Human resource (HR) management is a pivotal element in proper organizational performance and its overall existence. HR constitutes the core of a company due to the talent, skills, knowledge, and experience contributed to the organizational performance and the work done to ensure the completion of company strategy and tasks. The HR function is inherent in the integration of HR management approaches and structures that meet organizational goals. This HR function serves as a background for implementing a number of organizational objectives. In the contemporary business world, as well as public and nonprofit entities, the function of HR evolves. It is managed in a manner that justifies reduced costs, proactive decision-making, and talent development procedures to ensure competitive advantages for organizations. In such a manner, HR becomes an invaluable tool using which companies can facilitate their performance in their respective industries. Moreover, the flexibility of HR practices allows for adjusting them to the requirements of organizations of different scopes, structures, and industry alignment.
HR function allows companies to accomplish their missions with regard to the resources available. As stated by the Chartered Institute of Personnel and Development (CIPD) (2021b), the HR function “helps an organization deliver its corporate strategy and objectives by effectively recruiting and developing people and managing their performance” with the help of professionals working in an organization (para. 1). Thus, to exemplify the objectives that HR function is responsible for delivering, one might refer to corporate strategy and objectives, which are connected with the mission and vision of an organization. For example, at the Abu Dhabi National Oil Company (ADNOC), the policies employed within the HR management system are aligned with the mission and vision of the organization. ADNOC’s vision is to “harness energy resources in the service of our nation;” the company’s mission is as follows: “through partnership, innovation, and a relentless focus on high-performance and efficiency, we maximize the value of energy resources” (ADNOC Distribution, 2021, para. 1-2). Thus, the company will employ and develop talented professionals in the field of oil and gas to ensure that they contribute to ADNOC’s innovative solutions for harnessing energy sources.
Another example of an objective that the HR function is responsible for is effective recruiting. HR management should employ individuals that match the expertise level and the requirements of the company so that the organization gains talent and a competent workforce to fulfill its goals. In particular, the recruitment process at ADNOC involves measures of recruitment using “standardized recruitment criteria to ensure that all employees meet the caliber of expertise we strive to maintain” (ADNOC, 2021, para. 1). Furthermore, the HR function is responsible for employees’ continuous learning and their obtaining of rewards and recognition as a result of their work. At ADNOC, one of the core values of the organization is the search for excellence and teamwork, which imply continuous learning and development of employees for the benefit of the company (ADNOC Distribution, 2021). Moreover, the objective of risk and cost reduction through HR management is another issue addressed by the HR function. Indeed, with the employment of candidates that fit the corporate strategy and comply with the requirements and standards, a company averts the risks of poor performance quality and fewer hours for instruction and teaching.
The design of corporate structure and development of organizational culture are also objectives provided by the HR function. It is through personnel that a company is capable of structuring its departments depending on the business goals and industry. In addition, corporate culture is reflected in human behavior in the workplace, marked by compliance with company values, policies, and standard procedures (ADNOC Distribution, 2021). Furthermore, the HR function is responsible for the compliance of organizational performance with legal provisions. For example, the recruitment procedures at ADNOC are carried out in accordance with employment laws so that the recruitment process is established in a way that provides equal opportunity for candidates, as well as law-abiding treatment of employees (ADNOC, 2021). For example, the retention of HR records and the implementation of meticulously developed HR policies ensure the legality of the HR management process (CIPD, 2021b). The legal compliance achieved by the HR function is closely related to another vital aspect of HR management, which is ethics, professionalism, and justice in the recruitment and employment processes.
The reason why HR management should be carried out in a professional, ethical, and just manner is because these principles allow for ensuring that all employees are treated with respect to their rights. According to official HR management organizations, ethics is inherently connected with professionalism, which is why it is essential to integrate ethical decision-making at all levels of HR management (CIPD, 2021a). On the other hand, ethics involves just treatment of individuals, which excludes harassment, discrimination, and other unethical and even illegal conduct at the workplace. Therefore, HR management practices must be delivered in an ethical, professional, and just manner to ensure that corporate culture, behaviors, and employment standards are inclusive, non-discriminative, and overall morally appropriate.
HR objectives might be delivered in several ways depending on the organizational resources, strategies, scope, or industry. The two most popular and effective HR models that are capable of meeting organizational objectives are outsourcing and shared services. According to Ploneczka (2017), “today’s fast-changing business environment challenges the companies to adapt its business model accordingly to survive in the more and more competitive market” (p. 77). In its turn, the business model predetermines the selection of HR management models, which help deliver organizational objectives by forming relevant and professional human capital. Both outsourcing and shared services are used by organizations to meet their HR requirements in terms of recruitment, employment, and talent development. However, they both have their particular features, advantages, and disadvantages, which might be decisive for a particular company when choosing an HR model.
Firstly, outsourcing is an HR model that predisposes companies to use external parties for the execution of HR-related procedures. In the contemporary globalized world of the economy, the use of outsourced resources is rather common. Such an approach is capable of reducing costs and risks which might arise if a company tries to manage both business operations and HR processes. Outsourcing might be defined as “the transfer of an internal service function to an outside vendor” (Ploneczka, 2017, p. 78). Such an allocation of HR management responsibilities to a professional body specifically dealing with human capital issues allows a company to allocate more resources and time to accomplishing business objectives. (CIPD, 2021b). ADNOC as a significant player in the oil and gas industry on the international level, is particularly involved in partnership and outsourcing of its sources and HR management. The innovation direction employed in the company is aimed at creating new jobs and seeking professionals and talents to fit them (Alrawi, 2017). Thus, outsourcing is an effective way of meeting organizational objectives using the HR function.
Secondly, shared services are another HR model that might facilitate objective organizational achievement. According to Ploneczka (2017), the “shared services model allows the company to use people, capital, time and other company’s resources in a most optimal way” (p. 78). This approach to HR management entails the allocation of HR-related services to a centralized body within an organization, which delivers HR services to employees (CIPD, 2021b). In such a manner, this model allows an employer to concentrate on and enhance HR strategy without losing costs and time for HR management procedures. This approach is flexible and service-oriented, which helps in modifying HR management procedures according to business requirements (CIPD, 2021b). In the case of transnational or international organizations, this model allows for balancing localization strategies and standardization of HR practices.
HR functions vary depending on the size and industry in which the company operates. Larger organizations function internationally and might employ thousands of employees whose performance, legal issues, and other concerns need to be addressed by the employer. Moreover, big companies invest more in the development of corporate culture inherent in HR practices, which requires much attention and effort within the HR function. As for small companies, HR practices are less decisive for the business operations and the competitive advantage of an organization. Moreover, regardless of the size of an organization, the industry in which a company operates might predetermine the level of HR management relevance. For example, in innovation-driven companies like ADNOC, the quality of HR is essential to drive change in such an important industry as oil and gas. On the other hand, in an organization involved in a simple production industry that depends on automation, HR practices might be less influential since the workforce is easy to instruct to perform at the required level without specific requirements or high-rank competencies.
When discussing the differences between the HR function in organizations of different sizes, one might identify several pivotal characteristics. In particular, large organizations pay more attention to HR analytics and use more efficient HR management practices in comparison to small organizations due to the necessity of large corporations to use comprehensive HR strategies across multiple departments (Barbar et al., 2019). In this regard, small businesses might operate efficiently without investing much effort and resources into HR management since their performance is driven by business processes. Moreover, the more people there are in an organization, the more diverse and thought-out HR management strategy should be employed. Therefore, small organizations do not use complicated HR management approaches since the number of employees is insignificant.
As for the industry particularities, HR management approaches might vary depending on the belonging of an organization to the public or private sector. For example, in the private sector, “HR analytics are applied widely particularly in the intersection of accounting, operations, and marketing” because “private businesses rely on analytics to predict future employee training needs” (Barbar et al., 2019, p. 29). However, in the public sector, bureaucracy and governmental regulations might hinder the efficacy of HR functions. Moreover, public-sector HR practices are more concerned with costs associated with human capital management, which is different from private-sector HR management, which is particularly interested in the return on investment and added value through HR.
HR management and changes
Change is an inevitable attribute of any contemporary organization that functions in a rapidly evolving economic environment. Technological advancement, marketing strategies’ changes, alterations in the workforce demographics, and other modifications play a significant role in the way organizations evolve. Companies must align and adapt to the changes in the environment to comply with the demands and remain competitive participants in their respective markets and industries. Importantly, a change is driven by obstacles or challenges, which require a company to adjust in order to be able to function in the newly emerging environment. According to Rosenbaum et al. (2018), the process of handling change in an organizational setting is particularly related to the addressing of resistance to change as an obstacle that has to be tackled. Thus, when employing a change management model at an organization, a multitude of factors, both operational and HR-based, should be taken into consideration.
One of the most popular and widely applicable change management theories is the three-step Lewin’s model. It is a linear one-dimensional approach to change management that views the process of change from the perspective of the behavior of a group of employees in response to change (Rosenbaum et al., 2018). The three steps within this model are unfreezing, moving, changing, and refreezing (Rosenbaum et al., 2018). These steps are executed one after another in a linear order. Firstly, the state in which the group operated earlier is unfrozen, implying that the conventional practices are exposed to analysis. At this stage, the leadership of the organization views the currently used practices and performance approaches from the point of view of their compliance with the newly emerged requirements that drive change. As a preparation stage, unfreezing refers to the identification of the specific performance and behavior areas that need adjustment (Rosenbaum et al., 2018). Once such areas are identified, the second stage of the change management model occurs.
Secondly, moving or changing is the next step in Lewin’s change management theory. At this stage, the actual alteration of the performance and behavior, as identified in the first step, is carried out. At this change implementation stage, the process of communication occurs with the aim of supporting, instructing, and training employees. Thirdly, the refreezing stage follows, which implies the establishment of the changes as a new standard of performance in the organization. In such a manner, the author of this approach viewed “change as a process of movement from the current stage to the end stage and underpinned by Force-Field Analysis, Action Research and Group Dynamics that support planned change” (Rosenbaum et al., 2018 p. 290). Such a model might be applicable to companies with simple corporate structures where a limited number of factors influence the process of change management.
The second change management theory that might be effectively utilized by organizations when driving their employees through the process of adapting to new environments or requirements is McKinsey’s 7-S model. The authors of this model differentiated between seven separate domains of organizational performance, which should be considered distinctively when tackling corporate change. According to Putra et al. (2019), “the alignment of the seven elements in the organization is a key factor for the success of a company” (p. 12). The seven S-elements of the model include strategy, system, skill, style, staffing, structure, and shared values. Firstly, the change strategy is identified and outlined, which is driven by the characteristics of the organization, its goals, and the particularities of the change being implemented. Secondly, the structure of the company is considered from the point of view of how the change might affect it (Putra et al., 2019). Thirdly, the system of the business, with the inclusion of suppliers and other stakeholders, is evaluated and analyzed for the necessity of change and the quality of adaptation.
Fourthly, the skills of employees are assessed to identify the gaps that need to be filled using learning and training to adapt to the emerging change (Putra et al., 2019). Fifthly, the style in which the work was carried out is exposed to analysis in order to identify drawbacks or areas for change. Sixthly, staffing is an important element in McKinsey’s model since it considers the number of employees and their qualifications that would meet the requirements imposed by the implemented change. Finally, shared values constitute the guiding principles and core company values that are common for all processes and employees across organizational departments. These shared values predetermine the scope of change and validate the applicability of change within the other six domains of the model.
When implementing and evaluating the change management model in an organization, one might refer to the case of ADNOC and its implementation of change in the implementation of new innovative solutions for drilling (Alrawi, 2017). Firstly, the conventional procedures in drilling should be refrozen, implying that the processes should be analyzed and evaluated as per their compliance with the newly introduced drilling innovations. The inconsistencies should be addressed using technical, technological, and HR practices in order to bridge the gaps during the stage of moving or change implementation. Finally, the refreezing stage should occur when the newly implemented processes of drilling become standard company procedures. To evaluate the effectiveness of the model’s implementation, the management might conduct performance evaluations, employee assessments, and the pre-and post-change performance indicators comparison.
The contribution of the HR function to the business
When preparing for a report to a CEO on the contribution of the HR function to the business, one should identify the metrics that might be most demonstrative of the improvements in regard to employee performance, HR statistics improvement, and overall organizational benefits. From this perspective, to illustrate the improvements or underperformance in the HR domain, an evidence-based management framework should be used (Reddy & Lakshmikeerthi, 2017). Such a framework allows for concentrating on measurable indicators of performance, which are attainable, easy to identify, interpret, and evaluate in units. Thus, to illustrate the contribution of HR practices to company performance, one might demonstrate statistical data, monetary implications, and other metrics pertaining to employee performance and organizational outcomes.
The method of benchmarking might be utilized to ensure that evidence-based management is executed. In particular, this approach to measuring HR practices is “helpful in informing HR professionals about how their organization’s HR metrics stacked up to comparable or best-in-class organizations” (Reddy & Lakshmikeerthi, 2017, p. 26). Thus, this approach allows for identifying the best achievements in the industry and comparing a company’s performance to evaluate whether it is better, worse, or the same. In such a manner, the proper assessment might be implemented with reliable conclusions made for future improvements and adjustments in HR practices. Two types of benchmarking should be utilized to satisfy the need to interpret the performance of the company at an external and internal level. For that reason, external benchmarking should be utilized to compare the performance of the company with other similar organizations in the industry. Internal benchmarking should be conducted to compare the performance of employees to the best performance and standards within the organization.
The criteria that would be considered to validate the effectiveness of HR practices should be distinctive for internal and external benchmarking. For example, the external benchmarking process might deal with such measurements of company performance compared to other companies as profit-making, employee satisfaction rate, organizational risks, and others. As for the internal benchmarking, the criteria that would provide substantial evidence of the HR function’s contribution to the business might include the number of absence days, skills of employees, key performance indicators of employees, employee turnover rate changes, intra-organizational problems, outcomes of specific HR practices or programs, and others (Reddy & Lakshmikeerthi, 2017). Thus, these criteria might illustrate what areas have been improved and what the scope of improvement is.
In particular, when concentrating on the contribution of particular indicators in HR practices on the business in general, one might emphasize that through benchmarking, organizations obtain an invaluable tool for assessing the potential to compete in the market. For example, once an HR program is completed, the evaluation of its contribution follows. To demonstrate how the performance within the organization changed, an HR manager might collect, process, and interpret the data on employee retention. This criterion demonstrates employee satisfaction and the retention of talent within the company (Reddy & Lakshmikeerthi, 2017). The lower the turnover rate, the more chances a company has to build a sustainable and reliable team for continuous growth.
Moreover, when considering the monetary benefits of HR practices contributing to businesses, one might concentrate on cost savings. In particular, one of the most problematic HR management issues is employee absence which triggers leave payments and insufficient workforce performance, negatively impacting the operational outcomes of an organization (Reddy & Lakshmikeerthi, 2017). Therefore, to demonstrate how the HR function contributes to a company, one might collect data on the number of absent days before and after the program implementation. The decrease in the number of absent days will demonstrate that the costs of absent leaves have been saved, which is a positive outcome for a company. Another important metric of HR contribution to a company is the return on investment which is a calculation of the monetary benefits obtained as a result of the investment into finding and recruiting talent in a specific field. In such a manner, an evidence-based HR management approach “is defined more by education than persuasion, allowing practitioners to make informed decisions” (Reddy & Lakshmikeerthi, 2017, p. 24). Overall, these methods and criteria will be informative and illustrative of the benefits and possible drawbacks of the HR function.
The role of HR management in contemporary organizations cannot be overestimated since human capital has emerged as an asset in the hands of business corporations. It is due to the professionalism, skill, competencies, and talent of employees that organizations can achieve performance excellence, strive for continuous competitive advantage, and endure profit-making. Much evidence is available to organizations as a result of numerous studies investigating the benefits obtained by organizations due to the investment in HR management practices. The striving for performance excellence and talent management to achieve that performance excellence have been decisive elements in obtaining competitive advantages for businesses in contemporary, rapidly changing, and highly competitive economies.
One of the articles that illustrate the positive effects of HR practices on organizational outcomes was written by Mehmood et al. (2017) under the title “The impact of human resource management practices on organizational performance.” The study used a survey method to collect data on the effectiveness of HR management practices in improving organizational performance. The research study found that insufficient HR management approaches serve as destructive factors for employee performance and ultimately reduce the scope of benefits for the organization (Mehmood et al., 2017). It was found that such issues as inadequate compensation, impaired workplace conditions, and insufficient employee involvement in decision-making were of significant concern for employees, reducing their motivation and causing losses for organizations in the long-term perspective.
It was a quantitative study utilizing statistical analysis to measure the significance of relationships between variables. The research tested six hypotheses on the relationship between job satisfaction, employee participation, job appraisal, job definition, compensation, and organizational performance. It was found that organizational “performance can be attributed to HRM practices including training, performance appraisal, employee participation, job definition, and compensation” (Mehmood et al., 2017, p. 175). The alterations in these HR-related domains were proven to have a positive impact on the overall organizational outcomes. The limitations of the study include the small sample of approximately 100 participants (Mehmood et al., 2017). Moreover, the study focused on the employees of the educational sector, universities in particular which might imply the results’ dependence on the investigated sector’s particularities.
However, the findings of the study are very convincing since they are supported by measurable and credible data analysis. The implications of the study are evident since human capital is viewed as a pivotal asset across all industries and sectors of the economy. The increase in compensation and performance appraisal are effective tools that might increase employee satisfaction, improve performance excellence, and benefit the monetary, reputational, and competitive outcomes of a business. Moreover, employee inclusion in the decision-making process allows for building a comprehensive and solid corporate culture where the contribution of each employee is valued. In such a manner, through HR practices, organizations can empower employees to contribute their skills, talent, and competencies for company growth. Another important implication of the analyzed research is the practical implementation of surveys for monitoring employee satisfaction in order to identify possible problems for their timely elimination. Using the knowledge and evidence obtained from this article, company management might make informed decisions as per the investment into HR management to increase the rate of indicators of performance excellence.
Conclusively, as the discussion of HR practice’s contribution to organizational outcomes has demonstrated, it is relevant to invest in HR management to obtain benefits from both short- and long-term perspectives. Firstly, the investment in human capital and high performance can improve organizational culture, which leads to higher resilience and better performance in the market. Secondly, improved job satisfaction among employees due to the investment into HR management will yield better retention outcomes and empower employee engagement and loyalty, which are decisive in the talent-driven competitive environment. Thirdly, “management might be able to increase the level of the commitment in the organization by increasing satisfaction with compensation, policies, and work conditions” (Mehmood et al., 2017, p. 175). Finally, when investing in HR management, an organization invests in its future since talent management through education training makes the company rich in the most valuable asset, which is human capital.
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