Strategic Human Resource Management

Today, Strategic Human Resource Management (SHRM) plays an extremely important role in the functioning of modern organizations.

The role of human resources can hardly be underestimated, especially in companies operating in knowledge-based industries. In this respect, it is possible to refer to Sanmina-SCI Corporation, which is one of the leading global electronics manufacturing services provider.

The company has about 80 manufacturing sites and it operates internationally (Henning, 2006). In actually, the company develops its business worldwide, but it has to pay a lot of attention to the development of its human resources because the intellectual and creative potential of employees are very important for the company which serves original equipment manufacturers and operates in a high-tech industries, such as communication and computer hardware (Clements, 2008). The company is traditionally oriented on the maintenance of employees’ loyalty to the organization, its culture and values. The development of the organizational culture is strategically important for Sanmina-SCI Corporation and it is one of the major priorities of the company’s policies. It is obvious that the organizational culture defines the development of the company in terms of its international markets expansion strategy. This means that the organizational culture contributes to the development of organizational traditions, ethical norms and rules, standards of behavior and interpersonal relationships in all units of the company, regardless of their physical location. At the same time, the company faces a problem of the adaptation of new employees, especially employees that are hired abroad to work in new units of the company. The problem is that these employees need the time for adaptation and often managers of Sanmina-SCI need to change their traditional management style to facilitate such adaptation and to develop positive interpersonal relationships with employees. On the other hand, the main concern of the company’s strategic human resource management is the recruitment and retention of well-qualified employees which are able to generate new ideas and introduce innovations, which are strategically important for the company, which is oriented on the high-tech industry.

Sanmina’s SHRM

On analyzing Sanmina-SCI’s strategic human resource management, it should be said that the company views its human capital as the main asset which lays the foundation to the further development of the company. In actuality, Sanmina-SCI’s SHRM is mainly focused on the employment and retention of well-qualified employees. However, today, the company faces serious problems in its SHRM. To put it more precisely, in recent years, the company has suffered from the deterioration of its marketing performance that influenced its marketing strategies consistently, including its SHRM. In fact, the company had to cut jobs in order to improve its marketing performance and, today, the company may need to cut jobs even more because of the ongoing economic recession and deterioration of the situation in international markets. Obviously, the unfavorable situation in international markets forces the company to undertake bold steps to optimize its marketing performance. The company used job cuts as a means of the reduction of costs of the company, but, today, it is obvious that such a strategy has proved to be erroneous because it wreaks uncertainty in employees because they are uncertain in their future in the company, while the fear of being fired stimulates employees to look for better job opportunities. Naturally, in such a situation, it is hardly possible to maintain the strategy oriented on the prevention of the personnel turnover and formation of employees’ loyalty to the company.

Therefore, the company has to develop its SHRM in accordance with new challenges, such as the deterioration in the international market, the need to save costs and others, and strategic goals of the company, such as the retention of well-qualified personnel, introduction of innovations and encouragement of the personnel to generate new ideas and implement innovations.

Analysis of SHRM

At the same time, in order to understand the company’s strategic human resource management, it is important to dwell upon the essence of strategic human resource management. Strategic human resource management is a complex process which is constantly evolving and being studied and discussed by academics and commentators. Its definition and relationships with other aspects of business planning and strategy is not absolute and opinion varies between specialists (Schuller, 1992).

Strategic HRM can be regarded as a general approach to the strategic management of human resources in accordance with the intentions of the organization on the future direction it wants to take. It is concerned with longer-term people issues and macro-concerns about structure, quality, culture, values, commitment and matching resources to future need (Purcell, 2003). It has been defined as:  all those activities affecting the behavior of individuals in their efforts to formulate and implement the strategic needs of business; and the pattern of planned human resource deployments and activities intended to enable the forms to achieve its goals.

Strategic HRM can encompass a number of HR strategies. There may be strategies to deliver fair and equitable reward, to improve performance or to streamline structure (Clarke, 2000). However, in themselves these strategies are not strategic HRM. Strategic HRM is the overall framework which determines the shape and delivery of the individual strategies.

Boxall and Purcell argue that strategic HRM is concerned with explaining how HRM influences organizational performance (Boxall and Purcell, 2003). They also point out that strategy is not the same as strategic plans. Strategic planning is the formal process that takes place, usually in larger organizations, defining how things will be done. However strategy exists in all organizations even though it may not be written down and articulated. It defines the organization’s behavior and how it tries to cope with its environment. Strategic HRM is based on HRM principles incorporating the concept of strategy (Henning, 2006). So if HRM is a coherent approach to the management of people, strategic HRM now implies that that is done on a planned way that integrates organizational goals with policies and action sequences. A good business strategy, one which is likely to succeed, is informed by people factors. One of the driving factors behind the evaluation and reporting of human capital data is the need for better information to feed into the business strategy formulation process.

In the majority of organizations, such as Sanmina-SCI, human resources are now the biggest asset. The knowledge, skills and abilities have to be deployed and used to the maximum effect if the organization is to create value (Scott, 2007). The intangible value of an organization which lies in the people it employs is gaining recognition by accountants and investors, and it is generally now accepted that this has implications for long term sustained performance.

It is therefore too simplistic to say that strategic human resource management stems from the business strategy. The two must be mutually informative. The way in which people are managed, motivated and deployed, and the availability of skills and knowledge will all shape the business strategy (Boxall and Purcell, 2003). It is now more common to find business strategies which are inextricably linked with and incorporated into strategic HRM, defining the management of all resources within the organization. Individual HR strategies may then be shaped by the business strategy. So if the business strategy is about improving customer service this may be translated into training plans or performance improvement plans.

In such a context, it is obvious that Sanmina-SCI Corporation’s strategic human resource management is an essential part of the overall marketing strategy of the company. It is important to lay emphasis on the fact that strategic human resource management has long-running effects on the performance of the company. In this respect, the job cuts used by the company in the past to save costs was a very dangerous strategic decision in relation to human resources because it undermined the confidence of employees in the reliability of the company and in their own future in the company. At the same time, the company is concerned with the improvement of its marketing performance and increase of the efficiency of work of its employees. However, the latter is impossible to achieve without an effective strategic human resource management.

At the same time, the current policies of the company in regard to its human resources are not effective and, what is more, the company needs to develop new approaches to strategic human resource management in order to meet new requirements of the current business environment. The company has to overcome the current economic recession with minimal losses and financial losses are secondary compared to human capital losses for Sanmina-SCI Corporation, because human resources are vitally important for the company and they define the further development of the company, its ability to introduce innovations and offer new, competitive products in the market.

Issues influencing SHRM

Obviously, there are numerous issues that affect strategic human resource management of Sanmina-SCI. in this respect, it is important to understand that strategic human resource management is vulnerable to the impact of various factors which affect the organizational performance and strategic human resource management at different levels. A number of writers have argued that strategic HRM and human capital management (HCM) are one and the same thing, and indeed the concept of strategic HRM matches that of the broader definition of HCM quite well as the following definition of the main features of strategic HRM by Dyer and Holder shows(Dyer and Holder, 1998):

• · Organizational level ”“ because strategies involve decisions about key goals, major policies and the allocation of resources they tend to be formulated at the top.
• · Focus ”“ strategies are business-driven and focus on organizational effectiveness; thus in this perspective people are viewed primarily as resources to be managed toward the achievement of strategic business goals.
• · Framework ”“ strategies by their very nature provide unifying frameworks which are at once broad, contingency-based and integrative. They incorporate a full complement of HR goals and activities designed specifically to fit extant environments and to be mutually reinforcing or synergistic.

This argument has been based on the fact that both HRM in its proper sense and HCM rest on the assumption that people are treated as assets rather than costs and both focus on the importance of adopting an integrated and strategic approach to managing people which is the concern of all the stakeholders in an organization not just the people management function. However, the concept of human capital management complements and strengthens the concept of strategic HRM rather than replaces it (Dyer and Holder, 1998). Specialists (Dyer and Holder, 1998) argue that it does this by:

• · drawing attention to the significance of ”˜management through measurement’, the aim being to establish a clear line of sight between HR interventions and organizational success
• · providing guidance on what to measure, how to measure and how to report on the outcomes of measurement
• · underlining the importance of using the measurements to prove that superior people management is delivering superior results and to indicate the direction in which HR strategy needs to go
• · reinforcing attention on the need to base HRM strategies and processes on the requirement to create value through people and thus further the achievement of organizational goals
• · defining the link between HRM and business strategy
• · strengthening the HRM belief that people are assets rather than costs
• · emphasizing role of HR specialists as business partners.

Hence both HCM and HRM can be regarded as vital components in the process of people management and both form the basis for achieving human capital advantage through a resource-based strategy.

An alternative way of looking at the relationship between strategic HRM and human capital is in terms of the conversion of human capital into organizational value. Human capital evaluation is useful in that it provides information about the current and potential capabilities of human capital to inform the development of strategy (Henning, 2006). Business success will be achieve if the organization is successful at managing this human capital to achieve this potential and embed it in products and services which have a market value.

Strategic HRM could therefore be viewed as the defining framework within which these evaluation, reporting and management process take place and ensure that they are iterative and mutually reinforcing (Clarke, 2000). Human capital therefore informs and in turn is shaped by strategic HRM but it does not replace it. Therefore, Sanmina-SCI cannot ignore the role of strategic human resource management as an essential part of its strategic marketing development.

At the present moment, Sanmina-SCI’s strategic human resource management is influenced by several external and internal factors. First of all, the company is oriented on the knowledge-based industry that means that the company needs to employ well-qualified, prospective, gifted employees which are able to introduce innovations. In addition, the company operates worldwide that raises the problem of the adaptation of employees from different cultures to the organizational culture of Sanmina-SCI. Furthermore, the current situation within the company is destabilized by the experience of job cuts, which have increased anxiety of employees their future in the company and raised the problem of the personnel turnover. All these challenges and issues are aggravated by the ongoing economic recession which affects the global economy. As a result, the company has little opportunities to improve its marketing performance fast.

Recommendations

In such a situation, it is possible to offer several recommendations to the company. first of all, the company needs to focus on the development of the positive organizational culture which can encourage employees to keep working within the company in spite of possible difficulties they may face at the moment. At the same time, it is important to increase confidence of employees in their own future in the company and in the social responsibility of the company. In other words, employees need to be certain that they will keep working at Sanmina-SCI or, if they are fired, they will get compensation sufficient to afford living for certain period of time, until they can find a new job. Therefore, the company should develop its social responsibility policies. In terms of this policies, the company can focus on the provision of employees with health care insurance and expand health care insurance non only on employees but also on their family members. In such a way, employees will feel protected and secure. Moreover, today, when the costs of health care services and insurance increase substantially, employees will be interested to work at the company, which can provide them with health insurance. In addition, the company should a particular attention to the training of employees because the qualification of employees and their professional level are extremely important for the company and, to a significant extent, they define the competitive position of Sanmina-SCI in the future.

Obviously, training of employees will develop their professional skills and abilities and it will encourage them to work better as well as it will increase the efficiency of their work. Finally, the company needs to develop flexible approaches to human resource management in order to facilitate the integration of new employees in the organizational structure.