ACHIEVING ORGANISATIONAL EFFECTIVENESS THROUGH STRATEGIC FIT BETWEEN HUMAN RESOURCES AND INFORMATION TECHNOLOGY

Transcription

1 GJBM Achieving Organisational Effectiveness through Strategic Fit... ISSN: Vol. 2 No. 2, December 2008 ACHIEVING ORGANISATIONAL EFFECTIVENESS THROUGH STRATEGIC FIT BETWEEN HUMAN RESOURCES AND INFORMATION TECHNOLOGY P.C. Bahuguna* and Dr. P. Kumari** ABSTRACT The advent of information technology has changed the world around us. The competitive scenario of the business is experiencing new order. Organisations are investing heavily on IT applications and infrastructure to support their business processes and operations. IT influences the business in three ways Information technology practices, Information management practices and Information behaviours. The issue of fitting HR practices to IT strategies has become increasingly relevant over few years. The HR functionaries have to work in close coordination with the IT initiatives for creating the high performance work system and thereby help an organisation to achieve its objectives efficiently and effectively. The key challenge to human resource managers is not to ensure the HR and IT fit only but also they are required to define and communicate the information behaviours expected of the employees and initiate an organisational culture building exercise for internalising and espousing the desired values. The present paper has been divided into five parts. In part one and two, changes occurring in the business environment and strategic view of HR1-M have been discussed respectively. In third and fourth part, the concept of HR and IT fit, determinants of fit and challenges have been discussed. In the last part, conclusions have been drawn that what needs to be done on the part of the HR functionaries and the organisation itself to enhance the strategic fit between HR and IT and thereby achieve organisational effectiveness. Keywords: SHRM, HRM, e-governance, Liberalisation and Information behaviour The advent of the era of globalisation and liberalisation accompanied by the information technology revolution has transformed the world around us. The process of globalisation has *Sr. Lecturer, College of Management & Economics Studies, University of Petroleum & Energy Studies, Bidholi Campus: Energy Acres, Vill & P.O. Bidholi, Via Premnagar, Dehradun (Uttrakhand), replypcb@gmail.com **Reader, Department of Management Studies, Kanya Gurukul Mahavidyalaya, Second Campus, Gurukul Kangri University, Dehradun , (Uttrakhand) drpkumari3@rediffmail.com

2 2 P.C. Bahuguna and Dr. P. Kumari made possible the free flow of people, technology and goods across the globe, business activities are no more limited and confined to the geographical boundaries of the countries. The traditional jobs have become blurred. The economies across the globe are experiencing new order. Corporate governance issues have recently received much attention from Policymakers and the public. Two parallel processes, globalisation and transformations in the ownership structure of firms, have increased the perceived need for more effective monitoring mechanisms. Organisations are investing heavily on IT applications and infrastructure to support their business processes and operations. IT influences the business in three ways Information technology practices, Information management practices and Information behaviours. The issue of fitting HR practices to IT strategies has become increasingly relevant over few years. The HR functionaries have to work in close coordination with the IT initiatives for creating the high performance work system and thereby help organisation to achieve its objectives efficiently and effectively. The key challenge to human resource managers is not to ensure the HR and IT fit only but also they are required to define and communicate the information behaviours expected of the employees and initiate an organisational culture building exercise for internalising and espousing the desired values. It has brought to the centre stage the importance of human resource and e governance. With the coming of knowledge-based business (Davis & Botkin, 1994), researchers and executives have focussed their attention on understanding how knowledge-based systems enable firms to gain competitive advantage over rivals. Human resources are being viewed as an input, which can provide sustained competitive advantage to the organisations. Researches have evidenced the strong relationship between HRM practices and organisational performance. The present paper highlights the need and challenges for the strategic fit between the IT and HR in order to ensure the organisational effectiveness. HRM: A Strategic View Human resources are one of the enduring resources that can create competitive advantage (Barney, 1999). Guest et al. (2000 a) confirmed the findings of a large number of studies and produced evidence for a positive relationship between HRM and organisational performance. Over the years, organisations expectations from their HR managers and departments have changed considerably. The function was and still is expected to ensure that its policies, practices and procedures shape the culture of the organisation in a way that is consistent with its values and vision. Huselid and Becker (1997) found that the organisations whose Human resource management policies, practices and strategies are designed and aligned with the overall organisational goals are able to survive and maximise their returns. In view of the soaring competition and increased expectations of the top management, HRM has certain strategic challenges. The central challenge facing HRM is to provide a set of services that make sense with the company s strategic plan. HR managers need to support the corporate productivity and performance efforts and must be involved in designing not just executing the strategic plan. Strategic human resource management (SHRM) is a strategic approach to Vol. 2, No. 2, December, 2008

3 Achieving Organisational Effectiveness through Strategic Fit... 3 manage human resources of an organisation. It is the linkage between the HRM and strategic goals and objectives in order to improve business performance and develop organisational cultures that foster innovation and flexibility. By combining the HRM function with business strategy, SHRM reflects a more flexible arrangement and utilisation of human resources to achieve the organisational goals, and accordingly help organisations gain a competitive advantage. Strategic view of HRM can be explained as: Marketing Human Resource Management Strategic Goals Finance Production HRM A STRATEGIC VIEW Essentially, SHRM emphasises developing the firm s capacity to respond to the external environment through a better deployment of human resources. Since strategy is the course of action of a business firm to deal with and to meet the challenges of the environment, a human capital reservoir with a wide variety of skills that are complementary to the corporate strategy, is a catalyst for fulfilling the strategic goals through promoting behavioural utility among employees. A number of theoretical models have been developed to explain exactly what SHRM requires in an organisation and the process by which SHRM contributes to the success of a firm. Which theoretical model is correct and practically possible, probably answer to this question is not simple. Each model points out the different aspects of the process needed for developing SHRM. Best fit is perhaps more helpful in developing the HR strategies. Fit refers to the utilisation of human resources to help the organisation to achieve Global Journal of Business Management

4 4 P.C. Bahuguna and Dr. P. Kumari its goals. Fit means the pattern of planned human resource deployments and activities intended to enable the firm to achieve its goal (Wright and McMahan (1992: 298 ) from the perspective of the resource based view (RBV) of the firm (Barney 1986, 1991), researchers advocate that HR systems aligned with the firm s strategy is helpful for creating competitive advantage. Resource based model (J.B. Barney 1995) is based on the idea that organisation gain competitive advantage when they posses resources that are valuable, rare and difficult for competitors to imitate. The aim of the RBV is to improve the resources capability. It can develop strategic capability achieving strategic fit between resources and opportunities and obtaining added value from the effective deployment of resources (Barney 1999). Furthermore, the linkage of organisational resources and firm strategy cannot be easily identified and imitated by other firms due to the social complexity and causal ambiguity (Barney 1991, Boxall 1998). Thus, the integration of human resources with the appropriate strategy can generate a sustained competitive advantage for the firm. HR and IT FIT e-governance may be defined as the use of information and communication technology (ICT) to enhance information access and the delivery of government services for the benefit of citizens, business partners, organisations and government functionaries. e-governance does not mean proliferation of computers and accessories; it is basically a management decision which calls for discipline, attitudinal change in managers and employees, and massive government process re-engineering. e-governance may help the organisations to improve the performance and help to create competitive advantage. The information and communication systems have become an important factor of production and like the human resources of the company is the source of competitive advantage. Today, the firms are investing hugely on Information and communication infrastructure related activities. (Investment on research and development of information and communication system, developing the infrastructure for IT, training the people for using these technologies and displaying those behaviour which are necessary to utilize the communication technologies for creating the economies of scale and thereby meeting the competition. The importance of information system for the organisations is evident from the various kinds of softwares and databases offered by the companies such as SAP, People Soft, JD Edwards, Oracle, Microsoft, and many others (e.g., Evans, 1999; Hickman, 1999; Kathleen, 1999; McKendrick, 1999; Menezes, 1999). Large number of researches such as King, 1995, Quinn, Anderson & Finkelstein, 1996a) have evidenced the significant role of Information technologies on the performance of the firm. Information system can be viewed as a moderator of the relationship between organisational characteristics and several organisational outcomes, most importantly, efficiency and innovation. Vol. 2, No. 2, December, 2008

5 Achieving Organisational Effectiveness through Strategic Fit... 5 Organisational Input Size Structure Org. Culture Org. learning Human Resource Practices Information technology Information technology Information efficiency Information synergy Organisational output Organisational efficiency Innovation Source: Dewett, T. & Jones, G.R. (2001). Journal of Management 27, 314 Strategic fit between the Information technology and the human resource practices is perhaps helpful in achieving the strategic objectives of the organisation. Fit means the developing and hiring those information systems (Information technology practices, Information management practices and Information behaviours) that are critical for the survival of the organisation and enable it to achieve its goals. Scholars suggest that there are two kinds of fit, horizontal fit and vertical fit. Horizontal fit refers to the complementary bundle of HR practices within the system, whereas the vertical fit refers to the alignment of HRM practice with the strategic management process of the firm (Schuler and Jackson 1987). There are a number of factors that influence the congruence among the various human resource practices as well as the alignment between HR practices and the organisational strategic plan. The determinants of fit can further be classified as system related factors, individual related factors and organisational level factors. The system related factors refer to the factors which are related to the HR subsystem its philosophy, Policy and position in the organisation. The individual related factors refer to the personal capabilities or strengths, weaknesses, leadership style, conceptual skills etc. of the individuals who are responsible for creating or formulating and implementing the HR strategies and the organisational level factors refer to the overall organisational focus, the organisational objectives, structure and the organisational culture. Bundle or choices of the practices available with the human resource department provide the options to the human resource functionaries to decide upon the best suitable practices. Bhattacharya and Wright (2005) suggested that human resource option could be useful in this regard. Investment (direct and indirect) in human resource development is another important factor that determines the congruence among various HRM practices (Pfeffer and Slancik, 1978). With regard to individual or personal factors, the various researches (Lado and Wilson, 1994, Lado, Boyd and Wright, 1992, Wie and Lau 2005) suggest that Global Journal of Business Management

6 6 P.C. Bahuguna and Dr. P. Kumari personal factors such as personal capabilities, leadership style, commitment, knowledge and skills are important factors that determine the strategic fit among the various HR practices as well as the business strategic plan. With regard to vertical fit, besides system related factors, individual factors, and the organisational factors also play an important role. The types of strategy, organisational culture, the value system, and the organisational philosophy are important determinant of vertical fit (Schuler and Jackson (1987). The influence of nature of strategy has been demonstrated by Martell, Gupta and Carroll (1996). Organisational culture and values shape the HRM practices (Bowen and Ostroff, 2004, Wie and Lau, 2005). The strategic fit is also influenced by the economic conditions, structure of the industry, the supply of human resources etc. (Langnick and Hall, 1998). Truss and Gratton (1994) refer to the external environment as the one that provides opportunities and constraints for HR managers. Sparrow & Pettigrew (1987) identify the external factors like technology, political, social and economic conditions as factors that influence the HR practices. They also point out that organisational philosophy, culture, structure interact with the external environment in the process of HRM. These factors are not only important for strategic fit but are equally important for the success of effective implementation and success of e-governance. The Challenge IT influences the business in three ways Information technology practices, Information management practices and Information behaviours. The issue of fitting HR practices to IT strategies has become increasingly relevant over few years. The HR functionaries have to work in close coordination with the IT initiatives for creating the high performance work system and thereby help an organisation to achieve its objectives efficiently and effectively. The key challenge to human resource managers is not to ensure the HR and IT fit only but also they are required to define and communicate the information behaviours expected of the employees and initiate an organisational culture building exercise for internalising and espousing the desired values. Although there are many successful e-governance projects to talk about, overall, e- governance projects in India have enjoyed differing levels of success. Experience with e- governance projects in India shows that: 15 per cent of the projects are successful, 35 per cent are partial failures and 50 per cent are failures. The most important success factor for an e-governance project is that the focus should not be on the technology but on the pain areas and the strategies that are needed to use IT to resolve the pain aspects, explains Sharad Saxena, Chief Manager, IT, Konkan Railways (KR). All implementers and drivers of e-governance initiatives agree that the biggest challenge of deploying e-governance is not technology but change management. Change management is important not only in terms of cultural change but also in terms of changing operations and processes workflow that the automated environment will introduce. It s important to educate people at all levels about the Vol. 2, No. 2, December, 2008

7 Achieving Organisational Effectiveness through Strategic Fit... 7 benefits of technology. The various benefits and advantages of e-enabling the system should be communicated clearly right at the beginning to ensure popular support which will lead to greater chances of success, explains Dr. G. D. Gautam, Secretary, IT, Government of West Bengal. It is important to explain the people that the introduction of IT will not take away existing jobs but will make them easier, and if less manpower is required for operations the staff can be redeployed elsewhere with no threat to their career growth path. Thus, the integration of human resources with the appropriate strategy and information technology can generate a sustained competitive advantage for the firm. The essential elements in ensuring the fit between information technology and strategic human resource management and thereby contributing to the organisational performance are: 1. Transforming the HR functionaries: Based upon the resource based view of the firm; Huselid, Jackson and Schuler (1997) differentiated traditional HRM activities from strategic HRM activities. In the traditional role, staff members need to be specialist in certain personnel functional activities such as attracting high quality employees, placing them in appropriate positions, training them to work in the firm s specific way, and motivating them to devote more efforts to organisational goals. In contrast, Warren Wilhelm cites a survey indicating that the largest skill component needed to take on the SHRM is change management. Strategic fit will be enhanced if the HR staff members and other functionaries are well equipped and tried with the organisational development concept, tools and techniques. 2. Restructuring of HR department and enhancing administrative efficiency: As with many other forms of organisational restructuring, a key issue in designing strategic human resource is to determine which activities should be centralised and which should be decentralised. Companies like Warner-Lambert, Motorola, and Coca cola have created new organisation structure to realign the roles. Beer et al., (1984) and Walton (1985) describe a high level of functional flexibility, with the abandonment of potentially rigid job descriptions, a heavy reliance on team structure, structuring work and problem solving are some of the ways for high commitment. Restructuring of HR department and enhancing its administrative efficiency is very essential for effective strategy formulation, strategic fit and strategy implementation. 3. Integrating HR into strategic planning: In order to achieve the strategic fit (Horizontal as well as vertical fit), HR must play a role of the partner in the strategic planning or strategy formulation process. Ulrich (1998) is of the view that HR executives should impel and guide serious discussion of how the company should be organised to carry out its strategy. Tyson (1985) discusses HR should integrate their activities closely with top management and ensure that they serve a long-term strategic purpose. HR people have the capability to identify business opportunities, to see the broad picture, and to see how their HR role can help to achieve the company s business objectives. The same is also evidenced by Armstrong (2001). Global Journal of Business Management

8 8 P.C. Bahuguna and Dr. P. Kumari One important aspect of integrating the HR with strategic planning is to decide about the role, position and status of the HR executives in comparison to other top executives. The strategic fit will be enhanced when the HR functionaries play a role of a partner in strategic planning process. 4. Developing partnership with line managers: It is impossible for HR activities to have a value adding impact of HR practices and to enhance the strategic fit if those performing the HR functions do not work closely with line managers. Development of partnership between line managers and HR staff is critical. Lucent Technologies provide a very good example of partnership between HR and line management. To become a business partner the HR managers must learn the firm s business, must be more responsive about the needs and direction of the business and demonstrate how critical HR is to the success of the business. 5. Measuring and benchmarking the HRM impact: In order to make the contribution to the organisational performance or to enhance the contribution of HR practices to the organisational performance, the HR activities or practices are to be measured in terms of return on investment. Customer reaction approach can also be a useful tool for this purpose. Jac Fitzenz in his book, How to Measure HRM (1995), suggested that it is very important for HR to carry out a customer (other departments) survey to evaluate the effectiveness of its practices. An example of Kodak is very relevant to mention, it uses a variety of measure and it approaches the measurement from various strategic perspective. With respect to the integration of information technology with human resource management and thereby enhancing the organisational effectiveness, some of the important issues that need the attention are: Building e-governance awareness and commitment among the HR functionaries, raising awareness and commitment among leaders, awareness among the information providers, ensuring an integrated approach, Building e-governance Strategic Capacity, Building e-governance Strategy, Building e-governance Implementation Capacity and Building Technological Infrastructure for e-governance. CONCLUSION On the basis of all the literature and the studies available, we may conclude that strategic fit between HR and IT can create organisational effectiveness. There is overwhelming evidence that progressive human resource practices improve business performance. Organisations gain competitive advantage when they adopt a strategic and rational approach to people management. A better fit between Information technology and human resource management can create an environment of learning, flexibility, innovation and efficiency. REFERENCES Aguilera, R.V. & Cuervo-Cazurra, A. (2004). Codes of good governance worldwide: What is the trigger? Organisation Studies, 25 (3): Vol. 2, No. 2, December, 2008

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