Strategic Human Resource Management and Organizational Performance

Introduction

The industrial revolution in the nineteenth century brought about the automation in the manufacturing process putting the muscle power to the back seat and focusing mainly on production of goods. The focus later on shifted to marketing considerations putting customer satisfaction on the top. The information technology revolution of the twentieth century along with globalization has brought the drastic changes in the working environment i.e. putting people as the most important resource. The importance of human resources can be traced back to ancient Hindu texts such as Kautilya’s Arthashastra, which provides the evidence of existence of systematic management of people as early as 320 B.C. (Khanka, 2003). However, the first evidence of origin of human resource management (HRM) practices has its roots in the industrial revolution of the 17th century. The technical advancements during this period created the need for better work methods, productivity and quality. Smith (1776) in his book ‘An Enquiry into Nature and Causes of Wealth of Nations’ talked about the economic advantages of the division of labour. He proposed that work could be made more efficient through specialisation. From the division of labour he saw three advantages: the development of skills, time saving, and the possibility of using specialised tools. The importance of people in the business performance can be traced from the work of Owen (1825). He argued that money spent on developing people was one of the best investments that management can make. Babbage (1832) examined and expanded upon the division of labour in his work and concluded that it allows a more careful matching of people’s skills and physical abilities with specific tasks. Land mark revolution came in the field of people management practices when Taylor (1911) attempted to formalize the processes, methods, workers experiences and tacit skills into objective rules and formulae. The path breaking studies that revolutionized the human resource management practices were conducted from 1927 – 1932 by Mayo and his associates to study the relationship between productivity and the working environment followed by the studies carried out by Barnard (1938), and others. All these studies have identified commitment, communication, employee motivation, leadership and learning as the antecedents of organizational success. The nature, status and role of human resource management have progressively become broader and strategic since the days of industrial revolution (Figure 1).

Figure 1.