Strategic Human Resource Management

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Strategic Human Resource Management

Neelima Pinnamaneni Daliang Xu Dr. Henry Findley

(Kazmi. HRM is strategy-focused. levels in the business. Strategic Human Resource Management: Human resource management (HRM) involves all management decisions and practices that directly affect or influence the people. for a business to survive. it has to focus on its core competencies and discover in order to keep ahead of the competitors. (Wright et al. or human resources.. 1994). 1994). This illuminates the type of dynamic and complex business environment that companies have to face.e. 1991. and is related to the . i. HRM at strategic level is SHRM. by itself it is strategic in nature. Firms that learn how to manage their human resources well would have an advantage over others in long run since acquiring and deploying human resources effectively and efficiently is difficult and takes longer time. (Miller 1987) defines Strategic Human Resource Management practice as the decisions and actions. The rapid change in the environment reminds us that. which concern the management of employees at all.Strategic Human Resource Management 1 Introduction: As we enter the new era of an advanced high-tech environment. Lado and Wilson. the business world is also entering into an era of fierce competition noticed by takeovers and mergers. Several scholars have noted that managing people is tedious than managing technology or capital (Barney. The field of Strategic Human Resource Management has evolved mainly in accordance to the fact that human resources need to be managed strategically for the firm to enjoy sustainable competitive advantage over competition. 2002) Strategic Human Resource Management (SHRM) implies a concern with the ways in which HRM is crucial to organizational effectiveness. who work for the organization..

1995. The Five theoretical perspectives formulated to define the concept. No single process is correct and each one points to different aspects of the process needed for developing an effective strategic HR function. Delery and Doyt. it focuses on a firm’s human resources. in “goal achievement” Theoretical Perspectives of SHRM: Number of theoretical models has been developed to explain what exactly SHRM requires in an organization and the processes by which SHRM contributes to the bottomline success of a firm. which is the primary resource to be strategically leveraged as a source of competitive advantage.Strategic Human Resource Management 2 implementation of strategies directed towards sustaining competitive advantage. Third. First.” Wright and McMahan define Strategic HRM as “the pattern of planned human resource deployments and activities intended to enable the firm to achieve its goals.” The definition has the people. 1996. and planned pattern are all purposeful. both the “pattern” and” plan” describe the goal and process of strategy. There is an overlap among the various theoretical perspectives from which they are derived. Youndt et al. practices. are as follows: . 1996). described as” fit. Organizations are increasingly becoming aware of the importance of linking the organization’s human resource practices to strategy that leads to greater performance (Huselid. the concept of activities highlights HR programs. Ian Clark defines Strategic HRM that “centers on how organizations can improve their competitive performance by considering and utilizing their human resource more effectively.” The definition implies four components to Strategic HRM. policies and practices as a means by which people of the firm gain competitive advantage. Second..

collectively improving the business performance. Selective hiring practices. A focus on teams and decentralized decision making. Resource based Model: This model of SHRM is based on the idea that organizations gain competitive advantage with the resource (employees) that are valuable. rare. There is no single best way to manage human resources and strategy. Internal Service Provider: In this approach Strategic HRM. The set of HR practices include: High levels of employment security. .Strategic Human Resource Management 3 Universalistic approach : John Delery and Harlod Doty describe universalistic approach to Strategic HRM as the process of transforming traditional HR practices into a limited set of “correct” HR procedures and policies.in-hand and. The goal is to enhance the effectiveness and efficiency of the operations of the concerned business unit customers. Strategic fit approach: Contrary to the universalistic approach strategic HRM involves matching specific HR practices to the firm’s overall business strategy. involves the role of HR professionals in providing HR services to business units within the firm. External fit refers to how well HR practices align with specific aspects of the external environment. Configurational: The configurational approach to SHRM suggests that there are various configurations of HR practices that go hand. or bundle. of HR practices rather than on any single HR program or policy. Extensive employee training and so on. difficult with high competence levels for competitors to imitate or acquire success by enhancing the overall value of the firm. The effectiveness of HRM in enhancing a firm’s competitive advantage depends on a set. High pay levels.

4) Implementation-focused Approach: Miles & Snow view that organizations do have some competitive objectives that are achieved through some business strategies. managerial (medium-term) and operational (short-term). . They define that HRM by its nature itself is strategic. This view is not accepted by many of the scholars and view that HRM is strategic to some extent but not in all aspects. In order to formulate and implement such strategies appropriate HRM systems are necessary. Strategic planning suggests HRM planning. and those HR systems are strategic in nature so called SHRM. The elements of HRM like training. The author views that the HR functions performed at the strategic management level are SHRM. 2) Decision-focused Approach: Tichy et al defines that there are three management levels namely: strategic (long-term). recruitment. The managerial and operational level HR functions do not come under SHRM and would rather be considered as functional HRM activities. 3) Content-focused Approach: Torrington & Hall identifies that in the model of HRM process there are always some elements and in every such elements there are some strategic aspects that are referred to as SHRM. selection all of them operate as derivatives of requirements of strategy within the organization.Strategic Human Resource Management 4 Different Approaches to Strategic Human Resource Management: The four major approaches to Strategic Human Resource Management identifies the differing views which are consolidated below: 1) Strategy-focused Approach: Authors Mathis& Jackson and Beer et al view HRM and SHRM to be identical. According to this approach the functional aspects of HRM elements can also be included with the organization’s strategy leading to the emergence of SHRM.

b) Transforming the organizational structure:.Strategic Human Resource Management 5 Essential elements of SHRM: The above-discussed theoretical perspectives have six key elements necessary in developing SHRM within the firm. concern must be focused on the following areas: a) Transforming HR staff: There exists a significant difference in the skills needed by HR staff in the traditional and strategic orientations to HRM. 1) Internally transforming HR staff and structure: In creating a strategic HRM philosophy within a firm. In traditional HRM staff had to be specialized in certain functional areas like training or recruitment interviewing. involving strategic planning. it is common for the organizational unit to restructure. The strategic HRM role played by HR professional is “ change management”. size of the firm and firm’s overall business strategy. The relevant structure for the HR function depends on the nature of the firm’s business. Most HR units will face a significant transformation in order to manage human resources with a new strategic view. The major issue in designing a new strategic HRM unit is to determine whether to centralize or decentralize HR function. team building and having global perspective. In some organizations centralized structure for HR unit would be appropriate and in some highly decentralized HRM may be necessary. In transforming the HR structure from traditional to SHRM. Regardless of which particular structure is used the key element in successful transformation from traditional HR function to .

The development of strategic plan involves top management.” b) Administrative efficiency can also be enhanced by the development of centralized HR services that are shared throughout an organization. 2) Enhancing administrative efficiency: Dave Ulrich suggested that one of the key roles of HR staff is to be “administrative experts”. Several processes are needed to enhance the administrative expertise of HR units. c) The ultimate process involves HR staff to rethink how they create value to the firm in terms of value perceived by the customers rather than perceived by the provider of the program. 3) Integrating HR into the strategic planning process: The strategic integration of HR requires strategic planning process and the involvement of HR managers in that process. HR staff members must take an active role in reengineering administrative and other processes within the firm and find ways to share services more effectively throughout the organization. with the help of outside consultants. As administrative experts. To achieve full . by examining the gaps between the “as is” process and what the system “ needs to be. to go through and analyze the current and future condition of the organization.Strategic Human Resource Management 6 SHRM is to find a structure that meets the pressing needs of business strategy and allow the HR unit provide services designed to help the firm achieve strategic objectives. The objective is to increase HR service efficiency and save money. The first focuses on: a) Improving administrative efficiency by targeting current processes for improvement.

difficulty. b) Horizontal fit: This relates to the extent to which HR activities are mutually consistent. and time needed to switch resources from one use to another. whereas flexibility is defined as the firm’s ability to meet the demands of dynamic environment. c) External fit: The third aspect concerns how well HR activities match the demands of the external environment. The two types of flexibility identified are: d) Resource Flexibility: is the extent to which a firm can apply its resources to a variety of purposes. The three aspects of HR fit are: a) Vertical fit: This aspect of vertical fit concerns the coincidence between HR practices and overall business strategy. The challenge is to develop internally consistent configurations of HR practice choices that help implement the firm’s strategy and enhance its competitiveness. There is a need for strategic flexibility along with strategic fit for the long-term competitive advantage of the firm. Ensuring these aspects of fit requires HR practice choices. HR managers should not only have the ability to influence the development and selection of information used in decision making but should also have the ability to influence decision making. It also involves the cost.Strategic Human Resource Management 7 integration. HR fit involves making sure HR activities make sense and help the organization achieve its goals and objectives. Fit is defined as temporary state in an organization. Consistency ensures that HR practices reinforce one another. . 4) Linking HR practices to business strategy and to one another: This issue of fitting HR practices to business strategy is becoming increasingly important and relevant HR issue for HR staff and line managers.

5) Developing a partnership with line management: Major changes are required to link the human resource function to the user organization. such as finance. This will entail ongoing audits of the human resource function to determine how well it is doing in providing services to its clients. Step 1. new linking mechanisms will be required as follows: i. Most personnel functions are linked to the operational business activities. accounting. and production. Step 3. Provide the business with good human resource databases. marketing. ii. . The line organization must alter its incentive and control systems so that the overall human resource function is managed. The managers need to be committed to weighing human resource issues with the same level of attention as that of other functions. These include environmental scanning of labor markets and social and economic issues that impact the long-term human resource context of the organization. It will also be necessary for the organization to have ways of measuring the overall performance of the human resource function at the strategic. iii. managerial. and operational levels.Strategic Human Resource Management 8 e) Coordination flexibility: concerns the extent to which an organization has decision-making and other systems that allow it to move resources fastly from one use to another. With the addition of new managerial and strategic activities. This task is accomplished by having an effective partnership between HR managers and line managers. Alter the senior management role when it comes to human resource management issues so that these concerns receive quality attention. Step 2.

unions. customers. b) HR impact: To evaluate the impact of HR programs. return on HR investment. M. The strategic objectives should be identified for functional units along with human resource activities needed to accomplish those objectives. as some of these adjustments will require new sources of corporate funding. The benchmarking could be different types like” Internal Benchmarking” that deals with the firm comparing practices in one part of the organization against those in the internal . that are direct users of HR products. (Tichy. by assessing against the HR practices of key competitors and firms that demonstrate HR excellence. Most of suggested typologies relate to four basic approaches about HRM: a) Customer/stake holder approach to measure the HRM effectiveness involves identifying managers.Strategic Human Resource Management 9 Also adjustments must be make in budgeting for human resource services. Charles D. Fombrun. Mary A 2002) 6) Focusing on the bottom-line impact of HR and measurement of that impact: In order to show how HR contributes to overall business success. the first requirement is to identify the means of measuring HR’s performance. HR cost per sales dollar are used to asses HR. c) Dollar value of HR programs: The third issue relates to the monetary costs and benefits of HR activities. human resource units must develop a strategic framework for assessing the effectiveness of their services. and employees even the suppliers and company shareholders. Various dollar-value indices like: benefits as % of total compensation. N. d) Benchmarking HR practices: This fourth aspect is important as it determines the true competitive advantage of HR.

Hence HR professionals had to provide management not only with analysis. but also organization-design recommendations. SHRM practice is coupled with business strategy. “Generic HR benchmarking” involves the comparison of HR processes that are same. regardless of the type of industry. Vital Role of Strategic Human Resource Management: Strategic Human Resource Management (SHRM) idea is that human resources management is used to gain competitive advantage. HR professionals must be aware of global business and social trends and should be able to perform environmental scanning.Strategic Human Resource Management 10 units. Strategic HR considerations are more important than the traditional planning elements. Hence an absolute requirement for analysis would be effective use of computerbased human resource information systems. SHRM also includes internal human resource analysis. SHRM includes organizational analysis and design. HR professionals must analyze human resources against current and future business strategies and identify the gaps between them. “Competitive benchmarking” is conducted with external competitors in the same market. SHRM is also intended to assist management in the best use of internal labor market. Benchmarking against successful internal and external organizations is useful tool that helps in this process. The strategic HR considerations are as follows: a) Is the organizational culture supporting the long-term business strategy? . SHRM includes analysis of business and socio-political environment. SHRM elevates human resources management from micro level (individual personal level) to the macro level (business strategy level). SHRM is part of the business plan.

. The program involved all the senior officials. reward process should be related to the organizational long-term and short-term goals. The concept is based mainly on the human resource. Thus there should be greater emphasis in carefully developing managers. This had become a successful key in turning around the troubled bank to success between 1975 and 1980. General Motors Company has an equally strong tradition of management development tradition. Hence every organization must develop its own strategic position in terms of human resources. Hence human resource management is a major force in driving organizational performance. Hence the management development process. which is considered as human capital in achieving the long-term objective(s) of the company. appraisal process. Chase Manhattan Bank targeted on the use of management development program to support the company’s first formal strategic planning process. The appraisal system should also be effective at the strategic level for the evaluation of executive talent. The reward system should encourage set of desired strategic behaviors from managers.Strategic Human Resource Management 11 b) Is the organization’s structure consistent with the business strategy? c) Is management’s executive staffing adequate? Are skills adequate? d) Are the management-performance systems properly focused? Implementing Strategic Human resource management: Strategic human resource management is relatively a new concept both in the field of human resource management and in the field of strategic management. chairman in strongly reinforcing the importance of new strategic planning process. Many companies have been very strategic in developing managers.

. Hence organizations have to carefully design strategies and relate to human resources for effective utilization in achieving greater competitive performance. Effective strategic management requires effective human resource management. Strategic Human Resource Management implies the ways in which HRM is crucial to organizational effectiveness. has to follow in terms of greater performance and the pattern should be taken care in maintaining Strategic Human Resource Management. The human capital. practice.Strategic Human Resource Management 12 Conclusion: Human Resource management has a major impact on individual and so on productivity and organizational performance. which includes the kind of Strategy Company.

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