Concept of Strategic Human Resources Management - Essay Example

Running head: human resources Human resources Question: To what extent does strategic human resource management ensure that organisations are able to respond in a timely and positive manner to their internal pressures and external increasingly turbulent environment? Abstract Strategic human resources management has been adopted by almost every organization that aimed to attain a sustainable position in the market. This concept has provided a new way of management to the owners and has also demystified the significance of hidden human resource potential. The present discourse elaborates on the concept of strategic human resources management and implications of HR strategy on the firm. An understanding of implications of SHRM has been obtained by applying concepts such as resource-based view of the firm and HR-business partner model. The discourse also highlights critical aspects related to application of SHRM based on these two models and how organizations adapt to the changing demands from external and internal customers in order to sustain their competitiveness. Human Resources Strategic human resource management has emerged as the most favourable proposition for businesses as it provides a comprehensive framework for HR practices to be aligned to organisational strategies. These practices have enhanced company’s growth and profitability upon integration with business purposes. This faculty has become very popular in the areas of the traditional HRM, organisational behaviour and industrial relations. This concept practically addresses many limitations of the conventional HRM practices, and works on the philosophy of integration of HR strategy with business strategy. David Guest’s (1987, 1989a, 1989b, 1991) Harvard model emphasizes the significance of achieving strategic integration and asserts the role of organisation’s ability to integrate HRM issues into its strategic plans in such a manner that various aspects of HRM are congruent with the policies and practices implemented at all levels (Armstrong, 2000). To achieve this, many management specialists support the resource based view (RBV) of the firm as it provides competitive advantage in strategic sense. However, practical implications of RBV on managerial functions such as selection, development, combination and deployment of resources experience certain challenges which questions RBV’s status as the backdrop of SHRM. This discourse examines the extent of integration achieved by organisations between strategic decisions and practices with respect to SHRM. Further, an assessment of the effectiveness of RBV to SHRM in contexts of contemporary challenges with respect to knowledge, technology, costs, and talent will be carried out in order to understand the success and extent of integration between strategy and HRM. Wright and McMahan (1992) defined strategic HRM as “a pattern of planned human resource deployments and activities intended to enable an organisation to achieve its goals” (p.298). The difference between strategic HRM and human resource strategy comes from the intentions or the goals the organisation wants to arrive at. For instance, the long-term people issues that the organisation anticipates and puts in place suitable plans constitute strategic HRM whereas the HR strategies that need to be developed and/or changed depending upon the situation (Swart et al, 2005). HR strategies are short-term practices like hiring the suitable people required for the job, their training, reward and recognition programmes for their motivation, teamwork and stable employee relation programmes etc (Gratton, 2000). According to this, strategic HRM decisions are built into the strategic plan while HR strategies are derived from it. Human resource strategy is a part of the strategic human resources management that aims at handling the long-term and strategic people-related issues. HR strategies are the plans that are developed to facilitate management of people according to the job requirements, organisational performance management system, motivational practices, organisational structure, and employee relations. According to this, as Armstrong (2000) states, “strategic HRM decisions are built into the strategic plan while HR strategies are derived from it (p.45). Legge (1989) asserted that strategic planning and HR policies need to be appropriately integrated in order to achieve the desired organisational change (Armstrong & Baron, 2002). In this perspective, strategic HRM strongly advocates manpower planning as one of the strategies; however, it fails to consider environmental trends and is predominantly short term in nature (Brunstein, 2000, p.147). Contemporary management adopts specific practices to tackle the manpower planning issue by adopting job rotation, cross training and temporary staffing practices whereby manpower requirements can be modified according to external and internal factors (Landsbergis, Cahill & Schnall, 1999). Earlier, Legge (1989) also emphasized the significance of strategic human resource management compared to human resource strategy in achieving organisational goals. These practices of manpower planning have also improved employee motivation attributed to the learning opportunities and flexible working patterns. Contemporary management theorists support and encourage strategic management as strategy formulation involving high-level decisions connected with big agenda. Strategy formulation provides a comprehensive conceptual framework for the business and operations management. As stated by Bryson (2004), “strategic management encompasses strategic thinking, planning, and learning” (p.xiii). Strategic management can provide desired results only through a combination of these three elements. Strategic HRM aims at long-term management and is aligned to the organisational goals and interests as formulated by the senior management team. Legge (1995) argued, ‘evidence shows that the integration of strategy and HRM is at best a lengthy, complex and iterative process and, at worst, that there is little evidence to suggest that widespread integration is achieved” (p.124). Role of human resources in organisation’s growth and sustenance has been debated extensively through the RBV and SHRM literature. Both these paradigms have reinforced the significance of human capital in terms of talent acquisition and usage of the talent through strategic alignment of individual objectives to the organisational goals in different ways. Furthermore, other aspects that are highlighted include learning culture, organisational culture, leadership development, organisational systems and structure etc. Overall, all theories and propositions focus on strategic management of human resources as well as human capital. Strategic management has been regarded as the key to achievement of competitive advantage (Wright, Dunford & Snell, 2001). The senior level management is usually involved in strategic planning and decision making. However, implementation of strategic plans and decisions occurs at lower levels and would require knowledge of the wider business functions so that managers at lower levels are able to align their activities and job roles with the strategic goals. Lack of knowledge related to wider business functions at lower management levels can cause significant differences in interests and communication between managers and front line staff. Introduction of strategic human resources management should incorporate strategically planned change in order to avoid potential disturbances that may crop up due to the previous practices of independent management between staff and managers. Also, integration of strategy into HRM can be difficult for the personnel specialists who lack strategic skills needed to contribute to their organisation’s effectiveness. Integration of strategy and HRM involves integration of HRM with organisational strategies that is achieved by direct participation of HR heads in the decision making process; and secondly, strategic orientation of HR functions and operational areas through indirect involvement of HR personnel in goal-oriented organisational decisions. Third type of integration involves change in organisational norms, rules or programmes through specific HR policies and practices (Brewster, Larsen & Mayrhofer, 2000). Supporting Karen Legge’s statement, Brewster and Larsen (2000) point out that there is little research data that can provide evidence of the integration of HRM specialists into corporate strategy making in an informal view of strategy (p.48). In the area of direct participation of HR specialists, evidences suggest that HR specialists’ involvement in key decision making is minimal in most of the European companies (p.49). Other evidences also suggest that in some countries like Sweden and Finland, matters related to HRM either receives highest priority or no absolutely no importance at all. In addition, various companies in the European Union have disproportionate strategies and mission statements, with little or no relevance to personnel strategies. History related to strategic HRM indicates that HRM was considered as a significant component of management that had a critical role in implementation of strategy; however, traditionally HRM was not involved in strategy formulation. Lengnick-Hall and Lengnick-Hall (1988) had explained that conventional SHRM models focused on strategy implementation and human resources were considered as means to generate strategic objectives. This perspective lowered the importance of human resources as ways to derive competitive advantage (Allen & Wright, 2007). However, this notion was changed after framing and establishing the resource based view of the firm Barney’s (1991) resource based view proposes that firm’s competitive advantage comes from internal resources that it possesses, which was further reinforced by HRM proponents that emphasized the significance of human resources in organisational growth and development (Allen & Wright, 2007). The issues of extent of strategic integration of HRM and involvement of HR in key decision making have been addressed to a large extent in contemporary organisations through the HR-business partner model. This model considers HR professionals as partners of business or operations that work in coordination with operations at strategic as well as operations levels. This concept has been widely and successfully adopted by many organisations using different models. The most famous model is that proposed by Dave Ulrich, the four-role model, in which HR professionals responsibilities are categorized into four roles namely, management of strategic human resources, management of firm infrastructure, management of employee contribution, and management of transformation and change (Ulrich, 1997; 25). Another concept that integrates HRM with strategy is the HR business partner model. The Resource based view is one of the models that assists in successful adoption and implementation of HR business partner concept. From this perspective, Ulrich and Brockbank (2005) state, “value in this light is defined by the receiver more than the giver. HR professionals add value when their work helps someone reach their goals. It is not of a programme or declaration of policy that matters most, but what recipients gain from these actions. The HR value proposition means that HR practices, departments, and professionals produce positive outcomes for key stakeholders, employees, line managers, customers and investors” (as cited in Holbeche, 2009; p.5). The HR-BP model has been very successful in contemporary organisations like Southwest Airlines, Dell, Toyota, WAl-Mart, Vanguard, General Electric etc (Dessler and Varkkey 2009). These and many other success stories have only strengthened the concept of HR business partnering as an approach to SHRM, which adds value to a firm’s human capital through effective HR practices and HRM systems. Certain HR strategies resulting in strategic outcomes lead to competitive advantage in the form of cost reduction, quality enhancement and innovation (Schuler and Jackson, 1987). Qualities enhancing strategic practices include systematic recruitment and selection, comprehensive induction programmes, empowerment and high discretion jobs, high levels of training and development, harmonization, highly competitive pay and benefits packages, and a key role of performance appraisal (Marchington & Wilkinson, 2005, p.104). RBV is considered instrumental to the development of SHRM. RBV helps in analyzing the internal environment of the organisation by identifying its strengths, resources, capabilities, core competencies, and distinctive competencies, all of which are the source or foundation of the firm’s competitive advantages. RBV focuses on capitalizing these aspects of the organisation (Ireland, Hoskisson & Hitt, 2008). Barney’s (1991) proposition of RBV includes four key characteristics: firstly Valuable (V), which includes all resources that deliver value to the organisation; secondly, Rare (R) which include resources that provide competitive advantage to the firm that possesses because they are rare and unique; thirdly, inimitable (I) resources that provide sustainable competitive advantage; and Non-substitutable resources which are indispensable and are rare and not imitable by competitors. In short, these resources are referred to as the VRIN. The RBV allows the organisations to exploit the opportunities available in the market by using its own resources or by creating resources that are congruent with market requirements. The resources-based view allows organisations or businesses to adopt an inside-out approach contrary to outside-in approach that was followed in conventional business management (Boselie & Paauwe, 2009). This approach allows the firms to focus on available resources while developing a strategy, which will further provide wider horizon for business by leveraging the resources in many different ways. Cappelli and Singh (1992) promoted RBV as the best fit for SHRM because RBV provides ground to create unique sets of behaviours and attitudes from employees that would be required for business strategy and RBV can be used to create unique human resource polices required for strategic HRM. Further, RBV facilitates in rearranging resources according to the strategy (Wright, Dunford & Snell, 2005). In their paper, Wright, McMahan and McWilliams (1994) have provided a theoretical explanation of circumstances under which human resources can be a source of sustained competitive advantage and the role of HRM. According to them, “human resources is the pool of human capital under the firm’s control in a direct employment relationship. Human resource practices are the organisational activities directed at managing the pool of human capital and ensuring that the capital is employed toward the fulfillment of organisational goals” (p.304). Boxall and Prucell (2008) support the application of RBV to HRM emphasizing the significance of people in adding value to the organisation, their skills and expertise that make them rare, unique talent that makes them inimitable and non-substitutable by other organisational resources like technology or systems. Besides selection, recruitment, training, and performance evaluation, HR strategies that foster employee engagement have been given much importance in contemporary workplaces. Management believes that employee engagement creates value. However, the driving factors of employee engagement include suitable HR practices and employee attitudes. HR practices should reinforce positive attitudes in order to create value to human resources through enhanced commitment. The HR practices should be supported by the organisational culture that is inclusive and fair and are appropriately implemented by the line managers. These approaches will lead to, what Storey et al refer to as employee engagement in behaviours above and beyond the core job, which lead to true competitive advantage from people (2009; p.311). Employee engagement depends upon factors such as leadership, rigor and practices as well as employees’ level of motivation. Many theorists and researchers have critiqued the RBV that have highlighted key points for improvement. One such critical review is presented by Kraaijenbrink, Spender and Groen (2010), which collects eight categories of critiques highlighted by different people associated with implications of RBV on firms. Firstly, Priem and Butler (2001) point that RBV does not provide suggestions for managers about HRM practices that would create VRIN resources. However, RBV does provide guidance on how firms can create sustainable competitive advantage with use of their resources. It would be up to the management to choose or frame specific policies and practices that would make its human resources valuable, rare, inimitable and non-substitutable. For example, employee engagement practices can improve employee commitment and thus make them valuable (Kraaijenbrink et al, 2010). Secondly, the concept of RBV seems infinite making its integration with SHRM ambiguous and uncertain (Priem & Butler, 2001). This is true considering the never-ending competition, advancement in information and technology and narrowing of time and space In general, all competing firms create innovative products and services; in competition to this other organisations tend to build capabilities that can handle such competition and create other and better innovative products and services and so on. Thus, creation of VRIN resources seems never ending and firms have to accept this fact before embracing RBV into their SHRM practices. Kraaijenbrink et al (2010) argue that RBV’s applicability is too limited and is confined to unique resources, large firms, and to rare resources that are hard to obtain. To add to this, Barney (2002) asserts that RBV is applicable to firms as long as they are not undergoing any changes because of external or internal factors. Such consistency cannot be guaranteed for any organisation that aims to stay competitive and sustain its growth. However, a view point that supports RBV in SHRM is its application to creation of knowledge workers. Specialized knowledge alone cannot yield desired performance (Drucker, 2007). Conversion of knowledge to performance requires people, systems, and policies; this is possible through SHRM. Strategic HRM facilitates creation of systems and policies that help in this conversion through performance management system, strategic change management, and employee engagement programmes. Further, achieving sustainable competitive advantage through HR is temporary because of changing employee expectations and labour market demands. HR practices that are meant to foster establishment of better interpersonal relationships and friendly working environment have been embraced by organisations. For example, assigning budget for team outings or other celebrations account for this purpose. However, instances of misbehaviour from employees during such celebrations have been evidenced. To address such issues, organisations have adopted formal disciplinary procedures, a concept that conceives tension between HRM policies and practices adopted. These situations necessitate involvement of managers in dealing with issues in a formal manner instead of informal interactions, thus jeopardizing the interpersonal relationship with their subordinates (Saundry, Antcliff & Jones, 2008). In conclusion, SHRM has undoubtedly evolved as a strong management concept and practice that has been embraced by almost every organisation in ways that suit the nature and situation. The most critical aspect of SHRM is the integration of strategy with HRM, which is highly complex and requires a comprehensive consideration of the organisational systems, culture, and goals. To achieve this integration, various models have been proposed. 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International Journal of Human Resource Management, 5(2): 301-326. Read More