Items Description of Module

Subject Name Human Resource Management

Paper Name Strategic HRM
Module Title Introduction : SHRM in 21st Century
Module Id Module -1
Pre- Requisites Understanding of the concepts of HRM
Objectives To study the concepts related to SHRM in 21st century
Keywords Strategy, Human Resource management, SHRM
QUADRANT-I

1. Module 1: Introduction : Strategic HRM in 21st Century

2. Learning Outcome
3. Introduction
4. Strategy
5. Strategic HRM
6. Strategic Planning and Strategic Trends
7. SHRM in 21st Century
8. Summary

1. Module 1: Introduction : Strategic HRM in 21st Century

2. Learning Outcome
After completing this module, the students will be able to-
 Understand the concept of Strategic HRM
 Understand the different terminologies related to Strategic HRM

3. Introduction

Human resource management refers to acquisition, retention, motivation and maintenance of

human resources in an organization. In the current scenario, the efficient work systems facilitate
the competencies and retention of skilled force, help in developing management systems that
promote commitment and also work towards the practices that encourage team work.

It involves a set of policies, procedures, practices and programs designed to support both personal
and organizational goals. It is the process of bringing people and organization together so that
objectives are met.

It is the planning, organizing, staffing, directing and controlling ofhuman resources, focusing at
procurement, development, appraisal, compensation, integration and maintenance of human
resources, in return employees feel valued and rewarded.

In the context of the changing environment the model of HRM given by Ulrich explains the
working of HR department along with the various roles exhibited by the HR manger to gain
competitive advantage.
 Fig 1.1: Ulrich's Model of Human Resource Management
Whereas the functions of HR department include having strategic focus, people management, systems
management, and operational functions, the role of HR manager include being a strategic partner, a
change agent, an employee champion and an administrative expert.

A major issue is the changing role of HR in organizations. Where HR was once a clerical function
that was relegated to perform invisible role in the organization, today more and more companies have
elevated the HR function to the integral part of the senior planning team.

Strategy

The origin of this concept has military orientation, going back to the Greek word ‘strategos’, for a
general who organises, leads and directs his forces to the most advantageous position (Bracker, 1980;
Legge, 1995). In the context of business it explains how top management is leading the organisation
in a particular direction in order to achieve its specific goals, objectives, vision and overall purpose.
The main emphasis of strategy is to enable an organisation to achieve competitive advantage with its
unique capabilities by focusing on present and future direction of the organisation.

Strategy is the determination of the basic long-term goals and objectives of an enterprise, and the
adoption of courses of action and the allocation of resources necessary for carrying out these goals.
(Chandler, 1962)

Strategy is defined as “Strategy is a set of fundamental or critical choices about the ends and means of
a business.” (Child, 1972)

A strategy, whether it is an HR strategy or any other kind of management strategy, must have two key
elements: there must be strategic objectives (i.e. things the strategy is supposed to achieve), and there
must be a plan of action (i.e. the means by which it is proposed that the objectives will be met).
(Richardson and Thompson, 1999)

Fig.1.2 HIERARCHY OF STRATEGY

 Corporate strategy
Corporate strategy is the
direction an organization takes
with the objective of achieving
business success in the long
term.
Business Strategy
Business strategy is a long term
plan of action designed to
achieve a particular goal or set
of goals or objectives.
Operational Strategy
Operational Strategy is a plan
that details how a business will
use its production resources to
meet its goals..

Steps in Strategy Formulation

• Define mission and Vision of the organisation

• Set objectives.
• Conduct a SWOT analysis- appraisal of all the strengths, weaknesses, opportunities and
threats.
• Analyse existing strategies to determine their relevance in the light of the internal and
external appraisal . It should include gap analysis.
• Define in the light of this analysis the distinctive capabilities of the organization.
• Define the key strategic issues emerging from the previous analysis. These will be concerned
with such matters as product-market scope, shareholder value and resource capability
• Determine corporate and functional strategies for achieving goals and competitive advantage,
taking into account the key strategic issues.
• Prepare integrated strategic plans for implementing strategies.
• Implement the strategies.
• Monitor implementation and revise existing strategies or develop newstrategies as necessary.

Whittington’s Perspective on Strategy

The formation of organisational strategy as suggested by, Whittington (1993) presents four generic
approaches to strategy formation along the two dimensions of ‘processes’ and ‘outcomes of strategy’
(see Figure 1.3).

The ‘x’ axis deals with the extent to which strategy is formed in a rational, formal, planned and
deliberate manner. It is a result of bounded rational approach or is emergent in nature. The ‘y’ axis
relates to outcomes, i.e. the extent to which organisational strategy focuses on profit-maximising
outcomes. The top left-hand quadrant represents a mix of maximum profit-maximisation and a formal
planned and deliberate approach to strategy formation. Whittington denotes this combination as
‘classical’. The combination in the top right-hand is that of profit-maximisation and an emergent kind
of strategy formation called the ‘evolutionary’ approach. The other two combinations – the emergent
approach to strategy formation and pluralistic types of outcome and deliberate process and pluralistic
outcomes are denoted as ‘processual’ and ‘systemic’ approaches respectively.
 OUTCOMES

Profit-
Maximising

Classical Evolutionary

PROCESSES Emergent

Deliberate

Systemic Processual

Pluralistic

Fig 1.3Whittington’s (1993) generic perspective on strategy

4. Strategic HRM

The purpose of strategic management has been expressed by Rosabeth Moss Kanter (1984) as
‘bringing in the focus the present actions for the future’

As defined by Pearce and Robinson ‘Strategic management is the set of decisions and actions
resulting in the formulation and implementation of strategies designed to achieve the objectives of
an organization.’

The following points about SHRM make it more precise towards its understanding:

 Strategic Human Resource Management is the process of linking the human resource function
with the strategic objectives of the organization in order to improve performance.
 Establishing a strong HR strategy that is clearly linked to the organization’s strategy is not
enough.
 HR strategy needs to be communicated, practiced, spelled out and written down.

Strategic HRM defines the purpose and plans of an organization to achieve the business goals with
the help of people.

It is based on the following hypotheses:

 For competitive advantage the human resource is very important

 For any strategic plan, the people are very important
 Organizationsneed to adopt systematic approach

The process of strategic HRM nvolves the use of different approaches to the development of
HR strategies. These strategies integrate vertically with the business strategy and horizontally
 with the other functions. These strategies help to support the intent of overall organizational
effectiveness and other important issues like people management, employee relation etc.

4.1 Meaning of Strategic HRM

According to Purcell (1999), the actions which focus on the differentiation of firms from its
competitors is called as strategic HRM.

The concept of Human resource management (HRM) focuses on managing the most
important re source that is human resource through recruiting and hiring the best employees
and providing them with the compensation, benefits, training, and development with the help
of which they become successful within an organization. The concept and role of strategic
human resource management is a step further in which it takes these responsibilities by
aligning them with the goals of other departments and overall organizational goals.

The organizations which adopt the practicesof strategic management also ensure that all of
their objectives are aligned with the mission, vision, values, and goals of the organization of
which they are a part. Strategic HRM integrates the broad organizational issues relating to
cultural change, structural change, performance, effectiveness, knowledge management,
future growth requirements, and the capabilities.

According to Boxall (1996) ‘The critical concerns of HRM, such as choice of executive
leadership and formation of positive patterns of labour relations, are strategic in any firm.’

Fig 1.4STRATEGIC HRM MODEL

Strategic HRM models suggests that HR strategy is integrated with Business Strategy. As we can see
in the model vision and mission of the organisation gives direction to business strategy on the basis
of which HR strategy is formulated. Both business strategy and HR strategy in turn are designed
after scanning internal as well as external environment. Lastly HR implementation plans are put in
place.

Linear Model of SHRM

• The concept of strategic HRM appears to be based on the belief that the formulation of
strategy is a rational and linear process
 • Which denotes that the overall HR strategy flows from the business strategy and
generates specific HR strategies in key areas.
• The process takes place by reference to systematic reviews of the internal and external
environment of the organization, which identify the business, organizational and HR
issues that need to be dealt with.

4.2 Objectives of Strategic HRM

The basic aim of strategic HRM is to create and sustain competitive advantage by generating
strategic capability by ensuring that the organization has committed and well-motivated
employees. The justification for having strategic HRM practices is the perceived benefit of
having an agreement for developing approaches to people management in the longer term.

Strategic HRM addresses critical issues and factors which are primarily concerned with
people. The strategic decisions have long-term impact on the behaviour and success of the
organization.

Considering the aims of strategic HRM, it is necessary to consider how HR strategies will
take into account the interests of all the stakeholders in the organization: employees in general
as well as owners and management. Its objective is to provide a sense of direction in an
unstable environment so that the business needs of the organization and the individual, and
joint needs of its employees can be met by the development and implementation of logical
and practical HR policies and programmes.

Strategic HRM should attempt to achieve a proper balance between the hard and soft
elements. All organizations exist to achieve a purpose and they must ensure that they have the
resources required to do so and that they use them effectively. But they should also take into
account the human considerations contained in the concept of soft strategic HRM.

4.3 The strategic nature of HRM

The most important feature of HRM is its association with strategic integration, which flows
from top management’s vision and leadership. This requires the full commitment of people to
it.
 David Guest (1991) believes that an important aspect of the HRM is strategic integration, by
which he meant the ability of the organization to integrate HRM issues into its strategic plans.
This also reflects that various aspects of HRM fit together, and provide an aspect for
managers to incorporate an HRM perspective into their decision making.

Legge K (1989) also suggested and considered that one of the common themes of the typical
definitions of HRM is that human resource policies should be integrated with strategic
business planning.

Sisson K (1990) supported that a feature increasingly associated with HRM is a stress on the
integration of HR policies both with one another and with business planning.

Strategy formulation is not necessarily a rational and continuous process, as suggested by

Mintzberg (1987). A strategy, according to Mintzberg, can be deliberate – it can realize the
intentions of senior management. According to him a strategy is a systematic process: first we
think and then we act; we formulate and then we implement.

5. Strategic Planning and Strategic Trends

A. The fundamentals of Strategic Planning – A strategy is the company’s plan for how it will
balance its internal strengths and weaknesses with its external opportunities and threats
and maintain a competitive advantage. In the organizations the managers engage in three
levels of strategic planning:
o corporate-level strategy
o business-level competitive strategy,
o functionalstrategies.

B. The Strategic Planning Process also include conducting a SWOT analysis to identify its
strengths, weaknesses, opportunities, and threats for better planning and strategizing

C. Strategic Trends

o Globalization refers to the tendency of firms to extend their sales, ownership, and/or
manufacturing to new markets abroad. For businesses everywhere, the rate of
globalization in the past decade has been enormous, and has several strategic
implications for firms.

o Technological Advances have been forcing, and enabling, firms to become more
competitive.The nature of work is changing due to new technological demands.

o The Workforce demographics are changing as well. It’s becoming more diverse as
women, minority-group members, and older workers enter the workforce.

Managers have to craft strategies that balance opportunities and threats (like those
previously discussed) with their firm’s strengths and weaknesses, such as global
expansion and improved competitiveness strategies.
7. SHRM in 21st Century

Making a shift to a new HR role is raising novel issues for HR managers and organizations. There
are some alternatives and activities that will increase the likelihood of success. Some of these are:

 HR leadership. With change in the business scenario, there is a need to change the role of
HR in the organizations andan HRleader needs to work both within the group and with
the leaders to fulfill the expectations of what HR can and will deliver. The success of
these changes depends upon HR's ability to meet the needs of the organization and their
credibility. A focused leader can develop a clear vision, motivate others to share that
vision, and help them work towards achieving it.
 Future orientation. HR department can provide valueto understand how changing
environmental, organizational and workforce factors can influence the business,
anticipate the upcoming HR needs and address them. The HRdepartment can assess the
impact of any change initiative that is going to be implemented and plan to work with the
business leaders to decide how to respond before the change has happened and not after it
has happened.
 Creativity. In future, that HRdepartment can be successfulwhich will be adaptive and
responsive to the changing needs of its organization. Responsiveness in the changing
world of work will require being flexible, as the organizations change.The traditional
practices and processes will not be sufficient to meet the emerging needs of the future-HR
leaders. The leaders are likely to be dependent on creativity of their groups to achieve
effective results. Increasing globalization of the market will create a need for both
flexibility and creativity with a new workforce, and with new customers.

 The new trend in the organizations is to create specific business units as a way of
enabling them to develop a close network and working relation with a small part of the
business. This kind of structure can be successful and developed only when the HR
person has a direct reporting relationship with the leader of the business unit. In this kind
of structure the central HR team works with the specific unit to communicate and helpthe
departmentto function well. One advantage of this structure is that it supports and
promotes the flexibility and creativity as the concerned HR personnel can modify and
improve processes and services to meet the needs of their assigned business units.
 As organizations grow in the size due to various business reasons like expansion, merger
and acquisition, entering into new markets, the organizations develop multiplicity of HR
groups. These can be duplicative or complementary. The approach that seems to work
well is to develop "centers of excellence," where the HR groups in different parts of the
company develop their expertise in a particular area and serve the needs of the larger
company.

Jackson outlined a vision for the 21st century workplace based on three core principles identified by
SHRM and its affiliates:

 Innovation will play an important role, as an innovative workplace gives people the
flexibility to determine and monitor how, when and where work gets done. This enables
employees to find a better balance between their work and personal lives, which are
moreintertwined than ever before.
 A competitive workplace that allows companies to attract, recruit, hire and train the talent
they need. It is evident that the skills in highest demand are in the shortest supply in the
available pool of candidates and because of the skills gap, the HR mangers face tough
time in hiring the efficient people to man the jobs—when many people are still searching
for good jobs. To overcome the issue the people and companies are moving around the
world, so no organization will be able to avoid the global competition for talent.
 A fair practices workplace that gives everyone a fair shot and equal pay for equal work.It
is very important to treat people equitably to survive in the competitive world.
8. Let us now understand some of the strategic HR initiatives and the impact that they will have on
organisations and its Human resources.

Strategic HR Initiative Impact of strategic initiative

Guidance and motivation Enlarges the skill base and develops the levels
of competence required in the workforce.
Fosters learning, which happens when
individuals actively attain the knowledge and
skills that work towards the organization’s
objectives.
Knowledge Management Emphasis on providing learning opportunities
to share knowledge in a systematic way.
Ensures that knowledge is retained and deals
with improving the flow of knowledge,
information and learning within the
organization.
Talent management It is ensured that the talented and well-
motivated people are available on time which
are required by the organization to meet present
and future needs of the organization.
Working environment Making the organization an excellent place to
work with policies and procedures in place.
Attracting, and retaining people Work towards matching the people to the
strategic needs of the organization. Retention of
talented employees who can deliver
performance and productivity, innovation and
the people who can fit in the culture and the
strategic requirements of the organization.
Reward management Develops motivation, commitment,
jobengagement by rewarding people in sync
with their contribution.
Work design It enhances job satisfaction and flexibility,
which encourages high performance and
productivity. Provides individuals with
encouraging work and gives them the autonomy
and flexibility to perform their jobs well.
Performance management Helps in developing a performance
environment that encourages performance
through productivity, quality, levels of
customer service, growth, profits. It improves
risk taking, innovation, knowledge sharing and
establish trust in the culture.
Learning culture A growth medium in which the learning and
learning practices grow

9. Summary

Lets now summarise what we studied in this module. We learned about the genesis, definition and
meaning of the word strategy which is the foundation of strategic HRM. We also discussed the
emerging trends in strategic HRM and how strategic HRM in shaping in 21 st century. Lastly we
discussed some specific strategic HR initiatives and the impact they are likely to have on
organisations and its people.