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Strategic Human Resource Management (SHRM) can be defined as a link between human resources and the strategic goals and objectives of the business. Most importantly, the aim of that is to improve business performance and to develop an organisational culture that will foster innovation, flexibility and competitive advantage. In other words, the HR function is seen as a strategic partner helping the company to implement and formulate strategies as well as reach its goals and flourish. The main activities of HR department include selecting and recruiting the right people for the job roles, training and rewarding them (Armstrong, M. 2008:33-35).
Very often SHRM is being confused with HRM. SHRM has more of a long-term orientation towards objectives. It doesn't focus on internal human resource issues; the attention is focused more on addressing and solving problems that have an effect on management programs in a long run. In other words, SHRM focuses on occurring obstacles outside of human resources and tires to increase employee productivity. Therefore the key actions of SHRM manager are to identify main HR areas where strategies could be implemented in the long run in order to improve overall employee motivation and productivity (Wright, P.M. and McMahan, G.C., 1992).
SHRM is implemented with an aid of strategies. As all the organisations are different so are the strategies but they set out the same idea - what the organisation intends to do about its human resource management policies and practices and how they should be integrated with the business strategy as well as each other. The strategies could be identified as being of two types: 1) high-performance working (overall strategies); and 2) strategies relating to the different aspects of HRM such as learning and development (specific strategies). A good HR strategy is the one that achieves what it sets to achieve and is satisfying business needs as well as employees (Armstrong, M. 2008:54-61).
Developing of HR strategies one of the key areas of SHRM. It can be a difficult task as there is no 'right way' of developing them. The process can even be just as important as the contents of the strategies. Furthermore, implementing HR strategies with the business strategies is also a very complicated process. The integration can be achieved in two ways:
Vertical fit integration - integrating business and HR strategies. Vertical fit is about matching the HR measures with the strategy pursued by the company. In order to enhance an overall performance, the company needs to create or acquire the optimal package of human resources. Generally speaking, vertical fit is considered to be a critical step towards attaining the organisational goals with an aid of human resource activities.
Horizontal fit integration - bundling. Horizontal fit refers to the congruence among the various HRM practices among themselves. There are three factors that influence horizontal fit: HR policy, options of HR policy, and the budget of HRM. In other words, horizontal fit is concerned about the composition and arrangement of the HRM system, and the organisational policies toward HRM matters in order to achieve a high level of fit among independent HR practices.
(Wei, Li-Qun, 2006)
Table 1: Determinants of Both Types of Fit
In brief, both types of fit make quite a significant contribution to the competitiveness of a business and it is important to arrange a variety of HR practices in a systematic way. If properly implemented, the set of these practices can have a very positive impact on company's performance (Wei, Li-Qun, 2006).
Implementation of HR strategies is not easy. First of all, they have to be 'translated' from abstractions into programmes that would clearly state objectives and deliverables. Even then the implementation is not easy, as there are other barriers obstructing it. Naming only a few, the barriers could be:
Employees tendency to only accept initiatives relevant to their own areas;
Long-serving employees tendency to cling to the status quo;
Not all the employees understand complex or ambiguous initiatives or perceive them differently, especially in large, diverse organisations;
The initiatives are sometimes seen as a threat;
The extent to which senior management is trusted, etc.
(Armstrong, M. 2008:70-71)
These kind of barriers may occur when not enough attention is being paid to practical implementation problems. Here the role of a line manager is very important as well as the need to have established supporting processes for the initiative.
In order to overcome these barriers it is essential to formulate the strategy well, make sure there is a support for the strategy, assess barriers, prepare action plans, etc. (Armstrong, M. 2008:70-71).
The main idea behind all that, however, is that there is a gap between what the strategy says and what actually happens to it in practice.
SHRM in Practice
There are a lot of examples of SHRM in the business world. One of the best examples of a successful HR strategy is the one adopted by Google.
In 2008, Google was voted for as the best company in the UK to work for. It was revealed after a survey was carried out among 1.5 million employees across 4,000 organisations. Mrs Hornsey, the HR director for EMEA Google, revealed what made the company so successful in maintaining high staff morale and high retention rates:
"The cornerstone of what we are doing at Google that is very different is we put a big emphasis on hiring people. We try very hard to find the right people, people who will fit in with the Google culture, because we believe that if you can hire the right people, then everything else just flows from that." (Business Source Premier, 2008).
Mrs Hornsey added that the company is even willing to wait for several years, interviewing hundreds of applicants, to find the one who fits its culture best. Job interviews are conducted by direct line managers and often also a candidate's potential peers and subordinates.
Google as an employer is also known for giving theirs staff financial incentives and perquisites. For example, last year UK workers were given a bicycle. They also receive free gourmet meals and transport.
In addition to that, the company has unlimited sick leave and only expects the employees to work 70% of the time.
The organisation is built entirely on trust. Working with such conditions and with strong HR strategic policies in place employees thrive on hard work.
A not so impressive example of HR strategy could be shown with an aid of a case study of British Airways. The company went through a number of changes at the managerial level throughout the years. The biggest changes started happening in 1982 when Colin Marshall became a Chief Executive of the company. At that time it had a bad reputation and there was an urge to change the way of business was working.
Marshall has discovered that one of the main problems in the business was that the employees did not have a good harmonious working relation. He then introduced a Staff Development Initiative which aimed at deep-seated and lasting cultural change. It was also aiming to have more effective employees which would provide quality and excellent service among its customers.
Additionally, the Awards for Excellence have been created. The aim was to motivate the staff to always do their best in providing services (www.typepad.com).
However, good times didn't last long. Most recent economic downturn has affected thousands of businesses around the world and British Airways were among them.
The only way for the company to stay competitive in the market was to cut down the financial costs one of them being employees' wages. It has created a huge chaos within the organisation and resulted in people going on strikes; hence the service of BA was disturbed and caused a lot of complaints from the clients. Once again the company lost the trust of its clients as well as the employees (www.mynewsdesk.com).
Looking at the above described two case studies, two very different pictures of companies' appear. Also, the importance of HR department in those companies. British Airways did not pay the right attention to the importance of building the relationships among its employees at the start and later discovered it was a mistake. The case study just shows how there is now trust and no commitment within the company, the only thing that motivates people working for British Airways is their salary at the end of the month.
With Google, however, it is a completely different story. It is also very likely that having such a strong commitment to the workplace, even if financial difficulties were to occur, the employees would stay professional and would continue their work as they are driven not only by financial incentives. People admire the trust the company is showing to them as well as the opportunity of self-development, own time management and good business culture.
Another good example of efficient HR strategy would be Motorola and their idea to establish an institution that probably no such company has established before - a Motorola University. The decision has been made after the research showed that huge amount of company's employees had very poor knowledge of basic things that are learned at school. Not only people were bad at mathematics, some of them could not properly read or/and write.
Motorola has made a strategic decision to establish a University as they thought that a simple word as 'training' wouldn't impress people and they wouldn't be attracted to an idea of engaging to it.
The Universitys' doors are open not only for employees of Motorola but also for employees of their suppliers, principal customers, and even educational partners. The company was also planning to accept the students from outside their immediate community of companies and institutions, people who would not necessarily work for Motorola or any of their suppliers or customers.
The company has chosen to make such move in order to inspire people who work for the company or would be working in the future (Business Source Premier).
The Consequences of SHRM
It is important to identify what consequences SHRM has on the performance of business. In other words, as HRM is concerned with the people implications of the company, how can it change the vision of the organisations future and how can it help to fulfil the mission.
The key role of strategic HR management is already known and there are some issues that HR strategy may address:
Structure. It can be explained by citing the managing director of ABC Distribution: "I do not see any difference between the HR strategy and the business strategy because we evolve our organisation to reflect where the business is going", he said. The success of the company depends a lot on whether there is a proper management structure in place.
Teamworking. By withdrawing old traditional hierarchies a background of creating a team building is created. In a lot of cases, the less layers there are between the workers and director there are, the more harmonised is the working environment. Also the communication between staff is easier and more effective. In addition to that, it could have far-reaching effects on flexibility and performance and to achieving a better coordination of business.
Performance. This strategy is based on an analysis of the critical success factors and the performance levels reached in relation to them. The performance can be improved by taking the steps to improve training, development, reorganisation, the development of performance management processes, business process re-engineering, etc. A lot of companies have already adopted performance management processes in which the emphasis is on performance improvement and development and not reward. This scheme brings new priorities of involvement, teamwork and self-development.
Quality and customer care. The aim of most companies is to achieve the competitive advantage. The competitive advantage is often measured by customer satisfaction and hence loyalty and retention. Innovation and cost reduction is still important but the main focus of attention should be the customers because if they reject the product due to it not meeting their expectations then everything else looses the sense. Therefore the strategy for quality should be built into the business strategy.
(Armstrong, M. 2008:98-101)
Achieving a complete integration of HR and business strategies is quite complicated. Partly the reason for that is that in the past HR manager in the company was not considered to be a part of a general management team. Furthermore, the personnel advice was not a part of strategic direction. However, in today's modern business HR is indispensable.
The economy has just started to recover. The recession is finally over. Despite improving figures, some scientists predict it is going to be a long process before things will come back to their former places.
Economic crisis have also made business leaders to look at and re-assess their approach to people management. Today's managers have even greater responsibility to bring about the changes in the way people work. The corporate approach is slowly being pushed out by a more inclusive style of management as employers accept the benefits of building an engaged workforce and working across many partners.
The fact that human capital is the most valuable asset of every business is accepted unconditionally and the need for investment in its development is not seen as a luxury these days, conversely it is seen as a 'must'.
The role of strategic HR will become more and more important in the years to come. This conclusion can be made by looking at the companies which have already successfully adopted the strategic human resource management models and with their aid have secured the secure position in today's competitive market. Other companies will have to follow this trend in order to gain some competitive advantage.
Failing to improve the HR strategies may result in company's loosing money by failing to retain their existent staff or not providing staff with the right training for them to be more efficient in their job roles. Also businesses that have not yet done so will have to recognise the importance of implementation of some kind of reward systems to encourage their employees and to give them an incentive. Today's modern business environment demands more from their employees, they have to have as many relevant skills and experience as possible in order to get a job. On the other hand, these employees are or will be more demanding to the businesses in terms of reward system, good working conditions, environment and motivation.