Beyond administration: Strategic complexity and significance of HRM

HRM is no longer a mere administrative function but a strategic cornerstone of organisational success

Introduction

Though HR (Human Resources) is recognised globally as a source of sustainable competitive advantages, many Sri Lankan firms still view HRM (Human Resources Management) as an administrative and secondary service department. In light of this, the complexity of HRM, its critical role in achieving corporate success, and the challenges it encounters in a workplace are discussed in this article.

Uniqueness and complexity of HRM

The special duty of managing a subjective and emotional asset, ‘people,’ sets human resource management (HRM) apart from other professional fields. HRM works in a field of uncertainty based on human emotions, behaviours, and interpersonal dynamics, in contrast to other business management functions, where decisions are mostly influenced by facts, projections, and objective analysis. This uniqueness adds a degree of complexity that no other function can equal.

Precise measurements, algorithms, and data analytics can be used to quantify performance and success in many cases of other functions. Production output, profit margins, sales volume, revenue, inventory levels, and various ratios and numerical comparisons provide a direct and solid basis for evaluating and driving these functions. HRM, on the other hand, must rely on intangible elements like workplace harmony, job satisfaction, morale, and employee engagement. Employee Net Promoter Scores (eNPS), productivity surveys, and turnover rates are examples of HR metrics that provide some information, but they rarely represent the complex and individualised nature of human behaviour. Because of this, HRM is less stable and far more prone to changes brought on by environmental, cultural, and personal influences.

Furthermore, the performance of employees is not merely a product of skills and resources but is deeply intertwined with their motivation, values, and psychological well-being, etc. Despite good circumstances, employees may get disengaged or burn out, in contrast to capital assets or machines that operate reliably under comparable circumstances. Even the most talented person can be derailed by unexpected mood swings, personal difficulties, or disputes with co-workers. This unpredictability gives HRM dimensions of complexity that are rarely found in other domains.

The fact that HRM has little direct control over employees is one of its main differentiators. HR professionals are expected to maintain an engaged and satisfied workforce, but the daily experiences of employees are influenced more by their peers, team leaders, and direct supervisors than by HRM. HR-driven efforts are frequently overshadowed by departmental dynamics, communication strategies, and leadership styles of department heads. HR managers must therefore act as strategic go-betweens, striking a balance between the demands and expectations of upper management and the realities that employees experience on the ground. This creates conflicts, and finally HRM is at the receiving end. Due to the difficult environment created by this indirect kind of influence, HRM must promote behavioural and cultural change without using direct control, which adds further complexity to the HRM role.

Complexity is increased by trade unions, employment laws, changing social norms, and the growing focus on diversity, equity, and inclusion. This is made more complicated by the workforce’s generational gaps, as HRM must concurrently address the differing requirements and ideals of Baby Boomers, Generation X, Millennials, and Generation Z. Furthermore, HR initiatives may be hampered by toxic leadership or interpersonal disputes among top individuals, putting HR professionals in challenging situations where organisational demands and ethical considerations may conflict.

In contrast, experts in domains like marketing or information technology typically face more straightforward objectives and outcomes. While system performance, uptime, downtime, etc. can be used to evaluate IT projects, engagement metrics and conversion rates can be used to measure marketing efforts. These domains, though complex in their own right, operate within frameworks that are far more quantifiable and consistent than the inherently subjective nature of HRM.

Organisational politics, workplace disputes, and misunderstandings all add to the complexity of HRM. Unlike financial or operational issues that can often be resolved through logical analysis and explanations. To resolve HR-related conflicts requires emotional intelligence, empathy, and negotiation skills, and one needs to understand how public opinions work, which is beyond logical reasoning. Building a cohesive culture, fostering innovation, and maintaining morale are tasks that extend beyond numerical assessments and demand a profound understanding of human behaviour.

Ultimately, HRM’s uniqueness lies in its role as the custodian of workplace culture, the steward of employee well-being, the social glue that keeps people together, and the beacon of organisational trust and fairness. While other domains focus on maximising tangible resources and outcomes, HRM must align organisational goals with the aspirations and emotions of its people. This dual responsibility not only amplifies the complexity of HRM but also underscores its indispensable role in driving sustainable organisational success.

The strategic significance of HRM

Strategic planning, operational effectiveness, and financial performance are all important aspects of success, but they are insufficient without a strong emphasis on HRM. Poor labour relations, unethical leadership, toxic workplace culture, low employee engagement, and high talent attrition will make it more difficult for the business to succeed in a highly competitive market; in the worst situations, total company failure might result from ignoring HR-related concerns.

Take Uber as an example, whose aggressive international expansion was marred by a hostile workplace culture, harassment claims, and unethical leadership. The company experienced severe public criticism and internal strife, despite its financial success, underscoring the ways in which ignoring HRM may jeopardise long-term success. Similar to this, Enron, a once-dominant company in the energy industry, failed due to a culture that put profits ahead of morality and worker welfare in addition to accounting fraud. Another example is WeWork, which suffered severe financial and reputational losses when its aggressive expansion failed due to poor management, irrational growth estimates, and a disregard for employee well-being.

Building organisational trust, which is the cornerstone of employee engagement, cooperation, and loyalty, is an essential component of a sustainable organisation. Employees that have faith in their managers and the firm are more likely to be driven, effective, and dedicated to its success. For instance, by encouraging openness, moral leadership, and environmental responsibility, Patagonia has established a culture of trust. A highly engaged workforce and a strong brand reputation that translates into customer loyalty and long-term profitability are the results of employees’ belief in the company’s mission and dedication to social impact.

In a similar vein, Microsoft’s turnaround under CEO Satya Nadella shows how trust can propel company success. In order to create an environment where creativity and teamwork flourished, Nadella’s leadership prioritised empathy, open communication, and employee empowerment. In addition to increasing worker satisfaction, this cultural change gave Microsoft a competitive edge and resulted in a sharp rise in sales and market value.

On the other hand, businesses that are unable to establish trust frequently experience dire consequences. Wells Fargo serves as a warning example of how unethical behaviour and a lack of transparency damaged employee and consumer trust. The resultant scandal showed how a lack of trust can have far-reaching effects by causing significant employee turnover, strained customer relations, and billions in penalties and settlements.

The success of strategic manoeuvres such as mergers and acquisitions are often evaluated on successful financial deal. However, research demonstrates that many such initiatives subsequently fail due to an inability to address HR-related factors and poor management of the transition process. For example, the merger between Daimler-Benz and Chrysler is often cited as a failure because of cultural clashes and a lack of alignment between the two organisations’ human capital.

Companies that disregard HR-related matters run the danger of breaking labour laws, workplace safety rules, and anti-discrimination legislation, among other legal and compliance obligations. Even the most financially stable companies may become bankrupt as a result of these expensive legal actions, fines from the government, and harm to their reputation. Conversely, businesses that put a high priority on HRM and adopt a people-centric management philosophy create robust, creative, and long-lasting enterprises. This is best demonstrated by Google, which makes significant investments in the welfare of its workers through extensive training programs, flexible scheduling, and a collaborative and innovative culture.

Google’s continued supremacy in the IT sector can be attributed to its excellent HR procedures, which have repeatedly ranked the company among the best to work for. In a similar vein, Toyota credits its worldwide success to its emphasis on staff development and ongoing improvement through the management system, which enables staff members at all levels to share ideas and spur innovation.

HRM challenges beyond 2025

It is predictable that the fundamental nature of HRM will remain unchanged as we approach and move beyond 2025. However, HRM’s complexity and significance will continue to grow in a dynamic environment influenced by changes in employee expectations, technological development, and increasingly complex global concerns.

Some industries, such as farming, plantations, construction, and fisheries, will face significant shortages of people for traditional skilled and unskilled jobs as a result of increased education, better employment aspirations, migrations, and an ageing population. Generally, traditional roles and duties will be redefined by automation and the development of new technologies such as artificial intelligence (AI). Adoption of AI will result in large skill gaps even if it can increase productivity and streamline procedures. More and more automation, agile and dispersed teams, and a move towards project-based work will be characteristics of the workplace of the future. Rigid structures will give way to more flexible models in which workers are assigned according to their skills rather than fixed job roles.

The workforce will continue to become more diverse, embracing a range of generations, ethnic backgrounds, and work styles. Additionally, attracting and keeping top talent will depend on creating an inclusive workplace where varied talents feel empowered and appreciated. The COVID-19 pandemic has expedited the trend towards remote and hybrid work arrangements, which will continue through 2025. Although these models provide flexibility, they also pose difficulties in sustaining company culture, tracking productivity, and retaining employee involvement. Employees will continue to place a higher value on work-life balance, meaningful work, and personal growth than they do on conventional financial incentives, making the global labour market extremely competitive. In order to adapt to these changing tastes, organisations will need to develop compelling Employee Value Propositions (EVPs). 

Conclusion 

HRM is no longer a mere administrative function but a strategic cornerstone of organisational success. HR professionals work in the subjective and unpredictable domain of human behaviour, whereas other professionals work largely in data-centric environments, making HRM particularly challenging and unique. HR professionals navigate a range of cultural dynamics and emotional intelligence to compliance and ethical considerations that underscore the complexity of the HRM role, which will go further beyond 2025. To thrive in this environment, HR professionals must possess a diverse range of skills and competencies. By embracing the strategic complexity of HRM and with due recognition, companies can build a future-ready workforce capable of navigating the uncertainties of the modern business world, ensuring long-term success and sustainability.

(The writer is a Management Consultant, Researcher, Visiting Lecturer, Accredited Director, Chartered Member of CIPM, MSLIM, AITD. With 25 years of managerial experience across diverse sectors including manufacturing, construction and engineering, trading, and education, Dr. Silva has held prominent roles such as CEO, Executive Director, and Senior Vice President.)