Concept of Strategic Human Resource Management
” The concept of HRM is often defined as a strategic
approach to the management of an organization’s most valued assets- the people
working there who individually and collectively contribute to the achievement
of its objectives for sustainable competitive advantage”. (Armstrong M, 1994)
SHRM involves a set of practices and processes that are
designed to ensure that an organization's human resources are aligned with its
strategic objectives. This involves developing a comprehensive HR strategy that
is integrated with the organization's overall business strategy.
Hendy and Pettigrew (1986), identifies four meanings of
SHRM:
·
The use of planning
·
A coherent approach to the design and management
of personnel systems based on an employment policy.
·
Match HRM activities and policies to the
business strategy
·
Seeing the people of the organization as a
strategic resource for the achievement of competitive advantage.
Aims of
strategic SHRM
The aim of SHRM enables strategic decisions to be made that
have a major and long-term impact on the behavior and success of the organization
by ensuring that the organization has the skilled, committed, and well-motivated
employees it need to achieve sustained competitive advantage. The HR strategies
should consider the interests of all stakeholders in the organization,
employees in general as well as owners and management.
Strategic
fit
Strategic fit for organizations, explaining that it can help
to improve performance, increase competitiveness, and ensure that resources are
used effectively. Provide examples of companies that have successfully achieved
strategic fit. Strategic fit, explaining that it refers to the
extent to which an organization's strategy is aligned with its internal and
external environment. Discuss how this alignment helps organizations to achieve
their goals and objectives.
External Fit (vertical) alignment between an
organization's strategy and the external environment in which it operates. This
includes factors such as industry trends, competitive dynamics, and customer
needs. An organization that achieves external fit has developed a strategy that
is well-suited to its external environment and that takes advantage of
opportunities while minimizing risks and threats.
Internal Fit (horizontal integration) alignment
between an organization's strategy and its internal resources and capabilities.
This includes factors such as the organization's culture, structure, and
processes, as well as its human capital and other resources. An organization
that achieves internal fit has developed a strategy that leverages its
strengths and capabilities while addressing its weaknesses and limitations.
Both external
and internal fit are important for achieving strategic fit. Organizations must
develop a strategy that is well-suited to both their external environment and
their internal resources and capabilities to achieve their goals and
objectives.
For
example: A company
operating in a highly competitive industry may need to develop a strategy that
focuses on cost reduction and efficiency to remain competitive, while also
leveraging its strengths in innovation and customer service to differentiate
itself from competitors.
Strategic Flexibility
Strategic flexibility is important because in today's
rapidly changing business environment, organizations that are rigid and
inflexible are at a disadvantage. The ability to pivot quickly in response to
new market trends, customer needs, and technological advances is essential for
long-term success. Overall, strategic flexibility is a key driver of
organizational agility and resilience. By being able to adapt quickly to
changing circumstances, organizations can stay ahead of the competition and
thrive in an ever-changing business landscape.
Strategic
capabilities
Strategic capability is important because it enables
organizations to create sustainable competitive advantages that are difficult
for competitors to replicate. By leveraging their unique resources and
capabilities, organizations can differentiate themselves from competitors,
build brand loyalty, and improve their financial performance.
The
Resource Based view of SHRM.
The resource-based view (RBV) of strategic human resource
management (SHRM) is an approach that focuses on the internal resources and
capabilities of an organization and how they can be used to create competitive
advantages. This approach emphasizes the idea that a company's resources,
including its human capital, are the key drivers of its success.
“The
resource-based view of the firm (RBV) represents a paradigm shift in SHRM
thinking by focusing on the internal resources of the organisation, rather than
analyzing performance in terms of the external context. Advocates of the
resource-based view of SHRM help us to understand the conditions under which
human resources become a scarce, valuable, organisation-specific, difficult-to-imitate
resource, in other words key ‘strategic assets’” (Barney and Wright, 1998;
Mueller, 1998; Amit and Shoemaker, 1993; Winter, 1987)
In RBV-SHRM, the organization's human resources are viewed
as strategic assets that can be leveraged to create sustainable competitive
advantages. This approach suggests that the success of an organization is not
only dependent on its external environment, but also on its internal resources
and capabilities.
RBV-SHRM approach, organizations can develop a sustainable
competitive advantage by leveraging their unique resources and capabilities.
This approach can lead to improved financial performance, increased market
share, and enhanced brand reputation. However, it requires a long-term
perspective and a commitment to investing in the organization's internal
resources and capabilities.
Perspective
on strategic HRM.
·
The universalistic perspective- some HR practices are better than others and all
organization should adopt these best practices.
·
The contingency perspective – an organization HR polices must be consistent with other
aspects of the organization (strategy). This is described as the vertical fit.
· The configurational perspective – and organization must develop an HR system that achieves both horizontal & vertical fit.
The Best Practice Approach
The view that there are “Best practices” which all firm can advantageously adopt. Best practices produced by Pfeffer (1994) are:
- Employment security
- Selective hiring
- Self-managed teams
- High compensation contingent on performance
- Training to provide a skilled and motivated workforce.
- Reduction of status differential
- Information sharing
Critique
of Best practice approach
o Too
much diversity in list of best practices and do not specify the pathway or intervening
variables through which they are supposed to improve business performance.
o Major
object to the idea of universally valid set of HR practices is socio-cultural one
as there is a problem with trying to specify a set of cross culturally best
practices as there are significant difference across counties in cultural
values.
Best fit
approach
HR strategies should be contingent on the context the
circumstance of the organization and its type. Best fit can be perceived in
terms of vertical integration or alignment between the organization’s business
and HR strategies. The Best Fit approach involves analyzing an organization's
business strategy, identifying the key competencies and skills required to achieve
that strategy, and then developing HR practices that are specifically designed
to support those competencies and skills. This approach recognizes that
different organizations have different strategic goals and competitive
environments, and that HR practices need to be tailored to fit those unique
circumstances.
For example, an organization that competes based on
innovation may need to place a greater emphasis on training and development,
while an organization that competes based on cost may need to focus more on
efficiency and productivity. The Best Fit approach recognizes that there is no
single set of HR practices that will work for every organization, and that HR
practices need to be customized to meet the unique needs of each organization.
Conclusion
Strategic Human Resource Management (SHRM) is a critical
approach to managing human resources in organizations. SHRM involves
formulating and implementing HR strategies that support the organization's
goals and objectives. The aim of SHRM is to ensure that the organization has
the skilled, committed, and well-motivated employees it needs to achieve
sustained competitive advantage. The concept of strategic fit is central to
SHRM, and it refers to the extent to which an organization's strategy is
aligned with its internal and external environment. The resource-based view of
SHRM emphasizes the idea that an organization's resources, including its human
capital, are the key drivers of its success. In addition, strategic flexibility
and strategic capabilities are crucial elements of SHRM that organizations need
to consider. Finally, organizations can adopt various perspectives to SHRM,
including the universalistic, contingency, and configurational perspectives, to
develop an HR system that achieves both horizontal and vertical fit. By
adopting SHRM, organizations can develop a sustainable competitive advantage
and achieve their long-term goals and objectives.
Reference
- (Armstrong M, 1994) HRM represents a strategic approach in management, www.ukessays.com. (n.d.) [online] Available at: https://www.ukessays.com/essays/business/hrm-represents-a-strategic-approach-in-management-business-essay.php [Accessed 5 Apr. 2023]
- Vulpen, E. van (2019). Strategic Human Resource Management: The Basics. [online] AIHR. Available at: https://www.aihr.com/blog/strategic-human-resource-management/.
- Zigu (2011). Strategic Human Resource Management (SHRM) Definition | Human Resources (HR) Dictionary | MBA Skool-Study.Learn.Share. [online] MBA Skool-Study.Learn.Share. Available at: https://www.mbaskool.com/business-concepts/human-resources-hr-terms/7152-strategic-human-resource-management-shrm.html.
- CEOpedia | Management online. (n.d.). Strategic fit. [online] Available at: https://ceopedia.org/index.php/Strategic_fit#:~:text=Strategic%20fit%20relates%20to%20the%20situation%20in%20which [Accessed 5 Apr. 2023].
- Hartman, D. (2019). What Is Strategic Capability? [online] Chron.com. Available at: https://smallbusiness.chron.com/strategic-capability-15828.html.
- Jobs, W. (2009). The resource-based view of SHRM HR Management. [online] Wisdom Jobs. Available at: https://www.wisdomjobs.com/e-university/hr-management-tutorial-69/the-resource-based-view-of-shrm-8741.html.
- CIPD and Gifford, J. (2021). Strategic Human Resource Management | Factsheets | CIPD. [online] CIPD. Available at: https://www.cipd.co.uk/knowledge/strategy/hr/strategic-hrm-factsheet.
- Francis, A. (2012). Best Fit and Best Practice Approaches in Strategic HRM. [online] MBA Knowledge Base. Available at: https://www.mbaknol.com/human-resource-management/best-fit-and-best-practice-approaches-in-strategic-hrm/.
Interesting topic Hansika. Strategic Human Resource Management (SHRM) is critical for organizations to gain a competitive advantage and achieve their goals. According to Armstrong and Taylor (2014), SHRM is the "process of aligning the human resource function with the strategic objectives of the organization in order to improve performance." This approach enables organizations to attract and retain top talent, enhance employee engagement, and develop a high-performance culture. Furthermore, SHRM ensures that HR policies and practices are in line with the overall business strategy, thereby increasing organizational effectiveness and efficiency (Wright & McMahan, 2011). Therefore, effective SHRM can lead to improved organizational performance, increased innovation, and sustained growth and I hope you have the same thoughts
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DeleteDefinitely. Also I will post more about this. Thank you for your valuable idea❤
DeleteDear Hansika, This is a very useful article. According to your article, the RBV approach plays major role in the success of a business. But according to Kraaijenbrink (2010), the resource-based approach has some weaknesses. (1) The resource-based view has no managerial implications; (2) the resource-based view implies infinite regress; (3) the resource-based view’s applicability is too limited; (4) sustained competitive advantage is not achievable; (5) the value of a resource is too indeterminate to provide a useful theory; (6) the resource-based view is not a theory that is about the firm; and (7) the definition of a resource is not clear enough to work with. (Limitations of The Resource-Based View Management Essay, 2015). It is true that company resources are very important . But they are not only factor for the organization growth and performance and other external factors like Global economy ,Pandemic, Crisis situation in a country has badly impacted for Organization growth and Performance
ReplyDeleteThank you for your idea. You raise some valid points regarding the limitations of the resource-based view (RBV) approach. While the RBV has been widely used and has been instrumental in explaining the sources of competitive advantage for firms, it is not without its flaws. External factors such as the global economy, pandemics, and crises can certainly have a significant impact on a company's growth and performance.
DeleteHowever, it's worth noting that while external factors can certainly play a role in a company's success or failure, the RBV approach is still valuable in helping firms identify and leverage their unique resources and capabilities to gain a sustainable competitive advantage. While it's true that the RBV approach may not provide clear managerial implications or a complete explanation of all factors contributing to a firm's performance, it can still provide valuable insights into how firms can use their resources to create value and outperform their competitors. Thank you again for your valuable idea.
Dear Hansika: Excellent clarification of the SHRM concept. Another method of strategic HRM is The 5P's HRM Model, which was developed in 1992 by Randall S. Schuler, a renowned academic with interests in strategic HRM, global HRM, organizational HRM, and the intersection of company strategy and human resource management. The five constitutional components of purpose, principles, procedures, people, and performance are the foundation of the 5P's Model. This paradigm states that balancing and harmonizing these five principles results in business success. The same elements function in the 5P's Model, which M. G. Pryor, C. White, and L. Toombs adopted in 1998 as a tool for the long-term continuity and development of the businesses.
ReplyDeleteThank you for sharing the additional information about The 5P's HRM Model, which is another approach to strategic HRM. The five components of purpose, principles, procedures, people, and performance provide a comprehensive framework for aligning HR strategy with business strategy and achieving long-term success. The adoption of this model by Pryor, White, and Toombs in 1998 highlights the practical applications of this model in the business world. It's always great to learn about different models and frameworks that can help organizations achieve their strategic objectives, and The 5P's HRM Model certainly seems like a valuable tool for HR professionals and business leaders alike.
DeleteGood article. What are the real-life examples of companies that have successfully achieved strategic fit or implemented the RBV-SHRM approach?
ReplyDeleteThere are several real-life examples of companies that have successfully achieved strategic fit or implemented the Resource-Based View (RBV) of the firm and Strategic Human Resource Management (SHRM) approach. Here are a few examples:
DeleteGoogle: Google's HR policies and practices are an excellent example of how the RBV-SHRM approach can be successfully implemented. The company is known for its unique culture that values creativity, innovation, and collaboration. Google has a rigorous selection process and invests heavily in employee training and development. It also offers its employees a range of benefits, including flexible working arrangements, free meals, and on-site fitness facilities.
Southwest Airlines: Southwest Airlines' success can be attributed, in part, to its HR policies and practices. The company has a strong culture of employee engagement and empowerment, and it offers its employees significant autonomy and decision-making power. Southwest also has a rigorous selection process and invests heavily in employee training and development.
Netflix: Netflix is known for its unique HR policies, which include unlimited vacation time, flexible working arrangements, and no formal performance reviews. The company's HR practices are based on the RBV-SHRM approach, which emphasizes the importance of employee skills, knowledge, and capabilities. Netflix also has a strong culture that values innovation, risk-taking, and experimentation.
These companies are just a few examples of how the RBV-SHRM approach can be successfully implemented to achieve strategic fit and gain a competitive advantage in the marketplace.
This article provides a comprehensive overview of the concept of Strategic Human Resource Management and outlines the various elements that organizations need to consider when developing an effective HRM. It is an important reminder that HR practices need to be tailored to the unique needs of each organization and its strategy in order to achieve maximum success.
ReplyDeleteYes, it is and thank you so much for your idea, Gowri.
DeleteVery important topic in human resource management Hansika .Strategic management involves seeking and identifying opportunities and threats in the market and industry as well as the outside world in general. Strategic management is based on the premise that "all businesses are not the same." Strategic management involves assessing the strengths and weaknesses of your business. The strategic-management process consists of three stages: strategy formulation, strategy implementation, and strategy evaluation .
ReplyDeleteIt is true that strategic management recognizes that businesses differ from one another, and therefore, there is no one-size-fits-all approach to achieving success. Each organization must develop a unique strategy that takes into account its strengths and weaknesses, as well as its industry and market conditions.
Delete3 stages of strategic management - strategy formulation, implementation, and evaluation - are widely accepted as the standard approach to developing and executing a successful strategic plan. Strategy formulation involves developing a plan for how the organization will achieve its goals, while implementation involves putting that plan into action. Evaluation is the ongoing process of assessing the effectiveness of the strategy and making necessary adjustments to ensure continued success. However, strategic management is a critical process that helps businesses stay competitive and adapt to changing market conditions.
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ReplyDeleteHi detailed article. Improving the company morale and developing methods to ensure high-performance standards to resolve conflicts among employees and ensuring a company stays especially within its own budget. That's why many reasons for, why SHRM is important for business success.
ReplyDeleteThank you for your comment! I'm glad you found the article informative. You are correct that improving company morale and developing methods to ensure high-performance standards are crucial for resolving conflicts among employees and staying within budget. SHRM plays a vital role in achieving these objectives and is essential for business success. By aligning HR policies and practices with business goals, SHRM can help organizations attract, retain, and develop a talented workforce, which is critical for sustained competitive advantage.
DeleteThe blog post gives a very descriptive and wealth of knowledge for the reader in line with the discussed heading of the post Hansika. excellent post.
ReplyDeleteThank you so much for your comment!
DeleteDear Hansika
ReplyDeleteThis is very comprehensive and valuable article on SHRM. In today's fast-changing business environment, SHRM is becoming increasingly important for organizations that want to remain competitive and succeed in the long run. By doing so, organizations can ensure that their employees' skills, knowledge, and abilities are aligned with the organization's goals and objectives, and that they are able to contribute effectively to achieving those goals.
Further as you have elaborated SHRM involves the identification of the organization's strategic goals and objectives, the development of a human resource strategy that aligns with those goals, and the implementation of policies and practices that support that strategy. This approach emphasizes the importance of managing human resources as a strategic asset and recognizes the critical role that employees play in achieving organizational success.
Effective SHRM practices can lead to increased employee motivation and engagement, higher productivity, better customer service, and improved financial performance. Moreover, SHRM can also help organizations to attract and retain top talent, build a strong employer brand, and enhance their reputation as an employer of choice.
Further as you have discussed RBV of SHRM provides a valuable perspective on how organizations can achieve sustained competitive advantage through their human resources. By focusing on building and leveraging human capital, organizations can develop a workforce that is aligned with their business strategy and possesses unique capabilities that are difficult for competitors to replicate.
Overall what I understand is by adopting a strategic approach to managing their human resources, organizations can ensure that they have the right people in the right roles, with the right skills and knowledge, to achieve their strategic objectives and stay ahead of the competition.
I'm glad you found the article comprehensive and valuable, and that you highlighted the importance of effective SHRM practices in increasing employee motivation and engagement, higher productivity, better customer service, and improved financial performance. It's essential for organizations to attract and retain top talent, build a strong employer brand, and enhance their reputation as an employer of choice.
DeleteThe blog discusses the concept of Strategic Human Resource Management (SHRM), which involves aligning an organization's HR strategies with its overall business objectives to achieve competitive advantage. The author has rightly highlighted the importance of SHRM in managing an organization's most valued assets, its people, and has also explained the four meanings of SHRM. The blog's emphasis on the need for strategic fit and strategic flexibility to achieve organizational goals and objectives is well-supported by the research of various authors, including Hendy and Pettigrew (1986) and Lawler and Boudreau (2015). The use of external and internal fit and providing an example of a company operating in a highly competitive industry further strengthens the argument. In conclusion, the blog provides a good understanding of the importance of SHRM for organizations in today's competitive business environment.
ReplyDeleteThank you for your insightful comment. I'm glad to hear that you found the blog post informative and well-supported. Indeed, SHRM plays a crucial role in aligning an organization's HR strategies with its overall business objectives, which ultimately leads to competitive advantage. As you mentioned, the need for strategic fit and flexibility is essential to achieve organizational goals, and it is supported by the research of various authors.
DeleteThe survival of the organization is determined by its current objectives. You must know that this purpose should be directed to take the passage. Here the importance of employee management and employee motivation should be considered. You have properly demonstrated in this regard.
ReplyDeleteThank you for your comment. I completely agree with you that employee management and motivation play a critical role in achieving the organization's objectives. By implementing effective HR strategies, organizations can create a positive work environment and foster a culture of employee engagement and satisfaction, which ultimately leads to better productivity, employee retention, and achieving business goals. Additionally, providing opportunities for employee development and growth can also contribute to the organization's long-term success.
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ReplyDeleteGreat job Hansika, SHRM is still relevant and essential in managing human resources in the digital era, with a greater emphasis on digital skills and technology. It involves aligning HR practices and strategies with the overall business strategy to achieve organizational goals.
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