The response to liberalization created opportunities for technology upgradation and sophistication, resource mobilization from fresh sources, high growth and buoyant environment and HRM issues associated with strategic initiatives of diversification, mergers and acquisitions, restructuring, joint ventures, strategic alliances and for overall internationalization of the economy. Change from a regulated environment to a free market environment has direct implications for SHRM practices.
Human resource management specialists and the HRM departments are under severe pressure to bring about large-scale professionalized changes in their organizations in order to cope with the challenges brought about by economic liberalization. Strategic Human Resource Management (SHRM) has received a great deal of attention in recent years, most notably in the fields of Human Resource Management (HRM), Organizational Behavior, and Industrial Relations. SHRM is concerned with top managements attention and approach to HRM as a critical strategic dimension affecting firm performance. Strategic human resource management (SHRM) enhances productivity and the effectiveness of organizations. Their implementation in organizations has proven that when organizations employ such personnel practices, they are more able to achieve their goals and objectives.
“Strategy is a unified, comprehensive and integrated plan that relates the strategic advantages of the firm to the challenges of the environment. It is designed to ensure that the basic objectives of the enterprise are achieved through proper execution by the organization” Strategy is the direction and scope of an organization over the long term: ideally which matches its resources to its changing environment and in particular, its markets, customers or clients so as to meet stakeholder expectations
What is strategic management? :The concept of strategic management consists of a set of decisions and actions resulting in formulation and implementation of a strategy to achieve the objectives of an organization. Glueck defined strategic management as ‘a set of decisions and actions which leads to the development of an effective strategy or strategies to help achieve corporate objectives. The strategic management process is the way in which strategists determine objectives and make strategic decisions’. This definition points out the following elements of strategic management.
Analysis and diagnosis :It involves determining environmental problems and opportunities and internal strengths and weaknesses, recognizing problems and /or opportunities and assessing information needs to solve the problems and heuristics for evaluating the information.
Choice :
Involves generating alternative solutions to the problem, assessing them and choosing the best ones.
Implementation :
Involves making the strategy work by building the structure to support the strategy and developing appropriate plans and policies.
Evaluation Involves review of results and future possibilities, determining whether the strategy is working and taking steps to make it work.
Chandler describes strategic management as “the determination of basic long term goals and objectives of an enterprise and adoption of course of action and allocation of resource necessary to carry out these goals.”
According to Paine and Naumes,” Strategic management involves decision-making and the activities in an organization, which (1) have wider ramifications, (2) have a long time perspective, and (3) use critical resources towards perceived opportunities or threats in a changing environment.”
John Pearce and Robinson defined strategic management ‘as the set of decisions and actions resulting in formulation and implementation of strategies designed to achieve the objectives of an organization’
Process of Strategic Management :The process of strategic management follows the stages of establishing mission statement, conducting environmental and organizational analysis, establishing goals to strategy.
Mission statement :Mission statement defines business and future chalks out plan for success.
Environmental analysis
Environmental analysis involves opportunities and threats analysis and preparing to meet environmental pressures.
Establishing goals and objectives
Laying concrete figures that will help in benchmarking the performance.
These benchmarks will lead to the development of strategy that will decide how the company intends to meets its environmental challenges with given environmental and resource constraints in the time to come.
Strategic human resource management (SHRM): Strategic human resource management is a complex process which is constantly evolving and being studied and discussed by academics and commentators. Strategic human resource management (SHRM) is a concept that integrates traditional human resource management activities within a firm's overall strategic planning and implementation. SHRM integrates human resource considerations with other physical, financial, and technological resources in the setting of goals and solving complex organizational problems (Legnick-Hall & Legnick-Hall, 1988) SHRM also emphasizes the implementation of a set of policies and practices that will build employee pool of skills, knowledge, and abilities (Jackon and Schulerm 1995) that are relevant to organizational goals. Thus a larger variety and more complete set of solutions for solving organizational problems are provided and the likelihood that business goals of the organization will be attained is increased (Mechelin, 1996).
Wright and McMahan (1992) defined SHRM as 'a human resource system that is tailored to the demands of the business strategy' (Miles and Snow 1984) to 'the pattern of planned human resource activities intended to enable an organization to achieve its goals' although the difference between these two seems subtle, the implications of the difference are considerable. Where in the first definition human resource management is a 'reactive' management field in which human resource management becomes a tool to implement strategy, in the latter definition it has a proactive function in which human resource activities actually create and shape the business strategy (Sanz-Valle et al. 1999).
Strategic Human Resource Management may be defined as the ’organizational use of employees to gain or keep a competitive advantage against competitors and involves aligning initiatives involving how people are managed with organizational mission and objectives.’ In flattened, downsized & high-performing organizations, highly trained & committed employees are often the firm's competitive key. Perhaps the most drastic change in HR's role today is its growing involvement in developing & implementing the company's strategy.
Strategic HRM can be regarded as a general approach to the strategic management of human resources in accordance with the intentions of the organisation on the future direction it wants to take. It is concerned with longer-term people issues and macro-concerns about structure, quality, culture, values, commitment and matching resources to future need. It SCHULER, R.S., (1992) defined SHRM as: ‘all those activities affecting the behaviour of individuals in their efforts to formulate and implement the strategic needs of business.’
(2) SHRM provides a clear business strategy and vision for the future.
(3) Supplies competitive intelligence that may be useful in the strategic planning process.
(4) Useful for recruiting, retaining and motivating people.
(5)To develop and retain of highly competent people.
(6) To ensure that people development issues are addressed systematically.
(7) To supply information regarding the company's internal strengths and weaknesses.
(8) To meet the expectations of the customers effectively.
(9) To ensure high productivity.
(10) To ensure business surplus thorough competency.
(11) Facilitates development of high-quality workforce through focus on types of people and skills needed.
(12) Facilitates cost-effective utilization of labor, particularly in service industries where labor is generally greatest cost
(13) Facilitates planning and assessment of environmental uncertainty, and adaptation of organization to external forces.
(14)Successful SHRM efforts begin with identification of strategic needs.
(15) Employee participation is critical to linking strategy and HR practices.
(16) Strategic HR depends on systematic and analytical mindset.
(17) Corporate HR departments can have impact on organization's efforts to launch strategic initiatives,
The cycle starts with laying down a strategic plan, linking HR functions in it, and it provides the basis for Manpower planning and internal mobility. The Manpower planning will lead to the function of acquiring right people for the right job and in accordance recruitment as well as selection exercise will be designed and tools selected. For e.g. if a automobile company decides to launch a new four-wheel model in the time to come their focus will be on Research and Development and then on Market Testing and last but foremost production and after sales. This new plan will act as the guideline for the company and will help in determining how many people do we need and what qualifications they should posses and how many of them can be kept on full-time rolls and as permanent employees. The next Stage is for sustaining and retaining those who are hired and making sure that they work efficiently and help the company move in the selected direction. They should also facilitate the smooth movement of the company in the desired direction and should result in achievement of corporate goals and objectives effectively and efficiently. Employee's performance should be rated and compared with the benchmarks, recorded deviations are to be corrected, and precautionary measures for the future are implemented. In last stage the separation or farewell to those who are non-performing or may be to those who have completed their job or task i.e. project teams, is bided.
If people are truly an organization's greatest assets, then their careful selection, development and deployment can lead to a competitive advantage. Strategic human resource management requires formulation of HR objectives, strategies and policies. These enable the provision of the skills and abilities needed to meet the requirements of an organisation's overall objectives. In other words, they provide the framework which ensures that an organisation's people needs are met. In modern organisations HR strategy is supported by information technology in the form of human resource information systems and workforce management systems.
Human resource management specialists and the HRM departments are under severe pressure to bring about large-scale professionalized changes in their organizations in order to cope with the challenges brought about by economic liberalization. Strategic Human Resource Management (SHRM) has received a great deal of attention in recent years, most notably in the fields of Human Resource Management (HRM), Organizational Behavior, and Industrial Relations. SHRM is concerned with top managements attention and approach to HRM as a critical strategic dimension affecting firm performance. Strategic human resource management (SHRM) enhances productivity and the effectiveness of organizations. Their implementation in organizations has proven that when organizations employ such personnel practices, they are more able to achieve their goals and objectives.
What is a Strategy? :
Strategy is a multi-dimensional concept going well beyond traditional competitive strategy concepts. Strategies are broad statements that set a direction. Strategies are a specific, measurable, obtainable set of plans carefully developed with involvement by an institution's stakeholders. These action statements are linked to an individual or individuals who are accountable and empowered to achieve the stated result in a specific desired time frame. They are patterns of action, decisions, and policies that guide a group toward a vision or goals. “Strategy is a unified, comprehensive and integrated plan that relates the strategic advantages of the firm to the challenges of the environment. It is designed to ensure that the basic objectives of the enterprise are achieved through proper execution by the organization” Strategy is the direction and scope of an organization over the long term: ideally which matches its resources to its changing environment and in particular, its markets, customers or clients so as to meet stakeholder expectations
What is strategic management? :The concept of strategic management consists of a set of decisions and actions resulting in formulation and implementation of a strategy to achieve the objectives of an organization. Glueck defined strategic management as ‘a set of decisions and actions which leads to the development of an effective strategy or strategies to help achieve corporate objectives. The strategic management process is the way in which strategists determine objectives and make strategic decisions’. This definition points out the following elements of strategic management.
Analysis and diagnosis :It involves determining environmental problems and opportunities and internal strengths and weaknesses, recognizing problems and /or opportunities and assessing information needs to solve the problems and heuristics for evaluating the information.
Choice :
Involves generating alternative solutions to the problem, assessing them and choosing the best ones.
Implementation :
Involves making the strategy work by building the structure to support the strategy and developing appropriate plans and policies.
Evaluation Involves review of results and future possibilities, determining whether the strategy is working and taking steps to make it work.
Chandler describes strategic management as “the determination of basic long term goals and objectives of an enterprise and adoption of course of action and allocation of resource necessary to carry out these goals.”
According to Paine and Naumes,” Strategic management involves decision-making and the activities in an organization, which (1) have wider ramifications, (2) have a long time perspective, and (3) use critical resources towards perceived opportunities or threats in a changing environment.”
John Pearce and Robinson defined strategic management ‘as the set of decisions and actions resulting in formulation and implementation of strategies designed to achieve the objectives of an organization’
Process of Strategic Management :The process of strategic management follows the stages of establishing mission statement, conducting environmental and organizational analysis, establishing goals to strategy.
Mission statement :Mission statement defines business and future chalks out plan for success.
Environmental analysis
Environmental analysis involves opportunities and threats analysis and preparing to meet environmental pressures.
Organizational analysis:
The organizational analysis assesses organization’s strengths and weaknesses and chalks out roadEstablishing goals and objectives
Laying concrete figures that will help in benchmarking the performance.
These benchmarks will lead to the development of strategy that will decide how the company intends to meets its environmental challenges with given environmental and resource constraints in the time to come.
The changing role of HRM
The role of human resource management is changing & is changing very fast, to help companies achieve their goals. HRM has gone through many phases – from hiring & firing to relationship building, from there to legislation role, & now its role is shifting from protector & screener to strategic partner & as a change agent.Strategic human resource management (SHRM): Strategic human resource management is a complex process which is constantly evolving and being studied and discussed by academics and commentators. Strategic human resource management (SHRM) is a concept that integrates traditional human resource management activities within a firm's overall strategic planning and implementation. SHRM integrates human resource considerations with other physical, financial, and technological resources in the setting of goals and solving complex organizational problems (Legnick-Hall & Legnick-Hall, 1988) SHRM also emphasizes the implementation of a set of policies and practices that will build employee pool of skills, knowledge, and abilities (Jackon and Schulerm 1995) that are relevant to organizational goals. Thus a larger variety and more complete set of solutions for solving organizational problems are provided and the likelihood that business goals of the organization will be attained is increased (Mechelin, 1996).
Wright and McMahan (1992) defined SHRM as 'a human resource system that is tailored to the demands of the business strategy' (Miles and Snow 1984) to 'the pattern of planned human resource activities intended to enable an organization to achieve its goals' although the difference between these two seems subtle, the implications of the difference are considerable. Where in the first definition human resource management is a 'reactive' management field in which human resource management becomes a tool to implement strategy, in the latter definition it has a proactive function in which human resource activities actually create and shape the business strategy (Sanz-Valle et al. 1999).
Strategic Human Resource Management may be defined as the ’organizational use of employees to gain or keep a competitive advantage against competitors and involves aligning initiatives involving how people are managed with organizational mission and objectives.’ In flattened, downsized & high-performing organizations, highly trained & committed employees are often the firm's competitive key. Perhaps the most drastic change in HR's role today is its growing involvement in developing & implementing the company's strategy.
Strategic HRM can be regarded as a general approach to the strategic management of human resources in accordance with the intentions of the organisation on the future direction it wants to take. It is concerned with longer-term people issues and macro-concerns about structure, quality, culture, values, commitment and matching resources to future need. It SCHULER, R.S., (1992) defined SHRM as: ‘all those activities affecting the behaviour of individuals in their efforts to formulate and implement the strategic needs of business.’
Approaches to the SHRM
There are two approaches to strategic human resource management. - Attempts to link Human Resource activities with competency based performance measures, and
- Attempts to link Human Resource activities with business surpluses or profit
Benefits of a Strategic Approach to HR
(1) Identifying and analyzing external opportunities and threats that may be critical to the company's success. (2) SHRM provides a clear business strategy and vision for the future.
(3) Supplies competitive intelligence that may be useful in the strategic planning process.
(4) Useful for recruiting, retaining and motivating people.
(5)To develop and retain of highly competent people.
(6) To ensure that people development issues are addressed systematically.
(7) To supply information regarding the company's internal strengths and weaknesses.
(8) To meet the expectations of the customers effectively.
(9) To ensure high productivity.
(10) To ensure business surplus thorough competency.
(11) Facilitates development of high-quality workforce through focus on types of people and skills needed.
(12) Facilitates cost-effective utilization of labor, particularly in service industries where labor is generally greatest cost
(13) Facilitates planning and assessment of environmental uncertainty, and adaptation of organization to external forces.
(14)Successful SHRM efforts begin with identification of strategic needs.
(15) Employee participation is critical to linking strategy and HR practices.
(16) Strategic HR depends on systematic and analytical mindset.
(17) Corporate HR departments can have impact on organization's efforts to launch strategic initiatives,
The cycle starts with laying down a strategic plan, linking HR functions in it, and it provides the basis for Manpower planning and internal mobility. The Manpower planning will lead to the function of acquiring right people for the right job and in accordance recruitment as well as selection exercise will be designed and tools selected. For e.g. if a automobile company decides to launch a new four-wheel model in the time to come their focus will be on Research and Development and then on Market Testing and last but foremost production and after sales. This new plan will act as the guideline for the company and will help in determining how many people do we need and what qualifications they should posses and how many of them can be kept on full-time rolls and as permanent employees. The next Stage is for sustaining and retaining those who are hired and making sure that they work efficiently and help the company move in the selected direction. They should also facilitate the smooth movement of the company in the desired direction and should result in achievement of corporate goals and objectives effectively and efficiently. Employee's performance should be rated and compared with the benchmarks, recorded deviations are to be corrected, and precautionary measures for the future are implemented. In last stage the separation or farewell to those who are non-performing or may be to those who have completed their job or task i.e. project teams, is bided.
Barriers of SHRM:
There are different barriers to successful SHRM implementation. The main reason is a lack of growth strategy or failure to implement one. Other major barriers are summarized as follows:Inducing the vision and mission of the change effort, high resistance due to lack of cooperation from the bottom line, interdepartmental conflict, the commitment of the entire senior management team, plans that integrate internal resource with external requirements, limited time, money and the resources, the status-quo approach of employees, fear of in-competency of senior level managers to take up strategic steps, diverse work-force with competitive skill sets, fear towards victimization in the wake of failures, improper strategic assignments and leadership conflict over authority, ramifications for power relations, vulnerability to legislative changes, resistance that comes through the legitimate labour institutions, presence of an active labor union, rapid structural changes, economic and market pressures influenced the adoption of strategic HRM, more diverse, outward looking approach.
HR Practitioners' Role
The HR managers have keen role in the effective planning and implementation of the policies and decisions that in tune with the business changes. They should act as strategic partners and be proactive in their role than mere reactive, passive spectators. The HT managers should understand how far their decisions contribute to business surplus incorporating human competency and performance to the organisation. Strategic HR managers need a change in their outlook from seeing themselves as relationship managers to strategic resource managers. Kossek (1987, 1989) argues that major HRM innovations occur when senior management takes the lead and adoption of innovative SHRM practices is dependent on the nature of relationship of the HR Department with the CEO and the line managers. Legge (1978) commenting on the actions of the personnel practitioner in the innovation process suggests that adoption of an innovation by an organization depends largely on HR practitioners' credibility with information and resource providers. HR Department and HR managers in these innovative organizations play a strategic role (Ulrich, 1997) linking the HR strategy with the business strategy of the organization. A crucial aspect concerning SHRM is the concepts of fit and flexibility. The degree of fit determines the human resource system's integration with organization strategy. It is the role of HR Managers to ensure this fit in between Human Resource System with the Organization Strategy.
Integration of HR Strategy with Corporate Planning
Human resource strategy requires its integration with corporate planning, and the development of human resource policies. Many theorists consider a strong link with strategy to be the key difference between human resource management and earlier philosophies of people management. The integration of HR strategy with corporate strategy addresses a number of fundamental questions: Is strategic human resource management a reality? Are people managers involved in high-level decision-making? Are human resource concerns valued as much as financial, production or marketing issues? How can human resource strategies and practices be adapted to meet perceived threats and opportunities in a changing business environment?If people are truly an organization's greatest assets, then their careful selection, development and deployment can lead to a competitive advantage. Strategic human resource management requires formulation of HR objectives, strategies and policies. These enable the provision of the skills and abilities needed to meet the requirements of an organisation's overall objectives. In other words, they provide the framework which ensures that an organisation's people needs are met. In modern organisations HR strategy is supported by information technology in the form of human resource information systems and workforce management systems.
Strategic HRM - Reality and Action:
Translating strategy into action: The classic approach to implementing human resource strategies follows the 'matching' process outlined in the Michigan model of HRM. The goal is a realization of the organization's strategic human resource requirements in terms of numbers and, more importantly, attitudes, behaviour and commitment. According to Miller, the key lies with 'the concept of "fit": the fit of human resource management with the thrust of the organization'. The significant issue in HR strategy is that of integration with overall business strategy. In practice, this integration is difficult to achieve. Armstrong's solution to these problems is to emphasize the need for human resource practitioners to achieve an understanding of how business strategies are formed. They should adopt a wider point of view and an understanding of key business issues such as:Corporate intentions for growth or retrenchment, methods of increasing competitiveness, a perceived need for a more positive, performance culture, other cultural consequences of an organization's mission such as 'commitment, mutuality, communications, involvement, devolution and team working'.
The reality of HR strategy:
The control of the environmental, organizational and strategic aspects of both competition and human resources is so problematic that the relationship between the two can only be indirect and fragile. Another critical factor is that the human resource is but one of the resources of the firm. Strengths and weaknesses in other areas, such as marketing and finance, may obscure the best people management. They are highlighted in recession when the business needs do not fit with 'soft' HR values. HR strategies may focus on redundancies, and sacking employees inevitably damages or destroys a caring corporate image. Legge outlined a strategy described as tough love - being cruel to be kind - in which employees are expected to be both dedicated and disposable. More positively, human resource strategies can be aimed at improving an organization's competitiveness by increasing its 'knowledge base' or competence. Research by Warwick Business School has emphasized the value of 'complementarities - using several HR practices at the same time to complement and reinforce each other (reported in PM Online July 1998). This is common in the USA and has proven to be extremely effective in some of the largest UK companies. The survey examined HR practices at 139 UK businesses, particularly: incentive compensation, communication, team working, flexibility, job security and skills training. The theory of complementarities advocates that HR policies which are consistent and mutually supportive deliver results. US firms have 'bundled' HR practices in a formal way for some time, believing that improvements in one area enhances other HR practices as well. Overall the survey showed productivity gains of up to 8 per cent in businesses which bundle such practices together compared to companies which take a less comprehensive approach to human resource management.
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