What is Human Resource

Management (HRM)?
• Human resource management is the effective use of
human resources in order to enhance organizational
performance
• HRM is the art of procuring, developing and
maintaining competent workforce to achieve goals of
an organisation in an effective and efficient manner
Human Resource Management Functions
 Effective HRM Practices
• Training & Development
Employment Security
• Selectivity in Recruiting
Cross-Utilization & Cross-Training
• High Wages
Wage Compression
• Incentive pay
Promotion From Within
• Employee
Taking the Ownership
Long View
• Information Sharing
Measurement of Practice
• Participation
Overall Philosophy
& Ownership
• Self-Managed Teams
 Effective HRM Practices
• Very few firms will engage in all practices
• While these practices are important for
success, there are other determinants as well
• Downsides exist
– Requires more involvement and responsibility
than some employees want
– Managers & others may resist them as well
– Turnover may result

1–4
 Exhibit 1-3

HR Value Chain

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 Personnel Human Resource
Dimension
Management Management
1. Employee Contract Careful delineation Aim to go beyond
of written contracts. contract.
2. Key Relations Labour Management Customers

3. Speed of decision Slow Fast

4. Management Role Transactional Transformational

Leadership
5. Communication Indirect Direct

6. Prized Negotiation Facilitation

Management Skills
7. Conditions Separately Harmonization
Negotiated
8. Conflict Handling Reach Temporary Manage climate &
truce culture
9. Job Design Division Of Labour Team Work

10. Shared Interests Interest of the Mutuality of Interest

organisation are
uppermost
The Strategic View of Human Resources
• Employees are human assets
– Increase in value to organization and marketplace when
investments of appropriate policies & programs are
applied
• Effective organizations recognize that employees
have value
– Much as organization’s physical & capital assets have
value
• Employees are valuable source of sustainable
competitive advantage
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 Sources of Employee Value
• Technical Knowledge
– Markets, processes, customers, environment
• Ability to Learn and Grow
– Openness to new ideas
– Acquisition of knowledge & skills
• Decision Making Capabilities
• Motivation
• Commitment
• Teamwork
– Interpersonal skills, leadership ability
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Types of Organizational Assets/Capital

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Introduction
Definition-
• Strategic human resource management is the
integration of human resource management and
strategic management process.

In other words we can say that it is

the alignment of Human Resource Management
with the organization’s mission.
STRATEGIC HUMAN RESOURCE MANAGEMENT
 Objectives of SHRM: -

• Assess how well human resources management is

linked to agency mission accomplishment.
• Explore the role played by the HR staff in agency
strategic planning.
• Determine how the HR service providers work with
line managers to carry out agency strategic goals.
• Identify best practices aligning HRM with the agency
strategic plan and goals.
 STRATEGIC THEORIES

1.) Resource – Based View of the Firm

2.) Behavioral Perspective

3.) Cybernetic Systems

4.) Agency / Transaction Cost Theory

Resource – Based View of the Firm
• Defines Competitive Advantage as “ When
a firm is implementing a value creating
strategy not simultaneously being
implemented by any current or potential
competitors ”
• Firm Resource Heterogeneity
• Firm Resource Immobility
 Behavioral Perspective
• Focus on Employee Behavior as the mediator
between Strategy and Firm performance .

• Assumes that the purpose of various

Employment practices is to elicit and control
Employee Attitudes & Behaviors.
 CYBERNETIC SYSTEMS
• Open Systems Model
• Inputs are Competencies ( Skills , Abilities) of
Employees
• Throughput Process is Behavior of Employees in
the Organization .
• Outputs consist of Performance ( Productivity )
and Affective Outcomes ( Job Satisfaction )
 Agency / Transaction Cost Theory
• Transaction costs are the costs associated
with negotiating , monitoring , evaluating ,
and enforcing exchanges between parties .

• Agency costs are the costs associated

with establishing efficient contracts
between parties
 Introduction
• In a knowledge-based economy, the competitive
advantage is achieved through the capacity of
organizations to adapt to the dynamic environment,
by generating and applying new knowledge.

• Knowledge economy organizations need human

resource development professionals with different
competencies and attitudes as compared to
traditional environment.
 HRM in the Knowledge Economy
• Human resources are defined as the accumulated
stock of knowledge, skills and abilities possessed
by employees, which should be turned into
formal expertise by the organization.

• Organizations and their employees have to

acquire new skills and knowledge to satisfy the
customers’ needs and compete in today’s
dynamic business environment.
 Tacit and Explicit Knowledge
A significant amount of the organization’s knowledge
is embodied in the firm’s personnel in the form of
tacit knowledge.
An organization can reduce its dependency on key
personnel by implementing a proactive human
resource strategy that encourages knowledge transfer
and creation.
The methods of decision making, training and solving
programmed or non programmed problems can
either block or foster the knowledge creation process.
 Conclusions
• Implementing proper HRM strategies require an integrative
approach, so that there are aligned horizontally with all
human resource processes and vertically with the
organizational goals.

• The relationship between HRM and development has to do

more with collaboration, rather than subordination.

• Organizations competing in a knowledge economy need to

create dynamic capabilities continuously, based on continuous
learning and knowledge creation.
HR Roles in Knowledge-Based Economy
• Human capital steward
– Creates an environment & culture in which employees
voluntarily contribute skills, ideas, & energy
– Human capital is not “owned” by organization

• Knowledge facilitator
– Procures necessary employee knowledge & skill sets that
allow information to be acquired, developed, & disseminated
– Provides a competitive advantage
– Must be part of strategically designed employee development
plan
 Adopting an Investment Perspective
• Determines how to best invest in people
• Costs
– Out-of-pocket
– Opportunity
• Human assets become competitive advantage
• Required skills become less manual, more
knowledge-based
• Appropriate, integrated, strategy-consistent
approach is needed
 Strategic planning
1. DEVELOPMENT OF ORGANIZATIONAL PHILOSOPHY
AND MISSION STATEMENT
2.ENVIRONMENT SCANNING
3. SWOT ANALYSIS
4. FORMULATION OF STRATEGIC OBJECTIVES
5.GENERATION OF ALTERNATIVES FOR ACHIEVING
OBJECTIVES
6.EVALUATION AND SELECTION OF STRATEGIES
 NEED FOR STRATEGIC HR
• Enhancement of organization’s economic performance
• To survive in the market especially to handle the critical
aspects
• To utilize the human resource in the most effective and
optimum manner
• To adapt to various changes in the HR policies and practices in
accordance with the government legislations.
• To assist the organization in its career and succession
planning
• To ensure stability of the organization with contented work
force and appreciation from the stakeholders and the public.

Thus in strategic HR it focuses on performance,

improvement and competitive advantage.
 IMPORTANCE OF HR TO STRATEGIC
FORMULATION

• PROVIDES COMPETITIVE ADVANTAGE

• CONTROLLING LABOR COST
• EFFECTIVE UTILIZATION OF RESOURCES
 Hr contributions to strategy
• PERFORMANCE APPRAISAL,STAFFING,TRAINING AND
DEVELOPMENT

• ENVIRONMENTAL SCANNING AND COMPETITIVE

INTELLIGENCE

• IMPLEMENTATION OF RESOURCE ALLOCATION

Barriers to Strategic HR
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