HRM604: STRATEGIC HUMAN RESOURCE MANAGEMENT Topic 1

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1 WELCOME TO HRM604: STRATEGIC HUMAN RESOURCE MANAGEMENT Topic 1: Introduction to Strategic Human Resource Management

2 Learning Objectives Analyze the meaning of strategic human resource management Examine the aims of strategic human resource management Examine the key features of strategic human resource management Demonstrate the evolution of strategic human resource management Compare and contrast strategic human resource management with traditional HRM functions

3 Learning Objectives Assess and evaluate the future direction of strategic human resource management Examine some of the benefits of strategic human resource management Assess and evaluate barriers to strategic human resource management

4 Introduction Strategic HRM is an area that continues to evolve a lot of debates as to what it actually embraces Since the 1990s, there has been an increased focus on the strategic role of human resource management (HRM). The strategic approach to HRM refers to the relationship between human resource (HR) practices and the strategic objectives, that is the long term goals of the organization.

5 Introduction With the increasing recognition of the potential of human resources in providing competitive advantage, organizations have begun to consider employees as valuable ‘assets’ or ‘investments’. This view has become more significant in today’s knowledge economy that depends on the skill and knowledge of the workforce. From being a routine, administrative, and reactive function, the HR function today has evolved to being proactive and strategic.

6 Human Resource StrategyHuman resources – refers to the people who work in an organization Human Resource Management the person, department or section of an organization which deals with people it involves the process of co-ordinating all aspects of what needs to happen to and for people in an organization – recruitment, training, monitoring and appraisal HRM ensures the most effective and efficient use of human talent for accomplishing the goals of an organization.

7 Human Resource StrategyONE TYPE DOES NOT FIT ALL Human Resource Management departments or sections vary from one organization to another, depending upon : size of an organization the type of organization the age of an organization staff stability or high staff turnover

8 Human Resource StrategyHRM SUPPORTS THE WHOLE ORGANISATION The aim of a Human Resource Management section is to support the strategic direction of an organization In other words the HRM Department should plan for and recruit staff to: Enable the organization to function well now Enable the organization to function well in the future

9 Human Resource StrategySOME HRM OBJECTIVES Like other departments – Accounting, Research & Development etc – HRM must assist the organization in achieving its objectives: Organizational effectiveness – employee selection, job satisfaction, productivity, low wastage, motivation, change, recognition, performance evaluation, rewards etc. Profit – cost containment in the staffing area (downsizing etc) Customer Service Ethical behaviour – social responsibility

10 Human Resource Strategy

11 Human Resource StrategyIn order to successfully utilize and manage the human resources of an organization to achieve organizational objectives, each organization needs to develop a well-defined HR strategy. Chandler (1962) defined ‘strategy’ as the determination of the long term goals and objectives of an organization, and the allocation of resources necessary for carrying out these goals’

12 Human Resource StrategyLike strategy, HR strategy is concerned with two key elements: Determining the strategic objectives (what goals is the strategy supposed to achieve? For e.g., the goals may be high productivity, reduced accidents, etc) Developing a plan of action (How will the human resources be organized and allocated to accomplish the objectives of the organization?) Human resource strategy , therefore, involves the planned and effective use of human resources by an organization to help it to gain or maintain an edge over its competitors.

13 Human Resource StrategyThis definition indicates the central role that the people of the organization play in the organizational pursuit is to gain competitive advantage . An organization is said to achieve competitive advantage when it is able to gain and maintain an edge over its competitors by differentiating its products or services from those of its competitors, thereby increasing its market share.

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15 Strategy-Structure-CultureHRM exists as part of a larger system To be effective HRM must be familiar and congruent to the other parts in the system The strategy-structure-culture interaction suggests that changes in one may require changes in another as the three are interconnected

16 Strategic Human Resource ManagementGiven the increasingly significant role of human resources in an organization, HRM has become strategic in nature. Strategic human resource management (SHRM) is concerned with the relationship between HRM and strategic management in an organization SHRM is an approach which relates to decisions about the nature of employment relationship, recruitment, training, development, performance management, reward and employee relations

17 SHRM STRATEGIC HUMAN RESOURCE MANAGEMENT To be strategic is to: plandesign scheme manoeuvre plot develop a game-plan

18 To be strategic is to SHRM - be tactical achieve an advantagehave a long term plan for success outwit your enemies (your competitors) Strategic Human Resource Management (SHRM) aims to ensure that you are at least one step ahead of your competitors The organization aims to have a competitive advantage

19 SHRM SHRM by considering the future goals of an organization Strategic Human Resource Management should ensure that an organization has the staff it needs in the future to be able to achieve those goals: staff re-training and/or development recruitment decruitment

20 Strategic HRM Defined Definition of SHRM:The process of HRM which is driven by planning , foresight and analytical decision making SHRM involves: Setting standards and policies and developing a culture that aligns with the organization's environment and objectives Identifying and implementing activities and policies to enact the chosen strategy and to manage the employment relationship

21 Strategic HRM Defined Wright and McMahan (19920 defined SHRM as ‘the pattern of planned human resource deployment and activities intended to enable the firm to achieve its goals’. ‘SHRM is a concept that integrates human resource management activities within a firm’s overall planning and implementation’ (Dillip Kumar, 2006)

22 Strategic HRM Defined ‘SHRM integrates human resource consideration with other physical, financial, and technological resources in the setting of goals and solving complex organizational problems’ (Legnick-Hall & Legnick-Hall,1988) ‘SHRM also emphasizes the implementation of a set of policies and practices that will build employee pool of skills, knowledge, and abilities that are relevant to organizational goals’ (Jackson & Schulerm, 1995)

23 Strategic HRM Defined The Meaning of Strategic HRMAccording to Hendry and Pettigrew (1986), strategic HRM has four meanings: 1. The use of planning 2. A coherent approach to the design and management of personnel systems based on an employment policy and manpower strategy and often underpinned by a ‘philosophy’ 3. Matching HRM activities and policies to some explicit business strategy 4. Seeing the people of the organization as a ‘strategic resource’ for the achievement of ‘competitive advantage’.

24 Strategic HRM Defined There is difference in definition between HRM and SHRM, HRM is a considered a ‘reactive’ field, whereas SHRM become a tool to implement strategy, a ‘proactive’ function in which human resource activities actually create and shape business strategy’ (Sanz-Value et al. 1999)

25 SHRM Strategic HRM is concerned with the relationship between human resource management and strategic management in the firm. Strategic HRM refers to the overall direction in the organization wishes to pursue in achieving its objectives through people. It is argued that, because human capital is a major source of competitive advantage, and in the last analysis it is people who implement the strategic plan, top management must take these key considerations fully into account in developing corporate strategies. Strategic HRM is an integral part of those strategies.

26 SHRM & ORGANISATIONAL PERFORMANCESHRM is important to an organization's survival and sustainability SHRM should lead to improved organizational performance short term medium term long term

27 THE AIMS OF SHRM Strategic Human Resource Management aims to align the functions and processes of HRM with the strategic aims and objectives and competitive advantage of an organization. The availability and skills, knowledge, experience and superiority of staff is as important as finance, technology, location and innovation. SHRM AIMS TO LINK IT ALL TOGETHER.

28 THE AIMS OF SHRM The rationale for strategic HRM is the perceived advantage of having an agreed and understood basis for developing approaches to people management in the longer term. Underlying rationale in a business is the concept of achieving competitive advantage through HRM The fundamental aim of strategic HRM is to generate strategic capability by ensuring that the organization has the skilled, committed and well-motivated employees it needs to achieve sustained competitive advantage. Its objective is to provide a sense of direction in an often turbulent environment so that the business needs of the organization, and the individual and collective needs of its employees can be met by the development and implementation of coherent and practical HR policies and programmes

29 Evolution of SHRM The HR function has evolved over timeThe history of the function pre-dates Taylor’s theory of scientific management and Fayol’s administrative theory. However, it was only during the 193os and 1940s that the function grew in significance, largely due to the war-time imperatives. At this time, the HR functions matured and focused largely on labour relations and staffing

30 Evolution of SHRM Personnel Management HRM (early 1970s)Part of mechanistic organization Bureaucratic High Centralization High Formalization Low Flexibility HRM (early 1970s) Part of organic organization Cross-hierarchical and cross-functional teams Decentralized Low formalization Flexible SHRM (early 1980s) Convergence between HRM & business strategy Proactive HRM Concerned with organizational effectiveness and performance

31 Evolution of SHRM From Personnel Management to HRMThe early 1970s witnessed the emergence of the term HRM as an replacement for personnel management. The Change in terminology also suggests a change in the objectives and boundaries of the function. The main objectives of HRM is to ensure the achievement of organizational goals through people. The HRM function emphasizes the following two aspects: The importance of gaining the commitment of the people to the goals of the organization The need for a strategic fit between business strategy and HR strategy

32 Evolution of SHRM From Personnel Management to HRMPersonnel management and HRM differ form each other on several counts: One major difference being that while personnel management is part of the more mechanistic form of organization, HRM is aligned with the organic design of the organization Thus, personnel management is more bureaucratic with high levels of centralization and formalization and lower levels of flexibility. HRM, on the other hand, is decentralized, flexible (with low levels of formalization), and has cross-functional and hierarchical teams

33 Evolution of SHRM From Personnel Management (PM) to HRMAnother difference between PM and HRM that has been pointed out is the strategic nature of HRM. PM is not viewed as involved in the strategic areas of business. Despite these differences, it is often believed that HRM is just a more modern term for PM. Hence, HRM may be seemed as an approach rather than as an alternative to traditional PM.

34 Evolution of SHRM From HRM to SHRM: Shift in FocusThe dynamic and competitive business environment resulting form globalization has led management to bring a new focus on how human resources should be organized and managed. The HR function now has to develop a more strategic role. The Early 1980s saw the emergence and increase in the use of the term strategic HRM The late 1980s and early 1990s witnessed a visible convergence between HRM and business strategy In the 21st century this convergence has become startlingly obvious with the use of terms, such as ‘knowledge’, ‘networked’, ‘knowledge-based firm’ and the ‘virtual organization’

35 Evolution of SHRM From HRM to SHRM: Shift in FocusWhen adjective strategic is prefixed to HRM it puts an emphasis on the ways in which HRM contributes to the Organizational effectiveness. Strategic HRM focuses on the relationship of HRM with the strategic management of the organization as defined earlier. It goes beyond the functional role of HRM and emphasizes proactive HRM at the strategic level of the organization.

36 Evolution of SHRM From HRM to SHRM: Shift in FocusSHRM is concerned with organizational effectiveness and performance, changes in structure and culture, matching resources to the present and future requirements of the organization, capability development, employment relationship, and change management. Since corporate plans are implemented through people and because human resources provide competitive advantage to the organization, it is important to integrate HR considerations with the development of the strategic corporate/business plans.

37 Objectives of SHRM The major objectives of SHRM are as follows:To ensure the availability of a skilled, committed, and highly motivated workforce in the organization to achieve sustained competitive advantage. To provide direction to the organization so that both the business needs of the organization and the individual and collective needs of its workforce are met. This is achieved by developing and implementing HR practices that are strategically aligned.

38 Difference Between SHRM and Traditional HRMResponsibility for HR programmes Staff personnel in the HR department Line Managers: all managers responsible for people are HR managers Focus of activities Employee relations- ensuring employee motivation and productivity, compliance with laws Partnerships with internal (employees) and external (customers, stakeholders, public interest groups) groups Role of HR Reactive and Transactional Proactive and transformational, change leader Initiative for Change Slow, piecemeal, and fragmented, not integrated with larger issues Fast, flexible, and systemic, change initiatives implemented in concert with other HR systems Time Horizon Short-term Consider various time frames as necessary (short, medium, or long term)

39 Difference Between SHRM and Traditional HRMControl Bureaucratic control through rules, procedures, and polices Organic control through flexibility, as few restrictions on employee behaviour as possible Job design Focus on scientific management principles- division of labour, Independence, and specialization Broad job design, flexibility, as few restrictions on employee behaviour as possible Important investments Capital, products, technology, and finance People and their knowledge, skills and abilities Accountability Cost Centre Investment centre

40 Origins of the Concept 1. Mission strategy 2. Organization structureThe concept of strategic HRM was first formulated by Fombrun et at (1984) who wrote that three core elements are necessary for firms to function effectively: 1. Mission strategy 2. Organization structure 3. Human Resource Management They defined strategy as a process through which the basic mission and objectives of the organization are set, and process which the organization uses its resources to achieve its objectives.

41 Origins of the Concept They also made a distinction between the three levels of managerial work: Strategic level - policy formulation and overall goal-setting Managerial level - concerned with the availability and allocation of resources to carry out the strategic plan; Operational level - day-to-day management.

42 MODELS OF STRATEGIC HRM1.The Business-oriented model Wright and Snell (1998) have suggested that, in a business strategic HRM deals with ‘those HR activities used to support the firm’s competitive strategy’ Another business-oriented definition was provided by Miller (1989): Strategic HRM encompasses those decisions and actions which concerned the management of employees at all levels in the business and which are directed towards creating and sustaining competitive advantage.

43 MODELS OF STRATEGIC HRMThe Strategic fit model Walker (1992) defines Strategic HRM as ‘the means of aligning the management of human resources with the strategic content of the business’ This is based on the concept of strategic fit (The concept of strategic fit states that to maximize competitive advantage a firm must match its capabilities and resources to the opportunities available in the external environment) In HRM terms, strategic fit means developing HR strategies that are integrated with the business strategy and support its achievement (vertical integration or fit) and also with the use of an integrated approach to the development of HR practices such as resourcing, employment development, reward and employee relations, so that they complement one another (horizontal integration or fit)

44 BENEFITS OF SHRM What are some of the benefits of SHRM?1.Identifying and analyzing external opportunities and threats that may be crucial to the Company’s success Provides a clear business strategy and vision for the future To provide competitive intelligence that may be useful in the strategic planning process 4. To recruit, retain, and motivate people

45 BENEFITS OF SHRM To develop and retain highly competent peopleTo ensure that people development issues are addressed systematically To supply information regarding the Company’s internal strengths and weaknesses To meet the expectation of customer effectively To ensure high productivity 10.To ensure business surplus through competency

46 BARRIERS TO SHRM Barriers to successful SHRM implementation are complex The main reason is a lack of growth strategy or failure to implement one Other major barriers are summarized as follows:

47 BARRIERS TO SHRM Inducing the vision and mission for the change effort2. High resistance due to lack of cooperation from the bottom line Interdependent conflict The commitment of entire senior management team 5. Plans that integrate internal resource with external requirements 6. Limited time, money, and resources

48 BARRIERS TO SHRM 7. Fear of incompetency of senior level managers to take up strategic steps 8. Diverse workforce with competitive skill sets 9. Fear towards victimization in the wake of failures 10. Improper strategic assignments and leadership conflict over authority 11. Ramifications for power relations

49 BARRIERS TO SHRM Presence of an active labour unionRapid structural changes Economic and market pressure influenced the adoption of strategic HRM More diverse, outward looking approach

50 SUMMARY & CONCLUSION HR & top management to work together formulate the company’s overall business strategic Strategy then provides the framework with which HR activities such as recruiting, appraisal must be crafted

51 SUMMARY & CONCLUSION If done successfully, it should result in employee competencies and behavior which in turn should help the business implement its strategies and realize it goals According experts, the HRM system ‘must be tailored to the demands of business strategy’