STRATEGIC HUMAN RESOURCE MANAGEMENT: THREE-STAGE PROCESS AND INFLUENCING ORGANIZATIONAL FACTORS
Sandeep Krishnan
Personnel and Industrial Relations Area
D-18, Indian Institute of Management, Vastrapur, Ahmedabad 380 015, Gujarat, India.
Email: sandeepk@iimahd.ernet.in
Tel: ++91-79-26327816
Fax: ++91-79-26306896
Manjari Singh
Personnel and Industrial Relations Area
Wing 12-D, Indian Institute of Management, Vastrapur, Ahmedabad 380 015, Gujarat, India.
Email: manjari@iimahd.ernet.in
Tel: ++91-79-26324914
Fax: ++91-79-26306896
Abstract: A three-stage model for the process of strategic human resource management is developed in this paper. The three stages cover strategy formulation, implementation, and evaluation. The inter-linkages in this dynamic model have been explored. The organizational factors that have enabling or deterring influence on the success of each of these three stages have been discussed. The paper highlights the key role played by HR professionals in these three stages. Organizations are increasingly looking at human resources as a unique asset that can provide sustained competitive advantage. The changes in the business environment with increasing globalization, changing demographics of the workforce, increased focus on profitability through growth, technological changes, intellectual capital and the never-ending changes that organizations are undergoing have led to increased importance of managing human resources. In this scenario, a human resource (HR) department that is highly administrative and lacks strategic integration fails to provide the competitive advantage needed for survival, thus losing its relevance. Huselid and Becker found that there were noticeable financial returns for the organizations whose human resource management (HRM) systems have achieved operational excellence and are aligned with business strategic goals. According to Ulrich, one of the four roles of HR personnel is to become a strategic business partner. Youndt and Snell find that firms employing HR practices according to the stated strategy are regarded to have better perceptual performance. In recent years a host of papers have been published which look into the strategic aspects of HRM. Kazmi and Ahmad classify various definitions of strategic human resource management (SHRM) based on strategy-focused, decision-focused, content-focused, and implementation-focused approach. According to the strategy-focused approach, which is supported by authors like Mathis and Jackson and Beer, Spector, Lawrence, Mills, and Walton, HRM is strategic by its very nature and all its elements have strategic linkages. The decision-focused approach formulated by Devanna et al. is based on three decision-making levels, namely operational, managerial, and strategic and considers HRM at a strategic level to be SHRM. According to the content-focused approach that is proposed by Torrington and Hall, SHRM emerges when HRM elements match the organization's strategy. According to the implementation-focused approach that is brought forward by Miles and Snow, SHRM is when HRM systems help in the formulation and implementation of business strategies. However, it is the definition based on the implementation-focused approach dealing with alignment of HR policies and practices with business strategies that has gained momentum in the works of various researchers. Wright and McMahan define SHRM as 'the pattern of planned human resource deployments and activities intended to enable an organization to achieve its goals'.
One-Way Vertical Fit
Aligning HRM systems to the business strategy can be considered as a one-way vertical fit. This alignment has been conceptualized in various ways. Brockbank conceptualizes this as strategically reactive HR. Kesler considers this alignment as the partnering role of HR where HR is highly integrated with business processes. This alignment is also seen in the contingency approach of Delery and Doty. The appropriate HR strategy for the specific organizational and business strategies is discussed in the literature. Miles and Snow have studied the differences in the HR strategies according to the organizational types, namely defender, prospector, analyzer, and reactor. They discuss 'make' or 'buy' HR strategies where HRM systems focus on building or acquiring human resources. Schuler and Jackson discuss the kind of HRM systems needed to align the human resources to three kinds of competitive strategies, namely innovation, quality enhancement, and cost reduction strategy. Cost reduction strategy demands workers to work harder, innovation strategy requires workers to work differently, and quality strategy needs them to work smarter. HR practices follow entirely different patterns for different strategies. For example, in the case of an innovation-based strategy, impetus is to be given for free thinking and bringing in new ideas. Performance appraisal focuses on long-term results and has a long-term focus. There are no clear-cut job descriptions and employees are given the opportunity to learn across functions. The compensation offers more variety in terms of benefits like stock options and bonuses. Development of a cooperative culture is the aim. Schuler and Jackson have examined the HR practices followed by the firms following three kinds of generic strategies, namely dynamic growth, extract growth, and turnaround strategy. They have found that the HR practices vary according to these three strategies. Smith has explored the various HR practices followed at different stages of organizational growth.
Two-Way Vertical Fit
Two-way vertical fit is when HRM systems not only align to the business strategy but also contribute to the strategy formulation. The HR department's role as a strategic partner emerges in the two-way vertical fit. Lundy proposes a model for the entire strategy formulation and implementation process. In the model, each of the functions contributes to the strategy plan formulation, which in turn leads to the development of various functional strategies including the HR strategy. Brockbank conceptualizes this as strategically proactive HR that involves creating future strategic alternatives. This includes activities like creating a culture change, identifying mergers and acquisition possibilities, tracking the market, and proactively making changes. Hendry and Pettigrew collate different works in the SHRM literature and point out that it is not necessary that HR strategy always precede a given strategy but it can be proactive in contributing towards the strategy formulation, understanding the linkages between structure, culture, HRM, and the strategy.
From India, Coimbatore
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746Sandeep Krishnan
Personnel and Industrial Relations Area
D-18, Indian Institute of Management, Vastrapur, Ahmedabad 380 015, Gujarat, India.
Email: sandeepk@iimahd.ernet.in
Tel: ++91-79-26327816
Fax: ++91-79-26306896
Manjari Singh
Personnel and Industrial Relations Area
Wing 12-D, Indian Institute of Management, Vastrapur, Ahmedabad 380 015, Gujarat, India.
Email: manjari@iimahd.ernet.in
Tel: ++91-79-26324914
Fax: ++91-79-26306896
Abstract: A three-stage model for the process of strategic human resource management is developed in this paper. The three stages cover strategy formulation, implementation, and evaluation. The inter-linkages in this dynamic model have been explored. The organizational factors that have enabling or deterring influence on the success of each of these three stages have been discussed. The paper highlights the key role played by HR professionals in these three stages. Organizations are increasingly looking at human resources as a unique asset that can provide sustained competitive advantage. The changes in the business environment with increasing globalization, changing demographics of the workforce, increased focus on profitability through growth, technological changes, intellectual capital and the never-ending changes that organizations are undergoing have led to increased importance of managing human resources. In this scenario, a human resource (HR) department that is highly administrative and lacks strategic integration fails to provide the competitive advantage needed for survival, thus losing its relevance. Huselid and Becker found that there were noticeable financial returns for the organizations whose human resource management (HRM) systems have achieved operational excellence and are aligned with business strategic goals. According to Ulrich, one of the four roles of HR personnel is to become a strategic business partner. Youndt and Snell find that firms employing HR practices according to the stated strategy are regarded to have better perceptual performance. In recent years a host of papers have been published which look into the strategic aspects of HRM. Kazmi and Ahmad classify various definitions of strategic human resource management (SHRM) based on strategy-focused, decision-focused, content-focused, and implementation-focused approach. According to the strategy-focused approach, which is supported by authors like Mathis and Jackson and Beer, Spector, Lawrence, Mills, and Walton, HRM is strategic by its very nature and all its elements have strategic linkages. The decision-focused approach formulated by Devanna et al. is based on three decision-making levels, namely operational, managerial, and strategic and considers HRM at a strategic level to be SHRM. According to the content-focused approach that is proposed by Torrington and Hall, SHRM emerges when HRM elements match the organization's strategy. According to the implementation-focused approach that is brought forward by Miles and Snow, SHRM is when HRM systems help in the formulation and implementation of business strategies. However, it is the definition based on the implementation-focused approach dealing with alignment of HR policies and practices with business strategies that has gained momentum in the works of various researchers. Wright and McMahan define SHRM as 'the pattern of planned human resource deployments and activities intended to enable an organization to achieve its goals'.
One-Way Vertical Fit
Aligning HRM systems to the business strategy can be considered as a one-way vertical fit. This alignment has been conceptualized in various ways. Brockbank conceptualizes this as strategically reactive HR. Kesler considers this alignment as the partnering role of HR where HR is highly integrated with business processes. This alignment is also seen in the contingency approach of Delery and Doty. The appropriate HR strategy for the specific organizational and business strategies is discussed in the literature. Miles and Snow have studied the differences in the HR strategies according to the organizational types, namely defender, prospector, analyzer, and reactor. They discuss 'make' or 'buy' HR strategies where HRM systems focus on building or acquiring human resources. Schuler and Jackson discuss the kind of HRM systems needed to align the human resources to three kinds of competitive strategies, namely innovation, quality enhancement, and cost reduction strategy. Cost reduction strategy demands workers to work harder, innovation strategy requires workers to work differently, and quality strategy needs them to work smarter. HR practices follow entirely different patterns for different strategies. For example, in the case of an innovation-based strategy, impetus is to be given for free thinking and bringing in new ideas. Performance appraisal focuses on long-term results and has a long-term focus. There are no clear-cut job descriptions and employees are given the opportunity to learn across functions. The compensation offers more variety in terms of benefits like stock options and bonuses. Development of a cooperative culture is the aim. Schuler and Jackson have examined the HR practices followed by the firms following three kinds of generic strategies, namely dynamic growth, extract growth, and turnaround strategy. They have found that the HR practices vary according to these three strategies. Smith has explored the various HR practices followed at different stages of organizational growth.
Two-Way Vertical Fit
Two-way vertical fit is when HRM systems not only align to the business strategy but also contribute to the strategy formulation. The HR department's role as a strategic partner emerges in the two-way vertical fit. Lundy proposes a model for the entire strategy formulation and implementation process. In the model, each of the functions contributes to the strategy plan formulation, which in turn leads to the development of various functional strategies including the HR strategy. Brockbank conceptualizes this as strategically proactive HR that involves creating future strategic alternatives. This includes activities like creating a culture change, identifying mergers and acquisition possibilities, tracking the market, and proactively making changes. Hendry and Pettigrew collate different works in the SHRM literature and point out that it is not necessary that HR strategy always precede a given strategy but it can be proactive in contributing towards the strategy formulation, understanding the linkages between structure, culture, HRM, and the strategy.
From India, Coimbatore
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