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Strategic HumanResource Management
A Study on Indian Context
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CHAPTER-01
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Executive Summary
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Recently we have witnessed the amalgamation of several streams of management into the
strategic management literature including epistemology, organizational learning, the resource
based view, organizational capabilities and competitiveness and innovation and new product
development (Frost, 2003; Grant and Baden Fuller, 1995). Other streams focus on nature and
processes and examine the internal focus, which includes impact of strategic management
concepts and frameworks that managers use to develop competitive strategy (Clark, 1997).
Researchers have contended that the concept of strategic human resource management has
evolved into a bridge between business strategy and the management of human resources (e.g.
Butler et al., 1991; Lengnick-Hall and Lengnick-Hall, 1988; Lorange and Murphy, 1984). On the
other hand, Truss and Gratton (1994) opine strategic human resource management as the
overarching concept that links the management and deployment of individuals within the
organization to the business as a whole and its environment. Ulrich (1997) further distinguished
between strategic HR and HR strategy. He stated that strategic HR was the process of linking HR
practices to business strategy. Thus, strategic HR deals with identifying the capabilities required
of a business strategy and using HR practices to develop those capabilities.
On the other hand, he viewed HR strategy as building an agenda for the HR function and
defining the mission, vision and priorities of the HR function. During the last decade, the
personnel/HRM field has shifted from a micro focus on individual HRM practices to a debate on
how HRM as a more holistic management approach may contribute to the competitive advantage
of the organization (Fey et al., 2000). Researchers drawing largely on a behaviourist psychology
perspective have addressed the link between human resource management practices and
competitive advantage (Schuler and Jackson, 1987; Schuler and Macmillan, 1984). From this
perspective, researchers have argued that human resource management practices can contribute
to competitive advantage as far as they elicit and reinforce the set of role behaviours that result in
lowering costs, enhancing product differentiation or both (Schuler and Jackson, 1987). This
paper focuses on strategic HRM, as defined by Ulrich (1997), and the strategic role of HR linked
to the organizational learning capabilities of the Indian managers. The study will now look at the
field of HRM/HRD and the link to organizational learning capability.
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Introduction
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The SHRM literature is rooted in manpower (sic) planning, but it was the work of influential
management gurus, affirming the importance of the effective management of people as a source
of competitive advantage, that encouraged academics to develop frameworks emphasizing the
strategic role of the HR function and attaching the prefix strategic to the term human resource
management. Interest among academics and practitioners in linking the strategy concept to
HRM can be explained from both the rational choice and the constituency-based perspective.
There is a managerial logic in focusing attention on peoples skills and intellectual assets to
provide a major competitive advantage when technological superiority, even once achieved, will
quickly erode.
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 anyaspects 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.
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. This can affect the way things are
done at a business site, improving everything from hiring practices and employee
training programs to assessment techniques and discipline.
Strategic human resource management is essential in both large and small companies. In small
companies, this may be as simple as the owner or manager taking a little time every day to
observe, assist, and assess employees, and provide regular reviews. Larger companies may have
a whole department in charge of human resources and development. By meeting the needs of the
employees in a way that also benefits the company, it is possible to improve the quality of staff
members. Taking the effort to provide employees with the tools they need to thrive is worth the
investment.
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CHAPTER-02
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Strategic HRM Meaning and Definition
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The field of strategic HRM is still evolving and there is little agreement among scholars
regarding an acceptable definition. Broadly speaking, SHRM is about systematically linking
people with the organisation; more specifically, it is about the integration of HRM strategies into
corporate strategies. HR strategies are essentially plans and programmes that address and solve
fundamental strategic issues related to the management of human resources in an organisation
(Schuler, 1992). They focus is on alignment of the organisations HR practices, policies and
programmes with corporate and strategic business unit plans (Greer, 1995). Strategic HRM thus
links corporate strategy and HRM, and emphasises the integration of HR with the business and
its environment. It is believed that integration between HRM and business strategy contributes to
effective management of human resources, improvement in organisational performance and
finally the success of a particular business. It can also help organisations achieve competitive
advantage by creating unique HRM systems that cannot be imitated by others. In order for this to
happen, HR departments should be forward-thinking (future-oriented) and the HR strategies
should operate consistently as an integral part of the overall business plan. The HR-related
future-orientation approach of organisations forces them to regularly conduct analysis regarding
the kind of HR competencies needed in the future, and accordingly core HR functions (of
procurement, development and compensation) are activated to meet such needs.
Lengnick-Hall and Lengnick-Hall (1999: 2930) summarise the variety of topics that have been
the focus of strategic HRM writers over the past couple of decades. These include HR
accounting (which attempts to assign value to human resources in an effort to quantify
organisational capacity); HR planning; responses of HRM to strategic changes in the business
environment; matching human resources to strategic or organisational conditions; and the
broader scope of HR strategies. For these writers, strategic HRM is a multidimensional process
with multiple effects. Such writing also highlights the growing proactive nature of the HR
function, its increased potential contribution to the success of organisations and the mutual
relationships (integration) between business strategy and HRM.
Two core aspects of SHRM are: the importance given to the integration of HRM into the
business and corporate strategy, and the devolvement of HRM to line managers instead of
personnel specialists. Brewster and Larsen define integration as the degree to which the HRM
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issues are considered as part of the formulation of the business strategy and devolvement as the
degree to which HRM practices involve and give responsibility to line managers rather than
personnel specialists. Research in the field highlights a number of benefits of integration of
HRM into the corporate strategy. These include: providing a broader range of solutions for
solving complex organisational problems; assuring the successful implementation of corporate
strategy; contributing a vital ingredient in achieving and maintaining effective organisational
performance; ensuring that all human, technical and financial resources are given equal and due
consideration in setting goals and assessing implementation capabilities; limiting the
subordination and neglect of HR issues to strategic considerations; providing long-term focus to
HRM; and helping a firm to achieve competitive advantage.
In similar vein, researchers have highlighted the benefits of devolvement of HRM to line
managers. These include: highlighting certain issues that are too complex for top management to
comprehend alone; developing more motivated employees and more effective control; local
managers responding more quickly to local problems and conditions; resolving most routine
problems at the grassroots level; affording more time for personnel specialists to perform
strategic functions; helping to systematically prescribe and monitor the styles of line managers;
improving organisational effectiveness; preparing future managers by allowing them to practise
decision-making skills; and assisting in reducing costs by redirecting traditionally central
bureaucratic personnel functions.
Despite the highlighted benefits of the devolution of HRM to the line management, it is still not
widely practised in organisations. On the basis of earlier studies in the UK and their own in-
depth investigations into the topic, McGovern et al. suggest that devolution of responsibility for
HRM to line managers is constrained by short-term pressures on businesses (such as minimising
costs), the low educational and technical skill base of supervisors and a lack of training and
competence among line managers and supervisors.
An important issue for top decision-makers is how to evaluate the extent to which both strategic
integration and devolvement are practised in their organisations. The level of integration of HRM
into the corporate strategy can be evaluated by a number of criteria: these include representation
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of specialist people managers on the board; the presence of a written people management
strategy (in the form of mission statement, guideline or rolling plans, emphasising the
importance and priorities of human resources in all parts of the business); consultation with
people management specialists from the outset in the development of corporate strategy;
translation of the people management strategy into a clear set of work programmes; the growing
proactive nature of people management departments through the creation of rolling strategic
plans (emphasising the importance of human resources in all parts of the business); through
mission statements; by aligning HR policies with business needs through business planning
processes; by use of participative management processes and committee meetings; and via HR
audits.
The level of devolvement of HRM to line managers in an organisation can be evaluated on the
basis of measures such as: the extent to which primary responsibility for decision-making
regarding HRM (regarding pay and benefits, recruitment and selection, training and
development, industrial relations, health and safety, and workforce expansion and reduction) lies
with line managers; the change in the responsibility of line managers for HRM functions; the
percentage of line managers trained in people management in an organisation; the feedback
given to managers/line managers regarding HR related strategies; through consultations and
discussions; the extent to which line managers are involved in decision- making; by giving the
line managers ownership of HRM; and by ensuring that they have realised / accepted it by
getting their acknowledgement.
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Stages of the Evolution of Strategy and HRM Integration
Greer (1995) talks about four possible types of linkages between business strategy and the HRM
function / department of an organisation:
Administrative linkage represents the scenario where there is no HR department andsome other figurehead (such as the Finance or Accounts executive) looks after the HR
function of the firm. The HR unit is relegated here to a paper-processing role. In such
conditions there is no real linkage between business strategy and HRM.
Next is the one-way linkage where HRM comes into play only at the implementationstage of the strategy.
Two-way linkage is more of a reciprocal situation where HRM is not only involved atthe implementation stage but also at the corporate strategy formation stage.
The last kind of association is that of integrative linkage, where HRM has equalinvolvement with other organisational functional areas for business development.
Purcell (1989) presents a two-level integration of HRM into the business strategy upstream or
first-order decisionsand downstream orsecond-order decisions:
First-order decisions, as the name suggests, mainly address issues at the organisationalmission level and vision statement; these emphasise where the business is going, what
sort of actions are needed to guide a future course, and broad HR-oriented issues that willhave an impact in the long term.
Second-order decisions deal with scenario planning at both strategic and divisional levelsfor the next 35 years. These are also related to hardcore HR policies linked to each core
HR function (such as recruitment, selection, development, communication).
Guest (1987) proposes integration at three levels:
First he emphasises a fit between HR policies and business strategy. Second, he talks about the principle of complementary (mutuality) of employment
practices aimed at generating employee commitment, flexibility, improved quality and
internal coherence between HR functions.
Third, he propagates internalisation of the importance of integration of HRM and business
strategies by the line managers.
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Strategic Planning Process
A good strategic planning process is iterative, incorporating internal and external information,
various functional expertise, and cross-divisional management personnel throughout the year.
Further, it aligns the entire organization with measurable metrics which are tracked and
evaluated on a regular basis. It is important to establish an understanding of your organizations
strategic planning process and the decision-making process associated with it. At every stage in
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the strategic planning process information will be analyzed in order to make decisions. Seek out
those opportunities and offer information and insight that will enable those conversations.
Strategic decisions will be made based on return on investment (ROI), economic profit or
shareholder value creation, revenue growth, market share growth, margin, reputation or other
factors. Companies also make decisions based upon short-term (sometimes quarterly) or long-
term expectations, depending on the stage of growth and legal structure of the company. Once
you understand the planning process and the decision-making criteria for your organization, you
can begin to make inroads into the process. Your input into the process at every stage should be
in alignment with the decision-making process of the company. In fact, your ability to align your
conversations and actions with the process and decision-making criteria will at least get you on
the long list of invitations to the table.
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Approaches to Strategic Human Resource Management
The four major approaches to Strategic Human Resource Management identify the differing
views which are consolidated below:
1) Strategy-focused Approach: Authors Mathis& Jackson and Beer et al view HRM and
SHRM to be identical. They define that HRM by its nature itself is strategic. The elements of
HRM like training, recruitment, selection all of them operate as derivatives of requirements of
strategy within the organization. Strategic planning suggests HRM planning. This view is not
accepted by many of the scholars and view that HRM is strategic to some extent but not in all
aspects.
2) Decision-focused Approach: Tichy et al defines that there are three management levels
namely: strategic (long-term), managerial (medium-term) and operational (short-term). The
author views that the HR functions performed at the strategic management level are SHRM. The
managerial and operational level HR functions do not come under SHRM and would rather be
considered as functional HRM activities.
3) Content-focused Approach:Torrington & Hall identifies that in the model of HRM process
there are always some elements and in every such elements there are some strategic aspects that
are referred to as SHRM. According to this approach the functional aspects of HRM elements
can also be included with the organizations strategy leading to the emergence of SHRM.
4) Implementation-focused Approach:Miles & Snow view that organizations do have some
competitive objectives that are achieved through some business strategies. In order to formulate
and implement such strategies appropriate HRM systems are necessary and those HR systems
are strategic in nature so called SHRM.
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Essential Elements of SHRM
1. Internally Transforming HR Staff and Structure:a. Transforming HR Staff: There exists a significant difference in the skills needed by
HR staff in the traditional and strategic orientations to HRM. In traditional HRM staff
had to be specialized in certain functional areas like training or recruitment
interviewing. The strategic HRM role played by HR professional is change
management, involving strategic planning, team building and having global
perspective. Most HR units will face a significant transformation in order to manage
human resources with a new strategic view.
b. Transforming the Organizational Structure: In transforming the HR structurefrom traditional to SHRM, it is common for the organizational unit to restructure. The
major issue in designing a new strategic HRM unit is to determine whether to
centralize or decentralize HR function. The relevant structure for the HR function
depends on the nature of the firms business, size of the firm and firms overall
business strategy. In some organizations centralized structure for HR unit would be
appropriate and in some highly decentralized HRM may be necessary. Regardless of
which particular structure is used the key element in successful transformation from
traditional HR function to SHRM is to find a structure that meets the pressing needs
of business strategy and allow the HR unit provide services designed to help the firm
achieve strategic objectives.
2. Enhancing Administrative Efficiency: Dave Ulrich suggested that one of the key roles ofHR staff is to be administrative experts. As administrative experts, HR staff members must
take an active role in reengineering administrative and other processes within the firm and
find ways to share services more effectively throughout the organization. The objective is to
increase HR service efficiency and save money. Several processes are needed to enhance the
administrative expertise of HR units. The first focuses on:a. Improving administrative efficiency by targeting current processes for improvement,
by examining the gaps between the as is process and what the system needs to be.
b. Administrative efficiency can also be enhanced by the development of centralized HRservices that are shared throughout an organization.
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c. The ultimate process involves HR staff to rethink how they create value to the firm interms of value perceived by the customers rather than perceived by the provider of the
program.
3. Integrating HR into the Strategic Planning Process: The strategic integration of HRrequires strategic planning process and the involvement of HR managers in that process. The
development of strategic plan involves top management, with the help of outside consultants,
to go through and analyze the current and future condition of the organization. To achieve
full integration, HR managers should not only have the ability to influence the development
and selection of information used in decision making but should also have the ability to
influence decision making.
4. Linking HR practices to Business Strategy and to one another: This issue of fitting HRpractices to business strategy is becoming increasingly important and relevant HR issue for
HR staff and line managers. HR fit involves making sure HR activities make sense and help
the organization achieve its goals and objectives. The three aspects of HR fit are:
a. Vertical Fit: This aspect of vertical fit concerns the coincidence between HRpractices and overall business strategy.
b. Horizontal Fit: This relates to the extent to which HR activities are mutuallyconsistent. Consistency ensures that HR practices reinforce one another.
c. External Fit: The third aspect concerns how well HR activities match the demandsof the external environment.
d. Resource Flexibility: is the extent to which a firm can apply its resources to a varietyof purposes. It also involves the cost, difficulty, and time needed to switch resources
from one use to another.
e. Coordination Flexibility: concerns the extent to which an organization has decision-making and other systems that allow it to move resources fastly from one use to
another. This task is accomplished by having an effective partnership between HR
managers and line managers.
5. Developing a partnership with Line Management: Major changes are required to link thehuman resource function to the user organization. Most personnel functions are linked to the
operational business activities. With the addition of new managerial and strategic activities,
new linking mechanisms will be required as follows:
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a. Step 1: Provide the business with good human resource databases. These includeenvironmental scanning of labor markets and social and economic issues that impact
the long-term human resource context of the organization.
b. Step 2: Alter the senior management role when it comes to human resourcemanagement issues so that these concerns receive quality attention. The managers
need to be committed to weighing human resource issues with the same level of
attention as that of other functions, such as finance, marketing, accounting, and
production.
c. Step 3: The line organization must alter its incentive and control systems so that theoverall human resource function is managed. It will also be necessary for the
organization to have ways of measuring the overall performance of the human
resource function at the strategic, managerial, and operational levels. This will entail
ongoing audits of the human resource function to determine how well it is doing in
providing services to its clients.
6. Focusing on the bottom-line impact of HR and Measurement of that impact: In order toshow how HR contributes to overall business success, the first requirement is to identify the
means of measuring HRs performance. Most of suggested typologies relate to four basic
approaches about HRM:
a. Customer/stake holder approach to measure the HRM effectiveness involvesidentifying managers, unions, customers, and employees even the suppliers and
company shareholders, that are direct users of HR products.
b. HR impact: To evaluate the impact of HR programs, human resource units mustdevelop a strategic framework for assessing the effectiveness of their services. The
strategic objectives should be identified for functional units along with human
resource activities needed to accomplish those objectives.
c. Dollar value of HR programs: The third issue relates to the monetary costs andbenefits of HR activities. Various dollar-value indices like: benefits as % of total
compensation, return on HR investment, HR cost per sales dollar are used to asses
HR.
d. Benchmarking HR practices: This fourth aspect is important as it determines the truecompetitive advantage of HR, by assessing against the HR practices of key
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competitors and firms that demonstrate HR excellence. The benchmarking could be
different types like Internal Benchmarking that deals with the firm comparing
practices in one part of the organization against those in the internal units.
Competitive benchmarking is conducted with external competitors in the same
market. Generic HR benchmarking involves the comparison of HR processes that
are same, regardless of the type of industry.
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SHRM Models
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The Matching Model
Early interest in the matching model was evident in Devanna et al.s (1984) work: HR systems
and organizational structure should be managed in a way that is congruent with organizational
strategy. This is close to Chandlers (1962) distinction between strategy and structure and his
often-quoted maxim that structure follows strategy. In the Devanna et al. model, HRM
strategystructure follow and feed upon one another and are influenced by environmental forces.
Similarly, the notion of fit between an external competitive strategy and the internal HR
strategy is a central tenet of the HRM model advanced by Beer et al. (1984, see Figure 1.5). The
authors emphasize the analysis of the linkages between the two strategies and how each strategy
provides goals and constraints for the other. There must be a fit between competitive strategyand internal HRM strategy and a fit among the elements of the HRM strategy (Beer et al., 1984,
p. 13). The relationship between business strategy and HR strategy is said tobe reactive in the
sense that HR strategy is subservient to product market logic and the corporate strategy. The
latter is assumed to be the independent variable (Boxall, 1992; Purcell & Ahlstrand, 1994). As
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Miller (1987, cited in Boxall, 1992, p. 66) emphasizes, HRM cannot be conceptualized as a
stand-alone corporate issue. Strategically speaking it must flow from and be dependent upon the
organizations (market oriented) corporate strategy. There is some theorization of the link
between product markets and organizational design, and approaches to people management.
Thus, for example, each Porterian competitive strategy involves a unique set of responses from
workers, or needed role behaviours, and a particular HR strategy that might generate and
reinforce a unique pattern of behaviour (Cappelli & Singh, 1992; Schuler & Jackson, 1987).
HRM is therefore seen to be strategic by virtue of its alignment with business strategy and its
internal consistency (Boxall, 1996).
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The Resource-based Model
This second approach to developing typologies of HR strategy is grounded in the nature of the
rewardeffort exchange and, more specifically, the degree to which managers view their human
resources as an asset as opposed to a variable cost. Superior performance through workers is
underscored when advanced technology and other inanimate resources are readily available tocompeting firms. The sum ofpeoples knowledge and expertise, and social relationships, has the
potentialto provide non-substitutable capabilities that serve as a source of competitive advantage
(Cappelli & Singh, 1992). The various perspectives on resource-based HRM models raise
questions about the inextricable connection between work-related learning, the mobilization of
employee consent through learning strategies and competitive advantage. Given the upsurge of
interest in resource-based models, and in particular the new workplace learning discourse, we
need to examine this model in some detail.
The genesis of the resource-based model can be traced back to Selznick (1957), who suggested
that work organizations each possess distinctive competence that enables them to outperform
their competitors, and to Penrose (1959), who conceptualized the firm as a collection of
productive resources. She distinguished between physical and human resources, and drew
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attention to issues of learning, including the knowledge and experience of the management team.
Moreover, Penrose emphasized what many organizational theorists take for granted that
organizations are heterogeneous (Penrose, 1959, cited in Boxall, 1996, pp. 645). More
recently, Barney (1991) has argued that sustainedcompetitive advantage (emphasis added) is
achieved not through an analysis of a firms external market position but through a careful
analysis of its skills and capabilities, characteristics that competitors find themselves unable to
imitate. Putting it in terms of a simple SWOT analysis, the resource-based perspective
emphasizes the strategic importance of exploiting internal strengths and neutralizing internal
weaknesses (Barney, 1991).
The resource-based approach exploits the distinctive competencies of a work organization: its
resources and capabilities. An organizations resources can be divided into tangible (financial,
technological, physical and human) and intangible (brand-name, reputation and know-how)
resources. To give rise to a distinctive competency, an organizations resources must be both
unique and valuable. By capabilities, we mean the collective skills possessed by the organization
to coordinate effectively the resources.
According to strategic management theorists, the distinction between resources and capabilities
is critical to understanding what generates a distinctive competency. It is important to recognize
that a firm may not need a uniquely endowed workforce to establish a distinctive competency as
long as it has managerial capabilities that no competitor possesses. This observation may explain
why an organization adopts one of the control-based HR strategies.
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The Integrative Model
Bamberger and Meshoulam (2000) integrate the two main models of HR strategy, one focusing
on the strategys underlying logic of managerial control, the otherfocusing on the rewardeffort
exchange. Arguing that neither of the two dichotomous approaches (control- and resource-based
models) provides a framework able to encompass the ebb and flow of the intensity and direction
of HR strategy, they build a model that characterizes the two main dimensions of HR strategy as
involving acquisitionand development and the locus of control.
Acquisition and developmentare concerned with the extent to which the HR strategy develops
internalhuman capital as opposed to the externalrecruitment of human capital. In other words,
organizations can lean more towards making their workers (high investment in training) or
more towards buying their workers from the external labour market (Rousseau, 1995).
Bamberger and Meshoulam (2000) call this the make-or-buy aspect of HR strategy.
Locus of control is concerned with the degree to which HR strategy focuses on monitoring
employees compliance with process-based standards as opposed to developing a psychological
contract that nurtures social relationships, encourages mutual trust and respect, and controls the
focus on the outcomes (ends) themselves. This strand of thinking in HR strategy can be traced
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back to the ideas of Walton (1987), who made a distinction between commitment and control
strategies (Hutchinson et al., 2000).
HR Strategic PlanGoals and Objectives
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Goal One: Promote and enhance our competitive total rewards package to recruit and
retain top talent.
Objectives:
Create a total rewards message to educate HR partners, hiring managers, and recruits on thetotal value of the Virginia Tech employment package
Work closely with management to reinforce the need for competitive compensation forindividuals Virginia Tech wishes to attract and retain
Fine tune benefits package within the Virginia higher education restructuring framework Focus on retirement planning and support for current and retired employees Define a minimum level of employee educational benefit across all senior management areas
Goal Two: Support the talent development of our employees through professional
development, career development, and improved performance management.
Objectives:
Invest in professional development programs to improve leadership capabilities, job skills,and employee productivity
Develop comprehensive career management tools, job enrichment strategies, and mentoringprograms to help employees prepare for new opportunities
Provide organizational consulting services to all senior management areas to spur improvedorganizational and individual performance
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Goal Three: Promote the achievement of work-life balance and wellness in our employee
community.
Objectives:
Expand the use of flexible work arrangements through greater supervisory and employeeawareness about the potential benefits to employees and departments
Inform employees about the importance of education, awareness, self-care, and behavioralchange in improving wellness and productivity
Collaborate with individuals and departments, both on and off campus, to deliver a broaderrange of wellness programs and services for improved physical and mental health
Assess the ongoing need for more child-care options based on analysis of local supply anddemand
Goal Four: Deliver HR services, programs, and communications which are highly valued
by our prospective employees, current employees, and retirees.
Objectives:
Target employee communications more effectively to meet employee information needs Leverage technology to streamline HR service processes and improve access to employee
information
Define HRs customer service promise and assess and improve customer satisfaction to acommon standard through regular surveys
Develop HR scorecard for central HR and senior management areas as an overall assessmentand improvement tool
Plan new office location so that it provides a productive work environment for improvedservice and program delivery
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Goal Five: Foster a diverse, inclusive community with a positive work environment.
Objectives:
Develop a Building a Better Work Environment curriculum for supervisors Conduct regular organizational climate assessments and collaborate with senior managers to
improve the campus work climate
Partner with the Office of Diversity and Inclusion, senior managers, and department heads topromote and uphold our Principles of Community
Educate the campus community on the prevention of harassment and discrimination andproductive ways to resolve conflict
Insure we promote our commitment to diversity and non-discrimination through our actionsand in our outreach and employee recruitment efforts
Assess and address reasons why talented people leave the Virginia Tech employeecommunity
Goal Six: Compete for top talent with effective recruitment strategies and efficient
recruitment processes.
Objectives:
Identify more proactive recruiting solutions for staff and AP faculty positions Build relationships with senior management areas by assigning them staffing specialists and
developing recruitment strategies focused on their recruitment priorities
Improve employee onboarding experience through three month check-up Design and implement a central hiring procedures portal for managers to use when hiring all
job types
Provide search support for AP faculty searches upon request
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Dimensions of
Strategic Human Resource Management (SHRM)
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In addition to focusing on the validity of the matching SHRM model and typologies of HR
strategy, researchers have identified a number of important themes associated with the notion of
SHRM that are discussed briefly here These are:
HR practices and performance Re-engineering organizations and work Leadership and strategic Human Resource Management Workplace learning Trade unions
Human Resource Management practices and performance
Although most HRM models provide no clear focus for any test of the HRMperformance link,
the models tend to assume that an alignment between business strategy and HR strategy will
improve organizational performance and competitiveness. During the past decade, demonstrating
that there is indeed a positive link between particular sets or bundles of HR practices and
business performance has become the dominant research issue. The dominant empirical
questions on this topic ask What types of performance data are available to measure the HRM
performance link? and Do high-commitment-type HRM systems produce above-average
results compared with control-type systems? A number of studies have found that, in spite ofthe methodological challenges, bundles of HRM practices are positively associated with superior
organization performance.
Re-engineering and Strategic Human Resource Management
All normative models of HRM emphasize the importance of organizational design. As
previously discussed, the soft HRM model is concerned with job designs that encourage the
vertical and horizontal compression of tasks and greater worker autonomy. The redesign of work
organizations has been variously labelled highperforming work systems (HPWS), business
process re-engineering and highcommitment management. The literature emphasizes core
features of this approach to organizational design and management, including a flattened
hierarchy, decentralized decision-making to line managers or workteams, enabling information
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technology, strong leadership and a set of HR practices that make workers behaviour more
congruent with the organizations culture and goals.
Leadership and Strategic Human Resource Management
The concept of managerial leadership permeates and structures the theory and practice of work
organizations and hence how we understand SHRM. Most definitions of managerial leadership
reflect the assumption that it involves a process whereby an individual exerts influence upon
others in an organizational context. Within the literature, there is a continuing debate over the
alleged differences between a manager and a leader: managers develop plans whereas leaders
create a vision. Much of the leadership research and literature tends to be androcentric in nature
and rarely acknowledges the limited representation of ethnic groups and women in senior
leadership positions. The current interest in alternative leadership paradigms variously labelled
transformational leadership and charismatic leadership may be explained by understanding
the prerequisites of the resource-based SHRM model. Managers are looking for a style of
leadership that will develop the firms human endowment and, moreover, cultivate commitment ,
flexibility, innovation and change.
A number of writers make explicit links between learning, leadership and organizational change.
It would seem that a key constraint on the development of a resource-based SHRM model is
leadership competencies. Apparently, most re-engineering failures stem from breakdowns in
leadership, and the engine that drives organizational change is leadership, leadership, and still
more leadership. In essence, popular leadership models extol to followers the need for working
beyond the economic contract for the common good. In contemporary parlance, the
transformational leader is empowering workers. To go beyond the rhetoric, however, such
popular leadership models shift the focus away from managerial control processes and innate
power relationships towards the psychological contract and the individualization of the
employment relationship.
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Workplace Learning and Strategic Human Resource Management
Within most formulations of SHRM, formal and informal work-related learning has come to
represent a key lever that can help managers to achieve the substantive HRM goals of
commitment, flexibility and quality (Beer et al., 1984; Keep, 1989). As such, this growing field
of research occupies centre stage in the soft resource-based SHRM model. From a managerial
perspective, formal and informal learning can, it is argued, strengthen an organizations core
competencies and thus act as a lever to sustainable competitive advantage having the ability to
learn faster than ones competitors is of the essence here. There is a growing body of work that
has taken a more critical look at workplace learning. Some of these writers, for example,
emphasize how workplace learning can strengthen cultural control (Legge, 1995), strengthen
the power of those at the apex of the organization (Coopey, 1996) and be a source of conflict
when linked to productivity or flexibility bargaining and job control (Bratton, 2001).
Trade Unions and Strategic Human Resource Management
The notion of worker commitment embedded in the HRM model has led writers from both ends
of the political spectrum to argue that there is a contradiction between the normative HRM
model and trade unions. In the prescriptive management literature, the argument is that the
collectivist culture, with its them and us attitude, sits uncomfortably with the HRM goal of high
employee commitment and the individualization of the employment relationship. The critical
perspective also presents the HRM model as being inconsistent with traditional industrial
relations, albeit for very different reasons. Critics argue that high-commitment HR strategies
are designed to provide workers with a false sense of job security and to obscure underlying
sources of conflict inherent in capitalist employment relations (Godard, 1994). Other scholars,
taking an orthodox pluralist perspective, have argued that trade unions and the high -
performancehigh-commitment HRM model cannot only coexist but are indeed necessary if an
HPWS is to succeed. What is apparent is that this part of the SHRM debate has been strongly
influenced by economic, political and legal developments in the USA and UK over the past two
decades.
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SHRM andOrganisational Performance
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The concept of fit has emerged as central to many attempts to theorise about strategic HRM
(Richardson and Thomson, 1999). Internal fit is the case when the organisation is developing a
range of interconnected and mutually reinforcing HRM policies and practices. This implies that
there exists a set of best HR practices that fit together sufficiently so that one practice
reinforces the performance of the other practices. Synergy is the key idea behind internal fit.
Synergy can be achieved if the combined performance of a set of HRM policies and practices is
greater than the sum of their individual performances. In this regard, the importance of the
different HRM policies and practices being mutually reinforcing is emphasised.
External fit is the case when the organisation is developing a range of HRM policies and
practices that fit the businesss strategies outside the area of HRM. This implies that performance
will be improved when the right fit, or match, between business strategy and HRM policies and
practices is achieved. As discussed above, specific HRM policies and practices are needed to
support generic business strategies, for example Porters cost leadership, innovation or quality
enhancement. Similarly, Miles and Snow (1984) relate HRM policies and practices with
competitive product strategies.
Over the last decade or so the concept of fit has been further investigated by many scholars. An
analysis of such work highlights that there are generally three modes of fit, or approaches to fit:
universalistic, contingency, and configurational. The core features of these modes constitute
the structure of the so-called strategic HRM / business performance models.
Theuniversalistic perspectiveor HRM as an ideal set of practices suggests that a specified set
of HR practices (the so-called best practices) will always produce superior results whatever the
accompanying circumstances. Proponents of the universalistic model emphasise that internal fit
or horizontal fit or alignment of HR practices helps to significantly improve an organisations
performance. Higgs et al. (2000) explain how a large number of HR practices that were
previously considered to be distinct activities can all be considered now to belong in a system
(bundle) of aligned HR practices.
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Considering that internal fit is central to universalistic models, the main question / problem is
how to determine an HR system, that is, as a coherent set of synergistic HR practices that blend
better in producing higher business performance. The methods used in developing such HR
systems depend on the additive relationship (i.e. the case when the HR practices involved have
independent and non-overlapping effects on outcome), and on the interactive relationship.
However, in our opinion universalistic models do not explicitly consider the internal integration
of HR practices, and consider them merely from an additive point of view. Emerging research
evidence reveals the so-called portfolio effect, that is, how HR practices support and improve
one another. However, it is important to remember that there can be countless combinations of
practices that will result in identical business outcomes. This contributes to the concept of
equifinality, in which identical outcomes can be achieved by a number of different systems of
HR practices.
Support for the universalistic approach to strategic HRM is mixed as there are notable
differences across studies as to what constitutes a best HR practice. Most studies focus on
three mechanisms by which universal HR practices impact on business performance: (1) the
human capital base or collection of human resources (skills, knowledge, and potential), that the
organisation has to work with the organisations recruitment, selection, training and
development processes directly affect the quality of this base; (2) motivation, which is affected
by a variety of HR processes including recognition, reward, and work systems; and (3)
opportunity to contribute, which is affected by job design, and involvement/ empowerment
strategies. In addition, the best practices approach generally refers to the resource-based theory
of firm and competitive advantage, which focuses on the role internal resources such as
employees play in developing and maintaining a firms competitive capabilities. For a resource
to be a source of competitive advantage it must be rare, valuable, inimitable and non-
substitutable. Therefore, HR practices of the organisation can lead to competitive advantage
through developing a unique and valuable human pool.
The contingency or HRM as strategic integration model argues that an organisations set of
HRM policies and practices will be effective if it is consistent with other organisational
strategies. External fit is then what matters (Fombrum et al., 1984; Golden and Ramanujam,
1985; Schuler and Jackson, 1987; Lengnick-Hall and Lengnick-Hall, 1988; Guest, 1997). As
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discussed above, in this regard specific HRM policies and practices link with various types of
generic business strategies. For example, the work of Schuler and Jackson (1987), mentioned
above, suggests that the range of HRM policies and practices an organisation should adopt
depend on the competitive product strategies it is following. Considering that external fit is the
key concept of contingency models, the contingency approach refers firstly to the theory of the
organisational strategy and then to the individual HR practices that interact with organisational
strategy in order to result in higher organisational performance. The adoption of a contingency
HRM strategy is then associated with optimized organisational performance, where the
effectiveness of individual HR practices is contingent on firm strategy. The performance of an
organisation that adopts HR practices appropriate for its strategy will be higher.
The configurational or HRM as bundles model argues that to claim a strategys success turns
on combining internal and external fit. This approach makes use of the so-called bundles of HR
practices, which implies the existence of specific combinations or configurations of HR practices
depending on corresponding organisational contexts, where the key is to determine which are the
most effective in terms of leading to higher business performance.
Considering that both the internal and external fits are the key concepts of configurational
models, the configurational approach refers firstly to the theory of the organisational strategy and
then to the systems of HR practices that are consistent with organisational strategy in order to
result in higher organisational performance. As indicated above, there are a number of strategies
an organisation may choose to follow, such as Miles and Snows (1984) strategic typology that
identifies the four ideal strategic types of prospector, analyser, defender and reactor.
With respect to the configurations of HR practices, scholars (such as Kerr and Slocum, 1987;
Osterman, 1987; Sonnenfeld and Peiperl, 1988; Delery and Doty, 1996) have developed
theoretically driven employment systems. Specifically, Delery and Doty (1996) propose the
following two ideal type employment systems: the market type system, which is characterised
by hiring from outside an organisation, and the internal system, which is characterised by the
existence of an internal market. Because organisations adopting a defending strategy concentrate
on efficiency in current products and markets, the internal system is more appropriate for this
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type of strategy. On the otherhand, organisations pursuing a prospectors strategy are constantly
changing, and the market system is more appropriate for this type of strategy. A possible third
type of configurational strategy can be the analyser, at the midpoint between the prospector and
the defender. In summary, according to this approach, if consistency within the configuration of
HR practices and between the HR practices and strategy is achieved, then the organisation will
achieve better performance.
With respect to these three models, there is no clear picture of which of these three key broad
areas is the predominant one. It is worth repeating the words of Wood (1999: 409):
If ones arm were twisted to make an overall conclusion on the balance of the evidence so far,
one in favour of contingency hypothesis would be just as justified as the universal hypothesis.
This is because any such conclusion would be premature because of conflicting research results
but, more importantly, because the debate is still in its infancy.
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Linking Organisational Strategy andHRM Strategy
[Theoretical Developments]
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The strategic fit or the hard variant of HRM
Fibrin et al.s (1984) matching model highlights the resource aspect of HRM and emphasises
the efficient utilisation of human resources to meet organisational objectives. This means that,
like other resources of organisation, human resources have to be obtained cheaply, used
sparingly and developed and exploited as fully as possible. The matching model is mainly based
on Chandlers (1962) argument that an organisations structure is an outcome of its strategy.
Fombrun et al. (1984) expanded this premise in their model of strategic HRM, which emphasises
a tight fit between organisational strategy, organisational structure and HRM system. The
organisational strategy is pre-eminent; both organisation structure and HRM are dependent on
the organisation strategy. The main aim of the matching model is therefore to develop an
appropriate human resource system that will characterise those HRM strategies that contribute
to the most efficient implementation of business strategies.
The matching model of HRM has been criticised for a number of reasons. It is thought to be too
prescriptive by nature, mainly because its assumptions are strongly guitarist. As the model
emphasises a tight fit between organisational strategy and HR strategies, it completely ignores
the interest of employees, and hence considers HRM as a passive, reactive and implementations
function. However, the opposite trend is also highlighted by research. It is asserted that this
model fails to perceive the potential for a reciprocal relationship between HR strategy and
organisational strategy. Indeed, for some, the very idea of tight fit makes the organisation
inflexible, incapable of adapting to required changes and hence misfitted to todays dynamic
business environment. The matching model also misses the human aspect of human resources
and has been called a hard model of HRM. The idea of considering and using human resources
like any other resource of an organisation seems unpragmatic in the present world.
Despite the many criticisms, however, the matching model deserves credit for providing an
initial framework for subsequent theory development in the field of strategic HRM. Researchers
need to adopt a comprehensive methodology in order to study the dynamic concept of human
resource strategy. Do elements of the matching model exist in different settings? This can be
discovered by examining the presence of some of the core issues of the model. The main
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propositions emerging from the matching models that can be adopted by managers to evaluate
scenario of strategic HRM in their organisations are:
Do organisations show a tight fit between their HRM and organisation strategy wherethe former is dependent on the latter? Do specialist people managers believe they should
develop HRM systems only for the effective implementation of their organisations
strategies?
Do organisations consider their human resources as a cost and use them sparingly? Or dothey devote resources to the training of their HRs to make the best use of them?
Do HRM strategies vary across different levels of employees?
The Soft Variant of HRM
The Harvard model of strategic HRM is another analytical framework, which is premised on
the view that if general managers develop a viewpoint of how they wish to see employees
involved in and developed by the enterprise then some of the criticisms of historical personnel
management can be overcome. The model was first articulated by Beer et al. Compared to the
matching model, this model is termed soft HRM. It stresses the human aspect of HRM and is
more concerned with the employeremployee relationship. The model highlights the interests of
different stakeholders in the organisation (such as shareholders, management, employee groups,
government, community and unions) and how their interests are related to the objectives ofmanagement. This aspect of the model provides some awareness of the European context and
other business systems that emphasise co-determination. It also recognises the influence of
situational factors (such as the labour market) on HRM policy choices.
The actual content of HRM, according to this model, is described in relation to four policy areas,
namely, human resource flows, reward systems, employee influence, and works systems. Each of
the four policy areas is characterised by a series of tasks to which managers must attend. The
outcomes that these four HR policies need to achieve are commitment, competence, congruence,
and cost effectiveness. The aim of these outcomes is therefore to develop and sustain mutual
trust and improve individual / group performance at the minimum cost so as to achieve
individual well-being, organisational effectiveness and societal well-being. The model allows for
analysis of these outcomes at both the organisational and societal level. As this model
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acknowledges the role of societal outcomes, it can provide a useful basis for comparative
analysis of HRM. However, this model has been criticised for not explaining the complex
relationship between strategic management and HRM.
The Contextual Emphasis
Based on the human resource policy framework provided by the Harvard model, researchers at
the Centre for Corporate Strategy and Change at Warwick Business School have developed an
understanding of strategy-making in complex organisations and have related this to the ability to
transform HRM practices. They investigated empirically based data (collected through in-depth
case studies on over twenty leading British organisations) to examine the link between strategic
change and transformations, and the way in which people are managed. Hendry and associates
argue that HRM should not be labelled as a single form of activity. Organisations may follow a
number of different pathways in order to achieve the same results. This is mainly a function of
the existence of linkages between the outer environmental context (socio-economic,
technological, politico-legal and competitive) and inner organisational context (culture, structure,
leadership, task-technology and business output). These linkages directly contribute to forming
the content of an organisations HRM. To analyse this, past information related to the
organisations development and management of change is essential. The main propositions
emerging from this model are:
What is the influence of economic (competitive conditions, ownership and control,organisation size and structure, organisational growth path or stage in the life cycle and the
structure of the industry), technological (type of production systems) and socio-political
(national education and training set-up) factors on HRM strategies?
What are the linkages between organisational contingencies (such as size, nature, positioningof HR and HR strategies) and HRM strategies?
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The Issue of Strategic Integration
Debates in the early 1990s suggested the need to explore the relationship between strategic
management and HRM more extensively and the emerging trend in which HRM is becoming an
integral part of business strategy. The emergence of SHRM is an outcome of such efforts. As
mentioned above, it is largely concerned with integration and adaptation. Its purpose is to
ensure that HRM is fully integrated with the strategy and strategic needs of the firm; HR policies
are coherent both across policy areas and across hierarchies; and HR practices are adjusted,
accepted and used by line managers and employees as part of their everyday work.
SHRM therefore has many different components, including HR policies, culture, values and
practices. Schuler developed a 5-P model of SHRM that melds five HR activities (philosophies,
policies, programs, practices and processes) with strategic business needs, and reflects
managements overall plan for survival, growth, adaptability and profitability. The strategic HR
activities form the main components of HR strategy. This model to a great extent explains the
significance of these five SHRM activities in achieving the organisations strategic needs, and
shows the interrelatedness of activities that are often treated separately in the literature. This is
helpful in understanding the complex interaction between organisational strategy and SHRM
activities.
This model further shows the influence of internal characteristics (which mainly consists of
factors such as organisational culture and the nature of the business) and external characteristics
(which consist of the nature and state of economy in which the organisation is existing and
critical success factors, i.e. the opportunities and threats provided by the industry) on the
strategic business needs of an organisation. This model initially attracted criticism for being
over-prescriptive and too hypothetical in nature. It needs a lot of time to gain an understanding of
the way strategic business needs are actually defined. The melding of business needs with HR
activities is also very challenging, mainly because linkages between human resource activities
and business needs tend to be the exception, even during non-turbulent times.
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Vital Role ofStrategic Human Resource Management
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Strategic Human Resource Management (SHRM) idea is that human resources management is
used to gain competitive advantage. SHRM practice is coupled with business strategy. SHRM
elevates human resources management from micro level (individual personal level) to the macro
level (business strategy level). SHRM includes analysis of business and socio-political
environment. HR professionals must be aware of global business and social trends and should be
able to perform environmental scanning.
SHRM also includes internal human resource analysis. HR professionals must analyze human
resources against current and future business strategies and identify the gaps between them.
SHRM is also intended to assist management in the best use of internal labor market. Hence an
absolute requirement for analysis would be effective use of computer based human resource
information systems. SHRM includes organizational analysis and design. Hence HR
professionals had to provide management not only with analysis, but also organization-design
recommendations. Benchmarking against successful internal and external organizations is useful
tool that helps in this process.
SHRM is part of the business plan. Strategic HR considerations are more important than the
traditional planning elements. The strategic HR considerations are as follows:
a) Is the organizational culture supporting the long-term business strategy?b) Is the organizations structure consistent with the business strategy?c) Is managements executive staffing adequate? Are skills adequate?d) Are the management-performance systems properly focused?
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Matching Business Strategy andHRM
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The above discussion summarizes the theoretical developments in strategic HRM and its
linkages with organisational strategies. A number of clear messages emerge from the analysis.
For example, strategic HRM models primarily emphasise implementation over strategy
formulation. They also tend to focus on matching HR strategy to organisational strategy, not the
other way. They also tend to emphasise fit or congruence and do not acknowledge the need for
lack of such fit between HR strategies and business strategies during transitional times and when
organisations have multiple or conflicting goals (also see Lengnick-Hall and Lengnick-Hall,
1999). This section further highlights the matching of HRM policies and practices to some of the
established models of business strategies.
Porters Generic Business Strategies and HRM
Michael Porter (1980; 1985) identified three possible generic strategies for competitive
advantage in business: cost leadership (when the organisation cuts its prices by producing a
product or service at less expense than its competitors); innovation (when the organisation is able
to be a unique producer); and quality (when the organisation is delivering high-quality goods and
services to customers). Considering the emphasis on external-fit (i.e. organisational strategy
leading individual HR practices that interact with organisational strategy in order to improve
organisational performance), a number of HRM combinations can be adopted by firms to support
Porters model of business strategies. In this regard, Schuler (1989) proposes corresponding
HRM philosophies of accumulation (careful selection of good candidates based on personality
rather technical fit), utilization (selection of individuals on the basis of technical fit), and
facilitation (the ability of employees to work together in collaborative situations). Thus, firms
following a quality strategy will require a combination of accumulation and facilitation HRM
philosophies in order to acquire, maintain and retain core competencies; firms pursuing a cost-
reduction strategy will require a utilization HRM philosophy and will emphasise short-run
relationships, minimize training and development and highlight external pay comparability; and
firms following an innovation strategy will require a facilitation HRM philosophy so as to bring
out the best out of existing staff (also see Schuler and Jackson, 1987). In summary, according to
the external-fit philosophy, the effectiveness of individual HR practices is contingent on firm
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strategy. The performance of an organisation that adopts HR practices appropriate for its strategy
will then be higher.
Business Life Cycles and HRM
There is now an established literature in the field of HRM that highlights how possible
contingent variables determine the HRM systems of an organisation (for a detailed review see
Budhwar and Debrah, 2001; Budhwar and Sparrow, 2002). One among the long list of such
variables is the life cycle stage of an organisation: introduction (start-up); growth
(development); maturity; decline; and turnaround. Research findings reveal a clear association
between a given life cycle stage and specific HRM policies and practices. For example, it is
logical for firms in their introductory and growth life cycle stages to emphasise a rationalized
approach to recruitment in order to acquired best-fit human resources, compensate employees at
the going market rate, and actively pursue employee development strategies. Similarly,
organisations in the maturity stage are known to recruit enough people to allow for labour
turnover/ lay-offs and to create new opportunities in order to remain creative to maintain their
market position. Such organisations emphasise flexibility via their training and development
programmes and pay employees as per the market leaders in a controlled way. Accordingly firms
in the decline stage will be likely to minimise costs by reducing overheads and aspire to maintain
harmonious employee relations (for more details see Kochan and Barocci, 1985; Baird and
Meshoulam 1988; Hendry and Pettigrew 1992; Jackson and Schuler 1995; Boxall and Purcell,
2003).
Typology of Business Strategies and HRM
Miles and Snow (1978; 1984) classify organisations as prospectors (who are doing well and are
regularly looking for more products and market opportunities), defenders (who have a limited
and stable product domain), analyzers (who have some degree of stability but are on the
lookout for possible opportunities) and reactors (who mainly respond to market conditions).
These generic strategies dictate organizations HRM policies and practices. For example,
defenders are less concerned about recruiting new employees externally and are more concerned
about developing current employees. In contrast, prospectors are growing, so they are concerned
about recruiting and using performance appraisal results for evaluation rather than for longer-
term development.
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Generic HR Strategies
Identifying the need to highlight the prevalence of generic HR strategies pursued by
organisations in different contexts, Budhwar and Sparrow (2002) propose four HR strategies.
These are:
talent acquisition HR strategy (emphasises attracting the best human talent fromexternal sources);
effective resource allocation HR strategy (maximizes the use of existing humanresources by always having the right person in the right place at the right time);
talent improvement HR strategy (maxims the talents of existing employees bycontinuously training them and guiding them in their jobs and career); and
cost reductionHR strategy (reduces personnel costs to the lowest possible level).Budhwar and Khatri (2001) examined the impact of these HR strategies on recruitment,
compensation, training and development and employee communication practices in matched
Indian and British firms. The impact of these four HR strategies varied significantly in the two
samples, confirming the context specific nature of HRM. On the same pattern, there is a need to
identify and examine the impact of other HR strategies such as high commitment, paternalism,
etc. Such HR issues, which have a significant impact on a firms performance, are furtherexamined in different chapters in this book.
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The Strategic Role of
Human Resource Management
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The human resource management function has consistently faced a battle in justifying its
position in organizations. At good times when there are enough budgets, firms easily justify
expenditures on training, staffing, rewards and employee involvement systems, but when faced
with financial difficulties, such HR systems get the earliest cutbacks.
The advent of the subfield of strategic human resource management (SHRM), devoted to
exploring HRs role in supporting business strategy, provided one opportunity for demonstrating
its value to the firm. The birth of the field of strategic human resource management can be dated
back to 1984, when Devanna, Fombrun and Tichy extensively explored the link between
business strategy and human resources.
HRM discipline has witnessed a great deal of change over the past 25 years. These changes
represent two major transformations. The first is the transformation from being the field of
personnel management to being the field of human resource management. The second is the
transformation from being the field of human resource management to being the field of strategic
human resource management.
The first transformation incorporated helped the recognition that people are an important asset in
organizations and can be managed systematically. The second transformation has built on the
preceding knowledge base of the discipline.
This transformation is based upon the recognition that, in addition to coordinating human
resource policies and practices with each other, they need to be linked with the needs of the
organization. Given that these needs are reflected in the strategies of the firm, this transformation
of human resource management came to be known as strategic human resource
management.
Strategic human resource management is based upon the recognition that organizations can be
more effective if their human resources are managed with human resource policies and practicesthat deliver the right number of people with the appropriate behaviours, the needed competencies
and the necessary level of motivation to the organization.
To put it another way, strategic human resource management is the creation of linkage or
integration between the overall strategic aims of business and the human resource strategy and
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implementation. In principle, the processes and people within the company are managed in such
a way as to foster the aims of the business strategy and create an integrated approach to
managing the various human resource functions, such as selection, training and reward so that
they complement each other.
Strategic human resource management may bring a number of benefits to the organization:
Contributing to the goal accomplishment and the survival of the company, Supporting and successfully implementing business strategies of the company Creating and maintaining a competitive advantage for the company Improving the responsiveness and innovation potential of the company Increasing the number of feasible strategic options available to the company Participating in strategic planning and influencing the strategic direction of the company
as an equally entitled member of top management
Improving cooperation between the HRM department and line managersSHRMs spreading popularity owes much to the promise of greater organizational effectiveness
achievable, through the development of internally consistent bundles of human resource
strategies which are properly linked to business strategies.
Researchers in the field of SHRM have increasingly relied on the resource-based view of the
firm to explain the role of human resource practices in firm performance. Resource based view
of strategy is that the strategic capability of a firm depends on its resource capability, especially
its distinctive resources. Indeed, theoretical research on SHRM has suggested that systems of HR
practices may lead to higher firm performance and be sources of sustained competitive
advantage because these systems of practices are often unique, causally ambiguous, and difficult
to imitate. HR practices can enhance firm performance when they are internally aligned with one
another to manage employees in a manner that leads to competitive advantage.HR practices can
create value for a firm when the individual practices are aligned to develop critical resources or
competencies.
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Perspectives on SHRM andOrganisational Performance
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The concept of fit has emerged as central to many attempts to theorise about strategic HRM
(Richardson and Thomson, 1999). Internal fit is the case when the organisation is developing a
range of interconnected and mutually reinforcing HRM policies and practices. This implies that
there exists a set of best HR practices that fit together sufficiently so that one practice
reinforces the performance of the other practices. Synergy is the key idea behind internal fit.
Synergy can be achieved if the combined performance of a set of HRM policies and practices is
greater than the sum of their individual performances. In this regard, the importance of the
different HRM policies and practices being mutually reinforcing is emphasised.
External fit is the case when the organisation is developing a range of HRM policies and
practices that fit the businesss strategies outside the area of HRM. This implies thatperformance
will be improved when the right fit, or match, between business strategy and HRM policies and
practices is achieved. As discussed above, specific HRM policies and practices are needed to
support generic business strategies, for example Porters cost leadership, innovation or quality
enhancement. Similarly, Miles and Snow (1984) relate HRM policies and practices with
competitive product strategies (defenders, prospectors, analysers, reactors).
Over the last decade or so the concept of fit has been further investigated by many scholars. An
analysis of such work highlights that there are generally three modes of fit, or approaches to fit:
universalistic, contingency, and configurational. The core features of these modes constitute
the structure of the so-called strategic HRM / business performance models.
Theuniversalistic perspectiveor HRM as an ideal set of practices suggests that a specified set
of HR practices (the so-called best practices) will always produce superior results whatever the
accompanying circumstances. Proponents of the universalistic model emphasise that internal fit
or horizontal fit or 1alignment of HR practices helps to significantly improve an
organisations performance. Higgs et al. (2000) explain how a large number of HR practices that
were previously considered to be distinct activities can all be considered now to belong in a
system (bundle) of aligned HR practices.
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Considering that internal fit is central to universalistic models, the main question / problem is
how to determine an HR system, that is, as a coherent set of synergistic HR practices that blend
better in producing higher business performance. The methods used in developing such HR
systems depend on the additive relationship (i.e. the case when the HR practices involved have
independent and non-overlapping effects on outcome), and on the interactive relationship (i.e.
the case when the effect of one HR practice depends on the level of the other HR practices
involved). However, in our opinion universalistic models do not explicitly consider the internal
integration of HR practices, and consider them merely from an additive point of view. Emerging
research evidence (see Delery and Doty 1996) reveals the so-called portfolio effect, that is, how
HR practices support and improve one another. However, it is important to remember that there
can be countless combinations of practices that will result in identical business outcomes. This
contributes to the concept of equifinality, in which identical outcomes can be achieved by a
number of different systems of HR practices.
Support for the universalistic approach to strategic HRM is mixed as there are notable
differences across studies as to what constitutes a best HR practice. Most studies focus on
three mechanisms by which universal HR practices impact on business performance: (1) the
human capital base or collection of human resources (skills, knowledge, and potential), that the
organisation has to work with the organisations recruitment, selection, training and
development processes directly affect the quality of this base; (2) motivation, which is affected
by a variety of HR processes including recognition, reward, and work systems; and (3)
opportunity to contribute, which is affected by job design, and involvement/ empowerment
strategies. In addition, the best practices approach generally refers to the resource-based theory
of firm and competitive advantage, which focuses on the role internal resources such as
employees play in developing and maintaining a firms competitive capabilities. For a resource
to be a source of competitive advantage it must be rare, valuable, inimitable and non-
substitutable. Therefore, HR practices of the organisation can lead to competitive advantage
through developing a unique and valuable human pool.
The contingency or HRM as strategic integration model argues that an organisations set of
HRM policies and practices will be effective if it is consistent with other organisational
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strategies. External fit is then what matters. As discussed above, in this regard specific HRM
policies and practices link with various types of generic business strategies. For example, the
work of Schuler and Jackson (1987), mentioned above, suggests that the range of HRM policies
and practices an organisation should adopt depend on the competitive product strategies it is
following. Considering that external fit is the key concept of contingency models, the
contingency approach refers firstly to the theory of the organisational strategy and then to the
individual HR practices that interact with organisational strategy in order to result in higher
organisational performance. The adoption of a contingency HRM strategy is then associated with
optimized organisational performance, where the effectiveness of individual HR practices is
contingent on firm strategy. The performance of an organisation that adopts HR practices
appropriate for its strategy will be higher.
The configurational or HRM as bundles model argues that to claim a strategys success turns
on combining internal and external fit. This approach makes use of the so-called bundles of HR
practices, which implies the existence of specific combinations or configurations of HR practices
depending on corresponding organisational contexts, where the key is to determine which are the
most effective in terms of leading to higher business performance.
Considering that both the internal and external fits are the key concepts of configurational
models, the configurational approach refers firstly to the theory of the organisational strategy and
then to the systems of HR practices that are consistent with organisational strategy in order to
result in higher organisational performance. As indicated above, there are a number of strategies
an organisation may choose to follow, such as Miles and Snows (1984) strategic typo logy that
identifies the four ideal strategic types of prospector, analyser, defender and reactor.
With respect to the configurations of HR practices, scholars have developed theoretically driven
employment systems. Specifically, Delery and Doty (1996)propose the following two ideal
type employment systems: the market type system, which is characterised by hiring from
outside an organisation, and the internal system, which is characterised by the existence of an
internal market. Because organisations adopting a defending strategy concentrate on efficiency in
current products and markets, the internal system is more appropriate for this type of strategy.
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On the other hand, organisations pursuing a prospectors strategy are constantly changing, and
the market system is more appropriate for this type of strategy. A possible third type of
configurational strategy can be the analyser, at the midpoint between the prospector and the
defender. In summary, according to this approach, if consistency within the configuration of HR
practices and between the HR practices and strategy is achieved, then the organisation will
achieve better performance.
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SHRM Impact on
Organizational Performance
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Many organizations face a volatile market situation. In order to create and sustain competitive
advantage in this type of environment, organizations must continually improve their business
performance. Increasingly, organizations are recognizing the potential of their human resources
as a source of sustained competitive advantage. Linked to this, more and more organisations are
relying on measurement approaches, such as workforce scorecards, in order to gain insight into
how the human resou