introduction to strategic human resource management

STRATEGIC HUMAN RESOURCE MANAGEMENT

Prof. Dr.Yogananthan Srinivasan

Contents

• Introduction• Hierarchy and Roles• Definition • Importance• Strategic fit• Types of strategies• Traditional vs SHRM• Models & approaches• Summary

DEFINITION,NEED & IMPORTANCE

Hierarchy and Roles

Top level Planning SHRM

Managerial level

Execution FHRM

Operational Level

Operation OHRM

Human Resource Management Strategy

The Meaning of “Strategy”• Having a long-term focus• Plans that involve the top executives and/or

board of directors of the firm• A general framework that provides a perspective

for selecting specific policies and procedures• A critical factor that affects Firm Performance• A factor that contributes to Competitive

Advantage in markets

Strategic HRM is an approach to making decisions on the intentions and plans of the organization concerning its recruitment, training, development, performance management, reward and employee relations strategies, policies and practices and the employment relationship generally.

The defining characteristic of strategic HRM is that it is integrated – HR strategies are integrated vertically with the business strategy and horizontally with one another. The HR strategies developed by a strategic HRM approach are essential components of the organization’s business strategy.

STRATEGIC HRM DEFINED

NEED/IMPORTANCE OF SHRM

• When adjective STRATEGIC is fixed to HRM, it puts an emphasis on the ways in which HRM contributes to the organization effectiveness in realizing organization’s strategic intents.

• It provides direction to the organization so that both, the business needs of the organization, individual and collective needs of its workforce are met. This is achieved by developing and implementing HR practices that are strategically aligned with business strategies.

• SHRM is practiced in only those organizations that have a clearly articulated corporate or business strategies.

• An integrated approach in the design and implementation of HR systems.

• Matching HRM policies and activities with the business strategy of organization

• Viewing people as strategic resource for the achievement of competitive advantage

Strategic Human resource management

• 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.

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• 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 any aspects 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

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Companies who work hard to meet the needs of their employees can cultivate a work atmosphere conducive to productivity.

Human resource management is the best way to achieve this. Being able to plan for the needs of employees by thinking ahead can help to improve the rate of skilled employees who chose to remain working for a company.

Improving the employee retention rate can reduce the money companies spend on finding and training new employees.

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When creating a human resources plan, it is important to consider employees may want or need and what the company can reasonably supply. A larger company can usually afford training and benefit programs that smaller companies cannot afford to offer.

This does not mean that a smaller company should not engage in strategic human resource management. Providing specialized on-site training, even if provided by senior members of the company, and offering one-on-one assessment and coaching sessions, can help employees reach peak performance rates

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1-12

HR Strategy Leads to Improved Organizational Performance

HR Strategies

Organizational Strategies

Organizational Characteristics Environments

Organizational Capabilities

© 2008 Prentice Hall, Inc. All rights reserved.

Human Resource Management’s Strategic Roles

Strategy Execution

Role

Strategic Planning

Roles

Strategy Formulation Role

© 2008 Prentice Hall, Inc. All rights reserved. 3–14

Creating the Strategic Human ResourceManagement System

Human Resource Professionals

Employee Behaviors and Competencies

Components of a Strategic HRM System

Human Resource Policies and Practices

HIERARCHY OF STRATEGY

CORPORATE STRATEGY

BUSINESS STRATEGY

FUNCTIONALSTRATEGY

HR Strategy: Strategic Fit

Training Rewards

Corporate Strategy

Business Strategy

HR Strategy

HR System(Performance Mgmt.)

STRATEGY AT DIFFERENT LEVELS

CORPORATE STRATEGY

PURPOSE OR MISSIONSHAREHOLDER VALUE ?STAKEHOLDER INTEREST?ASPIRATIONAL ?

MEANS :

. GOOD PARENTING

. SELECT PORTFOLIO

. GUARD REPUTATION

COMPETITIVE STRATEGY

ATTAIN SUSTAINABLE COMPETITIVE ADVANTAGE BY:

. LEVERAGING RESOURSES

. DEVELOPING CAPABILITIES AND. COMPETING ON COST,OR DIFFERENTIATING OR OCCUPYING A NICHE

OPERATIONAL FUNCTIONAL LEVELSTRATEGYHR,FINANCE,PRODUCTNMARKETING,QUALITYEtc.

Functional Level Managersare responsible for:developing annual objectives& short term implementation Plans.

HR Strategy: HR System Internal Fit

Performance Management System

HR StrategyGoal Setting

Performance Measurement

Coaching

Rewards

Appeal

Performance Evaluation


Types of Strategies

Diversification Strategy

Geographic Expansion Strategy

Vertical Integration

Strategy

Corporate-Level Strategies

ConsolidationStrategy


Types of Strategies (cont’d)

Cost Leadership Focus/Niche

Business-Level/Competitive Strategies

Differentiation

TRADIONAL HR Vs STRATEGIC HR

EVOLUTION OF SHRM

PERSONNEL MGMT HRM SHRM

. MECHANISTIC

. BUREAUCRATIC

. HIGH CENTRALISATION

. HIGH FORMALISATION

. LOW FLEXIBILITY

. PART OF ORGANIC ORG

. CROSS HIERARICAL & CROSS FUNCTIONAL TEAMS. DECENTRALISATION. LOW FORMALISATION. FLEXIBLE. . DEVELOPMENT ORIENTED

. CONVERGENCE BETWEEN

HRM & BUSINESS STRATEGY . PROACTIVE/LONGTERM HRM PERSPECTIVE . COMPETITIVE ADVANTAGE THROUGH HUMAN RESOURCES. INVESTMENT PERSPECTIVE

TRADITIONAL HR Vs STRATEGIC HR

TRADIONAL HR STRATEGIC HR

RESPONSIBILITY HR STAFF LINE MANAGERS

FOCUS EMPLOYMENT RELATIONSHIP PARTNERSHIP WITH INTERNAL & COMPLIANCE WITH LAW & EXTERNAL CUSTOMERS

ROLE OF HR REACTIVE & TRANSACTIONAL PROACTIVE & TRANSFORMATIONAL

INITIATIVES SLOW & FRAGMENTED FAST,FLEXIBLE & INTEGRATED

TIME HORIZON SHORT TERM SHORT, MEDIUM & LONG TERM

CONTROL BUREAUCRATIC ORGANIC ( RULES,POLICIES, PROCEDURES) ( FLEXIBILITY,FEW RESTRICTIONS)

JOB DESIGN FOCUS ON SCIENTIFIC MGMT BROAD JOB DESIGN,GROUPS DIVISION OF LABOUR & TEAMS, CROSS FUNCTIONAL TRG

KEY INVESTMENTS PRODUCTS, TECHNOLOGY PEOPLE (KNOWLEDGE, SKILLS, ABILITIESACCOUNTABILITY COST CENTRE INVESTMENT CENTRE

BARRIERS TO STRATEGIC HR

• SHORT TEM MENTALITY/ FOCUS ON CURRENT PERFORMANCE Reason: No Long term view of investments. More focus on performance evaluation and compensation based on sort term.• INABILITY OF HR TO THINK STRATEGICALLY Reason: insufficient management training and segmented understanding of entire business• LACK OF APPRECIATION OF WHAT HR CAN CONTRIBUTE FROM STRATEGIC PERSPECTIVE Reason : Seeing HR function as providing unnecessary bureaucracy• FUNCTIONAL MANAGERS SEEING THEMSELVES AS HR MANAGERS Reason : Concerned more with technical aspects of their areas than human aspects.• DIFFICULTY IN QUANTIFYING MANY HR OUTCOMES REASON: Tendency towards programs that are quantifiable rather than developmental programs.• PERCEPTION OF HR ASSETS AS HIGH RISK INVESTMENTS THAN CAPITAL ASSETS. REASON: HR assets not owned by organizations. More investment in technology & information• DISINCENTIVES FOR CHANGE REASON: Strategic approach may call for drastic changes in system. Natural resistance is there

to change initiatives. So Risk is involved as these changes might fail MOST OF ABOVE BARRIERS ARE ROOTED IN CULTURE OF AN ORGANISATION ( Organizations history, values and management practices act as act as barriers to change

initiatives. Overcoming these barriers is the real challenge of STRATEGIC HRM )

INTEGRATING HR STRATEGY WITH

BUSINESS STRATEGY

SEQUENTIAL STRATEGIC HRM MODEL

EXTERNALENVIRONMENT

SCAN

VISIONMISSION

BUSINESSSTRATEGY

HRSTRATEGIC

PLANS

HRIMPLEMENTA-

TIONPLANS

INTERNALENVIRONMENT

SCAN

INVESTMENT PERSPECTIVE OF HR(How best to invest in its people )

• RESOURCE BASED VIEW ( VRIO FRAMEWORK ) value , rareness , limitability & organization

• ENHANCING HUMAN CAPITAL collective skills, knowledge & capabilities

• TRADITIONAL COST VIEW : HR related budget ( salaries, training etc.. )

• STATEGIC VIEW : Employees as valuable investments In knowledge economy : Knowledge is important (not goods, services or technology ) for all economic activities.

• INVESTMENT IN HUMAN RESOURCES IMPORTANT for getting competitive advantage to keep pace with changing technologies & processes

• COST OF TRG & OTHER INVESTMENTS to be constantly reviewed against benefits.

• RISKS INVOLVED : Enhanced employability of employees that makes them more desirables to competitors.

COMPETING APPROACHES &

MODELS

COMPETING APPROACHES AND MODELS

SHRM

FITPERSPECTIVE

FUNCTIONALPERSPECTIVE

ECONOMICPERSPECTIVE

TYPOLOGICALPERSPECTIVE

Human resources to be

Integrated withStrategic plg

Each functionalarea optimize performance wrtBusiness Strategy

To use Human Resourcesas distinguishableSource of competitiveadvantage

Use of 3 distinctHR Strategies. Inducement. Investment. Involvement

INDUCEMENT STRATEGY: To support highly competitive Business environment Focus on cost & high performance

INVESTMENT STRATEGY : Focus on Quality , differentiation and service PARTICIPATION / INVOLVEMENT STRATEGY: Focus on providing autonomy, challenge & opportunities for participation with suitable reward system

RELATIONSHIP BETWEEN BUSINESSAND HR STRATEGIES

• THREE TYPES OF BUSINESS STRATEGIES ARE ADOPTED BY ORGANISATIONS: COST LEADERSHIP , DIFFERENTIATION & FOCUS

• HR STRATEGIES ARE OUTCOME OF GENERAL SHRM APPROACH• FOR WINNING A SUSTAINABLE GLOBAL COMPETITIVE ADVANTAGE, A PERFECT STRATEGIC

FIT IS REQUIRED TO BE CREATED BETWEEN BUSINESS STRATEGIES AND HR STRATEGIESFollowing 5 types of strategic fits are generally adopted:BEST FIT APPROACH( STRATEGIC FIT APPROACH): Also called external fit or vertical integration

with business strategies. HR strategies should match stages of development of firm ie need for different types of people as well as diverse approaches towards investment in HUMAN CAPITAL.

FIT AS CONTIGENCY( BEST FIT APPROACH) : HR approaches to ensure that internal practices of organization respond to external factors : market, skill availability est.'s per contingency of situation

FIT AS AN IDEAL SET OF PRACTICES( BEST PRACTICE APPROACH) Identifying any organization as benchmark which has reputation for excellence and

copying its practices.FIT AS BUNDLES (BUNDLING APPROACH) : Development and implementation of several HR

practices together so that they are interrelated and internally consistent. Each HR practice reinforces and complements the other. Also termed as internal fit oe Horizontal integration.

RESOURCE BASED APPROACH:

APPROACHES TO STRATEGIC HRM

Strategic fit – vertical fit or integration is necessary to provide congruence between business and human resource strategy so that the latter supports the accomplishment of the former and, indeed, helps to define it. Horizontal integration with other aspects of the HR strategy is required so that its different elements fit together. The aim is to achieve a coherent approach to managing people in which the various practices are mutually supportive.

Best practise – the unfounded belief that there is a set of best HRM practices and that adopting them will lead to superior organizational performance.

Best fit – the belief that there can be no universal prescriptions for HRM policies and practices. It is all contingent on the organization’s context and culture and its business strategy – best fit is better than best practise.

‘Bundling’ – the belief that improved organizational performance will be achieved by developing inter-related HR practices which, when they are linked together, will function more effectively by complementing and supporting one another than if they existed as separate entities.

Resource-based strategic HRM (ECONOMIC PERSPECTIVE)– sustained competitive advantage stems from the acquisition and effective use of bundles of distinctive resources that competitors cannot imitate. (Barney, 1991). This is achieved by developing HR strategies and policies which increase the resource capability of the organization by ensuring that (1) it has higher quality people than its competitors (2) the unique intellectual capital possessed by the business is developed and nurtured (3) organizational learning is encouraged and (4) organization-specific values and a culture exist which ‘bind the organization together (and) gives it focus’ (Purcell et al, 2003).

MACKENZIE’S 7S MODEL

STRATEGY

SKILLS

STRUCTURE

SHAREDVISION

HUMAN SOURCESRE

SYSTEMS

STYLE

COMPETING APPROACHES

INTEGRATED SYSTEMS MODEL ( RAO & PARREK )• Has development of motivated. Capable, dynamic & committed people at its core• HRD systems are designed to work as an integrated system in line with corporate plans ( For Synergistic benefits of an integrated systems )• HRD SYSTEMS : CAREER SYSTEMS : APPRAISAL SYSTEMS: Performance and potential appraisals TRG. SYSTEM S: Separate For all category of employees WORK SYSTEMS: Task analysis, QWL, Stress management, productivity & Quality etc. CULTURAL SYSTEMS : Most neglected , Includes development of octapace culture,Reward systems etc. SELF RENEWAL SYSTEMS; Research. Survey feedback etc.

Reference

• Gary Dessler, Chapter 3, Strategic Human Resource Management and the HR Scorecard.

• Michael Armstrong, SHRM, PHI edition.• Gomez, Cardy, Managing human resources, Chpater 1,

prentice hall edition.• MBAO 6030 , Human Resource Strategy, web based

article.• STRATEGIC HUMAN RESOURCE MANAGEMENT, Prof.

VP.Kakkar, Web based article.

introduction to strategic human resource management

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