Strategic HRM Notes

7/30/2019 Strategic HRM Notes

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Strategic HumanResource Management

A Study on Indian Context


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CHAPTER-01


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Executive Summary


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Recently we have witnessed the amalgamation of several streams of management into the

strategic management literature including epistemology, organizational learning, the resource

based view, organizational capabilities and competitiveness and innovation and new product

development (Frost, 2003; Grant and Baden Fuller, 1995). Other streams focus on nature and

processes and examine the internal focus, which includes impact of strategic management

concepts and frameworks that managers use to develop competitive strategy (Clark, 1997).

Researchers have contended that the concept of strategic human resource management has

evolved into a bridge between business strategy and the management of human resources (e.g.

Butler et al., 1991; Lengnick-Hall and Lengnick-Hall, 1988; Lorange and Murphy, 1984). On the

other hand, Truss and Gratton (1994) opine strategic human resource management as the

overarching concept that links the management and deployment of individuals within the

organization to the business as a whole and its environment. Ulrich (1997) further distinguished

between strategic HR and HR strategy. He stated that strategic HR was the process of linking HR

practices to business strategy. Thus, strategic HR deals with identifying the capabilities required

of a business strategy and using HR practices to develop those capabilities.

On the other hand, he viewed HR strategy as building an agenda for the HR function and

defining the mission, vision and priorities of the HR function. During the last decade, the

personnel/HRM field has shifted from a micro focus on individual HRM practices to a debate on

how HRM as a more holistic management approach may contribute to the competitive advantage

of the organization (Fey et al., 2000). Researchers drawing largely on a behaviourist psychology

perspective have addressed the link between human resource management practices and

competitive advantage (Schuler and Jackson, 1987; Schuler and Macmillan, 1984). From this

perspective, researchers have argued that human resource management practices can contribute

to competitive advantage as far as they elicit and reinforce the set of role behaviours that result in

lowering costs, enhancing product differentiation or both (Schuler and Jackson, 1987). This

paper focuses on strategic HRM, as defined by Ulrich (1997), and the strategic role of HR linked

to the organizational learning capabilities of the Indian managers. The study will now look at the

field of HRM/HRD and the link to organizational learning capability.


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Introduction


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The SHRM literature is rooted in manpower (sic) planning, but it was the work of influential

management gurus, affirming the importance of the effective management of people as a source

of competitive advantage, that encouraged academics to develop frameworks emphasizing the

strategic role of the HR function and attaching the prefix strategic to the term human resource

management. Interest among academics and practitioners in linking the strategy concept to

HRM can be explained from both the rational choice and the constituency-based perspective.

There is a managerial logic in focusing attention on peoples skills and intellectual assets to

provide a major competitive advantage when technological superiority, even once achieved, will

quickly erode.

Strategic human resource management is designed to help companies best meet the needs of their

employees while promoting company goals. Human resource management deals with anyaspects of a business that affects employees, such as hiring and firing, pay, benefits, training, and

administration. Human resources may also provide work incentives, safety procedure

information, and sick or vacation days.

Strategic human resource management is the proactive management of people. It requires

thinking ahead, and planning ways for a company to better meet the needs of its employees, and

for the employees to better meet the needs of the company. This can affect the way things are

done at a business site, improving everything from hiring practices and employee

training programs to assessment techniques and discipline.

Strategic human resource management is essential in both large and small companies. In small

companies, this may be as simple as the owner or manager taking a little time every day to

observe, assist, and assess employees, and provide regular reviews. Larger companies may have

a whole department in charge of human resources and development. By meeting the needs of the

employees in a way that also benefits the company, it is possible to improve the quality of staff

members. Taking the effort to provide employees with the tools they need to thrive is worth the

investment.


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CHAPTER-02


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Strategic HRM Meaning and Definition


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The field of strategic HRM is still evolving and there is little agreement among scholars

regarding an acceptable definition. Broadly speaking, SHRM is about systematically linking

people with the organisation; more specifically, it is about the integration of HRM strategies into

corporate strategies. HR strategies are essentially plans and programmes that address and solve

fundamental strategic issues related to the management of human resources in an organisation

(Schuler, 1992). They focus is on alignment of the organisations HR practices, policies and

programmes with corporate and strategic business unit plans (Greer, 1995). Strategic HRM thus

links corporate strategy and HRM, and emphasises the integration of HR with the business and

its environment. It is believed that integration between HRM and business strategy contributes to

effective management of human resources, improvement in organisational performance and

finally the success of a particular business. It can also help organisations achieve competitive

advantage by creating unique HRM systems that cannot be imitated by others. In order for this to

happen, HR departments should be forward-thinking (future-oriented) and the HR strategies

should operate consistently as an integral part of the overall business plan. The HR-related

future-orientation approach of organisations forces them to regularly conduct analysis regarding

the kind of HR competencies needed in the future, and accordingly core HR functions (of

procurement, development and compensation) are activated to meet such needs.

Lengnick-Hall and Lengnick-Hall (1999: 2930) summarise the variety of topics that have been

the focus of strategic HRM writers over the past couple of decades. These include HR

accounting (which attempts to assign value to human resources in an effort to quantify

organisational capacity); HR planning; responses of HRM to strategic changes in the business

environment; matching human resources to strategic or organisational conditions; and the

broader scope of HR strategies. For these writers, strategic HRM is a multidimensional process

with multiple effects. Such writing also highlights the growing proactive nature of the HR

function, its increased potential contribution to the success of organisations and the mutual

relationships (integration) between business strategy and HRM.

Two core aspects of SHRM are: the importance given to the integration of HRM into the

business and corporate strategy, and the devolvement of HRM to line managers instead of

personnel specialists. Brewster and Larsen define integration as the degree to which the HRM


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issues are considered as part of the formulation of the business strategy and devolvement as the

degree to which HRM practices involve and give responsibility to line managers rather than

personnel specialists. Research in the field highlights a number of benefits of integration of

HRM into the corporate strategy. These include: providing a broader range of solutions for

solving complex organisational problems; assuring the successful implementation of corporate

strategy; contributing a vital ingredient in achieving and maintaining effective organisational

performance; ensuring that all human, technical and financial resources are given equal and due

consideration in setting goals and assessing implementation capabilities; limiting the

subordination and neglect of HR issues to strategic considerations; providing long-term focus to

HRM; and helping a firm to achieve competitive advantage.

In similar vein, researchers have highlighted the benefits of devolvement of HRM to line

managers. These include: highlighting certain issues that are too complex for top management to

comprehend alone; developing more motivated employees and more effective control; local

managers responding more quickly to local problems and conditions; resolving most routine

problems at the grassroots level; affording more time for personnel specialists to perform

strategic functions; helping to systematically prescribe and monitor the styles of line managers;

improving organisational effectiveness; preparing future managers by allowing them to practise

decision-making skills; and assisting in reducing costs by redirecting traditionally central

bureaucratic personnel functions.

Despite the highlighted benefits of the devolution of HRM to the line management, it is still not

widely practised in organisations. On the basis of earlier studies in the UK and their own in-

depth investigations into the topic, McGovern et al. suggest that devolution of responsibility for

HRM to line managers is constrained by short-term pressures on businesses (such as minimising

costs), the low educational and technical skill base of supervisors and a lack of training and

competence among line managers and supervisors.

An important issue for top decision-makers is how to evaluate the extent to which both strategic

integration and devolvement are practised in their organisations. The level of integration of HRM

into the corporate strategy can be evaluated by a number of criteria: these include representation


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of specialist people managers on the board; the presence of a written people management

strategy (in the form of mission statement, guideline or rolling plans, emphasising the

importance and priorities of human resources in all parts of the business); consultation with

people management specialists from the outset in the development of corporate strategy;

translation of the people management strategy into a clear set of work programmes; the growing

proactive nature of people management departments through the creation of rolling strategic

plans (emphasising the importance of human resources in all parts of the business); through

mission statements; by aligning HR policies with business needs through business planning

processes; by use of participative management processes and committee meetings; and via HR

audits.

The level of devolvement of HRM to line managers in an organisation can be evaluated on the

basis of measures such as: the extent to which primary responsibility for decision-making

regarding HRM (regarding pay and benefits, recruitment and selection, training and

development, industrial relations, health and safety, and workforce expansion and reduction) lies

with line managers; the change in the responsibility of line managers for HRM functions; the

percentage of line managers trained in people management in an organisation; the feedback

given to managers/line managers regarding HR related strategies; through consultations and

discussions; the extent to which line managers are involved in decision- making; by giving the

line managers ownership of HRM; and by ensuring that they have realised / accepted it by

getting their acknowledgement.


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Stages of the Evolution of Strategy and HRM Integration

Greer (1995) talks about four possible types of linkages between business strategy and the HRM

function / department of an organisation:

Administrative linkage represents the scenario where there is no HR department andsome other figurehead (such as the Finance or Accounts executive) looks after the HR

function of the firm. The HR unit is relegated here to a paper-processing role. In such

conditions there is no real linkage between business strategy and HRM.

Next is the one-way linkage where HRM comes into play only at the implementationstage of the strategy.

Two-way linkage is more of a reciprocal situation where HRM is not only involved atthe implementation stage but also at the corporate strategy formation stage.

The last kind of association is that of integrative linkage, where HRM has equalinvolvement with other organisational functional areas for business development.

Purcell (1989) presents a two-level integration of HRM into the business strategy upstream or

first-order decisionsand downstream orsecond-order decisions:

First-order decisions, as the name suggests, mainly address issues at the organisationalmission level and vision statement; these emphasise where the business is going, what

sort of actions are needed to guide a future course, and broad HR-oriented issues that willhave an impact in the long term.

Second-order decisions deal with scenario planning at both strategic and divisional levelsfor the next 35 years. These are also related to hardcore HR policies linked to each core

HR function (such as recruitment, selection, development, communication).

Guest (1987) proposes integration at three levels:

First he emphasises a fit between HR policies and business strategy. Second, he talks about the principle of complementary (mutuality) of employment

practices aimed at generating employee commitment, flexibility, improved quality and

internal coherence between HR functions.

Third, he propagates internalisation of the importance of integration of HRM and business

strategies by the line managers.


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Strategic Planning Process

A good strategic planning process is iterative, incorporating internal and external information,

various functional expertise, and cross-divisional management personnel throughout the year.

Further, it aligns the entire organization with measurable metrics which are tracked and

evaluated on a regular basis. It is important to establish an understanding of your organizations

strategic planning process and the decision-making process associated with it. At every stage in


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the strategic planning process information will be analyzed in order to make decisions. Seek out

those opportunities and offer information and insight that will enable those conversations.

Strategic decisions will be made based on return on investment (ROI), economic profit or

shareholder value creation, revenue growth, market share growth, margin, reputation or other

factors. Companies also make decisions based upon short-term (sometimes quarterly) or long-

term expectations, depending on the stage of growth and legal structure of the company. Once

you understand the planning process and the decision-making criteria for your organization, you

can begin to make inroads into the process. Your input into the process at every stage should be

in alignment with the decision-making process of the company. In fact, your ability to align your

conversations and actions with the process and decision-making criteria will at least get you on

the long list of invitations to the table.


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Approaches to Strategic Human Resource Management

The four major approaches to Strategic Human Resource Management identify 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 organizations 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

1. Internally Transforming HR Staff and Structure: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 structurefrom 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 firms business, size of the firm and firms 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 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 ofHR 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 HRservices that are shared throughout an organization.


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c. The ultimate process involves HR staff to rethink how they create value to the firm interms 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 HRrequires 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 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 HRpractices 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 HRpractices and overall business strategy.

b. Horizontal Fit: This relates to the extent to which HR activities are mutuallyconsistent. Consistency ensures that HR practices reinforce one another.

c. External Fit: The third aspect concerns how well HR activities match the demandsof the external environment.

d. Resource Flexibility: is the extent to which a firm can apply its resources to a varietyof purposes. It also involves the cost, difficulty, and time needed to switch resources

from one use to another.

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 thehuman 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:


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a. Step 1: Provide the business with good human resource databases. These includeenvironmental scanning of labor markets and social and economic issues that impact

the long-term human resource context of the organization.

b. Step 2: Alter the senior management role when it comes to human resourcemanagement 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.

c. Step 3: The line organization must alter its incentive and control systems so that theoverall 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.

6. Focusing on the bottom-line impact of HR and Measurement of that impact: In order toshow how HR contributes to overall business success, the first requirement is to identify the

means of measuring HRs performance. Most of suggested typologies relate to four basic

approaches about HRM:

a. Customer/stake holder approach to measure the HRM effectiveness involvesidentifying 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 mustdevelop 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 andbenefits 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 truecompetitive advantage of HR, by assessing against the HR practices of key


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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 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.


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SHRM Models


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The Matching Model

Early interest in the matching model was evident in Devanna et al.s (1984) work: HR systems

and organizational structure should be managed in a way that is congruent with organizational

strategy. This is close to Chandlers (1962) distinction between strategy and structure and his

often-quoted maxim that structure follows strategy. In the Devanna et al. model, HRM

strategystructure follow and feed upon one another and are influenced by environmental forces.

Similarly, the notion of fit between an external competitive strategy and the internal HR

strategy is a central tenet of the HRM model advanced by Beer et al. (1984, see Figure 1.5). The

authors emphasize the analysis of the linkages between the two strategies and how each strategy

provides goals and constraints for the other. There must be a fit between competitive strategyand internal HRM strategy and a fit among the elements of the HRM strategy (Beer et al., 1984,

p. 13). The relationship between business strategy and HR strategy is said tobe reactive in the

sense that HR strategy is subservient to product market logic and the corporate strategy. The

latter is assumed to be the independent variable (Boxall, 1992; Purcell & Ahlstrand, 1994). As


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Miller (1987, cited in Boxall, 1992, p. 66) emphasizes, HRM cannot be conceptualized as a

stand-alone corporate issue. Strategically speaking it must flow from and be dependent upon the

organizations (market oriented) corporate strategy. There is some theorization of the link

between product markets and organizational design, and approaches to people management.

Thus, for example, each Porterian competitive strategy involves a unique set of responses from

workers, or needed role behaviours, and a particular HR strategy that might generate and

reinforce a unique pattern of behaviour (Cappelli & Singh, 1992; Schuler & Jackson, 1987).

HRM is therefore seen to be strategic by virtue of its alignment with business strategy and its

internal consistency (Boxall, 1996).


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The Resource-based Model

This second approach to developing typologies of HR strategy is grounded in the nature of the

rewardeffort exchange and, more specifically, the degree to which managers view their human

resources as an asset as opposed to a variable cost. Superior performance through workers is

underscored when advanced technology and other inanimate resources are readily available tocompeting firms. The sum ofpeoples knowledge and expertise, and social relationships, has the

potentialto provide non-substitutable capabilities that serve as a source of competitive advantage

(Cappelli & Singh, 1992). The various perspectives on resource-based HRM models raise

questions about the inextricable connection between work-related learning, the mobilization of

employee consent through learning strategies and competitive advantage. Given the upsurge of

interest in resource-based models, and in particular the new workplace learning discourse, we

need to examine this model in some detail.

The genesis of the resource-based model can be traced back to Selznick (1957), who suggested

that work organizations each possess distinctive competence that enables them to outperform

their competitors, and to Penrose (1959), who conceptualized the firm as a collection of

productive resources. She distinguished between physical and human resources, and drew


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attention to issues of learning, including the knowledge and experience of the management team.

Moreover, Penrose emphasized what many organizational theorists take for granted that

organizations are heterogeneous (Penrose, 1959, cited in Boxall, 1996, pp. 645). More

recently, Barney (1991) has argued that sustainedcompetitive advantage (emphasis added) is

achieved not through an analysis of a firms external market position but through a careful

analysis of its skills and capabilities, characteristics that competitors find themselves unable to

imitate. Putting it in terms of a simple SWOT analysis, the resource-based perspective

emphasizes the strategic importance of exploiting internal strengths and neutralizing internal

weaknesses (Barney, 1991).

The resource-based approach exploits the distinctive competencies of a work organization: its

resources and capabilities. An organizations resources can be divided into tangible (financial,

technological, physical and human) and intangible (brand-name, reputation and know-how)

resources. To give rise to a distinctive competency, an organizations resources must be both

unique and valuable. By capabilities, we mean the collective skills possessed by the organization

to coordinate effectively the resources.

According to strategic management theorists, the distinction between resources and capabilities

is critical to understanding what generates a distinctive competency. It is important to recognize

that a firm may not need a uniquely endowed workforce to establish a distinctive competency as

long as it has managerial capabilities that no competitor possesses. This observation may explain

why an organization adopts one of the control-based HR strategies.


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The Integrative Model

Bamberger and Meshoulam (2000) integrate the two main models of HR strategy, one focusing

on the strategys underlying logic of managerial control, the otherfocusing on the rewardeffort

exchange. Arguing that neither of the two dichotomous approaches (control- and resource-based

models) provides a framework able to encompass the ebb and flow of the intensity and direction

of HR strategy, they build a model that characterizes the two main dimensions of HR strategy as

involving acquisitionand development and the locus of control.

Acquisition and developmentare concerned with the extent to which the HR strategy develops

internalhuman capital as opposed to the externalrecruitment of human capital. In other words,

organizations can lean more towards making their workers (high investment in training) or

more towards buying their workers from the external labour market (Rousseau, 1995).

Bamberger and Meshoulam (2000) call this the make-or-buy aspect of HR strategy.

Locus of control is concerned with the degree to which HR strategy focuses on monitoring

employees compliance with process-based standards as opposed to developing a psychological

contract that nurtures social relationships, encourages mutual trust and respect, and controls the

focus on the outcomes (ends) themselves. This strand of thinking in HR strategy can be traced


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back to the ideas of Walton (1987), who made a distinction between commitment and control

strategies (Hutchinson et al., 2000).

HR Strategic PlanGoals and Objectives


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Goal One: Promote and enhance our competitive total rewards package to recruit and

retain top talent.

Objectives:

Create a total rewards message to educate HR partners, hiring managers, and recruits on thetotal value of the Virginia Tech employment package

Work closely with management to reinforce the need for competitive compensation forindividuals Virginia Tech wishes to attract and retain

Fine tune benefits package within the Virginia higher education restructuring framework Focus on retirement planning and support for current and retired employees Define a minimum level of employee educational benefit across all senior management areas

Goal Two: Support the talent development of our employees through professional

development, career development, and improved performance management.

Objectives:

Invest in professional development programs to improve leadership capabilities, job skills,and employee productivity

Develop comprehensive career management tools, job enrichment strategies, and mentoringprograms to help employees prepare for new opportunities

Provide organizational consulting services to all senior management areas to spur improvedorganizational and individual performance


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Goal Three: Promote the achievement of work-life balance and wellness in our employee

community.

Objectives:

Expand the use of flexible work arrangements through greater supervisory and employeeawareness about the potential benefits to employees and departments

Inform employees about the importance of education, awareness, self-care, and behavioralchange in improving wellness and productivity

Collaborate with individuals and departments, both on and off campus, to deliver a broaderrange of wellness programs and services for improved physical and mental health

Assess the ongoing need for more child-care options based on analysis of local supply anddemand

Goal Four: Deliver HR services, programs, and communications which are highly valued

by our prospective employees, current employees, and retirees.

Objectives:

Target employee communications more effectively to meet employee information needs Leverage technology to streamline HR service processes and improve access to employee

information

Define HRs customer service promise and assess and improve customer satisfaction to acommon standard through regular surveys

Develop HR scorecard for central HR and senior management areas as an overall assessmentand improvement tool

Plan new office location so that it provides a productive work environment for improvedservice and program delivery


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Goal Five: Foster a diverse, inclusive community with a positive work environment.

Objectives:

Develop a Building a Better Work Environment curriculum for supervisors Conduct regular organizational climate assessments and collaborate with senior managers to

improve the campus work climate

Partner with the Office of Diversity and Inclusion, senior managers, and department heads topromote and uphold our Principles of Community

Educate the campus community on the prevention of harassment and discrimination andproductive ways to resolve conflict

Insure we promote our commitment to diversity and non-discrimination through our actionsand in our outreach and employee recruitment efforts

Assess and address reasons why talented people leave the Virginia Tech employeecommunity

Goal Six: Compete for top talent with effective recruitment strategies and efficient

recruitment processes.

Objectives:

Identify more proactive recruiting solutions for staff and AP faculty positions Build relationships with senior management areas by assigning them staffing specialists and

developing recruitment strategies focused on their recruitment priorities

Improve employee onboarding experience through three month check-up Design and implement a central hiring procedures portal for managers to use when hiring all

job types

Provide search support for AP faculty searches upon request


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Dimensions of

Strategic Human Resource Management (SHRM)


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In addition to focusing on the validity of the matching SHRM model and typologies of HR

strategy, researchers have identified a number of important themes associated with the notion of

SHRM that are discussed briefly here These are:

HR practices and performance Re-engineering organizations and work Leadership and strategic Human Resource Management Workplace learning Trade unions

Human Resource Management practices and performance

Although most HRM models provide no clear focus for any test of the HRMperformance link,

the models tend to assume that an alignment between business strategy and HR strategy will

improve organizational performance and competitiveness. During the past decade, demonstrating

that there is indeed a positive link between particular sets or bundles of HR practices and

business performance has become the dominant research issue. The dominant empirical

questions on this topic ask What types of performance data are available to measure the HRM

performance link? and Do high-commitment-type HRM systems produce above-average

results compared with control-type systems? A number of studies have found that, in spite ofthe methodological challenges, bundles of HRM practices are positively associated with superior

organization performance.

Re-engineering and Strategic Human Resource Management

All normative models of HRM emphasize the importance of organizational design. As

previously discussed, the soft HRM model is concerned with job designs that encourage the

vertical and horizontal compression of tasks and greater worker autonomy. The redesign of work

organizations has been variously labelled highperforming work systems (HPWS), business

process re-engineering and highcommitment management. The literature emphasizes core

features of this approach to organizational design and management, including a flattened

hierarchy, decentralized decision-making to line managers or workteams, enabling information


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technology, strong leadership and a set of HR practices that make workers behaviour more

congruent with the organizations culture and goals.

Leadership and Strategic Human Resource Management

The concept of managerial leadership permeates and structures the theory and practice of work

organizations and hence how we understand SHRM. Most definitions of managerial leadership

reflect the assumption that it involves a process whereby an individual exerts influence upon

others in an organizational context. Within the literature, there is a continuing debate over the

alleged differences between a manager and a leader: managers develop plans whereas leaders

create a vision. Much of the leadership research and literature tends to be androcentric in nature

and rarely acknowledges the limited representation of ethnic groups and women in senior

leadership positions. The current interest in alternative leadership paradigms variously labelled

transformational leadership and charismatic leadership may be explained by understanding

the prerequisites of the resource-based SHRM model. Managers are looking for a style of

leadership that will develop the firms human endowment and, moreover, cultivate commitment ,

flexibility, innovation and change.

A number of writers make explicit links between learning, leadership and organizational change.

It would seem that a key constraint on the development of a resource-based SHRM model is

leadership competencies. Apparently, most re-engineering failures stem from breakdowns in

leadership, and the engine that drives organizational change is leadership, leadership, and still

more leadership. In essence, popular leadership models extol to followers the need for working

beyond the economic contract for the common good. In contemporary parlance, the

transformational leader is empowering workers. To go beyond the rhetoric, however, such

popular leadership models shift the focus away from managerial control processes and innate

power relationships towards the psychological contract and the individualization of the

employment relationship.


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Workplace Learning and Strategic Human Resource Management

Within most formulations of SHRM, formal and informal work-related learning has come to

represent a key lever that can help managers to achieve the substantive HRM goals of

commitment, flexibility and quality (Beer et al., 1984; Keep, 1989). As such, this growing field

of research occupies centre stage in the soft resource-based SHRM model. From a managerial

perspective, formal and informal learning can, it is argued, strengthen an organizations core

competencies and thus act as a lever to sustainable competitive advantage having the ability to

learn faster than ones competitors is of the essence here. There is a growing body of work that

has taken a more critical look at workplace learning. Some of these writers, for example,

emphasize how workplace learning can strengthen cultural control (Legge, 1995), strengthen

the power of those at the apex of the organization (Coopey, 1996) and be a source of conflict

when linked to productivity or flexibility bargaining and job control (Bratton, 2001).

Trade Unions and Strategic Human Resource Management

The notion of worker commitment embedded in the HRM model has led writers from both ends

of the political spectrum to argue that there is a contradiction between the normative HRM

model and trade unions. In the prescriptive management literature, the argument is that the

collectivist culture, with its them and us attitude, sits uncomfortably with the HRM goal of high

employee commitment and the individualization of the employment relationship. The critical

perspective also presents the HRM model as being inconsistent with traditional industrial

relations, albeit for very different reasons. Critics argue that high-commitment HR strategies

are designed to provide workers with a false sense of job security and to obscure underlying

sources of conflict inherent in capitalist employment relations (Godard, 1994). Other scholars,

taking an orthodox pluralist perspective, have argued that trade unions and the high -

performancehigh-commitment HRM model cannot only coexist but are indeed necessary if an

HPWS is to succeed. What is apparent is that this part of the SHRM debate has been strongly

influenced by economic, political and legal developments in the USA and UK over the past two

decades.


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SHRM andOrganisational Performance


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The concept of fit has emerged as central to many attempts to theorise about strategic HRM

(Richardson and Thomson, 1999). Internal fit is the case when the organisation is developing a

range of interconnected and mutually reinforcing HRM policies and practices. This implies that

there exists a set of best HR practices that fit together sufficiently so that one practice

reinforces the performance of the other practices. Synergy is the key idea behind internal fit.

Synergy can be achieved if the combined performance of a set of HRM policies and practices is

greater than the sum of their individual performances. In this regard, the importance of the

different HRM policies and practices being mutually reinforcing is emphasised.

External fit is the case when the organisation is developing a range of HRM policies and

practices that fit the businesss strategies outside the area of HRM. This implies that performance

will be improved when the right fit, or match, between business strategy and HRM policies and

practices is achieved. As discussed above, specific HRM policies and practices are needed to

support generic business strategies, for example Porters cost leadership, innovation or quality

enhancement. Similarly, Miles and Snow (1984) relate HRM policies and practices with

competitive product strategies.

Over the last decade or so the concept of fit has been further investigated by many scholars. An

analysis of such work highlights that there are generally three modes of fit, or approaches to fit:

universalistic, contingency, and configurational. The core features of these modes constitute

the structure of the so-called strategic HRM / business performance models.

Theuniversalistic perspectiveor HRM as an ideal set of practices suggests that a specified set

of HR practices (the so-called best practices) will always produce superior results whatever the

accompanying circumstances. Proponents of the universalistic model emphasise that internal fit

or horizontal fit or alignment of HR practices helps to significantly improve an organisations

performance. Higgs et al. (2000) explain how a large number of HR practices that were

previously considered to be distinct activities can all be considered now to belong in a system

(bundle) of aligned HR practices.


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Considering that internal fit is central to universalistic models, the main question / problem is

how to determine an HR system, that is, as a coherent set of synergistic HR practices that blend

better in producing higher business performance. The methods used in developing such HR

systems depend on the additive relationship (i.e. the case when the HR practices involved have

independent and non-overlapping effects on outcome), and on the interactive relationship.

However, in our opinion universalistic models do not explicitly consider the internal integration

of HR practices, and consider them merely from an additive point of view. Emerging research

evidence reveals the so-called portfolio effect, that is, how HR practices support and improve

one another. However, it is important to remember that there can be countless combinations of

practices that will result in identical business outcomes. This contributes to the concept of

equifinality, in which identical outcomes can be achieved by a number of different systems of

HR practices.

Support for the universalistic approach to strategic HRM is mixed as there are notable

differences across studies as to what constitutes a best HR practice. Most studies focus on

three mechanisms by which universal HR practices impact on business performance: (1) the

human capital base or collection of human resources (skills, knowledge, and potential), that the

organisation has to work with the organisations recruitment, selection, training and

development processes directly affect the quality of this base; (2) motivation, which is affected

by a variety of HR processes including recognition, reward, and work systems; and (3)

opportunity to contribute, which is affected by job design, and involvement/ empowerment

strategies. In addition, the best practices approach generally refers to the resource-based theory

of firm and competitive advantage, which focuses on the role internal resources such as

employees play in developing and maintaining a firms competitive capabilities. For a resource

to be a source of competitive advantage it must be rare, valuable, inimitable and non-

substitutable. Therefore, HR practices of the organisation can lead to competitive advantage

through developing a unique and valuable human pool.

The contingency or HRM as strategic integration model argues that an organisations set of

HRM policies and practices will be effective if it is consistent with other organisational

strategies. External fit is then what matters (Fombrum et al., 1984; Golden and Ramanujam,

1985; Schuler and Jackson, 1987; Lengnick-Hall and Lengnick-Hall, 1988; Guest, 1997). As


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discussed above, in this regard specific HRM policies and practices link with various types of

generic business strategies. For example, the work of Schuler and Jackson (1987), mentioned

above, suggests that the range of HRM policies and practices an organisation should adopt

depend on the competitive product strategies it is following. Considering that external fit is the

key concept of contingency models, the contingency approach refers firstly to the theory of the

organisational strategy and then to the individual HR practices that interact with organisational

strategy in order to result in higher organisational performance. The adoption of a contingency

HRM strategy is then associated with optimized organisational performance, where the

effectiveness of individual HR practices is contingent on firm strategy. The performance of an

organisation that adopts HR practices appropriate for its strategy will be higher.

The configurational or HRM as bundles model argues that to claim a strategys success turns

on combining internal and external fit. This approach makes use of the so-called bundles of HR

practices, which implies the existence of specific combinations or configurations of HR practices

depending on corresponding organisational contexts, where the key is to determine which are the

most effective in terms of leading to higher business performance.

Considering that both the internal and external fits are the key concepts of configurational

models, the configurational approach refers firstly to the theory of the organisational strategy and

then to the systems of HR practices that are consistent with organisational strategy in order to

result in higher organisational performance. As indicated above, there are a number of strategies

an organisation may choose to follow, such as Miles and Snows (1984) strategic typology that

identifies the four ideal strategic types of prospector, analyser, defender and reactor.

With respect to the configurations of HR practices, scholars (such as Kerr and Slocum, 1987;

Osterman, 1987; Sonnenfeld and Peiperl, 1988; Delery and Doty, 1996) have developed

theoretically driven employment systems. Specifically, Delery and Doty (1996) propose the

following two ideal type employment systems: the market type system, which is characterised

by hiring from outside an organisation, and the internal system, which is characterised by the

existence of an internal market. Because organisations adopting a defending strategy concentrate

on efficiency in current products and markets, the internal system is more appropriate for this


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type of strategy. On the otherhand, organisations pursuing a prospectors strategy are constantly

changing, and the market system is more appropriate for this type of strategy. A possible third

type of configurational strategy can be the analyser, at the midpoint between the prospector and

the defender. In summary, according to this approach, if consistency within the configuration of

HR practices and between the HR practices and strategy is achieved, then the organisation will

achieve better performance.

With respect to these three models, there is no clear picture of which of these three key broad

areas is the predominant one. It is worth repeating the words of Wood (1999: 409):

If ones arm were twisted to make an overall conclusion on the balance of the evidence so far,

one in favour of contingency hypothesis would be just as justified as the universal hypothesis.

This is because any such conclusion would be premature because of conflicting research results

but, more importantly, because the debate is still in its infancy.


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Linking Organisational Strategy andHRM Strategy

[Theoretical Developments]


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The strategic fit or the hard variant of HRM

Fibrin et al.s (1984) matching model highlights the resource aspect of HRM and emphasises

the efficient utilisation of human resources to meet organisational objectives. This means that,

like other resources of organisation, human resources have to be obtained cheaply, used

sparingly and developed and exploited as fully as possible. The matching model is mainly based

on Chandlers (1962) argument that an organisations structure is an outcome of its strategy.

Fombrun et al. (1984) expanded this premise in their model of strategic HRM, which emphasises

a tight fit between organisational strategy, organisational structure and HRM system. The

organisational strategy is pre-eminent; both organisation structure and HRM are dependent on

the organisation strategy. The main aim of the matching model is therefore to develop an

appropriate human resource system that will characterise those HRM strategies that contribute

to the most efficient implementation of business strategies.

The matching model of HRM has been criticised for a number of reasons. It is thought to be too

prescriptive by nature, mainly because its assumptions are strongly guitarist. As the model

emphasises a tight fit between organisational strategy and HR strategies, it completely ignores

the interest of employees, and hence considers HRM as a passive, reactive and implementations

function. However, the opposite trend is also highlighted by research. It is asserted that this

model fails to perceive the potential for a reciprocal relationship between HR strategy and

organisational strategy. Indeed, for some, the very idea of tight fit makes the organisation

inflexible, incapable of adapting to required changes and hence misfitted to todays dynamic

business environment. The matching model also misses the human aspect of human resources

and has been called a hard model of HRM. The idea of considering and using human resources

like any other resource of an organisation seems unpragmatic in the present world.

Despite the many criticisms, however, the matching model deserves credit for providing an

initial framework for subsequent theory development in the field of strategic HRM. Researchers

need to adopt a comprehensive methodology in order to study the dynamic concept of human

resource strategy. Do elements of the matching model exist in different settings? This can be

discovered by examining the presence of some of the core issues of the model. The main


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propositions emerging from the matching models that can be adopted by managers to evaluate

scenario of strategic HRM in their organisations are:

Do organisations show a tight fit between their HRM and organisation strategy wherethe former is dependent on the latter? Do specialist people managers believe they should

develop HRM systems only for the effective implementation of their organisations

strategies?

Do organisations consider their human resources as a cost and use them sparingly? Or dothey devote resources to the training of their HRs to make the best use of them?

Do HRM strategies vary across different levels of employees?

The Soft Variant of HRM

The Harvard model of strategic HRM is another analytical framework, which is premised on

the view that if general managers develop a viewpoint of how they wish to see employees

involved in and developed by the enterprise then some of the criticisms of historical personnel

management can be overcome. The model was first articulated by Beer et al. Compared to the

matching model, this model is termed soft HRM. It stresses the human aspect of HRM and is

more concerned with the employeremployee relationship. The model highlights the interests of

different stakeholders in the organisation (such as shareholders, management, employee groups,

government, community and unions) and how their interests are related to the objectives ofmanagement. This aspect of the model provides some awareness of the European context and

other business systems that emphasise co-determination. It also recognises the influence of

situational factors (such as the labour market) on HRM policy choices.

The actual content of HRM, according to this model, is described in relation to four policy areas,

namely, human resource flows, reward systems, employee influence, and works systems. Each of

the four policy areas is characterised by a series of tasks to which managers must attend. The

outcomes that these four HR policies need to achieve are commitment, competence, congruence,

and cost effectiveness. The aim of these outcomes is therefore to develop and sustain mutual

trust and improve individual / group performance at the minimum cost so as to achieve

individual well-being, organisational effectiveness and societal well-being. The model allows for

analysis of these outcomes at both the organisational and societal level. As this model


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acknowledges the role of societal outcomes, it can provide a useful basis for comparative

analysis of HRM. However, this model has been criticised for not explaining the complex

relationship between strategic management and HRM.

The Contextual Emphasis

Based on the human resource policy framework provided by the Harvard model, researchers at

the Centre for Corporate Strategy and Change at Warwick Business School have developed an

understanding of strategy-making in complex organisations and have related this to the ability to

transform HRM practices. They investigated empirically based data (collected through in-depth

case studies on over twenty leading British organisations) to examine the link between strategic

change and transformations, and the way in which people are managed. Hendry and associates

argue that HRM should not be labelled as a single form of activity. Organisations may follow a

number of different pathways in order to achieve the same results. This is mainly a function of

the existence of linkages between the outer environmental context (socio-economic,

technological, politico-legal and competitive) and inner organisational context (culture, structure,

leadership, task-technology and business output). These linkages directly contribute to forming

the content of an organisations HRM. To analyse this, past information related to the

organisations development and management of change is essential. The main propositions

emerging from this model are:

What is the influence of economic (competitive conditions, ownership and control,organisation size and structure, organisational growth path or stage in the life cycle and the

structure of the industry), technological (type of production systems) and socio-political

(national education and training set-up) factors on HRM strategies?

What are the linkages between organisational contingencies (such as size, nature, positioningof HR and HR strategies) and HRM strategies?


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The Issue of Strategic Integration

Debates in the early 1990s suggested the need to explore the relationship between strategic

management and HRM more extensively and the emerging trend in which HRM is becoming an

integral part of business strategy. The emergence of SHRM is an outcome of such efforts. As

mentioned above, it is largely concerned with integration and adaptation. Its purpose is to

ensure that HRM is fully integrated with the strategy and strategic needs of the firm; HR policies

are coherent both across policy areas and across hierarchies; and HR practices are adjusted,

accepted and used by line managers and employees as part of their everyday work.

SHRM therefore has many different components, including HR policies, culture, values and

practices. Schuler developed a 5-P model of SHRM that melds five HR activities (philosophies,

policies, programs, practices and processes) with strategic business needs, and reflects

managements overall plan for survival, growth, adaptability and profitability. The strategic HR

activities form the main components of HR strategy. This model to a great extent explains the

significance of these five SHRM activities in achieving the organisations strategic needs, and

shows the interrelatedness of activities that are often treated separately in the literature. This is

helpful in understanding the complex interaction between organisational strategy and SHRM

activities.

This model further shows the influence of internal characteristics (which mainly consists of

factors such as organisational culture and the nature of the business) and external characteristics

(which consist of the nature and state of economy in which the organisation is existing and

critical success factors, i.e. the opportunities and threats provided by the industry) on the

strategic business needs of an organisation. This model initially attracted criticism for being

over-prescriptive and too hypothetical in nature. It needs a lot of time to gain an understanding of

the way strategic business needs are actually defined. The melding of business needs with HR

activities is also very challenging, mainly because linkages between human resource activities

and business needs tend to be the exception, even during non-turbulent times.


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Vital Role ofStrategic Human Resource Management


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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?b) Is the organizations structure consistent with the business strategy?c) Is managements executive staffing adequate? Are skills adequate?d) Are the management-performance systems properly focused?


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Matching Business Strategy andHRM


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The above discussion summarizes the theoretical developments in strategic HRM and its

linkages with organisational strategies. A number of clear messages emerge from the analysis.

For example, strategic HRM models primarily emphasise implementation over strategy

formulation. They also tend to focus on matching HR strategy to organisational strategy, not the

other way. They also tend to emphasise fit or congruence and do not acknowledge the need for

lack of such fit between HR strategies and business strategies during transitional times and when

organisations have multiple or conflicting goals (also see Lengnick-Hall and Lengnick-Hall,

1999). This section further highlights the matching of HRM policies and practices to some of the

established models of business strategies.

Porters Generic Business Strategies and HRM

Michael Porter (1980; 1985) identified three possible generic strategies for competitive

advantage in business: cost leadership (when the organisation cuts its prices by producing a

product or service at less expense than its competitors); innovation (when the organisation is able

to be a unique producer); and quality (when the organisation is delivering high-quality goods and

services to customers). Considering the emphasis on external-fit (i.e. organisational strategy

leading individual HR practices that interact with organisational strategy in order to improve

organisational performance), a number of HRM combinations can be adopted by firms to support

Porters model of business strategies. In this regard, Schuler (1989) proposes corresponding

HRM philosophies of accumulation (careful selection of good candidates based on personality

rather technical fit), utilization (selection of individuals on the basis of technical fit), and

facilitation (the ability of employees to work together in collaborative situations). Thus, firms

following a quality strategy will require a combination of accumulation and facilitation HRM

philosophies in order to acquire, maintain and retain core competencies; firms pursuing a cost-

reduction strategy will require a utilization HRM philosophy and will emphasise short-run

relationships, minimize training and development and highlight external pay comparability; and

firms following an innovation strategy will require a facilitation HRM philosophy so as to bring

out the best out of existing staff (also see Schuler and Jackson, 1987). In summary, according to

the external-fit philosophy, the effectiveness of individual HR practices is contingent on firm


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strategy. The performance of an organisation that adopts HR practices appropriate for its strategy

will then be higher.

Business Life Cycles and HRM

There is now an established literature in the field of HRM that highlights how possible

contingent variables determine the HRM systems of an organisation (for a detailed review see

Budhwar and Debrah, 2001; Budhwar and Sparrow, 2002). One among the long list of such

variables is the life cycle stage of an organisation: introduction (start-up); growth

(development); maturity; decline; and turnaround. Research findings reveal a clear association

between a given life cycle stage and specific HRM policies and practices. For example, it is

logical for firms in their introductory and growth life cycle stages to emphasise a rationalized

approach to recruitment in order to acquired best-fit human resources, compensate employees at

the going market rate, and actively pursue employee development strategies. Similarly,

organisations in the maturity stage are known to recruit enough people to allow for labour

turnover/ lay-offs and to create new opportunities in order to remain creative to maintain their

market position. Such organisations emphasise flexibility via their training and development

programmes and pay employees as per the market leaders in a controlled way. Accordingly firms

in the decline stage will be likely to minimise costs by reducing overheads and aspire to maintain

harmonious employee relations (for more details see Kochan and Barocci, 1985; Baird and

Meshoulam 1988; Hendry and Pettigrew 1992; Jackson and Schuler 1995; Boxall and Purcell,

2003).

Typology of Business Strategies and HRM

Miles and Snow (1978; 1984) classify organisations as prospectors (who are doing well and are

regularly looking for more products and market opportunities), defenders (who have a limited

and stable product domain), analyzers (who have some degree of stability but are on the

lookout for possible opportunities) and reactors (who mainly respond to market conditions).

These generic strategies dictate organizations HRM policies and practices. For example,

defenders are less concerned about recruiting new employees externally and are more concerned

about developing current employees. In contrast, prospectors are growing, so they are concerned

about recruiting and using performance appraisal results for evaluation rather than for longer-

term development.


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Generic HR Strategies

Identifying the need to highlight the prevalence of generic HR strategies pursued by

organisations in different contexts, Budhwar and Sparrow (2002) propose four HR strategies.

These are:

talent acquisition HR strategy (emphasises attracting the best human talent fromexternal sources);

effective resource allocation HR strategy (maximizes the use of existing humanresources by always having the right person in the right place at the right time);

talent improvement HR strategy (maxims the talents of existing employees bycontinuously training them and guiding them in their jobs and career); and

cost reductionHR strategy (reduces personnel costs to the lowest possible level).Budhwar and Khatri (2001) examined the impact of these HR strategies on recruitment,

compensation, training and development and employee communication practices in matched

Indian and British firms. The impact of these four HR strategies varied significantly in the two

samples, confirming the context specific nature of HRM. On the same pattern, there is a need to

identify and examine the impact of other HR strategies such as high commitment, paternalism,

etc. Such HR issues, which have a significant impact on a firms performance, are furtherexamined in different chapters in this book.


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The Strategic Role of

Human Resource Management


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The human resource management function has consistently faced a battle in justifying its

position in organizations. At good times when there are enough budgets, firms easily justify

expenditures on training, staffing, rewards and employee involvement systems, but when faced

with financial difficulties, such HR systems get the earliest cutbacks.

The advent of the subfield of strategic human resource management (SHRM), devoted to

exploring HRs role in supporting business strategy, provided one opportunity for demonstrating

its value to the firm. The birth of the field of strategic human resource management can be dated

back to 1984, when Devanna, Fombrun and Tichy extensively explored the link between

business strategy and human resources.

HRM discipline has witnessed a great deal of change over the past 25 years. These changes

represent two major transformations. The first is the transformation from being the field of

personnel management to being the field of human resource management. The second is the

transformation from being the field of human resource management to being the field of strategic

human resource management.

The first transformation incorporated helped the recognition that people are an important asset in

organizations and can be managed systematically. The second transformation has built on the

preceding knowledge base of the discipline.

This transformation is based upon the recognition that, in addition to coordinating human

resource policies and practices with each other, they need to be linked with the needs of the

organization. Given that these needs are reflected in the strategies of the firm, this transformation

of human resource management came to be known as strategic human resource

management.

Strategic human resource management is based upon the recognition that organizations can be

more effective if their human resources are managed with human resource policies and practicesthat deliver the right number of people with the appropriate behaviours, the needed competencies

and the necessary level of motivation to the organization.

To put it another way, strategic human resource management is the creation of linkage or

integration between the overall strategic aims of business and the human resource strategy and


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implementation. In principle, the processes and people within the company are managed in such

a way as to foster the aims of the business strategy and create an integrated approach to

managing the various human resource functions, such as selection, training and reward so that

they complement each other.

Strategic human resource management may bring a number of benefits to the organization:

Contributing to the goal accomplishment and the survival of the company, Supporting and successfully implementing business strategies of the company Creating and maintaining a competitive advantage for the company Improving the responsiveness and innovation potential of the company Increasing the number of feasible strategic options available to the company Participating in strategic planning and influencing the strategic direction of the company

as an equally entitled member of top management

Improving cooperation between the HRM department and line managersSHRMs spreading popularity owes much to the promise of greater organizational effectiveness

achievable, through the development of internally consistent bundles of human resource

strategies which are properly linked to business strategies.

Researchers in the field of SHRM have increasingly relied on the resource-based view of the

firm to explain the role of human resource practices in firm performance. Resource based view

of strategy is that the strategic capability of a firm depends on its resource capability, especially

its distinctive resources. Indeed, theoretical research on SHRM has suggested that systems of HR

practices may lead to higher firm performance and be sources of sustained competitive

advantage because these systems of practices are often unique, causally ambiguous, and difficult

to imitate. HR practices can enhance firm performance when they are internally aligned with one

another to manage employees in a manner that leads to competitive advantage.HR practices can

create value for a firm when the individual practices are aligned to develop critical resources or

competencies.


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Perspectives on SHRM andOrganisational Performance


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The concept of fit has emerged as central to many attempts to theorise about strategic HRM

(Richardson and Thomson, 1999). Internal fit is the case when the organisation is developing a

range of interconnected and mutually reinforcing HRM policies and practices. This implies that

there exists a set of best HR practices that fit together sufficiently so that one practice

reinforces the performance of the other practices. Synergy is the key idea behind internal fit.

Synergy can be achieved if the combined performance of a set of HRM policies and practices is

greater than the sum of their individual performances. In this regard, the importance of the

different HRM policies and practices being mutually reinforcing is emphasised.

External fit is the case when the organisation is developing a range of HRM policies and

practices that fit the businesss strategies outside the area of HRM. This implies thatperformance

will be improved when the right fit, or match, between business strategy and HRM policies and

practices is achieved. As discussed above, specific HRM policies and practices are needed to

support generic business strategies, for example Porters cost leadership, innovation or quality

enhancement. Similarly, Miles and Snow (1984) relate HRM policies and practices with

competitive product strategies (defenders, prospectors, analysers, reactors).

Over the last decade or so the concept of fit has been further investigated by many scholars. An

analysis of such work highlights that there are generally three modes of fit, or approaches to fit:

universalistic, contingency, and configurational. The core features of these modes constitute

the structure of the so-called strategic HRM / business performance models.

Theuniversalistic perspectiveor HRM as an ideal set of practices suggests that a specified set

of HR practices (the so-called best practices) will always produce superior results whatever the

accompanying circumstances. Proponents of the universalistic model emphasise that internal fit

or horizontal fit or 1alignment of HR practices helps to significantly improve an

organisations performance. Higgs et al. (2000) explain how a large number of HR practices that

were previously considered to be distinct activities can all be considered now to belong in a

system (bundle) of aligned HR practices.


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Considering that internal fit is central to universalistic models, the main question / problem is

how to determine an HR system, that is, as a coherent set of synergistic HR practices that blend

better in producing higher business performance. The methods used in developing such HR

systems depend on the additive relationship (i.e. the case when the HR practices involved have

independent and non-overlapping effects on outcome), and on the interactive relationship (i.e.

the case when the effect of one HR practice depends on the level of the other HR practices

involved). However, in our opinion universalistic models do not explicitly consider the internal

integration of HR practices, and consider them merely from an additive point of view. Emerging

research evidence (see Delery and Doty 1996) reveals the so-called portfolio effect, that is, how

HR practices support and improve one another. However, it is important to remember that there

can be countless combinations of practices that will result in identical business outcomes. This

contributes to the concept of equifinality, in which identical outcomes can be achieved by a

number of different systems of HR practices.

Support for the universalistic approach to strategic HRM is mixed as there are notable

differences across studies as to what constitutes a best HR practice. Most studies focus on

three mechanisms by which universal HR practices impact on business performance: (1) the

human capital base or collection of human resources (skills, knowledge, and potential), that the

organisation has to work with the organisations recruitment, selection, training and

development processes directly affect the quality of this base; (2) motivation, which is affected

by a variety of HR processes including recognition, reward, and work systems; and (3)

opportunity to contribute, which is affected by job design, and involvement/ empowerment

strategies. In addition, the best practices approach generally refers to the resource-based theory

of firm and competitive advantage, which focuses on the role internal resources such as

employees play in developing and maintaining a firms competitive capabilities. For a resource

to be a source of competitive advantage it must be rare, valuable, inimitable and non-

substitutable. Therefore, HR practices of the organisation can lead to competitive advantage

through developing a unique and valuable human pool.

The contingency or HRM as strategic integration model argues that an organisations set of

HRM policies and practices will be effective if it is consistent with other organisational


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strategies. External fit is then what matters. As discussed above, in this regard specific HRM

policies and practices link with various types of generic business strategies. For example, the

work of Schuler and Jackson (1987), mentioned above, suggests that the range of HRM policies

and practices an organisation should adopt depend on the competitive product strategies it is

following. Considering that external fit is the key concept of contingency models, the

contingency approach refers firstly to the theory of the organisational strategy and then to the

individual HR practices that interact with organisational strategy in order to result in higher

organisational performance. The adoption of a contingency HRM strategy is then associated with

optimized organisational performance, where the effectiveness of individual HR practices is

contingent on firm strategy. The performance of an organisation that adopts HR practices

appropriate for its strategy will be higher.

The configurational or HRM as bundles model argues that to claim a strategys success turns

on combining internal and external fit. This approach makes use of the so-called bundles of HR

practices, which implies the existence of specific combinations or configurations of HR practices

depending on corresponding organisational contexts, where the key is to determine which are the

most effective in terms of leading to higher business performance.

Considering that both the internal and external fits are the key concepts of configurational

models, the configurational approach refers firstly to the theory of the organisational strategy and

then to the systems of HR practices that are consistent with organisational strategy in order to

result in higher organisational performance. As indicated above, there are a number of strategies

an organisation may choose to follow, such as Miles and Snows (1984) strategic typo logy that

identifies the four ideal strategic types of prospector, analyser, defender and reactor.

With respect to the configurations of HR practices, scholars have developed theoretically driven

employment systems. Specifically, Delery and Doty (1996)propose the following two ideal

type employment systems: the market type system, which is characterised by hiring from

outside an organisation, and the internal system, which is characterised by the existence of an

internal market. Because organisations adopting a defending strategy concentrate on efficiency in

current products and markets, the internal system is more appropriate for this type of strategy.


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On the other hand, organisations pursuing a prospectors strategy are constantly changing, and

the market system is more appropriate for this type of strategy. A possible third type of

configurational strategy can be the analyser, at the midpoint between the prospector and the

defender. In summary, according to this approach, if consistency within the configuration of HR

practices and between the HR practices and strategy is achieved, then the organisation will

achieve better performance.


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SHRM Impact on

Organizational Performance


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Many organizations face a volatile market situation. In order to create and sustain competitive

advantage in this type of environment, organizations must continually improve their business

performance. Increasingly, organizations are recognizing the potential of their human resources

as a source of sustained competitive advantage. Linked to this, more and more organisations are

relying on measurement approaches, such as workforce scorecards, in order to gain insight into

how the human resou

Strategic HRM Notes

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