Entrepreneurial activities in human resource management.

• Author: Mitchell, Margaret E.

Abstract

The changing nature of human resource management fostered the development of entrepreneurial activities in human resource management. Some of these changes were forced on human resource management through activities such as downsizing, which affected human resource staff as well as other employees. Other changes were the consequence of human resource management's need to demonstrate its ability to add value to a firm. Entrepreneurial activity was demonstrated through an entrepreneurial philosophy, treating other departments within the firm as customers when they utilized the services of human resource departments, and the development of new firms who provided human resource services. Like all entrepreneurial endeavors, human resource entrepreneurs have varied in their success.

The successful entrepreneurs have been able to identify better and more cost-effective ways to provide human resource services. They also have demonstrated the ability of human resource management to add value to a firm.

The field of human resource management typically has not been associated with entrepreneurial activities. In fact, some observers might argue that "entrepreneurial human resource management" is an oxymoron. However, analysis of changes in human resource management reveal that entrepreneurial activities indeed have occurred. Some of these activities resulted from a changing business environment. Other changes were consequences of changes in the field human resource management.

In this paper entrepreneurial activities in human resource management are examined by first analyzing changes occurring in the field of human resource management during the past few decades. Entrepreneurial and intrapreneurial activities in human resource management are then described. Finally, the resulting changes for the field of human resource management are discussed.

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The Changing Nature of Human Resource Management

Human resource management has changed in various ways during the past few decades. Some of these changes are technical ones in which activities such as selection and human resource planning have become more complex and quantitative. Some of these changes are due to external factors such as technology, the legal environment, customer demands, foreign competition, or the globalization of business. Still other changes are due to basic value changes that require greater accountability from all parts of the firm.

The changing values are reflected in the expectation that all functions in a firm demonstrate their worth by demonstrating their ability to add value to the firm.

Human resource management has been criticized for being too expensive and providing no added value since no measurable business value could be demonstrated (Csoka, 1995). Therefore, human resource departments had to transform themselves from cost centers to tools of corporate strategy (Carrig, 1997). Any part of a firm that does not add real value can be removed through downsizing, restructuring, or outsourcing.

Human resources has always had a service role in the firm, but this role needed to change to a new role for human resources -- that is, business partner (Beatty & Schneir, 1997). Closer analysis of the various activities within human resource management reveals that some activities are cost centers (for example, benefits administration), but others do create value (Becker & Gerhart, 1996). For example, recruitment, selection, performance management, and training can add significant value to a firm.

The changes in human resource management also require human resource professionals to scrutinize carefully their own value to the firm. They must adopt a new paradigm that requires identifying the cost of specific actions and/or decisions, relating these costs to specific outcomes, and deciding whether or not the cost is worth the outcome(s). The requirement for bringing value to the firm applies to human resource professionals as well as to all other people. In some cases the results of this analysis may lead to a decision to eliminate specific human resource functions and/or staff.

Human resources can be a unique source of sustained competitive advantage. This is especially true when its parts have high internal and external fit (Baird & Meshoulam, 1988; Lengnick-Hall & Lengnick-Hall, 1988).

Entrepreneurial Activities in Human Resource Management

Since human resource management needs to be a value-added function, the cost and benefits of the human resource function have been analyzed in order to maximize the value of any resources directed toward this function. This analysis requires consideration of specific human resource functions (that is, job analysis, human resource planning, recruitment, selection, compensation system development, benefits administration, performance appraisal, career planning, training, etc.). Each function is analyzed to determine whether or not services related to this function should continue. If the specific services are considered worth providing, the next decision requires identifying the most cost-effective way to provide these services. Should the firm provide these services or should these services be provided by someone outside the firm?

The process of analyzing the cost-effectiveness of specific human resource functions has led to specific changes and entrepreneurial activities related to human resource management. The most obvious outcomes of these changes are outsourcing all or some of the human resource activities, an entrepreneurial philosophy of the human resource professionals providing services to other parts of the firm, and the development of human resource firms who provide the services to firms who have outsourced some or all of their human resource function.

Outsourcing All or Some of the Human Resource Activities

When an...