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In accordance with the modern theory of human resource management personnel is one of the firm’s resources, which need to be properly managed, creating the conditions for its development. In modern organization a developed HR policy is focused primarily on forming a strategy for HR management, which takes into account the whole strategy of the organization. To understand this it is necessary to consider the concept of SHRM.
Many scientists believe that the strategic human resource management is a means of consistency of human resources management with strategic aims of organization, that is, HR strategy is developed taking into account both the interests of the managers and the interests of the staff. But the main goal of strategic HRM is to create strategic opportunities by providing the organization with qualified, loyal and well motivated employees, who are necessary to achieve long-term competitive advantage.
Understanding of SHR management and its basic concepts
Strategic human resource management can be explained as management of a competitive labor potential of the organization, taking into account ongoing and upcoming changes in its external and internal environment, that allows organizations to survive, grow and achieve its objectives in the long term. Another definition that relates HR strategy with business needs was suggested by Miller: “The strategic human resource management covers all the issues and actions that are related to the management staff at all levels of the company and focus on creating and maintaining competitive advantage”. (Armstrong 2000)
Thus, the HR strategy includes:
– Definition of the objectives of HR management, that is, decision-making in the field of HR management should be considered both economic aspects (the adopted strategy of HR Management), and the needs and interests of employees (decent wages, satisfactory working conditions, opportunities for the development and implementation skills of workers and m. etc.);
– Formation of the ideology and principles of HR management, it is the ideology of human resource management should be reflected in document form and implemented in the daily work of all the heads of structural divisions of the organization, starting with the head of the organization. This document should be a set of ethical, non-infringement of the rules in dealing with personnel of the organization;
– Definition of terms to ensure a balance between economic and social effectiveness of labor resources in the organization. Cost-effectiveness of HR management means the optimum use of staff to achieve the goals of business organizations (for example, increase in production) with the limited human resources of the organization. Social efficiency is ensured by the implementation of measures aimed at addressing the socio-economic expectations, needs and interests of employees of the organization.
The main goal of strategic HRM is to create strategic opportunities by providing the organization with qualified, loyal and well motivated employees, who are necessary to achieve long-term competitive advantage. The main objective is to solve the following tasks:
1) the use of planning;
2) a logical and consistent approach to designing systems of HR management and management, based on employment policy and strategy for the use of human resources;
3) coherence and consistency between the activities and policies of HR management and certain well-defined business strategy;
4) Consideration of employees of the organization as a strategic resource for achieving competitive advantage.
The main conclusion of many researchers (Becker B. , 1996; Pablos 2005; achievement of the organization of the strategic and tactical goals can be guaranteed if each of its employees in the workplace has reached the goals set before him.
Of course, the contribution of employees in achieving the goals of the organization is different and depends on the tasks that they must solve, and the powers that were delegated to them. Nevertheless, for the effective functioning of the organization it is important an effective work of all staff. Therefore, the organization must (either continuously or from time to time) evaluate the conformity of its staff, based primarily on an analysis of the degree of success of the tasks assigned to the organization.
The concept of strategic HRM implies that HR strategy must be fully integrated with the corporate / business strategy in the sense that they are both connected with these strategies and ruled by them. It is necessary to ask the question: To what extent HRM strategy takes into account the interests of all parties to the organization, from employees and ending with managers and owners? A flexible version of the strategic HRM from all the issues of HR management focuses mostly on the aspects of human resources, emphasizing the continuous development, effective communication, staff involvement and the quality of working life. Another version of the strategic HRM focuses on generating income from investments in human resources, that is for the benefit of the business.
Strategic consistency of the HRM with competitive strategy of the organization
The concept of strategic consistency, sometimes called a model of “fit”, is central to the concept of strategic human resource management. Strategic consistency is necessary to make the integrity of the combination of competitive strategy with the strategy of HR management, the latter should not only contribute to the implementation of the first, but to its initial development. Strategic consistency means that HR strategy must comply with business strategy and promote its implementation.
M. Armstrong found that the HR strategy must comply with:
a) competitive strategy;
b) the phases of the life cycle of the organization;
c) the dynamics of organizational change;
d) organizational characteristics of the organization. (Armstrong, 2000)
An approach of the “best fit” is based on the belief that the “best fit” is more important than the “best practical solution.”
Strategic fit (integration) of HR management is a tool to target the management of staff at the strategic goals of the business. The strategy should comply with the strategy of the organization (vertical integration), but even better if it is an integral part of business strategy, and makes its contribution to the process of business planning and implementation of the plan. Vertical integration is necessary in order to ensure consistency of enterprise strategy and HRM strategies, so that the first must support the implementation of the second and help to define it. In addition, there is a need for horizontal integration between different aspects of the strategy, so that the various elements fit each other. The ultimate goal of this is finding a consistent approach to HR management, in which various practical solutions correspond with each other. That is why HR strategy as part of competitive strategy should be consistent with and depend on both the specific features, and the whole competitive strategy of organization. (Pablos Patricia 2005)
One of the first formalized concepts of SHRM was proposed by the Michigan school. They have suggested that HR and management of organizational structure must comply with organizational strategy (the “model of compliance”). Further, the authors said that the cycle of human resources management consists of four types of processes, or functions, performed by any organization, namely:
1. Selection – search for the optimal human resource for various kinds of work.
2. Evaluation – performance management.
3. Reward: reward system is the least effective and well-used management tools from those that are used to enhance the effectiveness of the company. Remuneration should be based on both short-and long-term results of work, given the fact that company needs to work in the present to achieve success in the future.”
4. Formation of high-performance staff. (Armstrong, 2000, p.10)
It should be noted that the strategic human resource management is a holistic process: it understands the organization as a whole and refers to the approaches that should be taken throughout the organization, so that it was possible to achieve corporate strategic goals. Strategic human resource management excludes the use of isolated programs and methods or the narrowly focused programs for personnel management. So, the feature of strategies of HRM is that they are closely linked with all other strategies in the company. Managing people is not defined as a separate function, and is the way to achieve all business aims. Planning for the HR should be an integral part of the process of formulating the rest strategies of the company, and where it occurs in isolation, arises the need to harmonize the two processes.
Guest identified five types of fit:
1. Fit as a strategic interaction: connection of the terms of HRM practices with external environment.
2. Fit as a situational factor – approaches, ensuring compliance of internal practices with specific external factors, such, for example, situation on the market.
3. Fit as an ideal set of practical approaches, that means a set of “best practice approaches” that any company can profitably implement.
4. Fit as a complete structure – an approach that underscores the importance of finding the optimal combination of practical actions.
5. Fit as a “bundles” – search for the distinctive configurations, or “bundles” of practices, united on the principle of supplements, in order to determine the most effective of them. (Armstrong, 2000, p.46)
Three of these kinds of compliance: compliance as an ideal set of practices (“best practical approaches”), compliance with the circumstances of the firm (the approach of “best fit”) and compliance as a “bunch” (“configuration” approach) may be applied to strategic HR.
One suggestion of Guest (Guest, 19896) for HR is that the strategic integration, among other things, deals with the ability of organizations to maximize the coherence of the various aspects of HRM. One of the views on the concept of HRM suggests that the likelihood to achieve adequate target is enhanced if the organization has a strategic imperative of the dominant or driving force, such as quality, efficiency or the need to develop skills and competencies, and if initiated processes and policies are developed and implemented “in bundle” to achieve a certain result. For example, if the driving force is directed at improving the efficiency of labor, it is appropriate to use the technique of profiling expertise to refine the recruitment standards, identify needs in training and development, and to indicate the desired standards of conduct or efficiency of work of the staff. (Armstrong, 2000)
The starting point of the process of implementing the approach of the “best fit” is to analyze the business needs of organizations in the context of its environment (culture, structure, technology, processes). This can specify exactly what should be done. After this it is useful to collect and mix the various ingredients of the “best practical solutions and choose a certain approach, which will use the practical steps that correspond to the identified needs of the business.
Relationship of HR strategy with the competitive strategy of the organization is proved by scientists at two levels:
– theoretical: based on the resource approach, the laws of the organization to study the essence of competition (for example, by Becker (1996), Patricia de Pablos (2005), Tyson (1997), etc.)
– Empirical: Based on studies of the relationship and analysis of existing practice (for example, by Delaney (1996), Huselid M., (1995) .
At the present stage of economic development a competitive advantage have those organizations that effectively manage their resources, both material and intangible. HR management is of particular importance for organization, as one of the essential and “rich” intangible resources of any company. Resource-based approach to HR suggests that it is possible to develop a strategy to achieve competitiveness, based on consistency and effectiveness of work of human resources. Direction, objectives and principles of HRM are reflected in the HR strategy, and competitiveness of the organization depends on its ability to develop and implement HR strategy which complies with overall strategy. (Wright, et al., 1994)
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