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In the 1980's and 1990's substantial changes were made in British and American industry conveyed in relation to the decline economy, competition from other countries. Conventional industries declined and were replaced by new up raising industries. The way people use to work was changed, given a power balance and expectation. Strategise was the response to this changes that occurred because everything had to be planned, organized, implemented and a strategy was taken out for any point of action.
Peters & Waterman (1982) wrote very influential saw people management as key to securing competitive advantage "customer relations simply mirror employee relations" (Peters & Waterman 1982)
A number of growing organizations, human resources (HR) are now viewed as a source of competitive advantage. There is greater recognition that distinctive competencies are obtained through highly developed employee skills, distinctive organizational cultures, management processes and systems. This is in contrast to the traditional emphasis on transferable resources such as equipment. Increasingly it is being recognized that competitive advantage can be obtained with a high quality workforce that enables organizations to compete on the basis of market responsiveness, product and service quality, differentiated products and technological innovation. Competitive advantage lies in management's ability to consolidate corporate-wide technologies and production skills into competencies that empower individual businesses to adapt quickly to changing opportunities.
The connection of human resources with strategic goal and objectives in order to improve business performance and develop organisational culture that promotes innovation and flexibility is Strategic human resource management (SHRM). It is an outline of Human Resource Management (HRM) functions and activities in full purpose to help organisations to achieve the goals set out in the organisations mission statements.
Strategic HR is a way of accommodating the HR function as a planned collaborator in the formulation of the organisation's strategies as well as in the implementation of their strategies through HR activities such as recruiting, selecting, training and rewarding personnel. While strategic HR is aware of HR's connection part in the planning process, the term HR Strategies refers to specific HR courses of action organisations plan to practice to attain their goals
Armstrong (1999) said Walker (1992) defined Strategic HRM as "the means of aligning the management of human resources with the strategic content of business" and Boxall (1994) expressed the view that "the critical concerns of human resource management are integral to strategic management in any business" (Armstrong, p248 1999)
SHRM aims to show the reasonable that organisational and business needs can be interpreted into lucid and realistic strategies and agendas, providing guideline for achievable action plans.
The integration of HR strategies with corporate or business strategies is the completely what SHRM is about.
The types of model used to develop, implement and also show the relationship between business strategy and HR strategy are:
Separation model shows how classic personnel management worked 20 years ago it is quite a common approach mostly used in small business. Here HR strategy is considered to be separate from the overall business strategies. This model focuses more on HR issues, and has the conception that HR as staff driven, functionally professional concern. There is no relationship between business strategies and HR strategies.
In the fit model organisations starts to become aware of the part people contribute in the day to day business strategy. It recognizes there importance of people Here HR strategy is designed to fit the business strategy and required to define a plan that is up to the standard of the organisations. This is not yet a packed assurance and possibly nevertheless not fully HRM probably a bit personnel management.
The dialogue model recognises the necessity for good communication between the business strategy and HR strategy. Business strategy is still the main focus in the organisation, but acknowledges the fact that there may be a need to change the strategies and reconsider alternative strategies because just the business strategy may not be realistic.
There close connection between business strategy and HR strategy in the holistic model. Organisation is being acknowledged as the key to competitive advantage rather than putting into operation the business strategy..
Finally, HR-Driven Model places Hr strategy as its principal position, HR strategy being the main constrain in the business strategy. This is mostly done knowledge based companies where 'human capital' is their principal business strategy, for example Mercer Human Resource consulting firm.
The strategic HRM concept attempts to develop the HR function to achieve strategic fit. Three main approaches have been identified: Best Practice, Best Fit and the Configurational Approach (Richardson & Thompson, 1999)
Strategic HRM theory - universalist, contingency/fit, and resource based
Implications of strategic choice for HRM
Cost Reduction focussed strategy
Fixed and explicit job descriptions
Repetitive tasks, that emphasise specialisation and efficiency
Short-term results driven appraisal / reward
Basic skills training, limited development opportunities
Quality focussed strategy
Competency-driven job descriptions
Involvement at job level
Individual and group performance targets for reward
Continuous training and development
Limitations of Strategic HRM
HR models based on rational linear managerial decision-making
Connection between external market strategies and the HR function.
To focused on an individual areas rather than the broader picture.
Concept of management control and the reason for having HR
As we learned earlier not all strategy or management decision-making is logical, linear and classical. But HR models tend to assume this as does the whole strategic HRM field.
HR strategies tend to be subordinate to economic considerations reducing the ability for long-term HR planning.
Some authors argue that to have a specific HR strategy ignores the complexity of organisational change.
Certain types of corporate strategy favour HR strategies and a commitment to HRM may result form a real or perceived belief in the value added of a HR Strategy which is more problematic.
(sourced from Andrew Hird lecture notes 17th October 2006).
Becker et al (1997) believed that organizations are individual and should be tailored as such. This undermines the concept of best practice it is an idea supported by Purcell (1999.) He sees it to be inconsistent with the resource-based view of HR. If it is the unique, inimitable characteristics of organizations that drive profit performance (Nelson, 1991) than best practice - a blanket approach using universal practices simply cannot be effective.
However, best practices allow room for greater understanding of which practices will work for an organization.
Purcell (1999) also argues against best fit. He feels the two approaches place a barrier against organizational change. The external environment for all businesses is dynamic by nature. Markets are chaotic and so an organization must be flexible. Although best fit gives equal status to the culture of an organization as to the business strategies Purcell (1999) observes that it would be impossible to match all variables successfully to create best fit.
Mac Duffie (1995) states that more is better. That is that the configurational approach - which 'bundles' practices to suit the culture of the organization, the industry and the objectives to achieve greater performance. This lends itself to strategic fit, as ascertained from research by Ichniowski et al (1997.)
Logic in favour of the configurational approach, it is very straightforward. That employee performance is a function of both motivation and ability, it follows that practices should reflect both. (Dyer and Reeves, 1995) Regarding ability this takes root in careful selection and training and the inclusion of both financial and non-financial incentives.
Supporting the belief that 'more is better' belief Mac Duffie, (1995,) Guest (1997) suggests the implementation of a broad range of high performance practices to achieve competitive advantage.
Whichever approach is considered fit, the overall theory of HRM is that the centre for competitive advantage can be developed through the implementation of practices that develop HR policy, rely on strategic integration and promote commitment. Firms should position themselves based on their unique, valuable resources and capabilities rather than products or services because they are more enduring than products and they provide increasing return as they are used.
It is useful to view the reality of SHRM. When we view HRM as a philosophy we accept that it is a perspective, something to keep in mind. It is not an applied logic Mintzberg et al, (1988).
HRM promotes strategic thinking and embracing of a planned point of reference, which showing the critical connection between business strategy and HR strategy