1) Introduction

Many organizations consider employees and people are the most important
asset to the company. However, the policies, procedures and managerial
practices they deploy are contradicting to that view. This will have tremendous
impact on employees’ commitment to organization and subsequently
influence their motivation, productivity and performance in the organization.
Therefore, understanding people management is important for an
organization to accomplish its mission, vision and goal. Effective human
resource management and implementation that aligns both employee and
business needs is critical in achieving high performance organization. For
example, one of key pillar of Siemen’s business strategy how the organization
manages, develops and motivates its employees. Siemen believes people are
like innovation and technology, which is an important source of company
competitive advantage (Siemen, The Times 100, 2007).

Strategic human resources management (SHRM) is to integrate and align

organization’s business strategy with human resources (HR) management
system (Miles and Snow 1984) i.e. to adapt, adjust HR practices and policies
across levels in organization to effectively utilise human resources to achieve
organization’s goals (Wright and McMahan 1992; Schuler R 1992). HR
policies and practices must be well fitted with business strategy to improve
business performance (Michie and Sheehan 2005). HR scholars recognized
that organizations’ performance would be enhanced if the HR practices and
policies are set and matched with company’s vision, mission and business
objectives (Lengnick-Hall, M.L. et. al 2009).

Today’s dynamic and complex business environment signifies the need for an
organization to constantly evaluate their environment both internal and
external for challenges and opportunities, so that they can stay relevant with
competitive business strategy for sustainable growth (Ramlall 2003). This is
especially important when an organization is going through stage of defining
(or redefining) its strategic business needs. Business strategy is a plan of
action designed to achieve competitive advantage in market position (product,
price or technical leadership, margin/profitability, contraction or expansion
etc.) that allows it to deliver superior value to customers and achieve superior
relationships with suppliers and distributors. All these can only be achieved
through an effective management of people. Today, practically all business
issues involved people and all human resource issues impact on business
(Walker, JW. 1994). Figure 1 showed the linking strategic business needs and
strategic HRM activities (Schuler 1992) while Table 1 showed deployment of
different HR strategies (policies & practices) with different business strategies.

Figure 1 : Linking strategic business needs and strategic HRM activities

Table 1 : Summary of different organization’s strategy and its HR policies and
practices

2) The interaction between HRM policies and business

strategies

Effective HRM policies are important in supporting business strategies (Figure

2). Many empirical studies have proven that HR practices and policies play a
pivotal role in supporting business strategies hence realizing business
objectives (Takeuchi, N. 2009; Sanz-Valle et al 1999; Wang et al 2001; Yeung
and Bernma 1997; Pfeffer 1994). HR is needed to identify the type of skills
and knowledge the employees need to carry out business strategy.
Successful companies like 3M, Motorola and AT&T designed human resource
strategy to help implement business strategy (Seibert et al 1995; Plevel et al
1994).

Figure 2. Conceptual Framework of studying SHRM (Wright & McMahan

1992)

HR policies provide guidelines for action on people-related business issues

and HR programs and practices based on strategic needs (Schuler 1992). HR
policies involve staff selection, recruitment and other staffing actions to make
sure it matches available resources with required capabilities to enable
strategic business implementation (Walker, JW. 1994). This will subsequently
lead to deciding types of training, development, education, job-related-
learning, performance management system and remuneration that are
required amongst individuals to help organization become more effective
(Becker & Huselid, 1998; Walker, JW. 1994, Peck 1994, Lengnick-Hall, M.L.
et. al 2009). Therefore, to ensure a successful implementation of the strategic
business plan, HR policies are important as it determines how an organization
will compete. InQpharm Staff Survey 2010 (Appendix B) reported that more
than 50 percent of the employees thought that HR policies and management
has to be aligned and linked with company’s business strategy to achieve its
goals and objectives. As such, business leaders of InQpharm need to
continually assess if appropriate expertise is available in the talent pool to
accomplish the business strategies. It is conclusive that an integration of HR
policies into organizational strategy provides support in implementing the
strategic plan to achieve competitive advantage (Wofford, 2002).

There are different HR strategy models that have been proposed (Figure 3).
The choice of HR strategy model is determined by variations in organizational
form (size, structure, age of the organization), competitive edge and the
stability of labor markets (Thompson and McHugh 2002). Effective HR
strategy has to be consistent with an organization’s competitive strategy. For
example, it is not wise to adopt Porterian cost-leadership strategy (Appendix
C) with an HR strategy grounded in either resource-based or control-based
model. Therefore, it’s again support the importance of linking business
strategy with HRM policies in ensuring business performance.
Figure 3 Human Resource Strategy Models (Bratton, J. 2003)

2.1 Staffing – Recruitment and Retaining, Training and Development

Staffing is an important HR process that helps the company to recruit the right
person with the right capability to the do the right work. This is important to
ensure the success of the business (Walker JW. 1994). For example, in line
with Air Asia corporate strategy, which is focus on innovation, Air Asia has
overhauled its HR policies and practices that has resulted in fast turnover and
became a profitable organization (Howell 2009). Air Asia looks for people who
are fun and innovative. To attract the enthusiastic and innovative staff, Air
Asia hires without prejudice against race and sex and take advantage on
labour markets. Air Asia recruits female pilot crew and taps on the talent pool
make up of female pilot. All the new staff in Air Asia are being constantly
encouraged to unleash their creativity in different ways through the
organization’s HR policies, procedures and communication platforms. Also,
Air Asia practices open office concept to ensure all the staff have the
opportunities to contact with each other. This enhances innovative thinking
and promotes ideas creation. On the other hand, Google has different hiring
policy where Google looks for those who believe in teamwork (Schmidt and
Varian, 2005) and work-life balance. Microsoft emphasizes on intelligence and
smartness as key criteria for new staff recruitment (Stross 1996) while
Southwest Airlines hires for attitudes rather than skills (Pate and Beaumont
2006). All these are aligned with each organization’s different business
objectives.

For Minnesota Mining and Manufacturing Co. (3M), the HR policy involves
recruiting high-quality individuals at the entry level. As such, 3M attracts fresh
graduates and grooms new recruits to grow quickly within the organization.
With this HR policy and practices in place, 3M trains and develops a
workforce that is not only committed to the company but also high-performing,
which is aligned with company’s vision and value i.e. to satisfy customers with
superior service, quality and value (3M Company Brief 2010).

Southwest Airlines invest a lot on training and encourages cross-functional

training (Pate and Beaumont 2006) while Pfizer spent 14% of payroll on
training and development budget (Gavin 2002) and SIA provides every staff at
least 11 days training each year (Chee et al 1993). This shows how these
companies strategically aligned personal development plans via their people
policies that are resource-based model.
2.2 Performance & Talent Management

Performance management systems are designed to ensure every employee

performs the tasks at the expected level to support the strategic business
objective (Ramlall 2003). InQpharm practices transparent communication to
employees about what is expected of them (InQpharm Staff Survey 2010) has
helped employees to perform well in supporting business needs.

Company applies resource-based HR policy pays attention on keeping their

people to establish company’s competitive advantage. This is because staff
turnover is not only involving cost of hiring and training replacements, high
staff turnover also impacts on company’s performance as newcomers might
need time to familiarize and acclimate to the company environment and also
to pick up skills (Kacmar et al. 2006).

To stay competitive in the airlines industry, Air Asia knows the important to
retain and manage its pool of talent, which is rare, difficult to imitate and costly
to substitute (Barney & Wright 1998). Therefore, Air Asia practices promote
from within and encourage professional growth within the company so that the
staff is pleased, productive and always stay ahead the business competitors.
Staff at all designations in Air Asia are given training and development
opportunities to help them grow and ultimately benefits Air Asia when they
become confident and competent in their role in growing the airline (Howell
2009).

In 2009/2010, staff turnover in InQpharm is much higher compared to year

before (approximately 20%). This could be due to lack of career growth
management that did not promise professional growth as 71% of the staff
thought that InQpharm doesn’t practice promotion from within but hire senior
people from outside the organization (InQpharm Staff Survey 2010). This
shows the importance of promotion from within to promote trust and loyalty,
improve morale amongst employees and retain them eventually. InQpharm
should consider commitment HR strategy which focusing on internal
development. This is important because the costs incur in recruiting and
training a new employee is considerably higher compared to promoting the
existing employer who is familiar with company culture, business nature and
may be fully productive in the new position within days.

For 3M, a loyal and productive workforce is developed through paternalistic

and commitment HR policies where 3M grows and retains their people and
workforce. One of these programs gives opportunity to employees to find
another position within the company. Through this policy, the employees are
given a sense that they are valuable and important to the company (3M
2010).

SAS, the software powerhouse manage to keep staff turnover below 4% in

the highly competitive software industry that normally has approximate 20%
turn over (Leonard 1999). This has enabled a stable workforce in 3M that
produced a new version of its data-mining software more economically and
efficiently (Bolman and Deal 2008, Leonard 1999). In this case, SAS could
have successfully applied integrative HRM model that is focus on internal
development and reward-effort exchange.

2.3 Benefits and Rewards

According to Lawler 1990, reward system should be designed based on the

strategic agenda of the organization. By understanding the organization
positioning for now and for the future, HR policy can design the reward
system to provide incentives to encourage and foster behaviour, attitude and
to motivate staff to increase their performance. Attractive benefits also attract
and keep good people in the organization to promote high-commitment
(Osterman 1995). Laursen 2002 and Laursen & Foss 2003 propose that HRM
practices that emphasizing on teamwork and performance related pay has
created a huge impact on innovations. The incentive offered to staff that
contributes to innovation has successfully instill company’s innovativeness
(Souitaris 2002). Being the largest supplier of escalators worldwide, Schindler
believes only highly motivated employees lead to satisfied customer.
Therefore, it promotes the use of bonuses and incentives to reward its
employees to make sure the remuneration package stay competitive
according to it organization positioning (Schindler Group Human Resource
Policy 2010). Profit sharing, incentive plan implementations were found
correlate positively with the speed of product development and
commercialization, product quality, customer satisfaction and sales growth
(Kalleberg and Moody 1994, Banker and Lee 1996).

Unlike InQpharm, many staff responded that company’s benefits package is

uncompetitive and benefits system was not designed to reward and retain its
staff (InQpharm Staff Survey 2010). At the growing stage, InQpharm should
consider applying fit and flexibility HR policies, which rewards staff at different
organizational life cycle stage. InQpharm should practice this HR policy to
attract right people and also at the same time rewards its existing staff for
them to stay motivate. As a company that depends a lot on innovative ideas
on marketing concept and product development, the reward-effort exchange
policy is important to help company achieves its goal.

2.4 HRM policies creates competitive advantage and high performance

work place (HPWP)

According to Becker and Huselid 1998, HR system is one of the very

important components that helps an organization becomes more effective and
achieves its unique competitive advantage. HRM policies and practices are no
doubt affecting both employee-level and organization-level performance via
their impact on employees’ skills, ability, knowledge and motivation (Arthur
1994; Gephart and Van Buren 1996; Guest 1997; Ichniowski and Shaw 1997).
It is evident that HRM policies have implications for firm performance and thus
create a unique competitive advantage that is difficult to replicate (Wright et al
1994; Guest 1987; Legge 1995). MacDuffie’s 1995 found that there was a
statistically significant evidence supported that bundles of HR practices are
positively related to performance of staff in terms of quality and productivity.
Huselid 1995 also reported that organization that practices low employee
turnover has increased organization financial performance and productivity.

2.5 HRM policies and organization change and development

With increased global competition and rapid change arise from new
technology and new competitor that shortened product life cycle, the ability for
a company to change and adapt quickly is critical. Recently, the challenges
face due to patent expiration and competition from generic drugs has caused
Pfizer focusing on managing the external environment. Pfizer changed the HR
hiring policy by implementing "just in time" approach i.e. hire only the talent as
it needs it so that Pfizer can respond immediately to market changes. Before
this, Pfizer used to plan for next 10 years and develop talent from within for
which it believed it would need (Marquez 2007). This strategic talent
management to develop employee based on competencies is in line with
business strategy of Pfizer in responding to external business change.

In the General Electric revolution, many workout sessions were implemented

for people to learn and redefine their jobs to be prepared for the challenges of
the changing business environment. This organizational change processes
were led by human resource staff, integrated with the business model and
strategy (Tichy and Sherman 1993). This showed that HRM policies
contribute to the smooth change of organization by converting as many
change agents as possible led by HR staff.

On the other hand, according to InQpharm Staff Survey 2010, there are 50
percent of the staff are in opinion that company does not have proper system
to respond to the changes in external environment and job description was
not updated to reflect the changing need of business conditions. As InQpharm
is fairly young organization, many underlying problems and operations issues
have arisen due to its fast growing rate. In addition, there are some
unforeseen circumstances on regulation and deregulation that might affect
company’s operations. Therefore, it is crucial for InQpharm to employ the right
people to implement appropriate system to handle change effectively.

2.6 HRM and business strategies in globalization and de-globalization

business world

Globalization represents the free flow of information technology and human

resources across nations resulting a dynamic, rapid changing and competitive
business environment. Globalization of business diffuses HRM practices from
Western business to Asia countries such as Vietnam (Nguyen 2003) and
China (Chiu 2003). HR policies and practices are increasingly affected by
different cultures globally. The set of skills required to achieve success in a
highly competitive global marketplace has changed and traditional pools of
candidates hired and developed in the organization might no longer meeting
the expectation of global organizations (Chen 2009). Therefore, it is critical for
company to respond to the organizational strategic change in the globalization
era through its competitive HR policies and practices since organization
competitive advantage depend largely on its ability in exploiting human
resources effectively.

On the other hand, Chen 2009 has recently highlighted the HR implication in
upcoming de-globalization environment. According to Chen 2009, de-
globalization would bring about an uncertain business environment (customer,
supplier, product, competition and technology uncertainties) and causing
shortage of workforce, especially the skilled employees. Therefore,
organizational agility is imperative to deal with this uncertainty, which
demands strategic flexibility and organizational learning ability. A continuous
rethinking of current business strategic actions, organization structure, nature
of uncertainties in business environment is needed to support organization
change and adaptation. Concurrent with the HR activities that promote the
new strategies, an organization would be able to compete in de-globalization
environment. Figure 4 shows the implications for HR policies and practices in
promoting agile organization.
Figure 4 implications for HR policies and practices in promoting agile
organization in facing de-globalization business environment (Chen 2009)

3. Arguments on the appropriateness to link business strategies and

HRM policies

There are a few researchers questioned about the logical and linear
relationship between organization business strategy and HRM strategy and
policies (Monks & McMackin 2001). According to Legge 1995, aligning
business strategy and HR strategy is not logic as managerial behaviour could
be uncoordinated, fragmented and ad hoc. The interpretations and
implementations of HR practice that dominate traditional business
arrangements may be unfavorable to achieve a coherent and sound HR
system. There are political aspects on highly competitive strategic decision-
making process where managers tend to compete fiercely for resources,
status and power (Purcel 1989). Therefore, due to this management milieu,
strategies could cause changes in power relationships among managers that
might affect effective business strategies implementation (Mintzberg et al
1998).

In addition, it is argued that contingency analysis that depend exclusively on

external marketing strategies gives more focus on how a company is
competing in the marketplace rather than how a company is being managed.
This is directly affecting HR practices that disregard the internal operational
strategies because to achieve competitiveness, it is hard to follow rigidly the
HR policies and practices. For example, the strategy at Flowpack Engineering
allows self-managed work teams via new technology to suits the competitive
advantage of being flexible, customized product range and high quality
(Bratton 1992). In this case, it doesn’t really make sense to follow what HR
policies in staff-management.

Also, one strategic decision and action might at the same time undermine
another strategic goal. For example, during recession, company strategy is to
downsize and improve profitability. In this case, if HR strategy is fitting
business strategy, it will lay off non-core employee and might create the
feeling of insecurity and low morale among employees in the company. This
then would not improve profitability as the low morale cause low performance
and low output eventually.
4. Conclusion

To achieve the distinctive competitiveness of a company, it is important to

align business strategy with HR strategy so that each employee’s
competences is maintained or even improved. An organization not only needs
to response to market development, but also to be proactive in order to set
the market trend. In achieving this, HRM needs to ensure that it provides
value that is unique and difficult to copy with appropriate system in place.
Aligning HR strategy and business strategy have been proven to promote
employee’s loyalty, trust, and ultimately enhance companies’ overall
performance. However, it is critical to consider external conditions and internal
‘structural contradictions’ in the organization to ensure effective HRM