Boselie and Paauwe (2004 p. 555) pointed out that according to the human resource competence study in 2002, business knowledge has the fourth highest impact on the company performance and is therefore (if HR don’t have business acumen) one of the main barriers for strategic HRM. Hammonds assumption is right as the reality is quite the same in many companies.A field study in which senior HR, finance and line managers of 13 Australian Best Practice companies have been interviewed to explain the main problems of strategic HRM integration showed that in most cases HR managers are not involved in the business and the decision making process because of their poor business knowledge (Sheehan 2005, p. 198).
So, it is clear that business knowledge is one of the problems HR has and if they want to be involved in the decision making process HR people must be able to “know the business inside out, identify the hot business issues and align objectives with the business” ( Goodge 2006, p.5).It is very interesting to look at HR managers from Japan in this case as they show a much wider knowledge of a company’s business than the managers of other counties do. The reason is because they have worked in the sales, accounting, finance, strategic planning and production department before the changed to do the job of HR (Buchanan 2005, p15). This doesn’t mean that all HR people should spent time of their career in these areas but they have to assure that they have the same amount of knowledge.
Only such HR managers can add value to the bottom line because they know what is required from the employees and they are aware of the key business drivers. The second reason Hammonds gives us for poor strategic HR output is that HR “pursues efficiency in lieu of value”. He wants to say that the work of HR isn’t delivering value to the company in the sense of a better performance for example. Moreover Hammonds points out that HR can’t fulfill its duty as the key driver for business.
This is absolutely right because in most cases HR departments aren’t measured by looking at the productivity and the profit of other companies.In many cases HR people think they aren’t responsible for sales for example. But the point is that their duty is to assure that the right workers do the jobs and thereby they are responsible for sales. (Kaufman 2006, p. 30) Lawler analyzed the problem by thinking of HR as a business who has to offer products to its clients. He mentioned 3 as the key goods HR has to deliver. The first is administrative work like hiring and staffing which is the origin of HR. The other two are HR as a business partner ; strategic partner (Lawler 2005, p.
166).That’s the point where the criticism of Hammonds regarding the work of human resource managers is justified as often HR focuses on delivering the first product, administrative work. Furthermore most of the HR metrics have no relationship to organizational performance. Measuring turnover rates or the amount of training hours is no indication about the performance in the future (Bassi & McMurrer 2007 p. 116). According to Jamrog and Overholt (2006) it is very important that HR thinks about what it delivers and how do they add value to the bottom line.Like any accountant or marketing specialist knows how their job contributes to a higher performance HR people must know the effect of their work too. Hammonds assumption regarding the value of HR is true as it has no great impact on the company performance.
Measuring training hours is neither a way to link HR output to strategic business nor is it crucial for the performance of the company (Jamrog & Overholt 2006). “HR must look beyond measuring the efficiency and effectiveness of programs and look outside the function to measure how well HR helps the organization execute strategy. ” (Jamrog & Overholt 2006).