Human Resource Management

Q2. Identify the potential difference in human resource management (HRM) policies between two organisations where one follows a low-cost strategy and the other follows a differentiated, quality enhancement strategy.

Human resource management is an essential part of the organization, management and structure as well of one company. This essay will discuss the differences in HRM policies in two companies which follow different strategies, one following low-cost and one following differentiation. Firstly, definition for HRM will be presented, then low-cost and differentiation strategies will be discussed together with which HRM policy matches best the two competitive strategies and lastly some examples of well-known companies.

Human resource management is an enabling function that represents "the human side of enterprises". It usually focuses on the relationships between employees and organizations that add value and help with the achievement of goals. A brief definition of HRM could be described as" the productive recruitment, development, deployment and motivation of people at work in order to achieve strategic business objectives and the satisfaction of individual employees". All the activities that are engaged in the HRM have these five major components recruitment and selection, training and development, performance appraisal and feedback, pay and benefits and labour relations.

A distinction within HRM itself is between 'hard' and 'soft' approaches. The former takes a business-led perspective, while the latter sees people as valuable assets whose motivation, involvement and development should have priority. Another theme is that if HRM is to support performance, management need to balance external and internal fit (Beer and Spector, 1985).

External fit refers to the link between business strategy and HRM strategy, whereby managers try to establish a close and consistent link between the two so that HRM practises encourage people to act in ways that support competitive strategy. In his work Porter (1985) identified two competitive strategies that firms could choose in order to gain competitive advantage. First one is low-cost strategy and the second one is differentiation. Differentiation is when a company offers a service that is distinct from competitors allowing firms to charge higher price which can be achieved through: design, reliability, technology and a widely recognized brand selling a distinctive product. A low-cost strategy, on the other hand, is when firms aim to compete on price rather than quality, they aim to sell their product at a lower price than their rivals achieving higher profits and revenues.

The different competitive strategies require different employee attitudes and behaviours, which HRM policies can encourage. Extensive training, team working and shop-floor problem-solving arrangements are likely in an organisation committed to