Strategic HRM defines the organization’s intentions and plans on how
its business goals should be achieved through people. It is based on
three propositions: first, that human capital is a major source of
competitive advantage; second, that it is people who implement the
strategic plan; and, third, that a systematic approach should be adopted
to defining where the organization wants to go and how it should get
there.
Strategic HRM is a process that involves the use of
overarching approaches to the development of HR strategies, which are
integrated vertically with the business strategy and horizontally with one
another.
These strategies define intentions and plans related to overall
organizational considerations, such as organizational effectiveness, and
to more specific aspects of people management, such as resourcing,
learning and development, reward and employee relations.
Strategic HRM focuses on actions that differentiate the firm from
its competitors (Purcell, 1999). It is suggested by Hendry and Pettigrew
(1986) that it has four meanings:
- the use of planning;
- a coherent approach to the design and management of personnel
- systems based on an employment policy and workforce strategy and
- often underpinned by a ‘philosophy’;
- matching HRM activities and policies to some explicit business
strategy;
- seeing the people of the organization as a ‘strategic resource’
for the
- achievement of ‘competitive advantage’.
Strategic HRM addresses broad organizational issues relating to changes
in structure and culture, organizational effectiveness and
performance, matching resources to future requirements, the development of
distinctive capabilities, knowledge management, and the management of
change. It is concerned with both human capital requirements and the
development of process capabilities, that is, the ability to get things
done effectively. Overall, it deals with any major people issues that
affect or are affected by the strategic plans of the organization. As
Boxall (1996) remarks: ‘The critical concerns of HRM, such as choice of
executive leadership and formation of positive patterns of labour relations,
are strategic in any firm.’
APPROACHES TO STRATEGIC HRM
There are five approaches to strategic HRM. These consist of
resource-based strategy, achieving strategic fit, high-performance
management, high- commitment management and high-involvement management,
as described below.
The resource-based approach
A fundamental aim of resource-based HR strategy, as Barney (1991)
indicates, is to develop strategic capability – achieving strategic fit
between resources and opportunities and obtaining added value from the
effective deployment of resources. A resource-based approach will address
methods of increasing the firm’s strategic capability by the development
of managers and other staff who can think and plan strategically and who
understand the key strategic issues.
The resource-based approach is founded on the belief that
competitive advantage is obtained if a firm can obtain and develop human
resources that enable it to learn faster and apply its learning more
effectively than its rivals (Hamel and Prahalad, 1989). Human resources
are defined by Barney (1995) as follows: ‘Human resources include all the
experience, knowledge, judgement, risk-taking propensity and wisdom of
individuals associated with the firm.’ Kamoche (1996) suggests that: ‘In
the resource-based view, the firm is seen as a bundle of tangible and
intangible resources and capabilities required for product/market
competition.’
In line with human capital theory, resource-based theory emphasizes
that investment in people adds to their value in the firm. The strategic
goal will be to ‘create firms which are more intelligent and flexible than
their competitors’ (Boxall, 1996) by hiring and developing more talented
staff and by extending their skills base. Resource-based strategy is
therefore concerned with the enhancement of the human or intellectual
capital of the firm. As Ulrich (1998) comments: ‘Knowledge has become a
direct competitive advantage for companies selling ideas and
relationships. The challenge to organizations is to ensure that they have
the capability to find, assimilate, compensate and retain the talented
individuals they need.’
Unique talents among employees, including superior
performance, productivity, flexibility, innovation, and the ability to
deliver high levels of personal customer service, are ways in which people
provide a critical ingredient in developing an organization’s competitive
position. People also provide the key to managing the pivotal inter-dependencies across functional activities and the important external relationships.
It can be argued that one of the clear benefits arising from competitive
advantage based on the effective management of people is that such an
advantage is hard to imitate. An organization’s HR strategies, policies
and practices are a unique blend of processes, procedures, personalities,
styles, capabilities and organizational culture. One of the keys to
competitive advantage is the ability to differentiate what the business
supplies to its customers from what is supplied by its competitors. Such
differentiation can be achieved by having HR strategies that ensure that
the firm has higher-quality people than its competitors, by developing and
nurturing the intellectual capital possessed by the business and by functioning
as a ‘learning organization’.
Strategic fit
The HR strategy should be aligned to the business strategy (vertical
fit). Better still, HR strategy should be an integral part of the business
strategy, contributing to the business planning process as it happens.
Vertical integration is necessary to provide congruence between business
and human resource strategy so that the latter supports the accomplishment
of the former and, indeed, helps to define it. Horizontal integration with
other aspects of the HR strategy is required so that its different
elements fit together. The aim is to achieve a coherent approach to
managing people in which the various practices are mutually supportive.
High-performance management
High-performance management (called in the United States
high performance work systems or practices) aims to make an impact on
the performance of the firm through its people in such areas as
productivity, quality, levels of customer service, growth, profits and,
ultimately, the delivery of increased shareholder value. High-performance
management practices include rigorous recruitment and selection
procedures, extensive and relevant training and management development
activities, incentive pay systems and performance management processes.
A well-known definition of a high-performance work system
was produced by the US Department of Labor (1993). The characteristics
listed were:
- careful and extensive systems for recruitment, selection and
training;
- formal systems for sharing information with the individuals who
work in the organization;
- clear job design;
- high-level participation processes;
- monitoring of attitudes;
- performance appraisals;
- properly functioning grievance procedures;
- promotion and compensation schemes that provide for the
recognition and financial rewarding of the high-performing members of
the workforce.
High-commitment management
One of the defining characteristics of HRM is its emphasis on the
importance of enhancing mutual commitment (Walton, 1985).
High-commitment management has been described by Wood (1996) as: ‘A form
of management which is aimed at eliciting a commitment so that behaviour
is primarily self-regulated rather than controlled by sanctions and
pressures external to the individual, and relations within the
organization are based on high levels of trust.’
The approaches to achieving high commitment as described by Beer et
al (1984) and Walton (1985) are:
- the development of career ladders and emphasis on trainability
and commitment as highly valued characteristics of employees at all levels
in the organization;
- a high level of functional flexibility with the abandonment of
potentially rigid job descriptions;
- the reduction of hierarchies and the ending of status
differentials;
- a heavy reliance on team structure for disseminating information
(team briefing), structuring work (team working) and problem
solving (improvement groups or quality circles).
Wood and Albanese (1995) added to this list:
- job design as something management consciously does in order
to provide jobs that have a considerable level of intrinsic satisfaction;
- a policy of no compulsory lay-offs or redundancies and
permanent employment guarantees with the possible use of temporary workers
to cushion fluctuations in the demand for labour;
- new forms of assessment and payment systems and, more
specifically, merit pay and profit sharing;
- a high involvement of employees in the management of quality.
High-involvement management
This approach involves treating employees as partners in the
enterprise whose interests are respected and who have a voice on matters
that concern them. It is concerned with communication and involvement. The
aim is to create a climate in which a continuing dialogue between managers
and the members of their teams takes place in order to define expectations
and share information on the organization’s mission, values and
objectives. This establishes mutual understanding of what is to be
achieved and a framework for managing and developing people to ensure that
it will be achieved.
LIMITATIONS TO THE CONCEPT OF STRATEGIC HRM
The concept of strategic HRM appears to be based on the belief that
the formulation of strategy is a rational and linear process. This
indicates that the overall HR strategy flows from the business strategy
and generates specific HR strategies in key areas. The process takes place
by reference to systematic reviews of the internal and external
environment of the organization, which identify the business,
organizational and HR issues that need to be dealt with.
But strategic HRM in real life does not usually take the form of a
formal, well articulated and linear process that flows logically from the
business strategy, as Mintzberg (1987) and others have emphasized. The
research conducted by Gratton et al (1999) in eight British organizations
established that ‘In no case was there a clearly developed and articulated
strategy that was translated into a mutually supportive set of human
resource initiatives or practices.’
Strategic HRM is in some ways an attitude of mind that
expresses a way of doing things. It is realized in the form of HR
strategies, as described in the next chapter.
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