STRATEGIC

HUMAN RESOURCE MANAGEMENT

Prof. Dr.Yogananthan Srinivasan

Contents

Introduction
Hierarchy and Roles
Definition
Importance
Strategic fit
Types of strategies
Traditional vs SHRM
Models & approaches
Summary

DEFINITION,NEED &
IMPORTANCE

Hierarchy and Roles

Top level

Planning

SHRM

Managerial
level

Execution

FHRM

Operationa
l Level

Operation

OHRM

Human Resource Management

Strategy
The Meaning of Strategy
Having a long-term focus
Plans that involve the top executives and/or
board of directors of the firm
A general framework that provides a
perspective for selecting specific policies
and procedures
A critical factor that affects Firm
Performance
A factor that contributes to Competitive
Advantage in markets

STRATEGIC HRM DEFINED

Strategic HRM is an approach to making decisions on the intentions and
plans of the organization concerning its recruitment, training,
development, performance management, reward and employee relations
strategies, policies and practices and the employment relationship
generally.
The defining characteristic of strategic HRM is that it is integrated HR
strategies are integrated vertically with the business strategy and
horizontally with one another. The HR strategies developed by a strategic
HRM approach are essential components of the organizations business
strategy.

NEED/IMPORTANCE OF SHRM

When adjective STRATEGIC is fixed to HRM, it puts an emphasis on the

ways in which HRM contributes to the organization effectiveness in
realizing organizations 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.
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 a clearly

articulated
corporate or business strategies.

An integrated approach in the design and implementation of HR systems.

Matching HRM policies and activities with the business strategy of

organization

Viewing people as strategic resource for the achievement of competitive

advantage

Strategic Human resource management

Strategic
human
resource
management
is
the
proactive
management of people. It requires
thinking ahead, and planning ways for a
company to better meet the needs of its
employees, and for the employees to
better meet the needs of the company.

2/3/16

Strategic Human resource management

Strategic human resource management is

designed to help companies best meet the
needs of their employees while promoting
company goals.
Human resource management deals with any
aspects of a business that affects employees,
such as hiring and firing, pay, benefits, training,
and administration.
Human resources may also provide work
incentives, safety procedure information, and
sick or vacation days
2/3/16

Strategic Human resource management

Companies who work hard to meet the

needs of their employees can cultivate a
work
atmosphere
conducive
to
productivity.
Human resource management is the best
way to achieve this. Being able to plan for
the needs of employees by thinking ahead
can help to improve the rate of skilled
employees who chose to remain working
for a company.
Improving the employee retention rate
2/3/16can reduce the money companies
10
spend

Strategic Human resource

management

When creating a human resources plan, it is

important to consider employees may want or
need and what the company can reasonably
supply. A larger company can usually afford
training and benefit programs that smaller
companies cannot afford to offer.
This does not mean that a smaller company
should not engage in strategic human resource
management. Providing specialized on-site
training, even if provided by senior members of
the
company,
and
offering
one-on-one
assessment and coaching sessions, can help
2/3/16employees reach peak performance rates
11

HR Strategy Leads to Improved

Organizational Performance
Organizational
Strategies

Organizational
Capabilities

HR
Strategies
Organizational
Characteristics

Environments

1-12

Human Resource Managements

Strategic Roles

Strategic
Planning
Roles

Strategy
Execution
Role

2008 Prentice Hall,

Inc. All rights reserved.

Strategy
Formulation
Role

Creating the Strategic Human Resource

Management System
Components of a
Strategic HRM
System

Human
Resource
Professionals

2008 Prentice Hall,

Inc. All rights reserved.

Human
Resource
Policies and
Practices

314

Employee
Behaviors and
Competencies

HIERARCHY OF STRATEGY

CORPORATE STRATEGY

BUSINESS STRATEGY

FUNCTIONAL
STRATEGY

HR Strategy: Strategic Fit

Vertical Fit

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

Horizontal Fit

Rewards

STRATEGY AT DIFFERENT LEVELS

CORPORATE STRATEGY

COMPETITIVE STRATEGY

OPERATIONAL

PURPOSE OR MISSION
SHAREHOLDER VALUE ?
STAKEHOLDER
INTEREST?
ASPIRATIONAL ?

ATTAIN SUSTAINABLE
COMPETITIVE ADVANTAGE
BY:

FUNCTIONAL
LEVELSTRATEGY
HR,FINANCE,PRODUCTN
MARKETING,QUALITY
Etc.

MEANS :
. GOOD PARENTING
. SELECT PORTFOLIO
. GUARD REPUTATION

. LEVERAGING RESOURSES
. DEVELOPING CAPABILITIES
AND
. COMPETING ON COST,OR
DIFFERENTIATING OR
OCCUPYING A NICHE

Functional Level Managers

are responsible for:
developing annual objectives
& short term implementation
Plans.

HR Strategy: HR System
Internal Fit
HR
Strategy
Appeal

Goal Setting

Performance
Measurement

Coaching

Rewards

Performance Evaluation

Performance Management System

Types of Strategies
CorporateLevel
Strategies

Diversificati
on Strategy

2008 Prentice Hall,

Inc. All rights reserved.

Vertical
Integration
Strategy

Consolidatio
n
Strategy

319

Geographic
Expansion
Strategy

Types of Strategies (contd)

Business-Level/
Competitive
Strategies

Cost
Leadership

2008 Prentice Hall,

Inc. All rights reserved.

Differentiation

320

Focus/Niche

TRADIONAL HR Vs STRATEGIC HR

EVOLUTION OF SHRM

PERSONNEL
MGMT

.
.
.
.
.

MECHANISTIC
BUREAUCRATIC
HIGH CENTRALISATION
HIGH FORMALISATION
LOW FLEXIBILITY

HRM

. PART OF ORGANIC ORG

. CROSS HIERARICAL &
CROSS FUNCTIONAL TEAMS
. DECENTRALISATION
. LOW FORMALISATION
. FLEXIBLE.
. DEVELOPMENT ORIENTED

SHRM

. CONVERGENCE
BETWEEN
HRM & BUSINESS
STRATEGY

PROACTIVE/LONGTERM
HRM PERSPECTIVE
. COMPETITIVE
ADVANTAGE
THROUGH HUMAN
RESOURCES
. INVESTMENT
PERSPECTIVE

TRADITIONAL HR Vs STRATEGIC HR
TRADIONAL HR
HR

RESPONSIBILITY

HR STAFF

FOCUS

EMPLOYMENT RELATIONSHIP
& COMPLIANCE WITH LAW

ROLE OF HR

REACTIVE & TRANSACTIONAL

STRATEGIC
LINE MANAGERS
PARTNERSHIP WITH INTERNAL
& EXTERNAL CUSTOMERS
PROACTIVE & TRANSFORMATIONAL

INITIATIVES

SLOW & FRAGMENTED

FAST,FLEXIBLE & INTEGRATED

TIME HORIZON

SHORT TERM

SHORT, MEDIUM & LONG TERM

CONTROL

BUREAUCRATIC
( RULES,POLICIES, PROCEDURES)

ORGANIC
( FLEXIBILITY,FEW RESTRICTIONS)

JOB DESIGN

FOCUS ON SCIENTIFIC MGMT

DIVISION OF LABOUR

BROAD JOB DESIGN,GROUPS

& TEAMS, CROSS FUNCTIONAL TRG

KEY INVESTMENTS

PRODUCTS, TECHNOLOGY

PEOPLE
(KNOWLEDGE, SKILLS,

ABILITIES
ACCOUNTABILITY

COST CENTRE

INVESTMENT CENTRE

BARRIERS TO STRATEGIC HR

SHORT TEM MENTALITY/ FOCUS ON CURRENT PERFORMANCE

Reason: No Long term view of investments. More focus on performance evaluation
and compensation based on sort term.
INABILITY OF HR TO THINK STRATEGICALLY
Reason: insufficient management training and segmented understanding of entire
business
LACK OF APPRECIATION OF WHAT HR CAN CONTRIBUTE FROM STRATEGIC
PERSPECTIVE
Reason : Seeing HR function as providing unnecessary bureaucracy
FUNCTIONAL MANAGERS SEEING THEMSELVES AS HR MANAGERS
Reason : Concerned more with technical aspects of their areas than human aspects.
DIFFICULTY IN QUANTIFYING MANY HR OUTCOMES
REASON: Tendency towards programs that are quantifiable rather than
developmental programs.
PERCEPTION OF HR ASSETS AS HIGH RISK INVESTMENTS THAN CAPITAL
ASSETS.
REASON: HR assets not owned by organizations. More investment in technology &
information
DISINCENTIVES FOR CHANGE
REASON: Strategic approach may call for drastic changes in system. Natural
resistance is there to change initiatives. So Risk is involved as these changes might fail
MOST OF ABOVE BARRIERS ARE ROOTED IN CULTURE OF AN ORGANISATION
( Organizations history, values and management practices act as act as barriers to
change initiatives. Overcoming these barriers is the real challenge of STRATEGIC HRM )

INTEGRATING HR STRATEGY
WITH
BUSINESS STRATEGY

SEQUENTIAL STRATEGIC HRM MODEL

VISION
MISSION

BUSINESS
STRATEGY
INTERNAL
ENVIRONMENT
SCAN

HR
STRATEGIC
PLANS
HR
IMPLEMENTATION
PLANS

EXTERNAL
ENVIRONMENT
SCAN

INVESTMENT PERSPECTIVE OF HR
(How best to invest in its people )

RESOURCE BASED VIEW ( VRIO FRAMEWORK )

value , rareness , limitability & organization

ENHANCING HUMAN CAPITAL

collective skills, knowledge & capabilities

TRADITIONAL COST VIEW : HR related budget ( salaries, training etc.. )

STATEGIC VIEW : Employees as valuable investments

In knowledge economy : Knowledge is important (not goods, services
or
technology ) for all economic activities.

INVESTMENT IN HUMAN RESOURCES IMPORTANT for getting

competitive advantage to keep pace with changing technologies &
processes

COST OF TRG & OTHER INVESTMENTS to be constantly reviewed

against benefits.

RISKS INVOLVED : Enhanced employability of employees that makes them

more desirables to competitors.

COMPETING APPROACHES
&
MODELS

COMPETING APPROACHES AND MODELS

SHRM

FIT
PERSPECTIVE

FUNCTIONAL
PERSPECTIVE

ECONOMIC
PERSPECTIVE

TYPOLOGICAL
PERSPECTIVE

Each functional To use Human

Use of 3 distinct
area optimize
Resources
HR Strategies
performance wrt as
Business Strategy distinguishable . Inducement
. Investment
Source of
. Involvement
competitive
advantage
INDUCEMENT STRATEGY:
To support highly competitive Business
environment
Focus
cost &, differentiation
high performance
INVESTMENT STRATEGY
: Focus
onon
Quality
and service
PARTICIPATION / INVOLVEMENT STRATEGY: Focus on providing
autonomy, challenge & opportunities for participation with suitable
reward system
Human
resources to
be
Integrated
with
Strategic plg

RELATIONSHIP BETWEEN BUSINESS

AND HR STRATEGIES

THREE TYPES OF BUSINESS STRATEGIES ARE ADOPTED BY

ORGANISATIONS: COST LEADERSHIP , DIFFERENTIATION & FOCUS

HR STRATEGIES ARE OUTCOME OF GENERAL SHRM APPROACH

FOR WINNING A SUSTAINABLE GLOBAL COMPETITIVE ADVANTAGE, A

PERFECT STRATEGIC FIT IS REQUIRED TO BE CREATED BETWEEN
BUSINESS STRATEGIES AND HR STRATEGIES
Following 5 types of strategic fits are generally adopted:
BEST FIT APPROACH( STRATEGIC FIT APPROACH): Also called external fit or
vertical integration with business strategies. HR strategies should match
stages of development of firm ie need for different types of people as
well as diverse approaches towards investment in HUMAN CAPITAL.
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
FIT AS AN IDEAL SET OF PRACTICES( BEST PRACTICE APPROACH)
Identifying any organization as benchmark which has reputation for
excellence and copying its practices.
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 oe Horizontal integration.
RESOURCE BASED APPROACH:

APPROACHES TO STRATEGIC HRM

Strategic fit vertical fit or integration is necessary to provide congruence between business
and human resource strategy so that the latter supports the accomplishment of the former and,
indeed, helps to define it. Horizontal integration with other aspects of the HR strategy is required
so that its different elements fit together. The aim is to achieve a coherent approach to managing
people in which the various practices are mutually supportive.
Best practise the unfounded belief that there is a set of best HRM practices and that adopting
them will lead to superior organizational performance.
Best fit the belief that there can be no universal prescriptions for HRM policies and practices. It
is all contingent on the organizations context and culture and its business strategy best fit is
better than best practise.
Bundling 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.

Resource-based strategic HRM (ECONOMIC PERSPECTIVE) sustained competitive advantage

stems from the acquisition and effective use of bundles of distinctive resources that competitors
cannot imitate. (Barney, 1991). This is achieved by developing HR strategies and policies which
increase the resource capability of the organization by ensuring that (1) it has higher quality
people than its competitors (2) the unique intellectual capital possessed by the business is
developed and nurtured (3) organizational learning is encouraged and (4) organization-specific
values and a culture exist which bind the organization together (and) gives it focus (Purcell et al,
2003).

MACKENZIES 7S MODEL
STRUCTURE
STRATEGY

SYSTEMS
SHARED
VISION

STYLE

SKILLS
HUMAN
SOURCESRE

COMPETING APPROACHES

INTEGRATED SYSTEMS MODEL ( RAO & PARREK )

Has development of motivated. Capable, dynamic & committed peop
core
HRD systems are designed to work as an integrated system in line
with corporate plans
( For Synergistic benefits of an integrated systems )

HRD SYSTEMS :

CAREER SYSTEMS :
APPRAISAL SYSTEMS: Performance and potential appraisals
TRG. SYSTEM S: Separate For all category of employees
WORK SYSTEMS: Task analysis, QWL, Stress management, productivity & Quality etc.
CULTURAL SYSTEMS : Most neglected , Includes development of octapace culture,Reward system
SELF RENEWAL SYSTEMS; Research. Survey feedback etc.

Reference
Gary Dessler, Chapter 3, Strategic Human
Resource Management and the HR Scorecard.
Michael Armstrong, SHRM, PHI edition.
Gomez, Cardy, Managing human resources,
Chpater 1, prentice hall edition.
MBAO 6030 , Human Resource Strategy, web
based article.
STRATEGIC HUMAN RESOURCE MANAGEMENT,
Prof. VP.Kakkar, Web based article.