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The Impact Of Hrm Strategy Business Essay

Paper Type: Free Essay Subject: Business
Wordcount: 4696 words Published: 1st Jan 2015

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With the globalization of the world economy and the growing market demand, the economic environment has become increasingly impermanence and market competition has become more and more furious. In order to compete and survive in the international market, organizations must continually focus on improving organizational performance by effective human resource management strategies including reduce costs, innovate products and processes, improve quality, productivity, add product value and boost market share.

Human resource management has significant effects on organizational performance. In order to positively affect organizational performance, human resource decisions should be make for improving efficiency and contributing to revenue growth. “Human resources, both as labor and as a business function, have traditionally been viewed as a cost to be minimized and a potential source of efficiency gains.”

In many organizations, labor cost is always the largest operating cost and reduction costs by restructuring organizations and reducing employees is one of the main strategies. The best decision is that it could reduce cost and at the same time gain values. Industrial Relations suggest that HR makes direct contributions to the implementation of the operating and strategic objectives of organizations. A smart strategic decision comes from reasonable combination of subjects including psychology, economics, finance, market and strategy. Strategic human resource management has irreplaceable impact on organizational performance (Becker & Gerhart, 1996).

Table of Contents

Executive Summary………………………………………………………………1


Factors involved in measuring the impact of HRM strategy……………………..4

Tools of measuring the effectiveness of HRM strategy…………………………..5

Connection between HRM strategy and organizational performance…………….8

Ethical codes of conduct and the solution of ethical dilemmas in HRM strategy…9

Training methods………………………………………………………………….12

Importance of further education and professional development in New Zealand…13





Gurbuz & Mert (2011) states since the 1990s, the research method has changed from a “micro-analytical approach” to a “macro-strategic perspective”. In recent years, the strategic human resource management (SHRM) has become a hot topic not only in academic research but also in world business. “SHRM involves designing and implementing a set of internally consistent policies and practices that ensure source of sustainable competitive advantage and its impact on organizational performance”. In western countries, professors have done a lot of research and numerous literatures have been published. Some researchers suggested that the SHRM is “positively related to financial and operational performance of the organization”. Although studies show SHRM has positive effects on organizational performance, it still needs to continue creating values and ensuring the implementation of organization. HR managers should appropriately utilize the strategic role of HR and make correct decisions to gain values and high outcomes.

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This study aims to analyze the impact of strategic human resource management on organizational performance in New Zealand. In the article, we will analyze the overall human resources strategy as a factor contribute to corporate performance; evaluate appropriate ethical principles and values as part of the given human resource strategy; analyze a system approach to training and further education as part of the given human resource strategy. We hope to make any contribution to a better understanding of the role of human resource decisions in creating and sustaining organizational performance and competitive advantage.

Factors involved in measuring the impact of HRM strategy

Organizational effectiveness and success is defined by the quality of services rendered to the customers who promote relationship as an industry leader. HR strategies must be effective in a variety of possible future, making workforce planning and flexible execution critical elements of strategy.

Organizational effectiveness needs to meet the situation of having the right people in the right jobs at the right time to adapt changing organizational requirements. Effectively performing the role of Human Resource function could obtain the right person. Important tools, such as staffing, training, compensation and performance management are necessary in the HR practices that shape the organization’s role in satisfying the needs of its stakeholders.

According to Gurbuz & Mert (2011), study results show that the selection and development of HRM strategies have a positive impact on the perceived financial and market performance, the organizational performance, and the job satisfaction.

Successful organizations view HR strategy formulation and execution as a continuous, dynamic process that is the responsibility of all managers, led by HR. Staffing, development, performance and rewards management and employee relations strategies must be integrated with each other and must support the overall HR strategy. Employees are the main power of organization. HR managers have to carry out appropriate strategic decisions to drive success.

How to measure human resource strategies are effective, there are three aspects to consider including strategic vision, demographics and transfer of knowledge. Effective HRM strategies exist in realistic practices. HRM strategies should be aligned with organization’s vision which will provide an indication of where need to focus. Ensuring exchange experience and knowledge between different department and employees, is necessary to guarantee positively impact on productivity and effectiveness.

Tools of measuring the effectiveness of HRM strategy

Balanced Scorecard

Balanced scorecard is a management tool that provides stakeholders with a comprehensive measure of how the organization is progressing towards the achievement of its strategic goals. A score card is more than a way of keeping score. It is a system, considering of people, strategy, processes and technology. Balanced scorecard, when developed as strategic planning and management systems, can help align an organization behind a shared vision of success, and get people working on the right things and focusing on results. A planning and management scorecard system uses strategic and operational performance information to measure and evaluate how well the organization is performing with financial, customer results, operational efficiency and organization capacity building. For an organization to be successful it must satisfy the demands of its stakeholders: investors, customers and employees.

Source: Performance Manajemen

The balanced scorecard helps managers to understand, at least implicitly, many interrelationships between different organizational functions. This understanding can help managers transcend traditional notions about functional barriers and ultimately lead to improved decision-making and problem solving. For instance, the balanced scorecard development and implementations of organization covers most key strategies which are essential to balanced scorecard in an organization. They use long-term experience in assisting organization to approach the best integration of the balanced scorecard and performance management; develop balance scorecard regularly including vision and strategy facilitation, developing performance objectives and measures, and setting target and promoting initiatives; use balanced scorecard to build organizational alignment, to strategically allocate resources, to link rewards to performance; sustain balanced scorecard success by reporting result regularly. Organization could draw a strategic map using balanced scorecard approach to integrate different strategic objectives.


Benchmarking is defined as a systematic process for identifying and implementing best or better practices. There exist two main types: “informal” and “formal”. Informal benchmarking is a type of benchmarking that people learn experience and behaviors from others during our life. In the context of work, most learning informal benchmarking comes from

1. Talking to work colleagues and learning from their experience.

2. Consulting with experts.

3. Networking with other people from other organizations at conferences, seminars, and internet forums.

4. Online databases and websites, publications. Formal benchmarking includes two types: performance and best practice.

Source: Generic Benchmarking (MEGA) 3

Performance involves comparing the performance levels of organizations for a specific process. This information can then be used for identifying opportunities for improvement or setting performance targets. Using best practice benchmarking, organization could study and search for organization’s high performers in most aspects of interest. Reorganization of the importance of study is more necessary than just associate performance levels. Feasible and appropriate practices of organization are almost gained through the study. These organizations focus on how to adapt high performing or best practices and incorporate into their own organizational process. Therefore best practice benchmarking involves the whole process of identifying, capturing, analyzing, and implementing best practices.

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Connection between HRM strategy and organizational performance

Chang & Huang (2005) state there is a debate on the existing type of SHRM, universality and contingency. Universalistic scholars assist that HR practices are more important than comparative practice and very organization needs to implement best practices. However, some scholars argue that SHRM not always have positively effect on organizational performance. They claim that best fit play significant role in organizational performance. No matter which one is more important, it is clear that HRM strategies play important role in organizational performance.

Strategic synergy, fit and integration are the key concepts that the organization adopts to be effective. Different HR practices should be coherent and complement each other. There should be fit between the coherent sets of human resource practices and other systems within the organization. The HR systems should be in line with the business or competitive strategy of the organization. The system adopted by the organization should be compatible with its operating environment. The aims of the HRS processes are typically concerned with devising ways of managing people which will assist in the achievement of organizational objectives.

HRM practices that can improve organizational performance by increasing employee skills and abilities; promoting positive attitudes and increasing motivation; providing employees with expanded responsibilities so that they can fully use of their skills and abilities. HRM practices can influence employee skills through the use of valid selection methods to hire appropriately skilled employees and through comprehensive training to develop current employees. This focuses on measuring the relationship between people management and other managerial inputs, and business performance output. Employee involvement model of workplace governance has the most beneficial impact on performance, although it may not be appropriate for all organizations given the high cost of establishing and maintaining employee involvement.

Decentralized decisions and relaxed rules will lead to increased performance, and if individual participation is allowed, discretion will increase and the larger social exchange of obligations will result in enhanced loyalty and commitment. Organizational performance will be enhanced by system of practices that support each other and that have a mutually reinforcing effect on employee contributions to organizational performance. Training and development, job security and satisfaction, employee commitment, superior pay and conditions, and quality initiatives are often treated as the key human resource techniques essential for high performance.

The relationship between HRM and performance is dependent upon the business strategy the organization is pursuing. That organization pursuing an HRM approach coupled with a quality focus within their business strategy perform best; and that HRM is more likely to contribute to competitive success where it is introduced as an integrated and coherent package, or bundle of practices. An organization with a strong commitment to HRM competes on the basis of product quality and differentiation as well as price’ and adopts HR policies which include a high investment in training job security and functional flexibility.

Guest (1997) presented that further researching about emerging issues on HRM and organizational performance. The lack of HRM natural practices is the first issue need to consider. The second issue is to improve organization performance to meet the effective outcomes. The most important thing is that outcomes should reflect the concept of the balanced scorecard.

Ethical codes of conduct and the solution of ethical dilemmas in HRM strategy

There are something called code of ethics in companies which sets principles and ethical standards to underlie the job responsibilities and conduct. In business, there aren’t always laws to govern employee behavior like ethic. Therefore, companies need to define some ethical behaviors and code of conduct to build a ethical climate for staff. According to the International Labor Organization, the concept “corporate code of conduct” refers to companies’ policy statements that define ethical standards for their conduct (ILO, 2012). It points out that company can take a number of formats and address any issue, such as workplace issues or workers’ rights issues. Also, the implementation of the ethics depends on the company concerned, in other words, the corporation objectives. Let us take Wal-mart as an example, it is a specialized in general merchandisers with discount stores. Its code of ethical conducts applied to all employees in the purchase processes that are honest and caring out duties. All employees need to follow the ethical principles during their daily responsibility. In company, therefore, it is useful to prepare an ethic principles guide in order to determine the outlines of behaviors and to regulate business relationships for the employees.

Effective ethical code of conducts defines the responsibilities of organizations to stakeholders, the conduct expected of employees to influence the organization effectively (Kaptein & Wempe, 2002). It can be used as a key strategic factor in an organization and make the organization appear more ethical to its stakeholders. It ca also enhances social responsibility and clarifies the norms and values the organization seek to uphold. Nowadays, most large U.S. companies have ethical code, such as Google, Coca cola, Amazon and Apple. One of the roles of ethical codes in business is avoiding illegal activities. The reason is there are always conflicts between law and ethics. In some situation, it is legal but unethical or ethical but illegal. Nowadays, business ethics scandals continue to be headline news stories today. Such as lying on resumes, obstruction of justice or stock price manipulation. To judge whether is legal or not we can use laws, regulations and court decisions. We also can use moral judgment to define it is ethical or unethical. There are five moral principles which are utilitarian, rights justice, care and virtue (Mandal, 2010). When we apply to business, if all five principles reach the same conclusion, then that’s the moral judgment. But if there appears to be conflict among the principles: firstly, examine the nature of the apparent conflict and think about a different action that would satisfy all five principles; if there is no action to satisfy them, set priorities among the principles (Mandal, 2010).

The ethical climate of a business organization can make the difference between a successful venture and an unsuccessful one. Every employee in an organization may face an ethical dilemma at some point, and some ethical decisions can be more challenging to fully understand than others. Knowing how to resolve ethical dilemmas in the workplace can increase employees’ decision-making effectiveness and keep company on the right side of the law and public sentiment (Debra, 2006).

There are some steps to deal with the ethical dilemmas regarding whistle-blowing, multinational workforce, equal opportunities and diversities. Firstly, consult company’s code of ethics and ethics training materials for formal guidance (Lankard, 1991). Most companies have institute guidelines that can help navigate a dilemma and can help clarify the situation. This may be able to resolve the dilemma immediately, depending on how comprehensive and specific the company’s ethical statement. The code of ethics can provide the pros and cons of business decisions, giving a clearer picture of which decision is more in line with the company’s ethical commitments. Secondly, discuss the issues with a trusted friend or colleague (Lankard, 1991). Sometimes listening to the opinion from others can provide more insight. Especially the one who has faced the same type of issue can prove beneficial. Explains that situation and express the desire to reach a solution. Also, we can speak with peers form other companies or someone we trust from a business networking group without divulging company secrets. This will help us to gain an even wider range of insights. Thirdly, share the dilemma with supervisor to take advantage of his or her experience (Lankard, 1991). Supervisor has more experience and knowledge to solve different types of problem. Taking ethical questions to supervisors can keep employees out of trouble in addition to resolving conflicts. If we are at the top of the organization, then we need to discuss this issue with other executives, because it is nothing wrong with asking for help from time to time. The executive team members should be able to provide unique insights into the problem. Fourthly, make a decision and take the action. As long as we discuss the dilemma with others and find out the solution to resolve it, we need to put it in to action. If need to blow the whistle, we can use anonymous letter or a third party to report the unethical behaviors. Explain the detail of the issues and the reason we thing is unethical and also the solution of the dilemma.

Training methods

There are two types of training methods. They are on-job training and off job training. No matter what method we choose it must fit the business objective and strategy. Training methods can improve employees’ ability performance on job.

The most frequently used method in the organizations is on-job training. This method of training uses more knowledgeable, experienced and skilled employees, such as mangers, supervisors to give training to new or less knowledgeable, skilled, and experienced employees (Samanta, 1993). This is the most common form of training; most employees receive at least some training and coaching on the job. Also, the job rotation is required. It usually is one-to-one instruction between coworkers or between the employees. On-job training can helps employer identify weaknesses and find out which areas which need improvement. There are some advantages of on-job training. It is cost effective and less disruptive to the business. For example: employees can be trained during the work and do not need to away from work. Training with equipment they are familiar with and people they know can help them. Employees can gain direct experience and get standard approved by the employer. Also, on-job training is productive as the employee is still working as they are learning.

Off-job training occurs when employees are taken away from their workplace to be trained. Common methods of off-job training include: day release, distance learning/ evening classes, block release courses, computer-based training, vestibule training, role playing, etc (Leslie, 1997). Off-job training has advantages. It is the most effective method as the trainees learns by experience, making him or her highly competent. Further, the method is least expensive to train a large number of people with a common need. Views, opinions and information can be shared with the other people in the group who can bring a wide range of experience or knowledge to the discussions. Also, employees can learn form outside specialists or experts and can be more confident when starting job. Off-job training creates opportunities for the learners to clarify aspects of the learning that they do not understand or on which they require additional information (Leslie, 1997). Like role playing, the essence is to create a realistic situation, as in case study, and then have the trainees assume the parts of specific personalities in the situation (Aswathappa, 2005). For example, a male worker may assume the role of a female supervisor, and the supervisor may assume the role of a male worker. Then, both may be given a typical work situation and asked to respond as they expect others to do. This can have a better understanding among individuals. Role playing helps promote interpersonal relations and change the attitude.

Importance of further education and professional development in New Zealand

In current business environment, the organization must do everything possible to stay competitive and maintain a highly skilled, motivated staff. In order to keep employees satisfied, boost morale, and remain competitive, employers need to be aware of the need for further training and education of personnel. One of the most important reasons to offer further training and education to employees is to ensure that work skills stay current. Keeping employees up-to-date regarding software applications, the latest thinking on logistical methods, and ways to improve efficiency are all necessary to keep businesses on a level playing field with competitors. A workforce with up-to-date professional skills in its industry gives company the positive opportunities in its competition. Further education also can develop and recognize up-and-coming leaders. Organization needs to develop future leadership. The employees who embrace further education might have good opportunity on career growth. Further education can reduce turnover (Kitson, 2010). Because an employee working for a company that is willing to gain more professional development opportunities and would be less likely to leave the organization. Therefore, the company needs to make an investment in its employees so they can stay current in their organization.

In many organizations of New Zealand, the owner recognize that the importance of further education and professional development and they start to offer this opportunities to their staff. Professional development may include attending a conference, completing an externship, developing curricula or taking a continuing education course to improve skills. Often, such education and professional development grants are geared towards a particular industry or occupation. Center for continuing education of the University of Auckland provide professional development programme to meet the need of NZ organizations (CCE, 2012). The center works closely with the company to design a unique programme. The presenters are professionals from local industry and the eight university faculties. They are all highly regarded as experts both in New Zealand and internationally. The New Zealand Association for Training and Development (NZATD) is New Zealand’s professional association for workplace learning and performance, training, learning and development, and adult education specialists. NZATD can provide professional performance to people for learning and development best practice (NZATD. 2012).


The report examined the impact of strategic HRM on firm performance. As revealed in our analysis, the strategic HRM variables are found to have a positive effect on organizational outcomes, especially with respect to a firm’s HR performance—employee productivity, job satisfaction and commitment. We recommend balanced scorecard and benchmarking is the tool to measure the effectiveness of HRM strategy. The relationship between HRM and performance is dependent upon the business strategy the organization is pursuing. We evaluate the business Ethics and comply with the policies and practices stated in this Code of Conduct. And we found that the Company’s ultimate goal is to achieve its business objectives for the benefit of all stakeholders including the shareholders and the society. And then we recommend some ways of ethical dilemma in workplace. After that we analyze the advantages and disadvantage of on-job training method and off-job training method. We found that the organization needs to choose the most suitable one to train the staff regarding the different demand of organization. Finally, we analyze the importance of further education and professional development in New Zealand context. New Zealand has some professional association to provide professional development for NZ companies.


Strategic human resource management is concerned with the role human resource management systems play in firm performance, particularly focusing on the alignment of human resources as a means of gaining competitive advantage. Organization need to aware that the successful human resource policies such as ethical code on conduct and practice may increase performance in different areas such as productivity, quality and financial performance. The operational performance of an organization is a function of people, process and technology. For effective interaction of people with technology and process, the people in the organization have to be competent enough, with the required and on-going knowledge, skill and abilities. Also, performance appraisal may enhance the competence of employees for higher performance.

Regular training is a fundamental necessity to ensure proper performance but we also recommend that teams periodically train between departments. The benefits are peer-to-peer support, feedback, exposure to new training methods and ultimately cross-fertilization of ideas.

Furthermore, in order to achieve the highest organizational performance and maximize the organizational competitive advantages, organizations should ensure following processes.

HR Practices are applicable to Teams.

Have strict and regular hiring procedures.

Effectively recognize employees’ talent and abilities to classify their position.

Proceeding effective performance evaluation regularly.

Implement competency-based assessment, development and training.

Implement an annual strategic planning to meet changing of business environment.


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