Professional Documents
Culture Documents
INTRODUCTION
strategy to bring about the best deployment and management of their human capital to
achieve sustainable competitive advantage. As such, human resource management
(HRM) has become an important focus of top managements attention, especially in
multinational enterprises. Trans-national organisations require trans-national HRM
systems for the development of trans-nationally competent managers to run their
global business. In turn, the development of capable managers are dependent upon the
organisations ability to design and run trans-national human resource systems that
recruit, develop, retain, and utilise such trans-national managers and executives (Adler
and Bartholomew, 1992).
Very little research has been done on the inter-discipline between globalisation and
SHRM. Hence, the objectives of our study is to examine the relationships between the
independent variable, degree of globalisation in the company, and the dependent
variable, degree of SHRM practiced in the company, and the mediator, the CEOs role
in HR.
For our first objective, we would like to examine if the degree of globalisation is
significantly related to the degree of SHRM in the company. Secondly, we would like
to explore if the degree of globalisation in the company is significantly related to the
CEOs role in HR. Furthermore, we would like to examine if the CEOs role in HR is
significantly related to the degree of SHRM practiced in the company. Lastly, we
would like to investigate if the CEOs role in HR plays a mediating effect in the
relationship between the degree of globalisation and the degree of SHRM in the
company.
II.
LITERATURE REVIEW
103
Sutcliffe and Weber (2003) study show that the way senior executives interpret their
business environment is more important than how accurately they know of their
environment. What CEOs perceive about their businesses has a greater impact on their
actions than how much they know, and hence, CEOs will correspondingly show their
support in the areas which they perceive to be instrumental in their companies
performance. Gerstner Jr. (2002) asserted that the CEOs role requires real
involvement and not exhortation. The fundamental role of a CEO is to lay down
actionable and specific strategies based on a deep understanding of its customers
and employees needs, competitive environment and economic realities that sustain
their companies. The CEOs must be motivated by their perceptions about their
business situations. CEOs, being the most powerful decision-maker in the company,
have the allowance to translate their perceptions about their business environment into
actionable strategies that benefit the companies (Gerstner Jr., 2002).
In particular, through the HR function, CEO is able to align the employees to the
desired strategic outcomes for the organisation. With labour costs making up 50-60%
of an organisations total operating cost, it represents the single largest expenditure
item on most organisations balance sheets. Investments in HR activities when
substantiated by their corresponding returns enable the CEO to view HR function as
an investment centre. Gradually, when the CEO perceives a greater importance of HR
to the company, they would be more willing to support the investment in human
capital to gain sustainable competitive advantage, which ultimately affects the
organisation bottom-line. Thus, the CEO is more likely to play a role in HR.
Strategic Human Resource Management (SHRM)
Through the last few decades, the responsibility of HR has evolved from being the
organisations disciplinarian to the friendly picnic organiser. Recently, more and more
top management have accepted the ascent of HRs role to that of a strategic business
partner. SHRM involves designing and implementing a set of proactive HR
policies/practices that ensures that an organisations human capital contributes to the
achievement of its corporate objectives, (Wan, Kok and Ong, 2002). Delaney and
Huselid (1996) observed that in a survey conducted on 590 for-profit and non-profit
firms from the National Organisations Survey, researchers found positive associations
between traditional HR management practices, such as training and staffing
selectivity, and perceptual firm performance measures. Furthermore, Huselid (1995)
evaluated comprehensively the links between systems of High Performance Work
Practices and firm performance on a sample size of 1,000 firms. His result indicates
that the High Performance practices have an economically and statistically
significant impact on both intermediate employee outcomes (turnover and
productivity) and short- and long-term measures of corporate financial performance.
The results provided strong evidence of the potential of HR to be a strategic business
partner on influencing financial performance and ultimately, the organisations
bottom-line.
Lepak, Bartol and Erhardt (2005) mentioned that in viewing HR, a practitioner should
adopt a system-approach instead of focusing on the specific practices. Typically, most
HR practices are used in tandem with each other; therefore, looking at HR practices as
a whole bundle present a more logical and holistic view (Delery and Doty, 1996;
Huselid, 1995; Lepak and Snell, 1999; Youndt et al., 1996; Lepak, Bartol and Erhardt,
104
Traditional
Employee
services
Record
keeping
Transformational
Compensation
Training
Performance Recruiting
management
Communication
Strategic
planning
Management
development
Employee
relations &
labour
Knowledge
management
Organisational
development
Business
partner
III. HYPOTHESES
The invisible but sweeping force of globalisation has changed the face of human
resource management in Singapore. For some, globalisation creates pressures for a
common, often taken as best, transferable set of HRM practices that can spread
around the world (Bae and Rowley, 2001). More often than not, these best practices
originate from the West, as they dominate the global environment, accounting for 57%
of the worlds GDP and resulting in a highly competitive global work environment
(Thurow, 2003). The previously neglected human capital theory of old that states that
individuals possess skills, experience and knowledge that have economic value to the
firm (Becker, 1964) is seriously regarded now.
Additionally, the increasing emphasis on knowledge-based competitiveness in the
current turbulent environment also accelerated the importance of human capital (Wan,
Kok and Ong, 2002). In Singapore, this effect is more pronounced after the 1997
Asian Financial Crisis, which saw the domino effects in the region after the Thai
currency crashed in July. Without natural resources or a big exporting market to
sustain the country, the government could only enhance its only valuable resource
human capital. The crisis provided an excellent opportunity for Singapore to reinforce
and sharpen its competitive edge, leading to the birth of a knowledge-based workforce
and economy, which is increasingly strategic in focus in this highly competitively
world.
Thus far, prior discussions from researchers (Kim and Briscoe, 1997) have attempted
to establish that globalisation plays a part in influencing the SHRM practices in an
organisation. However, little attention has been paid to the level of globalisation in a
105
However, not many companies are willing to invest heavily in HR functions if they
see no returns in their investment. Many HR management teams may have a welldeveloped vision of their departments strategic value in terms of HR perspective, yet
their CEO is sceptical of HRs role in the firm success (Becker, Huselid and Ulrich,
2001). As a result, the HR department faces difficulty in the implementation of high
quality HR practices.
To have the HR viewed as a strategic function, it is crucial that CEOs express their
support to the HR department (Li, 2006). CEOs perception and support of the HR
function is a result of their innate perceptions that HR will benefit the company. With
these perceptions that HR functions are crucial to influencing the firms
competitiveness, CEO would acquire and devote resources, time and support to
transform mere transactional HR functions to SHRM.
As pointed out by CEO of General Electric, an undisputed global company, Jeffrey
Immelt, HR at GE is not an agenda item, it is the agenda (Green et al., 2003). With
CEOs buy-in, request for funds and implementation of strategic HR practices would
be looked upon more favourably (Fit-enz and Davison, 2002). In light of the
importance of SHRM and the capacity of a companys CEO in influencing the degree
to which the companys strategy reflect SHRM practices, the following relationship is
proposed.
Hypothesis 3: There is a positive relationship between CEOs role in HR and the
degree of SHRM practiced in the company.
It is observed that in firms with high degree of globalisation, there appears to be a
high degree of SHRM practiced. This could be because as the degree of globalisation
in the company increases, it encourages CEOs to play a bigger role in HR to bring
about sustainable competitive advantage, resulting in a higher degree of SHRM
practiced in the company. CEOs role in HR seems to explain the relationship between
the degree of globalisation and the degree of SHRM in the company. Therefore, we
propose:
Hypothesis 4: The CEOs role in HR mediates the positive relationship between
globalisation and SHRM in the company.
A graphical representation of the aforementioned concepts can be summarised in
Figure 2.
FIGURE 2:
THEORETICAL MODEL OF HYPOTHESISED RELATIONSHIP
H1
Degree of globalisation in a
company
H2
CEOs role in HR
H4
107
H3
IV.
RESEARCH METHODOLOGY
responses could have been limited by our target audience, the CEOs, and there was
also the problem with the difficulty of reach. In addition, the period in which the
requests were sent out was during the year-end, which is traditionally the busiest
period of the companies. We therefore decided to get more responses by sending
reminder mails to the 150 companies and from 14 to 19 January 2007 we expanded
our database by sending out an addition of 677 emails in this second wave.
By the end of the second wave, all the questionnaires were returned to us via email
and post by 23 February 2007. The final breakdown of the data collection method,
alongside the number of requests made and number of responses from both waves are
shown in the table as follows:
TABLE 1:
NUMBER OF RESPONSES FROM WAVES 1 AND 2
No. of
requests
No. of
deliverables
Data
collection
method
No. of
responses
Percentage of total
responses against
number of deliverables
First wave
170
156
3.85
Second wave
677
623
Email and
snail mail
50
8.03
Total
847
779
Email and
snail mail
56
7.19
After the second round of data collection, we managed to increase our overall
response rate from 3.85% to 7.19%.
Profile of Respondents
The 56 companies that responded were randomly picked from the business directories.
They come from a diverse range of industry sectors, including manufacturing sector
(29%), retail sector (21%), financial service sector (16%) and others (IT services,
medical & pharmaceutical, hospitality) (34%).
FIGURE 3:
DISTRIBUTION BY INDUSTRIES
No. of Respondents
20
16
19
15
12
9
10
5
0
Manufacturing
Financial Services
Industry
109
Retail
Others
Measurements
The prime objective of this study is to ascertain the relationship between the degree of
globalisation and SHRM. In addition, we wish to determine whether the CEOs role in
HR would mediate the relationship between the degree of globalisation and the degree
SHRM practiced in the company. The questionnaire is divided into five sections. A
copy of our questionnaire could be found at Appendix A. The various variables used
to measure these three constructs are described as follows:
Degree of Globalisation
To assess a companys degree of globalisation, we have taken on the perspective as
used by Govindarajan and Gupta (2001) to fit the multi-dimensional nature of
globalisation. The concept of corporate globality can be viewed as a three-dimensional
construct based on the premise that an enterprise can be more or less global along
each of the three major characteristics as follows: globalisation of market presence,
globalisation of supply chain, globalisation of corporate mindset.
Globalisation of market presence refers to the extent to which the organisation is
targeting customers in all major markets within its industry throughout the world. To
assess the organisations globalisation of market presence, two items (Section B
Survey item 25 and Section D Survey item 3), alpha = 0.733, adapted from
Govindarajan and Gupta (2001), were used. A sample item is, the ratio of revenue
generated in the Asia, in America and in Europe.
Globalisation of supply chain refers to the extent to which the organisation is
accessing the most optimal locations for the performance of various activities in its
supply chain. To assess the organisations globalisation of supply chain, two items
(Section B Survey item 26 and 27), alpha = 0.796, adapted from Govindarajan and
Gupta (2001), were used. A sample item is the ratio of inbound logistics and the ratio
of capital funding obtained from Asia, America and Europe.
Lastly, globalisation of corporate mindset refers to the extent to which the
organisation as a collectivity reflects an understanding of diversity across cultures and
markets coupled with an ability to integrate across this diversity. Adapted from
Govindarajan and Gupta (2001), globalisation of corporate mindset is assessed using
six 7-point Likert-type scaled items (Section B Survey items 19-24), alpha = 0.899. A
sample item is, Your organisation is a leader in your industry in discovering and
pursuing emerging market opportunities in all corners of the world.
Finally, we averaged these items by aggregating their scores to construct scales
representing the index globalisation.
CEOs Role in HR
Being the key decision-makers of the company, what CEOs perceive about their
businesses has a great impact on their actions. Increasingly, CEOs have perceived HR
as a source of competitive advantage that allows firms to achieve supernormal firm
performance. Such a perception increases CEOs willingness to render their support to
the department. The perception and support given by the CEOs reflect the role that
they play in the HR function.
110
Section C of our questionnaires consists of nine items adopted from Li (2006), with
six items (Survey items 28 to 33) testing on CEOs perception of the importance of
HR, and three items (Survey items 34 to 36) testing on CEOs support towards HR.
CEOs perception of the importance of HR is measured using six 7-point Likert-type
scale items, alpha = 0.806. A sample item is, To what extent do you consider review
of HR policies to be important? CEOs support towards HR is measured with three
items, alpha = 0.714. A sample item is, How supportive are you of HR?
Correspondingly, the CEOs role in HR was aggregated using items from CEOs
perception and CEOs support and formed the index, CEOs role in HR.
Strategic Human Resource Management
According to Lepak, Bartol, and Erhardt (2005), HR functions should be viewed as a
system-approach, where HR interacts with all the components and the company as a
whole. Thus, HR practices should be viewed as a whole bundle instead of looking at
them as individual practices (Delery and Doty, 1996; Huselid, 1995; Lepak and Snell,
1999; Youndt et al., 1996; Lepak, Bartol, and Erhardt, 2005).
In the second section of the questionnaire, measures were structured to include
questions on the core HR functions with respect to SHRM and their fit. The five most
common HR practices identified in the literature were adopted to measure the
progressive HRM practices (Delaney and Huselid, 1996).
x
x
x
x
x
HR planning
Selection and recruitment
Performance appraisal
Compensation and benefits
Training and development
two possible answers of Yes and No. As noted above, HRM system, rather than
individual practices, is a more appropriate level of analysis. Hence, the bundle, the
degree of SHRM practiced in a company, is obtained by aggregating the factor scores
of the various HR variables.
Control Variables
Two variables that could affect the accuracy of our study include government
intervention, and the degree of globalisation at the country level.
Singapore government has been an indispensable driving-force for the development of
SHRM in the country (Wan, 1996; Yuen, 1997; Wan, 2003). The combination of a
committed government and tripartitism has push forth SHRM practices at national
level. With the same party in government for over 30 years, Singapore has been able
to continuously, develop its human resource strategy in conjunction with other
national strategic economic policies (Osman-Gani, 2004). Hence, by limiting the
survey targets to Singapore companies, we could thereby control the effect of
government intervention towards the use of SHRM. As mentioned in our literature
review, globalisation can be measured by country level, by industry level and by
company level. As such, the degree of globalisation of a company may be affected by
the degree of globalisation of the country. By performing the study only in Singapore,
we can ensure that the impact of the degree of globalisation of the country has on each
company is kept constant. This could then provide us with a consistent basis of
comparison.
V.
RESULTS
Table 2 presents the descriptive statistics and zero-order correlations for all of the
variables included in this study. All the variables of interest are significant and
positively correlated.
There is a strong correlation between all the HR variables, namely HR planning,
recruitment and selection, performance appraisal, compensation and benefits, and
training and development, and SHRM. This justifies our adoption of a systemapproach when viewing the five HR variables as an index (SHRM), confirming prior
works by researchers (Delery and Doty, 1996; Huselid, 1995; Lepak and Snell, 1999;
Youndt et al., 1996; Lepak, Bartol and Erhardt, 2005). The high magnitudes between
CEOs perception, CEOs support, and CEOs role in HR, also show strong
associations in the relationship. Similarly, a strong correlation is apparent between
global mindset, global presence, global supply chain, and the degree of globalisation
in a company, providing a basis to categorise them as an index. Therefore, all three
indexes are adopted in the hierarchical regression analyses in the preceding steps.
112
4.6429
HR planning
Performance appraisal
Global mindset
Global presence
Degree of globalisation in
company
CEOs perception
CEOs support
CEOs role in HR
10
11
12
13
4.9807
4.9613
4.1042
3.7143
3.8661
4.7321
5.2
5.2262
5.5
5.4881
5.1429
Mean
Variables
0.83666
0.89443
0.88191
1.19816
1.57497
1.80527
1.08138
0.76391
1.08638
0.72195
1.00094
1.08963
1.25305
S.D.
0.652**
0.592**
0.636**
0.413**
0.120
0.288*
0.687**
0.824**
0.506**
0.251
0.419**
0.682**
0.556**
0.473**
0.576**
0.359**
0.167
0.267*
0.543**
0.804**
0.472**
0.226
0.450**
0.420**
0.375**
0.418**
0.439**
0.309*
0.362**
0.546**
0.753**
0.476**
0.475**
113
0.146
0.153
0.121
0.321*
0.139
0.317*
0.224
0.498**
0.131
0.472**
0.403**
0.487**
0.265*
0.035
0.181
0.453**
0.735**
0.644**
0.571**
0.644**
0.489**
0.204
0.377**
0.695**
0.622**
0.547**
0.625**
0.726**
0.324*
0.569**
0.379**
0.280*
0.436**
0.979**
0.472**
TABLE 2:
VARIABLES AND SUMMARY DESCRIPTIVE STATISTICS AND CORRELATIONS
0.162
0.103
0.204
0.476**
0.473**
0.371**
0.521**
10
0.941**
0.775**
11
0.943**
12
To test for mediation, we have adopted a four-step procedure outlined by Baron and
Kenny (1986); Zhu, Chew and Sprangler (2005): (1) whether there is a significant
relationship between independent variable and dependent variable; (2) whether there
is a significant relationship between independent variable and mediator, (3) whether
there is a significant relationship between mediator and the dependent variable, and
(4) controlling for the influence of mediator, whether the original relationships
between independent variable and dependent variable are reduced to non-significance
or becomes smaller, which provides evidence for full or partial mediation. Tests on
hypotheses are shown in Table 3.
TABLE 3:
RESULTS OF TWO-TAILED HIERARCHICAL REGRESSION ANALYSES
Variable
Degree of globalisation
in the company
CEOs role in HR
R2
Adjusted R2
Change in R2
df (regression, residual)
Model 1
Degree of SHRM
practiced in the
company
0.488*
0.238*
0.224*
0.238*
1, 54
Model 2
CEOs role in
HR
Model 3
Degree of
SHRM practiced
in the company
0.473*
0.224*
0.209*
0.224*
1, 54
Model 4
Degree of
SHRM practiced
in the company
0.249*
0.644*
0.533*
0.415*
0.404*
0.415*
1, 54
0.465*
0.444*
0.227*
2, 53
* p<0.05
114
TABLE 4:
RESULTS OF MEDIATION TEST ON CEOS ROLE IN HR BETWEEN
GLOBALISATION AND SHRM
Variable
Degree of globalisation in the company
Model 1
Degree of SHRM
practiced in the
company
0.488*
Model 2
Degree of SHRM
practiced in the
company
0.249*
CEOs role in HR
0.533*
* p<0.05
FIGURE 4:
STANDARDISED PATH COEFFICIENTS
0.488*
Degree of globalisation in a
company
0.449*
0.644*
CEOs role in HR
0.533*
(Partial Mediation)
* p<0.05
VI.
DISCUSSION
It has been long and widely asserted that people are the preeminent organisational
resource and the key to achieving outstanding performance (Peters and Waterman,
1982; Pfeffer, 1994; Delaney and Huselid, 1996). Our results add up to the growing
empirical evidence that the practice of SHRM creates a sustainable competitive
advantage in a company. Overall, and in support of H1, a company that has a higher
degree of globalisation will tend to reflect a higher degree of SHRM practiced. This is
due to the need for the management of workforce diversity, which gives rise to the
implementation of HR practices like foreign talent management (expatriate/repatriate),
more comprehensive training and development and befitting compensation and
benefits, etc. The need for more well thought crisis management in a highly globalised
company, which leads to business continuity planning, in turn resulting in more
SHRM practiced.
As shown by the relationships in H2 and H3, globalisation causes firms to search for
sources of competitive advantage and HR provides such a source of sustainable
competitive advantage. According to the resource-based view, human capital is hard
to emulate and thus, can be a valuable asset to a firm. For example, CEOs like that of
Southwest Airlines has built a strong reputation and goodwill with its customers with
a dynamic working environment centred on their employees. Herb Kelleher himself
emphasises that the maintenance of its workplace culture is through zealous
recruitment and selection: We are looking for a particular type of person, regardless
115
of which job category it is. We are looking for attitudes that are positive and for
people who can lend themselves to causes. We want folks who have a good sense of
humour and people who are interested in performing as a team and take joy in team
results instead of individual accomplishments. This impressive culture is hardly able
to be replicated by their competitors and has helped Southwest Airlines to be a market
leader in American regional airline industry and the only one, which has been
profitable for many years.
H4 suggests a partial mediation of the CEOs role in HR and this is because there are
other factors, which could affect the relationship between the degree of globalisation
and SHRM. We recognise that culture, corporate philosophy, employees
receptiveness to SHRM and capabilities of change agents (e.g. HR personnel) are
possible mediators as well.
VII. SUBSTANTIATED IN-DEPTH CASE INTERVIEW
Results from our hypotheses aside, in order to increase the practical value of our
research, our group decided to embark on a more in-depth information collection
process. We sent out requests for conducting interviews with companies whom we
found unexpected results from their returned surveys. Unfortunately, from ten
enquiries made, only one company has acceded to our request. The HR manager of
Park Royal on Beach Road, Mr Petrus Leong, has provided us with valuable insights
that we could apply to our research. This section would highlight some of the relevant
points that were brought up.
In January 2007, for the first time in the hotels history, Mr Leong had successfully
launched The Park Royal Promises, which represents the organisations new
mission, vision and core values that were aimed to be inculcated in their staff and to
strive towards organisational excellence. This was a milestone as it signified their first
step towards a strategic alignment of the human capital with the business objectives.
Mr Leong prided in initiating this strategic movement of the hotel towards their
engagement in HR planning. To this effect, a major overhaul of job structure was
carried out as the hotel redefined the job descriptions of all the job positions,
following what he termed a renewed direction for the firm. We have found this
aspect of HR planning to be of strategic value in our research as well. This
documenting of job scopes and job requirements was essential to the support of the
new HR strategy and in his words, to keep the organisational structure lean and
mean and competitive.
Besides the importance of HR planning, Mr Leong also uses other HR practices like
selection and recruitment, and performance appraisal to align the employees to
business outcomes. However, he registered difficulties in the usage of compensation
and benefits to achieve this alignment. In a bid to enforce a competitive compensation
and benefits system, Mr Leong found resistance to the deployment of a performancebased pay. Concerns were raised about the morale of senior employees, who could
potentially suffer, if the organisation were to convert to a system of performancebased pay. Due to this sizable group of employees who would stand to lose, Mr Leong
has been hesitant to carry out the necessary step to turn the compensation and benefits
function to a strategic one, which, in our research, is shown to be one of the tools
which can be used to support the alignment of HR to the business strategy.
116
When asked about the importance of globalisation in the hotel and its relationship
with the implementation of SHRM as headed by him, Mr Leong admitted that
although Park Royal is not a highly globalised hotel as it is only operating in Asia, he
still sees the positive relationship that the two phenomena share. This is especially so
with the upcoming threat posed by the opening of the Integrated Resorts (IR), as this
forces Park Royal to take on a more globalised mindset. Mr Leong acknowledged that
this is a common threat faced by the hotel industry, as competition will intensify with
the surge in demand for skilled employees and an increased need to attract customers.
In anticipation of the shortage of talents and pending expansion plans, Park Royal has
been actively recruiting talents worldwide. Currently, in Park Royal, the percentages
of foreign talent in the following positions are as follows:
x
x
x
x
Executive management:
Top management:
Middle management:
Junior management:
0.31%
0.63%
0.63%
7.19%
These figures will continue to escalate and yet, competition will not cease. Hence, Mr
Leong has reflected that there is an urgent need for the hotel to increase its practice of
SHRM in order to attract, recruit and retain its employees and to stay unabated in
future times.
When asked about the importance of his CEOs role in HR, Mr Leong agreed that
having a CEO who perceives HR to be of value to a firm and supports the causes of
SHRM has indeed made much of his work smoother. Mr Leong meets up with the
CEO regularly to discuss about the hotels business strategy. With a clear direction,
Mr Leong is then able to launch many of his new initiatives to fit the needs of the
companys business strategies. Overall, Mr Leongs opinions further confirmed our
research in many aspects and have provided us with many insights from an industryspecific perspective.
On a different note, we proceeded to take our analysis a step further. In our study, all
HR practices adopted in the survey were assumed strategic in nature. The only
difference in SHRM within the firms lies in their degree of application. To validate
this point, we have decided to run additional tests on survey items C34 and C35. Items
C34 (How would you rate your employees skills and abilities to changes in
business/organisational strategy?) and C35 (What is the extent of change in HR
strategy to augment any corresponding changes to business/organisational strategy?)
were grouped into an index, HR Alignment to Business Strategy. A linear regression
on HR Alignment to Business Strategy and SHRM was significant support our initial
assumption that HR practices adopted in the survey are indeed strategic and suitable
for the measurement of SHRM. Additionally, and interestingly, we observed from the
data in Table 2 that HR planning has the highest correlation in magnitude with HR
Alignment to Business Strategy. From this, we may conclude that the CEOs in the
sample size are likelier to use HR planning, over the other HR variables, in the
alignment of HR to their business strategy.
On the other hand, as shown in Table 2, the insignificant relationship suggests that
compensation and benefits does not have an effect on the alignment of HR to the
business strategy. In an attempt to account for this relationship, we look to the
interview conducted with the HR manager of Park Royal Hotel. It was suggested that
117
compensation and benefits could lose its strategic means for business alignment when
a considerable number of employees are compensated by seniority-based pay instead
of performance-based pay. In Park Royal, there is a sizable group of employees, who
have been with their respective organisation for a considerable number of years. Thus,
these employees could be highly compensated by virtue of their long tenure of service
rather than their performance. In using seniority-based pay, compensation and benefits
will not have an effect on alignment of HR to business strategy. This situation could
be prevalent in other companies of our sample as well, which could explain why the
relationship is insignificant.
FIGURE 5:
GLOBALISATION/SHRM MATRIX
Degree of
globalisation in
company
From the above matrix, majority of the 56 firms surveyed showed moderate to high
degree of SHRM practiced. Most of these firms are those who are moderate or highly
globalised. Some of these firms in our sample are multi-national corporations
(MNCs). Generally, MNCs tend to adopt SHRM practices as they have a greater need
to remain competitive and to keep up with rivals. Another reason why highly
globalised MNCs practice SHRM is that their CEOs also act as HR Directors. This
can be seen in powerful MNCs like Deutsche Bank Asia Pacific, whose CEO,
Christian Machate, is also the Regional HR Director. Similarly, by marrying the
responsibilities of both the HR Director and the CEO, such a firm sees that its HR
function will act as an internal consultant in its business and ensures its HR practices
to be aligned and fitting with its business strategy.
Nonetheless, from our sample, we also observed that the practice of moderate to high
degree of SHRM even applies to firms with low to moderate degree of globalisation.
This is especially so for 14 firms which had a moderate degree of globalisation and
yet, practice a high degree of SHRM. These low to moderately globalised firms are
likely to consist of small and medium enterprises (SMEs), which play an important
role in Singapores economy. We have about 110,000 SMEs and they make up 90%
of local establishments, employ more than half of the total workforce and contribute
about one-third of total value-added (Lim, 2005). Although these firms may not have
a high degree of globalisation as compared to MNCs, they are still able to practice
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moderate and high degree of SHRM due to a similar organisational structure found in
some MNCs as mentioned above. The CEO of a SME also acts in the capacity of a
HR Director due to its relatively small size and limited management positions. This
allows such SMEs to be able to better practice SHRM as the CEO is able to
communicate his or her vision for the company and transmit the business needs more
effectively through the use of HR (Wu, Chew, Sprangler, 2005). HR, hence, becomes
a strategic partner in the business.
VIII. LIMITATIONS
One major limitation in our study is the relatively small sample size. This is because
of the exclusivity of our target group at CEOs of the companies. Hence, the results
from this exploratory research cannot be used to generalise across all firms in
Singapore and the true value of SHRM practices in the face of globalisation may not
have been accurately assessed.
Like all surveys, non-response error has also occurred in our research. Although 879
questionnaires were sent out, the low response rate indicated that a significant
proportion of the target group was not captured. These non-respondents, forming a
larger sample size, may have provided us with a more in-depth, sound and meaningful
analysis. Thus, future studies should aim to obtain a more representative sample and
form confirmatory results by follow-up on non-respondents.
The significance of our results may also be affected by a response bias. As Figure 5
shows, the firms are saturated at a high spectrum of the matrix. The skewness could be
because the CEOs were the ones who filled up the questionnaire. The knowledge that
their company and their role in HR would be assessed would cause them to respond
positively and mitigate the results of the research.
IX.
From our results, we can conclude that globalisation has a significant implication on
the practice of SHRM in the company. When changes taking place in the global
business environment are not complemented by changes in SHRM practices, it could
lead to a situation whereby the firms are unable to sustain their competitive advantage.
Thus, failure of firms to perform could be a direct consequence of the CEOs
mismanagement of the firms human capital. Since our propositions outlined above
are supported, then the challenge for organisations experiencing a higher level of
globalisation is to pay particular emphasis to strengthening their SHRM practices by
upgrading the relevant competencies.
More importantly, our findings in this paper are value-added in that it provides a
direction to where firms should be heading from here. In our discussion, we observed
that not many firms have been adopting a system approach towards SHRM. From our
sample, compensation and benefits was not used strategically, unlike the case of HR
planning, to align with business strategy. We recommend that firms should place
emphasis on all aspect of HR practices in order to achieve full strategic alignment.
119
In addition, in the face of intense globalisation, firms have a need to carve out
sustainable competitive advantage for themselves, and we propose that SHRM is one
of the ways. The locus of fit between HR architecture and value-creation of business
processes is important, but as pointed out in Becker and Huselid (2006), it leaves
options wide open between the adoptions of best practices versus configurations or
contingencies. Is there a one-size-fits-all solution, which creates value for all firms,
are there a few suitable configurations, or is it a matter of numerous customisations of
a generic strategy? Even the sharpest mind struggles to answer. However, we hold the
view that there is no one absolute way that firms should undertake. Depending on the
degree of globalisation apparent in the firm, so should the CEO adopt the approach
which best reconciles its HR and business strategy. We go one step further to suggest
that even within a firm, the different functions might also adopt different HR
architectures to reflect the strategic value of each individual departments business
process.
Future studies may wish to touch on other considerations, which were not addressed in
this paper. Firstly, government interventions could make certain HR practices
regulatory in nature, thereby inevitably raising the degree of SHRM practiced in the
company. The tripartite system as part of the Human-Capital Development (HCD) in
Singapore, the Manpower 21 policies, and our meritocratic education system are
examples of a well-established national infrastructure that the government has in place
to encourage the practice of SHRM (Osman-Gani, 2004). The effects of these
interventions can be tested to determine the relationship with the other variables
present in the model. This is especially so for Singapore, who has a strong and stable
government and whose influence over businesses is undeniable.
Lastly, abilities of HR managers could affect the effectiveness of the design and
implementation of a HRM system. There is a greater likelihood that a capable
manager will be better equipped to identify any misalignment of the HR system with
the value-chain, and thus, be able to initiate rectifications to the system. As such, it
follows that, besides the primary focus on CEOs in our research, investigations should
be carried out to determine the role of HR directors in affecting the degree of SHRM
practiced in the company.
Our paper has concluded that the global environment is indeed changing at an
unprecedented pace and companies, headed by competent CEOs, must embark and
embrace relevant strategies to achieve stalwart success. Truly, as M.E. Tracy puts it,
the solidest kind of enterprise is one that can look the whole world in the face.
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