Home » Subject » Management » Notes » Strategic Management of human resources
Strategic human resource management, abbreviated as SHRM is a viable approach to the management of human resources that gives a strategic structure to support long-lasting business objectives and results. The approach is associated with longer-term people problems and macro-concerns about structure, quality, culture, values, obligation and matching resources to future requirement. Strategic human resource management is a planned process to deal with human resources of a firm. In the area of management, Strategic human resource management is viewed as novel concept, in spite of its constant development since last many decades. The conventional human resource functions or technical HRM operations include array of employment practices, such as recruitment, selection, performance appraisal, training and development and the administration of compensation and benefits. In order to combine the HRM function with business policy, Strategic human resource management reveals flexible plan and use of human resources to accomplish the targeted goals of multinational firms and assists organisations to compete in tough marketplace.
Components of SHRM:
Strategic HRM stresses the requirement for Human Resource plans and strategies to be devised within the framework of general organizational strategies and objectives, and to be approachable to the varying nature of the organizations outside environment. It is a representation which requires interpretation and adjustment by specialists to make sure the most fit between human resource and business strategies and plans. Thus, Strategic Human Resource Management is the incorporation of the adherence of all human resource functions to broad organizational goals, and awareness to the external environment.
Theoretical review of Strategic human resource management:The field of human resource strategy differs from traditional HR management research in two significant ways. First, Strategic human resource management focuses on organizational performance instead of individual performance. Secondly, it also stresses the role of human resource management systems in order to resolve business problems rather than individual human resource management practices in separation. It is apparent that previous studies done for Strategic human resource management are positively related with various conceptualisations of HRM and firm performance (Wright et al., 2005). The strategic dimension of human resource management got attention of researchers at the end of the 1970s, with the conﬂuence of basic changes in the literature. There was shift from the old personnel administration approach to the more modern concept of human resources and the reorientation of generic strategic models to internal aspects of the organization. Strategic Human Resource Management is the designed pattern of human resource deployment and activities intended to enable the organization to meet organizational goals and objectives (Noe et al. 2007). According to Wright and McMahan, strategic human resource management is “the pattern of planned human resource deployments and activities intended to enable the firm to achieve its goals” (1992).
Evolution of SHRM:
The issue of Strategic human resource management emerged in the beginning of 1990s, at that time scholarly experts described it as: The undertaking of all those activities affecting the behaviour of individuals in their efforts to formulate and implement the strategic needs of business. Strategic human resource management deals with extensive organizational issues relating to changes in structure and culture, organizational efficacy and performance, matching resources to future requirements, the development of distinguishing capabilities, knowledge management, and the management of change. It is concerned with both human capital requirements and the development of process capabilities. In general, Strategic human resource management addresses any major people issues that are influenced by the strategic plans of the organization. In theoretical literature, SHRM has been explained “A distinctive approach to employment management which seeks to achieve competitive advantage through the strategic deployment of a highly committed and capable workforce using an array of cultural, structural and personnel techniques” (Storey, 2001: 6). The simplest representation of the Strategic human resource management model is an association between a firm’s HR architecture and firm performance. The HR architecture comprises of the systems, practices, competencies, and employee performance behaviours that reveal the development and management of the firm’s strategic human capital. Strategic human resource management mainly emphasizes on actions that distinguish the firm from its competitors (Purcell, 1999). Hendry and Pettigrew (1986) put forward that it has four meanings such as the use of planning; a coherent approach to the design and management of personnel systems based on an employment policy and workforce strategy and often underpinned by a ‘philosophy’; matching HRM activities and policies to some explicit business strategy; seeing the people of the organization as a ‘strategic resource’ for the achievement of ‘competitive advantage’. As Boxall (1996) commented that ‘The critical concerns of HRM, such as choice of executive leadership and formation of positive patterns of labour relations, are strategic in any firm.’ His underlying principle for strategic HRM is the apparent advantage of having an agreed and understood basis for developing approaches to people management in the long term.
According to Lengnick-Hall and Lengnick-Hall (1990), it is the concept of accomplishing competitive advantage. The strategic human resource role focuses to align human resource strategies and practices with business strategy. In this perspective, the HR expert works to be a strategic associate, helping to make certain the success of business strategies. By fulfilling this role, HR professionals increase the capacity of a business to implement its strategies. Converting business strategies into HR practices assists a business in three ways. First, the business can adjust to change because the time from the conception to the execution of a strategy is brief. Second, the business can fulfil purchaser demands because its customer service strategies have been translated into specific policies and practices. Third, the business can accomplish financial performance through its more effective execution of strategy.
Strategic human resource management supplies a perception that critical issues or success factors related to people can be addressed and strategic decisions are taken that have a major and long-term impact on the behaviour and triumph of the organization. The basic objective of Strategic human resource management is to create strategic capability to make certain that the organization has the skilled, committed and well-motivated employees it needs to accomplish sustained competitive advantage. Its purpose is to give a sense of direction in an often unstable environment so that the business needs of the organization and the individual and combined needs of its workers can be fulfilled by the development and execution of consistent and practical human resource strategies and programmes.
Dyer and Holder (1988) commented that tactical human resource management should provide ‘unifying frameworks which are at once broad, contingency based and integrative’. Storey’s (1989) described that soft strategic HRM will place greater prominence on the human relations aspect of people management, stressing continuous development, communication, involvement, security of employment, the quality of working life and work-life balance. ‘Hard strategic HRM’ will emphasize the yield to be obtained by investing in human resources in the interests of the business. Strategic human resource management tries to accomplish 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 notion of soft strategic HRM. It is a general belief in the business world that the human resources of an organization can be a basis of competitive advantage, provided that the policies and practices for managing people are incorporated with planned goals and objectives. Strategic human resource management highlights the significance of establishing equivalence between human resource policies and organizational strategic goals.
The impact of Strategic human resource management implementation on organizational performance:
There are numerous factors that affect strategic aspects of human resource. Internal factors include organizational structure, organizational culture, organizational competencies, organizational internal policies and organizational processes. External factors include market scenario, competitors, government policies and technological advancements.
Approaches of Strategic Human Resource Management
There are five approaches to Strategic human resource management. These include resource based strategy, achieving strategic fit, high-performance management, high commitment management and high involvement management.
The resource-based approach: the resource-based view is influential theoretical approach in the discussion on Strategic human resource management. In the resource-based, the importance is to attain sustainable competitive advantage through effective utilisation of the resources of an organisation (Wright et al., 2001). Main objective of resource-based human resource strategy, as is to develop strategic capability to achieve strategic fit between resources and opportunities and obtaining added value from the effective use of resources (Barney, 1991). A resource-based approach deals with methods to enhance the firm’s strategic capability by the development of managers and other employees who can tactically plan and who understand the major strategic issues. The resource-based approach is developed on the principle that competitive advantage is obtained if a firm can achieve and develop human resources that allow it to learn quicker and apply its learning more successfully than its competitors (Hamel and Prahalad, 1989). Kamoche (1996) proposes that ‘In the resource-based view, the firm is seen as a bundle of tangible and intangible resources and capabilities required for product/market competition.’ According to human capital theory, resource-based theory stresses that investment in people adds to their value in the firm. The strategic goal will enable firm to ‘create firms which are more intelligent and flexible than their competitors by hiring and developing more capable employees and by extending their skills (Boxall, 1996). Ulrich (1998) observed that Knowledge has become a direct competitive advantage for companies selling ideas and relationships. The challenge to organizations is to make sure that they have the potential to find, incorporate, balance and maintain the brilliant staff.
Grant (1991) presented reasonable statement to use resource-based strategy. When the external environment is in a state of instability, the firm’s own resources and capabilities may be a much more stable basis on which it has to define its identity. Therefore, a definition of a business in terms of what it is capable of doing may offer a more durable basis for strategy than a definition based upon the needs (which the business seeks to satisfy). Talented employees such as their better performance, productivity, flexibility, innovation, and the ability to deliver high levels of personal customer service, are ways in which employees can contribute to develop an organization’s competitive position. Delery and Shaw (2001) stated that the choice of the resource-based view offers numerous benefits to investigators researcher in exploring the strategic nature of human resource management. There theorists also gripped in criticisms of the approach, chiefly that the resource-based view does not meet the standards for a true theoretical viewpoint and contains several tautological elements (Priem and Butler, 2001).
resource based approach to strategic analysis:
Strategic fit: The human resource strategy must be aligned to the business strategy (vertical fit). Vertical integration is essential for comparison between business and human resource strategy so that the latter supports the achievement of the former and, indeed, helps to define it. Horizontal integration with other aspects of the human resource strategy is required so that its different elements fit collectively. The main intent is to accomplish a consistent approach to managing people in which the various practices are jointly helpful. Strategic fit suggests that if firms want to maximize its competitive advantage, it must match with its internal sources and skill with opportunities available in external environment. Experts, categorized five types of fit such as best fit approach, fit as contingency, best practice approach, fit gestalt and fit bundles.
Two fits of SHRM:
High-performance management: The objective of High-performance management is to make an impact on the performance of the firm through its people in the arena of productivity, quality, and levels of customer service, growth, profits, and finally the delivery of increased shareholder value. High-performance management practices include accurate recruitment and selection procedures, wide-ranging and appropriate training and management development activities, incentive pay systems and performance management processes.
High-involvement management: This practice involves treating workers as collaborators in the enterprise whose interests are valued and who can put their views on matters that concern them. It is concerned with communication and participation. The goal is to produce a climate in which a continuing conversation between managers and the members of their teams takes place in order to describe expectations and share information on the organization’s mission, values and objectives. This establishes common understanding of what is to be achieved and an agenda for managing and developing people to guarantee that it will be achieved.
Limitations: The theory of strategic HRM is based on the principle that the development of strategy is a logical and linear process. This designates that the overall HR strategy flows from the business strategy and creates specific HR strategies in major fields. The process happen by reference to systematic reviews of the internal and external environment of the organization, which recognize the business, organizational and HR issues that need to be dealt with. But strategic HRM in real scenario does not usually take the form of a formal, well-articulated and linear process that flows logically from the business strategy as described by Mintzberg (1987). Mello (2001) presented eight barriers to successful strategic human resource management. The first one is the short-term orientation of firms. As most of the HR interventions or practices have long-term implications, short-term oriented actions can obstruct effective human resource management. The second barrier is the incapability of the human resource managers to think tactically. Their inadequate general management training or inability to influence colleagues in other departments is visualized as barricade to SHRM.
The third hindrance of SHRM is lack of admiration for HRM as a function. The fourth barrier is lack of teamwork from the line managers and their untrustworthiness in handling HR function in their respective departments. The fifth reason that hinders HR functioning is the increasing focus on the quantifying results. The feeling of risk in investing heavily on human resources is major and sixth reason that can obstruct the development of the workers for complementing organisational performance. The seventh barrier that can slow down strategic linkage is the incapacity of the HR practices to change according to the business requirements. The final cause would be the disincentives related to changes associated with SHRM. Implementation of SHRM may involve radical changes in the work practices and other HR processes and hence may affect majority of employees. Bringing about change is a complex process and people who have faced negative consequences of an unproductive effort to change may hamper the change processes of the future.
Despite of barriers, strategic human resource management is significant for organization’s success as it is concerned with the following factors:
- Analyse the opportunities and threats existing in the external environment.
- Devise strategies that will match the organisation’s (internal) strengths and weaknesses with environmental (external) threats and opportunities.
- Execute the strategies so formulated.
- Assess and control activities to ensure that organisation’s objectives are duly achieved.
Strategic management presents financial and non-financial advantages to firms which practices it. Organizations who adopt SHRM can compete in tough business environment because it permits identification, prioritisation and exploitation of opportunities, provides an objective view of management issues, reveals a structure for improved co-ordination and control of activities, reduces the effects of unfavourable conditions and changes, enables major decisions to better support established objectives, Allows more effectual allocation of time and resources to identified opportunities, facilitates fewer resources and lesser time to be devoted to correcting erroneous or adhoc decisions, develops a framework for internal communication among personnel, assists to incorporate the behaviours of individuals into a total effort, gives a basis for the explanation of individual responsibilities, Gives support to forward thinking, Provides a co-operative, integrated and passionate approach to resolve problems and opportunities, promotes a positive attitude towards change and provides a degree of discipline and formality to the management of a business.
To summarize, Strategic human resource management is vital procedure to create human resource strategies, which are incorporated vertically with the business scheme and horizontally with one another. It is an effective process of recognizing and executing organization’s mission by harmonizing its abilities with demands of its environment. It relates human resource management with strategic goals in order to improve business output and develop culture to promote innovation and flexibility.
Buy These Notes in PDF Format
A strategic HR model is a plan to manage a company's human capital such as employees. It aligns its strategies with those of the business and provides direction to hire talent, appraise performance and determine compensation. Models are typically long-term plans that take time to develop and implement.What are the 5 P's model of SHRM? ›
As its name suggests, The 5P's Model is based on five constitutional aspects: purpose, principles, processes, people, and performance. According to this framework, aligning and balancing these five principles leads to achieving company success.What are the 5 steps of strategic HR management? ›
- Step 1: Identify Future HR Needs. ...
- Step 2: Consider Present HR Capabilities. ...
- Step 3: Identify Gaps Between Future Needs & Present Capability. ...
- Step 4: Formulate Gap Strategies. ...
- Step 5: Share & Monitor The Plan.
exter- nal labour orientation are combined to develop the four different HR strategies, which include Loyal Soldier (cost leadership/internal labour), Bargain Labourer (cost leadership/external labour), Free Agent (differentiation/external labour) and Committed Expert (differentiation/internal labour).What are the 4 basic model of strategic management? ›
The four phases of strategic management are formulation, implementation, evaluation and modification.What are the 5 model of strategic management? ›
The five stages of the process are goal-setting, analysis, strategy formation, strategy implementation and strategy monitoring.What is 5S in human resource management? ›
5S stands for the 5 steps of this methodology: Sort, Set in Order, Shine, Standardize, Sustain. These steps involve going through everything in a space, deciding what's necessary and what isn't, putting things in order, cleaning, and setting up procedures for performing these tasks on a regular basis.What are the three keys of SHRM? ›
- Vertical fit. This aspect of vertical fit concerns the coincidence between HR practices and overall business strategy.
- Horizontal fit. This relates to the extent to which HR activities are mutually consistent. ...
- External fit.
The three phases of human resources management are acquisition, development and termination. These phases are also known as the pre-hiring phase, the training phase, and the post-hiring phase.What are the six basic human resource strategies? ›
- Build and implement an HR strategy.
- Hire the right people.
- Keep employees.
- Invest in employees.
- Empower employees.
- Promote diversity.
There are four general steps in the HRP process: identifying the current supply of employees, determining the future of the workforce, balancing between labor supply and demand, and developing plans that support the company's goals.What are the 5 types of human resources? ›
- Compensation and Benefits. ...
- Recruiting and Staffing. ...
- Safety and Compliance. ...
- Training and Development. ...
- Talent Management.
The basic strategic planning model is ideal for establishing your company's vision, mission, business objectives, and values. This model helps you outline the specific steps you need to take to reach your goals, monitor progress to keep everyone on target, and address issues as they arise.
A strategic planning model is how an organization takes its strategy and creates a plan to implement it to improve operations and better meet their goals.What is the strategic management process model? ›
Strategic management process is a continuous culture of appraisal that a business adopts to outdo the competitors. Simple as it may sound, this is a complex process that also covers formulating the organization's overall vision for present and future objectives.What are the two models of HRM? ›
The four HRM models are the Fombrun, Harvard, Guest and Warwick models. Often studied by HR students, these models provide a helpful framework for HR planning. Using them gives credibility and legitimacy to HR policies.What are the 3 key elements of the strategic approach to HRM? ›
Main factors or variables involving in research of strategic HRM can be divided into HRM system, organizational strategy, organizational performance, and internal and external environment of organization.What is the fombrun model? ›
Fombrun. Fombrun's Michigan model outlines strategic human resource management that focuses on management, professional groupings, and the emerging labor force. The model's main goal was to match the organization's formal structure, new initiatives, and policies with the human resource system.What is the Ulrich model CIPD? ›
Their research found a correlation with the essential elements of the so-called Ulrich model – the existence of centres of expertise, decentralised HR generalists supporting business units and administrative processing centralised in shared services units and a strategic role for HR.