The Evolution of the Strategic Human Resource Management - Literature review Example

Strategic Human Resource Management (SHRM) “No one can seriously argue against the importance of best fit or contextual thinking in HRM” (Boxall and Purcell, 2011: 96) The research evidence supports the benefits of a best fit approach to Strategic Human Resource Management (SHRM) but does this mean that best practice and RBV perspectives, practiced by companies such as Google, are irrelevant? What does it mean to be strategic in HRM? To be strategic in Human Resource Management means that the organisation is able to come up with a strategic framework with an aim of supporting long term business objectives and outcomes. Strategic Human Resource Management is concerned with longer term issues dealing with the people as well as macro concerns touching on structure, quality, culture, commitment and values and matching resources for use in the future. SHRM is a complex process that keeps on evolving (Pfeffer, 1998). Being strategic means getting involved in all the activities which affect individual behaviour while trying to formulate and implement strategic needs of an organisation. It is also the planned pattern of human resource deployments and activities meant to allow the organisation to meet its goals. The link between an organisations performance and its human resource management activities is based on two approaches. Best practice which are universal approaches and best fit or contingency. In the universal approach (Best Practice), a set of HRM practices are said to be closely associated with improving the organisations performance and by allusion for all kinds of employees (Pfeffer, 1998). Best fit approach on the other hand posits that performance of an organisation is maximized by the human resources policies that are in line with the organisations business strategies. ‘Best practice’ are seen as high performance work practices which involve methods and systems with universal, addictive and positive effects on the performance of an organisation (Conways & Monks, 2009). This therefore asserts that the best practices an organisation applies, each one adds to the previous thus compounding the overall performance of an organisation. As best practice approach is based on universalism, it assumes that a set of activities targeting high performance will be beneficial to all organisations regardless of context. Features of best practice which have been given global recognition include, the employees having job security, selective hiring which involves hiring people who are highly qualified based on merit, decentralisation or team work especially in decision making, high remuneration for employees which is in tandem with the overall performance of the employee in the organisation, extensive training for all employees regardless of their level and better communication for employees and their superiors (Searle, 2011). This improves employee skills and abilities, promotes positive attitudes and keeps employees motivated and expands employees’ responsibilities maximising on their skills and abilities. Best fit or contingency approach asserts that HR strategy is more effective when linked to its surrounding context or business environment. This approach presents two elements being external fit and internal fit (Searle, 2011). External fit is linked to the marketing or operations strategies. This is the competitive strategy of the overall organisation. Internal fit asserts that human resource policies and practices must be coherent. Policies and practices that do not work hand in hand should be avoided such as encouraging team work but rewarding individual performance. Resource base view This is an influential theory in SHRM used to explain an organisations sustained competitive advantage. RBV is a modern theory that provides insights on strategic and organisational issues. It aspires to expound on the internal sources of an organisation’s competitive advantage (Torrington et al, 2011). RBV looks for the internal sources of sustained competitive advantage with an aim of explaining why organisations in the same industry differ in performance. RBV is used to determine whether an organisation is able to create sustainable competitive advantage in that it provides a frame work to determine whether a process provides real advantage over the market place. Different assumptions of the three mentioned approaches and how organisations can increase performance RBV asserts that an organization can attain sustained competitive advantage when it possesses and controls valuable, rare and inimitable and have in place a structure equipped to handle it (Boxall & Purcell, 2011). The basic assumption is that this theory aids in restoring the balance between internal and external analysis in strategic human resource. It is said to provide the basis for a new theory of the organisation. It is also seen as a theory of competitive advantage. RBV assumes that organisations main aim is to maximize the profits and that these organisations are directed by bounded rational managers who operate in distinctive markets that are seen to be predictable and moving towards equilibrium (Bratton & Gold, 2011). RBV agrees that information about the future the future value of a resource is equally distributed. If the manager can estimate the value of a resource better than their competition, this will provide the firm with favourable sources of sustained competitive advantage (Boxall & Purcell, 2011). As such, organisations must put more focus on human capital management as a part of competitive advantage by creating value for their clients if they want to be a success. It is therefore necessary to develop and maintain an engaged, creative and knowledgeable work force in an environment that allows human capital to grow (Boxall & Purcell, 2011). RBV asserts that the manner in which resources are applied within the organisation can create a competitive advantage through two approaches namely resource diversity and resource immobility. Resource diversity is about whether an organisation owns a resource or capability that is also owned by other competitors. If that is the case, than that resource cannot provide a competitive advantage. Resource immobility on the other hand pertains to a resource that is difficult to acquire for the competition due to the cost of developing or acquiring is too high. Best practice assumes that there exists a set of human resource management practices that are universally accepted and that they are best in any situation and adopting them will result to superior performance of the organisation. It is criticised since it does not take consideration to the local context. According to Pfeffer (1998), there are identifiable characteristics that will make an organisation in any context or environment to thrive. He cited the following assumptions as resulting to efficient growth of an organisation. These include as mentioned earlier, offering job security to the workers, training opportunities for improving skills and abilities, selective hiring, high compensation based on performance, information sharing and reduction of status differentials. This theory assumes that once employees in an organisation feel secure in their jobs, in an environment that is favourable and reduced communication gaps especially vertically, the workers will become more productive in their work and will eventually be reflected in the overall performance of the organisation (Pfeffer, 1998). Best fit on the other hand emphasises that human resource strategies should be congruent with the circumstances and context of the organisation. It can be viewed as relating to vertical integration or the organisation’s alignment of the business strategies with that of human resource (Bolton & Houlihan 2007). This theory assumes that the effectiveness of human resource management to a large extent depends on its fit with the organisation’s developmental stage. As the organisation develops and grows, human resource practices and programmes as well as the procedures must change to meet the organisation’s objectives. The theory argues that human resource management gradually develops through a series of developmental stages as the organisation becomes complex. The lifecycle lies on the theory that the development of a firm occurs in four stages: start-up, growth, maturity and decline, and that HR practices must fit each of these stages (Becker & Huselid 2010). The strategic configuration model is anchored on the view that strategy should be matched to one of the ideal types of organizations; the end results is increased effectiveness since consistency or fit is achieved between the patterns of relevant contextual factors. Generally, it is accepted that best fit is more acceptable than best practice. Relationship between the three models and is there room for a high commitment model when you take a best fit approach? The three mentioned models of human resource practices have one similar objective. This is to improve the overall performance of the organisation. As firms endeavour to maximise on their profits and increase their competitive advantage, it is pivotal to integrate different human resource practices rather than using them in isolation (Collings & Wood 2009). Bundling human resource practices is an essential aspect of strategic human resource which is mainly concerned with the organisation as a total entity which addresses what is required throughout the organisation as a whole. For an organisation to achieve total success, it is of paramount importance to interrelate the three approaches of strategic human resource management. Scholars have argued that individual practices cannot be implemented effectively in isolation and it is therefore necessary to combine the practices for total organisation growth (Lengnick-Hall, 2009). Combining these practices into an integrated bundle is essential. When used together, these practices create multiple reinforcing conditions that support the motivation of the employees, by ensuring they have necessary skills and know how to perform their work effectively. The idea of integrating these practices is to allow the organisation as a whole achieve its corporate strategic objectives (Boselie, 2010). Also to achieve coherence which is experienced when a mutually reinforcing set of human resource practices is developed jointly contributing to the attainment of the organisation’s strategies for similar resources to its needs improving performance, quality and competitive advantage (Lengnick-Hall, 2009). Even when an organisation chooses best fit approach to human resource management, there is still room for that organisation to acquire a high performance model or best practice approach. These will complement each other and enable the organisation to meet its objectives than when one practice is used solely. An organisation can apply best fit strategies which will enhance employees’ abilities, technical and business knowledge through an important investment in globally recognized best practice training methods. This integration aims at supporting and maintaining the superior efficiency objectives therefore creating core competencies compared to industry rivals and a competitive advantage. As such, the two methods can be used together for enhanced organisation’s performance (Marchington et al, 2012). Is Google embracing best practice or best fit approach or both and why? Google is one of the most successful organisations in the world that has moved from profit to profit. This success is attributed to what can be termed as extra ordinary people management skills. Google asserts that strategic focus on people management is essential since innovations are brought about by people and subsequently, one cannot maximize innovations unless by recruiting and retaining innovators (Marchington et al, 2012). You must also provide employees with good managers and an environment that supports innovation. Therefore it would be in order to say that Google has adopted best practices approach to human resource management. More focus is paid to employees by providing them with a conducive work environment, good remuneration, recruiting people who are innovators and training (Guest, 2012). Communication between high level managers and employees is also very efficient in that the employees are made to feel that they are part of the team especially in decision making and implementing new innovations. They are made to feel like they are at home in the work environment. This enhances their creativity as they are always highly motivated to come up with different strategies for improving the organisation. Google prides itself in hiring and retaining competent professionals (Appelbaum et al, 2012). Mediocre people make mediocre decisions which are detrimental to the overall performance of the organisation. Therefore Google has used the analytical people management practices to identify the appropriate people for the organisation, how to retain them and how to keep them motivated. Google continues to re-invent human resource practices by replacing the old practices by introducing a better people management approach (Appelbaum et al, 2012). Critical assessment of Google using research evidence Google uses several people management skills such as identifying characteristics of good leaders where managers are rated twice in a year by the employees on their performance. The organisation believes that superior technical knowledge and periodic one on one coaching is crucial to becoming a successful leader. Great leaders are believed to impact tremendously on the organisation’s success. Google also uses a PiLab which is a subgroup that conducts experiments within Google to determine the most effective approaches for managing people and to maintain a productive environment. The lab has in the past improved the health of the employees by reducing their calorie intake and their eating facilities by relying on scientific data and experiments (Becker & Huselid 2010). This goes to show the level of importance the organisation plays on the well being of the employees as they know they are a major factor to the success of the organisation. This is well reflected in the principles of best practices approach in human resources which place emphasis on the employees’ well being. Google has also invested a lot on recruitment, another principle of best practices in human resource management. The organisation has come up with a hiring algorithm which predicts which candidates have the highest capability of succeeding if they are hired. The hiring decision is also made by a group so as to prevent individual managers from hiring people for their own short term ends (Becker & Huselid 2010). These are just but a few examples of how Google uses best practice approach to become one of the best performing company in the world today. Are HR practices mutually exclusive? The two basic human resource practices are not mutually exclusive. The universal approach main aim is to identify ways of managing people which can be applied in all organisations. Contingency approach on the other hand aims at matching different ways of managing people with the best possible method of producing goods or giving services. Each can be used independently. However, HR practices that are consistent and reinforce each other can enhance better working environment (Guest et al, 2011). The various practices can complement each other especially when bundled together to enhance performance in an organisation. Firms can apply the various mentioned approaches as they may work hand in hand to improve the performance of the workers and maintain allow the organisation to achieve a competitive advantage (Guest et al, 2011). When the employees’ needs are put to focus by being properly managed and are matched with the current situation of the organisation, it is likely that success will be achieved. Performance and how it is measured Measuring performance of an organisation means using proper indicators and measures to monitor, evaluate and establish the appropriateness of the services an organisation offers, effectiveness of these goods or services to the community and the efficiency of the organisation itself (Ramsay et al, 2000). Performance measurement entails ensuring that the organisation produces outcomes and results as per its objectives and that these results are of benefit to the community. It involves management of issues such as waste and fraud as well as providing a sense of purpose and satisfaction to all the stakeholders involved. This way they are confident to continue supporting the organisation in its ongoing efforts. The organisations strategic plan is the best place to start when measuring performance. Finding out how well an organisation is doing in meeting its objectives is a good indicator of performance. The key questions that need to be evaluated include: What are the organisation’s strategic objectives? How will the organisation know that it is achieving these goals? What information is relevant to show how well the organisation is doing? And finally, is this information relevant enough to show how the organisation is doing? However, there is no generic set of performance measures set to measure performance. In profit making organisations, innovation is commonly used to measure performance since it relates to improved practices processes and practices. It is usually measured by using a subjective rating of the rate of the product or by measuring differences in the amount of new or adapted products over a given period of time (Ramsay et al, 2000). Customer satisfaction is used to evaluate business performance especially in the service sector where other aspects are difficult to determine. Profitability of the organisation can also be used as a measure of how well the organisation is using the available resources to maximize on profits. Limitation of HRM practices Human resource management primarily deals with people who are constantly prone to change and are evolving from time to time. Most of the firms do not take into consideration the important role HRM plays in improving the performance of an organisation in an effort to achieve its goals. Most analysts use financial indicators to measure the performance of the organisation such as sales and profits which could be problematic as differences in profits could be attributed to more than just HR practices. The disparity between HR practices and financial performance of the organization could potentially be too large to find statistical valid linkages (Boselie, 2010). There fails to be an agreement on the nature of HRM and the involved practices. Different experts define HRM practices in their own way. This may make it difficult for quick absorption and adoption of SHRM practices in many organizations. Strategic Human Resource Management is the way to go if an organization is looking to improving its performance and meeting its set objective in the set time. Conclusion Coming up with an effective HR system that is in line with the strategy of the organization is pivotal to the success of any organization and especially in a competitive business setup. Increased complexity of modern corporate life has awakened the importance of shedding traditional beliefs that were taken up by personnel managers and shape newer focuses to proactive attitudes and as such placing greater emphasis on the utilization of human resource practices in the organization (Pfeffer, 1998). In the past, the Human Resource department was viewed as only an area to fulfill the role of staffing, compensation and in charge of training the employees. However, this has changed since these functions are considered as pragmatic and narrow in scope and management duties are not as centralized as it was in the past (Torrington et al, 2011) . With the increased role of human resource in business, managing people is highlighted to be of strategic importance. As such, systematic and long term views need to be incorporated in managing human capital in order to improve the competitiveness of an organization. These need to be developed as long term plans for the well being of the organization (Boxall & Purcell, 2011). If they are of high quality, the human resource set up will feature the internal consistency of the various HR practices. Reference list Conway, E. & Monks, K. 2009. ‘Unravelling the complexities of high commitment: an employee level analysis’. Human Resource Management Journal, 19, 140-158 Pfeffer, J. (1998) The Human Equation: Building Profits by Putting People First, Harvard Business School Press. Searle, R. (2011). Trust and human resource management. Cheltenham, UK, Edward Elgar. Torrington, D, Hall, L, Taylor, S, & Atkinson, C. (2011) 8th Edition. Human Resource Management, Pearson Education. Bratton, J. & Gold, J. (2012) Human Resource Management: Theory and Practice, 5th edition. London: Palgrave Macmillan. Boxall, P & Purcell, J (2011) Strategy and HRM, London: Palgrave Bolton, S. C.& Houlihan, M. (eds) (2007) Searching for the Human in Human Resource Management: Theory, Practice and Contexts, Basingstoke: Palgrave Macmillan. Collings, D.G. & Wood, G. (2009) Human Resource Management: A Critical Approach, Oxon: Routledge [Available as an e-book] Becker, B. E. & Huselid, M. A. (2010), ‘SHRM and job design: Narrowing the divide’. Journal of Organizational Behaviour, 31: 379–388 Boselie, P. (2010) Strategic Human Resource Management: A Balanced Approach, McGraw Hill. Lengnick-Hall, M.L., Lengnick-Hall, C.A., Leticia, S.A., & Drake, B. (2009) ‘Strategic human resource management: The evolution of the field’, Human Resource Management Review, 19:2, 64-85. Marchington, M., Wilkinson, A.& Marchington, L. (2012) Human Resource Management at Work, 5th ed., London: CIPD. Guest, D. (2011) ‘Human resource management and performance: still searching for some answers’, Human Resource Management Journal, 21:1, 3-13. Appelbaum, E., Bailey, T., Berg, P. & Kalleberg, A. (2000). Manufacturing Advantage: Why High Performance Work Systems Pay Off, Ithaca, NY: ILR Press. Guest, D., Paauwe, J. & Wright, P. (2011). Human Resource Management and Performance: What’s Next?, Chichester: Wiley Ramsay, H., Scholarios, D. & Harley, B. (2000). ‘Employees and high- performance work systems: testing inside the black box’. British Journal of Industrial Relations, 38: 4, 501–531. Read More