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What is Strategic Human Resource Management?

There are varying views as to the role of a Human Resource Function and its practitioners. Explore what these roles are and analyse how they can add value and enhance organisational effectiveness.

The growth strategy of an organisation depends upon many factors one such factor is the concerns related to global human resources of the organisation. In the business world there are pressing concerns regarding issues like cross cultural diversity, business practices and host country laws. This is where strategic human resource management comes into play as it is a concept of HR management which involves processes that defines the plans and intentions of an organisation. It is designed to help the organisations that meet the needs and desires of their employees.  HRM deals with aspects in organisations or business that affects employees directly aspects such as training, pay, firing, hiring and administration. They are also responsible for providing safety procedure information, work incentives and providing vacation and sick leaves. The strategic HRM role is to define the organisation plans and intentions on how the goals of the organisation can be achieved through employees. It is usually based on these three propositions:-

  • Human resource or capital can be a competitive advantage
  • The strategic plan can be implemented only through the people
  • A systematic approach is the only option that can be adopted to define the organisation needs and goals

Purcell in the year 1999 defined strategic HRM as the process that focuses on the actions that differentiate the business of a firm than its competitors. Pettigrew and Hendry in the year 1986 explained how strategic human resource management can have four meanings:-

  • It is coherent approach to plan and design the management of the employees or personnel
  • It is usually underpinned by philosophies that are based on workforce safety and employment policies
  • It sees people as a “strategic resource” for which HRM policies and activities have to matched by the management
  • It is the achievement of the “competitive advantage”

The strategic HRM issues are mostly associated with changes in the culture and structure of the organisation, organisation performance and effectiveness, the development of capabilities, to match the resources with the organisations resources, change and its management and knowledge management. Their concern is to get things done with the development of capabilities and fulfilling the human capital requirements. (Boxall&Purcell, 1999)Boxall in the year 1996 said that the central concern of strategic human resource management is the choice of leadership and the formation of labour relations through positive patterns. The rationale of strategic HRM is understanding and agreeing with the approach of people management in the longer duration or term. Lengnick Hall in the year 1990 suggested that in a business that rationale of strategic HRM is the underlying concept which helps in achieving the competitive advantage through human resource management. It is all about proactively managing people. The people involved in this field have to plan and think ahead for a business to meet the requirements of the people and thus helping the employees to meet the goals that are decided for the company. HRM is the best way to cultivate a atmosphere in a company that is work based and is about productivity.

The fundamental aim of strategic human resource management is to ensure that the firm or organisation has the committed, well motivated and skilled employees that help in achieving a sustained competitive edge or advantage. Their objective is to steer the business in a direction that can ensure that the individual need of the employees are fulfilled with the business needs of the firm which can be met collectively. They can be achieved collectively by developing and implementing the practical and coherent human resource programmes and policies. According to a remark by Holder and Dyer in the year 1988 strategic human resource management is about unifying frameworks that are integrative, broad and contingency based. The aims of strategic human resource management can be considered only when we consider the interests of all the stakeholders through the human resource strategies which take into account the employees as well as management and owners. Storey in the year 1989 termed that strategic human resource management places greater emphasis on the HR aspect of the management of people as it is continuously stressing on the development of people through securing their employment, communication, work life balance and improving the quality of life.

Importance of Strategic Human Resource Management

Strategic human resource management has five main approaches. These consist of:-

1. Resource based approach:- Barney in the year 1991 indicated that in order to generate a strategic capability it is primarily to achieve a strategic balance or fit between the oppurtunities and resources.( Barney, 1991) A RBV approach helps in addressing the methods of increasing the organisation strategic capability by the development of staff and management who can plan and think strategically along with understanding the strategic issues. The RBV approach is based on the belief that if a firm develops and obtains its human resources it can achieve competitive advantage by enabling them to learn faster and then apply their learning on their rivals. Barney in the year 1995 explained that Strategic human resource management is about including the knowledge, experience, wisdom, risk taking propensity and judgement of employees that work in the firm or organisations. Kamoche in the year 1996 suggested that in resource based approach the organisation is a bundle of intangible and tangible capabilities and resources that require market/product competition.

2. Strategic fit:- is a vertical fit to the business strategy. The human resource strategy is an essential part of the business strategy that contributes to the business planning. Vertical integration is essential to provide congruence between human resource strategy and business so that the former supports the latter. The aim of this approach is to manage people by being mutually supportive.

3. High performance management:- approach has the aim of making an impact on the performance of the organisation through areas like growth, productivity, profits, and levels of customer service through people which will ultimately increase the shareholder value. In this type of management the selection and recruitment techniques are very rigorous. They provide relevant and extensive management and training activities. To increase productivity many incentive pay systems along with performance management are used. (Armstrong&Baron, 1998) Michael Armstrong defined that performance management helps in establishing a culture that is based on high performance in which teams and individuals take responsibility for the improvement of the firm by contributing through effective leadership and high skills.( Armstrong&Baron,2005) The aim of the performance management is to reward, empower and motivate employees. Armstrong gives a palatable alternative to performance appraisals with performance management that is a user friendly approach that is based on the collaboration of employees and managers. He emphasizes that if organisations plan and execute performance management properly they can encourage and even monitor the development of the employees for a longer period of time. This model has some limitations as well as there are issues with inputs, outputs, process and outcomes. As it is based on planning ahead it is essential that the expectations are listed in business plans and objectives. It works on the principle of measurement thus if we can’t measure a performance we can’t review it. There are issues that arise from concerns related to transparency and fairness as the performance review needs these both.

4. High commitment management:- Walton in the year 1985 emphasized on the importance of commitment on a mutual basis. In this type of management that aim is at forming a commitment that primarily is self regulated but later it is controlled by external pressures and sanctions to the individual. These relationships are based on extreme levels of trust in the organisation.

Approaches of Strategic Human Resource Management

5. High involvement management:- in this approach the management treats employees as partners as their interests and needs are respected. The employees are free to voice their concerns on any matter they desire. These matters usually deal with involvement and communication. This approach helps in creating a climate that helps in creating a dialogue between employees and managers. They share expectations and information about the firm’s objectives, mission and values. A mutual understanding is formed that helps in achieving a framework for developing and managing people of the organisation.

There are many theories and models based on human resource management. Some of the most influential and renowned theories in HRM are:-

1. David Guest gave a model in the year 1997 about how organisation will see improvements and will benefit in their performance if they identify and commit to implement some HRM practices.( Guest, 1997) It included theories like normative theories, descriptive theories, and strategic theories. Strategic theory was about having a good fit between the HRM practices and structure and business strategy of an organisation. Descriptive theory was about a system approach which related outcomes with the HR practices. Normative theory was about a standard practice that is a norm which is established as a best practice by the organisation. He stressed on “high commitment” that links with the human factor. There should be a ideal set of HR practices that should be followed in the case of the human factor in the organisations. These steps will ensure that the effectiveness and productivity of the employees will increase as they will be motivated to reach the organisations goals.( Guest,Michie,Conway&Sheehan, 2003) He laid a view that the policies needed to be horizontally integrated and congruent to each other and named this concept as universal best practices set”. But many believe that this view point given by Guest is disputable as it presents a non accurate and non specific definition of human resource policies. This model constitutes of different policies that significantly vary from one model to another. It is very hard to measure the performance of organisations that adopt this model as it is difficult to conceptualize and generalize. He was able to acknowledge that commitment is a “messy” concept thus establishing a relationship between high performance and commitment is difficult.

2. Paul Boselie in the year 2005 conducted a analysis for the link between HRM and performance on hundred and four articles from journals between the year 1994 and 2003. According to their research the theories that were most popular were AMO theory, resource based view and contingency theory but it was also seen that in most of the cases that what link these theories address between performance and HRM.( Boselie,Dietz&Boon, 2005) They concentrated on Guest plea that HRM should have a theoretical foundation. When they approach the findings of Guest they found out that there is no consensus on the nature of human resource management. As some theories focus on the HRM values whereas some focus on value of HR based on competencies, skills and knowledge. Boselie was able to pinpoint the enormous variety of the different practices with the help of his analysis of numerous articles from the journals. He even presented a list of twenty six different practices out of which the top four were about contingency pay, development, training and reward schemes. Thus these four reflect the “strategic” human resource management programmes that identify and are responsible for the recruitment of the strong performers. The issue that originated here was that the underlying meaning was changing even when the same concepts were used. Thus the lack of a central concept came into light. He even found out that among the three most popular theories that were AMO theory, resource based view and contingency theory, the AMO theory was used in more than half of the articles that were published after the year 2000. The ones that were using resource based view and contingency theory were published before 2000 suggesting that this was the period for the birth of a commonality around human resource management.

Influential Theories of Human Resource Management

3. One of the key discussions in the field of human resource management is about the best fit approach VS the best practice approach. (Pfeffer, 1994)Some researchers like Pfeffer in the year 1994 stressed about a universalistic best practice approach in HRM whereas others like Wood in the year 1999 stated that the effect of the human resource practices depend on a specific external or internal context.( Boxall&Purcell,1999) But it was Purcell and Boxall in the year 2003 that argued that both the best fit and best practice streams are right in their own way.( Wood,1999) As some principles like employee involvement, high rewards and employee development are universal. But the design of any HR practice depends on the internal or external context. (Purcell, 2004)

The HR professionals have to cater to the ever changing needs and goals of the organisations. They have numerous roles that they have to play to cater to these needs. These roles are performed in different proportions in different organisations as they vary according to the organisations objectives and vision.

Some of these roles are:-

1. As a strategic Partner:- HR professionals are becoming strategic partners in many organisations by aligning business objectives with HR strategies. These professionals are able to identify weaknesses that affect the organisation performance, this helps in shaping the HR strategies according to the firm’s needs.

2. Merger and Acquisition Facilitator:- the process to integrate human resources is a complex process. In the case of a Merger or acquisition the success depends on human resources challenges and issues. “Human factor” is the key differentiating factor in the failure or success of the acquisition or merger. If issues like compensation structures are not addressed on time than it can lead to high attrition later. They need to ensure that they are able to get a smooth transition and the dynamic of the people working is not affected by the acquisition or merger

3. Diversity manager:- the strategic human resource managers work on strategies that help in transfer of experience and knowledge between the employees. As every organisation is in search of highly experienced and skilled employees thus these employees are from different generations.

4. Functional expert:- these functional experts work on human resource system, procedures, culture and structure. They keep a track and audit the HR plan and system to ensure that the HRD plans and systems are performing at par to the goals of the organisation.

5. Talent manager:- these professionals are responsible for creating and maintaining a people oriented and supportive culture. They have the capability to recognize traits, talents, skills in people. Thus the organisation that has a talent management approach always ensure that their selection and recruitment are integrating and coordinating with each other.

6. Change agent:- the organisations are continuously go through changes. In this case the HR professionals have to diagnose that what is the current state of the organisation and how will it affect the success of the organisation. They are responsible to implement crucial aspects of the transformation process such as communication, development and training, and rewards. They have to align the right people for the right job after the change has occurred in the organisation.

The understanding of the relationship between performance and HRM can be achieved by taking into consideration all the theories and models that are stated above. But even now the real picture can be obtained by the studying about the developments in the field of SHRM. As the speed by which the organisations are changing and how they are managing the stakeholders and employees can be understood by following their progress.

Armstrong&Baron, M&A, 1998. Performance management:The new realities. 1st ed. London: Institute of Personnel and development

Armstrong&Baron, M&A, 2005. Managing Performance:Performance management in action. 1st ed. London: Institute of Personnel and development

Barney, J.B, 1991. Firm resources and sustainable competitive advantage. Journal of Management, 17(1), 99-120

Boselie,Dietz&Boon, P., G. & C, 2005. Commonalities and contradictions in research on Human Resource Management and Performance. Human Resourcce Management Journal , 1(1), 53-96

Boxall&Purcell, P. & J, 1999. Strategy and human resource management. 1st ed. London: Palgrave Macmillan

Pfeffer, J, 1994. Competitive advantage through people. 1st ed. Boston: Harvard Business School Press

Wood, S, 1999. Human resource management and performance. International Journal of Management Reviews, 1(1), 367-413

Purcell, J, 2004. Business strategies and human resource management: Uneasy bedfellows or strategic partners?. International seminar on HRM: What’s Next?, 1(1), 120-136

Guest, D.E, 1997. Human resource management and performance: a review and research agenda. The International Journal of Human Resource Management, 8(1), 263- 276

Guest,Michie,Conway&Sheehan, D.E., J., N. & M, 2003. Human resource management and corporate performance in the UK. British Journal of Industrial Relations, 41(2), 291-314.

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