Abstract
This study examines the relationship between human resource strategy and firm performance in the service sector. We find that firms with a proactive human resource strategy, characterized by a focus on training and development, employee involvement, and performance management, have higher financial performance levels than firms with a reactive human resource strategy, which focuses on cost-cutting and compliance. Human resource strategy may be more effective in enhancing firm performance in the service sector.
Literature Review
Theme: Human Resource Strategy
Human resource strategies refer to an organization’s plans and actions to manage its employees effectively. These strategies can significantly impact the organization’s culture, productivity, and overall success. Some common HR strategies include:
Talent management: This involves identifying, attracting, and retaining top talent. This can include recruiting efforts, employee development programs, and employee retention initiatives.
Performance management: This involves setting clear performance goals and expectations for employees, providing feedback and support to help them meet those goals, and addressing performance issues as needed.
Workplace diversity and inclusion: This involves creating a diverse and inclusive work environment where all employees feel valued and supported. This can include initiatives such as diversity training, mentorship programs, and policies to promote equal opportunity. Employee engagement involves creating a work environment that promotes employee satisfaction and commitment to the organization. This can include initiatives such as flexible work arrangements, opportunities for career advancement, and recognition programs. Employee development involves providing employees with the knowledge, skills, and resources they need to grow and succeed in their careers. This can include training and development programs and opportunities for employees to take on new challenges and responsibilities.
Effective HR strategies can have several positive impacts on an organization, including:
Improved employee productivity: By setting clear goals and expectations, providing support and development opportunities, and creating a positive work environment, HR strategies can help increase employee productivity and motivation. Enhanced employee retention: By focusing on employee development and engagement, organizations can create a more positive and supportive work environment, which can lead to increased employee retention and reduced turnover.
Increased profitability: By improving employee productivity and retention, HR strategies can increase the organization’s profitability. Greater competitive advantage: Organizations can gain a competitive advantage in their industry by attracting and retaining top talent. Improved reputation: By promoting diversity and inclusion, organizations can improve their reputation and attractiveness to employees and customers.
Legal compliance: HR strategies can help organizations ensure compliance with labor laws and regulations, which can help prevent costly legal disputes. Human Resource (HR) researchers have long been interested in elucidating the impact of specific HR practices on individual-level outcomes such as turnover and job satisfaction (Bamberger, 2014).
Topic: Conceptual and Frameworks of Human Resource Strategies
Several conceptual and theoretical frameworks have been developed to help organizations understand and effectively implement HR strategies. Some of these include:
The resource-based view of the firm: This framework suggests that organizations can gain a competitive advantage by managing their human and other resources effectively. It emphasizes the importance of aligning HR strategies with the overall business strategy and maximizing the value of human capital (Samantha, 2018). The contingency approach: This framework suggests that the most effective HR strategies depend on the specific needs and goals of the organization and the context in which it operates. It emphasizes the importance of considering factors such as the organization’s size. Therefore, organizations have yet to embrace innovation in their processes and products. Ahmed,(2020). The best practices approach: This framework suggests that organizations can improve their performance by adopting HR practices that have been proven to be effective in other organizations. This can include things like training programs, performance management systems, and employee involvement programs.Florida,(2018)
The high-performance work system approach: This framework suggests that organizations can achieve high-performance levels by creating work systems that support the development and utilization of human capital. This can include job design, training and development programs, reward systems that encourage employee engagement and commitment to the industry, and culture when developing HR strategies. (Kaushik, 2021)
Issues: The conceptual basis of knowledge management concepts in building a human resource strategy
The conceptual basis of knowledge management in building a human resource strategy involves the idea that an organization’s human resources (HR) can be a source of competitive advantage. This means that a company’s employees and their skills, knowledge, and experience can be leveraged to create value for the organization. Organizations must be proactive in managing and developing their knowledge and skills to utilize HR as a strategic asset effectively. This includes identifying the knowledge and skills that are important to the organization’s success, encouraging ongoing learning and development, and creating an environment that fosters collaboration and the sharing of knowledge.
Effective knowledge management can also involve using technology, such as databases and knowledge management systems, to store and share knowledge within the organization. This can ensure that the knowledge and skills of individual employees are not lost when they leave the organization and can be easily accessed and used by others. Incorporating knowledge management into an HR strategy can help an organization better align its human resources with its business goals and objectives and create a continuous learning and development culture. This can lead to increased innovation, productivity, and competitiveness within the organization.
An organization’s ability to leverage employees’ knowledge heavily depends on its Human Resources, which effectively create, share, and use that knowledge to grow. Antunes, (2020).
Rationale
This paper explains the importance of human resource strategy because it determines how human resource processes work and ensures they align with organizational goals. Human resource practices can increase employee productivity, positively impact employee learning, and improve overall performance. It also allows maximization of the potential of employees with organization objectives. Learning how to analyze the workforce’s skills and forecast the organization’s needs help create an effective human resource strategy and better reach the organization’s goals.
A human resource strategy is a plan that outlines how an organization will manage and develop its human capital. It is an essential aspect of overall business strategy, as it helps to align the organization’s goals with its workforce. A well-developed human resource strategy can help an organization attract, retain, and develop talented employees, contributing to its overall success.
There are several reasons why human resource strategy is important:
Aligns workforce with business goals: A human resource strategy helps to align the organization’s workforce with its business goals and objectives. By identifying the skills and competencies that are required to achieve these goals, the organization can focus on attracting and developing the right employees.
Attracts and retains top talent: A strong human resource strategy can help an organization attract and retain top talent. This includes developing effective recruiting and retention programs and offering competitive benefits and career development opportunities. Improves employee engagement: A well-thought-out human resource strategy can help to improve employee engagement and motivation. This can lead to increased productivity and a positive work culture, which can help the organization to achieve its business goals.
Enhances organizational effectiveness: A human resource strategy can enhance organizational effectiveness by ensuring that the organization has the right mix of skills and competencies to meet its business needs. This can include developing training and programs to help employees acquire the skills they need to succeed in their roles.
Overall, a human resource strategy is critical in helping an organization effectively manage and develop its human capital. By aligning the workforce with business goals, attracting and retaining top talent, improving employee engagement, and enhancing organizational effectiveness, a human resource strategy can contribute to the organization’s overall success.Macke, (2019).
Framework
A human resource strategy can be developed using a variety of frameworks. The SHRM (strategic human resource management) paradigm is one such strategy. Strategic human resource management provides an integrated and proactive strategy for addressing significant human factor risk, which considers human factors’ two interconnected responsibilities which has the following four essential parts:
- Strategic planning entails understanding how the workforce can support and contribute to the organization’s business goals and objectives.
- Analysis of the organization’s human resource needs, including skills, competencies, and experience levels, is done in this process.
- Human resource implementation: This entails carrying out the human resource strategy through numerous initiatives and programs, including hiring and selecting employees, providing them with training and development, and managing their performance.
Analysis
The provided framework model enables managers to employ a combination of risk management and human resources principles. The model takes a systemic approach to managing staff performance and capability limits. It can be described as an analysis of a company’s internal strengths and weaknesses as well as its environments, opportunities, and threats. It is a comprehensive tool made to be utilized in numerous applications in the early phases of decision-making and as a precursor to strategic planning. An effective strategy should be the by-product of the company’s internal resources, industry position, and industry capabilities.
Justification
SWOT Analysis
SWOT analysis is a tool that is commonly used to identify a company’s strengths, weaknesses, opportunities, and threats (also known as SWOT). By analyzing these factors, a company can better understand its internal and external environment and make informed decisions about how to achieve positive social change. Here are a snapshot of how a company might address positive social change through SWOT analysis:
- Strengths: A company can leverage its strengths to address positive social change. For example, if a company has a strong reputation for sustainability, it could use this strength to advocate for and promote environmentally friendly practices within its industry.
- Weaknesses: A company can address its weaknesses in order to contribute to positive social change. For example, if a company has a weakness in its supply chain practices, it could improve these practices to reduce its impact on the environment and promote fair labor practices.
- Opportunities: A company can identify and pursue opportunities to positively impact society. For example, suppose a company has the opportunity to partner with a nonprofit organization to address a specific social issue. In that case, it could take advantage of this opportunity to make a positive contribution.
- Threats: A company can use SWOT analysis to identify and mitigate potential threats to positive social change.
Strengths
An effective HR strategy can support an organization’s strengths by identifying and leveraging the skills and abilities of employees, as well as by developing programs and initiatives that enhance employee performance and productivity. Identifying a company’s strengths should be easy if one thoroughly analyzes the internal environment. Company strength is something the company does well or something that is a positive asset. A company’s strengths are those factors over which the company has control, and strengths are determined through a thorough analysis of the internal environment. It brings better risk management, more effective corporate management, and greater satisfaction from working with people.
Weakness
Identifying a company’s weakness should be easy if one thoroughly analyzes the internal environment. A weakness is something the company does not do well and has control over. It is essential in the analysis to admit to all weaknesses. Also, remember that something can simultaneously be a strong factor and a weakness.
Opportunities
A thorough assessment of the external environment was conducted, and opportunities are easy to spot. Opportunities are factors that exist in the external environment of which the company the company can take advantage.
Threat
A company has no control over a constraint threat, but the threat can do a lot of damage to the business if not managed properly. It can give management a good snapshot of where the company is at the present moment. It also helps to assess exactly where the company is in terms of internal organization. Human resource strategy can help an organization mitigate threats by identifying potential areas of risk and developing strategies to address them.
Overall, SWOT analysis can be a useful tool for companies seeking to address positive social change by identifying and leveraging their strengths, addressing their weaknesses, pursuing opportunities, and mitigating threats in businesses; downsizing is a common management technique. However, the topic of whether downsizing strategies ultimately improve performance is frequently posed in the field of organizational transformation and needs to be adequately addressed. Over the years, the repercussions have not always come to pass.
On the flip hand, downsizing hurts workers and their families while also wreaking social havoc. SWOT analysis can be useful for developing and evaluating human resource strategies. By identifying a company’s strengths, weaknesses, opportunities, and threats (SWOT) related to its human capital, and a company can better understand its current and potential human resource capabilities and develop strategies to optimize its human resource management. Human resources and strategy were said to have a positive effect on the greening of an organization (Zaid, 2018)
Gaps and Future Research
This study addresses the research gap by exploring human resource strategies and how developing goals impacts the organization. Future studies should aim to do more research on the role of human resource strategies in organizational change: Researchers could study the role of Human resource strategies in facilitating and managing organizational change, including how human resources can support employees through the transition process and how human resource strategies can be adapted to support evolving business needs.
