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Module II part 2 The Concept of Strategic HRM Approaches to SHRM and the evolving strategic role of HR

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Approaches and models of SHRM

There are number of models which, within the framework of the concept of strategic HRM, describe various approaches to its development and implementation.

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THEORETICAL PERSPECTIVE ON SHRM

SWIERCZ (2002)
SHRM

FIT PERSPECTIVE

FUNCTIONAL PERSPECTIVE An organization Performs best when Each departmental Unit maximizes its Contributions Limited to its unique Area of expertise

ECONOMIC PERSPECTIVE Human resources are a unique And distinguishable Source Of competitive advantage

TYPOLOGICAL PERSPECTIVE 3 distinct types of HR Strategies: Inducement Investment involvement

Human resources Should be Integrated with the Strategic planning Process of the firm

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The strategic fit proposes that if an organization seeks to maximize its competitive advantage it must match its internal resources and skills ( organizational competencies) with the opportunities available in the external environment. General models - Best fit approach - The best practice approach - The configuration approach

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TYPES OF FIT BETWEEN HR AND BUSINESS STRATEGY

Best Fit Approach

Fit as strategic integration - HR Practices linkage with external context. Also referred as vertical integration (linkage of Business strategy with HR strategy)

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Vertical fit- Matching of HR strategy with the business strategy ( making HR strategy as an integral part of the Business strategy, contributing to Business planning process) Horizontal Fit- Fit required between the different elements of the people strategy.

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HR Strategy: Strategic Fit

Corporate Strategy Business Strategy HR Strategy HR System (Performance Mgmt.)

Training

Rewards

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HR Strategy: HR System Internal Fit

HR Strategy
Appeal

Goal Setting Performance Measurement Coaching

Rewards

Performance Evaluation

Performance Management System

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Best Practice Approach

Fit as a ideal set of practices - there are best practices which all firms can adopt to gain superior performance.

Pfeffer(1994) list 7 HR Practices of successful organizations. Employment security Selective hiring Self managed teams High compensation contingent on performance ( eg., profit sharing) Training Reduction of status differentials Sharing information

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Configuration Approach
It suggests search of bundles of HR practices that complement each other in order to determine which bundle is more effective . Also referred as horizontal integration

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Prescriptive models
SHRM ADOPTS RESOURCE BASED PHILOSOPHY/ PERSPECTIVE FRAMEWORK

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THERE ARE 3 POSSIBLE APPROACHES-

(A) High Performance Management

(B) High Commitment Management (C) High Involvement Management

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What is RESOURCE BASED PHILOSOPHY ?

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Sustainable Competitive Advantage

1. The Question of Value:

Capabilities are valuable when they enable a firm to conceive of or implement strategies that improve efficiency and effectiveness. Value is dependent on type of strategy:
Low cost strategy: lower costs Differentiator: add enhancing features

To be valuable, the capability must either

Increase efficiency (outputs / inputs) Increase effectiveness (enable some new capability not previously held)

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Sustainable Competitive Advantage

2. The Question of Rareness: Valuable resources or capabilities that are shared by large numbers of firms in an industry are therefore not rare, and cannot be a source of SCA.

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Sustainable Competitive Advantage

3. The Question of Imitability
Valuable, rare resources can only be sources of SCA if firms that do not possess them cannot obtain them. They must be imperfectly imitable, i.e. impossible to perfectly imitate them. Ways imitation can be avoided: Unique Historical Conditions Causal Ambiguity Social Complexity

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Sustainable Competitive Advantage

5. The Question of organization?

Organization - for people to provide competitive advantage, organizations systems and practices must be exploited
Nordstorm Toyotas efficient distribution systems - Just-in-time (JIT) delivery, strong supplier relationships, and well-trained inventory specialists

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Economic Performance
Valuable? No Rare? -Costly to Imitate? Exploited by the Organization? Competitive Implications Economic Performance Below Normal ---

Competitive Disadvantage
Competitive Parity Temporary Competitive Advantage Sustained Competitive Advantage

Yes

No

--

--

Normal

Yes

Yes

No

--

Above Normal

Yes

Yes

Yes

Yes

Above Normal

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High Performance Management - David Nadler

High performance working involves the development of a number of interrelated processes which together 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 increase in shareholder value. How can it be achieved? - Enhancing the skills and engaging the enthusiasm of employees - Leadership and direction, vision and benchmarking - Decentralized and devolved decision making made through people close to customers

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High-performance Work System (HPWS)

A specific combination of HR practices, work structures, and processes that maximizes employee knowledge, skill, commitment, and flexibility. Systems composed of many interrelated parts that complement one another to reach the goals of an organization, large or small.

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Developing High-Performance Work Systems

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Underlying Principles for designing of HighPerformance Work Systems

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HPWS design
Its not possible to build a full set of best practices but some trends can be observed in Work design and team work Complementary HR practices- staffing practices, T&D AND Compensation Management processes and leadership Supportive IT

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Complementary Human Resources Policies and Practices

Training and Development

Staffing Practices

Compensation

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Fitting It All Together

Ensuring Internal fit
The situation in which all the internal elements of the work system complement and reinforce one another.

Establishing External fit

The situation in which the work system supports the organizations goals and strategies.

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Achieving Strategic Fit

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Assuring HPWS Success

Necessary Actions for a Successful HPWS astd
Make a compelling case for change linked to the companys business strategy. Make certain that change is owned by senior and line managers. Allocate sufficient resources and support for the change effort. Ensure early and broad communication.

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Benefits of HPWS
Employee Benefits
Have more involvement in the organization. Experience growth and satisfaction, and become more valuable as contributors.

Organizational Benefits
High productivity Quality Flexibility Customer satisfaction.

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Evaluating the Success of the System

Process audit
Determining whether the high-performance work system has been implemented as designed:
Are employees actually working together, or is the term team just a label? Are employees getting the information they need to make empowered decisions? Are training programs developing the knowledge and skills employees need? Are employees being rewarded for good performance and useful suggestions? Are employees treated fairly so that power differences are minimal?

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Outcomes of High-Performance Work Systems

Employee Benefits of HPWS Systems

More involved in work, more likely to be satisfied and find that needs for growth are more fully met.

More informed and empowered, they are likely to feel that they have a fuller role to play in the organization and that their opinions and expertise are valued more. Greater commitment comes from higher skills and greater potential for contribution,

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High Commitment Management

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High Involvement Management

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The Five Ps Model of SHRM

Philosophy Statements of how organization values & treats employees; essentially culture of the organization Policies Expressions of shared values & guidelines for action on employee-related business issues Programs Coordinated & strategized approaches to initiate, disseminate, & sustain strategic organizational change efforts necessitated by strategic business needs

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The Five Ps Model of SHRM

Practices HR practices motivate behaviors that allow individuals to assume roles consistent with organizations strategic objectives Three categories of roles: Leadership Managerial Operational

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The Five Ps Model of SHRM

Processes
Continuum of participation by all employees in specific activities to facilitate formulation & implementation of other activities

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The Five Ps Model of SHRM

Successful SHRM efforts begin with identification of strategic needs Employee participation is critical to linking strategy & HR practices Strategic HR depends on systematic & analytical mindset Corporate HR departments can have impact on organizations efforts to launch strategic initiatives

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Evolving strategic role of HR

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The evolving strategic role of HR function and HR

What is the need?
Changing nature of employment relationship Need for aligned collection of practices, programs, & policies to facilitate achievement of strategic objectives Moving from traditional HR perspective to Strategic HR

The evolving strategic role of HR function

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Possible Roles Assumed by HR Function- DAVE ULRICH

The evolving strategic role of HR function

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HR Roles in Knowledge-Based Economy

Human capital steward Creates an environment & culture in which employees voluntarily contribute skills, ideas, & energy Human capital is not owned by organization Knowledge facilitator Procures necessary employee knowledge & skill sets that allow information to be acquired, developed, & disseminated Provides a competitive advantage Must be part of strategically designed employee development plan

The evolving strategic role of HR function

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HR Roles in Knowledge-Based Economy

Relationship builder Develops structure, work practices, & culture that allow individuals to work together Develops networks that focus on strategic objectives Rapid deployment specialist Creates fluid & adaptable structure & systems Global, knowledge-based economy mandates flexibility & culture that embraces change

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Critical Competencies - Society for Human Resource Management

HRs success as true strategic business partner dependent on five specific competencies: Strategic contribution - development of strategy Business knowledge - understanding nuts & bolts of organization Personal credibility - measurable value demonstrated in programs & policies HR delivery - serving internal customers through effective & efficient programs HR technology - using technology to improve organizations management of people

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HR ROLES
Each role must have these five competencies
CFO, an expert at metrics INTERNAL CONSULTANT, trains and empower the line manager TALENT MANAGER, optimal mix of employees VENDOR MANAGER, who determines what functions can be managed internally or externally

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Critics Nature of the organizations ignored

The evolving strategic role of HR function

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Lepak & Snells Employment Models

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Characteristics of human capital Strategic value- the potential to improve the efficiency and effectiveness, exploit market opportunities and neutralize potential threats. Uniqueness degree of specialization of the human capital

The evolving strategic role of HR practitioner

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The Basic Roles

SCOPEThe roles of HR practitioners vary widely according to the extent to which they are generalist or specialist, the level to which they work the needs of the organization, the context within which they work and their own capabilities

The evolving strategic role of HR practitioner

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The Basic Roles

Proactive role: Involved more in strategic decision making processes at strategic level, operate mostly as internal consultants and focus to deliver performance targets working with line managers. Reactive role: involved in routine administrative systems required for the management. It is referred as non- interventionary role.

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The basic Roles CONTD..

The role of Service provision to internal customersIt aims to provide effective services that meet the needs of the business, its management and its employees and to administer them efficiently. The role of Guidance and advice to management at varying degrees The business partner role The strategist role The innovation and change agent role The internal consultancy role The monitoring role The guardian of values role

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DAVE ULRICH & WAYNE BROCKBANK ( 2005) Employee advocate ( 19 % of time spent) Human capital developer Functional expert Strategic partner Leader

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Traditional HR Versus Strategic HR