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Strategic Human Resource Management


In the past, people were viewed in 3 different ways: 1. As a cost 2. As a resource 3. As an asset

Defining Human Resource Management (1)

HRM is a strategic and coherent approach to the management of an organisations most valued assets: the people working there who individually and collectively contribute to the achievement of its objectives
(Armstrong, 2006,)

Introduction (Cont)

But for now, the organisation view the people as a central to the successful performance of the organisation

The Changing Business Environment

The Changing Business Environment

Throughout the years, human resource become the organisations most important asset: Strategic Management People = Finance and Capital Resources
(SHRM is link with the success and failure of an organisation)

The Changing Business Environment (Cont)

In the modern time, SHRM becomes the most powerful competitive advantage of one organisation. Organisations concentrate more into Intellectual assets to compete with the others.

The Changing Business Environment (Cont)

Some problematic to control and access that knowledge:
Insecure and flexible work 2. The notion of organisation boundaries is sometimes less clear. 3. Employees long-term relationship with organisation, the normal route to developing and securing access to expertise.

The Changing Business Environment (Cont)

Personnel Management includes an operational, system-based approach to managing people. HR policies, leadership style, and employees reaction should be taken care at the same time.

The Changing Business Environment (Cont)

3 challenges facing organisations that must be met are:

1. 2. 3.

Managing intangible assets

Managing strategic change

Innovation in terms of what organisations

produce by way of goods and services, and the

way they approach the task.

The Changing Business Environment (Cont)

New skills are needed to engage all organisations resources:

1. 2.

Tacit knowledge Recognising core competencies and attending to stakeholder views

The Changing Business Environment (Cont)

Tacit knowledge includes:




Action-centered skills artforms Learning from errors reactions of people, anticipation Learning from interaction with others customer needs and expectations, contextualisation, sensing expectations Learning from work routines quickest pathways, sensing success

The Changing Business Environment (Cont)

Core Competencies are the abilities such as reasoning, analytical skill, problemsolving, etc

Linking People Management and Strategic Management

An organisations response to external challenge can come from a cascade of environmental


Active business strategy and SHRM response can

be found out by classifying strategy in order to

gain an overview.

Linking people management and strategic management

There are 2 main ways to classify


Using life cycle model of the product or



In terms of single, diversified or multiple products or services

The life cycle model

Product and Service HR function
Attracting qualified employees to the company
Reach the right number of qualified employees; develop the management process within a company Minimise layoffs by reorganising shift job


Product enters the market

Sales of product increase quickly

Maturity Decline

Get the peak of its sales

Sales and profits fall Reductions and reallocation the workforce

Single, diversified or multiple products model

HR strategy Selection Single product in one company Multiple products globally Functional orientation using Functional and generalist specialist job criteria orientation using systematic and objective criteria Subjective and measured by personal contact Unsystematic, allocated perhaps paternalistically Objective, based on multiple organisational goals Based on multiple, planned goals. Some top management discretion



Development Largely through job Formal and systematic, experience. Usually a single across divisions and function focus subsidiaries

Linking People Management and Strategic Management

These models above help us to:



Establish the links between SHRM and corporate strategy. Indicate the SHRM levers that can bring about effective and appropriate employee behaviour. Develop the role of SHRM in underpinning change depending on circumtances.


David Guest (1987, 1989a, 1989b 1991) has taken the Harvard model and developed it further by defining four policy goals which he believes can be used as testable propositions: 1. Strategic integration ability of the organization to integrate HRM issues into its strategic plans

UK VERSIONS OF THE HRM MODEL British academics (cont.) 2. High commitment a behavioural

commitment to pursue agreed goals and

attitudinal commitment reflected in a strong

identification with the enterprise

3. High quality this refers to all aspects of

managerial behaviour which bear directly on

the quality of goods and services provided.

UK VERSIONS OF THE HRM MODEL British academics (cont.)


Flexibility functional flexibility and the existence of an adaptable organization structure with the capacity to manage innovation.

Guest (1989a) believes that the driving force behind HRM is, the pursuit of competitive advantage in the market-place through:

Provision of high-quality goods and services, Competitive pricing linked to high productivity, The capacity swiftly to innovate and manage change in response in the market-place or to breakthroughs in R&D.

He considers that HRM values are:

Unitarist to the extent that they assume no

underlying and inevitable differences of interest between management and workers.

Individualistic in that they emphasize the individual-organization linkage in preference to operating through group and representative systems.

Guest has asserted (1989b) that HRM has been talked up and its impact has been on attitudes rather than behaviour. He stated (1989a) that the term runs the risk of becoming a catch-all phrase, reflecting general intentions but devoid of specific meaning.

Approaches to The Strategic Management of People

The 3 models of SHRM:

1. 2. 3.

The best practice view.

The best fit view.

The resource-base approach.

The Best Practice View

It is based on a single set or bundle of HR

policies and practices.

The company will follow these policies and

practices as its standard in any prevailing

business circumstances.

Using 18 key practices (see p.14) in case study

The Best Practice View

The criticism of this view is came from: 1. Cost of implementation. 2. Tensions between the need for production and cost minimisation, and issues of flexibility, creativity and skills enhancement. 3. The restricted applicability of the model mainly to the western private sector (because of legal and economical choice) 4. The doubtful ability to assess the impact of HR interests using financial measures. 5. The belief that it is easier to establish and sustain the model on the green-field sites.

The Best Fit View

This model is based on the idea that HR strategies flow from business strategy.

Much of what was outlined earlier in this unit

can be related to the best fit model

The Best Fit View

The success of a best fit model depends on its ability to:


Integrate into the organisations strategic plans.

2. Provide horizontal or vertical integration of the key policy areas.

The Best Fit View

How far the organisational objectives will be met is dependent on: 1. The level of fit between the business strategy and the environment at one level.

The HR strategy and business strategy at a second level. The internal coherence of the policy.


The Best Fit View

Best fit can determine whether a hard or a soft approach. A hard may include outsourcing, enhanced productivity, and emphasis on tighter contracting.

A soft relies on involvement, partnership and communication and sharing.

Best Fit Integration

It is an open template to interpret the environment in which business operates and to evaluate the integrated reaction or responses that are necessary.

Best Fit Integration (Cont)

The SHRM role is focus not on external relationships but on how staff and their abilities are used

Best Fit Integration (Cont)

According to Storey (1995, p.4-5), a sustained

competitive advantage derives from internal

resources, which must:
1. 2. 3. 4.

Add value. Be unique or rare. Be difficult to imitate. Be non-substitutable, for example, by technology.

Resource-based approach

This third model of SHRM is a bottom-up


This view focuses on the organisation and its potential, and develops ways to exploit or enhance the available resources.

According to Mueller (1998), the resourcebased view includes 5 proposition about the creation of strategic assets or capabilities.

Proposition 1







incremental and uncertain ways, not in any linear or planned way.

Proposition 2

Assets require broad-based commitment over a lengthy period, not a single initiative.

Proposition 3






importance of routinising skill formation activities.

Proposition 4

This view concerns the development of cultures that will allow potential to be used and developed.

Proposition 5

Barriers to imitation and loss of their resources, both in patents, copyright and so on, and their people resources should need to build.

The end of Unit 1