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A Strategic Approach To Human Resource Management Business Essay

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Published: Mon, 5 Dec 2016

It is an evolution of Human Resource Management, in the training, development and selection of human capital that lead to a strategy. The difference is that HRM has not find a way of integration between the various functions, but instead it evolved in isolation with no assimilation or coordination between functions.

Given this lack of Human Resource Management, another practice, Strategic Human Resource Management (SHRM) came to find a better way of integration and linking methods, functions and tools to the overall strategy, by just aligning every function with the organizational goals.

Even if Human resource management is always being defined by researchers one of the most important factor to achieve organizational effectiveness [3] ; however it is not enough to gain competitive advantage. Strategic human resource management, in contrast, thanks to its activity of alignment with the overall strategy and the human resource practices it is.

In fact, SHRM is concerned with all those activities affecting the behavior of individuals in their effort to formulate and implement the strategic needs of the business. [4] It is interested in the decision about human resource practices, composition of human capital, effectiveness of this decision, skills and ability held and the overall business strategy.

Here, a scheme that shows the entire environment in which Strategic Human Resource Management operates:

Firm strategy

Institutional/ Political forces

HRM practices Resource dependence,

Resource based institutional

View of the firm

Agency/transaction

Cost

Firm level outcomes (performance, satisfaction, absenteeism, etc.)

Hr capital pool

(skills and abilities)

HR behaviour

5Figure 1.

As noticed above, the strategic human resource management has relationships with three groups: the environment, human resources and their behavior/outcomes and the business strategy.

The environmental influences include the markets changing, technology, innovation, politics, and government.

Business strategy defines strategic decision, long term decision (upstream) or decision regarding managing people in the workplace (third-order decision). [6] 

The last variable is human resources, and as soon as this is a strategic perspective, it requires focusing first on organizational goals in defining the role of human resource management. It is a strategic management that means that traditional HR objectives such as turnover or performance are superseded by organization-wide goals designed to complement a specific business strategy. [7] 

A means of developing integrated human resource strategy is the presence of several conditions:

There is an overall purpose and the human resource dimension of that purpose is 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 bases to ensure the integration of human resource consideration with the organizational decision making process.

The office of chief executive provides the challenge of integrating human resource consideration to meet the need of business.

The organization at all levels establishes responsibilities and accountability for human resource management.

Initiatives in the management of human resources are relevant to the needs of business.

It includes the responsibility to identify and interact in the social, political, technological, and economic environment in which the organization is and will be doing business. [8] 

However, an organization using a Strategic human resource approach has to remember that the relationship between business strategy and human resource strategy has to be reactive. Actually, human resource practices need to be integrated with the overall strategy and its objectives, with its competitive environment and with business conditions in order to create competitive advantage and respect all the seven point mentioned above.

As soon as these things are clear inside a company, changes are yet to come. A strategic organizational realignment is necessary, having an impact on the culture value and tradition, image and ability to recruit employees, especially the high skilled ones.

SHRM requires the management team to be able to work with these concepts and face the change. The planning requires knowledge and techniques of strategic management, organizational structure, culture, change management and human resource planning. The management team has to consider new data from the environment, feedback from organization structure, system and processes in a specifically human resource oriented input to a strategic decision making process. Organizational realignment may even cause readjustment in organization’s power structure and strategic planning process.

However, the critical managerial task is to align the formal structure and the HR systems so that they drive the strategic objectives of the organization [9] and can gain superior performance. This means that an alignment consists in finding the right candidate in the right position doing the right thing is the goal to be achieved and developed inside organization to gain organizational effectiveness and reach a competitive advantage. So, strategic human resource activities of selection, performance assessment, training and development and employee relations are integrated together to gain this common purpose of driving the company strategy to a reconfiguration and generate change.

The work of Strategic human resource management doesn’t run out so simply; central is the utilization of specific core effectiveness criteria as an identifiable thread running through the staffing of organization [10] , the management of performance and the achievement of an appropriate employment climate, by doing an appropriate selection and by aligning those human capital in the internal environment. In this way, SHRM can become a driving force with regard to the development of the organization. [11] 

Strategic human resource management works through processes “facilitated by persistent intent and builds on underlying developments in skills formation and established patterns of spontaneous cooperation”. [12] Thanks to this, this approach usually ensures alignment, better performance and a better interaction between employees.

Further, what is needed for this approach and for the alignment that entail, are core competencies, skills development, where more power is given to line managers in order to implement the process.

A bottom-up organization is needed, and it is evident that this approach involves a disruption of the organizational structure. Aligning organizational and HR strategies presents several difficulties, because strategy development may be incremental, ad hoc social, cultural and political affairs where numerous cognitive, information limitations – allied to cultural ways of thinking, and political loyalties, and historic relationships and interests – play major roles in structuring how managers think and what they think about” [13] .

SHRM theory describes this process too easily; but inside organization this is not so simple to implement. Many organizations can face to inability to formulate clear strategic objectives; other can have difficulty in matching long-term ideas with short-term requirements. Additionally, “single recipe” approaches to SHRM take little or no account of cultural difference between organizations or even countries [14] .

1.5 Strategic Human Resource Management Activities

As introduced in the previous chapter regarding Strategic Human Resource Management, this model implies a modification of the strategy and human capital of a company in order to achieve a competitive advantage and an organizational effectiveness.

In the phase of planning, management and development of human resources, competencies are a vital part of the strategy, because through them the company can realize its objectives. So, organizations need even more profession and competencies, that can take the form of the right person in the right place (best fit model) or harmony between resources and organizations (matching model).

Individual competencies and role definition are a basic part of the planning and strategy of human resources; in this way Strategic Human Resource Management activities are a way of understanding the perspectives through which human resource capabilities are utilized in support of the business strategy. It can be referred to them as the processes of selection, training and development, motivation and rewards and employee relations.

Scholars have been argued that in the organizations there is such a war of talent in order to attract and retain employees. In a global economy, company is seeking new growth opportunities and hiring new staff can help them achieve this growth.

The process of selection is used by every company in order to recruit human capital inside the organization and find the right candidates, identifying which characteristic they are looking for. Nowadays, there are a lot of changes inside and outside organizations and often is very difficult for the management to find a right definition of roles, even more often employees are asked to face as many activities and abilities that they can.

However, this process is vital for a firm, because if the selection is done in an incorrect manner, it can erode all the benefits gained from linking the process with organization strategy, but also if the strategy to which it is linked is of poor quality.

Across all industries, individual employees must possess the requisite mix of skills, aptitudes, motivations, and so on, that will enable their firm to compete effectively and create competitive advantage in their given market space and to help the organization adapt to future unknown challenges. For many companies, recruiting and selection have become essential tools in ensuring that they have human resources necessary to achieve their current strategic direction and to continue innovating and growing in the future.

In the strategic human resource management, a growing number of researchers have noted that organizations are made up of different groups of employee; and organizations are likely to achieve optimal levels of performance by matching employee system to the unique set of characteristics associated with the responsibilities tied to these roles.

Research on contingency theory would also suggest that there is not a single best recruitment and selection system and not all of the potential system will be ideal for every type of employee. Thus, the first priority of a company is to identify different groups of employees and to clearly articulate the differences in knowledge, skills and abilities between the positions. The second priority, instead, is to identify the best recruitment and selection system that will ensure that the employees in these unique subunits have the requisite skills, abilities and aptitudes required to deal with the level of information uncertainty that they face.

It is essential that all human resources systems and processes, that are brought to bear on strategic process, reflect what state of the human resource theory and practice is.

Human resource selection is a process of measurement, decision making and evaluation, with the aim of selecting the right individuals to perform a job. A good system should add to the overall effectiveness of the organization. [15] 

So, the company has to predict, by using reliability and validity that the selecting candidate will perform the job in the right way, but it is also important that the human resource management specialist have the right knowledge and valid instruments to evaluate their candidate.

The selection has to be done in a long term prospective, because it cannot stop only in satisfying the needs of human capital in the short term and the adequacy of the candidate, but the company should think about the set of capabilities of the candidate and how he can fit inside organization. So it is necessary to valuate not only professional factors, but mostly motivation and personal characteristic.

When a company decides to introduce new resources, the process of selection activates and coordinates with the overall long term strategy, designing career path for key resources. The more capital the company decides to invest in human resources, the more effective will be the definition of the ideal candidate able to reach the business’ objectives.

There have been developed three approaches on how strategic planning techniques applied to developing human resource management practices together with the strategic selection process.

One of these approaches is the product life cycle, which consists in the rotation of human capital together with the cycle of a product; this means that in the growth phase the company will require more human resources, while in the phase of decline, employees request will be subjected to contraction.

The second type of approach is portfolio mix that concerns the relationship between human resources and business units.

Resources are transferred from one business units to another as the company needs, creating such a portfolio mix of human resources. Employees will be requested to have varying areas where to operate and degrees of competences and interests. People, together with other resources can be transferred from one unit to another where most needed.

The last approach consists in the use of competitive strategies and Porter’s theory about innovation, quality enhancement and cost reduction. It considers what employee role behaviors would be needed to pursue each, in addition to the specific skills, knowledge and abilities required from a particular task.

There are several dimensions in which employees’ role behavior can vary; considering in terms of what their implications would be for each of the human resource management practices of planning, staffing, appraising, compensating and training and development.

One of the choices is where to recruit employees, if the organization should rely on internal resources or on the external labor market. Recruiting exclusively from internal sources implies an effort to construct a promotion politics and with regard to career paths the choice is whether to establish broad or narrow paths. The broader the path, the greater the opportunity to acquire skills relevant to many functional areas and gain exposure and visibility within the firm. The time frame for broad skill acquisition is longer and promotion may thus be slower. [16] 

The organization also needs to decide the criteria used in the choice of who to promote:

the more explicit the criteria, the less adaptable is the system to exceptions and changing circumstances, while the more implicit the criteria, the greater the flexibility to move employees around.

Another part of this approach reflects on Porter consideration about differentiation and low cost strategy, managerial characteristics and organization performance.

It is based on the idea that there is a link between managerial characteristic and strategic business unit and that each business unit has to be matched with managers and employees bearing the same tasks, behavior, knowledge, skills and value.

The study examines a portfolio of managerial characteristics including a mix of both biographical background and personality orientation.

Another activity of Strategic Human Resource Management is strategic training and development. It is such an activity becoming more and more important inside companies, because it can represent opportunities and challenges.

Fisher says that there are two main conditions that push the employees to learn inside organizations: readiness and motivation. [17] A trainee ready for learning will possess such skills and knowledge necessary to learn and be a useful resource for the management and strategy.

There are also important learning principles to be considered when an organization decides to design a continuing training. Individuals usually show differences in motivation, aptitude, and ability and this affects the speed of learning and capacity to cope with task difficulty. Successful past learning, but above all feedback and knowledge of results are very important and can increase confidence and likelihood to accomplish new goals.

To benefit from off the job training is essential to maximize the transfer of learning to the job setting. The ways in which it is possible to do this are listed below:

Maximize the similarity between the training and job situations

Provide as much experience as possible with the task being taught

Provide for a variety of examples when teaching concepts or skills

Identify or label important features of the task

Make sure that general principles are understood before expecting much transfer

Make sure that the training behaviors and ideas are rewarded in the job situation

Design the training content so that the trainees can see its applicability [18] 

The effectiveness of a training program can be evaluated in terms of reaction, learning, behavioral or result criteria and assess the knowledge and skills acquired by the trainee.

As soon as there are several types of knowledge, especially inside organizations, it is quite central to link the effectiveness of learning with the objectives of the organization and the training programme.

Carnevale have linked generic strategy with training; he renamed the strategies “umbrella strategies”, exploring the training and development implications of each umbrella strategy and its subsets. [19] An organization with an internal growth is willing to enhance its competitive position, encourage innovation, expansion in new markets, and development of new products and partnership with other companies. It encourages, also, new ideas, suggestion and motivation, a good communication, low bureaucracy, more control on risk takers projects, encouragement of creative thinking, team work, and analytical skills.

This means that in terms of training and development, this type of organizations is sensible to the flexibility of the market and environmental modification, it results in a reorganization of business units and departments, and so does the human capital.

This innovation improvement should be driven towards strategic objectives, and both organization and people need to be strategically driven to formulate and implement strategy. Management development is strategic important too, as a means to ensure the nature and mix of management competences for the organization to secure its current competitive position and to develop management competences to enable the organization to maintain and shift its competitive position in the future. [20] 

When the external environment and the market become more dynamic, the strategic importance of management development increases and can take inside organization three different forms:

Corporate level: it is the level in which the strategic mission is prepared, and so,

at a human resource management this means train managers for the future of the organizations. Not only training is enough, but the HR board will seek to ensure that existing and future management development strategy supports the organization value and mission, specifying the behavior required by each individual.

Business unit level: management in this level is focused on maximizing the performance and the profitability of an organization. It is possible to develop managers with specific personalities, experience and skills and place them where there are most suitable, so they may carry out a particular strategy.

Functional level: the management is focused to fill the gap between management competences and competences required by organization. It uses problem solving, communication, leadership, self awareness, conflict management, focusing both on individual and group level training needs.

The challenge in a strategic management development is to remain focused on

long term strategic objectives at corporate and business unit level, while being flexible enough to respond to short term competitive pressure at the functional level. To achieve it usually a company focuses on a development approach where the learning process is continuous, linked to the organizational goals and becomes such important that is essential for business survival and a competitive weapon too. This approach pushes to the motivation in high level employees (managers) by bringing in challenge and responsibility. In addition an environment supportive for risk taking and that permits mistakes as part of learning process.

The management development leads to the focus point of strategic human resource activity of learning. In fact, the learning concept is becoming even more significant both for individuals and for organizations. It is seen to arise from environmental conditions which create the need for new forms of organization in term of flexibility and capacity to respond to change and with the underlying thinking that people are the only sustainable source of competitive advantage within a complex environment. [21] 

A definition of this phenomenon is that the learning organization, “broadly encompasses the concept that successful adaptation to change and uncertainty is most likely to occur when sufficient and appropriate learning takes place throughout the organization all the time.” [22] 

A learning organizations is always in constant change, continually transform together with the development of its members. “Transformation” so it’s a way through which an organization decides to answer by itself to changes, it is an evolution from organizational development to organization learning, focused on individual training, and defined as organization in ” continual transformation”.

West suggests that the assumption underlying a learning organization is that:

Learning is of value

While learning happens all the time, the quantity and quality of learning can be increased if it is done deliberately rather than by being left to chance.

Learning is a continuous process with no beginning and no end

Shared learning with other people is easiest to sustain [23] 

It can be inferred that a learning organization has quite benefits for human resource management and the linking with the overall strategy, differentiating by other organizations though. In this kind of environment, in fact, human resource strategy is the focus point of the business policy, making the organizations live a process of transformation, learning and working and where every member is encouraged to learn and develop their potential.

“Successful companies are those that consistently create new knowledge, disseminate it widely through the organization and quickly embody it in new technologies and products.” [24] In his view the company is a learning environment, “a living organism”, gained through continuous innovation that can be find mostly in the intuitions, guess, personal features and belief of employees. It is the “organizational equivalent of self knowledge- a shared understanding of what the company stands for, where it is going, what kind of world it wants to live in, and, most important, how to make that world a reality.” [25] 

The other Strategic human resource management activity is strategic management of motivation and rewards. Reward management “is the process of developing and implementing strategies, policies and system which help organization to achieve its objectives by obtaining and keeping the people it needs, and by increasing their motivation and commitment”. [26] 

Some researches and past company experience have shown that reward management has not to be considered as a collateral part of Strategic human resource management, because taken in isolation may undermine not only motivation of employee but also the overall business strategy.

The motivation is important too: what management needs to do to improve it is to align the already existing motivation of employees with the needs of the organization.

This is not a simple process, because management not only has to recognize which are the needs of employees, what they are looking for in order to have a superior performance, but in addition has to consider the idea of changing organizational goals and methods of working.

To motivate employees are necessary plans well structured, and part of an integrated scheme of work planning. If the objective is to be competitive and to deliver high quality products and customer service, it is essential to achieve high levels of motivation aligned to company goals and team working.

A theory of motivation that needs to be taken in consideration by companies is “expectancy” theory. It suggests that human resources have to put so much of their abilities and effort to achieve the organizational goals in order to obtain high results, without forgetting that employees have different needs and goals, and that their behavior will be influenced by their ability to achieve those goals.

The strategic implication of expectancy theory is evident that lies in the consideration of human resources as a tool of performance achievement. It is taken into account which are the perceptions and expectations of human capital by making up plans that considers their needs, the strategic planning and the culture of the organization.

After having considered the expectancy theory, another approach that maximizes the motivation inside organization is goal setting. This theory has its basis in the concept that if a company clarify which are the goals for each individuals and the goal for each group, higher levels of motivation and performance are likely to be achieved. The goals set by the management has not to be too difficult, appropriate goals make the employee worth to do its job, while difficult tasks only lead to higher performance when an individual is committed to them, and this commitment increase as soon as employee participate to the goal setting process.

The goal setting theory can be used, as expectancy theory, as a basis for the decision regarding the reward policies. It is not always simple for companies decide what is the congruent reward strategy, because it has to fit with the corporate value and beliefs and also fit the desired management styles. But, it has not to be underestimated, because a reward it’s a vital part of employees motivation. Often, workers feel themselves and their work not valued by the management, so a reward policy is what the company needs to motivate: be clear, linked to performance, anchored to the realities of the labor markets, expression of employee work, is an excellent way to show employees the consideration of the company towards their work.

Job evaluation is another thing to be taken into considerations. It attempts to create a rational pay structure based on the content of jobs that is, based on job descriptions, and has been the mainstay of many large company schemes in recent decades. [27] 

To evaluate a job usually it is used as said a job description and definition, in order to place the employees where they are needed and with the tasks their able to accomplish. This job has to be done carefully in order not to suppress and eliminate the ideas and motivation of workers, then placing a great emphasis in job requirements reduces the importance of other compensable factors, such as individual capability and performance.

Having outlined these two ways of motivation enhancement does not take into account how to outperform and reach what is called the performance management and the performance related pay (PRP), usually reserved for directors and senior managers.

Performance management can and should be strategic in that at each level of analysis, it is tied to accomplish higher level objectives and overall organization results. This flows into the concept of performance related pay, linked with the concept of goal setting, performance monitoring for feedback and development and performance appraisal.

PRP is another tool of employee motivation, there is not a tested casual relationship between higher productivity and PRP, the economic change is forcing employees to move in direction of PRP schemes, avoiding individual performance related pay

The last Strategic human resource management activity lies in the strategic employee relations and engagement. When an employee experiences engagement or commitment, a number of positive outcomes occur: less conflict and stress, sense of control over work environment, confide


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