HRM and Environmental Pressures

Researchers at the Harvard Business School have proposed a broad way of understanding human resources management that takes HRM beyond the narrow connotation of planning, selecting, training and appraising. Figure indicates how external stakeholder interests, such as union interests and situational factors, such as the local labor market can influence HRM policies. These policies naturally have consequences for the organization itself –consequences that, in turn affect both the environment and the organization.

For example, many people are forecasting a labor shortage in the United States for the late 1990s. If this proves true, then business strategies must take this fact into account. Some labor intensive activities may have to be transferred to other countries, or alternatively executives may have to lobby for a liberalization of immigration laws. Additionally, industries will be affected differently by a labor shortage. Companies may have to adopt a variety of new reward system and even new ways of dividing and sharing work.

Such considerations provide clear evidence that the HRM process cannot be divorced from strategy – the overall direction of the firm. The most important point to remember however is that unless HRM policies are influenced by all stakeholders, the organization will fail to meet the needs of the stakeholders in the long run and will as an organization.

The Four C’s Model for evaluating human resources

To evaluate the effectiveness of the HRM process within an organization, the Harvard researchers have proposed a ‘four C’s’ model: competence, commitment, congruence, and most cost effectiveness. Examples of questions related to each of the four C’s and some methods for measuring them are given in the following list.

Competence: How competent are employees in their work? Do they need additional training? Performance evaluations by managers can help a company determine what talent it has available. To what extent do HRM policies attract, keep, and develop employees with skills and knowledge needed now and in the future?

Commitment: How committed are employees to their work and organization? Surveys can be conducted through interviews and questionnaires to find answers to this question. Additional information can be gained from personnel records about voluntary separation, absenteeism, and grievances. To what extent do HRM policies enhance the commitment of employees to their work and organization?

Congruence: Is there congruence or agreement between the basic philosophy and goals of the company and its employees? Is there trust and common purpose between managers and employees? Incongruence can be detected in the frequency of strikes, conflicts between managers and subordinates, and grievances. A low level of congruence results in low levels of trust and common purpose tension and stress between employees and managers may increase. What levels of congruence between management and employees do HRM polices and practices enhance or retain?

Cost effectiveness: Is there congruence or agreement, between the basic philosophy and goals of the company and its employees? Is there trust and common purpose between managers and employees? Incongruence can be detected in the frequency of strikes conflicts between managers and subordinates, and grievances. A low level of congruence results in low levels of trust and common purpose tension and stress between employees and managers may increase. What levels of congruence between management and employees do HRM policies and practices enhance or retain?

By shaping HRM policies it enhances commitment, competence, congruence, and cost effectiveness, an organization increase its capacity to adapt to changes in its environment. High commitments, for example means better communication between employees and managers. Mutual trust is enhanced and all stakeholders are responsive to one another’s needs and concerns whenever changes in environmental demands occur. High competence means that employees are versatile in their skills and can take on new roles and jobs as needed. They are better able to respond to changes in environmental demands. Cost effectiveness means that human resources costs such as wages, benefits and strikes are kept equal to or less than those of competitors. Finally, higher congruence means that all stakeholders share a common purpose and collaborate in solving problems brought about by changes in environmental demands. This capacity to collaborate is crucial in an ever changing environment.