Strategic HRM


Strategic Human Resource Management


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Strategic HRM


Abstract As the business enterprises are flourishing in the society, competition is getting tough and challenging. So, in order to attain the desired ends and pursue the set targets successfully, an organization has to focus on the optimum utilization of its resources and manage them effectively and efficiently. Strategic Human Resource Management (SHRM) is the optimum utilization by the firm of its human capital. HRM has recently gained a lot of importance for the business sector as it aims at achieving maximum benefits from all of human resources in order to gain a competitive edge over its competitor. This paper studies the literature presented on SHRM and points out whether or not its application is evident in the actual life settings. It analyses the theories presented by different people and specifically quotes examples from the real life.

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Strategic HRM


Strategic Human Resource Management Strategic human resource management (HRM) is one of the techniques employed by modern businesses, especially after the industrial revolution, which focuses on the employees of the firm as one of its assets. Literature review Strategic human resource management is the clear and rationale organization of a firm¶s most significant assets; people (Armstrong, 2004, p.6). Moreover, strategic human resource management exists to cater to the need of the employees so that their satisfaction with the job can lead to increased productivity for the company (³strategic resource management´, 2010). From the academics side, after the subject of human resource management was first introduced as subject in mid 1980s, the morality of such a practice was questionable (Armstrong, 2004, p.5) as it was thought that the employees behavior and their liking or disliking for their employers and the firms should not be manipulated so that originality and truthfulness of feelings and behaviors can be maintained. The practitioner side of business i.e., those who actually had to apply the managing skills however believed otherwise. They said that in the ever growing

Strategic HRM


environment of competition and resource scarcity, efficient managing automatically includes strategic human resource management (Armstrong, 2004, p.5) and strategically managing your team, through an incentive-to-work methodology, would lead to higher overall productivity for a firm thus achieving the goal for which the company has actually been set up. This view has been further analyzed by Fombrun, Tichy, and Devanna (1984) by ³emphasizing to best utilize the scarce and depleting resources of this world´ and thus including the skilled and educated human force as a scarce resource that needs to be properly managed. According to another analysis, some organizations perceive their human resources (or employees) as an investment which results in a rate of return in the shape of higher productivity and greater profits while the others see their employees as a variable cost of input (Greer, 2009, p.21). What the organizations plans for it human resource management is then dependant of these perceptions. In case of an investment, a firm properly allocates its assets and analyses them regularly for greater benefits. This view then leads to what is called the strategic human resource management. The two versions of HRM Armstrong (2004) described HRM to have two versions; a hard version and a soft one (p.6). According to this theory, hard HRM is concerned with quantitative and the calculative approach to manage the human resource in a rational way, just like any other economic commodity. Not surprisingly, this version has been met with criticism with respect to morality and concern for human feelings and capacity. Next version of HRM is the soft one. This approach emphasizes on the commitments of the employees to the firm. It believes in getting to the hearts and minds of the employees µthrough a method of involvement, communication and other methods of developing a high commitment, high trust organization¶ (Armstrong, 2004, p.7). This approach focuses on a more integrated working environment where the relationship between the employees and employers is one of trust, dependency and mutuality. Coming now, from a simple HRM to strategic HRM requires firstly, a separate definition and analysis of what the term strategic means and then the connection it makes with HRM.

Strategic HRM


Lundy and Cowling (1996) describe the strategic process as one whose anticipated outcome is to win (p.15). The dictionary definition of strategy is µan act of warship, generalship, especially the act of directing military movements so as to secure the most advantageous positions and combination of forces¶ (Lundy and Cowling, 1996, p.16). Using this definition, strategic HRM is the most advantageous combination of forces.

Non Strategic Human Resource Management

Whereas strategic HRM is concerned with rational and calculative approaches, non strategic HRM normally deals with the political side of HRM. It cannot be said that non-strategic HRM is not practiced. Organizational politics have been a constant complain of many employees, however this form is not completely erred. There are benefits such as judgmental allocation of employees to various tasks which can be obtained from non-strategic HRM but it is usually seen that strategic HRM yields better productivity when compared to the non-strategic one.

Evidence of Strategic Human Resource Management

Generally, the evidence of existence of SHRM with monetary plans is found in the bigger concerns such as multi-national corporations or other domestic firms with huge shares in the industry. The reason for it is that the small to medium enterprises or the sole proprietorships do not usually have extra amount of funds to be allocated to an apparently ³no direct return´ department. Here a non-monetary approach is preferred e.g. putting the name of the employee of the month on the notice board rather than giving him a cash bonus. For the bigger concerns on the other hand, where funding is not that big of a deal, monetary plans for SHRM are implemented.

Strategic HRM


Moreover, when the public and private sector differences come in, it is in the core firms of the private sector, where the employees are seen as an investment, that the strategic HRM is most prevalent (Fombrun, Tichy, and Devanna, 1984, p.12). Storey (1995) however notes that results have been found against the preconceived notion that HRM is only practiced is µhightech, non-unionized¶ organizations as recent studies have significantly found that it is precisely the unionized establishments that use the innovative HRM practices and, according to a survey, 84% of unionized establishments practiced human resource management techniques. Storey (1995) notes further that from the in-depth research he carried out in 1992 of fifteen mainstream British employing firms, all of them were practicing the management of their employees and that most of these initiations were devised by non-personnel specialists (p.9). Moreover there are a number of longitudinal case studies conducted in USA which significantly document a change from the µtraditional employment practices to ³innovative´ HRM practices (Bratton and Gold, 2001, p.31). There exist differences as to how human resource management is practiced in various firms and over various industries. These differences can roughly be divided into the following categories (Shculer and Jackson, 1999, p.50): y Behavioral Perspective: This view focuses how an employee acts as a mediator between the organization and the goals that the organization wants to achieve and how the behaviors and the type of strategic human resource management used is interrelated. y Cybernetic Model: This deals with an open system where the inputs of employees are competitively encouraged to be more productive. y Cost Reduction Strategy: This strategy is about keeping the costs of inputs low as implied. Employees are to focus on this objective and so are trained and managed accordingly. y Resource Based View: Here the employees are managed to fully utilize the resources that the firm has. To review the use of SHRM, the example of Honk Kong Shanghai Banking Corporation can be taken. HSBC has over 260,000 employees around the globe and therefore it has to maintain a balance in the overall environment of the firm. Here the main aim for the bank to

Strategic HRM


not discriminate between it employees on racial or cultural basis. The company wants to make itself adaptable to different sort of situations to maximize its productivity. It can therefore be said that HSBC practices a mixture of behavioral perspective and cybernetic model for SHRM. On the other hand is the example of the pizza chain, Pizza Hut is another example where the customer group is as diverse as the employees group. In the western societies, hospitality and retailing jobs are very largely taken up by students. This provides the firm with a cheap source of labor. When compared to HSBC, Pizza Hut¶s HRM is different in the sense that nowadays ebanking and e-commerce has stolen the banking show and employees of HSBC are trained according to dealing with technology more than with customers. For Pizza Hut however employee-customer relationship is of utmost importance. Thus the employees are managed accordingly. It is however evident that both the firm practice SHRM. Conclusion

As the differences mentioned exist in the structure of the firm, the strategy of human resource management applied also varies from firm to firm. It is however evident that strategic HRM exists in almost all firms. Moreover, those which practice the strategic management of their human capital yield a higher level of productivity when compared to those who do not because they do not fully utilize their resources.

Strategic HRM



Armstrong, M. (2004). Strategic human resource management: a guide to action. Retrieved from 6iCDC&sig=tTggDK_xqNzC9ZEx7n_1sobx7xk&hl=en&ei=vmrRTNb7PMnRcaSqqbsL&sa=X &oi=book_result&ct=result&resnum=2&ved=0CCEQ6AEwAQ#v=onepage&q&f=false Bratton, J and Gold, J. (2001). Human Resource Management: theory and practice. Retrieved from esource+management&hl=en&ei=yW3TTOmBK4OycPrP_eQE&sa=X&oi=book_result&ct=res ult&resnum=3&ved=0CDUQ6AEwAg#v=onepage&q=evidence%20of%20human%20resource %20management&f=false Fombrun, C. J., Tichy, N. M., Devanna, M. A. (1984). Strategic human resource management. Retrieved from

Strategic HRM


ategic+human+resource+management&ots=AfyxhNNpYr&sig=3BJ4ys0HUDP2HESgebQMNp sxD5E#v=onepage&q&f=false Greer, R. C. (2001). Strategic Human Resource Management. Retrieved from man+resource+management&hl=en&ei=nl7TTMeeCYOlcYP63J8F&sa=X&oi=book_result&ct =result&resnum=7&ved=0CE8Q6AEwBg#v=onepage&q&f=false Lundy, O. and Cowling, A. (1996). Strategic Human Resource Management. Retrieved from man+resource+management&hl=en&ei=nl7TTMeeCYOlcYP63J8F&sa=X&oi=book_result&ct =result&resnum=8&ved=0CFQQ6AEwBw#v=onepage&q&f=false Schuler, S.R. and Jackson, E.S. (2007). Strategic Human Resource Management. Retrieved from,+HRM&source=bl&ots=mCxRJ5uN6x&s ig=QMfMAhoHocKYUYAvslmhM0_338&hl=en&ei=9nXTTLLGN8jQcdfDkJ8F&sa=X&oi=book_result&ct=result&resnu m=1&ved=0CBwQ6AEwAA#v=onepage&q=cybernetic%20model%2C%20HRM&f=false Storey, J. (1995). Strategic Human Resource Management: a critical text. Retrieved from resource+management&hl=en&ei=yW3TTOmBK4OycPrP_eQE&sa=X&oi=book_result&ct=re sult&resnum=5&ved=0CEAQ6AEwBA#v=onepage&q=evidence%20of%20human%20resource %20management&f=false What is strategic human resource management? (2010). Wisegeek.

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