The Strategic Role of Human Resource Management

Introduction:

SABIC, which stands for Saudi Arabian Basic Industries Corporation, is a manufacturing company, with products ranging from plastics, fertilizers, chemicals and metals. Founded in 1976 to convert oil by-products (like natural gas) into useful chemicals, 70% of the shares in the Riyadh based company are owned by the Saudi government. SABIC is the largest and most profitable public company in the Middle East. (oilandgasnewsworldwide, n.d.) The chairman is Prince Saud bin Abdullah bin Thunayan Al-Saud. The workforce is very diverse, comprising over 30,000 employees belonging to various nationalities. Despite of the large diversified workforce, SABIC still remains proud of its Saudi heritage and from the total more than 85% of the workforce is comprised of Saudi nationals.  (sabic.com, n.d.)

Human Resources Process:

Human resource management (HRM) is a vast term and relates to a function of the organisation which deals in the hiring, recruiting and managing the workforce. It’s an important department for ever organisation but for a diversified organisation it is almost crucial. The main reason for this is that the workforce is the main factor which is directly related with the production and sales, and so it is the task of Human Resource Department to take care of their issues since the employees can’t do it for themselves. The main tasks of this department is to deal with issues which pertain to compensation, hiring and firing, performance management, organisational development, safety of all, welfare of the employees, motivating the employees to perform well, bridging the communication gap within the employees and the management, administering the tasks of the employees and providing training to them all. Thus they are very important for the organisation because of the above tasks it performs. Although it is a very wide field but it deals mainly with two major areas; employee and leader motivation and also aspects of linked human planning (recruitment and selection, training, performance appraisal and compensation).

SABIC is composed of six business units (SBUs), namely Basic Chemicals, Intermediates, Polymers, Specialty Products, Fertilizers and Metals. The human resources department has recently developed and revolutionized to focus on leadership development, organizational effectiveness, workforce planning and development and performance and awards. SABIC maintains contact with universities and vocational schools in order to recruit talented young workers. Maintaining the Continuing Education and Knowledge Transfer program helps to incorporate on the job training and gives employees an opportunity to increase their skills. The Leadership Development Council looks at selecting, assessing and training the next generation of leaders for the company.  (sabic.com, n.d.)

Human Resource Management has to respond and change as the business environment changes. Human resource managers need to synthesize their personnel issues with the general economic and business issues, while staying in touch with technological progress. By doing this they help and ensure that the organisation remains on track and fulfils its performance target promise.  (managementhelp.org, n.d.)

 Critical Appraisal:

Effective human resource management is extremely important in employee productivity, achievement of goals and growth of the company. Employee turnover means the number of workers that are not retained, i.e. they leave their jobs. This is a major factor in all the organisations and it is the task of the Human Resource Department that they prevent this number from increasing. If the turnover rate is very high it means that the employees in the organisation are highly dissatisfied by the organisation’s management and prefer to leave their jobs in search of new ones. This Job dissatisfaction can occur because of a lot of major issues which the Human Resource department try their best to minimize as much as they can. Job dissatisfaction can occur due to lack of remunerative benefits, lack of job satisfaction, and bad manager- employee communication. In order to minimise job dissatisfaction (and hence, employee turnover), employees need adequate remuneration, job security and comfortable working conditions; which is why SABIC focuses on its employees and giving them competitive rewards and incentives. The recruitment process consists of an assessment of the vacancy which needs to be filled, a job analysis, a job description and a person specification. It is very important to recruit the right person for the job. Organisations can choose to recruit externally or internally. The strengths of internal recruitment are the provision of a motivational factor for the employees and it is more practically viable. This also promotes employee loyalty as it represents progress and growth; managers can help gauge the capabilities of an employee and there is a cut in the cost of training and development. External recruitment can provide a fresh insight into the corporate culture, it inspires creativity and a new approach in terms of management and goal setting. SABIC prefers to recruit its skilled labour fresh from universities and vocational schools.

Focus on reward and adequate remuneration helps to keep the employee turnover low, especially since skilled labour and management is difficult to replace in a petrochemical company such as SABIC. Working conditions must be adequately managed, so that work hazards are at a minimum. Employee turnover is lowest for skilled workers that have remained with the company for longer. SABIC’s HR department has revolutionized a training and development committee for top managers and leaders of the next generation.

The expression of a long-term vision by managers is crucial to the development of knowledge culture.  (emeraldinsight, 2008) ‘‘Time allocation’’ (provision of time to employees for sharing of knowledge and goals) is a key factor for the existence of differences in knowledge habits between various teams and divisions within a given organization. It is common to find managers who concentrate predominantly on achieving short-term goals and targets. These managers may not allow their team to spend time on knowledge creation and sharing, consequently they hinder the knowledge culture. (emeraldinsight, 2008)

Organizational Culture and Management Style:

At SABIC, workers are valued highly and deemed the most important driving force behind the company’s stellar growth. It would seem organizational commitment is affected less by a lack of negative reinforcement and is more a product of direct managerial initiatives. HR systems built on commitment and rewards have higher productivity and a lower employee turnover. These systems are characterized by the use of problem solving groups, information dissemination, team work and job flexibility stemming from a perception of employees as resources to be developed rather than as disposable factors of production.

Defining corporate culture means a set of values and beliefs, specific to an organization that are generally understood and shared by all members. An organization’s culture helps to shape and determine the behavior of the members and the practices within the organization.  (inderscience.metapress.com, n.d.) Culture is complex and elusive and is defined in many different ways. As a result, the various methods for measuring it also vary, but our experience from working with and studying hundreds of companies suggests that the organizations which closely align their cultures to support their business strategies tend to outperform those where strategy and culture are not aligned. Since culture drives the behaviours of the workforce, it can have a significant impact at a macro level on productivity, customer service, product and service quality, and operational efficiency. (emeraldinsight, 2008)

Impact of organizational culture and management style on HRM:

Human resource management is directly affected by organizational culture and management style. If the management style is lassez faire, then HRM will also be ineffective and production will go down. If the management style is too autocratic, human resource would have to deal with a high employee turnover, low productivity, and lack of employee motivation. As SABIC has an organizational culture of efficiency and growth, HRM needs to analyse and assess employees for training and development. Human resource strategy is dynamic and is affected as organizations continue to come across and manage tremendous challenges.

Most of the change factors are well known and have been cited on many occasions:

• Globalization of markets;

• Technological;

• Legal;

• Regulatory;

• Mergers and acquisitions;

• Demographic;

• Social and organization structural changes.

All of these issues have fundamental consequences for the management of the human resources function within the organization.

Successful HR managers have a significant strategic impact on their organizations, as they do so at SABIC.

Organizational culture can impact human resource management in varied ways; whether management is autocratic or participatory, whether policies are consistent and fair, whether management focuses on customers and is accessible to employees. All this would contribute to worker motivation, productivity and retention. If the organizational culture is focused on innovation and growth, a certain degree of employee empowerment will be necessary to provide the right environment to workers. Organizational culture cannot be inconsistent with goal setting of the company.

At SABIC, the organizational culture is focussed on sustainable growth and therefore, HRM is focussed on finding the right personnel for each job description and retention of their highly values employees.

Organizational rewards motivate employees towards knowledge sharing and foster a knowledge culture. However, in the context of knowledge contribution, research suggests that the indirect rewards such as appreciation and recognition play a greater role than the monetary incentives. (emeraldinsight, 2008)

Human resource management challenges:

One of the major challenges of human resource is labour retention, which is especially an issue when skilled labour leaves during intensive research or competitive periods. More research needs to be done on worker retention; currently it seems workers stay when the incentives to leave are absent. One of the methods of reducing worker turnover is by using word-of-mouth recruitment or referrals. Existing workers who have recommended the other worker tend to ‘socialise’ with the new recruit to ensure he/she fits in. Although such informal methods do have their disadvantages as well, it may leave a pool of recruits untapped and may leave the corporation open to accusations of indirect discrimination.

Due to increased competitive pressure, managers are looking for ways to improve and sustain organizational performance. Some organizations launch quality management programs which remain unsuccessful because of factors such as lack of top management support and/or employee empowerment, inconsistent human resource policies or a failure to create a conductive culture. Read also about methods of resource allocation

Conclusion:

Human resource management is an important and valued part of organizational structure and strategy. SABIC values its work force highly and therefore has a comprehensive employment package, consisting of reviewed remuneration and rewards. Since it is the largest publicly owned company in the Middle East and is continuing to expand, the Human Resource has been revolutionized to remain compatible with the needs of the company and to deal with issues like employee motivation, training, and retention of skilled labour. Management style and organizational culture cannot be inconsistent with human resource management if the company is to maximise productivity of employees and attain its goals.

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