shrm
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Strategic HRTRANSCRIPT
Strategic Human Resource Management 0
Strategic Human Resource Management
Neelima Pinnamaneni
Daliang Xu
Dr. Henry Findley
Strategic Human Resource Management 1
Introduction:
As we enter the new era of an advanced high-tech environment, the business
world is also entering into an era of fierce competition noticed by takeovers and mergers.
This illuminates the type of dynamic and complex business environment that companies
have to face. The rapid change in the environment reminds us that, for a business to
survive, it has to focus on its core competencies and discover in order to keep ahead of
the competitors. 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. Several scholars have
noted that managing people is tedious than managing technology or capital (Barney, 1991;
Lado and Wilson, 1994). 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. (Wright et al.,
1994).
Strategic Human Resource Management:
Human resource management (HRM) involves all management decisions and
practices that directly affect or influence the people, or human resources, who work for
the organization. HRM is strategy-focused, i.e., by itself it is strategic in nature. HRM at
strategic level is SHRM. (Kazmi, 2002)
Strategic Human Resource Management (SHRM) implies a concern with the ways
in which HRM is crucial to organizational effectiveness. (Miller 1987) defines Strategic
Human Resource Management practice as the decisions and actions, which concern the
management of employees at all, levels in the business, and is related to the
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implementation of strategies directed towards sustaining competitive advantage.
Organizations are increasingly becoming aware of the importance of linking the
organization’s human resource practices to strategy that leads to greater performance
(Huselid, 1995; Youndt et al., 1996; Delery and Doyt, 1996). Ian Clark defines Strategic
HRM that “centers on how organizations can improve their competitive performance by
considering and utilizing their human resource more effectively.”
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 implies four components to Strategic HRM. First, it focuses on a firm’s human
resources, which is the primary resource to be strategically leveraged as a source of
competitive advantage. Second, the concept of activities highlights HR programs,
policies and practices as a means by which people of the firm gain competitive advantage.
Third, both the “pattern” and” plan” describe the goal and process of strategy, described
as” fit.” The definition has the people, practices, and planned pattern are all purposeful, 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 bottom-
line success of a firm. There is an overlap among the various theoretical perspectives
from which they are derived. No single process is correct and each one points to different
aspects of the process needed for developing an effective strategic HR function. The
Five theoretical perspectives formulated to define the concept, are as follows:
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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. There is no single best way to manage
human resources and strategy. The set of HR practices include: High levels of
employment security, Selective hiring practices, A focus on teams and decentralized
decision making, High pay levels, Extensive employee training and so on.
Strategic fit approach: Contrary to the universalistic approach strategic HRM involves
matching specific HR practices to the firm’s overall business strategy. External fit refers
to how well HR practices align with specific aspects of the external environment.
Internal Service Provider: In this approach Strategic HRM, involves the role of HR
professionals in providing HR services to business units within the firm. The goal is to
enhance the effectiveness and efficiency of the operations of the concerned business unit
customers.
Configurational: The configurational approach to SHRM suggests that there are various
configurations of HR practices that go hand- in-hand and, collectively improving the
business performance. The effectiveness of HRM in enhancing a firm’s competitive
advantage depends on a set, or bundle, of HR practices rather than on any single HR
program or policy.
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, difficult
with high competence levels for competitors to imitate or acquire success by enhancing
the overall value of the firm.
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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. They define that HRM by its nature itself is strategic. The
elements of HRM like training, recruitment, selection all of them operate as
derivatives of requirements of strategy within the organization. Strategic planning
suggests HRM planning. This view is not accepted by many of the scholars and view
that HRM is strategic to some extent but not in all aspects.
2) Decision-focused Approach: Tichy et al defines that there are three management
levels namely: strategic (long-term), managerial (medium-term) and operational
(short-term). The author views that the HR functions performed at the strategic
management level are SHRM. 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. 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.
4) Implementation-focused Approach: Miles & Snow view that organizations do have
some competitive objectives that are achieved through some business strategies. In
order to formulate and implement such strategies appropriate HRM systems are
necessary, and those HR systems are strategic in nature so called SHRM.
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Essential elements of SHRM:
The above-discussed theoretical perspectives have six key elements necessary in
developing SHRM within the firm.
1) Internally transforming HR staff and structure:
In creating a strategic HRM philosophy within a 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. In traditional HRM staff had to be
specialized in certain functional areas like training or recruitment interviewing. The
strategic HRM role played by HR professional is “ change management”, involving
strategic planning, team building and having global perspective. Most HR units will
face a significant transformation in order to manage human resources with a new
strategic view.
b) Transforming the organizational structure:.
In transforming the HR structure from traditional to SHRM, it is common for the
organizational unit to restructure. The major issue in designing a new strategic
HRM unit is to determine whether to centralize or decentralize HR function. The
relevant structure for the HR function depends on the nature of the firm’s business,
size of the firm and firm’s overall business strategy. In some organizations
centralized structure for HR unit would be appropriate and in some highly
decentralized HRM may be necessary. Regardless of which particular structure is
used the key element in successful transformation from traditional HR function to
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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.
2) Enhancing administrative efficiency:
Dave Ulrich suggested that one of the key roles of HR staff is to be “administrative
experts”. As administrative experts, 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. The objective is to increase HR
service efficiency and save money. Several processes are needed to enhance the
administrative expertise of HR units. The first focuses on:
a) Improving administrative efficiency by targeting current processes for
improvement, by examining the gaps between the “as is” process and what the
system “ needs to be.”
b) Administrative efficiency can also be enhanced by the development of
centralized HR services that are shared throughout an organization.
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. The development of strategic plan
involves top management, with the help of outside consultants, to go through and
analyze the current and future condition of the organization. To achieve full
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integration, 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.
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. HR fit involves making
sure HR activities make sense and help the organization achieve its goals and objectives.
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.
b) Horizontal fit: This relates to the extent to which HR activities are mutually
consistent. Consistency ensures that HR practices reinforce one another.
c) External fit: The third aspect concerns how well HR activities match the
demands of the external environment.
Ensuring these aspects of fit requires HR practice choices. 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. Fit is defined as
temporary state in an organization, whereas flexibility is defined as the firm’s ability to
meet the demands of dynamic 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. It also involves the cost, difficulty, and time needed to
switch resources from one use to another.
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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. This task is accomplished by having an effective partnership
between HR managers and line managers.
5) Developing a partnership with line management:
Major changes are required to link the human resource function to the user
organization. Most personnel functions are linked to the operational business activities.
With the addition of new managerial and strategic activities, new linking mechanisms
will be required as follows:
i. Step 1. Provide the business with good human resource databases. These
include environmental scanning of labor markets and social and economic
issues that impact the long-term human resource context of the organization.
ii. Step 2. Alter the senior management role when it comes to human resource
management issues so that these concerns receive quality attention. The
managers need to be committed to weighing human resource issues with the
same level of attention as that of other functions, such as finance, marketing,
accounting, and production.
iii. Step 3. The line organization must alter its incentive and control systems so
that the overall human resource function is managed. It will also be
necessary for the organization to have ways of measuring the overall
performance of the human resource function at the strategic, managerial,
and operational levels. This will entail ongoing audits of the human resource
function to determine how well it is doing in providing services to its clients.
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Also adjustments must be make in budgeting for human resource services, as some of
these adjustments will require new sources of corporate funding. (Tichy, N; Fombrun, M;
Charles D; 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. Most of
suggested typologies relate to four basic approaches about HRM:
a) Customer/stake holder approach to measure the HRM effectiveness involves
identifying managers, unions, customers, and employees even the suppliers and
company shareholders, that are direct users of HR products.
b) HR impact: To evaluate the impact of HR programs, human resource units must
develop a strategic framework for assessing the effectiveness of their services.
The strategic objectives should be identified for functional units along with
human resource activities needed to accomplish those objectives.
c) Dollar value of HR programs: The third issue relates to the monetary costs and
benefits of HR activities. Various dollar-value indices like: benefits as % of total
compensation, return on HR investment, HR cost per sales dollar are used to
asses HR.
d) Benchmarking HR practices: This fourth aspect is important as it determines the
true competitive advantage of HR, by assessing against the HR practices of key
competitors and firms that demonstrate HR excellence. 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
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units. “Competitive benchmarking” is conducted with external competitors in the
same market. “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. SHRM practice is coupled with
business strategy. SHRM elevates human resources management from micro level
(individual personal level) to the macro level (business strategy level). SHRM includes
analysis of business and socio-political environment. HR professionals must be aware of
global business and social trends and should be able to perform environmental scanning.
SHRM also includes internal human resource analysis. HR professionals must analyze
human resources against current and future business strategies and identify the gaps
between them.
SHRM is also intended to assist management in the best use of internal labor
market. Hence an absolute requirement for analysis would be effective use of computer-
based human resource information systems. SHRM includes organizational analysis and
design. Hence HR professionals had to provide management not only with analysis, but
also organization-design recommendations. Benchmarking against successful internal and
external organizations is useful tool that helps in this process.
SHRM is part of the business plan. Strategic HR considerations are more
important than the traditional planning elements. The strategic HR considerations are as
follows:
a) Is the organizational culture supporting the long-term business strategy?
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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. The
concept is based mainly on the human resource, which is considered as human capital in
achieving the long-term objective(s) of the company. Hence human resource
management is a major force in driving organizational performance. Hence the
management development process, appraisal process, reward process should be related to
the organizational long-term and short-term goals.
Chase Manhattan Bank targeted on the use of management development program
to support the company’s first formal strategic planning process. The program involved
all the senior officials, chairman in strongly reinforcing the importance of new strategic
planning process. 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. Thus there should be greater emphasis in carefully developing
managers. Many companies have been very strategic in developing managers. 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. Hence every organization must develop its own strategic position in
terms of human resources.
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Conclusion:
Human Resource management has a major impact on individual and so on
productivity and organizational performance. Effective strategic management requires
effective human resource management. Strategic Human Resource Management implies
the ways in which HRM is crucial to organizational effectiveness. Hence organizations
have to carefully design strategies and relate to human resources for effective utilization
in achieving greater competitive performance. The human capital, practice, which
includes the kind of Strategy Company, has to follow in terms of greater performance and
the pattern should be taken care in maintaining Strategic Human Resource Management.
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References
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Houghton Mifflin
Irene Keng-Howe, C; Keng-Howe, C; Irene Chong, P (1999) Effects of strategic human
resource management on strategic vision. International Journal of Human
Resource Management; Vol.10 Issue6
Kazmi, A; Ahmad, F (2002) Differening Approach to Strategic Human Resource
Management Journal of Management Research Issue 3 p133, 8p
Khatri, N (1999) Emerging issues in strategic HRM in Singapore International Journal of
Manpower; Vol. 20 Issue 8, p516, 14p
Tichy, N; Fombrun, M; Charles D; Mary A (1982) Strategic Human Resource
Management. Sloan Management Review Winter82 Issue 2 p47 2 diagrams
Tokesky; George C; Kornides; Joanne F (1994) Strategic HR management is vital
Personnel Journal Vol.73 Issue 12, P115
Wright; Patrick, M (1998) Introduction: Strategic human resource management research
in the 21st century Human resource Management Review Vol.8 Issue 3, P187,
5p