Importance of Strategic Management

Strategic management has gained importance in recent years. During last century organizations focused on long-term planning. Long-term planning supposed that external and internal environment will remain stable for long period of time and thus they made plans for long duration. Today it is clear to the managers and entrepreneur’s that environment can change at any point of time and their plans should follow a strategy that includes contingency planning too.What is a Strategy?A strategy can be defined as a step-by-step plan to achieve a goal.

Strategic Management:Strategic management is an ongoing process of formulating strategies for the organization that bring profit to the organization and create harmony between organization and its environment. It lists the strengths that the organization already possess for the achievement of its objectives; weaknesses that hinder in goals accomplishment; opportunities and markets that can be exploited in favor; and threats that are present in external and internal environment: this is in short called as SWOT analysis.

While making decisions about the strategy the organization analyzes what are thedistinctive competencies the company already possesses. Distinctive competency can be a valuable asset for the company. Distinctive competencies make the process of strategy formulation much more directional and successful.Importance of Strategic Management in Organizations:A well-formulated strategy can bring various benefits to the organization in present as well as in future.

1. Strategic management takes into account the future and anticipates for it.

2. A strategy is made on rational and logical manner, thus its efficiency and its success are ensured.

3. Strategic management reduces frustration because it has been planned in such a way that it follows a procedure.

4. It brings growth in the organization because it seeks opportunities.

5. With strategic management organizations can avoid helter & skelter and they can work directionally.

6. Strategic management also adds to the reputation of the organization because of consistency that results from organizations success.

7. Often companies draw to a close because of lack of proper strategy to run it. With strategic management companies can foresee the events in future and that’s why they can remain stable in the market.

8. Strategic management looks at the threats present in the external environment and thus companies can either work to get rid of them or else neutralizes the threats in such a way that they become an opportunity for their success.

9. Strategic management focuses on proactive approach which enables organization to grasp every opportunity that is available in the marke

in today’s businesses, the right approach and management of the company’s employees can

greatly affect the company’s overall performance. A strategic approach in Human Resource

Management is vital especially in growing companies. Starting from right staffing to maintaining

performing employees, HR management is key in developing not only the employees, but the

whole organization itself.

Human Resources encompasses a broad scope in management. An expanding company

dependent on its current success can maintain and further develop its business starting with the

right staffing. As demands for the product or services increase, additional manpower is needed to

comply with them. The current manpower should be checked but not simply if they can comply

with the demands, but it has to ensure that it can still keep its quality and standards. Mass

production or bulk orders should not be an excuse in decreasing quality, hence, increased

customer dissatisfaction and decreased sales. For a company that is already recognized in the

industry and is eyeing on expansion, their status and reliability should be maintained. The leaders

of the company can now focus on the products itself and expansion, and let the HR Department

handle the development of the organization. Keeping an eye on the company’s log-term goals,

mission and vision, the development of performance standards is essential to identify potential

problems, non-performing employees and compliance to tasks and standards. Minor employee

and performance problems should be seen immediately to avoid any future inconvenience and

potential problems to the customers and thus become a liability to the company. HRM

professionals can also identify the processes and the proper staffing for each of these activities,

and in effect, the systems and approach in terms of the company’s front line operations can be

improved to decrease manpower hours, improve quality, streamline processes, and elevate

standards. The success and growth of a small company can be attributed to its culture. Due to its size,

communication between all employees is not complicated. And alongside this communication,

the trust and organizational goals are easily shared and understood by everyone. And in its

growth, it is important that this culture is maintained and adjust to changes accordingly. HR

professionals can work both with management and employees in doing this. With increase in

employees and more demands in operations, communication may take a backseat for both

parties. However, Human Resources Management can amend this and become a bridge in

establishing what the management wants from employees and vice-versa.

In its continuous development, it is but imperative that the management or its owner be prepared

for more arduous tasks in operations and leading the rest of the team towards continued success.

Management should be equipped with the right skills in planning, leading, organizing and

establishing standards. As they are the ones who will eventually be focused in developing the

company instead of the operations and technical aspects, a higher understanding of this

responsibility is essential, and this also plays a significant part once competition is put into the

picture. Companies fail because of a number of reasons, and mismanagement can be one of

them. Operations may spin out of control if personal agendas and politics are placed, and in

growing companies, this should be monitored and prevented.

Developing not only management but also its employees is significant. To keep up with

competition, employees should be given with a number of reasons to stay with the company, and

do their jobs exemplary well. Their continuous growth, the right compensation and benefits, and

work-life balance are just some of the things that motivate employees to perform better,

producing better results for the customers and ultimately, the company.

The role of HR is changing. Previously considered a support function, HR is now becoming a strategic

partner in helping a company achieve its goals. A strategic approach to HR means going beyond the

administrative tasks like payroll processing. Instead, managers need to think more broadly and deeply

about how employees will contribute to the company’s success.

HR as a Strategic Partner

Strategic human resource management (SHRM) is not just a function of the HR department—all

managers and executives need to be involved because the role of people is so vital to a company’s

competitive advantage.[732] In addition, organizations that value their employees are more profitable

than those that do not.[733] Research shows that successful organizations have several things in

common, such as providing employment security, engaging in selective hiring, using self-managed

teams, being decentralized, paying well, training employees, reducing status differences, and sharing

information.[734] When organizations enable, develop, and motivate human capital, they improve

accounting profits as well as shareholder value in the process.[735] The most successful organizations

manage HR as a strategic asset and measure HR performance in terms of its strategic impact.

Here are some questions that HR should be prepared to answer in this new world.[736]

Competence: To what extent does our company have the required knowledge, skills, and abilities to

implement its strategy?

Consequence: To what extent does our company have the right measures, rewards, and incentives in

place to align people’s efforts with the company strategy?

Governance: To what extent does our company have the right structures, communications systems

and policies to create a high-performing organization?

Learning and Leadership: To what extent can our company respond to uncertainty and learn and adapt

to change quickly?

The Importance of Human Capital

Employees provide an organization’s human capital. Your human capital is the set of skills that you

have acquired on the job, through training and experience, and which increase your value in the

marketplace. The Society of Human Resource Management’s Research Quarterly defined an

organization’s human capital as follows: “A company’s human capital asset is the collective sum of the

attributes, life experience, knowledge, inventiveness, energy and enthusiasm that its people choose to

invest in their work.”[737]

Focus on Outcomes

Unfortunately, many HR managers are more effective in the technical or operational aspects of HR

than they are in the strategic, even though the strategic aspects have a much larger effect on the

company’s success.[738] In the past, HR professionals focused on compliance to rules, such as those

set by the federal government, and they tracked simple metrics like the number of employees hired or

the number of hours of training delivered. The new principles of management, however, require a

focus on outcomes and results, not just numbers and compliance. Just as lawyers count how many

cases they’ve won—not just how many words they used—so, too must HR professionals track how

employees are using the skills they’ve learned to attain goals, not just how many hours they’ve spent

in training.[739]

John Murabito, executive vice president and head of HR and Services at Cigna, says that HR executives

need to understand the company’s goals and strategy and then provide employees with the skills

needed. Too often, HR execs get wrapped up in their own initiatives without understanding how their

role contributes to the business. That is dangerous, because when it comes to the HR department,

“anything that is administrative or transactional is going to get outsourced,” Murabito says. [740] Indeed,

the number of HR outsourcing contracts over $25 million has been increasing, with 2,708 active

contracts under way in 2007.[741] For example, the Bank of America outsourced its HR administration to

Arinso. Arinso will provide timekeeping, payroll processing, and payroll services for 10,000 Bank of

America employees outside the U.S.[742] To avoid outsourcing, HR needs to stay relevant and accept

accountability for its business results. In short, the people strategy needs to be fully aligned with the

company’s business strategy and keep the focus on outcomes.

Key Elements of HR

Beyond the basic need for compliance with HR rules and regulations, the four key elements of HR are

summarized in the following figure. In high-performing companies, each element of the HR system is

designed to reflect best practice and to maximize employee performance. The different parts of the HR

system are strongly aligned with company goals.

Category: Human Resource >> Importance of Human Resource Management

Strategic Human Resource Management

The importance of human resource management cannot be undervalued in today's intensely competitive global market place. The reason for this is that there is a very small margin for error from becoming a market leader to becoming a market joke. A lot of emphasizes is now put on good human resource management, as it is the difference between employing a qualified work force and hiring inept workers. Human resource management nowadays is not just about employing people or drafting work policies; it is also about being able to rapidly respond to customer's needs and competitors moves.

In a large number of organizations (both big and small) these days, human resources is viewed as a source of having a competitive advantage over your competition. What this means is that human resources is now playing a more vital role than ever in the organizational hierarchy of a company. This is because a carefully implemented human resource policy can obtain a high quality workforce that lets an organization compete on the basis of market responsiveness, product and service quality and technological innovation.

More and more these days the importance of strategic human resource management is coming to the forefront of many businesses. Here the word 'strategic' means keeping in view the long term results or the so called 'bigger picture'. Strategic human resource management focuses is human resource programs that have long term objectives. Instead of focusing on internal human resource issues, the focus is on addressing and solving problems that effect people management programs in the long run. Therefore the primary goal of strategic human resources is to increase employee productivity by focusing on business obstacles that occur outside of human resources.

Strategic human resource management thus employs strategies that help to improve a business' performance and foster an environment of innovation and flexibility among employees. The primary actions of a strategic human resource manager are to identify key HR areas where strategies can be implemented in the long run to improve the overall employee motivation and productivity.

Strategic human resource management is also about assessing the company's internal strengths and weaknesses. This is very important as the strengths and weaknesses of a company's human resources have a direct effect on the how a company will do in the future.

So how does a human resource manager implement these strategic plans? In strategic human resource management, an HR manager becomes a very important player in the company, the reason for this being that rather than acting as passive administrators, they play a more proactive role in policy formulation. The HR manager thus becomes a resource manager as he or she will utilize the full potential of their human resources. HR professionals thus become strategic partners when they take part in defining a business' overall strategy.

From the above we can thus see that strategic human resource management is now coming to play a very important role in today's business world. Strategic human resource management is all about strategically managing a business' human resources in a manner that works to the overall benefit of the business.