Strategic Human Resource Management

Introduction

This point of time when globalization become a natural phenomenon, bring human resource in a lime light. A large number of organizations viewed human resource as a source of competitive advantage. There is greater acceptance that distinctive competencies are obtained through highly developed employee skills, distinctive organizational cultures, management processes and systems. However, it is necessary to invest the concept with clear meaning. In today’s highly competitive business environment, organizations cannot sustain excellent performance unless they develop a competence for rapid, continuous strategic change.

According to Edward E. Lawler (2008) the source of competitive advantage has shifted in many organizations from reliability to innovation and flexibility. Further argue that it is a combination of the right structure and the right people that provides the foundation and tools for creating competitive and innovative organizations.

Traditionally, human resource has been considered a factor only after the strategic business decisions are made. Human resource issues were not even discussed during the decision to purchase the business. One human resource executive put it succinctly when he said “the line job is to tell us where the business is going and then it is up to us to find the people to develop.” Companies like GM and AIG are some of the example when they sour large number of their stake because they had not considered the human resource implication of their purchase.

However, companies such as IBM, GE, and Intel use of human resource management as an integral part of strategy formulation. Indeed, many companies have begun to require the human resource component in their strategic plan. Where they begun a great deal of experimentation and problem solving to decide what data are required, what issue should be considered, and how they can relate to the various aspect of the business.

The major emphasis in strategic planning has doubtless been on formulation. This led to a conclusion up until 1980 that much time and thought had gone into analyzing and planning strategy yet very little into implementation. But after 1980 it changes to the effective implementation of the strategy. i.e getting people to do the right things to make strategies happen. In this respect, the human resource tools become central and focus.

Strategic Human Resource Management

Strategic human resource management is a multipart process which is frequently developing and being studied and discussed by academics and commentators. Its characterization and associations with other aspects of business setting up and strategy is not complete and estimation varies involving writers.

It has been defined as:

* All those activities affecting the actions of individuals in their efforts to put together and put into action the strategic needs of business. (Schuler, 1992)

* The prototype of planned human resource deployments and activities anticipated to facilitate the forms to attain its goals (Wright, Macmahan, 1992)

In general, Strategic human resources management is defined as the linking of HRM with strategic goals and objectives in order to improve business performance and develop organizational cultures that foster innovation and flexibility.

Boxall and Purcell (2003) argue that strategic HRM is apprehensive with explaining how HRM influences organizational performance. They also point out that strategy is not the identical as strategic plans. Strategic planning is the formal procedure that takes place, generally in larger organizations, defining how things will be done. However strategy exists in all organizations even though it may not be in black and white and expressed. It defines the organization’s behavior and how it tries to cope with its environment.

Strategic HRM is based on HRM philosophy incorporating the concept of strategy. So if HRM is a logical approach to the management of people, strategic HRM now implies that that is done on a planned way that integrates organizational goals with policies and action sequences.

Coppers & Lybrand (C&L) consider HRM and its development as their top priority. The administration is determined in hiring and retaining skilled and competent workers. Each worker should meet the demands of the highly competitive and growing business industry worldwide. Chairman and CEO says that the attraction and retention of people, which they consider as the highest intellectual capital is the critical objectives of C&L.

The Basic Architecture of HR

Source: Brian Becker et al. 2001

Implementing Strategy

There are four generic human resource activities of all the organization

1. Selection/ promotion/ placement process

Example of Chase Manhattan bank

During the period between 1975and 1980 the bank underwent major managerial changes key to the bank s’ successful turnaround from a troubled bank in the mid -70s was a careful strategic level selection and placement of executive. Historically in banking in general and specifically at chase senior level positions were based on historical precedent with old-boy net works playing a major role. Also the tradition incident based on historical precedent with old-boy net works playing a major role. Also the tradition in banking was reward those with banker skills not those with managerial skills which were implicitly considered to be less importance .Under the stress of serious performance problems chase manhattan when the trust manager retired corporate management decide that the department whose operation had been essentially stable should focus on a more aggressive growth strategy instead of seeking a veteran banker chase hired a man whose experience had been with IBM because it was felt he brought a strong marketing orientation to the trust department which the new strategy required.

Similarly, when chase reorganized it retail banking business from a low margin operation in which the stress was keeping down costs of to a more expansionary business offering broader consumer financial services it hired because of his entrepreneurial skills an executive who had been a division chief of a small industrial firm and had a track record of entrepreneurial management experience.

2. Reward processes

Good selection is the sine qua non of performance. Once people are in job and perform however they should also be rewarded for good performance. These incumbents should also be developed to improve performance and prepare them for a new position.

The linkage to reward outcomes reduces or eliminates the developmental value of appraisals. Rather than an opportunity for constructive review and encouragement, the reward-linked process is perceived as judgmental, punitive and harrowing.

For example, how many people would gladly admit their work problems if, at the same time, they knew that their next pay rise or a much-wanted promotion was riding on an appraisal result? Very likely, in that situation, many people would deny or downplay their weaknesses.

Nor is the desire to distort or deny the truth confined to the person being appraised. Many appraisers feel uncomfortable with the combined role of judge and executioner.

3. Development process

Ensuring that organization has an adequate supply of human resource talent at all levels is no easy task especially when organization is going to a rapid strategic changes. The key is to have a human resource planning system that make accurate forecast. In order to plan for the future, an accurate inventory of current human resource stock is important. This should include both the current individual performance and the future potential of an individual.

4. Appraisal process

A basic human tendency to make judgments about those one is working with, as well as about oneself. The human inclination to judge can create serious motivational, ethical and legal problems in the workplace. Without a structured appraisal system, there is little chance of ensuring that the judgments made will be lawful, fair, defensible and accurate. Appraisal systems began as simple methods of income justification. That is, appraisal was used to decide whether or not the salary or wage of an individual employee was justified.

In many organizations – but not all – appraisal results are used, either directly or indirectly, to help determine reward outcomes. That is, the appraisal results are used to identify the better performing employees who should get the majority of available merit pay increases, bonuses, and promotions.

Sue Peattie

It has been seen that Food market continuous to grow rapidly since 1990 in UK. (Sue Peattie). In order to full fill the demand of the market, markets had to use all available marketing tools. Promotion is one of the major adapted tools to maintain or increase the sales. However, more focus remains on price base promotion. As more and more competition is coming into market. This tool needs more attention. Business tends to use different kinds of promotions to attract more and more sales. Buy one get free one free, buy three in price of one, bundle deal are good attraction for promotion.

Example:

“During 1972-82, US per capita consumption of variety meats (offal) reached a high of 5.66 lb in 1977 and then declined to 4.21 lb in 1982. The objective of this market test was to measure the effects of promotional and merchandising strategies on food store sales of selected beef/pigment variety meats. Promotion took place in 8 test stores of one food chain in three test markets (Salina, Topeka, and Wichita, Kansas) during three eight-week test periods (TP). Promotional and merchandising strategies tried were: (1) a special clearly designated display section for variety meats; (2) point of purchase (POP) price signs; (3) colored wall posters; (4) POP nutritional information and recipes; (5) newspaper advertising at two conventional supermarkets; (6) in-store advertising at all stores; (7) price specials; (8) personal salesmanship; and (9) product taste samples. Average weekly sales (lbs) of total variety meats increased in every test store from TP-1 to TP-2. Sales of 5 beef items (heart, liver, sweetbreads, tripe and oxtail) increased significantly. Retail sales increased 9.6% in the test stores compared to a 6.0% seasonal increase in purchases by all stores associated with a wholesale supplier (AWG). A seasonal decline in lbs of variety meats sold of 19.6% in test stores from TP-2 to TP-3 was matched by a 19.1% drop in wholesale purchases by all stores. Promotion in TP-2 increased retail sales over those of TP-1, but continued promotion in TP-3 did not lead to further sales increases.”

(Source: http://www.cababstractsplus.org/abstracts/Abstract.aspx?AcNo=19901880256)

Strategic HRM and human capital management

Many writers have argued that strategic HRM and human capital management (HCM) is one and the same thing, and certainly the concept of strategic HRM matches that of the broader explanation of HCM relatively well as the following definition of the main features of strategic HRM by Dyer and Holder (1998) shows:

* Organizational level – because strategies involve decisions about key goals, major policies and the distribution of resources they be inclined to be formulated at the top.

* Focus – strategies are business-driven and focus on organizational effectiveness; thus in this perspective people are viewed first and foremost as capital to be managed in the direction of the achievement of strategic business goals.

* Framework – strategies by their extraordinarily nature provide unifying frameworks which are at once broad, contingency-based and integrative. They incorporate a full accompaniment of HR goals and activities planned specifically to fit extant environments and to be commonly reinforcing or synergistic.

This argument has been based on the information that both HRM in its appropriate sense and HCM rest on the supposition that people are treated as assets rather than costs and both focus on the importance of adopting an integrated and strategic move toward to managing people which is the concern of all the stakeholders in an organization not just the people management role. However, the perception of human capital management complements and strengthens the idea of strategic HRM relatively replaces it. (Armstrong and Baron, 2002)

Strategic HRM could consequently be viewed as the essential framework within which these estimation, reporting and management course of action take place and make sure that they are iterative and communally reinforcing. Human capital consequently informs and in turn is shaped by strategic HRM but it does not substitute it.

Strategic HRM and business performance

Since the mid 1990s, CIPD and others have been generating evidence for the impact of people management practices on business performance. Much emphasis has been put on the importance of ‘fit’. In other words it is argued that HR strategies much fit both with each other and with other organizational strategies for maximum impact. The main areas of practice which all the researchers agreed have an impact on performance are around job design and skills development.

However, CIPD work found that practices alone do not create business performance. They can create ‘human capital’ or a set of individuals who are highly skilled, highly motivated and have the opportunity to participate in organizational life by being given jobs to do. However, this will only feed through into higher levels of business performance if these individuals have positive management relationships with their superiors in a supportive environment with strong values. All these factors will promote ‘discretionary behavior’, the willingness of the individual to perform above the minimum or give extra effort. It is this discretionary behavior that makes the difference to organizational performance.

Conclusion

The SHRM idea is a influential idea if function properly within an organization. HR groups are able to plan for potential growth and react to any changes that may take place. In addition, SHRM allows companies to completely make the most of their human assets to make real improvement over their competitors. This advantage comes from having the HR policies and strategies perfectly aligned with the corporate goals so that the organization has the right human capital, right remuneration packages and training methodologies to allow the employees to efficiently do their jobs.

There may also be an remarkable view of HRM as an implicit part of the major strategic change

Initiative, relatively as a critical stand alone component of reform. This view may now be

Changing as more and more people realize the need to reform human resources management as an equal and necessary component of overall Government-wide reform and reinvention.

In short, SHRM allows an organization to create a competitive advantage with their human capital by aligning their strategic goals with their HRM systems. Author Ronald Sims states it clearly when he writes:

“Successful organizations in the prospect must strongly make parallel their HRM strategies and programs with the external opportunities, competitive strategies, and their only one of its characteristics and core capability. Organizations that fail to clearly define HRM strategy or competitive strategy that explicitly incorporates human resources will not be successful” (Sims, 2002, p. 30).

Bibliography

# ARMSTRONG, M and BARON, A. (2002) Strategic HRM: the key to improved business performance. Developing practice. London: Chartered Institute of Personnel and Development.

# SCHULER, R.S. (1992) Strategic human resource management: linking people with the needs of the business. Organizational Dynamics. Vol 21, No 1. pp18-32.

# WRIGHT, P.M. and MCMAHAN, G.C. (1992) Theoretical perspectives for SHRM. Journal of Management. March. pp215-247.

# BOXALL, P. and PURCELL, J. (2003) Strategy and human resource management. Basingstoke: Palgrave Macmillan.

# DYER, L. and HOLDER, G. Strategic human resource management and planning. In: DYER, L. (ed) (1998) Human resource management: evolving roles and responsibilities. Washington DC: Bureau of National Affairs.

Cavusgil, T.S. and Zou, S. (1994), “Marketing strategy-Performance relationship: an investigation of the empirical link in export market Ventures”, Journal of Marketing Research, Vol. 58, January, pp. 1-21

Sims, R. R. (2002). Organizational success through effective human resources management (1st ed.). Westport, CT: Quorum Books.

Truss, C., & Gratton, L. (1994, September 1994). Strategic human resource management: A conceptual approach. The International Journal of Human Resource Management, 5(3), p. 663.