54838277 importance-of-strategic-management


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54838277 importance-of-strategic-management

  1. 1. Importance of Strategic ManagementStrategic management has gained importance in recent years. During last century organizationsfocused on long-term planning. Long-term planning supposed that external and internal environmentwill remain stable for long period of time and thus they made plans for long duration. Today it is clearto the managers and entrepreneur’s that environment can change at any point of time and theirplans 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 bringprofit to the organization and create harmony between organization and its environment. It lists thestrengths that the organization already possess for the achievement of its objectives; weaknessesthat hinder in goals accomplishment; opportunities and markets that can be exploited in favor; andthreats that are present in external and internal environment: this is in short called as SWOTanalysis.While making decisions about the strategy the organization analyzes what arethedistinctive competencies the company already possesses. Distinctive competency can be avaluable asset for the company. Distinctive competencies make the process of strategy formulationmuch 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 infuture. 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
  2. 2. in today’s businesses, the right approach and management of the company’s employees cangreatly affect the company’s overall performance. A strategic approach in Human ResourceManagement is vital especially in growing companies. Starting from right staffing to maintainingperforming employees, HR management is key in developing not only the employees, but thewhole organization itself.Human Resources encompasses a broad scope in management. An expanding companydependent on its current success can maintain and further develop its business starting with theright staffing. As demands for the product or services increase, additional manpower is needed tocomply with them. The current manpower should be checked but not simply if they can complywith the demands, but it has to ensure that it can still keep its quality and standards. Massproduction or bulk orders should not be an excuse in decreasing quality, hence, increasedcustomer dissatisfaction and decreased sales. For a company that is already recognized in theindustry and is eyeing on expansion, their status and reliability should be maintained. The leadersof the company can now focus on the products itself and expansion, and let the HR Departmenthandle 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 potentialproblems, non-performing employees and compliance to tasks and standards. Minor employeeand performance problems should be seen immediately to avoid any future inconvenience andpotential problems to the customers and thus become a liability to the company. HRMprofessionals 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 beimproved to decrease manpower hours, improve quality, streamline processes, and elevatestandards. The success and growth of a small company can be attributed to its culture. Due toits size,communication between all employees is not complicated. And alongside this communication,
  3. 3. the trust and organizational goals are easily shared and understood by everyone. And in itsgrowth, it is important that this culture is maintained and adjust to changes accordingly. HRprofessionals can work both with management and employees in doing this. With increase inemployees and more demands in operations, communication may take a backseat for bothparties. However, Human Resources Management can amend this and become a bridge inestablishing what the management wants from employees and vice-versa.In its continuous development, it is but imperative that the management or its owner be preparedfor 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 andestablishing standards. As they are the ones who will eventually be focused in developing thecompany instead of the operations and technical aspects, a higher understanding of thisresponsibility is essential, and this also plays a significant part once competition is put into thepicture. Companies fail because of a number of reasons, and mismanagement can be one ofthem. Operations may spin out of control if personal agendas and politics are placed, and ingrowing companies, this should be monitored and prevented.Developing not only management but also its employees is significant. To keep up withcompetition, employees should be given with a number of reasons to stay with the company, anddo their jobs exemplary well. Their continuous growth, the right compensation and benefits, andwork-life balance are just some of the things that motivate employees to perform better,producing better results for the customers and ultimately, the company.
  4. 4. The role of HR is changing. Previously considered a support function, HR is now becoming a strategicpartner in helping a company achieve its goals. A strategic approach to HR means going beyond theadministrative tasks like payroll processing. Instead, managers need to think more broadly and deeplyabout how employees will contribute to the company’s success.HR as a Strategic PartnerStrategic human resource management (SHRM) is not just a function of the HR department—allmanagers and executives need to be involved because the role of people is so vital to a company’scompetitive advantage.[732] In addition, organizations that value their employees are more profitablethan those that do not.[733] Research shows that successful organizations have several things incommon, such as providing employment security, engaging in selective hiring, using self-managedteams, being decentralized, paying well, training employees, reducing status differences, and sharinginformation.[734] When organizations enable, develop, and motivate human capital, they improveaccounting profits as well as shareholder value in the process.[735] The most successful organizationsmanage 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 toimplement its strategy?Consequence: To what extent does our company have the right measures, rewards, and incentives inplace to align people’s efforts with the company strategy?Governance: To what extent does our company have the right structures, communications systemsand policies to create a high-performing organization?Learning and Leadership: To what extent can our company respond to uncertainty and learn andadapt to change quickly?The Importance of Human CapitalEmployees provide an organization’s human capital. Your human capital is the set of skills that youhave acquired on the job, through training and experience, and which increase your value in themarketplace. The Society of Human Resource Management’s Research Quarterly defined anorganization’s human capital as follows: “A company’s human capital asset is the collective sum of theattributes, life experience, knowledge, inventiveness, energy and enthusiasm that its people choose toinvest in their work.”[737]
  5. 5. Focus on OutcomesUnfortunately, many HR managers are more effective in the technical or operational aspects of HRthan they are in the strategic, even though the strategic aspects have a much larger effect on thecompany’s success.[738] In the past, HR professionals focused on compliance to rules, such as thoseset by the federal government, and they tracked simple metrics like the number of employees hired orthe number of hours of training delivered. The new principles of management, however, require afocus on outcomes and results, not just numbers and compliance. Just as lawyers count how manycases they’ve won—not just how many words they used—so, too must HR professionals track howemployees are using the skills they’ve learned to attain goals, not just how many hours they’ve spentin training.[739]John Murabito, executive vice president and head of HR and Services at Cigna, says that HRexecutives need to understand the company’s goals and strategy and then provide employees with theskills needed. Too often, HR execs get wrapped up in their own initiatives without understanding howtheir role contributes to the business. That is dangerous, because when it comes to the HRdepartment, “anything that is administrative or transactional is going to get outsourced,” Murabito [740]says. Indeed, the number of HR outsourcing contracts over $25 million has been increasing, with2,708 active contracts under way in 2007.[741] For example, the Bank of America outsourced its HRadministration to Arinso. Arinso will provide timekeeping, payroll processing, and payroll services for10,000 Bank of America employees outside the U.S.[742] To avoid outsourcing, HR needs to stayrelevant and accept accountability for its business results. In short, the people strategy needs to befully aligned with the company’s business strategy and keep the focus on outcomes.Key Elements of HRBeyond the basic need for compliance with HR rules and regulations, the four key elements of HR aresummarized in the following figure. In high-performing companies, each element of the HR system isdesigned to reflect best practice and to maximize employee performance. The different parts of the HRsystem are strongly aligned with company goals.
  6. 6. Category: Human Resource >> Importance of Human Resource ManagementStrategic Human Resource ManagementThe importance of human resource management cannot be undervalued in todays intenselycompetitive global market place. The reason for this is that there is a very small margin for errorfrom becoming a market leader to becoming a market joke. A lot of emphasizes is now put ongood human resource management, as it is the difference between employing a qualified workforce and hiring inept workers. Human resource management nowadays is not just aboutemploying people or drafting work policies; it is also about being able to rapidly respond tocustomers needs and competitors moves.In a large number of organizations (both big and small) these days, human resources is viewed as asource of having a competitive advantage over your competition. What this means is that humanresources 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 qualityworkforce that lets an organization compete on the basis of market responsiveness, product andservice quality and technological innovation.More and more these days the importance of strategic human resource management is coming tothe forefront of many businesses. Here the word strategic means keeping in view the long termresults or the so called bigger picture. Strategic human resource management focuses is humanresource programs that have long term objectives. Instead of focusing on internal human resourceissues, the focus is on addressing and solving problems that effect people management programsin the long run. Therefore the primary goal of strategic human resources is to increase employeeproductivity by focusing on business obstacles that occur outside of human resources.Strategic human resource management thus employs strategies that help to improve a businessperformance and foster an environment of innovation and flexibility among employees. Theprimary actions of a strategic human resource manager are to identify key HR areas wherestrategies can be implemented in the long run to improve the overall employee motivation andproductivity.Strategic human resource management is also about assessing the companys internal strengthsand weaknesses. This is very important as the strengths and weaknesses of a companys humanresources 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 humanresource management, an HR manager becomes a very important player in the company, thereason for this being that rather than acting as passive administrators, they play a more proactiverole in policy formulation. The HR manager thus becomes a resource manager as he or she willutilize the full potential of their human resources. HR professionals thus become strategicpartners when they take part in defining a business overall strategy.
  7. 7. From the above we can thus see that strategic human resource management is now coming to playa very important role in todays business world. Strategic human resource management is all aboutstrategically managing a business human resources in a manner that works to the overall benefitof the business.