Current Issues in Strategic Human Resource Management - Coursework Example

Current Issues in Strategic Human Resource Management Table of Contents Introduction 2 Strategic Human Resource Management 3 Role of Strategic Human Resource Management in the Current Context 5 The Concept of Strategic Fit 7 ‘Fit’ Models of Strategic Human Resource Management 8 Limitations of Strategic Human Resource Management 9 Practical Considerations of the Limitations 11 Conclusion 13 References 17 Introduction Schuler (1992) has defined strategic human resource management (SHRM) as, “all those activities affecting the behaviour of individuals in their efforts to formulate and implement the strategic needs of the business” (Armstrong, 2000, P. 40). Thus strategic human resource management is largely the strategic approach to understand, evaluate and implement the concepts of human resource management in a way that helps an organisation align its human resource related activities with its business goals. It is a management discipline that enables decision making on the basis of organisational goals and plans centred on employment relationship, i.e. employer (management) – employee association, as well as miscellaneous activities such as recruitment, performance management, employee relations, etc. As the very name suggests, strategic human resource management is a combinatorial discipline that blends human resource management with strategic management, and described in the simplest form, it “refers to the overall direction the organization wishes to pursue in achieving its objectives through people” (Armstrong, 2000, P. 41). Quite clearly, strategic human resource management is an indispensable constituent of an organisation’s overall business strategy. Strategic human resource management, as has been opined by Wright and McMahan (1992), is “the pattern of planned human resource deployments and activities intended to enable the firm to achieve its goals” (Armstrong, 2000, P. 41). The premise that strategic human resource management is indispensable in the organisational context, may be justified through the argument that human capital has the maximum contribution towards organisational competitive advantage and again, the major strategic decisions are taken by none other than the employees, thereby necessitating the attachment of due importance to strategic human resource management. This particular discipline has a wide scope and thus it addresses futuristic concerns such as organisational change and development in terms of structure as well as culture, reinforcement of knowledge, skills and abilities (KSAs) and overall effectiveness as well as performance of the organisation. It can thus be observed that strategic human resource management analyses and evaluates the elements of employee as well as organisational processes and attempts to achieve a successful alignment between the two. Strategic human resource management fundamentally aspires to “generate strategic capability by ensuring that the organization has the skilled, committed and well-motivated employees it needs to achieve sustained competitive advantage” (Armstrong, 2000, P. 43). The long-term orientation of strategic human resource management is manifested through various models of which the most prominent is that of strategic fit. The aim of this report will be to establish the various types of strategic fit as integral components of strategic human resource management and subsequently evaluate them to analyse their limitations. Strategic Human Resource Management As has been already outlined in the introduction, strategic human resource management is a conceptual blend of strategic management and human resource management. For a comprehensive understanding of strategic human resource management it is equally important to understand the fundamentals of both these branches of management. Strategic management, as has been defined by Drucker (1955), comprises “all decisions on business objectives and on the means to reach them” (Armstrong, 2000, P. 29). The concept of strategic management was further augmented through the pioneering works of various management visionaries such as Igor Ansoff, Henry Mintzberg and Michael Porter. According to Chandler (1962), “strategy is the determination of the basic long-term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals” (Armstrong, 2000, P. 30). Correlating this definition with those of strategic human resource management it can be observed that both address the futuristic requirements of an organisation. It can be debated that strategic management is an all-encompassing, holistic set of organisational plans, whereas strategic human resource management is that component of it that caters to the human resource related activities. Strategic management, in general, takes into consideration three organisational aspects which are (a) mission and strategy, (b) formal structure and (c) human resource systems (Fombrun, Tichy & Devanna, 1984, P. 34). The aspect of mission and strategy is necessary because a mission provides an organisation with a reason to exist while a strategy imparts a practical blueprint to enable a proper manifestation of the former. A formal structure embodies the organisational layout which supports the implementation of the strategy and finally, the human resource systems define the processes by which suitable employees are recruited as well as developed with the aim to execute through them the jobs that contribute towards manifestation of organisational goals. Thus, it is again observed that human resource management plays a vital and almost inseparable role in designing organisational strategies. There are three key deliverables of strategic management that have been observed. The first one, conceptualised by Michael Porter (1985), is competitive advantage which “arises out of a firm creating value for its employees” (Armstrong, 2000, P. 31). The second one is termed as distinctive capabilities, which according to Quinn (1980) is a vital feature that “confers superiority on the organization” (Armstrong, 2000, P. 31). The third and final deliverable is the strategic fit which establishes the concept that competitive advantage may be maximised if the capabilities as well as resources of an organisation are compatible with the environmental opportunities as well as risks. Role of Strategic Human Resource Management in the Current Context Effectiveness of strategic human resource management is evaluated mainly depending on the support that it tenders to organisations under adverse circumstances which may present themselves in many forms depending on the numerous uncertainties of the business environment. Owing to the presence of such uncertainties organisations have growingly become more adaptable towards environmental changes. This has been made possible through efficient practices of strategic human resource management. A significant development has been observed in the form of reduced rigidity of organisational human resource policies. This has been possible because strategic human resource management necessitates the understanding of change management and makes the organisation modify its human resource policy in accordance with the environmental demands (Schuler & Jackson, 2007). Strategic human resource management also classifies organisations under categories such as high-commitment, high-involvement and high-performance which define three different classes of workplaces. Organisations tend to adopt specific approaches to manifest within themselves any of these workplace environments. However, it has been observed that often organisations adopt a combination of all these approaches in such proportions that help them achieve strategic excellence (Hunter, 1995). It has been observed that strategic human resource management comprises theoretical aspects that combine various perspectives such as exogenous factors, that represent the elements of the external environment, and endogenous factors, that represent the elements that are internal to the organisation. It also embodies views pertaining to the resource-based theory which is found to have an inclination towards resource-based views of organisational members (Stahl & Björkman, 2006). In the context of recent business scenario, strategic human resource management has been found to gain an enhanced involvement in organisational practices and at the same time, has gained additional prominence owing to the fact that inter-organisational competition has remarkably amplified. This has called for the implementation of strategic human resource management which aligns organisational human resource with business strategies, thereby providing support to accomplish corporate goals (U.S. Office of Personnel Management, 1999). Owing to the enhanced levels of competition, employees nowadays experience short-term pressures. The impacts of competition can be recognized as two separate categories that have formal and informal objectives. While, formal objectives can be understood through the organisational performance objectives, informal objectives can be identified through the instructions that have been provided by the top management (Gratton, 1999). The Concept of Strategic Fit Strategic fit signifies integration and represents the concept on which strategic human resource management is centred. As has been discussed previously, organisational human resource strategy must be aligned with its business strategy in order to manifest uniformity of goals. In other words, human resource strategy should form a vital component of the organisation’s business strategy thereby contributing significantly and simultaneously to the planning process. The alignment of human resource strategy to the organisation’s business strategy is seen as a vertical fit as an integration of this type is aimed at achieving congruence between the two and in turn manifest strategic integration though them (Armstrong & Baron, 2002, P. 44). The element of strategic integration, as propounded by Fombrun et al states “just as firms will be faced with inefficiencies when they try to implement new strategies with outmoded structures, so they will also face problems of implementation when they attempt to effect new strategies with inappropriate HR systems” (Armstrong & Baron, 2002, P. 44). Thus, it becomes increasingly evident that alignment of the formal organisational structure to the human resource systems is a critical task of the management in order to materialise the strategic aims. Within the different components of the human resource strategy of an organisation, integration is necessary in the form of horizontal fit (Armstrong & Baron, 2002, P. 44). The basic understanding of this requires the identification of the various human resource functions as interdependent components that appear on a continuum. As each of these elements ensues from their predecessors and in turn contributes to the functionality of their succeeding elements, it is immensely necessary that there is proper alignment between these. Thus, in order to achieve strategic fit it is necessary that the internal environment of an organisation is harmonised to the extent that goal orientation is consistent. Strategic fit helps in identifying the anomalies between the organisational resources and the environmental opportunities and subsequently straightening out any element of misfit in the former (Burton & Obel, 2004, P. 21). The next section will aim at analysing and evaluating the different variations of the strategic fit. This is deemed necessary in order to understand how they contribute towards organisational efficiency. ‘Fit’ Models of Strategic Human Resource Management In the previous section sufficient attempt was given to establish the concept of strategic fit. This particular aspect of strategic human resource management is put to a wide range of organisational diagnoses and practices. A generalised discussion of strategic fit, as had been put forward by Guest in 1997, is appended below. Strategic interaction fit links human resource related practices with elements of the external environment and leads to the comparative evaluation of the KSAs in terms of goal alignment. Contingency fit comprises approaches that underlie that fact that organisational practices must meticulously respond to external factors. Strategic fits should form a set of best practices which in turn should enable an organisation, irrespective of its industry to perform optimally towards achieving business excellence and profitability. Human resource management system, like any other organisational system should be “internally consistent and coherent, and moreover, focused on solving operational problems and implementing an overall competitive strategy” (Burton, Eriksen & Hakonsson, 2006, P. 89). The Gestalt fit embodies a well-defined pattern of activities that may be institutionalised as an apposite blend of organisational practices (Armstrong & Baron, 2002, P. 45). This particular strategic tenet ensues from the concept of organisational best practices as a foundation of operational and process excellence. Finally, fits may be holistically grouped as bundles of distinct configurations that complement each other and subsequently the most effective bundle may be chosen to be implemented on an organisation-wide basis. From these different variations of strategic fit it can be observed that they conceptualise a holistic response to the external environment, in the form of internal alignment that works towards identification of the organisational goal and putting in efforts to achieve the same. Fits as a set of best practices, the circumstantial fit and the bundles of fit respectively comprise the probable approaches in the context of strategic human resource management. However, when it comes to implementing fits on an organisational level, the practical approaches are limited to the vertical fit and the horizontal fit. Limitations of Strategic Human Resource Management As has been observed in the previous sections, the core organisational outcome that strategic human resource management attempts to manifest is sustainability. With reference to the uncertainties that prevail in the external environment, organisational sustainability becomes a dynamic and at the same time a holistic concept as it is all about continually modifying the internal resources and making them at par with the environmental demands. However it has been observed that the various conceptual approaches have their limitations (Ehnert, 2009, P. 58). The bases of the limitations pertaining to this field of study can be understood to a considerable extent through the suggestions of Wright & McMahon, “the implications of a power and politics perspective of HRM are numerous. First it changes the focus from viewing strategic HRM in mechanistic terms where all HRM practices are rationally determined and are perfectly supportive of organizational strategies. As anyone who has worked with organizations in the development of HR practices such as selection or appraisal systems has experienced, it is political rather than technical or strategic considerations that often strongly affect the development of a final product” (Armstrong, 2000, P. 57). Other significant limitations of strategic human resource management as especially those of the concept of strategic fit that are exhibited by organisations become increasingly prominent during the expansion of their business operations. These impediments are faced in the forms of legal variations, transnational problems arising out of differences in culture, language, etc. Even the management of employee health and safety, compensation and benefits and employee relationship is also a daunting task and these require a focussed approach of strategic human resource management (Anonymous-a, 2008). In case of global corporations that have huge employee bases and hence has a widely diverse spectrum of issues to address to, it often so happen that strategic fit cannot be manifested always. Thus the fallouts also increase in number as well as criticality. While designing a global human resource policy the organisations may omit the specific requirements of a particular set of employees and this in turn maligns the entire process in the form of a strategic misfit. In most of the organisational failures pertaining to strategic misfits, it has been found that they have failed to select the strategy that best fits a particular situation. Selection of a wrong strategy may herald the production of irrelevant as well confusing outcomes which in turn deviates the organisations from the path leading to their business goals. Wrong strategies also confuse the managements and they in turn find it increasingly difficult to forecast the futuristic trends of human resources (Hunter, 1995). Practical Considerations of the Limitations Strategic human resource management largely depends on both empirical evidence as well as practical activities that together try to establish an interrelationship between organisational strategies and human resource management activities. Though a large number academic literature and theories that are available suggest a theoretical association between the two facets of corporate management, it is quite surprising to observe that the conclusions derived from such theories have mostly failed to establish substantial congruence between strategic management and human resource management. It is accepted that the tenets of strategic human resource management centre on views generated through organisational research conducted by various management thinkers and it is on the basis of such research findings that they have opined that human resource management, which is highly diffused in the nature of its application across the different levels of organisational structure, may play a vital role in the formulation of organisational strategy. However, thinking from a practical perspective, it is worth considering that the views of the management limit the scope of strategic human resource management. Human resource audits have proven the fact that ideas contributing to the formulation of human resource strategies should be invited from all employees irrespective of their position on the organisational hierarchy. Quite often than not, this doesn’t happen in reality and this in turn alienates the employees as they feel they are simply meant to carry out orders by being a part of a formatted organisational machinery. Correlating this with the theories of motivation, it can be said that employee participation in decision making/ strategy formulation process is necessary for enhance employee satisfaction as well as employee morale. Hence, this is a serious drawback in terms of practical implementation of strategic human resource decisions. Moreover, this specialised field of study faces another serious impediment as it is often related to organisational survival, however on the basis of empirical assessment. Though strategic human resource management should ideally ensue from a combination of resource-based views (RBVs) and the ecological aspects of organisational employee base, each of these two concepts plays a specific role in strategic human resource management. While the RBV aims at discovering employees’ needs and attempts to correlate them with organisational goals thereby helping the employees as well as the organisation achieve their coveted goals, the ecological aspects enable the employees to gather knowledge about the processes that contribute to organisational growth as well as to human resource development. Thus, a combination of these two concepts aims at providing significant support to strategic human resource management. Even though various research works have put forward the idea that significant contributions can be made to the success of success of organisational strategies by human resource management, it is again discovered that in a prominent contrast to such a premise, various organisations have disagreed to such a strategic approach and hence the application of strategic human resource management have been found to be missing in such organisations. Thus, the global acceptance of this concept is found to be questionable. When it comes to the organisations that have successfully adopted the institutional practice of strategic human resource management, they have been observed to put in efforts so that their knowledge capital may be enhanced. In order to achieve that, these organisations develop efficient procurement as well as talent management strategies (Lawler & Mohrman, 2003). Conclusion It has been observed through the course of this research that strategic human resource management is an outcome of the combination of strategic management as human resource management – which are otherwise two independent areas of management science. Strategic human resource management is a strategic approach that helps understand, evaluate and implement the concepts of human resource management in such a way that enables an organisation to align its human resource related activities with its overall business goals. It is thus, a management discipline that enables organisational decision making on the basis of corporate goals as well as plans that are centred on employment relationship and miscellaneous activities such as recruitment, performance management, employee relations, etc. Strategic human resource management is deemed indispensable in the organisational context, as human capital has the maximum contribution towards organisational competitive advantage and the major strategic decisions are taken by none other than the employees. This particular discipline has a wide scope in organisational performance and it addresses to various futuristic concerns such as organisational change and development in terms of structure, reinforcement of knowledge, skills and abilities (KSAs) and overall effectiveness of the organisation. It can thus be observed that strategic human resource management leads to the analysis and evaluation of the elements related to employee as well as to organisational processes, and attempts to achieve a successful alignment between the two. Strategic management largely comprise a holistic set of organisational plans, and in contrast strategic human resource management is that component of it that caters to the human resource related activities. Strategic management takes into consideration three organisational aspects viz. mission and strategy, formal structure and human resource systems. Mission and strategy are important because a mission provides a reason for organisational existence while a strategy serves the purpose of a practical blueprint that enables a proper manifestation of the organisational mission. A formal structure substantiates the organisational layout that supports the implementation of the strategy and finally, the human resource systems characterize the processes through which suitable employees are recruited and subsequently developed with the aim to execute through them the jobs that contribute towards manifestation of organisational goals. Hence, human resource management plays a vital and almost inseparable role in designing organisational strategies. Effectiveness of strategic human resource management depends mainly on the support that organisations receive from it under adverse circumstances that may be experienced in many forms depending on the numerous uncertainties of the business environment. Owing to the presence of such uncertainties organisations have growingly become more adaptable towards environmental changes and this has been made possible through efficient practices of strategic human resource management by organisations. A significant development has been observed in the form of increased flexibility of organisational human resource policies. This has been possible because strategic human resource management necessitates the understanding of change management and makes the organisation modify its human resource policy in accordance with the environmental demands. Strategic human resource management also classifies organisations under three main categories viz. high-commitment, high-involvement and high-performance which define three distinct classes of workplaces. Though organisations generally tend to adopt specific approaches to manifest any of these three workplace environments, it has also been observed that they often adopt a combination of all these approaches in such proportions that help them achieve strategic excellence. Strategic fit signifies integration/ alignment and represents the fundamental concept on which strategic human resource management is based. Organisational human resource strategy must be aligned with its business strategy in order to manifest a uniformity of business goals and hence human resource strategy should form a vital component of the organisation’s business strategy thereby contributing significantly and simultaneously to the planning process. The alignment of human resource strategy to the organisation’s business strategy is said to manifest a vertical fit whereas, integration between different components of organisational human resource strategy is said to achieve a horizontal fit. Thus, it becomes increasingly evident that alignment of the formal organisational structure to the human resource systems is a critical task of the management in order to materialise the strategic aims. The basic understanding of the concept of strategic fit requires the identification of the various human resource functions as interdependent components that appear on a continuum. As each of these elements ensues from the respective preceding elements and in turn contributes to the functionality of their succeeding elements, it is immensely necessary that there is proper alignment between these. Though various academic journals and scholarly theories have reiteratively suggested that there is a theoretical association between the two facets of corporate management, i.e. strategic management and human resource management, it maybe observed that the conclusions derived from most of those theories have rather failed to establish any substantial congruence between the two. It is generally accepted that the tenets of strategic human resource management centre on views generated through organisational research that have been conducted by various management thinkers and it is mainly on the basis of those findings that they have opined that human resource management may play a vital role in the formulation of organisational strategy. However, while thinking from a practical perspective, it may be worth considering that the views that are nurtured by the management in this respect, limit the scope of strategic human resource management. Ideas that contribute to the formulation of human resource strategies should be democratically invited from all employees irrespective of their position on the organisational hierarchy to enhance strategic excellence. However, this doesn’t happen in reality and this in turn alienates the employees. By correlating this fact with the theories of motivation, it can be found that employee participation in decision making/ strategy formulation process is necessary for enhance employee satisfaction as well as employee morale. Thus, this is a serious drawback in terms of practical implementation of strategic human resource decisions and hence in terms of strategic fit. Another serious impediment that strategic fit faces is that it is often related to organisational survival, however on the basis of empirical assessment. References 1. Anonymous-a. 2008. Human Resource Management Global Human Resource Management. [Online] Available at: http://bc.inter.edu/facultad/ialvarado/BADM%203330/presentaciones%20Mondy/Chapter%2014.ppt [Accessed on March 02, 2010]. 2. Armstrong, M. 2000. Strategic human resource management: A Guide to Action. 2nd ed. Kogan Page Publishers. 3. Armstrong, M. & Baron, A. 2002. Strategic HRM: The Key to Improved Business Performance. CIPD Publishing. 4. Burton, M. R., Eriksen, B. & Hakonsson, D. D. 2006. Organization Design: The Evolving State-of-the-Art. Springer. 5. Burton, M. R. & Obel, B. 2004. Strategic Organizational Diagnosis and Design: The Dynamics of Fit. 3rd ed. Springer. 6. Ehnert, I. 2009. Sustainable Human Resource Management: A Conceptual and Exploratory Analysis from a Paradox Perspective. Springer. 7. Gratton, L. 1999. Strategic Human Resource Management: Corporate Rhetoric and Human Reality. Oxford University Press. 8. Hunter, L. 1995. How Will Competition Change Human Resource Management in Retail Banking? A Strategic Perspective. [Online] Available at: http://fic.wharton.upenn.edu/fic/papers/95/9504.pdf [Accessed on March 02, 2010]. 9. Fombrun, J. C., Tichy, M. N. & Devanna, A. M. 1984. Strategic human resource management. John Wiley and Sons. 10. Lawler, E. & Mohrman, S. 2003. Creating a Strategic Human Resources Organisation: An Assessment of Trends and New Directions. [Online]. Available at: http://www-sup.stanford.edu/book.cgi?id=5247 [Accessed on March 02, 2010]. 11. Schuler, R. & Jackson, S. 2007. Strategic Human Resource Management. 2nd ed. Wiley-Blackwell. 12. Stahl, G. & Björkman, I. 2006. Handbook of Research in International Human Resource Management. Edward Elgar Publishing. 13. U.S. Office of Personnel Management. 1999. Strategic Human Resources Management: Aligning with the Mission. [Online] Available at: http://www.opm.gov/studies/alignnet.pdf [Accessed on March 02, 2010]. Read More