Strategic Human Resource Management

Formulating and Implementing HR Strategies for a Competitive Advantage

Ananda Das Gupta

• Publisher: Productivity Press
• Year: 2020
• ISBN:
  9781000053692
• Edition: 1
• Topic: Business
• Subtopic: Gestione delle risorse umane
• Index: Business

The concept of strategic human resource management has developed widely in the last couple of years, especially because of the impact of human resources on the competitiveness of organizations. The development of human resource strategies involves taking into account their multiple mutual dependencies and the fact that they must be vertically integrated with the business strategy. These strategies define the intentions and plans related to the overall organizational considerations, such as organizational competitiveness, effectiveness or image, and to more specific aspects of human resources management, such as resourcing, motivating, valuating, learning and development, reward and employee relations.

Strategic management of human resources provides a large perspective on the way critical issues or success factors related to people can be addressed and how different concepts of strategic decisions are made, with long-term impacts on the behavior and success of the organization. The fundamental objective of human resource strategic management is to generate strategic capabilities by ensuring that the organization has the high-qualified, committed and well-motivated employees it needs to achieve and sustain the competitive advantage.

The emergence of strategic human resource management (SHRM) is influenced by global competition and the corresponding search for sources of a sustainable competitive advantage. SHRM has achieved its prominence because it provides a means by which business firms can enhance the competitiveness and promote managerial efficiency. It facilitates the development of human capital that meets the requirements of a competitive business strategy, so that organizational goals and the mission of the organization will be achieved.

The HRM system is defined as "a set of distinct but interrelated activities, functions and processes that are directed at attracting, developing, and maintaining (or disposing of) a firm's human resources." Many agree that HRM is the most effective tool which contributes to the creation of human capital, and in turn, contributes to organizational performance and the competitive advantage.

This book puts emphasis on understanding the role of HRM between organizations and people and provides an analytical approach toward encompassing HRM, employment relations, and organizational behavior. As a management discipline, HRM draws insights, models and theories from cognate disciplines and applies them to real-world settings. Further, this book discusses how current theoretical perspectives and frameworks (e.g., those related to strategic competitiveness, knowledge management, learning organization, communities of practice, etc.) can be applied by reflective practitioners to create an eco-friendly organizational culture.

Chapter 1

Introduction to Strategic Human Resource Management

Introduction

The origin of the concept of Strategic Human Resource Management (SHRM) can be traced back to the military system – to the Greek word “strategos,” which means a general who organizes, leads and directs his forces to the most advantageous position. In the world of business, it mainly denotes how top management leads the organization in a particular direction in order to achieve its specific goals, objectives, vision and overall purpose in the society in a given context/environment. The main emphasis of strategy is thus to enable an organization to achieve a competitive advantage with its unique capabilities by focusing on the present and future directions of the organization.

Learning Objectives

Three central arguments are made in this introductory chapter.

1. (1) That a growing body of evidence converges to suggest that the changes taking place in the global business environment are often not accompanied by complementary changes in Human Resource Management practices, thereby leading to a situation in which the failure of some firms is due to the mismanagement of people rather than to problems with the technical systems per se.
2. (2) That this is because organizations have achieved relatively low levels of effectiveness in implementing SHRM practices (Huselid et al., 1997), especially in emerging economies of Southeast Asia and other developing countries like Nigeria, which are exposed to the challenges and opportunities of globalization.
3. (3) That in order to manage employees to achieve the competitive edge in a period of globalization, human resource personnel must possess relevant competencies for implementing such SHRM policies and practices (Barney and Wright, 1988; Huselid et al., 1997; Ulrich and Yeung, 1989, 1996; Ulrich et al., 1995).

I

Developments in the field of Human Resource Management (HRM) are now well documented in the management literature. The roots of HRM go back as far as the 1950s, when writers like Drucker and McGregor stressed the need for visionary goal-directed leadership and the management of business integration. The “configurational” perspective posits a simultaneous internal and external fit between a firm’s external environment, business strategy and HR strategy, implying that business strategies and HRM policies interact, according to the organizational context, in determining business performance.

Mintzberg (1987) says that a formal approach to devising a strategy results in deliberation on the part of the decision-makers, which results in thinking before action. On the other hand, the incremental approach allows the strategy to emerge in response to an evolving situation. Lundy and Cowling (1996: 23), summarizing Mintzberg’s thinking, write that deliberate strategy precludes learning, while emergent strategy fosters it but precludes control. Effective strategies combine deliberation and control with flexibility and organizational learning. A number of scholars have criticized Mintzberg’s work as over-prescriptive.

Organizations adopting the classical approach (like the army) follow a clear, rational, planned and deliberate process of strategy formation and aim for maximization of profits. This approach is most likely to be successful when the organization’s objectives and goals are clear, the external environment is relatively stable, the information about both the external and internal environments is reliable, and the decision-makers are able to analyze the strategy thoroughly and make highly calculated decisions in order to adopt the best possible choice. Strategy formulation is undertaken by top managers, and the implementation is carried out by operational managers of different departments.

Lengnick-Hall and Lengnick-Hall (1999: 29–30) summarize a variety of topics that have been the focus of SHRM writers over the past couple of decades. These include HR accounting (which attempts to assign a value to human resources in an effort to quantify organizational capacity), HR planning, responses of HRM to strategic changes in the business environment, matching human resources to strategic or organizational conditions and the broader scope of HR strategies. For these writers, SHRM is a multidimensional process with multiple effects. Such writing also highlights the growing proactive nature of the HR function, its increased potential contribution to the success of organizations and the mutual relationships (integration) between business strategy and HRM.

Fombrun et al.’s (1984) “matching model” highlights the “resource” aspect of HRM and emphasizes the efficient utilization of human resources to meet organizational objectives. This means that, like other resources of the organization, human resources have to be obtained at low cost, used sparingly and developed and exploited as fully as possible. The matching model is mainly based on Chandler’s (1962) argument that an organization’s structure is an outcome of its strategy. Fombrun et al. (1984) expanded this premise in their model of SHRM, which emphasizes a “tight fit” between organizational strategy, organizational structure and the HRM system. The organizational strategy is pre-eminent; both the organizational structure and HRM are dependent on the organization’s strategy. The main aim of the matching model is therefore to develop an appropriate “human resource system” that will characterize those HRM strategies that contribute to the most efficient implementation of business strategies.

In recent decades, researchers have given due recognition to the theories and literature regarding SHRM. Strong and comprehensive theoretical frameworks help in concentrating and consolidating research efforts, which facilitates the conversion of HRM practices into real strategic standards. SHRM is based on two principles. First is the belief that the organization’s human resources are of vital strategic importance. This means that every employee’s personal traits, talent, behavior and interactions are potentially important in the formulation of basic strategies and, more importantly, putting these strategies into practice. Second is the idea that HRM practices should be utilized in order to increase the strategic strength of the organization. Appropriate methods of HRM play an important role in the strategic success of organizations. Wright and McMahan (1992) defined Strategic Human Resource Management as “the pattern of planned human resource deployments and activities intended to enable the firm to achieve its goals” (p. 298). In 1980, a strategic approach to human resources was emphasized by many scholars. Changes in thinking and practice caused an increase in specialization, and thus it led to decreased use of the term “personnel management” in Human Resource Management. In the 1980s and 1990s, changes in the operational environment of HRM drew attention to the strategic management of human resources. According to studies done by many researchers, for instance, Mabey et al. (1998), one of the most important issues in the 1980s, which developed SHRM, was the industrial crisis in the United States. This led to major changes in personnel management, and the focus on the strategic management of human resources increased.

Three different patterns of assumptions emerged during the 1990s, and Delery and Doty (1996) provided a useful scheme for categorizing these major SHRM theoretical perspectives. The universal perspective argues that some HR practices have a positive effect on organizational performance across all organizations and under all conditions. Which HR practices are universal has remained a source of debate. Essentially, this position argues that there is no need to fit HR practices into a particular strategy or in a particular organizational context. The configurational perspective argues that unique patterns of HR practices have a positive effect on organizational performance. Additionally, the assumption of equifinality means that more than one configuration may be effective in any given setting. Using a stratified sample of 1050 banks, Delery and Doty (1996) found relatively strong support for the universalistic perspective as well as some support for both the contingency and configurational perspectives. Youndt, Snell, Dean and Lepak (1996) compared the universalistic perspective with the contingency perspective of SHRM in a study conducted using a sample of 97 plants in a manufacturing setting. The results supported the contingency approach.

They found that an HR system focused on human capital enhancement in organizations pursuing a quality enhancement strategy related to multiple dimensions of operational performance. The researchers argued that a universalistic and a contingency perspective are not necessarily mutually exclusive – an assertion that others have also made. In other words, universal “best practices” provide a solid foundation of SHRM activities, but to achieve a higher level of performance, contingent factors should be considered. Boxall and Purcell (2000) weighed in on the debate between best fit (i.e., the contingency perspective) and best practices (i.e., the universalistic perspective). They concluded that there is little evidence to support the universalistic perspective. However, they encouraged a broader view on the contingency theory than had been examined previously. Additionally, they argued that the resource-based view of the firm had been useful in SHRM research and encouraged researchers to investigate how HR activities could influence knowledge creation and organizational renewal. Using a sample of 286 Japanese affiliates operating in mainland China and Taiwan, Takeuchi, Wakabayashi and Chen (2003) found support for a configurational hypothesis (i.e., that each HRM technique could be used in a way that is symmetrical to the process of enlarging the capacity of corporate organizational learning), predicting the financial outcomes of an affiliate’s performance. Chang and Huang (2005) also tested the universalistic and contingency approaches to SHRM using a sample of 235 Taiwanese firms. They found no support for the universalistic perspective, but they found that an innovative product market strategy did moderate the relationship between HR practices and organizational performance.

In recent years, SHRM has been very useful in developed countries. According to research, more than half of the organizations in these countries, by using the results of the predefined strategies, could achieve new capabilities in their SHRM practices. Fambrun and his colleagues believed that the human resource systems and organizational structures must be managed in such a way that they are consistent and compatible with the organizational strategies. Miller argues that HR strategies should be integrated with corporate strategies. For this integration, the management measures in the field of human resources should be coordinated and synchronized with other areas of the organization’s activities.

A number of researchers studying the interaction of organizations’ systems and Human Resource Management have found that SHRM, by creating harmony between organizational strategies and HR policies, bring synergy to the activities of an organization. Many HR researchers believe that the HR department should have a greater role in strategy formulation and the organization of forces. HR systems should strive to be harmonious with the overall strategies of the organization.

In developing countries, applying the models of HR strategy is not given due consideration. Few studies have examined the importance of SHRM and its impact on the overall organizational success in Malaysia. The main reasons are the newly emerged concept of SHRM, relevant knowledge, the lack of maturation of strategic dialogue in this area, the lack of resources and references in native languages and the lack of attention to the localization of successful and innovative international models. The matrix of SWOT analysis is an important tool through which managers can compare the information and provide four types of strategies. Comparison of the internal and external key elements of this matrix is the most important part as it requires precise judgment.

Despite the many criticisms, however, the matching model deserves credit for providing an initial framework for subsequent theory development in the field of SHRM. Researchers need to adopt a comprehensive methodology in order to study the dynamic concept of human resource strategy. Do elements of the matching model exist in different settings? This can be discovered by examining the presence of some of the core issues of the model. The main propos...