european journal of social sciences issn: 1450-2267 - EuroJournals

European Journal of Social Sciences – Volume 5, Number 3 (2007)
In addition to technological and environmental forces, many firms and industries face pressure
for innovation in products or services. To compete effectively a business firm may have to pursue
several types of different innovation strategies simultaneously (O’Reilly and Tushman, 2004).
This type of information input from the strategic human resource managers to decision-makers
becomes intensely more critical and the simplistic conceptualization of derived demand is unveiled to
be a complex set of relationships, requiring a detailed understanding of how technology impacts the
mix and skill levels of the firm’s workforce.
Conclusion
Traditionally, regardless of the nation in which they operate, HR managers have focused on the
input/resource market – hiring people to fill open positions. However, ignoring the derived demand
conditions facing the firm in its product/service market along with the impending changes in
organizational structure would surely leave the firm at a major competitive disadvantage. Strategic
human resource management requires the linking of human resource market information with the
information and planning occurring in the product/service market. Without this linking, forecasting the
mix and quantity of human resources is almost insurmountable. Thus, the human resource function
must also comprehend the nature of product/service innovation, market changes, its impact on business
firm structure, and the implications for acquiring human resources.
The factors affecting the derived HR demand linkages are complex and difficult to estimate and
yet they have a real and critical impact on the operation of the firm. Whether the business firm creates
its own human resource department or, as in the case of small business, requires operating managers to
carry out the primary human resource function, understanding the derived demand linkage and the
conditions shaping it are an essential task for the strategic human resource management of the firm.
The strategic function of today’s global human resource department can no longer take a seat at
the back of the bus: human resources must have a seat next to the driver. Its role has evolved from a
paper pushing administrative function of its historical past to a more proactive, strategic function.
Decision makers in upper levels of management must become acutely aware of how quickly a
competitive advantage in the global marketplace can vanish without the proper input from the human
resource function. This requires that human resource managers go beyond their traditional roles and
make their mark on the strategic planning of the firm. The nature, complexity and types of markets in
which the firm competes must inform strategic human resources practitioners. The economic
perspective discussed in this paper should help provide a start for HR managers to understand the true
implications of Strategic HR management, and, hopefully, increase focus on the important elements to
include in planning.
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