Strategic HRM

Human Resource Management HRM: 301

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What is SHRM?Survey of 1050 companies indicates that still HR professionals devote less than one-third of their time to strategic HR activities. Most of their time spent on traditional HR

Traditional HR activities are:a. Human Resource Planningb. Recruiting Staffc. Job Analysisd. Establishing Performance Review Systemse. Wage, Salary, and Benefits Administrationf. Employee Trainingg. Personnel Record Keepingh. Legislative Compliance (Affirmative action, EEOi. Labor Relations

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Strategic HRM: Some Theoretical Approach

• The New Role of HR can be described most simply as “one of helping managers maximize the contribution of employees in achieving Competitive Advantage.” (James Walker)

• SHRM is “concerned with the promotion of efficiency and profitability, it centers on how organizations can improve their competitive performance by considering and utilizing their HR more effectively.” (Ian Clark)

• As there is considerable debate about how “helping managers maximize the contribution of employees” or “utilizing their human resources more effectively”. A number of theoretical models have been developed.

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Traditional and Strategic Views of HRM

Research and Development

Finance

Production Marketing

Personnel• Staffing• Pay• Training

StrategicGoal

R&D

Marketing Production

FinanceHRM

a. Traditional view of HRM

b. Strategic view of HRM

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Universalistic Approach to SHRM•A Universalistic Approach to SHRM focuses on “one

best way” to manage HR.•Here, HR managers focus on adopting a set of universally

effective HR practices.•This set of HR practices include the following:

i. High levels of employment security.ii. Selective hiring practicesiii.A focus on teams and decentralized decision makingiv.High pay levelsv. Extensive employee trainingvi.Practices that reduced status distinctions among

employeesvii.High levels of information sharing among employees

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Strategic-fit perspective of SHRM

•SHRM involves matching specific HR practices to the firm’s overall business strategy.

•Strategic-fit perspective of SHRM suggests that “firm performance will be enhanced to the degree that firms adopt HRM practices that complement and support both other HR policies and practices, and other elements of the organization’s strategic plan.”

•Three types of Strategic-fit SHRM are-• Horizontal fit refers to the consistency among

various HR practices within a firm.• Vertical fit is the degree to which HR practices

are consistent with the firm’s overall business strategy.

• External fit refers to how well HR practices align with specific aspects of the external environment.

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SHRM as Internal Service Provider

• Strategic HRM involves HR professionals providing HR services to business units within the firm.

• The HR goal is to improve the quality and cost-effectiveness of HR services and to increase the satisfaction of management “customers”.

• In this model, HR professionals work closely with business unit managers to help solve their people related business problems and increase the overall effectiveness of their units.

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Configurational Approach to SHRM• There are various configurations, or “bundles”, of HR

practices that go together and, collectively, can improve business performance.

• HR focuses on HR bundles rather than single, magic bullet.

• Certain bundles are effective in certain industries and/or in certain business conditions, while other bundles should be used in other industries or under different business circumstances.

Difference and Consistency between --

Universalistic Approach and Configurational

Approach

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Resource-based Model of SHRM

• This model is based on the idea that organizations gain competitive advantage when they possess resources that are valuable, rare, difficult for competitors to imitate, and organized in such a way as to maximize their overall value to the firm.

• This SHRM increase organizational success by enhancing a firm’s ability to acquire, develop, utilize, and retain employees with high competence levels relevant to firm activities.

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Resource-based Model of SHRM

From this perspective, strategic HRM involves HR managers in solving four basic questions. These are-

How can HR function-

• aid in either decreasing costs or increasing revenues in the firm, that is, adding value?

• identify and take advantage of the rare skills and characteristics of employees?

• help create a labor force that is very difficult for other competitors to imitate?

• help structure the firm so that it can best exploit its human resource advantage?

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Theoretical Perspectives: Conclusions about SHRM

Which theoretical approach is correct?The essential 6-Key Elements of SHRM-1. Internally transforming HR staff and structure.

2. Enhancing administrative efficiency.

3. Integrating HR into the strategic-planning process.

4. Linking HR practices to business strategy and to one another

5. Developing a partnership with line management.

6. Focusing on the bottom-line impact of HR and measurement of that impact.

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Transforming HR Staff & Structure• Transforming HR People (Table 2.3)

Traditional HRM Strategic HRM

Specialist Generalist

A good policy and procedure writer A good communicator

Current focus Current and future focus

Monolingual (speaks “HR-ese” Speaks the language of business

Management-hierarchy focused Customer-focused, good customer relations skills

Stays “within the box” Thinks “outside the box”

Focused on the internal organization Focused on the internal organization and the broader society

Factual communicator Persuader

A nationalist An internationalist

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Transforming HR Staff & Structure

• Transforming HR Structure Obviously, the appropriate structure for the

HR function will depend on the nature of the firm’s business activity, its size, and its overall business strategy.

In some organizations, a more centralized structure for HRM may be appropriate to ensure quality of HR product and gain economies of scale in their development and delivery.

In other situations, highly decentralized HR units may be necessary.

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Enhancing Administrative Efficiency

The first of these focuses on improving Administrative Efficiency by targeting current processes for improvement.

The role of the HR unit is to examine the gaps between “as is” process and what the system “should be”.

Once these gaps are identified, programs can be developed to close them.

Administrative efficiency can also be enhanced through the development of Centralized HR Services”, that are shared throughout an organization by developing a “One-Stop Shop”.

A final process involved in HR staff members’ becoming “Administrative Expert” requires them to completely rethink how they create value for the firm through their administrative activities.

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Integrating HR into Strategic Planning

The Strategic Planning Process Mission, Goals, and Values Statements

Environmental Threats and Opportunities

Organizational Strengths and Weaknesses

Goals and Objectives (tactical & Operational)

Formulation and Implementation of Strategies

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Fitting HR Practices to Business Strategy

& Vice-versa

HR Practice Choices

Staffing Appraising Compensating Training and Development Employee Influence Work Systems

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Fitting HR Practices to Business Strategy

& Vice-versaA New Set of Strategic Business

Principles Make people a key priority Win customers for life Use the total quality management

approach to run the business Profitably grow by being the leader in

customer-led applications of technology Rapidly and profitably globalize the

business Be the best value supplier

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Partnership

To become a business partner, the HR manager must

Learn as much about the firm’s business as possible,

Be more responsive to and more aware of the organization’s needs and direction

Shift away from traditional HR functions Become more involved in supportive,

collaborative relationships with managers throughout the organization

Demonstrate how critical HR is to the success of the business

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Measuring HRM

HR Impact-Table 2.8

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Traditional and Strategic Views of HRM

Research and Development

Finance

Production Marketing

Personnel• Staffing• Pay• Training

StrategicGoal

R&D

Marketing Production

FinanceHRM

a. Traditional view of HRM

b. Strategic view of HRM