EDUCATION HOLE

PRESENTS

2013

STRATEGIC HUMAN RESOURCE MANAGEMENT

Module II: The Concept of Strategic HRM By:-Management Department

Strategic Human Resource Management .......................................................................... 1 Evolution of SHRM ......................................................................................................................................... 1 How does SHRM fit in with Strategy? ............................................................................................................ 2 The Way SHRM works .................................................................................................................................... 2 Conclusion ...................................................................................................................................................... 2

AIMS OF STRATEGIC HRM ......................................................................................................... 2

APPROACHES TO STRATEGIC HRM ............................................................................................ 3 The resource-based approach ....................................................................................................................... 3 Strategic fit ..................................................................................................................................................... 4 High-performance management ................................................................................................................... 5

CHALLENGES IN SHRM ...................................................................................................... 5 Supporting the Entire Strategy ...................................................................................................................... 5 For Unique Characteristics Of The Organisation HRM Strategies Needs To Be Developed........................... 6 Securing The Commitment Of The Management .......................................................................................... 6 Organisations Strategic Plan Needs To Be Integrated ................................................................................... 6

The Strategic Role of Human Resource Managers ............................................................. 6 Overview ........................................................................................................................................................ 6 Workplace Safety ........................................................................................................................................... 7 Compensation and Benefits ........................................................................................................................... 7 Employee Training ......................................................................................................................................... 7 Recruitment and Selection............................................................................................................................. 7 Employee Relations ....................................................................................................................................... 8 Barriers to the implementation of HR strategies: .......................................................................................... 8

Strategic Human Resource Management Strategic Human Resource Management is the practice of aligning business strategy with that of HR practices to achieve the strategic goals of the organization. The aim of SHRM (Strategic Human Resource Management) is to ensure that HR strategy is not a means but an end in itself as far as business objectives are concerned. The idea behind SHRM is that companies must “fit” their HR strategy within the framework of overall Business objectives and hence ensure that there is alignment between the HR practices and the strategic objectives of the organization.

Evolution of SHRM With the advent of new economy industries like IT and the mushrooming of the service sector, organizations all over the world realized that human resources must be viewed as a source of competitive advantage as opposed to treating it much the same way in access to technology or capital is concerned. What this means is that the practice of HRM is being viewed as something that promotes the business objectives of the firms and not merely another factor in the way the firm is managed.

How does SHRM fit in with Strategy? With the advent of today’s economy where services account for a major share of the GDP and the fact that the service sector is essentially people centric, it is imperative that the people first approach be embraced by the organizations for sustainable business strategy. The practice of SHRM demands a proactive and hands on approach by the management as well as the HR department with regards to the entire gamut of activities ranging from staffing and training and development to mentoring and pay and performance management.

The Way SHRM works If we take real world examples, many organizations in recent times have dedicated “people managers” whose sole function is to look after the enabling and fulfilling needs of the resources. This is a marked change from treating people as just resources to treating people as assets. For instance, Infosys states that people are its assets and the famous statement by Mr. Narayana Murthy, one of the founders of the company that the capital of Infosys walks in every morning and walks out every evening has to be taken in this context.

Elaborating on this point, one finds that organizations tend to leverage upon the capabilities of the people employed there and ensuring that the “human capital” is nourished and nurtured as a source of competitive advantage. This translates into a dedicated HR department and people managers in every group dealing exclusively with employee issues as opposed to treating this as a line management function.

Conclusion The times when management could arbitrarily dictate terms to the employees and tread upon their rights is something that is not relevant anymore. With the ballooning of the white collar workforce, it becomes necessary for organizations to pay more attention to the needs of the employees more than ever. Finally, the fact that organizations derive their strategy from employees instead of imposing strategy upon them is the essence of SHRM.

AIMS OF STRATEGIC HRM The rationale for strategic HRM is the perceived advantage of having an agreed and understood basis for developing approaches to people management in the longer term. It has been suggested by Lengnick-Hall and Lengnick-Hall (1990) that underlying this rationale in a business is the concept of achieving competitive advantage through HRM. Strategic HRM supplies a perspective on the way in which critical issues or success factors related to people can be addressed and strategic decisions are made that have a major and long-term impact on the behaviour and success of the organization. The fundamental aim of strategic HRM is to generate strategic capability by ensuring that the organization has the skilled, committed and well-motivated employees it needs to achieve sustained competitive advantage. Its objective is to provide a sense of direction in an often turbulent

environment so that the business needs of the organization and the individual and collective needs of its employees can be met by the development and implementation of coherent and practical HR policies and programmes. As Dyer and Holder (1988) remark, strategic HRM should provide ‘unifying frameworks which are at once broad, contingency based and integrative’. When considering the aims of strategic HRM it is necessary to consider how HR strategies will take into account the interests of all the stakeholders in the organization: employees in general as well as owners and management. In Storey’s (1989) terms, ‘soft strategic HRM’ will place greater emphasis on the human relations aspect of people management, stressing continuous development, communication, involvement, security of employment, the quality of working life and work–life balance. Ethical considerations will be important. ‘Hard strategic HRM’ on the other hand will emphasize the yield to be obtained by investing in human resources in the interests of the business. Strategic HRM should attempt to achieve a proper balance between the hard and soft elements. All organizations exist to achieve a purpose and they must ensure that they have the resources required to do so and that they use them effectively. But they should also take into account the human considerations contained in the concept of soft strategic HRM. In the words of Quinn Mills (1983), they should plan with people in mind, taking into account the needs and aspirations of all the members of the organization. The problem is that hard considerations in many businesses will come first, leaving soft ones some way behind.

APPROACHES TO STRATEGIC HRM There are five approaches to strategic HRM. These consist of resource-based strategy, achieving strategic fit, high-performance management, high- commitment management and high-involvement management, as described below.

The resource-based approach A fundamental aim of resource-based HR strategy, as Barney (1991) indicates, is to develop strategic capability – achieving strategic fit between resources and opportunities and obtaining added value from the effective deployment of resources. A resource-based approach will address methods of increasing the firm’s strategic capability by the development of managers and other staff who can think and plan strategically and who understand the key strategic issues. The resource-based approach is founded on the belief that competitive advantage is obtained if a firm can obtain and develop human resources that enable it to learn faster and apply its learning more effectively than its rivals (Hamel and Prahalad, 1989). Human resources are

defined by Barney (1995) as follows: ‘Human resources include all the experience, knowledge, judgement, risk-taking propensity and wisdom of individuals associated with the firm.’ Kamoche (1996) suggests that: ‘In the resource-based view, the firm is seen as a bundle of tangible and intangible resources and capabilities required for product/market competition.’ In line with human capital theory, resource-based theory emphasizes that investment in people adds to their value in the firm. The strategic goal will be to ‘create firms which are more intelligent and flexible than their competitors’ (Boxall, 1996) by hiring and developing more talented staff and by extending their skills base. Resource-based strategy is therefore concerned with the enhancement of the human or intellectual capital of the firm. As Ulrich (1998) comments: ‘Knowledge has become a direct competitive advantage for companies selling ideas and relationships. The challenge to organizations is to ensure that they have the capability to find, assimilate, compensate and retain the talented individuals they need.’ A convincing rationale for resource-based strategy has been produced by Grant (1991): When the external environment is in a state of flux, the firm’s own resources and capabilities may be a much more stable basis on which to define its identity. Hence, a definition of a business in terms of what it is capable of doing may offer a more durable basis for strategy than a definition based upon the needs (eg markets) which the business seeks to satisfy. Unique talents among employees, including superior performance, productivity, flexibility, innovation, and the ability to deliver high levels of personal customer service, are ways in which people provide a critical ingredient in developing an organization’s competitive position. People also provide the key to managing the pivotal interdependencies across functional activities and the important external relationships. It can be argued that one of the clear benefits arising from competitive advantage based on the effective management of people is that such an advantage is hard to imitate. An organization’s HR strategies, policies and practices are a unique blend of processes, procedures, personalities, styles, capabilities and organizational culture. One of the keys to competitive advantage is the ability to differentiate what the business supplies to its customers from what is supplied by its competitors. Such differentiation can be achieved by having HR strategies that ensure that the firm has higher-quality people than its competitors, by developing and nurturing the intellectual capital possessed by the business and by functioning as a ‘learning organization’.

Strategic fit The HR strategy should be aligned to the business strategy (vertical fit). Better still, HR strategy should be an integral part of the business strategy, contributing to the business planning process as it happens. Vertical 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.

High-performance management High-performance management (called in the United States high-performance work systems or practices) aims to make an impact on the performance of the firm through its people in such areas as productivity, quality, levels of customer service, growth, profits and, ultimately, the delivery of increased shareholder value. High-performance management practices include rigorous recruitment and selection procedures, extensive and relevant training and management development activities, incentive pay systems and performance management processes.

CHALLENGES IN SHRM

If an organisation wants to develop and be successful it is very important that they identify the challenges in SHRM and take necessary steps in order to address them. The identification of organisational short comings and working towards them is not only necessary in the development of the organisation but also in designing the plan for SHRM.

Many successful organisations are of the opinion that while developing plans for effective SHRM strategy in an organisation, the organisation face to the fact there are certain challenges in SHRM. Many of these challenges in SHRM are discussed below:

Supporting the Entire Strategy There are several challenges in SHRM, which is faced by the company when they begin formulating SHRM strategies for the development of the organisation. The first challenge in the list is the inability of the top most management of the company to communicate the strategy of the company to its employees. Secondly, is the disagreement in the selection of SHRM strategy for the development of the organisation. The third challenge in the list is there are different strategies formulated in the different units of the organisation, where every unit wants to formulate the SHRM strategy.

For Unique Characteristics Of The Organisation HRM Strategies Needs To Be Developed There are no organisations in the world that are like one another. There are various factors based on which the organisations differs from one another, like leadership, history, culture, strategy, technology etc. Therefore it is very obvious that if the HRM strategies are formulated without taking into consideration the characteristics of the organisation, then the strategy is bound to fail. This is one of the most important challenges in SHRM strategy formulation. That is creating a vision for the future of the organisation which leaves no impact on the present of the organisation.

Securing The Commitment Of The Management The formulation of SHRM strategies does not only take place in the HRM department of the organisation. For the HRM strategies to be successful in developing the organisation, it is very important that the other managers and executives of the company including the top most management support the strategy. In order to ensure that the strategy will be supported by the top most management of the company, the HRM strategy developers must work in close contact with them, while the strategy is formulated. But in reality it is difficult for the HRM personnel to work in close association with the management since they get stuck with the functions of their department.

Organisations Strategic Plan Needs To Be Integrated The HRM plans need to be derived from the plans of the organisation. It has often been found that a plan looks very strong and promising on the paper but because of poor implementation, it fails to produce desired results. A strategic plan can be tested by identifying that whether the plan is able to create any difference in the practice. If the plan doesn’t lead to any changes in the practice, it is considered to be a failed plan by the managers and the employees of the organisation. Therefore the biggest challenge in SHRM is in the fact of program development for the working of the plan.

The Strategic Role of Human Resource Managers Strengthening the employer-employee relationship is the strategic role of a human resources manager. However, there's more than meets the eye to doing this. Human resources managers formulate workforce strategy and determine the functional processes necessary to meet organizational goals. Their job requires expertise as an HR generalist, which means they must be familiar with every human resources discipline.

Overview During the 1980s, personnel departments were responsible for handing out applications, providing employees with insurance enrollment forms and processing payroll. The role of the

personnel department was mainly administrative. Over the next two decades, the role of personnel administration became more involved with overall business goals. Companies began to recruit human resources leaders who were capable of managing the department from a more strategic position. Personnel administration, therefore, evolved into a business now referred to as human resources management. Human resources managers are responsible for developing strategic solutions to employment-related matters that affect the organization's ability to meet its productivity and performance goals.

Workplace Safety Creating a work environment free from unnecessary hazards is a strategic role of every human resources manager. Strategic development for workplace safety entails risk management and mitigating potential losses from on-the-job injuries and fatalities. Workers' compensation insurance is an area in which a strategic plan helps lower company expense for insurance coverage. Reducing accidents through training employees on the proper use of complex machinery and equipment is one of the functional tasks associated with creating a safe work environment.

Compensation and Benefits An employer's compensation and benefits structure partly determines the company's business reputation and image. In addition, the decisions that human resources managers make regarding pay scales and employee benefits can impact employee satisfaction, as well as the organization's ability to recruit talented workers. Job evaluation, labor market conditions, workforce shortages and budget constraints are factors that HR managers consider in a strategic plan for pay and benefits. In addition, a strategy includes weighing an employer's choices between satisfying its workforce and pleasing the company's stakeholders. Pursuant to the health care reform law passed in 2010, human resources managers for companies with more than 50 employees must decide between offering group health coverage and paying fines, beginning in 2014.

Employee Training Human resources managers' strategic role with respect to employee training and development prepares the workforce for future positions within the company. Succession planning, promotion-from-within policies and performance evaluation factor into the human resources manager's role. Training and development motivate employees, and in some cases, improve employee retention.

Recruitment and Selection Employee recruitment and selection is as much a part of employee relations as it is a separate discipline unto itself. Therefore, a human resources manager's strategic role is to combine elements of employee relations into the employer's recruitment and selection strategy. Integrating employee recognition programs into promotion-from-within policies is an effective form of employee motivation that combines the employee relations and recruitment and selection areas of human resources.

Employee Relations Some human resources managers believe that strengthening the employer-employee relationship rests solely in the employee relations areas of the HR department. This isn't true. Nevertheless, employee relations is such a large part of every discipline -- including salaries, benefits, safety, training and employee development -- that sustaining an employee relations program is an important element of human resources strategy. Implementing a workplace investigation process and enforcing fair employment practices are two components of an employee relations program. The strategic role of a human resources manager is to determine how to identify and resolve workplace issues, as well as how best to attract a diverse pool of applicants through effective recruitment and selection processes.

Barriers to the implementation of HR strategies: Each of the factors are essential to understand for successful implementation of Hr strategies. These major barriers can be encountered by Hr strategists when attempting to implement strategic initiatives includes:

1. Inadequate assessment of the environmental and cultural factors that affect the consent of the strategies.

2. Failure to understand the strategic needs of the business, with the result that Hr strategic initiatives are seen as irrelevant, even counter-productive.

3. Failure to take into account the need to have established supporting processes for the initiatives (for example, performance management to support performance pay)

4. Inability to persuade top actively to support the initiative. 5. Inability to gain the understanding and acceptance of employees. 6. Failure to monitor and evaluate the implementation of the strategy and to take swift

remedial action if things are not going according to plan. 7. Failure to ensure that the resources (finance, people and time) required implementing the

initiative will be available in this case HR support is very essential. 8. Failure to recognize that the initiative will take new demands on the commitment and

skills of the line managers who may have to play a major part in implementation.