Explain in detail how human resource management (HRM) activities such as recruitment

and selection, performance appraisal, and compensation are related to corporate strategy.

Corporate level strategy is the set of strategic alternatives from which an organization chooses as

it manages its operations simultaneously across several industries and several markets. Most

large companies today compete in a variety of industries and markets, (Griffin, 2002). Thus,

although they develop business level strategies for each industry or market, they also develop an

overall strategy that helps define the mix of industries and markets that are of interest to them.

Boyd, Claude, and Walker (2002) explain that if a business keeps in mind the corporate goals

along with its corporate strategies then it will surely be a successful and profitable business. And

to ensure that these components are taken care of efficiently, all the business departments, be it

marketing department, finance department or human resource department, all work together

towards predetermined goals.

Human Resources Management (HRM) as defined as the strategic management of the

employees, who individually and collectively contribute to the achievement of the strategic

objectives of the organization, (Promoni, 2009). The article supports the fact that the employees

of an organization are individuals with own mental maps and perceptions, own goals and own

personalities and as such they cannot be perceived as a whole, HRM holds that the organization

should be able to employ both individual and group psychology in order to commit employees to

the achievement of organizational goals.

It is the responsibility of the human resource department to hire the right employees, then gauge

their performance and on the basis of their performance reward them and continuously train

them and provide them with the chance of career development. Because just as a satisfied

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employee will add to the bottom line, an unsatisfied employee will take value from the company

so it is important to manage the human resources in a way that the company objectives are also

met and the employees are also satisfied. This is exactly what Griffin (2002) talks about

regarding the various human resource management activities.

Edwin B. Flippo defines recruitment as “the process of searching the candidates for employment

and stimulating them to apply for jobs in the organization”. Another process undertaken by the

human resource department is selection. Selection is the process of matching people to specific

job; this is how Roberts. G (1997) defined it in his book. Performance Appraisal, which is yet

another responsibility undertaken by this department, is defined by Business Glossary as a

personnel evaluation method seeking the measurement of employee work effectiveness using

objective criteria. Performance appraisal systems hope to achieve higher productivity outcomes

by delineating how employees meet job specifications. A major challenge for performance

appraisal systems is to define performance standards while maintaining objectivity. After

appraisal comes compensation. Darlington.H (2005) defines compensation as all the rewards that

employees receive in exchange for their work, including base-pay, commissions, bonuses and

other incentives. A link between all these key words and the corporate strategy shall be evaluated

in more detail progressively.

Organizational Psychology holds that successful organizations do not owe their success solely to

market realities and sustainable competitive advantages. Actually, there is a lot more. Successful

companies are those that consider their human capital as their most important asset. Facts and

figures are the quantitative elements of successful management, yet the qualitative, i.e. the

cognitive aspects, are those that actually make or break an organization, (Lunthons F, 2005).

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Employees are now the primary builders of a profitable business. The quality if an organization’s

employees directly influence its ability to gain and sustain competitive advantage, argues

Kaufman E. Bruce (2001). Since the employees play a major role in the success of a business

therefore, every business has a special department formed and emphasized upon to recruit the

right people with right skills for the right job. This is what Human Resource management is all

about. Moreover, the article supports the fact that it provides significant support and advice to

line management and attracts, preserve and develop high caliber people as they are a source of

competitive advantage for the business.

DeCenzo and Robbins (2002) highlight the importance of HRM for a business. At one instance

the author quotes a landmark example of Human Capital Index (HCI) study, conducted in 1999

in 750 North American and European companies, and indicated that quality HRM services

improved both the financial well-being of an organization and shareholder value. The companies

studied by Watson Wyatt indicated that over a five-year period quality HRM provided a 64%

total return to shareholders as compared to 21% return for companies with weaker HR practices.

The HRM activities in modern organizations are typically performed in communication with the

general management in an effort to provide a variety of views when a decision must be taken,

(Biridi, et al, 2008). The article also backs the argument that by stating that decision making is

not subject to the individual perceptions of the HR or the General Manager, but it becomes the

outcome of strategic consensus. To achieve the organization goals, Human Resources

Management trains and motivates the employees by communicating ethical policies and socially

responsible behavior to them. Also the articles says that in doing so, it plays a significant role in

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clarifying the organization's problems and providing solutions, while making employees working

more efficiently.

On the other hand, challenges do not cease for the HRM. Modern organizations can survive in

the dynamic, competitive environment of today only if they capitalize on the full potential of

each employee. Unfortunately, many companies have not understood the importance of the

human capital in successful operations. The recruitment and selection of the best employees is a

very difficult obligation, (Reif and William,1999). Even companies that are voted in the top-ten

places to work at, often endure long periods of hard work to realize that human element is all an

organization should care about.

Krishnan and Rishikiesha (2005) gave an excellent example of a company that has integrated its

human resource strategy tightly with other corporate strategies to create inimitable capabilities

and drive competitive advantage, the American steel company, Nucor. Nucor’s competitive

advantage is based on cost leadership but at the base is a well-matched human resource strategy.

Nucor hires goal-oriented, self-reliant people who are motivated by striving for continuous

improvement that yields them increasing monetary compensation.

Another legendary company that has aligned its corporate strategy with its human resource

management is the Lincoln Electric Company, reports Gryskiewicz (1997), a producer of

electrodes and welding machinery. James F. Lincoln, Lincoln’s cofounder, believed that

everyone could develop to his or her full potential through a system of incentives designed to

encourage both competition and teamwork. Like Nucor, Lincoln also focuses on hiring

individually motivated and devoted high performers. The article specifically points out that these

individuals have their compensation tightly linked to their output with laid down minimum

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quality levels. Its innovative HR strategy enabled it to gain, by 1995, a market share of 36% in

the otherwise fragmented US market for welding equipment and supplies.

These two examples clearly shows the importance of hiring the well qualified individuals not

only results a more efficient and devoted workforce but also helps the business’s corporate goals

to be achieved. (Slade, Peter, 2005) confirm this conclusion by stating that the more the

motivated employees would be easier it would be for the business to achieve its targets.

Therefore, the process of recruitment and selection is of great importance because if the business

manages to attract individuals who understand the importance of corporate strategies and align

their efforts in achieving the goals set by the managers than the business is likely to flourish and

become strong over the period time. Hence it is of core importance that while recruiting and

selecting, individuals who fit the job well must be taken on board.

Human resource management is also concerned with performance appraisal. (Larid and Clampitt,

2004) highlights the fact that job of HR department does not end after hiring the best job-fit

individuals. Once employees are settled and trained into their jobs, one of the management’s

next concerns is performance appraisal. In simple terms performance appraisal is a formal

assessment of how well employees are doing their job. Because performance evaluations often

help determine wages and promotions, they must be fair and nondiscriminatory.

The most important purpose or goal of the appraisal is to improve performance in the future, and

not just for the employees, managers can get valuable information from employees to help them

make employee's jobs more productive. Performance appraisal should be treated as an ongoing

developmental process rather than a formal once-a-year review. It should be closely monitored

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by employee and reviewer to ensure that targets are being achieved, (Waldman, Bass &

Eienstein, 1987).

Performance appraisals, if done correctly, says Grote (2002), can become the most valuable

instrument in the manager's toolbox. "No other management process," he says, "has as much

influence over individuals' careers and work lives." On the most practical level, the few hours a

manager invests in a careful appraisal process can help improve an employee's performance for

an entire year. More broadly, an effective evaluation process is part of the strategic first-rate

people management that helps top companies succeed. In fact, many of the companies judged the

best at performance evaluation in a 1999 survey conducted by the Houston-based American

Productivity & Quality Center and the Lexington, Mass.-based Linkage Inc. refused to divulge

their evaluation techniques, viewing them as key components of their competitive strategies.

"We would no more show our performance appraisal form to a bunch of outsiders," said one

participating VP of human resources, "than the Coca-Cola Company would let you come in and

look over the secret formula for Coke."

Performance appraisal is a tool to facilitate good management- a means to an end, not an end in

itself. With this idea in mind, Grote bases the performance appraisal process on the principle (set

forth long ago by Peter Drucker) that the best managers help their people do two main things: Set

goals and achieve them.

Allen (2003) further explains how Douglas McGregor expounded upon this theory in the

Harvard Business Review back in 1957. Developing people effectively, he argued in the

language of the era,

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…does not include coercing them (no matter how benevolently) into acceptance of the goals of

the enterprise, nor does it mean manipulating their behavior to suit organizational needs.

Rather, it calls for creating a relationship within which a man can take responsibility for

developing his own potentialities, plan for himself, and learn from putting his plan into action.

This theory underlies the success that performance appraisal is designed to measure. Soon after

Drucker and McGregor articulated the principle of management by objectives, General Electric

studied its implications. "Criticism," GE found, "has a negative effect on achievement of goals;

praise has little effect one way or the other." GE also determined that the best way to improve

performance is to have manager and employee sit down together and establish specific goals that

are based on the individual's strengths, (Allen, 2003).

Murakami (1999) narrates that eliciting peak performance begins with designing satisfying jobs

but does not end there. The business needs to find the best people to fill these positions; plan

employees' daily, monthly, and yearly tasks; create conditions that motivate; and deal with

problems as they come up. The article says that evaluating the work that has been done, though

an important step comes only at the end of the process. Managers who do all of these steps right

will find that performance appraisal is no longer an ordeal they dread, but rather a valuable tool

that helps them do their own jobs better—namely, helping their employees do the best job they

can.

After organizations have attracted and developed an effective workforce, they must also make

every effort to maintain that workforce. To do so requires effective compensation and benefits as

well as career planning. Griffin (2002) talks at length about all the activities that are undertaken

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by human resource department and he defines compensation as the financial remuneration given

by the organization to its employees in exchange for their work.

An article by Darllington (2005) is also of the view compensation system is important for an

organization. According to him compensation is an important and complex part of the

organization-employee relationship. Basic compensation is necessary to provide employees with

the means to maintain a reasonable standard of living. Beyond this, however, compensation also

provides a tangible measure of the value of the individual to the organization. If employees do

not earn enough to meet their basic economic goals, they will seek employment elsewhere.

Likewise, if they believe that their contributions are undervalued by the organization, they may

leave or exhibit poor work habits, low morale, and little commitment to the organization. The

article concludes that designing an effective compensation system is clearly in the organizations

best interest.

The compensation strategy that a company implements is one of the most important pieces of the

complex puzzle of running a business. Compensation packages are extremely important in

attracting new hires and retaining good people. Darlington (2008) says that five things are

suggested that companies should strive to accomplish if they truly want to be the very best they

can:

• Hire the BEST

• Train the BEST

• Communicate the BEST

• Motivate the BEST

• Compensate the BEST

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An ideal compensation system will have positive impact on the efficiency and results produced

by employees, (Carlson, Dawn, Upton, Nancy, Seasman & Samuel, 2007). It will encourage the

employees to perform better and achieve the standards fixed and will enhance the process of job

evaluation and will also help in setting up an ideal job evaluation and the set standards would be

more realistic and achievable An article in the Journal of Small Business Management

Diane and Cadrain (2003) talk about the benefits of a good compensation system and according

to them compensation system should be well defined and uniform. It should be applicable to all

the levels of the organization as a general system. A good compensation system helps

management in complying with the various labor acts. It motivates and encourages those who

perform better and provides opportunities for those who wish to excel. Sound

Compensation/Reward System brings peace in the relationship of employer and employees.

Moreover, it also says that the perfect compensation system provides platform for happy and

satisfied workforce. This minimizes the labor turnover and thus the organization enjoys the

stability. The organization is able to retain the best talent by providing them adequate

compensation thereby stopping them from switching over to another job. The business

organization can think of expansion and growth if it has the support of skillful, talented and

happy workforce. The sound compensation system is hallmark of organization’s success and

prosperity. The success and stability of organization is measured with pay-package it provides to

its employees.

Employees in many organizations do not have an understanding of how their job performance is

linked to the overall success of the business, ( Hartley, 2008). And the further down one goes in

the ranks of the organization, the more difficult it is to define individual performance objectives

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that merit incentive pay. But such problems can be overcome by establishing clear links between

job performances at all levels and the overall success of the business.

Hartley (2008) gives two intriguing examples, Western Digital and Bersin & Associates. The

summary of which is that Four years ago, the company, Western Digital, decided to go global. It

moved its production operations to Asia, hired 30,000 new employees, and added many new

products to its portfolio. Critical to its success was maintaining a culture that incented employees

to demonstrate behaviors directly tied to company success. Pay for performance was the key.

Western is now recognized as one of the leaders in the flash memory space industry.

The other example mentioned in this article is of the research and enterprise learning consulting

firm Bersin & Associates also noted that pay for performance works well for companies in

transition. Its research highlighted a major retailer that made pay for performance a cornerstone

of its transition strategy and saw retail sales increase by more than 25%. Both these examples

show that a good and effective compensation system along with a firm understanding of the link

between reward and company goals will result is benefit, for both, the employees and the

company itself.

After seeing some of the critical activities performed by the Human Resource Department it can

be concluded that human resource management is a complex art of managing the people in an

organization and ensuring that they are doing what is expected from them to do in order to

achieve the corporate goals. Hayton & James (2005) summarizes the basic role played by human

resource management. To achieve the corporate goals, Human Resources Management trains and

motivates the employees by communicating ethical policies and socially responsible behavior to

10
them. In doing so, it plays a significant role in clarifying the organization’s problems and

providing solutions, while making employees working more efficiently.

New challenges arise even now for the organization, and it is certain that new challenges will

never cease to emerge. Therefore, the use of proper Human Resources techniques is a really

powerful way for organizations to overcome these challenges, and to improve not only their

quantitative goals but also their organizational culture, and their qualitative, cognitive aspects.

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