The global economy is dynamic and changes all the time at a very fast rate. The change is characterized by globalization, investor demands and ever changing customer behavior. It is necessary for organizations to strategize their business operations so as to cope with the changing economic environment. International trade has brought business demands that include new technologies and robust transport systems. The entire system requires professional input in form human resources. This is due to the demand for quality service delivery and in other aspects of the business. This is essential for the firms to remain relevant and competitive in the business environment (Martin, 2009). Some of the measures that are required include managing human resource in the firm, reducing production cost. Strategic human resource management is essential to ensure that the firm pays all its personnel.
The global economy has seen unpredictable shrinkage that cause panic in the business environment over the last five years. This problem has not only affected International businesses but also local enterprises. This has a resulted in a series of recession for most firms that were enjoying better economic times before the crisis. The future of a business environment is still volatile, and it is hard to make accurate predictions of future events. The world economy has lost its financial confidence because of the uncertainty that has significantly slowed International trade. There is a real danger for the firms engaged in imports and exports getting out of business. This is a great concern for partners who were either customers or suppliers of businesses.
The role played in strategic human resource management that has resulted in various organizational functions. Strategic management involves formulating and evaluating a cross functional objectives to enable organizations achieve its objectives (Bohlander & Snell, 2010). Strategic human resource management is essential in streamlining an organizations objectives and human resource demands in the firm. Human Resource involves Strategic management process and Resource based view of business activities. The Resource Based View is based on a firm’s resources such as finances, physical resources, capital and human resources. This is in contrary to other needs that include environmental conditions that determine the organization’s decision making process.
The industrial organization model of strategic management involves analysis of external environments. It is essential to integrate human resource strategies with other business activities and its environment. This is essential in sorting issues of sustainable competitive advantage and the survival of the firm in a volatile environment (Sims, 2007). The main motivation behind strategic human resource management is to align business initiatives and how people are managed. The people making up the human resource of firms are necessary for an organization’s success. How people are managed is the most essential part of the firms operations. Other sources of success such as use of the latest technology and products and economies are less essential than human resource.
Firms that are going through a financial crisis are less concerned about other factors except for their human resource. The primary aim of managing human resource in a firm is to ensure sustainability and by obtaining and maintaining skills. It is essential to understand the role strategic human resource management in firms that are about to face a crisis. Firms can easily justify their expenditures on training and doing staffing activities. There are a number of benefits that a firm stands to gain from engaging in strategic human resource management. It contributes to goal accomplishment and the survival of the firm in times of crisis.
The firm stands to implement its strategies based on the number of personnel in the firm. The firm can easily improve its responsiveness and its innovative potential. It is easy to increase the number of feasible operation options including outsourcing. It is essential in directing the company’s fortunes in volatile markets. It is also necessary in improving the cooperation of the production personnel and management personnel.
AOI is currently facing a volatile market, and the future seems to be uncertain. The firm needs to create and sustain a competitive advantage in the volatile environment. It is essential for the organization to improve its business performance consistently. The value of human resource is essential especially in creating measurement approaches that resemble a scorecard. This is essential in creating a viable vision on how human resources in the organizations add value.
The process of integrating human resources and a firm’s strategic management activities is either vertical or horizontal coordination. Strategic human resource management is distinct and has procedures to follow in its implementation. The management involves line managers that focus on internal and external customer demands (Martin, 2009). The line managers play roles that include making transformational decisions, initiating projects and implementing strategic decisions. Their projects are based on various timelines including short, medium and long durations depending on the project.
It is essential that the line managers are able to implement their initiatives in a fast and proactive manner. This is in order to align the firm’s objectives to the volatile business environment. Human resource strategies are affected by external factors including technology volatile economies and uncertainty. AOI should be concerned about how they would integrate human resource policies to their business strategy based on the environment. Human resources strategies involve plans intentions and programs that would help develop human capability of organizations in meeting future requirements. The patterns of decision making in strategic management lead to the formation of viable human resource strategies for sustainable development.
The interdependency between human resource strategies to corporate strategies is essential. The applications of human resource strategies require different corporate strategies including growth, turnaround and sustainability. Some firms are likely to apply retrenchment strategies in order to maintain the status quo in the firm. Pursuing stability strategies in firms results in limited opportunities, in the business environment in deciding continued business operations (Martin, 2009). Volatile business environments create limited opportunities for firms such that they need strategic human resources to pursue opportunities.
Down sizing and outsourcing is a usual undertaking in maintaining the status quo of a firm. Downsizing refers to resizing the size of a firm to meet the current economic objectives of the firm. Outsourcing refers to the process of contacting other firm’s business operations. Most outsourcing operations occur in offshore firms who offer affordable services. The personnel are often demoralized and stressed and end up being disloyal to their employers. Maintaining the remaining employees and boosting their morale is a challenge for strategic human resource.
AOI may consider focusing in cost cutting strategies for their dwindling imports. This strategy may cover the cost maintaining the number of production and engineers in the firm. It is essential to have a manageable employee size in the firm that would ensure administrative efficiency. Once the number of production personnel is reduced, the operating cost would reduce concurrently to the management cost. Cutting the crew cost is also essential in the maintenance policy of the firm.
Downsizing is also essential in ensuring that the firm remains competitive and survives the volatile business environment. Outsourcing is also essential in finding affordable operating costs for services offered offshore. The firm should consider employing these strategies in its human resource management practice. Many firms are employing these strategies in their business operations for the financial benefits that are derived from the practices (Brown, 2005). AOI should note that the current market conditions does not allow for firms to maintain many employees. This was the trend about ten years ago, but things change rapidly. There is a need for the firm to lay off some employees to keep up with the volatile economic environment.
It is essential to note that financial growth of organizations corresponds to reduced cost of operation. Going by current trends, organizations need to learn that size translated to liability. Downsizing the size of a firm corresponds to natural growth of a firm. It leads to enhanced efficiency as a result of reduced ineffectiveness. The organizations that are successful in their operations are smaller, consistently resizing and conscious to the cost of their operations.
AOI stands to perform better than firms that are larger in size and dominant in the market place. It is an event that occurs purposely to reduce the size of the firm for the benefit of the firm. There is a difference between downsizing and the loss of market share. It is not limited to the reduction of personnel alone as other factors of the firm can be significantly reduced. The purpose is mainly to open up new sources of revenue and the introduction of new products.
Implementing Downsizing and outsourcing strategies are essential for the operations of AOI. Downsizing involves implementing several strategies including reducing the headcount in the firm. This should cover all levels including management, production and engineering employees in the firm. This involves early retirement, firings, and attrition and buy out packages for valuable employees. The main objective is just to reduce head count.
The issue with this strategy is that it is difficult to determine who would be released to go. Some employees may not want to take up early retirement or may decline it. The next step is undertaking outsourcing services to firms that offer essential services needed by the firm. Outsourcing should be limited to engineering and production aspects of the business (Brown, 2005). This service should be given to firms that can perform the operations at affordable prices. AOI should maintain a limited number of production and engineering employees for the purpose of quality assurance. The firm should ensure that the products are good quality as they would be produced in house.
In conclusion, strategic human resource management is essential in the survival of a business and its stability. Employee participation, communication, and information sharing are necessary for the success of the business. The processes of downsizing and outsourcing are inevitable for the survival of a firm in a competitive environment. The main issue is administering downsizing strategies in a fair manner such that everyone remains happy. The implementation of downsizing strategies should be done in a top down manner for effectiveness. The goal of outsourcing is to open up new financial sources and significantly cut operational cost.
Bohlander, G. W., & Snell, S. (2010). Managing human resources. Mason, OH: South-Western Cengage Learning.
Brown, D. (2005). The Black Book of Outsourcing: How to Manage the Changes, Challenges, and Opportunities. Hoboken: John Wiley & Sons
Martin, J. (2009). Human resource management. Los Angeles: SAGE.
Sims, R. R. (2007). Human resource management: Contemporary issues, challenges and opportunities. Greenwich, Conn: Information Age Publ.