The Existing Models of Strategic Human Resource Management - Term Paper Example

STRATEGIC HUMAN RESOURCES MANAGEMENT Introduction Organizations are changing and adopting new ways and new intensities. Parallel to these changes and innovations organizations need to adopt new arrangements and systems which are competent enough to adjust to the new situations. One of the ideas increasingly becoming necessary in modern organization is Strategic Human Resource Management (SHRM). Realizing the importance of Human Resource (HR) in today's competitive world, there is a growing need of integrating corporate strategy with Human Resource Management (HRM). A successful strategy is based upon the allocation of an organization's resources to create a unique and viable long-term position in its environment. HRM assumes strategic importance when there is a need for employee commitment to strategic goals concerning efficiency, quality and innovation. A key policy goal underpinning HRM practice is to "maximize organizational integration" (Guest, 1988), where strategic integration refers to "the ability of the organization to integrate HRM issues into its strategic plans" (Guest, 1989). This paper is meant to contribute to the debate by understanding the genesis, concept, approaches and models of SHRM. The paper takes an analytical approach where emphasis is put on the various models of SHRM and its applicability. Definition American firms in the early 1980s had to face stiff competition from foreign companies, who began to export their products to the USA at lower prices than American companies could offer. The cost advantage stemmed from lower labour costs and made it nearly impossible for American companies to survive. They had to look for more efficient and effective ways to use the resources available to them and stay afloat. The ensuing effort gave rise to the concept of Strategic Human Resource Management (SHRM). For the first time, Galbraith and Nathanson (1978) recognized the need to fit HR into the strategy implementation process and they identified four basic HRM sub-functions or strategies: Selection, appraisal, rewards and development. SHRM is an "elusive target, characterized by a diversity of meanings and ambiguous conceptual status" (Hales, 1994). SHRM can be considered as an approach to deal with long term people issues as part of the strategic management thrust of a business. It covers macro-organizational concerns relating to structure and culture, organizational effectiveness and performance, matching resources to future business requirements, and the management of change (Hales, 1994). According to Miller (1989), "SHRM encompasses those decisions and actions which concern the management of employees at all levels in the business and which redirect towards creating and sustaining competitive advantage." Wright and Snell (1991) have suggested that in a business, SHRM deals with "those HR activities used to support the firm's competitive strategy." Another way of looking at SHRM is "the pattern of HR deployments and activities intended to enable an organization to achieve its goals" (Wright and McMahan, 1992). Truss and Gratton (1994) define SHRM 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." Ghoshal and Bartlett (1997) see SHRM as a radical new approach to organization, management and employee relations and indeed to the relationship between firms and their host societies and to each other. They advocate a strategy towards HR in which employees are developed and made employable and this keeps the employer honest. Differences between Business Strategy and SHRM Business strategy is commonly understood as the long term planning by a firm to link its external environment with the internal capabilities so that a unique position can be attained in the market and firm's value can be improved. Business strategies can be formulated in line with any of the internal factors of an organisation that best utilises its external opportunities. Unlike conventional organisations, modern organisations consider its people as the most important asset and strategies formulated are naturally linked with the people management. Strategic human resource management, therefore, stems from business strategy itself. Both business strategy and strategic human resource management are informative mutually in the sense that business strategy is formulated in line with the capabilities, attitudes and value creation of human capital of the firm. Traditional Personnel Management is non-strategic, separate from the business, reactive, short-term and constrained by a limited definition of its role as dealing with unionized and lower-level employees (Miller, 1989). Personnel Management becomes strategic when employees are managed in ways which recognize their key role in strategy implementation and a key goal of employee relations becomes the motivation of employees to fulfil strategic objectives. Besides, it also addresses the complexities of the change management process in the modern organization and promotes an enlightened, ethical and skill focused change process. Typically, Strategic Human Resource Management (SHRM) bridges the gap between business strategy and HRM, and focuses on the integration of HR with business and its environment. SHRM has become topical in recent years but the definitions, reason of integrating business strategy and HRM, and the process of integration widely vary from organization to organization and country to country. Approaches to SHRM Basically, there are two approaches to SHRM: The Michigan group and the Harvard group. The Michigan group focuses on strategic management and developed the notion of SHRM which entailed the interconnection of business strategies, organizational structure and HRM (key personnel systems selection, appraisal, rewards and development). HRM systems were best designed to support the implementation of corporate strategy. "The critical management task is to align the formal structure and HR systems so that they drive the strategic objective of the organization" (Baker 1999). At the heart of the Harvard approach was human relations, which emphasized on the responsibility and capability of managers to make decisions about the relationship between the organization and its employees so as to maximize organizational outcomes for key stakeholders. This approach focuses on managers' responsibility to manage four key HRM policy areas: Employee influence (participation); HR flow; reward systems; and work systems (work organization). Main Body SHRM Models Despite there have been many studies undertaken in the field of strategic human resource management to evolve effective SHRM models, authors and thinkers have varying consensus as to what exactly SHRM should involve. Some thinkers are of the opinion that SHRM is an outcome, while others take it as a process. As an outcome, SHRM is the effective use of work force of an organisation to develop a competitive advantage (Analoui 2007 p. 82). From the perspective of process, SHRM is the process of linking the human capital (intellectual, social, emotional capital) to the corporate strategic objectives (Analoui 2007 p. 82). With different views on the stand of this newly evolved concept, different authors have developed different models, which define how the organizational changes can be made to survive in the modern business contexts. Two of the commonly accepted models are Best-fit models and Life cycle model. Any model of the SHRM should suggest that the human resource strategies should be framed in line with the firm's overall strategies and plans. This is what is known as strategy integration. This integration can be either vertical or horizontal. In a vertical integration model strategy, the organization's overall strategy is first translated into human resource strategy and then human resource strategies into human resource activities. The Horizontal integration, which is also called horizontal fit or bundling, deals with the integration of HR activities themselves. It describes how one HR activity affects another individually and collectively. Best-fit Model This model is also known as matching model. As the very name suggests the main contention of the best-fit model is that external environmental factors are the determinants of an organizational strategy rather than internal factors. This theory argues that a firm frames its strategies that best fit to the external forces that can be favorable or unfavorable to the organization. The theory further believes that internal capabilities (human resources) can be used effectively only when the external forces that decide how internal forces can be better made use of are congenial. Therefore, it is necessary to form a relationship between the external forces and internal capabilities to have a best-fit strategy. Limitations Conceptual: - Predicted upon the rational view of strategic decision-making; however, organisation should also be treated from the view point of uncertainties in future. Empirical: - It lacks limited empirical support, which is more essential to get accepted and popular. Controlled-based Model This model argue that management structures and strategies formulated by human resource department are closely related and can be used as instruments to control all aspects of the labour activities and processes so as to secure higher efficiency and profitability. There are two versions for control based models, namely process based control and outcome based control. The former is used when there is certainty as to the mean end relations. Outcome based control is adopted when the certainty of means ends is relatively less. Resource-based model The main contention of this model is that organizations should put emphasis on the strategic value of human assets and continuous workplace learning. The model explains that there are abundant opportunities to make use of the available human resource which when integrated with the strategies will make wonders. This model is different from best fir model in the sense that matching model focuses on external 'Opportunities' and "Threats' (from SWOT). However, resources-based model focuses internal strengths and how they can be utilized as strategic advantage for the organization. Limitations This model is conceptually vague: - It does not provide any empirical support to prove that resource based model is more superior to achieve high organisational performance and employee commitment. More importance on internal resources: - It gives more emphasis on internal resources such as human resources leaving less opportunity to make use of external opportunities. This will even result in eliminating external competition Best Practice Model This theory is based on the presumption that HR practices which have been proved to be successful in a firm can be transmitted and implemented to other similar firms for attaining the same result. The practices which have been found successful in one firm can be called best practice and the belief around this assumption is called best practice theory. Human Resources (HR) are the mighty pillars that form the business colonnade in the world of economy. They, therefore, deserve all the care and attention. The very art of managing HR is based on thoughtful policies and a bouquet of helpful practices aimed at creating motivation and commitment in the workforce. While HR policies form the framework for effective functioning of HR management, HR practices form the culture in business management. The practices should, therefore, necessarily be the "best practices in HR Management (HRM)", which would result in benefits to all stakeholders like the shareholders, creditors, suppliers, consumers and employees. The organization as a whole will then reap the benefits. Such practices invariably create, in the workforce, an awareness of the need to achieve the business goals in the best possible and ethical manner. They are also aimed at creating a sense of togetherness in the organization. In fact, the set of the best practices' are evolved in such a manner that the HR policy weaves itself into the business strategy, providing support to the organization in all its endeavors to achieve its business targets and to overcome business hazards like competition and change in consumer patterns. Good HR policies also help overcome economic forces such as recession, inflation, etc. Jeffrey Pfeffer's Best Practice Approach The famous SHRM thinker and practitioner Pfeffer has advocated seven work practices, which can enhance the organizational performance. The following paragraphs discuss the best practice model (McCourt 2003, p.37): Employment Security It implies the organization should find ways to keep the employees and make them feel security in their job. In return for the security to the job, employees will be committed and more loyal, which will further enhance the opportunities to the firm to improve Selective Hiring To achieve the organizational goals as mentioned above with the right kind of work force, it is necessary to hire the people with right skill and competency Self-management Teams Modern organizations stress on filling the vacancies of the organization with people who are self-motivated and self-manageable. This reduces the executive engagement time in matters relating to achievement, motivation etc. High Compensation contingent on performance This theory illustrates that high performance should be given to those who contribute maximum to the organization. People with high salary need not perform better, especially in time of their old ages. This tendency and approach should be changed so that organization can retain high performers with the organization. Training It is a key component of any work system, especially those what is mentioned above. High performers need to be trained to become abreast of the competition. Reduction in Status Differentials This practice put emphasis on the importance of reducing the staff discrimination and thereby, worker's commitment and engagement will improve. Sharing Information It allows the firm to reduce communication gap between the workers at different layers of the ladder. It is necessary to decentralize the decision making process and much better involvement from the workers. Analysis and Discussion As mentioned already, strategic human resource management deals with the strategic use of human resource of an organisation. Strategic human resource management has been defined from different dimensions by different authors. Some use SHRM as an outcome where as some others argue that it is a process. The employer and the employee have mutual expectations that are vital for the success of the business unit. While the employers expect commitment, loyalty and motivated performance, from the employees; the employees expect recognition, reward, career advancement and job security from the employers. These expectations shape themselves generally into a covenant comprising three layers. They are the functional, monetary and psychological layers. While the functional and monetary layers can be precisely spelt out in terms of responsibilities, power and emoluments, and can even be documented, the psychological layer can only be nourished in terms of relationships like loyalty, commitment, motivation, etc., but can scarcely be documented. Mutual satisfaction in this regard can be ensured through productive policies and rewarding practices. It then follows that the entire repertoire of practices depends upon the nature of these layers of relationship and mutual expectations between the employer and the employee. It is appropriate here to illustrate an example- the application of SHRM in British Airways (BA). SHRM was introduced at BA in the early 1980s (McCourt 2003). BA had been incurring huge loss before this period owing to several reasons. One of the reasons identified after a research among the firm's customers is that customers were not satisfied with the service. Realizing the importance of people management, BA introduced a new campaign, coined as 'Putting People First' for those who are in direct contact with the customers. The strategic role of HRM in organizations is basically to align the long-term business objectives and vision with the optimum utilization of the human resources. This requires the most efficient and effective practices for the whole range of HRM functions in organizations. If innovation is adopted by an organization as its strategic goal or component of long-term strategy, the onus lies with the HRM function to develop and sustain a culture of organization-wide innovation and align the people management practices accordingly. The primary responsibility of strategic HRM function is to help in generating innovative ideas in the organization. Ideas can evolve inside the organization or it can be borrowed from outside. Anyone can be the source of ideas for an organization: Suppliers, partners, customers and even competitors. In order to create a systematic process of idea generation within the organization, HRM can be a crucial player. Through the formation of cross-functional, cross-hierarchical groups and teams focused on innovation, organizations can reap benefits. Conclusions HR professionals role is no longer restricted to just administration and recruitment. The future of HR is slowly shifting from support function to more of a strategic partner which helps the organization to achieve its objectives. The delivery of education for HR subjects should change from the traditional approach through books to a more direct exposure from industry interface by means of a professional from industry delivering the inputs. Also, detailed and Innovative methods in various areas should be included in the syllabus to make it more and more meaningful. Measuring HR activities should also be given higher priority. The professional organizations/bodies through their latest and updated research can help the academia get a need and talented pool of people who could start contributing to the organization immediately. Contemporary managers need to realize its importance and try to link HRM with organizational strategy and performance. The key functions associated with this concept are integration of HRM with business policies and plans; HR deployments; exploring people's capabilities and matching them with business strategies; capacity building; organizational learning; and commitment. 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