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As the corporate scene gets intolerable, managing under various circumstances comes off as quite the major challenge and requires companies to go back to their basics. In-depth knowledge on their nature of business to goals gives way to developing competitive business strategies. The role of human resource management playing an active part in formulation of strategy remains a frequently pondered upon area or subject. The availability of innumerable data on strategic human resource management is a constant remainder of the need for a welcome change in the current business scenario that will change the traditional school of thought that often describes human resources as a follower of strategic business decisions more than a maker of strategic business decisions.
Porter's Definition of Strategy:
The concept of competitive advantage was formulated by PORTER, M (1985), Competitive advantage arises out of a firm creating value for its customers. To achieve it, firms select markets in which they can excel and present a moving target to their competitors by continually improving their position.
Porter's focus remained on differentiation constituting the perception of the offer of a product or service as unique industry-wide and focus constituting serving a particular group or market a more effectively than competitors.
His framework revolves around three main strategies that organizations use to gain competitive advantage. These are:
3. Cost leadership
A sustained competitive advantage cannot be achieved by evaluating opportunities or threats and then conducting businesses only in environments that seem viable to them at that point of time. Rather, it is about creating a sustained competitive advantage by capitalizing on the resources and talent available in such a manner that an organization begins to attract competition for itself in the environment.
EVOLUTION OF STRATEGIC HUMAN RESOURCE MANAGEMENT:
The following diagram explains clearly the evolution of strategic human resource management and the prior phases that brought about the formation of SHRM.
(CHARLES FOMBRUN.NOEL.MARY ANNE DEVANNA - STRATEGIC HUMAN RESOURCE MANAGEMENT, 1984)
Need for strategic human resource management
Quality of life
Figure 1.1 Phases of Strategic Management
With increasing competition and scarcity of talent fuelled by challenging economic, political, social and technological factors creates an emphasis on today's corporation to interfere and take a step towards better management of its human resources.
The recent focus being human capital that remains an evolving challenge makes it an important aspect for human resource managers to procreate new and aggressive strategies designed to achieve better efficiencies in corporate practices.
A look at Figure 1.1 explains that strategic human resource management function as Fombrun, Noel and Devann (1984) discuss in their book on Strategic Human Resource Management is actively engaged in attempts to support the strategically oriented organization as it struggles with the environmental trends mentioned in the figure shown above.
A buoyant environment that keeps in mind HRM issues associated with strategic notions to help diversify, internationalize and restructure organizations to bring about prudent changes in order to cope with issues thereby promoting effective personnel practices that have a great impact on employee performance and helps achieve organizational goals and objectives. This revolves around the main objectives of Strategic Human Resources Management.
Strategic HRM has been defined as: "All those activities affecting the behavior of individuals in their efforts to formulate and implement the strategic needs of business". (SCHULER, R.S., 1992)
Strategic Human Resource Management involves the formulation of key HR objectives, policies and strategic that makes provision for essential skills and talent required to meet the organization's overall goals while ensuring employees' needs are met. Strategic HRM provide a solid framework that supports the effective use of information technology to apply human resource information systems and other management systems in the present day scenario.
FOUNDATION FOR STRATEGIC HUMAN RESOURCE MANAGEMENT:
With a well-defined strategy that acts as a solid framework, organizations can explore various aspects of management like effectiveness of strategy formulation, implementation and even leadership.
It is important to note key issues in culture and strategy that influence the organization in terms of competitive advantage and overall, in securing an employee's commitment to pursue those strategic plans and instills willingness in adapting to change.
Strategic employee relations are therefore a key initiative that plays an important role in deciding human resource's capability in being entrusted the task of formulating and implementing an organization's strategies.
An interesting point made by Mintzberg (1987), claims Strategy formulation is not necessarily a rational and continuous process. He believes it is more a consciously driven through systematical strategic reorientation happening in what he calls "quantum loops". A strategy, in Mintzberg's book, is an action plan arising out of deliberation and may involve revealing the intentions of the top management in achieving success in existing and new markets.
Mintzberg's article in the Harvard Business Review on "The rise and fall of strategic planning" 1994, states that:"Far from providing strategies, planning could not proceed without their (human beings" prior existenceâ€¦ real strategists get their hands dirty digging for ideas, and real strategies are built from the nuggets they discoverâ€¦ sometimes strategies must be left as broad visions, not precisely articulated, to adapt to a changing environment".
Strategic human resource management positions and maintains the accuracy levels of organizational goals with the organization's activities to achieve the desired result. SHRM integrates the use of some of the best human resource practices streamlining it into the main planning process to achieve goals and targets as desired.
The process of Strategic Human Resource Management has a smooth transition that starts with essential human resource strategies that extend then towards strategies resulting in the organization's performance. This usually involves the employment of a substantiated behavioral approach that will effectively help implement the overall business strategy.
MODELS OF STRATEGY:
Resource Based Value (RBV) Model: Resource Based Theory (Barney, 1991) argues that a firm with valuable, rare, inimiable and nonsubstituable resources can gain a competitive advantage in the market. The resource based model emphasized on the strategic literature away from the external factors (such as industry position) toward internal firm resources as sources of competitive advantage (Hoskisson, Hitt, Wan &Yiu, 1999). Boxall (1996) further built upon the RBV/SHRM paradigm, suggesting that human resource advantage (i.e., the superiority of one firm's HRM over another) consists of two parts. The first part is the human capital advantage which refers to developing valuable resources in an Organisation who would be productive to achieve the goals and targets in the desired time frame. It then focuses on the aligning the interest to create a skilled and productive work force. The second task is to develop and train the employees with maximum exposure so that they can be shifted within as well as across the industry cycles. Lepak and Snell (1999) presented an architectural approach to SHRM based at least partly in the RBV.This approach was based on developing a 2 by 2 matrix combinations focussing on the uniqueness and skills available in an Organization. The major implication on this theoretical Resource based model was that some employees were found to be more productive and competitive when compared to others. This requires managing them in a different manner. The conceptitual development within the Strategic HRM has leveraged the theoretical resource based model to focus on certain key areas. First it focuses on the skills which are already available in Organisation at any given point of time. A strategy is developed to retain the skill levels or to achieve a better alignment between the skills represented in the firm. Secondly it focuses on the employees behaviour which is an independent component of the SHRM.A freedom of speech should exist among the employees which would enable them to make decisions in the activities which they engage in. There may be a high skilled employees prevailing in an Organization but either the poor design of work or poor treatment of employees would create havoc in the Strategic policies in turn affection the performance of the Organization. For example a plant operator in a production plant who hears an alarm would have discretion in running the plant unless and until there is major breakdown which increases the downtime of the plant and affect the maintenance costs. Finally it focuses on the multiple human resource practices which would affect the performance of the employees rather than focussing on a single practice. This gives a wide perspective to look into the various practices beyond the HR functionalities such as communication both upward and downward in an organization, culture, competencies, job roles, leadership that impact the employees and shape their behavioural attitudes, perception and performance in an Organization. The important aspect of the resource based model is that it needs to be constantly monitored and reframed as the employees and the environment in an Organisation keeps changing from time to time. An organization might achieve a superior advantage on any one of this factors but sustainable competitive advantage requires superior position on all the three factors. Though this model can be identified and applied, there are limitations in applying this model as it would take time for the organization to realise the effects and in the meantime the competitors would gain sufficient advantage on the market.
Resource Based Model and Empirical SHRM Research: There were number of studies based on the application of the resource based concepts to the Empirical SHRM research.Huselid (1995) argued at a general level that HR practices could help create a source of competitive advantage, particularly if they are aligned with the firm's competitive strategy. The study revealed that the HR practices were directly linked to the employee turnover and the gross return value to the Organization and this was intense in a capital intensive Organization. The attributes of a highly productive work force can always be taken as a role model for a strategy to implement a resource based strategy in an organization. Wright, McMahan and Smart (1995) found that organizations opting for a different strategy rather would perform in a poor manner rather than those organizations who would opt for a preferred strategies.Altough the empirical approach of the resource based model focuses on the high performance work systems and alignment of talent to fit the employees it fails to address on the dependencies of the HR policies. Though HR policies were impacting the employee's appraisals, training practices and performance; there are limitations on the extent to which HR policies would affect the employee's performance in an Organization. This is because of the lack of skill based knowledge which a HR would posses in an Organization. Also there would be a communication gap between the HR and the senior management which could create lack of skill based knowledge among the HR.This requires in-depth understanding thereby identifying the ambiguities and analysing them. For example a product development company does not simply imply that all the employees in the Organisation try and come up with new innovative ideas. It is the system and Organizational structure which ensure the employees to follow them and come up with new intuitive ideas. Though HR policies are less effective here, it would still extend and amplify the performance of the employees to follow the systems. The resource based combined with Knowledge centric would give a wider perspective on the Strategies though the model has relatively influenced the fields of SHRM.Also it has provided more of an attention towards the internal resources of the Organization such as employees motivation techniques, knowledge and learning.
Knowledge Centric Strategy: While the resource based view of strategic HRM focuses on human abilities, motives and interactions and can make organizations better at learning and more adaptable to changing environments, it can be unarguably concluded from the literature that RBV largely focuses on knowledge (Wright, Dunford & Snell, 2001). As mentioned, focusing on human abilities, motives and interactions requires that firms define knowledge, identify existing knowledge bases, and provide mechanisms to promote the creation, protection and transfer of knowledge. The focus of knowledge in HR literature has focused on not only job related knowledge but also training and development to improve this job knowledge or soft skills like communication and leadership. These functions of the HR professionals need to be collated and collected from the resources available and data over a period of time. Knowledge centric strategy should not only focus on individual learning and development but also organizational learning so that it can contribute to the overall business strategy and acquiring a competitive advantage to better the prospects of organizations. HRM practitioners need to treat knowledge as an individual phenomenon rather than based on an organization as a whole. This sort of change is achieved only when the entire organization helps to contribute to the bottom line and administrators need to push these strategies forward to every HR function. Furthermore, skill acquisition and accumulation of organizational assets deeply contribute towards the knowledge centric as well as the resource based view of SHRM. It can be seen that models of SHRM do not exist individually and a combination of one or more of them are required depending on the firms needs and human resources used to maintain the firms' success. Some of the priorities of HR executives are to reinvent or redesign it to compete more effectively to become more customer focused and cost centric. HR professionals need to contribute to cost management and contribute to work on making the business more effective as well as rejecting fads, quick fixes, addressing the diversity issue and rejecting other HR fads.
Best fit and Best Practice:
There has long been considerable debate amongst HR literature whether firms must adopt best practices or best fit. While adopting best practices, organizations still fail to meet the standards and do not perform to the expectations. In a similar manner, it can be deduced that there can be no particular manner in which to conduct HR strategies that would fit the needs of all organizations. There is overwhelming evidence against a universal set of HR practices based on national variations in culture, regulations, and traditions of management. diversity found within national and international contexts implicate that employ most likely want to adopt innovative work practices and are international competition, employ more advance technology and pursue competitive strategies, which include a blend of quantity and service dimensions as well as cost.
Processes of organizational change need to be extremely sensitized and avoid being trapped in logical or rational choices. HR practitioners need to gain a better understanding of synergistic combinations of HR policies and link this to operational, financial and other aspects of the overall business strategy itself. This ultimately becomes the main difference between the best fit and best practice strategies of HRM.
Organizations that manage change successfully have been able to integrate their HRM policies with their strategies and the entire change process inclusive of employee relations, compensation packages, etc. It is indeed imperative to understand the specific HRM policies and procedures that will contribute towards organizational change. There is an underlying need for organizations to move away from the notion of a best practice manner of HRM towards a synergistic model that combines HR policies with the overall scheme of HR systems and business and operational strategies. Furthermore, it can be noted that top management teams need to seamlessly work towards developing a set of teamwork focused SHRM practices that concentrate on building an integrated team while enhancing the organizations competitive strategies thereby contributing to competitive advantage. HR practices also need to be able to work with these strategies within an ethical framework. HRM practices need to be of strategic importance and hence need to contribute to organizational performance and 'bottom line' whether it is a strategic fit for organizations as described by (Wright and Snell,2000) which are appropriate HR practices that are linked to the achievements of a flexible organization or 'best practice (Winstanley and Woodall, 2000).
Since SHRM focuses on the overall organizational performance and emphasizes the need for HR systems in place to solve business problems, it must also be accentuated that strategic proactivity needs to contribute to competitive advantage. Most HRM literature deals with the performance of HR policies during organizational change and how this is managed (Purcell, 1999). The models of SHRM discussed not only provide solutions towards what practices may be adopted during this sort of a change process but also helps us to link each of these models to arrive at a strategy of HRM practices that contribute to the bottom line performance of organizations. Undeniably whether the resource based view is adopted or balance scorecard, best fit or best practice, it utilizes the knowledge centric approach in terms of collecting data both at an individual level and an organizational level. It can be inferred that there is no particular golden rule that can be applied industry wide amongst organizations and there needs to be considerable research conducted to ascertain the specific HR strategies that are to be applied towards each organization. Becker and Huselid (2006) also suggest that once HR principles are well established, the policies and practices that follow naturally will self organize and flow in concert with idiosyncratic context of the organizational unit. Some of the considerations that practitioners need to concentrate on are issues of organizational diversity, ethics and also towards creating a differentiating culture that emphasizes these HRM practices that are suitable to the overall business strategy. The alignment of the business strategy with the function of every process within the organization including HRM strategies, certainly would contribute towards better firm performance while creating the competitive advantage that is the focus of all SHRM literature.