Hr Functions

Abstract

This article examines the strategic role of HR and its main practices, describes the outcomes of the respective category of HR practices, explains the critical reasons for measuring HR's efforts, and proposes a framework for assessing HR. Ultimately, organizations would be able to utilize the information to determine how particular HR practices correlate with better business results; determine potential areas for investments, expansions, and reductions; justify budget allocations; and be more accountable for each dollar spent within the organization. The framework proposed does not merely explain the cost for each of the major HR activity, but demonstrates the value of the activity and hence, the opportunity to determine if it is a worthwhile investment and strategy for creating a competitive advantage.

What value does the human resources (HR) function contribute to the bottom line of the organization? Over the years, there has been tremendous emphasis placed on HR practitioners becoming strategic business partners and being a value-added source within organizations. Traditionally, HR professionals could talk generally and conceptually about employee morale, turnover, and employee commitment being outcomes of HR efforts. Furthermore, the HR function is often viewed as an expense-generator and an administrative function and not as a value-added partner. Ulrich (1997b) reiterated that to fulfill the business partner role of HR, concepts need to be replaced with evidence, ideas with results, and perceptions with assessments.

This article examines the strategic role of HR and its main practices, describes the outcomes of the respective category of HR practices, explains the critical reasons for measuring HR's efforts, and proposes a framework for assessing HR. Ultimately, organizations would be able to utilize the information to determine how particular HR practices correlate with better business results; determine potential areas for investments, expansions, and reductions; justify budget allocations; and be more accountable for each dollar spent within the organization. The framework proposed does not merely explain the cost for each of the major HR activity, but demonstrates the value of the activity and hence, the opportunity to determine if it is a worthwhile investment and strategy for creating a competitive advantage.

The framework has proven its effectiveness at many companies showing how HR creates value, utilized the information collected to increase investments in specific HR strategies and eliminating ineffective investments, and used as a critical resource in the strategic business planning and budget allocation. The companies include Fortune 500 and smaller companies from retail, transportation, and financial industries.

Understanding the Strategic Role of HR

In today's business environment, organizations need to be constantly evaluating their internal and external environment for challenges and opportunities to remain competitive and to sustain growth. Political, economic, social, and even psychological changes within our societies create significant impact on organizations. Given any significant change or event, how ready are we as an organization to react in order to remain competitive?

Many factors are driving changes in organizations today including the use of technology, globalization, changes in workforce demographics, eliminating the bureaucracies in organizational structures, and balancing work-family issues. Understanding the potential of an organization's resources and optimizing the output of such resources given the changes, provides the impetus for HR being the key source of creating the competitive advantage for the organization.

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To create value and deliver results, HR professionals must begin not by focusing on the work activities or work of HR but by defining the deliverables of that work. HR's roles in building a competitive organization include management of strategic human resources, management of transformation and change, management of firm infrastructure and management of employee contribution (Ulrich, 1997a). Although these roles are valid and have proven to be value-added in recent years, there is now the critical need to move beyond the strategic business partner role to players in the business (Ulrich & Beatty, 2001). Players, according to Ulrich & Beatty, contribute to the profitability of the organization, they deliver results and they do things to make a difference. The roles of players are to a) coach b) design, c) construct, d) change the organization,