SHRM

Chapter Overview

In this chapter, we will discuss the meaning and concept of strategic human
resource management (SHRM).
Various models and schools of thought in the area of SHRM are presented.
The nature and characteristics of SHRM are also discussed.
The chapter also sketches a picture of the emerging human resource (HR)
scenario and the changes taking place in the field of human resource
management (HRM).
The different types of HR roles are also discussed. In the end, the challenges
facing new age HR departments are highlighted.
General Electric’s Journey to ‘Imagination
at Work’
Welch
energize GE’s employees.
unproductive procedures to speed up decision cycles
work move information through organization, provide
quick and effective feedback, and evaluate and
reward managers on qualities such as openness,
candour, and self-confidence to create a lean
and efficient organization.

levels of the organization and encourage

emotional creativity and feelings of ownership and self-
energy worth.

JOURNEY RESULT:
His ultimate goal was to create an enterprise
good business that could tap the benefits of global scale
leaders create a and diversity without the stifling costs of
vision bureaucratic controls and hierarchical authority.
 STRATEGIC HRM DEFINED

Strategic HRM is the process of

defining how the organization’s goals
will be achieved through people by
means of HR strategies and
integrated HR policies and practices.
CONCEPTUAL BACKGROUND
• The concept of SHRM is essentially based on this principle of people power.

02
SHRM is basically concerned with the integration of HRM with the strategic
management process.
03

• It is defined as a set of techniques that enables interventions to be made within the

business in order to improve performance.

In general, SHRM is the effective application of human resources to meet an

organization’s strategic objectives.
Chris Hendry and Andrew Pettigrew stated that in SHRM, there are two themes that overlap:
the term ‘strategic’ and ‘human resources’.2 It connotes integrating HRM with business strategy.
According to them, there are four underlying meanings in the concept of SHRM:

1. The use of strategic planning

2. A coherent approach to the design and management of personnel
systems based on workforce strategy .
3. Matching HRM activities and policies to some explicit business
strategy
4. Seeing the people of the organization as a ‘strategic resource’ for the
achievement of ‘competitive advantage’.
• most authors agree that it seeks to gain competitive advantage by
managing human assets through an integrated, synergistic set of HR
practices that both complements and promotes the overall business
strategy.
3

• SHRM is largely about integration and adaptation. Its concern is to

ensure that (a) HR management is fully integrated with the strategy
and the strategic needs of the firm, (b) HR policies cohere both across
policy areas and across hierarchies, and (c) HR practices are adjusted,
accepted, and used by line managers and employees as part of their
everyday work. 4
• There is divergence of views on the nature of integration. While some
definitions focus on tailoring HR systems to the demands of the
business strategy, others focus on developing patterns of planned HR
activities intended to enable an organization to achieve its goals.
• Despite differences in definitions, SHRM is seen as the close linking
of HR with strategic imperatives of an organization.
MODELS OF SHRM
Various scholars have identified taxonomies of schools of thoughts and models in SHRM.
Researchers have linked SHRM with firm performance and effectiveness. Broadly speaking, one
of the following three ways to examine the effectiveness of HR practices on firm performance
can be identified: contingency, universalistic, and configurational. 15

• Contingency perspective Contingency theorists argue that, in order to be effective, an

organization’s HR practices must be consistent with the organization’s business strategy.
• Universalistic perspective Researchers in the universalistic perspective are micro analytical
in nature and posit that some HR practices are always better than others and that all organizations
should adopt these practices.
• Configurational perspective Configurational theories are concerned with how the pattern
of multiple independent variables is related to a dependent variable, that is, how systems of HR
practices lead to better performances
 fit-as-bundles.
multiplicative
David Guest pattern bring
synergistic effects
on performance
universalistic,
External fit (HRM as
a strategic integration),

fit-as-gestalt’
HRM practices
contingency,
are additive
internal fit (HRM as an configurational fit (HRM as rather than
ideal set of practices), bundles-internal and external fit), multiplicative
 Daniel A. Verreault and Mary Anne Hyland
The strategic approach The systems approach focused
implies achieving ‘fit’ initially on the
between HRM and strategy, relationship between individual
that is, vertical fit. HRM practices and
organizational performance and
later on a
set of HRM practices and
performance, that is, internal fit.

John Purcell considers two major perspectives to SHRM:

best fit (contingency practices (universalistic and later
configurational) approach SHRM can be identified

John Storey best fit school or best practices school or

hard (strategy as a determinant of HRM) soft (employee commitment as a contingency universalistic and
determinant of HRM) configurational approach.
 Strategic HRM thoughts

•.
Best practice.
Best fit school
•.

•.

•.

•.
Humanistic Instrumental
individual System
( harvard) (Michigan)
 Best practice.

• the focus of best fit theorists is on integrating HR practices with the

organization’s business strategy, whereas best practice .theorists focus
on the relationship between HRM practices and organizational
performance.This approach was identified earlier as the ‘universalistic’
approach and later as the ‘configurational’ approach.
The Best Fit School
The best fit perspective focuses essentially on the HR–strategy link. It is,
therefore, also called the strategic approach or contingency approach. It is based
on the premise that organizational effectiveness is contingent on ensuring a fit
between corporate strategy and HRM.
debates highlight the differences in approaches to strategic management.
Their debate revolves around the issue whether strategy formulation and
implementation are separate. The differences pin upon the planning versus
learning hypothesis giving rise to two streams of research:
 Strategic Management Literature This is the classical or traditional stream, with
its focus on strategic content, which assumes strategy-making as a rational,
formal-analytical, and planning process.
 Organization Theory Literature This is the behaviour-based stream, with its
focus on process, which emphasizes strategy-making as a learning process.
 Best fit school

• The traditional strategic management approach assumes that strategy

formulation and implementation are separate functions. The top
management of the company formulates a comprehensive strategy,
which is then implemented by the lower level staff. This approach
attempts to fit an organization with its environment.
• Instrumental Approach to SHRM: rational-outcome’ model of strategic
management to view HRM as something that is driven by and driven directly from
corporate, divisional, or business level strategy, and geared almost exclusively to
enhancing competitive advantage.
• HRM is concerned with the integration of HR issues into business planning.
CHARACTERISTICS OF SHRM
 The Michigan Model
matching model

• The model emphasizes a ‘tight fit’ between organizational strategy, organizational structure,
and HRM. It argues that all issues associated with HR should be derived from strategy. The
second part of the model shows how HR functions, such as selection, appraisal,
development, and reward, can be mutually geared to produce the required type of employee
performance. It basically talks of the concept of one-way fit between HRM and business
strategy by prescribing the design for HRM policies in the light of strategy.
• Disadvantage: The Michigan model is seen as a harder, less humanistic approach to HR. The hard model
of HRM emphasizes the quantitative, calculative, and business strategic aspects of managing resources.
The Michigan model is also known as the 'matching model' or
'best-fit' approach to human resource management. ... As such, it
limits the role of HR to a reactive, organizational function and
under-emphasizes the importance of societal and other external
factors.
Managerial implications of the model
• The influence of the hard version has encouraged the development of measurable criteria in
HRM (for example, profit per employee, added value per employee, and costs per employee).

• The model is considered simplistic in nature. It has also been criticized because of its
dependence on a rational strategy formulation approach and because of the nature of the one-
way relationship with organizational strategy. It fails to perceive the potential for a reciprocal
relationship between HR strategy and business strategy.

• HRM appears as something that is ‘done to’ passive human resources, rather than something
that is ‘done with’ active human beings. In many respects, humanistic variants of HRM can
be seen as a response to many of these criticisms.
 Humanistic
( harvard)
• This approach utilizes ‘process’ theory to emphasize the reciprocal nature of the
relationship between strategic management and HRM, and the latter’s role in
ensuring that competitive advantage is achieved through people, and not at their
expense. The emphasis is on ‘human’ resource management. This leads to a less
prescriptive and more people-centred approach than that found in instrumental
orientations.
Managerial implications of the model
• This model offers three significant insights for practice. First, HRM
policies should be defined keeping in view the environmental factors
and stakeholders’ concerns. In other words, there must be a good fit
between an organizational environment and HR policies. Second, such
HRM policies and practices must have a goal to achieve employee
commitment, competence development, coherence among themselves,
and embrace cost-effective methods. Third, HRM that stems from
environmental factors and is drawn based on four Cs will result in
employee and organizational effectiveness. This is a soft model as it is
based on stakeholders’ concerns and their commitment to
organizational goals.
CHARACTERISTICS OF SHRM
• SHRM is largely concerned with ‘integration’ or fit’. SHRM is
concerned with establishing two types of fit, namely vertical and
horizontal fit.
Vertical Fit
It is concerned with ensuring integration of HRM with the strategic management process. The
key aspects of a vertical fit are:
• The organizational vision is used to provide an overarching frame of reference for laying
down the HR vision and plan.
• HRM activities are designed keeping the organization’s strategy in mind.
• Organizational strategy is also designed keeping in mind HR issues.
• Top-level strategic teams include HR head or executives.
• Inputs about HR are considered an integral part of the organizational strategy.
• Top management takes special interest in HR issues and strategies.
• There is existence of a comprehensive exchange and feedback mechanism between the
senior managerial team and the HR department.
• Senior HR executives are provided training in general managerial skills.
Horizontal Fit
Horizontal fit is concerned with ensuring integration at the same level. This involves two types
of fit—internal and external fit.
Internal Fit
It involves integration between the various HRM sub-functions or sub-systems, such as staffing,
compensation, and training. The key features of internal fit are listed below:
• The HR vision helps integrate all the HRM activities.
• HR policies, such as recruitment, training, and reward, are consistent with each other.
There is a common vision that runs across these sub-functions. All HRM activities are,
thus, integrated and coherent with each other.
• An information sharing mechanism between HR sub-areas exists.
• A coordinating mechanism between HR sub-functions is established.
External Fit
This is concerned with the integration between HRM and other functional areas, for
example,
marketing, finance, and operations. The key aspects are:
• Consistency of HR activities with other functional activities is established by aligning all
functional areas with the organizational vision and strategy.
• All managers are in some way HR managers, as they all deal with people issues.
• HR decisions are taken jointly with managers of other areas.
• Managers of other areas are actively involved in HR activities, such as recruitment,
selection,
training, appraisal, and compensation.
SHRM FRAMEWORK