Strategic human resource management (SHRM) has emerged as a significant issue in tandem with the increasing focus being given by the companies to strategy. Faced with an accelerating changing and unsteady environment, the response of the corporation has been to attempt to create a sound internal configuration that includes human resource management (HRM) systems. The key to providing an effective response is to have an HRM system attuned to strategic requirements. The philosophical and academic bases for SHRM, proposed during the past three decades, have followed differing paths. This project attempts to bring together the differing approaches to SHRM and presents a consolidation and evaluation of these viewpoints. A discussion highlights the problem of semantics and pinpoints the controversies and contradictions implicit in the different viewpoints. This project underscores the emerging area of agreement viz. the increasing emphasis on the strategic nature of HRM and considering human resource as a strategic resource to be used to create and sustain a competitive edge for organizations.
Strategic Human Resource Management is essential to every firm and organization to define its plans and strategies on how the company vision and goals should be aligned and attained through people. It is founded on the following propositions:
1- Human resources is a key source of competitive advantage
2- Employees are those who implement the strategic plans
3- A systematic strategy should be implemented to define which pass the firm is willing to take and how it is going to reach its goals.
Strategic Human resource is a process that encompasses the use of different and wide approaches to the HR strategies' development, which are vertically integrated with the business strategy and horizontally with each other's.
These HR strategies outline intents and policies firmly related to the organization goals, such as people management, organizational efficiency, resource management, employee's training and development, reward and recognition, knowledge management and the management of change in structure and culture. In general, Strategic HRM deals with any major employees' issues that affect or are affected by the strategic plans of the company.
Goals of Strategic HRM
The foundation for strategic HRM is the real advantage of having an agreed basis for developing methodologies to people management in the longer term, and this is how a company can achieve a competitive advantage.
Strategic HRM gives a perspective on how to address people's critical issues and success factors; it offers strategic decisions that have long term focus and affect the firm performance either in its success or failure. The goal of strategic HRM is to create special capabilities by ensuring that the firm has what it needed from highly professional, skilled, devoted and motivated employees to create and sustain a competitive advantage in the market. It is aimed to provide direction and guidance for individuals, in a turbulent business environment, by implementing various HR programs and policies. Also when it comes to strategic HRM, it is essential to take into consideration the interest and benefits of all the stakeholders in the firm, so in addition to the employees, the management and owners of the organization are also key individuals to consider in any strategy before implementing it.
There are two types of strategic HRM: soft and hard. The soft strategic HRM will focus mainly on the security of the employees, their wellbeing, the internal communication process in the organization and the employees' work-life balance. The hard strategic HRM on the other hand, take into account before any strategic decision or even a policy implementation, the profit that the business will get in return of investing in human resources. So any organization rallying its team to achieve its goals and is following an effective strategy to reach its vision, should obtain and retains its skilled resources by using more often the concept of soft strategic HRM. However the hard concept comes first in many firms and could not be considered wrong depending on the business and its circumstances but it has been noticed that effective strategic HRM should combine the hard and soft elements to accomplish a proper balance for the benefit of all stakeholders.
Business strategies are set to achieve a firm's vision, mission and objectives. Different environment, vision, mission, and objectives require different types of strategies and in order to frame and implement these, appropriate type of HRM strategies are required. Some authors call these blending of strategies with HRM strategies as strategic HRM. Miles & Snow (1984) investigated the competitive strategies of several hundred companies in more than a dozen widely differing industries. This resulted in their popular classification of organizations as defenders, prospectors, and analyzers depending on their strategic behavior and supporting characteristics. These authors attempt to relate the elements in the HRM system across these three types of organizations. With regard to HRM system, the basic strategy of the defenders, according to them, could be to build human resource, of prospectors could be to acquire human resource, and of analyzers to allocate human resource. Taking the case of performance appraisal, defenders and analyzers could be process-oriented meaning thereby that they could evaluate performance based on critical incidents and production targets while prospectors could be result-oriented by evaluating performance on profit targets. Tackling the important question of compensation, defenders could determine it based on the position of a person in the organizational hierarchy, prospectors on performance, and analyzers on a mix of hierarchy and performance popularly referred to as merit-cum-performance basis.
Approaches to Strategic HRM
Among the several viewpoints of SHRM, five major approaches to SHRM were identified and we shall discuss them below:
Several authors (e.g. Mathis & Jackson, 1995 or Beer et al., 1984) view HRM and SHRM as identical. According to them, HRM is strategy focused and contains certain elements. This means that HRM by its very nature is strategic. The elements of HRM such as recruitment and selection or compensation do not strictly operate in isolation but are derivatives of the requirements of the strategy that an organization employs. Strategic planning dictates HRM planning. Though desirable and idealistic, this view does not seem to be fully acceptable by the thinkers. There is a feeling that HR planning is to some extent strategic but not in all its aspects. So the HR strategy should be a derivative of the whole organization strategy and aligned with it, it is an integral part of the business strategy. This is called vertical integration between business and HR strategy to accomplish each other's. Also Horizontal integration with other features of the HR strategy is needed to combine its different elements together. The purpose is to attain an intelligible approach to managing individuals in a firm in which the various practices are reciprocally supportive.
High-commitment management approach
As per Walton (1985), one of the main characteristics of HRM is to stress the importance of enhancing mutual commitment and increase the level of trust within the internal relations in an organization. The approaches to achieve high commitment are detailed below as per Walton (1985) and Wood (1995):
- Reduce the hierarchies in a firm
- Emphasis a high level of function flexibility while diminishing the potential of strict job descriptions
- Increase the reliability on team structure for better team briefing and working and improvement problem solving in groups.
- Focus on the career development for employees by trainings to ensure commitment at all levels in the company.
- Increase employee's engagement in the quality management.
- Introduce the merit payment system and profit sharing advantage.
- Design and provide jobs that have a significant level of intrinsic satisfaction.
- Introduce a policy of kind of permanent employment securities with low risk of lay-offs
High performance approach
This approach aims to create an impact on the whole organization performance through its people in all different areas as customer service, productivity, profits, quality, growth and eventually better shareholder value. The High-performance approach includes severe recruitment procedures for ultimate selection of employees, diversified management development activities, performance management processes, extensive training programs and incentive pay systems.
The characteristics of this approach are as follows:
- Close monitoring for personal attitudes
- Clear job description and design
- Rigorous recruitment system, careful selection of employee and training
- Performance appraisals
- Clear and proper complaint procedures
- Formal MIS system to share information within all people in the organization
- Reward and promotion system related to the high performers in the company
The High-involvement approach
This approach considers employees as partners in the organization and their input in every issue is taken into great consideration and their interests are respected, in general it focuses on involvement and communication. The aim is to keep the communication channels and dialogues between managers and employees always open in order to outline expectations and continuously share information about the company vision, mission, objectives and values. This will keep the whole organization synched and aligned on the same page, with a full and mutual understanding on what should be done and when, all in the benefit of the company.
The resource-based approach
As per Barney (1991), this approach aims to achieve strategic alignment between the resources and opportunities to obtain the best added value after effectively deploying the resources. This approach stresses on the development of managers and other employees who are capable of thinking and planning strategically and who can understand the key strategic issues. In this way, the company can increase its strategic capability and can obtain a competitive advantage because its human resources are enabled to learn faster and to adapt quickly and effectively to changes than its competitors. Those who apply this approach believe that by investing in hiring and developing more talented employees adds to their value and extends the skills base in the company. Thus the main concern is to enhance the human and intellectual capital of the company.
A convincing rational behind this approach has been produced by Grant (1991):
When the external environment is in a state of flux, the firm's own resources and capabilities may be a much more stable basis on which to define its identity. Hence, 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 (eg markets) which the business seeks to satisfy.
This rational says that if the company invests in human capital, it is investing in a durable and stable base, while focusing on market needs is putting most of the efforts on an unsteady environment. Thus creating a unique pool of high performing, productive, flexible and innovative talents, is the basis of developing and sustaining a competitive advantage that is hard to imitate. Why it is hard to imitate? Because when adopting an HR strategy, a company is creating a unique blend of policies, practices, styles, personalities and culture which enable the company to differentiate what is supplies to the customers from what the rivals are supplying.
Conclusion and Limitations of the strategic HRM
All the approaches of the SHRM are based on the theory that every business, after reviewing and auditing the internal and external factors, they create a business strategy and from this strategy they generate HR strategies in specific areas which should be aligned with the business strategy.
But what we see in real life is that strategic HRM is not a formal process and it is not a well communicated policy. Aligning strategic HRM with business strategy is definitely a good theory but it is difficult to achieve specially that HRM is the closest function that deals with people and is affected directly by the organization culture.
All in all, the emerging discipline of SHRM offers interesting and insightful variants so far as the views and approaches are concerned. An on- going effort is required to unravel the mysteries of SHRM that holds the promise of being a powerful tool to manage human resource in the environment of fast-paced changes that organizations are experiencing today.
Human Resource Management: Transforming Theory into Innovative Practice, 1e
SHRM Website: Strategic human resource management: concept and process
HRPS Website: Essentials of Human Resource Training and Development
Wikipedia: Strategic human resource planning
Harvard Business Review: The Differentiated Workforce: Transforming Talent into Strategic Impact
Foulkes, F. K. (Ed) (1986), Strategic Human Resource Management: A Guide for Effective Practice, Prentice-Hall, Englewood Cliffs, NJ
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