January 10th, 2018
Forces Contributing to the Integration of HRM Strategy with Corporate Strategy
A number of factors such as globalization, increasing competitiveness and market dynamism have been core contributors to the current orientation of HR towards a strategic role. The subsequent section evaluates the contribution of various factors towards the transformation of the human resource function.
Current Economic Climate
One of the factors necessitating business organizations to focus on factors that achieve their long-term growth has been the frequent occurrence of economic crises. For instance, since the 1930s great depression, crises such as the oil shock of 1973, the energy crisis of 1979, and more recently, the 2008 credit crunch have characterized events across the global economy (Barsky & Kilian 2004; Krugman 2010). With recent to the recent crisis, its gravity has been enormous only surpassed by that of the great depression, as suggested in some reports (Krugman 2010). In the UK, the impact of the crisis has for instance been noted with layoffs and failure of entities that were considered formidable in yester years (House of Commons 2008; European Communities 2009, p. 35; Bell & Blanchflower 2009). Such loss of incomes impacts negatively on households’ ability to spend thus affecting the demand in the market (Colander 2008). Currently, the economic climate in the UK is on a recovery process from the 2008 credit crunch, with projections indicating that the effect of the crisis could persist for some years, probably extending to the next decade (European Communities 200p, pp.27-31). Accordingly, with consumers purchasing power having been curtailed, entities need to evaluate aspects that would make them more efficient thus offer value to dissuade customers from switching to competitors with low-priced alternatives.
Another effect arising from the recent economic crisis, with respect to HRM, has been massive reduction in employee levels as entities attempt to reduce their costs due to decreased demand. A BBC (2009) report for instance identified the widespread layoffs globally as companies reported poor performance, with companies in the UK such as the steel manufacturer, Corus (currently referred as Tata Steel Europe) noted among those announcing massive layoffs at the height of the crisis. Although entities cut jobs in their downsizing strategies, with the heightened focus on enhancing the value of the shareholders, it has increasingly become evident that such cost cutting approaches may not ensure sustainability of growth in the long –term, when not accompanied by other measures (Beer 1997). Beer (1997), for instance, points out that “implementation of new strategies requires fundamental changes in organizational behaviour” (p.49). Accordingly, strategic HRM has been suggested as a way through which organizations can build their capabilities to change (Court 2011).
Increased competitiveness in the business environment can be attributed to such factors as globalization and technological advancement. With respect to globalization, factors such as trade liberalization and easing of cross-border barriers have led to the increase in multinational corporations (Brealey & Kaplanis 1996; Yong-Shik 2005). Such entry of foreign entities is associated with increased competitiveness in the host market, thus necessitating host country firms to improve their service or product offerings (Lehner & Schintzer 2008). On the other hand, globalization has resulted into increased labour mobility (Seymen 2006). Due to such mobility, multicultural workforce has become a common characteristic of most multinationals, requiring entities to develop effective strategies to develop such multicultural nature of their organizations to reap the benefits that such multiculturalism is associated with (Seymen 2006).
Increased competitiveness has also been brought about by technological advancements. Technological advancement have for instance diminished the competitive advantage of companies such as Xerox, by enabling competitors to manufacture cheaper alternatives (Brynes & Crockett 2009). However, IT adoption, by itself does not automatically result into value addition, rather it is the appropriate use of such IT that ensures an entity is able to reap the benefits associated with adoption (Soh & Markus 1995). Accordingly, building human resource capabilities that ensure the appropriate use of IT could better an organization’s ability to compete effectively.
Accordingly, increasing competitiveness could involve two factors. Firstly, is the trade liberalization that results into entry of multinational companies who, by the virtue of factors such as massive resources they control, initiate strategies that spur enhanced competition in the market. Secondly, competitive market could arise of technological advancements that have made it easier, even for smaller firms to enter a particular market. Due to such an effect, companies that enjoyed a substantial market share are increasingly losing such a market to the small firms that can match these services. Resulting from the increased competitiveness, and the prevailing economic climate, entities have been forced to become innovative in ways through which they can add value to the business. Alignment of the human resource strategy to the corporate strategy has been advanced as one way through which organization would create a competency that competitors will find hard to imitate (Kim & Gray 2005; Luthans & Sommer 2005; Ismail, Omar & Bidmeshgipour 2010). go to part 4 here.