Strategic human resource management

• This discipline covers the concepts and practices that guide and align Human Resource Management philosophy, tactical planning and practice with the strategic and long term goals of the organization, with a particular focus on human capital.• It deals with the macro-concerns of the organization regarding structure, quality, culture, values, commitment, matching resources to future needs and other longer term people issues.• Strategic HRM gives direction on how to build the foundation for strategic advantage by creating an effective organizational structure and design, culture, employee value proposition, systems thinking, an appropriate communication strategy and preparing an organization for a changing landscape, which includes downturns and mergers & acquisitions.• Strategic HRM emphasizes organizational codes of ethics, managing the societal impact of business decisions, philanthropy and the role of the human resource professional in improving the quality of life of employees, their families and the community at large.

Strategic human resource management

• Strategic human resource management is designed to help companies best meet the needs of their employees while promoting company goals• 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.• Strategic human resource management is essential in both large and small companies. In small companies, this may be as simple as the owner or manager taking a little time every day to observe, assist, and assess employees, and provide regular reviews. Larger companies may have a whole department in charge of human resources and development.• 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.

strategy

• “If one does not know to which port one is sailing, no wind is favorable” (Seneca)•"Strategy is the direction and scope of an organization over the long-term: which achieves advantage for the organization through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfill stakeholder expectations".In other words, strategy is about:* Where is the business trying to get to in the long-term (direction)* Which markets should a business compete in and what kind of activities are involved in such markets? (markets; scope)* How can the business perform better than the competition in those markets? (advantage)?* What resources (skills, assets, finance, relationships, technical competence, facilities) are required in order to be able to compete? (resources)?* What external, environmental factors affect the businesses' ability to compete? (environment)?* What are the values and expectations of those who have power in and around the business? (stakeholders)

Strategy: corporate levels

• Strategy at Different Levels of a Business•Strategies exist at several levels in any organization - ranging from the overall business (or group of businesses) through to individuals working in it.•Corporate Strategy - is concerned with the overall purpose and scope of the business to meet stakeholder expectations. This is a crucial level since it is heavily influenced by investors in the business and acts to guide strategic decision-making throughout the business. Corporate strategy is often stated explicitly in a "mission statement".•Business Unit Strategy - is concerned more with how a business competes successfully in a particular market. It concerns strategic decisions about choice of products, meeting needs of customers, gaining advantage over competitors, exploiting or creating new opportunities etc.•Operational Strategy - is concerned with how each part of the business is organized to deliver the corporate and business-unit level strategic direction. Operational strategy therefore focuses on issues of resources, processes, people etc.

Strategy: formulation

• Strategy formulation refers to the process of choosing the most appropriate course of action for the realization of organizational goals and objectives and thereby achieving the organizational vision. • The process of strategy formulation basically involves six main steps.a) Setting Organizations’ objectives - The key component of any

strategy statement is to set the long-term objectives of the organization. It is known that strategy is generally a medium for realization of organizational objectives.

b) Evaluating the Organizational Environment - The next step is to evaluate the general economic and industrial environment in which the organization operates. This includes a review of the organizations competitive position. It is essential to conduct a qualitative and quantitative review of an organizations existing product line.

Strategy formulation

c) Setting Quantitative Targets - In this step, an organization must practically fix the quantitative target values for some of the organizational objectives. The idea behind this is to compare with long term customers, so as to evaluate the contribution that might be made by various product zones or operating departments.d) Aiming in context with the divisional plans - In this step, the contributions made by each department or division or product category within the organization is identified and accordingly strategic planning is done for each sub-unit. This requires a careful analysis of macroeconomic trends.e) Performance Analysis - Performance analysis includes discovering and analyzing the gap between the planned or desired performance. A critical evaluation of the organizations past performance, present condition and the desired future conditions must be done by the organization. f) Choice of Strategy - This is the ultimate step in Strategy Formulation. The best course of action is actually chosen after considering organizational goals, organizational strengths, potential and limitations as well as the external opportunities.

Strategic management

• Strategic management can be used to determine mission, vision, values, goals, objectives, roles and responsibilities, timelines, etc.• “Strategic management can be defined as the art and science of formulating, implementing and evaluating cross-functional decisions that enable an organization to achieve its objectives.”•“An integrative management field that combines analysis, formulation, and implementation in the quest for competitive advantage.”•“Strategic management includes understanding the strategic position of an organization, making strategic choices for the future and managing strategy in action.”•“Strategic management is defined as the process by which managers of the firm analyze the internal and external environments for the purpose of formulating strategies and allocating resources to develop a competitive advantage in an industry that allows for the successful achievement of organizational goals.”

Strategic management: benefits

• Defines a company’s vision, mission and future goals.•Identifies the suitable strategies to achieve the goals.•Improves awareness of the external and internal environments, and clearly identifies the competitive advantage.•Increases managers’ commitment to achieving the company’s objectives.•Improves coordination of the activities and more efficient allocation of company’s resources.•Better communication between managers of the different levels and functional areas.•Reduces resistance to change by informing the employees of the changes and the consequences of them.•Strengthens the firm’s performance.•On average, companies using strategic management are more successful than the companies that don’t.•Strategic planning allows the organization to become more proactive than reactive.

Strategic management: process

• The strategic management process means defining the organization’s strategy. It is also defined as the process by which managers make a choice of a set of strategies for the organization that will enable it to achieve better performance.• Strategic management is a continuous process that appraises the business and industries in which the organization is involved; appraises it’s competitors; and fixes goals to meet all the present and future competitor’s and then reassesses each strategy.

Strategic management: process Strategic management process has following four steps:1.Environmental Scanning- Environmental scanning refers to a process of collecting, scrutinizing and providing information for strategic purposes. It helps in analyzing the internal and external factors influencing an organization. After executing the environmental analysis process, management should evaluate it on a continuous basis and strive to improve it.2.Strategy Formulation- Strategy formulation is the process of deciding best course of action for accomplishing organizational objectives and hence achieving organizational purpose. After conducting environment scanning, managers formulate corporate, business and functional strategies.3.Strategy Implementation- Strategy implementation implies making the strategy work as intended or putting the organization’s chosen strategy into action. Strategy implementation includes designing the organization’s structure, distributing resources, developing decision making process, and managing human resources.4.Strategy Evaluation- Strategy evaluation is the final step of strategy management process. The key strategy evaluation activities are: appraising internal and external factors that are the root of present strategies, measuring performance, and taking remedial / corrective actions. Evaluation makes sure that the organizational strategy as well as it’s implementation meets the organizational objectives.

Strategic management: process

• Goal-Setting:- The purpose of goal-setting is to clarify the vision for your business. This stage consists of identifying three key facets: First, define both short- and long-term objectives. Second, identify the process of how to accomplish your objective. Finally, customize the process for your staff, give each person a task with which he can succeed. • Analysis:- Analysis is a key stage because the information gained in this stage will shape the next two stages. In this stage, gather as much information and data relevant to accomplishing your vision. The focus of the analysis should be on understanding the needs of the business as a sustainable entity, its strategic direction and identifying initiatives that will help your business grow. • Strategy Formulation:- The first step in forming a strategy is to review the information gleaned from completing the analysis. Determine what resources the business currently has that can help reach the defined goals and objectives. Identify any areas of which the business must seek external resources. • Strategy Implementation:- Successful strategy implementation is critical to the success of the business venture. This is the action stage of the strategic management process. If the overall strategy does not work with the business' current structure, a new structure should be installed at the beginning of this stage.• Evaluation and Control:- Strategy evaluation and control actions include performance measurements, consistent review of internal and external issues and making corrective actions when necessary. Any successful evaluation of the strategy begins with defining the parameters to be measured.

Investment perspective: HRM

• Employees are human assets that increase in value to the organization and the marketplace when investments of appropriate policies and programs are applied.•Effective organizations recognize that their employees do have value, much as same as the organization’s physical and capital assets have value.•Employees are a valuable source of sustainable competitive advantage.

Sources of employee value

• Technical Knowledge•Markets, Processes, Customers, Environment

•Ability to Learn and Grow•Openness to new ideas•Acquisition of knowledge and skills

•Decision Making Capabilities•Motivation•Commitment•Teamwork•Interpersonal skills, Leadership ability

Adapting an investment perspective

• Determines how to best invest in people•Costs•Out-of-pocket•Opportunity

•Human assets become competitive advantage•Required skills become less manual, more knowledge-based•Appropriate, integrated, strategy-consistent approach is needed

FACTORS INFLUENCING INVESTMENT ORIENTATION

INVESTMENT ORIENTATION FACTORS

• Senior Management Values & Actions•Managers need “investment orientation” toward people

•Attitude Toward Risk•Investment in human resources inherently riskier •Human assets never absolutely “owned”

•Nature of Skills Needed by Employees•The more marketable employee skills, the riskier the firm’s investment in skill development

• Utilitarian (“Bottom Line”) Mentality•Attempt made to quantify employee worth through cost-benefit analysis•“Soft” benefits of HR programs difficult to objectively quantify

•Availability of Outsourcing•Given availability of cost-effective outsourcing, investments in HR should produce highest returns & sustainable competitive advantages.

TYPES OF ORGANIZATIONAL ASSETS

HR VALUE CHAIN

STRATEGIC HUMAN RESOURCE MANAGEMENT: AIMS

• Strategic HRM supplies a perspective on the way in which critical issues or success factors related to people can be addressed, and strategic decisions are made that have a major and long-term impact on the behavior and success of the organization.• The fundamental aim of strategic HRM is to generate strategic capability by ensuring that the organization has the skilled, committed and well-motivated employees it needs to achieve sustained competitive advantage. • Its objective is to provide a sense of direction in an often turbulent environment so that the business needs of the organization, and the individual and collective needs of its employees can be met by the development and implementation of coherent and practical HR policies and programs.•Strategic HRM should attempt to achieve a proper balance between the hard and soft elements. All organizations exist to achieve a purpose and they must ensure that they have the resources required to do so and that they use them effectively. But they should also take into account the human considerations contained in the concept of soft strategic HRM.

STRATEGIC HUMSN RESOURCE MANAGEMENT: PRINCIPLES

• There is an overall purpose and the human resource dimensions of that purpose are evident• A process of developing strategy within the organization exists and is understood, and there is explicit consideration of human resource dimensions• Effective linkages exist on a continuing basis to ensure the integration of human resource considerations with the organizational decision making process• The office of the chief executive provides the challenge for integrating human resource considerations to meet the needs of the business• The organization of all levels establishes responsibility and accountability for human resource management• Initiatives in the management of human resources are relevant to the needs of the business• It includes the responsibility to identify and interact in social, political, technological and economic environment in which the organization is and will be doing business in

Traditional vs. shrm

• Traditional and strategic approaches to human resources, or HR, offer an organization different models for providing what employees need. •The HR function exists to support employees on the job through training and development and in their personal lives, including offering insurance and benefits to support employees' families.• Traditional HR practices were popular in the past. An HR department's role was to assist with recruitment and selection; administer payroll, compensation and benefits; and perhaps develop employee development and training solutions, report diversity data and resolve conflicts.• Strategic HR means that an organization takes a tactical approach to ensure that all actions relate to the business objectives stated in the strategic plan.

Traditional vs. shrm

• Strategic HR is part of a different way of running an entire organization. HR focuses on the objectives that will be achieved and how HR can put the people in the right positions to maximize those achievements. • A strategic organization is data driven, focusing on productivity and measurement of how objectives are achieved; it might change its HR practices to respond to the internal climate and to external economic events.• The fundamental significance of Strategic Human Resource management (SHRM) is its focus on the human capital component of organizational success. •SHRM differs from traditional HR management in that SHRM focuses on the entire organizational rather than the individual in two main aspects of business. The first difference is SHRM focuses on organizational performance rather than individual performance

Traditional vs. shrm

• Secondly, SHRM focuses on entire systems when solving organizational issues rather than individual or linear methods practiced in isolation. •In addition to the focus on systems, SHRM is about aligning with the company's objectives of superior performance by creating a competitive advantage. •The alignment with organizational objectives requires HR Management to manage personnel in a way to achieve company goals by tailoring HR Functions to reach the organizational objectives• traditionally, HR has always played the role of a support function, catering to resourcing, training and motivation requirements, the modern organization demands a more enhanced participation from the HR department.• Strategic HR (SHR), the new avatar, is a realization that HR can play a more important and proactive role in the emerging flexible new organization paradigm.

Traditional vs. shrm

A traditional HR company focuses on clearly laid out and more operational responsibilities of:•Staffing/resourcing/hiring: Getting the right people for the appropriate role/position•Evaluating/rewarding: Setting a system of evaluating performance and ensuring adequate returns and rewards•Motivating/mentoring/ counseling: Keeping employees happy with their roles/ work and work environment, minimizing dissent or conflicts•Developing/maintaining culture: Developing the organization’s unique character, values, ethics and principles•Managing/controlling: In the administrative capacity, to ensure that policies/processes and standards are appropriately implemented.

Traditional vs. shrm

• In this enhanced capacity (SHRM), HR is required to balance the roles of a change agent, an administrative expert, a strategic partner, and an employee champion—and add value on all these counts.• Change agent: HR must play a proactive role in shaping the workforce attitude and focus in alignment with the company’s business objectives.• Administrative expert: The HR function has to perform its basic functions, and these need to keep evolving with new developments.• Strategic partner: HR must be an active participant in strategic decision-making. The learning’s from the HR role can help advise, coach and educate senior executives on how workforce issues can affect the overall performance of the business, and offer solutions that support the execution of business plans. • Employee champion: In addition to the above, HR should maintain a well-knit bond with the employees and develop their trust and confidence in the organization’s objectives.

Strategic human resource management: challenges

• Talent and leadership are becoming even scarcer resources than ever before.• The work force, on average, is growing older, and people are having fewer children.• More companies are becoming global organizations as they try to recruit abroad, integrate diverse cultures and retain foreign talent.• The emotional well-being of employees is more important than ever before. The days of staying at one company are over, mobility is the new norm. And with that, employees will increasingly make job choices based on family considerations and a desire to have a life outside of work.

Strategic human resource management: challenges

• Companies will face 8 critical HR challenges that fall into three strategic categories.Developing and Retaining the Best Employees. The first category includes the challenges of managing talent, improving leadership development, and managing work-life balance.Anticipating Change. The second category encompasses managing demographics, managing change and cultural transformation, and managing globalization.Enabling the Organization. The third category consists of becoming a learning organization and transforming HR into a strategic partner.

Strategic human resource management: challenges

• The first challenge from a strategic perspective in HRM is that there is need to support corporate productivity and performance improvement efforts, with the globalization of world economy competition has soared and with it the need to continually improve organizational performance• Secondly employees play an expanded role in employers performance improvement efforts, example could be toyata’s high technology team base4d production and various tools like JIT, Kaizen, Kanban are useless without extraordinarily high levels of employee competence and commitment• The third challenge is that employers see that their human resource units must be more involved in designing not just executing the companies strategic plan• Questions like What activities and processes are most critical for value creation as defined by customers and capital markets, Who in the firm executes these activities successfully, need to be addressed(Dessler, Page 87)

SHRM: HARVARD MODEL• The Harvard Model was postulated by Beer et al (1984) at Harvard University.

•The authors of the model also coined it the map of HRM territory.

•The Harvard model acknowledges the existence of multiple stakeholders within the organization.

•These multiple stakeholders include shareholders various groups of employees, government and the community at large.

•The recognition of the legitimacy of these multiple stakeholders renders this model a neo - pluralist model.

•This model emphasizes more on the human/soft side of HRM.

•Basically this is because this model emphasizes more on the fact that employees like any other shareholder are equally important in influencing organizational outcomes.

•In fact the interest of the various groups must be fused and factored in the creation of HRM strategies and ultimately the creation of business strategies.

SHRM: HARVARD MODEL• A critical analysis of the model shows that it is deeply rooted in the human relations tradition.

•Employee influence is recognized through people motivation and the development of an organization culture based on mutual trust and team work.

•The factors above must be factored into the HR strategy which is premised on employee influences, HR flows, reward system etc.

•The outcomes from such a set up are soft in nature as they include high congruence, commitment, competencies etc.

•The achievement of the crucial HR outcomes has got an impact on long term consequences, increased productivity, organizational effectiveness which will in turn influence shareholder interests and situational factors hence making it a cycle.

•It is thus important to note that the Harvard model is premised on the belief that it is the organization’s human resources that give competitive advantage through treating them as assets and not costs.

SHRM: MICHIGAN MODEL

• The Michigan model was propounded by Fombrun Tichy and Devanna (1984) at the Michigan Business School.•They also named this model a matching model of HRM.•Precisely, the matching aspect of this model demonstrates that the model is inclined towards the harder side of HRM.•This is because the matching model emphasizes more on “tight fit” between the HR strategy and the business strategy.•NB It demands that available human resources must be matched with jobs in the organization.•The HR strategy must be highly calculative in terms of the quantity of the human resources required to achieve the objectives enshrined in the business strategy.•Business strategy takes the central stage in this model hence human resources are taken like any other resource which must be fully utilized together with the other resources to achieve organizational objectives.

Shrm: guest model

• The Guest model was propounded by David Guest in 1987. This model is a fusion of aspects that resemble both a hard and a soft approach of HRM. Guest proposes 4 crucial components that underpin organizational effectiveness. These 4 crucial components are: -1. Strategic Integration •This is the ability of organizations to maintain a fit between the HRM strategy and the business strategy. In other words, there must be congruence between business strategy and the HR strategy for the organization to achieve its goals.

•Strategic integration shows the harder side of the Guest Model.

•This is precisely because human resources are treated in a similar manner like any other resource with the prime goal of achieving business objectives.

•Thus there are implications of labor exploitation.

Shrm: guest model

2) Flexibility •Flexibility is basically concerned with the ability of the organization and its people to adapt to the changing business and work environment and to the capacity to manage innovation.•Flexibility can be numeric, functional, pay, distancing. •Flexibility carries both connotations of hard and soft HRM.•Hard HRM for example can be seen through numeric flexibility where employees are employed only when their production is required and when their labor is not required they are discharged. •This can be exemplified through seasoned work.•Flexibility can also show the soft side of HRM through the same example given above. •Flexibility in this case is not only concerned with the need to achieve business objectives but also the need to treat its employees as fairly as possible.

Shrm: guest model

3) High Commitment •This is concerned with the need to have both behavioral commitment, which is the ability to go an extra mile, and attitudinal commitment, which is reflected through a strong identification with the organization. 4) Quality

Quality is based on the assumption that provision of high quality goods and services results from a quality way of managing people.

Tutorial model The model by John Storey is based on four aspects. •Beliefs and Assumptions•The model is premised on the notion that HRM is based on a set of beliefs and assumptions, which makes it a distinctive approach.•Fundamentally it is believed that it is the human resource among all the other factors of production, which gives the difference.• Successful organizations are distinguished from the rest by the capabilities and commitment of the people who work for them.•It is therefore imperative that the human resource ought to be treated with great care and nurtured as valuable assets.•Finally it is believed that the employment relationship is based on commitment and not compliance.

Tutorial model

• Strategic Qualities

•HRM is further distinguished by the fact that it is strategic in nature and therefore requires the attention of senior management and top executives.

•The above-mentioned assumption stems from the 1st belief that the human resource is the most important source of competitive advantage.

•HR Policies are too important to be a product of prescribed best professional practice only. In fact they must be sensitive to the demands of the competitive business environment, business strategy and the HR strategy.

•Role of Line Managers

•Line managers have a very important role to play in people management.

•It is clear from the HRM philosophy that people management is too important to be left to operational personnel specialists.

•Fundamentally, the importance of line managers is seen through the strong link that exists between them and their respective subordinates or employees.

Tutorial model

• Key Levers•There is a strong belief that culture management is important than managing Procedures and systems.•This is primarily important because culture management brings consensus on overall organizational values, beliefs and assumptions.•Culture management is also believed to be essential in flexibility and commitment.• Integrated action on all HRM policies Restructuring and job redesign to allow developed responsibility and empowerment.

Hr: evolving strategic role

• 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• 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

Hr: evolving strategic role

• 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• 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• 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

Hr roles in knowledge based economy

• Human capital stewarda) Creates an environment and culture in which employees voluntarily contribute

skills, ideas and energyb) Human capital is not owned by organization• Knowledge Facilitatora) Procures necessary employee knowledge and skill sets that allow information to

be acquired, developed or disseminatedb) Provides competitive advantage and must be part of strategically designed

employee development plan• Relationship buildera) Develops structure, work practices and culture that allows individual to work

togetherb) Develops network that focus on strategic objectives• Rapid deployment specialista) Creates fluid and adaptable structures and systemsb) Global, knowledge based economy mandates, flexibility and culture that

embraces change

Barriers to shrm

• Strategic contribution•Business knowledge•Personal credibility•HR delivery•HR technology•The barriers that can be met by HR strategists when attempting to implement strategic initiatives often result from a failure to understand the strategic needs of the business, with the result that HR strategic initiatives are seen as irrelevant, even counter productive. ‑• Implementation will also be difficult if one initiative is taken in isolation without considering its implications on other areas of HR practice or trying to ensure that a coherent, holistic approach is adopted.• It will be very hard to implement anything if the practical problems of getting the initiative accepted by all concerned, including, importantly, top management have not been dealt with. Inability to achieve ownership among line managers, or to develop the skills they require to play their part in implementation, will be major obstacles.