MODULE 1.

Introduction to Strategic Human Resource Management

(SHRM) and Human Resource Environment

Learning Objectives:

1. Discuss and explain the concept and meaning of strategic human resource
management.
2. Identify and differentiate SHRM from traditional HRM.
3. Discuss and explain the significance of viewing human resources as “investment”
and source of sustainable competitive advantage for organizations
4. Explain the linkage between HR strategy and business strategy
5. Discuss and explain the business environment in the industry life cycle, and
appreciate the HRM in knowledge economy
6. Discuss and explain the competitive advantage of technology and HRM

Content Discussion:

TOPIC 1. Basic Concept of Human Resource Strategy

 Strategic Human Resource Management is the practice of attracting, developing,

rewarding and retaining employees for the benefit of both the employees as
individuals and the organization as a whole.

 HR departments that practice strategic human resource management do not work

independently within a silo, they interact with other departments within the
organization in order to understand their goals and then create strategies that align
with those objectives as well as those of the organizations.

 As a result, the goals of a human resource department reflect and support the goals
of the rest of the organization.

 Strategic HRM is seen as a partner in organizational success, as opposed to a

necessity for legal compliance or compensation.

 Strategic HRM utilizes the talent and opportunity within the human resources
department to make other departments stronger and more effective.

 Strategic Human Resource Management can be defined as the linking human

resources with strategic goals and objectives in order to improve business and
develop organizational culture that foster innovation, flexibility and competitive
advantage. In an organization SHRM means accepting and involving the HR
functions as a strategic partner in the formulation and implementation of the
 company’s strategies through HR activities such as recruiting, selecting, training
and rewarding personnel.

 Strategic HRM gives direction on how to build the foundation for strategic
advantage creating an effective organizational structure and design, culture,
employee value proposition, systems thinking, an appropriate communication
strategy and preparing an organization for a changing landscape which includes
downturns and mergers and acquisitions.

 Sustainability and Corporate Social Responsibility come within the ambit (or
scope/extent) of this discipline, especially with reference to organizational values
and their expression in business decision making.

 Strategic HRM emphasizes organizational codes of ethics, managing the societal

impact of business decisions, philanthropy and the role of the human resource
professional in improving the quality of life of employees, their families and the
community at large.

 Strategic HRM includes typical human resource components such as hiring,

discipline and payroll, and also involves working with employees in a collaborative
manner to boost retention, improve the quality of the work experience, and
maximize the mutual benefit of employment for both the employee and the
employer.

Strategic HRM, therefore, is concerned with the following:

1. Analyze the opportunities and threats existing in the external organization.

2. Formulate strategies that will match the organization’s (internal) strengths and
weaknesses with environmental (external) threats and opportunities. In other
words, make a SWOT analysis of organization.
3. Implement the strategies so formulated.
4. Evaluate the control activities to ensure that the organization’s objectives are duly
achieved.

Nature of SHRM:

1. Long-term Focus: As business strategies have a long-term orientation, thereby

focus of SHRM is also long-term probably more than one year.

2. Associated with Goal-Setting: SHRM is highly related with setting of objectives,

formulation of policy and allocation of resources and it is carried out at all levels of
top management.
3. Interrelated with Business Strategies: There is interrelation between business
strategies and SHRM.

Example, it gives significant inputs when business strategy is formulated, and

human resource strategies like recruitment, staffing, training and performance
appraisal.

4. Foster Corporate Excellence Skills: SHRM considers employees as the strategic

potential of the organization and on that basis makes effort to differentiate the
organization from its competitors present in the markets. It also promotes learning
of modern skills.

Figure 1.1 Ulrich's Model of Human Resource Management

Whereas the Functions of HR Department include:

1. Having Strategic Focus 2. People Management

3. Systems Management 4. Operational Functions

 The Roles of HR Manager include:

1. Being a Strategic Partner 3. An Employee Champion

2. A Change Agent 4. An Administrative Expert

Strategy

The origin of this concept has military orientation, going back to the Greek word
‘strategos’, for a general who organizes, leads and directs his forces to the most
advantageous position (Bracker, 1980; Legge, 1995).

In the context of business, it explains how top management is leading the organization in a
particular direction in order to achieve its specific goals, objectives, vision and overall
purpose.

The main emphasis of strategy is to enable an organization to achieve competitive

advantage with its unique capabilities by focusing on present and future direction of the
organization.

Strategy is the determination of the basic long-term goals and objectives of an enterprise,
and the adoption of courses of action and the allocation of resources necessary for carrying
out these goals. (Chandler, 1962).

Figure 1.2 HIERARCHY OF STRATEGY

 Aims of SHRM:

1. To develop Strategic Competencies

To make sure that the company needs standards and competent and highly
motivated employees for achieving sustainable competitive advantage.

2. To give Sense of Direction

It guides the organization in the right direction so that the business requirements of
the organization and the individual as well as the co-operative requirements of its
employees are met by creation and attainment of consistent and reasonable HR
policies and programs.

3. To achieve Integration

Target of SHRM is to give a united framework, so that the organized HR system

works synergistically in accordance with the organizational strategic objectives.

4. To formulate Business Strategy

By focusing on the measures through which the organization can use the power of
its human resources for the increasing benefits.
 Key Features of Strategic Human Resource Management:

1. There is an explicit linkage between HR policy and practices and overall

organizational strategic aims and the organizational environment.

2. There are some organizing scheme or design linking individual HR interventions

so that they are mutually supportive.

3. Much of the responsibility for the management of human resources is devolved or

delegated down the line.

Approaches of the SHRM:

1. Attempts to link Human Resource activities with competency based performance

measures.
2. Attempts to link Human Resource activities with business surpluses or profits.

These two approaches indicate two factors in an organizational setting.

1. The human factor, their performance and competency

2. The business surplus which are uniquely important in sustained business success.

Barriers of SHRM:

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. Commitment of the entire senior management team
5. Plans that integrate internal resource with external requirement
6. Limited time, money and other resources
7. The status quo approach of employees
8. Fear of incompetency of senior level managers to take up strategic steps
9. Diverse workforce with competitive skill sets
10. Fear towards victimization in the wake of failures
11. Improper strategic assignments and leadership conflict over authority
12. Ramification or consequence or outcome for power relations
13. Vulnerability to legislative changes
14. Resistance that comes through the legitimate labor institutions
15. Presence of an active labor union
16. Rapid structural changes
17. Economic and market pressures influenced the adoption of SHRM
18. More diverse, outward looking approach
 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 through competency

5P - Model of SHRM:

The 5 Ps Model of strategic human resource management is a new model in the area of
study. This model is proposed by Randal Schuler, that melds (blends or mix) together five
human resource activities with strategic highlight just how significant the strategy activity
link can be.

The proposed model incorporates the 5 Ps of SHRM which stand for:

1. Philosophy of Human Resources

2. Policies of Human Resources
3. Programs of Human Resources
4. Practices of Human Resources
5. Processes of Human Resources

Philosophy: Expressed in statements defining business values and culture. It

expresses how to treat and value people

Policies: Expressed as shared values and guidelines. Policies establish guidelines for
action on people related business issues and HR programs.

Programs: Articulated as human resource strategy. These coordinate efforts to

facilitate change to address major people related business issues.

Practices: For leadership managerial and operational role practices motivate needed
role behaviors.

Processes: For the formulation and implementation of other activities that define how
activities are carried out.
 How SHRM differs from HRM

Difference SHRM HRM

Strategy in day to day
People-centered Values
Operations
Traditional Management of
Focus Human Resource Programs
People
Addressing and Solving Standard Practices or
Problems Industrial Relations Models
Increase employee Resolve business obstacles
Primary Goal
productivity with people
Identify key HR Areas to Communication between
Primary Actions be Implemented in the Top and Lower
Long-run Management is Vital

Importance of SHRM:

1. Helps firm in achieving cost-effective engagement of labor

2. Enables firm to meet changing needs
3. Provides clear-cut goals, direction, and future focus
4. Helps organization in planning and executing organizational changes
5. Ensures optimum utilization of organizational resources
6. Develops, manages and sustains skills and knowledge

Challenges of SHRM:

1. Absence of long-term orientation

2. Lack of strategic reasoning
3. Lack of adequate support from top management
4. Resistance from labor unions
5. Fear of failures
6. Rigidity of HR practices

Overcoming Challenges of SHRM:

1. Conduct a rigorous initial analysis

2. Formulate strategy
3. Gain support
4. Assess barriers
5. Manage change
6. Project management and implementation
7. Follow-up and evaluate
 Summary

Let us now summarize what we studied in this module. We learned about the
genesis, definitions and meaning of Human Resource Management, Strategy,
and Strategic Management which are the foundation of Strategic HRM.

We also discussed the concepts, nature, aims, importance, features,

approaches, hierarchy, barriers, benefits, challenges and how to overcome
these challenges in the emerging trends in Strategic HRM.

We also learned the difference between the Human Resource Management

(HRM) and the Strategic Human Resource Management (SHRM) that may
influence how Strategic HR initiatives and the impact they likely to have on
organizations and its people

*************** End of Topic No. 1 Under Module 1 *************