Strategic HRM as Means to Strategy

(The existing Views on strategic link of HRM polices and practices with organizational strategy)

Discussion paper Submitted to: Ast.Prof. Fisseha Afework ,AAU School Commerce, Department of Management, Information and Economic Sciences
Compiled By Group 4: post graduate Students: Alemu Biniam D C Addis Ababa March

Introduction
Strategic Human resources Management can be defined as an integrated approach to the development of HR strategies. It is formulated based on the concept of Strategy and HRM. According to Johnson and Scholes (1993) strategy is direction and scope of an organization over the long term that matches resources and the environment. Strategy determines strategic intent, resource allocation and competitive advantages. This in turn calls for effective development of organizational and HR capabilities. Hence, to understand the role of HRM as means to strategy formulation, we have to analyze the existing integration and fit between the HRM Policies and practices and organizational strategy. We also have to see the existing congruence among existing HR practices. Strategy is all about creation of mission, setting objectives, formulating policies, assurance of policy implementation to achieve over all goals under existing internal and external environment.HRM is concerned on developing ,applying, and evaluating policies, procedures, methods and programs.(Pattanayak,2009) According to Pfeiffer(1998) Human resources practices should be linked with business objective and corporate strategy. According to Ulrich and Lake(1990) The strategic HR frame work aims to align HR practices to build critical organizational capabilities. In this discussion paper we shall review, analyze and understand these existing views on strategic HRM role as means to achieve

Strategic HRM as Means to Achieve Organizational Strategy

One of the approches to achiving commitment is high involvement management. Thia approach treats employees as business partners whose interests are respected and who have a voice for matters that concern them. The focus here is communication and involment of HRM team during defining expectations,mmiission, values and objectives. High Involment work practices have been identified by Pil and McDuffie(1999). The identified involment prictices were online work team, off line envolment activities,problem solving groups, job rotation,suggestion programmes and decentralized quality efforts. The implementation of strategic HRM is to be carried out with in the framework of the approaches stated above. Strategy is expressed in strategic goals and implemented through the process of strategic management. Strategy implementation includes change management and planning strategic fit with policies and practices. The implementation process covers matching capabilities, material resources, opportunities, and human resources with strategy. Strategy has no fixed meaning, there are differing theories on how it works,(Mintzberg et al(1988). It can mean plan, pattern, perspective or a ploy. However, the concept of strategic HRM is derived from the concept of HRM and Strategy from its very meaning. According to recent literature review ,(Rao,1999 )strategic HRM plays important role in achieving organizational goals. This is evident from the fact that business objectives are to be achieved by people working in the organization. Also today's business management, HR professionals are becoming a part of team who formulate business strategy. This intergrated practice calls for and results in linkage of HR functions and corporate strategic objectives. Further more ,strategic formulation process requires sequence of questions to answer across the stages in which HRM processes are involved as indicated on table below.

Sequence of questions across Strategy formulation stages

Stage Analysis Diagnose Question What are the problems? What are the causes of problems?

Conclusion and Recommendation

Action planning

What alternative strategies are available for the problem solution?

What problems may we meet ahead and how will we overcome them? How will we obtain resources? How do we benefit Individual Employees?

Resource planning Employee Benefit Plans

Source : Hand Book Of Strategic HRM ,Michael Armstron,Crest Publishing (2003)

The above raised questions indicate the need to implement strategic HRM in all HR systems and subsystems. The vital point here is that strategic HRM functions are strategic staffing and strategic HR development. Other related functions such as performance management, compensation management and reward systems are also important functions in HRM that are closely related to strategic planning considerations. Hence ,corporate strategy formulation and functional strategy formulation are mutually interactive. This Indicates strategic link of HRM. Structural approaches to strategy formulation need to consider the strategies of competitors. For this reason ,lot of commonalities in terms of business environment and, opportunities exist among organizations. But still more customized Strategy formulation is

Strategic Link of functions, Systems and People

Function System People/Employee s

HR professionals Strategically Strategically with strategic aligned policies focused Competencies and practices competencies and motivations

The linkage between HRM systems and functions on the table above show a paradigm shift from traditional HR functions to strategic HR functions in the value adding processes. The HR systems needs to be developed from strategic prospective in order to create value and reinforce policies and practices. The main question here is that what specific policies and practices lead to high performance? Available Survey research result on HRM systems in public held companies shows the following data.

HRM Systems Study Qualitative data

Factor/policy/practice of interest that led to high performance is Firm Size Industry Age of Firm HRM Performance Management Compensation HR Professionals Strategic Communication with employees Focus on Empowerment Performance Orientation People Based System tested Answers

N0 No No Yes Yes Yes Yes Yes Yes Yes

Shift from Traditional HR to strategic HR

Variable of Interest Studied Accountability Importance

Traditional HR

Strategic HR

HR Specialist Managing Activities

HR Specialist & Line Mangers Strategy formulation & Implementation

Role of HR Approach Orientation Major Function

Custodian of HR Strategic Business Policy Partner reactive Activities People development Proactive Results People & Organizational Development

The Seven Step Model Link of HR with business Strategy

Analysis of existing case studies have shown that employee behavior is critical for achieving goals and productivity. Integrating behavior patterns with over all efforts is real strategic change. According to seven step model of Becker, Huselid and Ulrich(2001),HR can link its deliverables to business strategy in the implementation processes as under: Clearly defined business strategy provide means of understanding roles in realizing the goal and measuring achievements Building a business case for HR as strategic asset shows how HR Support Strategy Creating a strategic map gives close look at on strategic objectives Identifying HR deliverables with in the strategy map help identify which deliverables support performance Aligning HR architecture with HR Deliverables is most important issue to address structure of HR Designing the strategic measurement system helps to identify drivers and enablers of performance Implementing management by measurement assure strategic significance of drivers and enablers.

1.

2. 3. 4.

5.

6.

7.

HR resource score cards from measurement process contain indicators for performance. The score card help link people, strategy and performance. The most recent research projects has identified the relative importance of the five domains of effective HR professionals. An effective HR professional needs to have knowledge of business, HR practices, Managing culture, orchestrating change and demonstrating personal credibility. To develop these competencies, HR mangers must understand strategic measurement dimensions, on what to measure and how to measure. Currently identified strategic measurement dimensions are critical and causal thinking, understanding principles of good measurement, estimating causal relationships, and

Conclusion
In to days fast changing business environment, sustenance of growth and development is only possible through creating performing organizations and develop performing people and performing people create organizations. This can be realized only through linking people, strategy and performance. To ensure this, a shift from traditional HR function to Strategic performance management function is required . HR professionals need to develop new competencies in strategizing HR functions so as to achieve business goals and make them selves an excellent business partners Existing case studies on strategic HR identify the improved role of HR under strategic approach. These studies point out that HR development is key consideration for ensuring over all success of strategy. Many case studies have come up in support of this idea. We can therefore conclude that HRM is more crucial today for the success of any organization than ever before. The question that arise at this point is what measure should be considered to move towards this goal. Workers are not liability, but key resources which need to carefully nurtured and constantly developed. Organizations are becoming conscious of the potential of new technologies. This also requires realizing the crucial role that human beings play in managing that technology. Strategic HRM involves the formulation and implementation of specific strategies in each area of HRM as discussed in the literature article reviews. Therefore, to enhance survival in competitive environment and promote organizational learning as well as achieve corporate goals ,Strategic HRM Must be a means to integrate, and fit HR policies and practices with organizational strategy.

References
Pattanayak(2009),Human

Resources Management, 3rd edition PHI Learning Private Ltd,New Delhi, PP 364-381