MODULE 2- STRATEGIC HUMAN RESOURCE MANAGEMENT

1. Staffing/HR planning 2. Organisation/employee development 3. Compensation/employee relations 4. Employee support 5. Legal compliance 6. Labour/union relations 7. Policy adherence 8. Administrative services

A factor analysis of 73 activities on the strategy implementation or operating level yielded eight dimensions:

*Penn State Executive Program Management Skills Assessment-Human Resources study *a study commissioned by the Society for Human Resource Management and CCH, Inc. entitled "A 21stCentury Vision of Strategic Human Resource Management" along with the previously-mentioned HRPS study

According to Rothwell et al. (1998), compelling evidence that HR practitioners of the future must demonstrate exemplary leadership skills if they are to be successful is to be found

1. Integration of personnel policies both with one another and with business planning more generally. 2. Change in the locus of responsibility for personnel management from specialist managers to senior line management. 3. A shift in focus from management-trade union relations to management-employee relations and from collectivism to individualism. 4. Emphasis on commitment and the exercise of initiative, with managers now donning the roles of enabler, empowerer and facilitator.

According to Sisson (1990), there are four features associated with HRM:

Dessler (2001)

According to him, strategic HR means accepting the HR function as a strategic partner in the formulation of the company's strategies as well as in the implementation of those strategies through HR activities such as recruiting, selecting, training and rewarding personnel.

Truss and Gratton (1994)

According to him, strategic human resource management is the linking of HRM with strategic goals and objectives in order to improve business performance and develop organisational cultures that foster innovation and flexibility.

Wright and Snell (1991)

Another business-oriented definition was provided by _____________________: "Strategic human resource management encompasses those decisions and actions which concern the management of employees at all levels in the business and which are directed towards creating and sustaining competitive advantage."

Competitive Advantage

Any factor that allows a company to differentiate its product or services from its competitors to increase their presence or profits.

Harvard group

At the heart of this group's approah was the responsibility and capacity of managers to make decisions about the relationship between the organisation and its employees so as to maximise the organisational outcomes for key stakeholders. This approach focuses on managers' responsibility to manage four key HRM policy areas.

Firms pursuing a growth strategy by acquisition of other firms

Candidates in the new firm that has been acquired will be less known to the top managers of the firm that is acquiring. Here, there is a tendency for the top management to use more objective criteria for manager selection. By contrast to the former example where managers may be transferred, more emphasis will be on new blood in this case. The candidates for promotion will come from newly acquired units.

parallel or sequential linkage, inclusion, participation and review.

Dyer also identified the various ways in which HRM can be linked to formal strategic planning in the organisation:

people from outside

Firms which require new ideas may seek _______________________________for certain types of jobs such as marketing, research and development.

employee influence (participation), human resource flow, reward systems and work systems (work organisation).

Four key HRM policy areas

coherence of HR practices with each other and that of all HR practices with the organisation's strategy

HRM brings a degree of dual integration:

At the lowest level of involvement

HRM merely responds to and accommodates the organisation's strategic goals.

• A firm that grows by acquiring new firms may evaluate a manager's performance on the ease with which a new firm is integrated into the existing one. • Firms that pursue different diversification strategies or those that grow by venturing into new product areas tend to reward managers with bonuses. The greater the diversification (the more unrelated the products); the higher the bonus tends to be.

HRM practices will vary according to the strategy the firm pursues. Examples are:

Buller (1989)

He empirically investigated the linkage of HRM and strategic planning in eight high-performing firms in the U.S. and concluded that the level of integration depends on the fit of HRM with its environment.

Dyer (1986)

He identifies specific contributions that HRM can make in strategy formulation. According to him, there can be involvement in the assessment of various strategic alternatives in terms of feasibility and desirability.

Tsui (1987)

He reported on the expectations of 805 managers and other employees as to HR department activities.

1. The use of planning. 2. A coherent approach to the design and management of personnel systems based on an employment policy and manpower strategy and often underpinned by a philosophy. 3. Matching HRM activities and policies to some explicit strategy. 4. Seeing the people of the organisation as a strategic resource for achieving competitive advantage

Hendry and Pettigrew (1986) argue that the strategic aspect of HRM consists of four elements:

1. Functional specialisation 2. Business knowledge 3. Management of change

In a survey of 8,900 HR associates concerning perceived competencies for HR professionals, it was strongly suggested that three main areas of competency be acquired:

level of employee

In addition to the above three elements of strategy, HRM, and outcomes, the ____________________ is important because HRM functions differ significantly by level (top, middle and first-line levels of management as well as non-management employees)

past employee performance

In regard to selection, the focus for firms with a policy of promotion from within would be more on _______________________________________ within the firm rather than on education or other types of experience.

management and research skills

In terms of skills, technical and human relations skills are no longer sufficient; the HR professional must have _______________ and _____________ as well.

People

It is ___________________who implement the strategic plan. Hence, top management must take this key factor fully into account in developing its corporate strategies.

type or level of employee

Managers must consider the three elements (strategy, HRM and outcomes) and how each may affect the others. A fourth dimension is critical too;___________________________is affected by the other three factors.

environmental scanning

One additional activity that HRM must undertake to implement SHRM entails ________________________________ to identify appropriate strategies and plans.

Cost leadership firms, Differentiators, Focus firms

Porter (1981) classifies firms into three groups:

1. Ways to assess the costs of specific human resource activities such as selection, training and benefits. 2. Methods to evaluate the effectiveness of human resource activities such as the pre/post evaluation of training programmes. 3. General approaches to the audit of the strengths and weaknesses of the overall human resource activities.

Research has thrown some light on the effectiveness, costs and benefits of specific human resource management activities. The focus has been on three general areas:

1995-1996 Human Resource Planning Society (HRPS)

Rothwell et al. further state that this study was commissioned by the society's board to look into the future needs of the profession

1. Change agent 2. HR strategist 3. Business strategist 4. HR functional aligner 5. Partner to general managers 6. Problem solver and consultant

Rothwell et al. state that six key roles for HR leaders have emerged:

Single-business firms, Dominant-product firms, and Unrelated firms

Rumelt's classification is:

• Organisational history and culture • Strategy • Structure • Incumbent executives' values and skills • Workforce values and skills • Management systems

The Buller study also reported other factors that shape the type of linkage:

strategic human resource management

The fact that employees today are central to achieving competitive advantage has led to the emergence of the field known as

people management

The idea of HRM is based around the notion that _____________________________ can be a key source of sustained competitive advantage

1. People can make the difference because it is human capability and commitment which distinguish successful organisations from the rest in the final analysis. Accordingly, people need to be treated as assets and not as costs. 2. As such, managing human resources is indeed truly a matter of strategic importance. 3. Managing human resources is hence too important to be left entirely to personnel specialists; it has to be an activity which is owned by all managers. 4. The key levers must be internally integrated with each other and externally integrated with business strategies.

The idea of HRM is based around the notion that people management can be a key source of sustained competitive advantage. This in turn is based on four main precepts:

Strategic management

The process of identifying and executing the organisation's mission by matching its capabilities with the demands of its environment.

rests on the perceived advantage of having an agreed and understood basis for developing approaches to managing people in the longer term. It also contains the belief that declarations of intent in human resource management should be integrated with the needs of both the organisation and the people in it.

The rationale of SHRM

Robert Eichinger; David Ulrich

The study team headed by ______________________ of Lominger Limited, Inc. and ______________________ of the University of Michigan focused on state-of-the-art future trends for the HR profession. The aim of the study was to identify the business challenges facing organisations today, what general managers must do to prepare for these challenges, and the HR implications for the future. The study results also reveal that HR practitioners must move away from an activity-oriented focus to one that delivers value through an alignment of HR services with organisational needs.

At a higher level of involvement

There is a more interactive role in that HRM has input in the formulation of strategies, particularly with respect to implementation issues.

At the highest level of involvement

There is full integration in that HRM is linked to the strategic planning group and the various HR activities are linked as well.

Firms pursuing a growth strategy by internal expansion

These firms tend to use mainly subjective performance criteria which are non-quantifiable. There are not many objective and quantifiable ways to assess performance in these firms

Horovitz and Thiebault (1982)

They found that high performing firms pursuing the same strategy had similar management systems

Tichy, Fombrun and Devanna (1982)

They have argued that a better match between strategy and HRM issues is associated with better firm performance or effectiveness. They have discussed how firms that appear to match strategic business unit level strategy, type of manager and human resource practices seem to have better performance.

Human resource management

This component emphasizes the set of personnel activities related to managing employees

Organisational outcomes

This component tells us how well a firm is doing in terms of meeting goals (effectiveness) or achieving financial, marketing or other types of performance standards.

1. At the lowest level of involvement - HRM merely responds to and accommodates the organisation's strategic goals. 2. At a higher level of involvement - There is a more interactive role in that HRM has input in the formulation of strategies, particularly with respect to implementation issues. 3. At the highest level of involvement - There is full integration in that HRM is linked to the strategic planning group and the various HR activities are linked as well.

Three approaches have been identified for implementing SHRM (Butler et al., 1988). They vary in the extent of involvement in the overall strategic management of the firm.

Lower levels of linkage

________________ may be sufficient where the environment is stable and predictable.

Prospector

aggressively pursues new markets, new product ideas and the like.

Strategic Human Resource Management

aims to provide a sense of direction in an often turbulent environment so that organisational and business needs can be translated into coherent and practical policies and programmes.

Strategic HR

an approach to making decisions on the intentions of the organisation concerning people - essential components of the organisation's business strategy. It is about the relationship between HRM and strategic management in the organisation.

top managers

are often required to think outside of a single discipline. Therefore, research should help them decide what types of HR practices fit their firms' chosen strategies

Rumelt's (1974) strategy classification

based on the extent of product diversity in a firm.

Maintaining

benefits and health/safety

Strategic Human Resource Management (SHRM)

can be considered an approach to dealing with longer-term people issues as part of the strategic management thrust of the business. It covers macro-organisational concerns relating to structure and culture, organisational effectiveness and performance, matching resources to future business requirements and the management of change. Overall, it will address any major people issues which affect or are affected by the strategic plans of the organisation and it will provide agendas for change which set out intentions on how these issues will be handled.

The HR function

can provide input concerning the availability of the required human resources (quantity, quality and skill mix) and the costs of acquiring, retaining, developing and motivating such resources.

Analyser

combines strategies and acts as a prospector in some markets and a defender in others.

The Michigan group

developed the notion of strategic HRM which entailed the interconnection of business strategies, organisational structures and HRM (key personnel systems: selection, appraisal, rewards and development).

Focus firms

firms concentrating on selling to specific market groups.

Unrelated firms

firms producing many widely diverse products.

Differentiators

firms providing products or services that distinguish them from competitors in some way; through more luxury or better service, for instance.

Single-business firms

firms that produce only one product and generate all revenues from a single product.

Cost leadership firms

firms that pursue a strategy of having relatively lower costs than competitors.

Dominant-product firms

firms that rely on a few similar products; these receive 70 per cent of revenue from those products

Strategic HRM

formulating and executing human resource policies and practices that produce the employee competence the company needs to achieve its strategic aims.

Defender, Prospector,Reactor, Analyser

four general stances a firm may take in its industry:

Wright and Snell (1991)

have suggested that SHRM deals with "those HR activities used to support the firm's competitive strategy" in a business.

Acquiring

human resource planning, recruitment and selection

business knowledge

is required for the new role of HRM: as a member of management, the HR professional is expected to have a business/profit orientation as much as the rest of the management team.

critical management task

is to align the formal structure and the HR systems so that they drive the strategic objective of the organisation.

Rothwell et al

it is no longer enough for HR practitioners to be compliance-oriented practitioners, supporters or performance consultants.

Managing performance

performance appraisal, compensation and discipline

Allocating

placement, orientation and socialisation

Miles and Snow typology

refers to four general stances a firm may take in its industry

Strategic HRM

refers to the overall direction the organisation wishes to pursue in achieving its objectives through people.

Product diversity

refers to the range of products a firm offers and the degree to which those products are related to one another (for example, through use of similar technology or market channels).

Reactor

responds to what happens in the market and takes advantage of such occurrences whenever possible.

Defender

seeks to protect its current market share and concentrates on maintaining the status quo.

Acquiring, Allocating, Developing, Managing performance, and Maintaining

set of personnel activities related to managing employees:

1. Explicit recognition of the influence of the external environment. 2. Recognition of labor market features. 3. Long-range focus. 4. Focus on choice and decision making. 5. Consideration of all personnel. 6. Integration with overall corporate strategy and functional strategies.

six key elements of SHRM

consultation skills

the HR professional must develop ______________ because the new role entails not merely solving problems already identified by other managers but also working together with line managers to identify problems and pinpoint opportunities to optimise the use of human resources towards the achievement of goals

Strategic plan

the company's plan to match its internal strengths and weaknesses with external opportunities and threats to maintain a competitive advantage.

strategic human resource management

the pattern of planned human resource deployments and activities intended to enable an organization to achieve its goals. (Wright & McMahan, 1992)

1. Global operating skills 2. Business and financial savvy 3. Strategic, visioning, critical thinking and problem-solving skills 4. Using information technology 5. Deep HR technology savvy 6. Change management skills 7. Organisational effectiveness

the seven most essential skills for HR executives in the future are:

TRUE

the term HRM can be regarded as synonymous with strategic human resource management (SHRM). (T/F)

Firms pursuing a growth strategy by internal expansion

these firms most probably use more subjective selection criteria when they choose top managers. This is because the candidates are well known to the top managers and personal traits are therefore also given more emphasis in addition to specific objective criteria.

Integrating strategy, HRM and organisational outcomes

these should help to guide and contribute to more effective use of decisions about human resources.

managers

they continually seek guidance and creative thinking on how to integrate strategy, human resource issues and organisational outcomes

Misa and Stein (1983)

to examine whether and how HRM concerns were included in strategic decisions in high-performing and low-performing firms. They found that there was more human resources department participation in business decisions and strategic planning in high-performing firms than in poorer performers.

Developing

training, development and career management

The Michigan group and the Harvard group

two influential American schools of HRS

HRM systems

were best designed to support the implementation of corporate strategy