The Evolving Strategic Role of HRM

•The Role of human resource management in organization has

been evolving dramatically

•No more a personnel department

•HR is being seen as a strategic HR partner

•SHRM involves making the function of managing people the

most important priority in the organization and integrating all HR
programs and policies within the framework of a company’s
strategy
 The Evolving Strategic Role of HRM
•Strategic HRM realizes that people make or break an
organization because all decisions made regarding
finance, marketing, operations or technology are made by an
organization’s people

•Strategic HRM involves the development of a consistent,

aligned collection of practices ,programs and policies to
facilitate the achievement of the organization’s strategic
objectives
 The Evolving Strategic Role of HRM
• Strategic Human Resource Management is the process of
linking the human resource function with the strategic
objectives of the organization in order to improve
performance

• Establishing a strong HR strategy that is clearly linked to

the organization’s strategy is not enough

• HR strategy needs to be communicated, practiced-spelled

out and written down
 Ulrich's Model of Human Resource
Management
Strategic Focus

Strategic Change Agent

partner

Systems People

Administrative Employee Champion

Expert

Operational
 Ulrich's Model of Human Resource
Management
– HR can be defined by what it does, or by what it delivers
– HR can perform 4 different Roles
• Strategic Partner: HR is responsible for the
organizational architecture / structure; work with
executive team to add value and achieve company
objectives.

• Administrative Expert: HR makes sure that the

work gets done effectively and efficiently; streamline
and automate most operations
Ulrich's Model of Human Resource
Management
• Change Agent: HR helps the organization adopt and
profit from change; helps plan for and overcome
resistance to change.

• Employee Champion: Change Agent: HR

responsible for motivating, advocating for, and
representing the employees; work with and train line
managers to achieve these goals
 Strategic Human Resource Management
•Strategic human resource management and traditional
HR functions differ in several ways(adapted from Mellow
2003)
Traditional HRM SHRM

Responsibility for HR Staff personnel in the HR Line managers,all managers

programmes department responsible for people are
HR managers
Focus of activities Employees Partnerships with internal
relations,motivation,productivity,c and external customers
ompliance with laws
Role of HR Reactive and transactional Proactive and
transformational,change
leader
Initiative for change Slow,piecemeal,fragmented,not Fast,flexible,systematic,
integrated with larger issues change initiatives
implemented in concert with
other HR systems
 Strategic Human Resource Management
Traditional HRM SHRM

Time horizon Short term Consider various time frames

as necessary
(short,medium,or long)

Control Bureaucratic control through rules Organic control through

,procedures and policies flexibility as few restrictions
on employee behaviour as
possible
Job design Focus on scientific management Broad job
principles-division of design,flexibility,teams and
labour,independence and groups and cross -training
specialization
Importance investments Capital ,products,technology and People and their
finance knowledge,skills and abilities

Accountability Cost centre Investment centre

 Strategic Human Resource Management
•Difference between SHRM and HR Strategies(adapted
from Armstrong 2000
SHRM HR Strategies

A general approach to strategic management Outcome of the general SHRM approach

of human resources
Aligned with the organizational intention Focus on specific organizational intentions
about its future direction about what needs to be done
Focus on long term people issue Focus on specific issues that facilitate the
achievement of corporate strategy
Defines the areas in which specific HR Human resource strategy decisions are
strategies need to be developed derived from SHRM
Focus on macro concerns such as structure
culture
Strategic HRM decisions are built into the
strategic business plan
 Strategic Human Resource Management
Evolution of SHRM

HRM SHRM
PM Early 1980
1930-1940 1970’s onwards
 Strategic Human Resource Management
•Myths about HR Professionals
Old Myth New Realities

People go in for HR because they like people HR departments are not designed to provide
corporate theraphy.HR professionals must
create the practice that employees are more
competitive, not more comfortable

Anyone can do HR Hr activities are based on theory and

research. HR professionals must muster
both theory and practice

HR deals with soft side of business and The impact of HR practices on business
therefore not accountable results can and must be measured .HR
professionals must learn how to translate
their work into financial performance
Strategic Human Resource Management
•Myths about HR Professionals
Old Myth New Realities

HR’s job is to be the policy police The HR function does not own compliance-
managers do.HR practices do not exist to
make employees happy but to help them
become comitted.HR professionals must
help manager committed towards employees
and administer policy

HR is full of fads HR practices has evolved over time.HR

professionals must see their current work as
part of an evolutionary chain and explain
their work with less jargon and more
authority
 Strategic Human Resource Management
•Myths about HR Professionals
Old Myth New Realities

HR is staffed by nice people At times HR should force vigorous

debates.HR professionals should be and
challenging as well as supportive

HR is HR’s job HR work is important to line managers as are

finance, strategy and other business
domains. HR professionals should join with
managers in championing HR issues
HR focuses on costs which must be Hr practices must create value by increasing
controlled the intellectual capital within the firm. HR
professionals must add value not reduce
costs
 Strategic Human Resource Management
Challenges for HR managers
•Globalization(1)
•Effective global competition requires more than creating a
product in a home market and shipping it as it is to the new
market.
•It requires complex net work of global centres of excellence
that draw on technologies invented in one locale and shared
worldwide-rapid ideas around the world to meet local needs –It
needs local commitment(thinking globally but acting locally)
 Strategic Human Resource Management
Challenges for HR managers
Value chain for business competitiveness and HR services(2)
•HR professionals and theorists have emphasized building HR
practices within a form
•Refocusing HR practices more on the value chain(Suppliers
and customers)and less on activities within the firm has
profound implications

•The shift to a customer focus redirects attention from the firm

to the value chain in which it is embedded

•This help the firm to be more customer responsive

 Strategic Human Resource Management
Challenges for HR managers
Profitability through cost and growth (3)
•Cutting costs has been one of the means to become more
profitable-It is however increasingly being realized that revenue
growth is other means for increasing profits

•The point is not to replace cost with growth but to find ways to
experience profitable growth by leveraging customers
,leveraging core organizational competencies and inorganic
route to Mergers and acquisitions/joint ventures are the other
means for profitable growth
 Strategic Human Resource Management
Challenges for HR managers
Capability(4)
1.Building capabilities of confidence
2.Becoming boundary less, allowing flow of information and
ideas across hierarchical ,horizontal and external boundaries
3.Achieving capacity for change, the flexibility and agility that
allow constant innovation
4.Learning, attaining change that builds on and maintain itself

HR managers have to constantly seek the capablities

necessary for success
 Strategic Human Resource Management
Challenges for HR managers
Capability(4)
1.Building capabilities of confidence
2.Becoming boundary less, allowing flow of information and
ideas across hierarchical ,horizontal and external boundaries
3.Achieving capacity for change, the flexibility and agility that
allow constant innovation
4.Learning, attaining change that builds on and maintain itself

HR managers have to constantly seek the capabilities

necessary for success
 Strategic Human Resource Management
Challenges for HR managers
Change(5)
•Managers ,employees and Organizations must learn to change
faster and more comfortably

•HR professionals need to help their organization change

1.How to unlearn what we have learnt
2.How to honour the past and adapt for the future
3.How to encourage risk taking necessary for change without
putting the firm in jeopardy
4.How to determine which HR practices to change for
transformation and which to leave for continuity
 Strategic Human Resource Management
Challenges for HR managers
•Technology(6)
•Technology has made our world smaller, closer and faster-
ideas and images spread quickly worldwide

•Technology will dramatically affect how and where work is

done through teleconferencing, telecommunicating and shared
data sources
•Proximity was critical when a firms boundaries were
geographical
HR Professionals will have to figure out how to make
technology a viable and productive part of the setting
 Strategic Human Resource Management
Challenges for HR managers
Attracting ,Retaining and measuring competence and
intellectual capital(7)
•Sourcing and retaining talent has become the competitive
battleground
•Sourcing intellectual capital means upgrading the leadership
bench
•Leadership in the future will be team –focused and shared
rather than driven by single person
•The task of seeking intellectual capital will change a firms
measurement process(vs profitability or financial performance
etc)
•HR managers will have to seek, identify and use such
measures
 Strategic Human Resource Management
Challenges for HR managers
Turnaround(8)
•Turnaround is not transformation
•Turnaround so often seen in the corporate world is not
transformation
•Transformation changes the fundamental image of the
business as seen by customers and employees
•Transformation focuses on creating mind-share more than
market –share

HR professionals who focus on transformation create

fundamental change
 Strategic Human Resource Management
Challenges for HR managers
•Organizations have difficulty achieving their strategic
objectives because employees do not really understand these
or how their jobs contribute to overall organizational
effectiveness

•Fewer than 50% employees understand their organization

strategy

•Effective strategy management require not only that the

organization’s strategic objective be communicated to
employees but that there is a link between employees
productivity-relative to these objectives-and the organization’s
reward system
 Strategic Human Resource Management
• The SHRM is rooted in ‘manpower’ planning

• It was the work of influential management gurus(for

example Ouchi, 1981; Peters & Waterman, 1982),
- affirming the importance of the effective
management of people as a source of competitive
advantage

• This encouraged academics to develop frameworks

emphasizing the strategic role of the HR function
(for example Beer et al., 1985; Fombrun etal., 1984)
-attaching the prefix ‘strategic’ to the term ‘human
resource management
 Strategic Human Resource Management
• Fombrun ,Tichy and devana were the first to
formulate the concept of strategic HRM in 1984
•These researchers emphasize a strategic fit between
HRM and corporate strategy
 Fombrun Model Of HRM

HRD

Selection Appraisal
Organisational
effectiveness

Rewards
The Harvard Model of Human
Resource Management
Guest’s Model of HRM
Guest
Warwick
 Strategic Human Resource Management
Hendry and Pettigrew (1986) put forward four meanings of
SHRM:
1.The use of planning in human resource management

2.An integrated approach to the design and

implementation of HR systems

3.Matching HRM policies and activities with the business

strategy of the organization

4.Viewing people as a strategic resource for the

achievement of competitive advantage
 Strategic Human Resource Management
•Once the business strategy has been determined,
an HR strategy is implemented to support the
chosen competitive strategy.
•one-way downward from business- to functional-
level strategy.
•In this sense, a HR strategy is concerned with the
challenge of matching the philosophy, policies,
programmes, practices and processes – the
‘five Ps’
 Strategic Human Resource Management
The major objectives of SHRM are as follows:
•To ensure the availabilty of a skilled committed and highly
motivated workforce in the organization to achieve
sustained competitive advantage

•To provide direction to the organization so that both the

business needs of the organization and the individual and
collective needs of its workforce are met

•This is achieved by developing and implementing HR

practices that are strategically aligned
 Strategic Human Resource Management
•The extent of application of SHRM within organizations as
well as the form and content of SHRM vary from one
organization to another

•HRM is practiced in only those organizations that have a

clearly articulated corporate or business strategy

•Organizations who do not have a corporate plan cannot

have SHRM

•In such organization HR personnel carry out the

traditional administrative and service roles-not concerned
with strategic business issues
 Strategic Human Resource Management
Hendry and Pettigrew (1986) put forward four meanings of
SHRM:
1.The use of planning in human resource management

2.An integrated approach to the design and

implementation of HR systems

3.Matching HRM policies and activities with the business

strategy of the organization

4.Viewing people as a strategic resource for the

achievement of competitive advantage
 Strategic Human Resource Management
•Once the business strategy has been determined,
an HR strategy is implemented to support the
chosen competitive strategy.
•one-way downward from business- to functional-
level strategy.
•In this sense, a HR strategy is concerned with the
challenge of matching the philosophy, policies,
programmes, practices and processes – the
‘five Ps’
 Strategic Human Resource Management
The major objectives of SHRM are as follows:
•To ensure the availabilty of a skilled committed and highly
motivated workforce in the organization to achieve
sustained competitive advantage

•To provide direction to the organization so that both the

business needs of the organization and the individual and
collective needs of its workforce are met

•This is achieved by developing and implementing HR

practices that are strategically aligned
 Strategic Human Resource Management
•The extent of application of SHRM within organizations as
well as the form and content of SHRM vary from one
organization to another

•HRM is practiced in only those organizations that have a

clearly articulated corporate or business strategy

•Organizations who do not have a corporate plan cannot

have SHRM

•In such organization HR personnel carry out the

traditional administrative and service roles-not concerned
with strategic business issues
 Strategic Human Resource Management
•(SHRM)Strategic human resource management deals
with macro concerns such as
•quality
•Commitment
•performance
•culture
•management development
•It defines the areas in which specific HR strategies need
to be developed
 Strategic Human Resource Management
•strategic HRM’ is an outcome: ‘as organizational
systems designed to achieve sustainable competitive
advantage through people’. For others, however, SHRM is
viewed as a process, ‘the process of linking HR practices
to business strategy’ (Ulrich, 1997,)
 Strategic Human Resource Management
Human resource strategies are concerned with
ensuring
•Availability of an efficient workforce
•Training
•Rewards
•Good employee relations
•Human resource strategies are more specific and
facilitate the successful achievement of the
corporate objectives and goals
•According to Ulrich (1997, ) ‘HR strategy’ is the
outcome: ‘the mission, vision and priorities of the
HR function’.
 Strategic Human Resource Management
Vision for Human Resources
•Business Partner
•-Aligned with line management
•-Integral member of management team
Both at corporate and regional level
•Drive culture change to fit strategy and vision
•Do the basics (administrative tasks)well
•Organize flexibility around the work to be done
 Strategic Human Resource Management
Human Resource Mission
•To provide high quality and cost effective
processes, programs, and services to our
associates throughout the world that align with
company’s overall business strategy
 Strategic Human Resource Management
•Strategic human resource management and traditional
HR functions differ in several ways(adapted from Mellow
2003)
Traditional HRM SHRM

Responsibility for HR Staff personnel in the HR Line managers,all managers

programmes department responsible for people are
HR managers
Focus of activities Employees Partnerships with internal
relations,motivation,productivity,c and external customers
ompliance with laws
Role of HR Reactive and transactional Proactive and
transformational,change
leader
Initiative for change Slow,piecemeal,fragmented,not Fast,flexible,systematic,
integrated with larger issues change initiatives
implemented in concert with
other HR systems
 Strategic Human Resource Management
Traditional HRM SHRM

Time horizon Short term Consider various time frames

as necessary
(short,medium,or long)

Control Bureaucratic control through rules Organic control through

,procedures and policies flexibility as few restrictions
on employee behaviour as
possible
Job design Focus on scientific management Broad job
principles-division of design,flexibility,teams and
labour,independence and groups and cross -training
specialization
Importance investments Capital ,products,technology and People and their
finance knowledge,skills and abilities

Accountability Cost centre Investment centre

 Strategic Human Resource Management
•Difference between SHRM and HR Strategies(adapted
from Armstrong 2000
SHRM HR Strategies

A general approach to strategic management Outcome of the general SHRM approach

of human resources
Aligned with the organizational intention Focus on specific organizational intentions
about its future direction about what needs to be done
Focus on long term people issue Focus on specific issues that facilitate the
achievement of corporate strategy
Defines the areas in which specific HR Human resource strategy decisions are
strategies need to be developed derived from SHRM
Focus on macro concerns such as structure
culture
Strategic HRM decisions are built into the
strategic business plan
 Strategic Human Resource Management
Link between HR Strategy and Business Strategy
•The concept of SHRM is the idea of strategic fit

•In order to ensure that HR strategies facilitate the

achievement of business strategies a strategic integration
between the two is necessary

•A key factor that influences the linkage is organizations

quest to attain Competitive advantage
 Strategic Human Resource Management
Strategic Fit: A Conceptual Framework
•Organizations are often confronted with a dilemma
•Should they adopt business strategies that fit the
available competencies and capabilities in the firm
•Should they first decide their business strategy and then
stretch and modify their competencies and capabilities to
fit the business strategy?
•The strategic fit proposes that if an organization seeks to
maximise its competitive advantage
•Must match its internal resources and skills(organizational
competencies)with the opportunities in external
environment
 Strategic Human Resource Management
Strategic Fit: A Conceptual Framework
•When Organization attempts to implement new strategies
with outmoded or inappro-priate HR strategies it can face
problems
•Strategic human resource management is largely about
integration

•Guest (1989) emphasized that it is important to ensure

that HRM is fully integrated to strategic planning

•In 1997Guest identified the following five types of fit:

 Strategic Human Resource Management
Types of Fit between HR and Business Strategy

Fit as Fit as
bundles(con strategic
figuration interactio
approach) n best fit
Fit approach
perspective

Fit as
gestalt
Fit as an Fit as
ideal set contingency
of
practices
 Strategic Human Resource Management
Strategic Fit: A Conceptual Framework
1.Fit as strategic interaction(best fit approach)-HR
practices linkage with external context

2.Fit as contingency-HR approaches to ensure that

internal practices of the organization respond to external
factors such as the nature of the market, skill availability

3.Fit as an ideal set of practices(best practice approach )-

there are best practices which all firm can adopt
 Strategic Human Resource Management
4.Fit as gestalt-emphasizes the importance of finding an
appropriate combination of practices

5.Fit as bundles (the configuration approach)-suggests a

search for distinct configuration or bundles of HR practices
that complement each other in order to determine which
bundle is likely to be most effective
 Strategic Human Resource Management
Three of the five types of fit provide the following possible
approaches to SHRM:
•The best fit approach
•The HR bundles or configuration approach
•The best practice approach
 Strategic Human Resource Management
The Best Fit Approach
The focus of the best fit approach is on the linkage of HR
strategies with business strategies
Also referred to as external fit or vertical integration
Best fit also means that HR strategies match the stages of
development of the firm
Start-up
Maturity
Decline/degeneration
Regeneration or transformation
Business strategies and HR strategies will differ between
green field firm and one that is in the transformation stage
 Strategic Human Resource Management
HR practices Corresponding to the stages of an
Organizations life cycle(adapted from Armstrong)
Life Cycle Stages HR Practices

Start up Flexible patterns of work

Recruitment of highly motivated and
committed employees
Little formality
No unions

Growth More sophisticated recruitment and

selection
Training and development
Performance management processes
Reward systems
Focus on high commitment
Developing stable employee relations
Control compensation
 Strategic Human Resource Management
HR practices Corresponding to the stages of an
Organizations life cycle
Life Cycle Stages HR Practices

Maturity Attention to the control of labour costs

Focus on increasing productivity
Strained employee relations
Control compensation
Decline Emphasis on rationalization of workforce
and downsizing
Abandoning some longstanding practices
to cut costs
Trade unions have a marginalized role
Retaining and career consulting services
 Strategic Human Resource Management
The Best Fit Approach contd
Bases of classification of HR Strategies:
Beaumont (1992) three bases of classification of HR
strategies:
1.Different types of business strategies- example-
organization chooses strategy of low cost producer it
adopts different HR approaches to compensation as
compared to an organization which adopts a product
innovation strategy
Porter(1985) different business strategies will result in
variation in HR practices
 Strategic Human Resource Management
The Best Fit Approach contd
2.Stages in the business or product cycle
HR practices are related to variations in the life cycle
stages of a business-startup-growth-maturity-decline
In the growth stage an organization recruits an adequate
number and mix of qualified people

In the maturity stage encourages sufficient turnover to

minimize layoffs and facilitate reorganization

Decline stage-plans and implements workforce

reductions
 Strategic Human Resource Management
The Best Fit Approach contd
3.Types and numbers of products-Fombrun et
al.(1984)suggested that the strategy aimed at achieving
variations in product focus
-Single product strategy having a functional structure is
likely to be subjective in selection/appraisal/rewards

•Organization that follows strategy of growth –acquisition

of unrelated business-criteria of selection will differ
-performance appraisals and rewards are impersonal and
based on ROI and profitability
-Development is cross functional not cross business
 Strategic Human Resource Management
Three types of business strategy that may be adopted by
an organization
•Cost leadership
•Differentiation
•Focus

•According to Porter an organization may adopt any one of

the three business strategies in order to compete
successfully in a particular market and gain and sustain
superior performance as well as an advantage over its
competitors
 Strategic Human Resource Management
HR strategy classification
After discussing the bases of classification of HR strategy
the most popular approach is the type of business strategy
and adoption of complementary HR strategies
Schuler and Jackson focused on Porter ‘s classification of
the three generic business strategies
Cost Leadership
Differentiation
Focus
They argued that the HR practices should be designed to
reinforce the behavioural implication of these strategies
 Strategic Human Resource Management
Linking Business Strategy and HR Strategy(O’Riordon)
Business Strategy HR Strategy

Cost Leadership Utilization HR Strategy

Suitable for repetitive and predictable HR Strategy focussed on short term
behaviour performance measures –results or outcomes
Concerned with short term focus and Hierarchical pay ,few incentives
quantities Narrow career path ,limited training
Result oriented
Differentiation Facilitation HR strategy
Long term focus Broad career paths
Creative job behaviour Extensive training
Moderate concern for quality and quantity Equal and fair pay/many incentives for
creativity
Focus Accumulation HR Strategy
High concern for quality Equal and fair pay with many incentives
Moderate concern for quality Hiring employees belonging to the new target
Long /medium term focus market/High employee participation
 Strategic Human Resource Management
The HR Bundles Approach
•Bundling refers to the development and implementation of
several HR practices together so that they are interrelated
and internally consistent
•Each HR practice complements and reinforces the other
•Flexible production techniques need to be supported by
bundles of high commitment HR practices such as:
Performance –contingent pay
Employment security etc
-High involvement HR practice that is complementary to
other HR practices is introduced in a firm
-The new practice produces improvement in performance
-Also has drawbacks
 Strategic Human Resource Management
The best Practice Approach
Superior management practices are readily identifiable
and are transferable across organizations
An organization should therefore identify any organization
with reputation for excellence in some function and copy
its practices in order to perform well
Pleffer’s (1994) list of seven practices
1.Employment security
2.Selective hiring
3.Teamworking
4.High pay contingent on company performance
5.Extensive training/6.reduction of status
differences/7.information sharing
 Strategic Human Resource Management
Miles and Snow’s Classification of Business Strategy and
HR Strategy
Dominant Culture of the organization HR Strategy
(Business Strategy)
Defenders Build HR
Find change threatening Likely to emphasize training programmes and
internal promotion

Prospectors Creative and flexible management style

Thrive on change Have high quality HR Redeployment
Favour strategies of product/market Acquire HR
development Emphasize recruitment, selection,
performance based compensation
Analyzers Low levels of monitoring and coordination
Seek to match new ventures with the present Buy and make Key HR
business set up Emphasize HR planning
Ventures not new to the market only new to
the firm