Human resources as a strategic business partner
One of the major predicaments that many contemporary organizations face today, and will persistently face in the near future, are competitive forces. Securing a competitive advantage is a crucial objective for these organizations, functioning in an enterprising global market (Ananthram and Nankervis, 2013). Competitive forces develop efficient organizations, and maintaining organizational efficiency comes with efficient human resources (HR). Thus, the role of human resources becomes critical in contemporary business models. This article critically examines the role of human resources as a strategic business partner and attempts to substantiate its significance in contemporary organizations.
Different roles played by human resources
Over the last few years, human resources have become one of the staple departments in contemporary organizations. The different roles and responsibilities undertaken by human resource professionals are key in determining the productive capabilities of the workplace. According to Lawler and Boudreau (2009), these roles can be categorized as the Administrative Services, Business Partner Role, and the Strategic Role.
The administrative services entail the implementation and enforcement of company regulations and also designing policies, administrating employee benefits, insurances, leaves, etc. In its role as a ‘business partner’, the human resource department supports other departments in executing their business models. Finally, it also plays an important role as a strategic partner of the organization. This particular role, however, has given human resources an unprecedented prestige. As a strategic partner, it assists executive managers in their business strategy and serves as a partner in the decision-making process. To be specific, the role of human resources is not just limited to planning strategic activities for the organization, it also involves the formulation of those strategies (Khan, 2014). A reductionist view might not be able to see its contribution beyond the recruitment process. But the literature is overrun by claims that emphasize its role as the strategic spearheads of organizations, fit to take on management and leadership roles. (Huselid, 1995).
Empirical evidence supporting the role of human resource in financial and non-financial sectors
There are ample empirical studies to support the above claims. These studies focus on the role of human resources in the financial and non-financial sectors. For instance, Becker and Gerhart (1996), Delery and Doty (1996), Huselid (1995), Nankervis and Stanton (2010) have focused on the influence of administrative activities by the human resource management (HRM) on the performance of firms. They concluded, that the implementation of systematically sound strategies and processes by human resources can help organizations optimize the value of their human capital. Systematically sound strategies and processes involve balancing the horizontally aligned human resource management ‘processes’ with the vertical aligned ‘business strategies and functions’ (Francis and Keegan, 2006). And, therefore, the notions of ‘Human capital’ and ‘Human Investment’ are principle in defining the role of human resource in creating competitive advantage in work efficiency for firms (Wright, Mcmahan and Mcwilliams, 1994).
In the Indian context, the economic liberalization of 1991 paved the way for the influx of foreign direct investment (FDI), creating the need for momentous alterations in the human resource management fields (Budhwar and Sparrow, 1997) (Ratnam, 1998). The organizations, as a result, witnessed the evolution of the role of human resources from mere suppliers of administrative services to playing advanced roles in strategic planning and business growth (Rao, 2012). Unlike earlier, humans are now seen as invaluable ‘strategic resources’ who flourish in the presence of innovative HR practices (Ananthram and Nankervis, 2013).
(Rao, 2012) in his research observed that Indian CEOs are increasingly adopting strategic human resource management approaches for business requirements, even more than their American counterparts. Interactions with the CEOs of top-tier Indian companies like Tata Consultancy Services and Reliance Industries revealed that the role of human resources is increasingly being recognized in developing and managing talent and multinational companies are investing in ‘employee engagement’ and ‘workforce training’ (Ananthram and Nankervis, 2013). Many senior-level executives also stress the role of human resources in stimulating strategic agility in the workforce (Roth, 1996). Moreover, when given the center stage, human resources can be immensely beneficial for contemporary organizations in reshaping their business structure internally as well as modeling ‘strategic flexibility’ on the global level (Lepak and Snell, 1999).
Propositions and oppositions to the role of human resources in strategic decision making
Literature reports various recommendations from senior-level executives who use subjective examples from their organizations on how to enhance the role of human resources as strategic business partners.
Executives emphasize on the importance of strong leadership that can actively support and back the human resource department (Doz and Kosonen, 2008). Some also recommend a flexible administrative structure. Another key recommendation talks about the significance of human resources in designing and executing the management systems through “combinative capabilities” to achieve ‘strategic flexibility’ (Ananthram and Nankervis, 2013). Some executives put forth the concept of “continuous learning” which can enhance the contribution of human resources as strategic business partners (Swan, Scarbrough and Preston, 1999). Establishing a profound understanding of “strategic and operational aspects of business” is also an important recommendation (Ananthram and Nankervis, 2013)
However, some executives are against giving human resources the central role as a strategic business partner. For example, many executives banking sectors have placed, the onus of blame on the leadership qualities of senior executives with experience in accounting and finance. The human resource is merely seen as a resource-draining department in such sectors (Ananthram and Nankervis, 2013). In addition to this, the role of human resources as a strategic business partner has been questioned citing reasons such as incapable understanding of business managers in catering the needs of business in terms of human resource and hence again placing the onus of blame on leadership qualities of senior executives (Doz and Kosonen, 2008).
A dynamic human resource team to aid in strategic decision making
Overall, the role of human resources as a strategic business partner seems unparalleled in terms of what needs to be done and the activities required to indulge in strategic decision making. There has been a general consensus that to cater to the dynamic business setups, human resources need to create flexible program designs whilst also preserving a non-discriminate and goal-oriented workplace (Ananthram and Nankervis, 2013). The recommendations provided above, despite some disagreements, strongly support the claim that establishing a strategic business partner should be an important role of human resources in contemporary organizations across the globe.
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