Strategic Human Resource Management

Lo 1: Understand how the strategic management of human

resources contributes to the achievement of organization
objectives.
Importance of Strategic Human Resource Management

Strategic human resource management is the process of integrating human resources

function with the strategic objectives of the organization. In, order to achieve

organization goal. The next section explores how human resource management has

been modified to reflect the step changes in markets and production requirements over

time. We will describe the nature of the changes to major business eras, leading to an

appreciation of how skills requirements have reflected these major changes.

After explaining what is meant by strategy, the third section develops key strategic

issues in human resource development. We will also investigate how human resources

can play a profoundly important part in developing and implementing strategy within an

organization. Next, the emergence of human resources as a strategic issue is explored

in greater depth. This section explains the critical differences between many Western

firms’ and Japanese approaches to human resource development. We will show that

human resource development needs to be in place alongside other important human

resource issues, including industrial relations, and describe how human resources can

become part of the core competence of an organization.

The main things why the strategic human resource management? It should be self

-confident. Organization consists of people, and so the development of these people

should be a key task of organization. If people were to speak to senior – level managers

within firms they would, typically, identify how important their staff are. However, these

same senior –level managers will often concentrate on slashing budgets related to

human resources development. They may also have no qualms about downsizing the

number of employees at the same time. What is sometimes not clear, though, is that

people really do matter in organizations. People matter because in the highly

competitive environment which firms now face, human capital has become a precious

commodity is gaining any short of advantage over other firms.

Human Resource Development is a vital area for firms because ideas for innovation,

quality and continuous improvement, as well as other critically important inputs needed

to compete in the modern, highly competitive business world, come from people and not

from machines. The extent to which people will provide suggestions for improvements in

all forms will depend, to a large extent, on human resource development strategies

within firms. The need to develop human resources on an ongoing basis has not always

been so prominent.

However, the overwhelming evidence seems to be that organizations do not fully

understand the strategic importance of human resource development. Many firms are

too quick to downsize or ‘right size’ in the pursuit of cost-cutting initiatives. Other

strategic decisions, including mergers and acquisitions, may threaten the culture that

had human resource development as part of its core capabilities.

1.2 Purpose of Strategic Human Resource Management Activities

The fundamental purpose of strategic human resource management activities is to

generate strategic capability by ensuring that the organization has the skilled, engaged

and well-motivated employees it needs to achieve sustained competitive advantage. In

according with the resources – based view as described Boxall theory, the strategic

goal will be to create firms which are more intelligent and flexible than their competitors

by hiring and implementing more talented employee and by improving their skills base

.Strategic human resource management is largely about integration and adaption. It

purpose is to ensure that Human resource management is fully integrated with the

strategy and strategic needs of the firm. Human resource policies cohere both across

policy areas and across hierarchies and human resources practices are adjusted,

accepted and used by line managers and employees as part of their everyday work.

When considering the aims of strategic Human Resource Management it is necessary

to address the issue of the extent to which HR strategy should take into account ethical

considerations the interests of all the stakeholders in the organization and employees

in general, as well as owners and management and the responsibilities of the

organization to the wider community.

Strategic HRM is underpinned by three concepts, namely the resource-based view,

strategic fit and strategic flexibility.

The resources-based view

To a large extent, the philosophy of strategic HRM is based on the resource based view.

This states that it is the range of resources in an organization, including its human

resources, that produces its unique character and creates competitive advantage .The

resource based view as developed and expanded provides a durable basis for strategy

and builds on and provides a unifying framework for the field of strategic human

resource management.

That competitive advantage arises first when firms within an industry are heterogeneous

with respect to the strategic resources they control and, second, when these resources

are not perfectly mobile across firms and thus heterogeneity can be long-lasting.

Creating sustained competitive advantage therefore depends on the unique resources

and capabilities that a firm brings to competition in its environment. These resources

include all the experience, knowledge, judgment, risk-taking propensity and wisdom of

individuals associated with a firm.

For a firm resource to have the potential for creating sustained competitive advantage it

should have four attributes: it must be valuable, rare, imperfectly imitable and

substitutable. To discover these resources and capabilities, managers must look inside

their firm for valuable, rare and costly-to imitate resources, and then exploit these

resources through their organization.

Strategic fit

Strategic fit refers to the two dimensions that distinguish strategic Human Resource

Management. First, vertically, it entails the linking of human resource management

practices with the strategic management processes of the organization. Second,

horizontally, it emphasizes the coordination or congruence among the various human

resource management practices.’

Strategic flexibility

Strategic flexibility is defined as the ability of the firm to respond and adapt to changes

in its competitive environment. Environmental differences will affect a flexibility strategy.

Stable, predictable environment the strategy could be to develop people with a narrow

range of skills or not to develop multi skilled people and to elicit a narrow range of

behavior (e.g. tight job descriptions). In a dynamic, unpredictable environment, however,

organizations might develop organic Human Resource systems that produce a human

capital pool with people possessing a wide range of skills who can engage in a wide

variety of behaviors. The need is to achieve resource flexibility by developing a variety

of ‘behavioral scripts’ and encourage employees to apply them in different situations,

bearing in mind the increased amount of discretionary behavior that may be appropriate

in different roles.

It can be argued that the concepts of strategic flexibility and fit are incompatible, ‘fit’

implies a fixed relationship between the Human Resource strategy and business

strategy, but the latter has got to be flexible, so how can good fit be maintained, But that

the concepts of fit and flexibility are complementary fit exists at a point in time, while

flexibility has to exist over a period of time.

1.3 Contribution of strategic human resource management to achievement of an

organization goal.

Modern developed economies are increasingly relying on human capital to gain their

competitive advantage. In such a knowledge economy, it is the skills and knowledge of

employees rather than just the abilities inherent in technology and machinery that are

crucial. The capacity of an organization to manage its talent is what will set it apart from

other competitors. Our people are our most valuable resources and the key to the

development of a knowledge based economy. Only by developing our own local human

resources and providing opportunities for continuing education for people of all walks of

life can we prepare ourselves for the changes in the marketplace. This is of most

importance to the well-being of our people and the long-term development. However,

talented people are scarce; as a result companies must pay closer attention to the issue

of talent management, in terms of attracting, recruiting, and developing talent in an

economy that is increasingly knowledge-based.

The contribution of human resource management function to an organization’s strategy

is underscored by reviewing the overall functions of strategic planning. These include

periodic forward scanning, analysis based on longer time frame, communication about

goals and resource allocation, framework for short-term plan evaluation and integration,

institutionalizing longer term time horizons necessary for investments, and decisional

criteria for short-term decision making. It is impossible to address these critical issues

without bringing in the human resources factor at each element of the process.
In the early development of strategic management, there was little concern about the

human resources function until the actual implementation began. Rarely was the human

resource brought into the planning process. Now this is changing. Strategy and human

resource planning are integrated early in the process. There are several benefits of

integrating human resource planning with strategic planning, making it imperative for

this integration to be regularly pursued. Some experts have suggested that the human

resource manager be labeled Director of People Strategy.

Because of the importance of strategy in the success of firms and the critical ingredient

of human resources in the strategic plan, human resource managers are finding

themselves heavily involved in the strategic planning process. Because strategy is

related to the organizational goals, the ultimate opportunity to show the contribution of

human resources begins in the strategic planning arena.

The strategic importance of human resources has been widely recognized. As a result,

strategic human resource management (SHRM) has been argued to be positively

related to organization performance. More especially, Human Resource Management,

has been linked to increased productivity, good customer service, improved efficiency,

increased firm value, greater profitability or financial returns and overall organizational

survival.

Strategic role of HRM as “organizational systems designed to achieve competitive

advantage through people”. In turn, competitive advantage may be defined as a set of

capabilities or resources giving an organization an advantage that leads to superior

performance relative to that of competitors. In this respect, the main focus of SHRM is
on integrated combinations of HRM practices, through which organizations should

create competitive advantage rather than simply adapting to the existing context. A

review of the literature reveals five interrelated approaches to the link between the

competitive position of an organization and the creation of superior human assets.

First, the resource-based approach of competitive advantage focuses on the

relationships between a firm’s internal resources, its profitability and the ability to stay

competitive through its strategy formulation. According to this approach, a resource is

considered as an internal strength only if it meets the five criteria for sustainable

competitive advantage. Specifically, a resource must be immobile, be difficult to

replicate, have no close substitutes, be rare and create value. The central idea of the

resource-based theory is that a firm’s systems, among its other attributes, enable the

organization to achieve success relative to competitors.

Another approach focuses on the way human resource systems support competitive

advantage and organizational learning through people. This perspective implies that

human resource management should focus on how the integration of organizational

resources, practices and capabilities can lead to sustainable competitive advantage. To

understand this integration researchers have used notions of internal or horizontal fit

and external or vertical fit. Management must have a clear understanding of internal fit

and the way such fit facilitates organizational learning and adaptation. Furthermore,

practices with external fit create capabilities that maintain the organization’s overall

strategy and support multiple strategic dimensions in order to lead to sustainable

competitive advantage