to understand which

strategy was followed and how this was applied in specific conditions. Particularly for

business enterprises we expect strategy to provide direction and cohesion of action

in the highly competitive and continuously changing business scene; to identify what type

of competitive advantage the enterprise should pursue, what activities and positioning

should select and how to implement the strategic choices.

Strategy formulation is only one part of the equation however; it is often in the details of implementation that business strategies get into difficulties. Implementation like formulation requires an appropriate environment. There no doubt therefore that human resource is fundamental (crucial) to the business and a favourable human resource (HR) environment has to be established before the various strategic choices can be analysed. It is human resource strategy, and the role of human resources in building competitive advantage and successful strategies.

Formulation of strategies focuses on dealing with opportunities and threats in the environment. Human resources and human resource management (HRM) can play major roles in the organization's overall strategy, particularly when human resources are viewed as providing a major competitive advantage. Strategic human resource management (SHRM) is the effective application of the organization's human resources to accomplish the organization's overall strategies. Human resource strategies define the manner in which the organization's practices, programs, policies, and activities will be aligned to obtain consistency with the organization's overall strategies. Such strategies play an implementation role and are valuable means of obtaining direction, consistency, and coherence in human resource efforts.

Strategy implementation focuses on business transformation and change. Directing strategy implementation and change processes, methods and tools. Defining a change plan, with actions spanning over a wide spectrum: structures and systems, skills and culture, individuals and management style. Organization of the project of strategic change, agents and roles. Engagement of stakeholders, overcoming resistance, communication as well.

There is little disagreement about the strategic importance of human resources in organizations among scholars and practitioners. During the recent years a growing number of sources have claimed, that the human resources are the companies most important assets, and that management of these resources to a larger extent will contribute to the continuous competitive advantage of firms (e.g., Wright et al., 1994; Lado & Wilson, 1994; Pfeffer, 1994; Ulrich (ed), 1998).

As a scarce strategic resource core employees and managers must be carefully allocated and continuously developed. Also, since traditional sources related to markets, financial capital, and/or scale economies is weakened by globalization, effective management of human capital may possibly be the significant determinant of firm performance. Human resource activities are claimed to be related to the performance of a firm. Appelbam et al. (2000) investigated the link between high performance work systems (implemented through HRM) and company performance. The results showed that HRM helped employees in three vital areas; ability, motivation and opportunity.

Human resource (HR) department that is highly administrative and lacks strategic integration fails to provide the competitive advantage needed for survival, thus losing its relevance. Huselid and Becker (1997) found that there were noticeable financial returns for the organisations whose human resource management (HRM) systems have achieved operational excellence and are aligned with business strategic goals. According to Ulrich (1998), one of the four roles of HR personnel is to become strategic business partner. Youndt and Snell (1996) find that firms employing HR practices according to the stated strategy are regarded to have better performance.

How human resource(s) (departments) can contribute to the competitive advantages of the firm has been described thoroughly since the mid-1980s (e.g., Paauwe (2004) for an overview). In particular during the last years HR has had the opportunity to prove, that it can contribute to organizational success through the development of a more strategic role, i.e. delivery of efficient services and the facilitation of organizational change. The unique ways which HR departments add crucial values to firms are the recruitment and selection of employees who have the appropriate competencies and fit the firms culture.

This development is based on a growing demand (and concern for) the continuous improving of organizational effectiveness and profitability. In other words, at this point in time, HR seems to be able to provide a large variety of solutions to some of the dominant questions being posed by corporate life. However, in answering the how-question a multiplicity of approaches emerge.

For an HR department to contribute optimally to organizational performance, it must be optimally organized, and the various aspects of the organizational system must be aligned. HR practices must fit with each other, with the strategy, and with the design of the organization