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Unit 1: Definition & purpose of SHRM: In the past, organisations have tended to view people in three different ways: as a cost, as a resource and as an asset. What many organisations are now realising is that their employees are central to the successful performance of the organisation and therefore an integrated and coherent approach to managing people is needed. During the last 15-20 years, however, an increasing number of organisations stated that people are their most important asset and the strategic management of people has gained equal standing in the organisations resource profile alongside finance and capital resources. The cost of employment in western economies is high In many sectors it is the major cost. Emerging debate centres upon the intellectual assets, the knowledge that can be mobilised for the benefit of the organisation. However, gaining access to, or control or ownership of this knowledge and experience is problematic: Work is becoming more insecure and flexible. The notion of organisational boundaries is sometimes less clear. Employees long-term relationships with organisations, the normal route to developing and securing access to expertise, can no longer be taken for granted. Even if change comes from a strategic response to the business environment or may be related to the goals of the organisation, people as well as systems and processes, are important. There are three challenges facing organisations that must be met if they are to gain the competitive advantage we referred to earlier (Mabey and Lawton, 1998): The challenge of managing intangible assets. This means the ability to access scarce skills and to cope with the implications of new forms of organisations. The challenge of managing strategic change, including trends towards flexibility in organisations and in job design, the break up of bureaucracies and of traditional structures of employment. These changes create major challenges for working attitudes and relationships and require a sustained and holistic approach to people management. The challenge of innovation in terms of what organisations produce by way of goods and services, and the way they approach the task. Development, innovation and creativity become core intangible assets, a focus for managing people strategically. In other words, bringing the design tasks of innovation together with a focus on innovatory behaviour. A strategic approach to HRM involves new ways of operating in organisations and demands new skills. These include the need to understand tacit knowledge, recognise core competencies and attend to stakeholder views, Tacit knowledge is not easily shared. It involves learning and skill, but not in a way that can be written down. Tacit knowledge consists often of habits and culture that we do not recognize in ourselves. It includes: learning from errors peoples reaction, anticipation. Learning from interacting with others; from customers needs and expectations. Learning from work routines.

Core competencies are those that are likely to be as important tomorrow as it is today. Example: analytical skill and problem solving. Linking people management and strategic management: An organisations response to external challenge can come from a cascade of environmental triggers. For example, responding to changing requirements in the marketplace will necessitate an evaluation of labour market supply and skills availability. The response can also arise from two other areas: Keeping pace with successful methodologies tried out in other locations for example, the trend towards Japanese management or practices such as Just in time (JIT), Business Excellence, and Total Quality Management (TQM). An assessment of the strengths and capabilities of the organisation That is, a bottom-up view of strategy formulation. It will help us, therefore, to try to classify strategy in order to gain an overview of the potential links between active business strategy and SHRM response and provide the first steps in defining the scope and nature of SHRM. We can classify strategy in several ways: Using the life cycle model of the product or service Human resource Introduction Growth Maturity Decline functions Recruitment, Attract best -Recruit adequate Encourage Plan and selection and technical/ numbers and mix sufficient turnover implement staffing professional talent of qualified to minimize workforce workers. lay-offs and reductions and -Management provide new reallocation succession openings. planning. Encourage -Manage rapid mobility as internal labour reorganizations market shift jobs around movements Compensation and Meet or exceed Meet external Control Tighter cost benefits labour market market but compensation control rates to attract consider internal needed talent equity effects. Establish formal compensation structures. Employee training Define future skill Mould effective Maintain flexibility Implement and development requirements and management team and skills of an retraining and begin establishing through ageing workforce career consulting career ladders management services development and organizational development Labour/employee Set basic employee Maintain labour Control labour Improve relations relations peace and costs and maintain productivity and philosophy and employee labour peace. achieve flexibility organization motivation and Improve in work rules. morale. productivity Negotiate job security and


employment adjustment policies The potential benefits of a strategic approach: Guests (1992) model of HRM is based around four goals of: Strategic integration with planning to ensure coherent HRM policies. Commitment of the employees to the organisation and to high performance. Flexibility of both organisational structure and functions, based on a multiskilled workforce. High quality of goods and services. This model is based on three dimensions commitment, flexibility and quality to ensure beneficial outcomes such as high job performance, coping with change, cost effectiveness and low levels of absence and low staff turnover. Approaches to the strategic management of people: The best practice view The notion of best practice - sometimes called 'high commitment' HRM - proposes that the adoption of certain best practices in HRM will result in better organizational performance. This view starts from the premise that a single set or bundle of HR policies and practices will lead to better organisational performance, sustained over a lengthy period, whatever the prevailing business circumstances. EXAMPLES: These practices included: providing employment security, selective hiring, extensive training, sharing information, self-managed teams, high pay based on company performance and the reduction of status differentials. However, there is a huge number of studies which provide evidence of best practices, usually implemented in coherent bundles, and therefore it is difficult to draw generalized conclusions about which is the 'best' way Some problematic aspects of this view are as follows: Perception of the effectiveness of those practices which emphasise skills of implementation. A suggestion that best practices do not fit business strategy, which is worrying when linked to the relevance of people management at the top of the organisation. A problem of real strategic choices HR is driven by outside factors which point us toward the next model of SHRM, the best fit view. Criticisms of the best practice view as a way of managing people have been constructed on the grounds of: Cost of implementation. Tensions between the need for production and cost minimisation on the one hand, and issues of flexibility, creativity and skills enhancement on the other. The restricted applicability of the model mainly to the western private sector, where there is wider scope for managerial choice legally and economically. The doubtful ability to assess the impact of HR interests using financial measures. The belief that it is easier to establish and sustain the model on greenfield sites. The best fit view Best fit argues that HRM improves performance where there is a close vertical fit between the HRM practices and the company's strategy. This link ensures close coherence between the HR people processes and policies and the external market or business strategy. The success of a best fit model depends on its ability to: Integrate into the strategic plans of the organisation. Provide horizontal or vertical integration of the key policy areas. How far organisational objectives will be met is dependent on: The level of fit between the business strategy and the environment at one level. The HR strategy and business strategy at a second level. The internal coherence of the policy. Best fit allows organisations to determine whether a hard or a soft approach needs to be taken given the prevailing circumstances. A hard view might include outsourcing, enhanced productivity, and emphasis on tighter contracting. A soft view relies on involvement, partnership and communication and sharing. Best fit integration Best fit integration is an open template to interpret the environment in which business operates and to evaluate the integrated reaction or responses that are necessary. Best practice differs in that the outcomes are not prescribed. Best practice does not emphasise fit or matching but is solution oriented. LEVEL OF INTEGRATION REQUIRED TO MEET THE BEST FIT MODEL (BULLER): A one-way response level where business strategy informs HR strategy. A two-way response level where the relationship between the two is interdependent but not fully integrated. A fully integrated, reciprocal level with top-down, bottom-up strategy formulation. EXAMPLES: COMPANY A: Differentiation strategy HR practices: select highly skilled/minimum controls/invest in training/appraise long-term/IT systems in place/economy of scope/Just in time. COMPANY B: Cost leadership HR p


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