Items Description of Module

Subject Name Human Resource Management

Paper Name Strategic HRM
Module Title The Context of SHRM
Module Id Module 2
Pre- Requisites Understanding of the concepts of SHRM
Objectives To Understand the context of SHRM
Keywords SHRM, Strategic Fit
 QUADRANT-I
1. Module 2: Context of SHRM

2. Learning Outcome
3. Introduction
4. HR and Technology
5. Need and Importance of SHRM
6. Context of SHRM
7. Consolidation of various view points
8. Summary

1. Module 2: Context of SHRM

2. Learning Outcome:

After completing this module the students will be able to understand the -

 The context of SHRM

 The view points on SHRM
 The different types of strategic Fit

3. Introduction

The evolving role of HR indicates that it is the company’s workforce that provides the
competitive advantage for the company. With changes in technology and globalization the HR’s
role is shifting from protector and screener to strategic partner and change agent, whereas the
Strategic Human Resource Management refers to improving business performance through
developing an organizational culture that supports and encourages the innovation and flexibility
by linking HRM with the strategic goals and objectives of the company.

Human resource management (HRM) practitioners use “strategic human resource management
terminologyto emphasize that the effective use of SHRM practices contribute to business growth
and effectiveness.

The field today generally defines strategic HRM scholarship as the study of sets of HRM
elements and their interrelationships with other elements comprising an organizational system,
 including elements in the organization’s internal and external environment as well as the multiple
stakeholders who evaluate the organization’s effectiveness and determine its long-term survival.

There are three essential constructs:

 HRM systems include encircling HRM philosophies, formal HRM policies, specific
HRM practices, which are the routine practices of human resource philosophies and policies
 HRM partnerships, and
 Multiple stakeholders.

Strategic HRM practitioners view organizations as complex systems of interrelated elements,

such that each element influences the system’s functioning and is affected by at least one other
element in the system.

Strategic HRM acknowledges the multilevel nature of management systems, as well as

interrelationships between the HRM system and other elements of an organization.

4. HR and Technology.

1. Basic HR Systems - Most companies have computerized their individual HR tasks.

2. Human Resource Information Systems (HRIS) refers to interrelated HR systems

working together to support various human resource management activities.
3. HR and the Internet – The Internet has enabled HR departments to shift some
activities to specialized online HR service providers. The HR.NET feature shows
how the Internet can be used to put some HR services online with the use of HR
portals, so that HR managers can focus on more strategic issues.

Strategic human resource management is a complex process which is constantly evolving and being
studied and discussed by academics and commentators. Strategic Human Resource Management
(SHRM) is an area that continues to evoke a lot of debate as to what it actually embraces.
 In objective of company's overall strategic planning and implementation the Strategic Human
Resource Management (SHRM) that integrates traditional human resource management activities
within.

According to Legnick-Hall,SHRM integrates human resource requirements with other physical,

financial, and technological resources in the setting of goals and solving complex organizational
problems, whereas emphasized by Jackon and SchulermSHRM also advocates the implementation of
a set of policies and practices that will build employee pool of skills, knowledge, and abilities which
are important for achieving organizational goals. By contributing all this, it can be concluded that a
large number of complete options for solving organizational problems are provided and the chances
of achieving business goals of the organization can be increased.

The expectation from the area of Strategic Human Resource Management (SHRM) is still to be
debated what actually it can provide to the organizations.

In some context, it is defined as the 'a human resource system that is tailored to the demands of the
business strategy' (Miles and Snow) implies it to be 'reactive' management field in which human
resource management becomes a tool to implement strategy which varies to the definition as put by
Wright and McMahan 'the pattern of planned human resource activities intended to enable an
organization to achieve its goals' which supports a proactive function in which human resource
activities actually create and shape the business strategy. The difference in the two conceptsis only in
the implications of the two.

Strategic HRM can be regarded as a general approach to the strategic management of human resources
in accordance with the intentions of the organization on the future direction it wants to take.

5. Need and Importance of SHRM

• When STRATEGY is added to HRM, it puts an emphasis on the ways in which HRM contributes
to the organization effectiveness in realizing organization’s strategic intents.
• It provides direction to the organization so that both, the business needs of the organization,
individual and collective needs of its workforce are met.All this, is achieved by developing and
implementing HR practices that are strategically aligned with business strategies.
• SHRM is practiced in only those organizations that have clearly articulated corporate or business
strategies.
 APPROACHES AND MODELS

FUNCTIONAL ECONOMIC TYPOLOGICAL

FIT PERSPECTIVE
PERSPECTIVE PERSPECTIVE PERSPECTIVE

Human Resources to Each functional area To Use HR as Use of 3 distinct HR

be integrated with optimize perfor with distinguishable source of strategies Inducement
strategic planning respect to business competitive advantage Investment Involvement
strategy

 Inducement Strategy-To support highly competitive Business environment Focus on cost & high
performance
 Investment Strategy-Focus on Quality , differentiation and service
 Participation / Involvement Strategy: Focus on providing autonomy , challenge & opportunities
for participation with suitable reward system

With respect to Strategic Human Resource perspective, there can be three categories of
management –

High-performance management

Aim 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, widespread and significant training and management development
activities, incentive pay systems and performance management processes. The observed
characteristics of the high performance management are as follows:-

 Formal systems for sharing information with the individuals who work in the organization;
 Explicit job design
 High-level participation
 Monitoring of attitudes
 Performance appraisals along with properly functioning grievance procedures
 Promotion and compensation schemes that provide for the recognitionand rewarding of the high-
performing employees.

High-commitment management
One of the defining characteristics of HRM is its emphasis on the importanceof enhancing mutual
commitment (Walton, 1985). High-commitmentmanagement has been described by Wood (1996) as:
‘A form ofmanagement which is aimed at eliciting a commitment so that behaviour isprimarily self-
regulated rather than controlled by sanctions and pressuresexternal to the individual, and relations
within the organization are basedon high levels of trust.’

 The approaches to achieving high commitment according to Beer et al(1984) and Walton (1985)
are:
 The development of career ladders and emphasis on trainability andcommitment as highly valued
characteristics of employees at all levels inthe organization;
 a high level of functional flexibility with the abandonment of potentiallyrigid job descriptions;
 The reduction of hierarchies in the structure
 A heavy reliance on team structure for disseminating information also added and contributed by
Wood and Albanese (1995):
 Job design as something management consciously does in order toprovide jobs that have a
considerable level of intrinsic satisfaction;
 A policy of no compulsory lay-offs or redundancies and permanentemployment guarantees with
the possible use of temporary workers tocushion fluctuations in the demand for labour
 Merit pay and profit sharing and a high involvement of employees in the management of quality.

High-involvement management

This approach involves treating employees as partners in the organisationswhose interests are valued
and who have a voice on matters that concernthem. It is concerned with communication and
involvement. The aim is tocreate a climate in which a continuing interaction between managers and
themembers takes place in order to define expectations and shareinformation on the organization’s
mission, values and objectives. This establishesan enviornment conducive to mutual understanding of
what is to be achieved and a framework formanaging and developing people to ensure that it will be
achieved.

5.1. Types of strategic fits

The following types of strategic fits are generally adopted:

 STRATEGIC FIT APPROACH: also called external fit or vertical integration with business
strategies. HR strategies should match stages of development of companyi.e. need for
different types of people as well as diverse approaches towards investment in HUMAN
CAPITAL. The aim is to achieve a coherent approach to managing people in which the
various practices are mutually supportive.
 FIT AS CONTIGENCY (BEST FIT APPROACH): HR approaches to ensure that internal
practices of organization respond to external factors: market, skill availability est.'s per
contingency of situation. The unfounded belief that there is a set of best HRM practices and
that adopting them will lead to superior organizational performance

 FIT AS AN IDEAL SET OF PRACTICES (BEST PRACTICE APPROACH): Identifying

any organization as benchmark which has reputation for excellence and copying its
practices.The belief that there can be no universal prescriptions for HRM policies and
practices. It is all contingent on the organization’s context and culture and its business
strategy – best fit is better than best practise
 FIT AS BUNDLES (BUNDLING APPROACH): Development and implementation of
several HR practices together, so that they are interrelated and internally consistent. Each HR
practice reinforces and complements the other. Also termed as internal fit orhorizontal
integration. Bundling is the belief that improved organizational performance will be achieved
by developing inter-related HR practices which, when they are linked together, will function
more effectively by complementing and supporting one another than if they existed as
separate entities.

5.1.1 5 P Model of SHRM

1. Philosophy
Statements of how the organization values and treats employees; essentially the culture of
the organization which is prevalent
2. Policies
Shared values and guidelines for action on employee-related business issues.
3. Programs
Coordinated and strategized approaches to start, distribute, and maintain strategic
organizational change efforts necessitated by strategic business needs.
4. Practices
 Practices that motivate behaviors that allows individuals to assume roles constant with
the organization’s strategic objectives.
5. Processes
The scale of involvement by all employees in the specific activities to facilitate the
formulation and completion of other activities.

6. Context of SHRM

Strategic human resource management (SHRM) has emerged as a significant issue with the increasing
attention being given by the companies to strategy. The response of the organizations has been to
attempt to build up a sound internal configuration that includes human resource management (HRM)
systems. The key to providing an effective response is to have an HRM system attuned to strategic
requirements.

6.1 Different views on Strategic HRM

SHRM is facing an 'identity crisis' and it is defined and viewed from several perspectives. Some of
the major perspectives are:

1) HRM or Strategic HRM

HRM and strategic HRM are considered identical and used interchangeably by some authors.
Mathis & Jackson define HRM as "the strategic planning and management of human resources
for an organization.”
HRM is more broadly focused and strategic in nature. HRM is seen as a strategic function
focusing on tasks such as HR planning or devising compensation policies and strategies. Even the
definition is similar to what Beer et al. consider as SHRM. In their words "we view HRM from
strategic perspective”.

2) Strategic Functions of HRM

Every function of HRM process has its own strategic elements. These strategic elements of the
functions of the HRM process are also called strategic HRM. Some other authors mention that
every element of the HRM process has some strategic aspects that could be termed as SHRM.
Olian & Rynes see a relation between the stages of staffing process and the choice of selection
needs to focus on the strategic dimensions, as the type of knowledge, skills, and abilities required
for the job.

7. Views on SHRM

There are several different views expressed by theoreticians from time to time. Like

1) People are Strategic Resource - In HRM discipline, every author agrees that people of the
organization should be viewed as not only resource asset or capital but also as human (Snell & Dean,
1992) or social (Beer et al., 1984) resource, asset, or capital.

2) Planning Process - Strategic HRM is a planning process as put by Miller (1989). For the purpose of
this linkage, it is necessary to formulate a long-run plan and this planning process continues until final
implementation and feedback are completed
 3) Competitive Advantage- The objective of SHRM is to create competitive advantage for the
organization. The concept 'our people make the difference' is the outcome which illustrates that HRM
is a crucial part of organizational success

7.1 Consolidation of Various Viewpoints

An attempt to consolidate the different viewpoints led us to develop a typology of the approaches
based on the focus of a particular group of thinkers in SHRM. It presents a comparative chart of four
approaches.

1) Strategy-focused- HRM by its very nature is strategic. The elements of HRM such as recruitment
and selection or compensation, do not operate in isolation, but are derivatives of the requirements of
the strategy that an organization employs Strategic planning dictates HRM planning.
 2) Decision-focused- The HR decisions taken and functions performed at the strategic management
level is SHRM. The managerial- and operational- management level activities that deal with medium-
and short-term HR functions do not come under SHRM. Rather these are functional HRM activities.
The strategic management level activities are directed to achieve strategic goals.

3) Content-focused- In every element of HRM there are two aspects, the strategic and the functional.
When HRM elements match with the organization's strategy, SHRM emerges. These strategic aspects
are referred to as SHRM. In the content-focused approach, the functional aspects of HRM elements
can also be blended with the organization's strategy which leads to the emergence of SHRM.

4) Implementation-focused–The organizations have some competitive objectives that are achieved by

some business strategies. In order to implement these business strategies, appropriate types of HRM
systems are required. Such HRM systems are strategic in nature; this approach can be termed as
SHRM.

7.2 Steps in Strategic Human Resource Management

Human resource management as a specialist function evolved from very small beginnings. To be
effective, a human resource management strategy should be formulated after considering an
organization’s environment, mission and objectives, strategies, and internal strengths and weaknesses
including its culture. Typically, the strategy formulation and implementation process consists of the
six steps outlined below

Step 1:Environmental Analysis

On continuous monitoring of economic, social, and labor market trends and evident changes in
governmental policies, legislation (statute law), and public policy assertion, a human resource
manager will be able to identify environmental threats and opportunities that in turn help formulate
new action guidelines

Step 2: Organizational Mission and Goals Analysis

An organizational analysis, involving a close look at the organization’s overall mission and goals, is a
second integral aspect of identifying human resource strategies. Even similar organizations regularly
pursue different goals; however, some goals such as profitability (or revenue surplus), organizational
growth, employee satisfaction, efficiency, adaptiveness to environmental changes

Step 3: Analysis of Organizational Strengths and Culture

Human resource strategies ought to be framed simply after a watchful take a gander at the qualities
and shortcomings of the organization concerned and its culture. Similarly, hierarchical organizational
strategies that can't be based on existing human asset capacities ought to be evaded (unless it is
conceivable to evacuate these insufficiencies promptly either through preparing or determination of
workers).

Step 4: Analysis of Organizational Strategies

A firm can choose from at least three major generic strategies: cost leadership, differentiation, or
focus.
 Product differentiation strategy focuses on creating, a unique product that has innovative design, or
other feature. This may be accomplished through product design, unique technology, or even through
carefully planned advertising and promotion. Organization that use this strategy may even be able to
charge higher-than-norm monetary value for their products

Step 5: Choice and Implementation of Human Resource Strategies

Given the company’s objectives, strategies, and constraints, the human resource manager should
examine each strategic option for its feasibility. Inappropriate strategic options must be dropped from
consideration. The ones that appear viable should be scrutinized in detail for their advantagesand
weaknesses before being accepted for implementation.

Step 6: Review and Evaluation

Human Resource Strategies Human resource strategies, however effective they prove to be, must be
examined periodically. An organization’s contextual factors, such as technology, environments,
government policies, and so on, change continuously; so do several of its internal factors, such as
membership characteristics, role definitions, and internal procedures. All these changes demand
periodic strategy evaluation to guarantee their continued improvement

Strategic choice and implementation involves an examination of the entire management philosophy,
the formal and informal organizational structures, and the climate of the organization.

8. Summary

In this module we talked about the linkages between HR and technology, the approaches and models
of strategic HRM and the concept of Strategic fit.We also discussed the working of Strategic HRM in
the contexts of high performance management, high commitment management, and high involvement
management.We also understood differing views on SHRM which are consolidated under four groups
wherein SHRM is seen to be either strategy-focused, decision- focused, content-focused, or
implementation-focused. The main objective of SHRM, which arises as a natural corollary to the
definition of SHRM, is creating and sustaining competitive advantage for the organization