The human resource management that aims to improve the productive contribution of

individuals while simultaneously attempting to attain other societal and individual employee
objectives has undergone drastic change with the passing of years.

We all know that HRM is concerned with the "people" & keeping the fact in mind that HRM
helps in acquiring, developing, stimulating & retaining the outstanding employees as it gives
both effectiveness & efficiency to the working of the organization, it has been started being
used strategically & is now termed  as Strategic human resource management.

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.

Defining SHRM:

o Organizational use of employees to gain or keep a competitive advantage against

competitors.

o Involves aligning initiatives involving how people are managed with organizational mission
and objectives.

In today's flattened, downsized & high-performing organizations, highly trained &

committed employees – not machines – 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.

In order to understand the modern aspect of HR i.e. SHRM, lets discuss the terms which
would help us in understanding the concept:

o Core Competency can be defined as - A unique capability in the organization that creates
high value and that differentiates the organization from its competition.

o Mission Statement explains purpose and reason for existence; it is usually very broad, but
not more than a couple of sentences & it serves as foundation for everything organization
does.

o Strategy: the company's plan of how it will balance its internal strengths & weaknesses
with external opportunities & threats in order to maintain a competitive advantage, earlier
this role was performed by the line managers, but now it is carried by the HR manager.

Strategies increasingly depend on strengthening organizational competitiveness & on

building committed work teams, & these put HR in a central role. In the fast changing,
globally competitive & quality oriented industrial environment, it's often the firm's
employees – its human resources – who provide the competitive key. And so now it is a
demand of the time to involve HR in the earlier stages of development & implementing the
firm's strategic plan, rather than to let HR react to it. That means now the role of HR is not
just to implement the things out but also to plan out in such a manner that the employees
can be strategically used to get edge over the competitors, keeping in mind the fact that
this is the only resource (HUMANS), which cannot be duplicated by the competitors.

The Strategic Management Process includes:

– Determining what needs to be done to achieve corporate objectives, often over 3 - 5

years
– Examining organization and competitive environment
– Establishing optimal fit between organization and its environment
– Reviewing and revising strategic plan

The Stage in the Process of Strategic Management:

Mission statement- Business definition and future plan for success.

Environmental analysis- OT analysis and preparing to meet environmental pressures.
Organizational self-assessment- SW analysis and chalking road map for attaining goals.
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.

Benefits of a Strategic Approach to HR:

* Facilitates development of high-quality workforce through focus on types of people and

skills needed
* Facilitates cost-effective utilization of labor, particularly in service industries where labor is
generally greatest cost
* Facilitates planning and assessment of environmental uncertainty, and adaptation of
organization to external forces
* Successful SHRM efforts begin with identification of strategic needs
* Employee participation is critical to linking strategy and HR practices
* Strategic HR depends on systematic and analytical mindset
* Corporate HR departments can have impact on organization's efforts to launch strategic
initiatives

Human Resources Life Cycle:

The above diagram is divided into four different colours each indicating a separate stage of
HR life cycle. Each stage has specific actions or steps that form respective stage for e.g. in
third stage there are six different steps involved such as step 3 to step 8. These four stages
cover all actions or functions pertaining to HR manager's job and they are related with
strategic plan of the organisation.

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.

Factor Linkages of HR Plans and Strategies:

Given diagram presents various factors that have an impact on HR plans and Strategy and
how are they interlinked with each other. Their interactions and impact on each element and
the resulting change in HR Plan and policy is also indicated clearly.

The table given above takes into consideration two of the generic strategies and the
strategic focus required to generate each of these competitive advantages along with HR
strategy and activities needed to be done by HR Department to help the organization in
generating these strategic advantages and to move successfully towards desired goals and
objectives.

To understand these linkages we can look at them as tasks and steps needed to be taken in
order to complete the tasks. The selected strategic focus should be very clear and well
integrated into organizational policy and clearly communicated to HR Department to help in
drafting suitable HR strategy and last in carrying out all activities.

Conclusion:

Ideally HR & top management work together to formulate the company's overall business
strategy; that strategy then provides the framework within which HR activities such as
recruiting & appraising must be crafted. If it is done successfully, it should result out in the
employee competencies & behavior that in turn should help the business implement its
strategies & realize its goals.

According to an expert "the human resources management system must be tailored to the
demands of business strategy".
In order to be successful the employees should be developed in such a manner that they
can be the competitive advantage, & for this the human resource management must be an
equal partner in both the formulation & the implementation of the corporate & competitive
strategies.

Strategic Human Resource Management (SHRM): An Over View

By

Prof. Dileep Kumar M.

Ex-Professor
Symbiosis (SCMHRD, SCDL), IIIT, SCMLD, SBS
Pune
 

Introduction

Liberalization and indust6rialisation has paved an increasing pressure on organizations in India to change
from indigenous, costly, sub-optimal levels of technology to performance based, competitive and higher
technology provisions. The response to liberalization has created opportunities for technology upgrading an
sophistication, resource mobilization from new sources, highly competitive input/output market, high growt
and buoyant environment and HRM issues associated with strategic initiatives of diversification, mergers an
acquisitions, restructuring, joint ventures, strategic alliances and for overall internationalization of the
economy (Som, 2002). change from a regulated environment to a free market environment has direct
implications for SHRM practices in India (Krishna and Monappa, 1994, Rao, 1999) and HRM specialists and
the HRM departments are under severe pressure to bring about large-scale professionalized changes in the
organizations in order to cope with the challenges brought about by economic liberalization (Rao et al.,
2001; Som, 2002). Strategic Human Resource Management (SHRM) has received a great deal of attention
recent years, most notably in the fields of Human Resource Management (HRM), Organizational Behavior,
and Industrial Relations. An area that demands greater understanding is that of Strategic Human Resource
Management (SHRM). SHRM is concerned with top managements attention and approach to HRM as a
critical strategic dimension affecting firm performance; which is the objective of this article.   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
(mentioned in this paper) they are more able to achieve their goals and objectives. This article first
describes what the word Strategy means and shifts its focus on HRM at a strategic level highlighting its
importance in the present day organizations. The paper then highlights what best practices (as a result of
strategic planning) the organizations can adopt that would ensure them of success.
What are Strategies?

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 o
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 timeframe.  They are patterns of action, decisions, and policies that guide a group toward a
vision or goals.

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 an area that continues to evoke a lot of debate as to what it actually embraces. Definitions range from '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'
(Wright and McMahan 1992).

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).

Strategic Human Resource Management (SHRM) is an area that continues to evoke a lot of debate as to
what it actually embraces. Definitions range from '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' (Wright and McMahan 1992). 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 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 has been defined as:

All those activities affecting the behaviour of individuals in their efforts to formulate and implement the
strategic needs of business. (SCHULER, R.S., 1992)

The pattern of planned human resource deployments and activities intended to enable the forms to achieve
its goals. (WRIGHT, P.M. and MCMAHAN, G.C. (1992)

Approaches of the SHRM,

o attempts to link Human Resource activities with competency based performance measures
 o attempts  to link Human Resource activities with business surpluses or profit

These to approaches indicate two factors in an organisational setting. The first one is the human factor, the
performance and competency and the later is the business surplus. An approach of people concern is based
on the belief that human resources are uniquely important in sustained business success. An organization
gains competitive advantage by using its people effectively, drawing on their expertise and ingenuity to
meet clearly defined objectives. Integration of the business surplus to the human competency and
performance required adequate strategies. Here the role of strategy comes into picture. The way in which
people are managed, motivated and deployed, and the availability of skills and knowledge will all shape the
business strategy. The strategic orinetation of the business then requires the effective orinetation of human
resource to competency and performance excellance.

Benefits of SHRM

1. Identifying and analyzing external opportunities and threats that may be crucial to the company's
success.
2. Provides a clear business strategy and vision for the future.
3. To supply competitive intelligence that may be useful in the strategic planning process.
4. To recruit, retain and motivate 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 comopetency

Barriers of SHRM

Barriers to successful SHRM implementation are complex. The main reason is a lack of growth strategy or
failure to implement one. Other major barriers are summarized as follows:

1. Inducing the vision and mission of the change effort.

2. High resistance due to lack of cooperation from the bottom line.
3. Interdepartmental conflict.
4. The commitment of the entire senior management team.
5. Plans that integrate internal resource with external requirements.
6. Limited time, money and the resources.
7. The statusquo approach of employees.
8. Fear of incomopetency of senior level managers to take up strategic steps.
9. Diverse work-force with competitive skill sets.
10. Fear towards victimisation in the wake of failtures.
11. Improper strategic assignments and leadership conflict over authority.
12. Ramifications for power relations.
13. Vulnerability to legislative changes.
14. Resistance that comes through the legitimate labour institutions.
15. Presence of an active labour union.
16. Rapid structural changes.
17. Economic and market pressures influenced the adoption of strategic HRM.
18. 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 a
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.

Conclusion

As global business competition shifts from efficiency to innovation and from enlargement of scale to creatio
of value, management needs to be oriented towards the strategic use of human resources.  Strategic huma
resources management practices enhance employee productivity and the ability of agencies to achieve thei
mission. Integrating the use of personnel practices into the strategic planning process enables an
organization to better achieve its goals and objectives. Combining human resource practices, all with a focu
on the achievement of organizational goals and objectives, can have a substantial affect on the ultimate
success of the organization. To manage future operations effectively, it is essential that companies produce
"business leaders" and "innovators" through SHRM Approach.

authorSTREAM.COM flarworldknowledge.com

HR And That Elusive Strategic Role

 By Alan Price

Updated May 1 2008 - Recently, Maxxim Consulting interviewed 20 CEOs of FTSE350 companies in the UK and
found that only four knew exactly how many people worked in their respective head offices. Also, just four CEOs
knew how much their head offices cost to run each year.

According to Claire Arnold, a Partner at Maxxim Consulting:

"Our study shows that at most UK corporate headquarters, unnecessary layers of complexity and bureaucracy often
accumulate over time. This is an area that many of the FTSE350 are set to review in 2008 with a view to finding cost-
savings. The fact that so few of the Chief Execs we interviewed for our study were sure exactly how many people
worked at head office is a clear indication that there's some serious housekeeping to be done."

Granted this was an extremely small study and must be regarded as illustrative rather than definitive. But,
nevertheless, what part should HR managers play in such 'housekeeping' exercises?

It seems that finally senior managers - some of them, at least - are willing to give HR managers a significant role in
strategic decisions. But how many human resource managers know how to fulfill that role? Paul Kearns (2003: 4) tells
the tale of a workshop exercise for senior human resource managers when participants were given a military
scenario. Briefly, they were asked to envisage that they, and a thousand soldiers under their command, had been
dropped behind enemy lines - with no information about their opposition. What would they do? The first response he
received was 'I'd retreat'. Kearns comments: 'Why does this response from an HR person not surprise me?' It doesn't
surprise me either because so many HR managers are used to operating someone else's strategy, rather than
participating vigorously in their organizations' strategic decisions.

Noting that 'business partner' and 'strategic thinker' have featured as the most important roles in some recent surveys
of human resource management, Jamroq and Overhot (2004) observe that 'there's something elusive and ambiguous
about this widely touted goal of becoming a strategic business partner'. They cite a recent conference on the future of
HR where a panel of human resource experts came out with the statement that 'I can't define it, but I know it when I
see it' when asked to define the term 'strategic business partner.'

Measuring the effectiveness of HRM

Is measurement at the root of the problem? Are HR managers measuring the wrong things? One common approach
is to use a 'Balanced Scorecard' which includes a range of HR measures as well as the more traditional financial and
other metrics. Gubman (2004) feels that 'Too many HR scorecards focused on operational metrics: Time to hire, cost
per hire, percentage of appraisals completed, etc. While important to track, these kinds of measures will not get HR to
the strategic partner role. They only reinforce the view of HR as an administrative function. Key HR measures needed
to be central to business success.'

More beneficially, according to Gubman, HR managers should focus instead on the same two major issues as their
financial colleagues: return and growth. 'HR-things' can only create economic value from three sources:

 Employee turnover and retention

 Productivity - revenue against employee costs
 Expenditure on the HR function and related activities

Providing measures for these three elements does not require any 'rocket science' because they relate to three
familiar HR goals:

1. Attracting, developing and retaining staff

2. Aligning, engaging, measuring and rewarding performance
3. Controlling or reducing HR costs

HR-relevant measures for growth are trickier and need to be tailored to the organizations' individual situation.
Grubman believes that HR measures can be devised that, like market share, can indicate trends and forecasts for
improved revenue in the future. He argues that the following are the most significant growth-related human resource
measures at present:

 Leadership development, to be measured in terms of unique candidates ready to assume executive

and other major roles.
 Engagement - levels of employees' intellectual and emotional commitment to their work.
 Diversity, particularly the number of women and ethnic minority employees coming through the
system or 'talent pipeline'.

Tamkin et al (2008) used a set of criteria described as the '4A model' (Access, Ability, Attitudes, Application) in their
study of almost 3000 British organizations and found that the use of 'bundles' of HR practices produced improved
performance and profitability. They suggest a number of issues that HR managers should focus on:

 Access The quality of the recruitment process: putting serious effort into attracting high quality
applicants; using policies and practices that 'ensure the ongoing movement of the best people
through the organization'.
 Ability Effective, long-term development plans focused on the needs of employees and the
business. These plans should be constantly monitored to ensure their effectiveness. The
researchers also highlight the need for a high workforce quality, e.g. possession of degrees.
 Attitudes Aligning employees to the objectives of the organization - 'vital in terms of capturing
discretionary effort'. They emphasize one-to-ones, appraisals and reward strategies related to
organizational performance.
 Application Encouraging autonomy, empowerment and generation of ideas.

Behaving proactively

Weiss (2000) argues that HR managers must demonstrate the ability to provide stimulating ideas and challenge
decisions that do not have business value. To do this, they need to perform at the same intellectual level as their
colleagues in an executive meeting. Most importantly, they need to wear a 'business hat' rather than a 'HR hat'
otherwise they will be relegated to the traditional administrative or tactical (second-level) role that has bedevilled the
human resource function for decades. Weiss considers that HR managers need to demonstrate the following to show
their ability to add value:

 Broad understanding of the business, thus helping the human resource function to contribute to the
overall direction of the company.
 Knowledge of how all activities need to align, enabling the company to maximize the success of its
strategic initiatives.
 Professionalism in investing in human capital and HR processes, allowing HR to help guide
employees and the organization's decision making.
 A unique perspective, allowing the HR function to become an 'ideas merchant' so that people and
the outcomes of organizational processes can be made into strategic advantages.

Finally, we can consider Gubman's belief that:

"HR needs to keep moving itself forward, toward the strategic partner role, by becoming better profit-and-loss
business leaders. Be the ones to lead companies back into thinking externally, about customers and markets, and
how to create unique value for them. What a surprising and powerful role that would be for HR leaders! Start
measuring HR impacts on real business results, not HR activities. Instead of measuring time to hire, measure the
people aspects of opening up a new market and the returns they generate."

Question: What Does a Human Resources Manager, Generalist, or Director Do?

 Read the Daily Human Resources Blog.

Answer:

 So, You Think You Want a Career in Human Resources?

 More About Job Descriptions.

Human Resources Generalists, Managers, and Directors, depending on the size of the organization,
may have overlapping responsibilities. In larger organizations, the Human Resources Generalist, the
Manager, and the Director have clearly defined, separated roles in HR management with progressively
more authority and responsibility in the hands of the Manager, the Director, and ultimately, the Vice
President who may lead several departments including administration.

HR directors, and occasionally HR managers, may head up several different departments that are each
led by functional or specialized HR staff such as the training manager, the compensation manager, or
the recruiting manager.

Human Resources staff members are advocates for both the company and the people who work in the
company. Consequently, a good HR professional performs a constant balancing act to meet both
needs successfully.

The Changing Human Resources Role

The role of the HR professional is changing. In the past, HR managers were often viewed as the
systematizing, policing arm of executive management. Their role was more closely aligned with
personnel and administration functions that were viewed by the organization as paperwork.

When you consider that the initial HR function, in many companies, comes out of the administration or
finance department because hiring employees, paying employees, and dealing with benefits were the
organization's first HR needs, this is not surprising.

In this role, the HR professional served executive agendas well, but was frequently viewed as a road
block by much of the rest of the organization. While some need for this role occasionally remains —
you wouldn’t want every manager putting his own spin on a sexual harassment policy, as an example
— much of the HR role is transforming itself.

New HR Role

The role of the HR manager must parallel the needs of his or her changing organization. Successful
organizations are becoming more adaptable, resilient, quick to change direction, and customer-
centered.

Within this environment, the HR professional, who is considered necessary by line managers, is a
strategic partner, an employee sponsor or advocate and a change mentor. At the same time,
especially the HR Generalist, still has responsibility for employee benefits administration, often payroll,
and employee paperwork, especially in the absence of an HR Assistant.

Depending on the size of the organization, the HR manager has responsibility for all of the functions
that deal with the needs and activities of the organization's people including these areas of
responsibility.
 Recruiting.
 Hiring.
 Training.
 Organization Development.
 Communication.
 Performance Management.
 Coaching.
 Policy Recommendation.
 Salary and Benefits.
 Team Building.
 Employee Relations.
 Leadership.

With all of this in mind, in Human Resource Champions, Dave Ulrich, one of the best thinkers and
writers in the HR field today, and a professor at the University of Michigan, recommends three
additional roles for the HR manager.

HR Role: Business and Strategic Partner

In today’s organizations, to guarantee their viability and ability to contribute, HR managers need to
think of themselves as strategic partners. In this role, the HR person contributes to the development
of and the accomplishment of the organization-wide business plan and objectives.

The HR business objectives are established to support the attainment of the overall strategic business
plan and objectives. The tactical HR representative is deeply knowledgeable about the design of work
systems in which people succeed and contribute. This strategic partnership impacts HR services such
as the design of work positions; hiring; reward, recognition and strategic pay; performance
development and appraisal systems; career and succession planning; and employee development.

To be successful business partners, the HR staff members have to think like business people, know
finance and accounting, and be accountable and responsible for cost reductions and the measurement
of all HR programs and processes. It's not enough to ask for a seat at the executive table; HR people
will have to prove they have the business savvy necessary to sit there.

HR Role: Employee Advocate

As an employee sponsor or advocate, the HR manager plays an integral role in organizational success
via his knowledge about and advocacy of people. This advocacy includes expertise in how to create a
work environment in which people will choose to be motivated, contributing, and happy.

Fostering effective methods of goal setting, communication and empowerment through responsibility,
builds employee ownership of the organization. The HR professional helps establish the organizational
culture and climate in which people have the competency, concern and commitment to serve
customers well.

In this role, the HR manager provides employee development opportunities, employee assistance
programs, gain sharing and profit-sharing strategies, organization development interventions, due
process approaches to problem solving and regularly scheduled communication opportunities.

HR Role: Change Champion

 The constant evaluation of the effectiveness of the organization results in the need for the HR
professional to frequently champion change. Both knowledge about and the ability to execute
successful change strategies make the HR professional exceptionally valued.

Knowing how to link change to the strategic needs of the organization will minimize employee
dissatisfaction and resistance to change.

The HR professional contributes to the organization by constantly assessing the effectiveness of the
HR function. He also sponsors change in other departments and in work practices. To promote the
overall success of his organization, he champions the identification of the organizational mission,
vision, values, goals and action plans. Finally, he helps determine the measures that will tell his
organization how well it is succeeding in all of this.

 Beginning a Career in Human Resources

 Mid-career Change and Mid-career Development
 Later Career Change and Later Career Development
 Career Success

The Changing Role of Strategic Human Resource Management in Principles of Management

Learning Objectives

1. Understand how HR is becoming a strategic partner.

2. Understand the importance of an organization’s human capital.

3. List the key elements of SHRM.

4. Explain the importance of focusing on outcomes.

The role of HR is changing. Previously considered a support function, HR is now becoming a

strategic partner in helping a company achieve its goals. A strategic approach to HR means going
beyond the administrative tasks like payroll processing. Instead, managers need to think more
broadly and deeply about how employees will contribute to the company’s success.

HR as a Strategic Partner

Strategic human resource management (SHRM) is not just a function of the HR department—all
managers and executives need to be involved because the role of people is so vital to a
company’s competitive advantage.[732] In addition, organizations that value their employees are
more profitable than those that do not.[733] Research shows that successful organizations have
several things in common, such as providing employment security, engaging in selective hiring,
using self-managed teams, being decentralized, paying well, training employees, reducing status
differences, and sharing information.[734] When organizations enable, develop, and motivate
human capital, they improve accounting profits as well as shareholder value in the process.[735]
The most successful organizations manage HR as a strategic asset and measure HR performance
in terms of its strategic impact.

Here are some questions that HR should be prepared to answer in this new world.[736]

 Competence: To what extent does our company have the required knowledge, skills, and
abilities to implement its strategy?

 Consequence: To what extent does our company have the right measures, rewards, and
incentives in place to align people’s efforts with the company strategy?

 Governance: To what extent does our company have the right structures, communications
systems and policies to create a high-performing organization?

 Learning and Leadership: To what extent can our company respond to uncertainty and
learn and adapt to change quickly?

The Importance of Human Capital

Employees provide an organization’s human capital. Your human capital is the set of skills that
you have acquired on the job, through training and experience, and which increase your value in
the marketplace. The Society of Human Resource Management’s Research Quarterly defined an
organization’s human capital as follows: “A company’s human capital asset is the collective sum
of the attributes, life experience, knowledge, inventiveness, energy and enthusiasm that its
people choose to invest in their work.”[737]

Focus on Outcomes

Unfortunately, many HR managers are more effective in the technical or operational aspects of
HR than they are in the strategic, even though the strategic aspects have a much larger effect on
the company’s success.[738] In the past, HR professionals focused on compliance to rules, such as
those set by the federal government, and they tracked simple metrics like the number of
employees hired or the number of hours of training delivered. The new principles of
management, however, require a focus on outcomes and results, not just numbers and
compliance. Just as lawyers count how many cases they’ve won—not just how many words they
used—so, too must HR professionals track how employees are using the skills they’ve learned to
attain goals, not just how many hours they’ve spent in training.[739]

John Murabito, executive vice president and head of HR and Services at Cigna, says that HR
executives need to understand the company’s goals and strategy and then provide employees
with the skills needed. Too often, HR execs get wrapped up in their own initiatives without
understanding how their role contributes to the business. That is dangerous, because when it
comes to the HR department, “anything that is administrative or transactional is going to get
outsourced,” Murabito says. [740] Indeed, the number of HR outsourcing contracts over $25
million has been increasing, with 2,708 active contracts under way in 2007.[741] For example, the
Bank of America outsourced its HR administration to Arinso. Arinso will provide timekeeping,
payroll processing, and payroll services for 10,000 Bank of America employees outside the U.S.
[742]
To avoid outsourcing, HR needs to stay relevant and accept accountability for its business
results. In short, the people strategy needs to be fully aligned with the company’s business
strategy and keep the focus on outcomes.

Key Elements of HR

Beyond the basic need for compliance with HR rules and regulations, the four key elements of
HR are summarized in the following figure. In high-performing companies, each element of the
HR system is designed to reflect best practice and to maximize employee performance. The
different parts of the HR system are strongly aligned with company goals.

Figure 16.4. Key HR Elements
Selection and Placement

When hiring, acquaint prospective new hires with the nature of the jobs they will be expected to
fulfill. This includes explaining the technical competencies needed (for example, collecting
statistical data) and defining behavioral competencies. Behavioral competencies may have a
customer focus, such as the ability to show empathy and support of customers’ feelings and
points of view, or a work management focus, such as the ability to complete tasks efficiently or
to know when to seek guidance.

In addition, make the organization’s culture clear by discussing the values that underpin the
organization—describe your organization’s “heroes.” For example, are the heroes of your
company the people who go the extra mile to get customers to smile? Are they the people who
toil through the night to develop new code? Are they the ones who can network and reach a
company president to make the sale? By sharing such stories of company heroes with your
potential hires, you’ll help reinforce what makes your company unique. This, in turn, will help
the job candidates determine whether they’ll fit into your organization’s culture.

Job Design

Design jobs that involve doing a whole piece of work and are challenging but doable. Job design
refers to the process of putting together various elements to form a job, bearing in mind
organizational and individual worker requirements, as well as considerations of health, safety,
and ergonomics. Train employees to have the knowledge and skills to perform all parts of their
job and give them the authority and accountability to do so.[743] Job enrichment is important for
retaining your employees.

One company that does training right is Motorola. As a global company, Motorola operates in
many countries, including China. Operating in China presents particular challenges in terms of
finding and hiring skilled employees. In a recent survey conducted by the American Chamber of
Commerce in Shanghai, 37% of U.S.-owned enterprises operating in China said that recruiting
skilled employees was their biggest operational problem.[744] Indeed, more companies cited HR
as a problem than cited regulatory concerns, bureaucracy, or infringement on intellectual
property rights. The reason is that Chinese universities do not turn out candidates with the skills
that multinational companies need. As a result, Motorola has created its own training and
development programs to bridge the gap. For example, Motorola’s China Accelerated
Management Program is designed for local managers. Another program, Motorola’s
Management Foundation program, helps train managers in areas such as communication and
problem solving. Finally, Motorola offers a high-tech MBA program in partnership with Arizona
State University and Tsinghua University so that top employees can earn an MBA in-house.[745]
Such programs are tailor-made to the low-skilled but highly motivated Chinese employees.

Compensation and Rewards

Evaluate and pay people based on their performance, not simply for showing up on the job. Offer
rewards for skill development and organizational performance, emphasizing teamwork,
collaboration, and responsibility for performance. Help employees identify new skills to develop
so that they can advance and achieve higher pay and rewards. Compensation systems that
include incentives, gainsharing, profit-sharing, and skill-based pay reward employees who learn
new skills and put those skills to work for the organization. Employees who are trained in a
broad range of skills and problem solving are more likely to grow on the job and feel more
satisfaction. Their training enables them to make more valuable contributions to the company,
which, in turn, gains them higher rewards and greater commitment to the company.[746] The
company likewise benefits from employees’ increased flexibility, productivity, and commitment.

When employees have access to information and the authority to act on that information, they’re
more involved in their jobs and more likely to make the right decision and take the necessary
actions to further the organization’s goals. Similarly, rewards need to be linked to performance,
so that employees are naturally inclined to pursue outcomes that will gain them rewards and
further the organization’s success at the same time.

Diversity Management

Another key to successful SHRM in today’s business environment is embracing diversity. In past
decades, “diversity” meant avoiding discrimination against women and minorities in hiring.
Today, diversity goes far beyond this limited definition; diversity management involves actively
appreciating and using the differing perspectives and ideas that individuals bring to the
workplace. Diversity is an invaluable contributor to innovation and problem-solving success. As
James Surowiecki shows in The Wisdom of Crowds, the more diverse the group in terms of
expertise, gender, age, and background, the more ability the group has to avoid the problems of
groupthink.[747] Diversity helps company teams to come up with more creative and effective
solutions. Teams whose members have complementary skills are often more successful because
members can see one another’s blind spots. Members will be more inclined to make different
kinds of mistakes, which means that they’ll be able to catch and correct those mistakes.

Key Takeaway

Human resources management is becoming increasingly important in organizations because

today’s knowledge economy requires employees to contribute ideas and be engaged in executing
the company’s strategy. HR is thus becoming a strategic partner by identifying the skills that
employees need and then providing employees with the training and structures needed to develop
and deploy those competencies. All the elements of HR—selection, placement, job design, and
compensation—need to be aligned with the company’s strategy so that the right employees are
hired for the right jobs and rewarded properly for their contributions to furthering the company’s
goals.

Exercises

1. What are the advantages of the new SHRM approach?

2. Name three elements of HR.

3. What must HR do to be a true strategic partner of the company?

4. What benefits does a diverse workforce provide the company?

5. If you were an HR manager, what steps would you take to minimize the outsourcing of
jobs in your department?