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1. INTRODUCTION

Strategy is a high-level plan to achieve one or more goals under conditions of uncertainty.
Strategy is an action that managers take to attain one or more of the organization’s goals.
Strategy can also be defined as “A general direction set for the company and its various
components to achieve a desired state in the future. Strategy results from the detailed strategic
planning process”.

 Chandler defines Strategy is the determination of the basic long-term goals of an

enterprise, and the adoption of courses of action and the allocation of resources necessary
for carrying out these goals.
 Mintzberg defines Strategy is a mediating force between the organization and its
environment: consistent patterns in streams of organizational decisions to deal with the
environment.
 Prahlad defines Strategy is more then just fit and allocation of resources. It is stretch and
leveraging of resources

 Jauch and Glueck defines “Strategy is a unified, comprehensive and integrated plan that
relates the strategic advantages of the firm to the challenges of the environment. It is
designed to ensure that the basic objectives of the enterprise are achieved through proper
execution by the organisation.”

1.1.1 NATURE OF STRATEGY

Based on the above definitions, we can understand the nature of strategy. A few aspects
regarding nature of strategy are as follows:

Strategy is a major course of action through which an organization relates itself to its
environment particularly the external factors to facilitate all actions involved in meeting the
objectives of the organization.

Strategy is the blend of internal and external factors. To meet the opportunities and threats
provided by the external factors, internal factors are matched with them.

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Strategy is the combination of actions aimed to meet a particular condition, to solve certain
problems or to achieve a desirable end. The actions are different for different situations.

Due to its dependence on environmental variables, strategy may involve a contradictory

action. An organization may take contradictory actions either simultaneously or with a gap of
time. For example, a firm is engaged in closing down of some of its business and at the same
time expanding some.

Strategy is future oriented. Strategic actions are required for new situations which have not
arisen before in the past.

Strategy requires some systems and norms for its efficient adoption in any organization.

Strategy provides overall framework for guiding enterprise thinking and action.

1.1.2 CONCEPT OF STRATEGY

The concept of strategy is based on three subsidiary concepts:

 Competitive advantage

 Distinctive capabilities and

 Strategic fit.

Competitive advantage

The concept of competitive advantage was formulated by Michael Porter (1985). Competitive
advantage, Porter asserts, arises out of a firm creating value for its customers. To achieve it,
firms select markets in which they can excel and present a moving target to their competitors by
continually improving their position.

Distinctive capabilities

A distinctive capability or competence can be described as an important feature that confers

superiority on the organization’. Kay extends this definition by emphasizing that there is a
difference between distinctive capabilities and reproducible capabilities. Distinctive capabilities

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are those characteristics that cannot be replicated by competitors, or can only be imitated with
great difficulty. Reproducible capabilities are those that can be bought or created by any

company with reasonable management skills, diligence and financial resources. Most technical
capabilities are reproducible.

Strategic fit

The concept of strategic fit states that to maximize competitive advantage a firm must match its
capabilities and resources to the opportunities available in the external environment. A critical
aspect of top management’s work today involves matching organizational competences (internal
resources and skills) with the opportunities and risks created by environmental change in ways
that will be both effective and efficient over the time such resources will be deployed.

1.1.3 FORMULATION OF STRATEGY

Strategy formulation refers to the process of choosing the most appropriate course of action for
the realization of organizational goals and objectives and thereby achieving the organizational
vision.

The process of strategy formulation basically involves six main steps. Though these steps do
not follow a rigid chronological order, however they are very rational and can be easily followed
in this order.

1. Setting Organizations’ objectives - The key component of any strategy statement is to

set the long-term objectives of the organization. It is known that strategy is generally a
medium for realization of organizational objectives. Objectives stress the state of being
there whereas Strategy stresses upon the process of reaching there. Strategy includes both
the fixation of objectives as well the medium to be used to realize those objectives. Thus,
strategy is a wider term which believes in the manner of deployment of resources so as to
achieve the objectives. While fixing the organizational objectives, it is essential that the
factors which influence the selection of objectives must be analyzed before the selection
of objectives. Once the objectives and the factors influencing strategic decisions have
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been determined, it is easy to take strategic decisions.

2. Evaluating the Organizational Environment - The next step is to evaluate the general
economic and industrial environment in which the organization operates. This includes a
review of the organizations competitive position. It is essential to conduct a qualitative

and quantitative review of an organizations existing product line. The purpose of such a
review is to make sure that the factors important for competitive success in the market
can be discovered so that the management can identify their own strengths and
weaknesses as well as their competitors’ strengths and weaknesses. After identifying its
strengths and weaknesses, an organization must keep a track of competitors’ moves and
actions so as to discover probable opportunities of threats to its market or supply sources.

3. Setting Quantitative Targets - In this step, an organization must practically fix the
quantitative target values for some of the organizational objectives. The idea behind this
is to compare with long term customers, so as to evaluate the contribution that might be
made by various product zones or operating departments.

4. Aiming in context with the divisional plans - In this step, the contributions made by
each department or division or product category within the organization is identified and
accordingly strategic planning is done for each sub-unit. This requires a careful analysis
of macroeconomic trends.

5. Performance Analysis - Performance analysis includes discovering and analyzing the

gap between the planned or desired performance. A critical evaluation of the
organizations past performance, present condition and the desired future conditions must
be done by the organization. This critical evaluation identifies the degree of gap that
persists between the actual reality and the long-term aspirations of the organization. An
attempt is made by the organization to estimate its probable future condition if the current
trends persist.

6. Choice of Strategy - This is the ultimate step in Strategy Formulation. The best course of
action is actually chosen after considering organizational goals, organizational strengths,
potential and limitations as well as the external opportunities.
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1.1.4 STRATEGY IMPLEMENTATION

Strategy implementation is the translation of chosen strategy into organizational action so

as to achieve strategic goals and objectives. Strategy implementation is also defined as
the manner in which an organization should develop, utilize, and amalgamate

organizational structure, control systems, and culture to follow strategies that lead to
competitive advantage and a better performance.

Steps in implementing a strategy:

Developing an organization having potential of carrying out strategy successfully.

Disbursement of abundant resources to strategy-essential activities.

Creating strategy-encouraging policies.

Employing best policies and programs for constant improvement.

Linking reward structure to accomplishment of results.

Making use of strategic leadership.

Excellently formulated strategies will fail if they are not properly implemented. Also, it is
essential to note that strategy implementation is not possible unless there is stability
between strategy and each organizational dimension such as organizational structure,
reward structure, resource-allocation process, etc.

1.2 EVOLUTION OF SHRM

The evolution of SHRM are summarised here:

1. From Personnel Management to HRM:

Traditionally, it was the initial stage to perform the HR functions in the managerial set up in the
form of personnel department. There were mainly the functions of staffing and maintaining the
labour relations at every sphere of organisational set up. The personnel management was more
centralise and bureaucratic with some old and traditional approaches. It was not viewed as

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involved in the competitive or strategical areas of business. Before the year 1970, the emergence
of HRM as replacement for personnel management was taken up. The main task of HRM is to
ensure the achievements of organisational goals through the commitment of people and it is often
believed in that HRM is just a more modern term as compared to the traditional personnel
management.

2. From HRM to SHRM:

For the last four decades, it was the dynamic and competitive business environment resulting
from globalisation has led top managerial cadres to bring a new focus on HR to be organises and
managed. It was a basic perception that how the HRM managed and contributes to the effective
role and performance of organisation. Now the HR function has to develop more dynamic and
strategical viewpoints. The late 1980th and early 2000s witnessed an integrated approach was
developed between HRM and business strategy. More attention was given on the relationship of
HRM with the strategic management of organisation. In the 21st century the HRM has the
approaches of HR cognition, HR learning, knowledge of HR, network of HR and HR
development within the purview of strategic managerial scenario.

It was the proactive role of HRM which have concerned with organisational effectiveness,
strategical framework, behavioural aspects, resource utilisation, capacity development and
change environment. Since the HR provide and contribute a lot of different competitive
advantages to the organisation, it is needful to integrate HR practices with the emergence of new
strategical viewpoints of corporate business areas. With the emerging role of strategic planning
of HR, integrated approach of HR systems, strategical business environment and new avenues of
organisational effectiveness was emerged. There have been a dynamic shift from the concept of
HRM to Strategic Human Resource Management.

Strategic human resource management is the process of linking the human resource function
with the strategic objectives of the organization to improve performance. Attracting and keeping
talented and skilled employees is one of the most important challenges organizations face in
today’s dynamic business world. No strategy, no matter how well designed, will work unless the
organization has the right people, with the right skills and behaviors, in the right roles, motivated
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in the right way and supported by the right leaders. A company can develop a competitive
advantage through the skills and competencies of its people. So to be successful more value must
be given to people.

 Strategic human resource management is the proactive management of people to the

desired value to them. It is designed to help companies better meet the needs of their
employees while promoting company goals.

 SHRM is a philosophy of people management based on the belief that human resources
are uniquely important to sustain business success.
 SHRM aims to ensure that the culture, style, and structure of the organization and the
quality, commitment and motivation of its employees contribute fully to the achievement
of business objectives.
 HR strategies combine all people management activities into an organized and integrated
program to meet the strategic objectives of an enterprise.

1.3 SHRM DEFINITION

“Strategic human resource management means formulating and executing human resource
policies and practices that produce the employee competencies and behaviors that the company
needs to achieve its strategic aims.”- Gary Dessler

“Strategic human resource management is an approach to making decisions on the intentions and
plans of the organization concerning the employment relationship and the organization’s
recruitment, training, development, performance management, and the organization’s strategies,
policies, and practices.” – Armstrong

Strategic human resource management (SHRM) is defined as “the pattern of planned human
resource deployments and activities intended to enable an organization to achieve its goals”. –
Wright & McMahan

1.3.1 NATURE OF SHRM

Long-term Focus: As business strategies have a long-term orientation, therefore, focus of
SHRM is also long-term probably more than one year

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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.
Interrelated with Business Strategies: There is an interrelation between business strategies
and SHRM. E.g. it gives significant inputs when business strategy is formulated, and human
resource strategies (like recruitment, staffing, training and performance appraisal)

Fosters 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

1.3.2 COMPONENTS OF STRATEGIC HUMAN RESOURCE MANAGEMENT

This definition implies the following four components of SHRM:

1. It focuses on an organization’s human resources (people) as the primary source of competitive

advantage of the organization.

2. The activities highlight the HR programs, policies, and practices as the means through which
the people of the organization can be deployed to gain competitive advantage.

3. The pattern and plan imply that there is a fit between HR strategy and the organization’s
business strategy (vertical fit) and between all of the HR activities (horizontal fit).

4. The people, practices, and planned patterns are all purposeful, that is, directed towards the
achievement of the goals of the organization.

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Fig 1: Components of SHRM

1.3.1 OBJECTIVES OF SHRM

(a) Plan for manpower requirements for its business located in national and international
markets.

(b) Conduct scientific selection and appointment of employees for business operation of right
type and right in number.

(c) Train the employees on technology in use and working procedure for developing their skills
and knowledge.

(d) Place the employees at jobs according to their areas of specialization.

(e) Provide opportunities for the employees deserving on the scientific basis.

(f) Compensate employees according to their skills, experience and contributions.

(g) Maintain employees motivated, satisfied and cooperative in organisation.

(h) Improve industrial relations, industrial peace and harmony at workplace.

(i) Encourage employees for their cooperation, commitments and higher performance at work.

(j) Contribute through manpower in improvement of organisational performance and

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organisational effectiveness in business.

(k) Contribute in profitability, progress and image of the organisation.

(l) Stay competitive and effective in business for growth and excellence in global market.

For effective accomplishment of the objectives the Strategic HRM should keep in mind the
interests of all concerned parties or stakeholders in the organisation in designing its strategies.
The main stakeholders are employees, employer and management. The focus of SHRM should
be on human relations, regular development, empowerment of employees; leadership,
communication, welfare and security of employees, quality of work life.

1.3.2 NEED FOR SHRM

 The first & at most concern of SHRM is to focus on actions that distinguish an
organization/firm from its competitors.

 It provides idea to allocate the resources of organization to most match & capable
Employee.

 It design the foundation of organization to achieve efficient business benefits, structure,

culture, employees values propositions and effective communication strategic plan for
HRM.

 SHRM also keep track of down turns, down falls, risks and other business acquirement.

 SHRM also take part in employee recruitment, hiring, training and assessments
processes.

 SHRM add its expression in business’s decision making task.

 Strategic Human Resource Management give emphasis to organizational codes of moral

values and manage public crash of business.

 SHRM provide tactic and proposal to the director of organization.

 SHRM take your business to the new level, integrates HR workflow, defines new goals,

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aligned employee work force for business flourishment.

1.3.3 IMPORTANCE OF STRATEGIC HUMAN RESOURCE MANAGEMENT

1. Identifying and analysing 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 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 competency.

1.3.4 ROLE OF SHRM

The major roles of Strategic HRM in an organisation are given below:

1. Strategic role – The strategic role of HR involves formulating business decisions, translating
corporate strategy into a human resource strategy, and training employees to concentrate on
customer needs.

2. Information and decision-making role – In this role, the HR department must inform and
advice the organisation about the various best practices like efficiency in customer services or
new product development. In the information and decision- making role, HR must take decisions
about problems in employee relations.

3. Strategic HR functional role – This is a very important role. In this role, HR must select,
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design and implement planning and appraisal systems for the employees. These systems should
fit both the strategy and the culture of the organisation concerned.
4. Administrative role – In this role, HR must implement policies and procedures for the
organisation. In addition, the HR department must try to improve the administrative system of
the organisation. SHRM organises various training and development programmes to encourage
employee involvement. It thus, motivates the employees to become flexible to achieve the
strategic goals of the organisation.

1.3.7 HR AS ASSETS - VRIO Framework:

The VRIO Framework or VRIO Model is part of the Resource-Based View (RBV), which is a
perspective that examines the link between a company’s internal characteristics and its
performance. RBV is therefore complementary to the Industrial Organization (I/O) perspectives
that look more at external factors such as competitiveness in order to determine performance and
profit potential .

The supporters of RBV argue that organizations should look inside the company to find the
sources of competitive advantage instead of looking at the competitive environment. The key
concepts within this view are therefore Firm Resources and Sustainable Competitive Advantage.
Firm resources can be defined as ‘all assets, capabilities, organizational processes, firm
attributes, information and knowledge controlled by a firm that enables it to improve its
efficiency and effectiveness’.

Resources are often classified into categories such as tangible (e.g. equipment, machinery, land,
buildings and cash) and intangible (e.g. trademarks, brand reputation, patents and licenses)
or physical, human and organizational resources. In order for companies to transform these
resources into sustainable competitive advantage, resources must have four attributes that can be
summarized into the VRIO framework.

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VRIO framework
Valuable:
First and foremost resources must be valuable. According to the RBV, resources are seen as
valuable when they enable a firm to implement strategies that improve a firm’s efficiency and
effectiveness by exploiting opportunities or by mitigating threats.

Rare Secondly, resources must be rare. Resources that can only be acquired by one or few
companies are considered to be rare. If a certain valuable resource is possessed by a large
amount of players in the industry, each of the players has a capability to exploit the resource in
the same way, thereby implementing a common strategy that gives non of the players a
competitive advantage. Such a situation is indicated as competitive parity or competitive
equality. In case a company does possess a large amount of resources that are valuable and rare,
it is likely to have at least temporary competitive advantage.

Inimitable
Although valuable and rare resources may help companies to engage in strategies that other firms
cannot pursue since the other firms lack the relevant resources, it is no guarantee for long-term
competitive advantage. It may give the focal company a first-mover advantage but competitors
will probably try to imitate these resources. Another criteria that resources should meet is
therefore that they should be hard and costly to imitate or substitute.

Organization
The resources themself do not create any advantage for a company if the company is not
organized in way to adequately exploit these resources and capture the value from them. The
focal company therefore needs the capability to assemble and coordinate resources effectively.
Examples of these organizational components include a company’s formal reporting structure,
strategic planning and budgeting systems, management control systems and compensation
policies. Without the correct organization to acquire, use and monitor the resources involved,
even companies with valuable, rare and imperfectly imitable resources will not be able to create
a sustainable competitive advantage. When all four resource attributes are present, a company is
save to assume it has a distinctive competence that can be used as source of sustainable
competitive advantage. Below is a diagram that sums up the four VRIO attributes and the
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resulting advantages the company has in different situations.

Fig 2: VRIO Framework

1.4 TRADITIONAL HRM VERSUS SHRM

. The major points of differences between the two are;

Basis Traditional HRM SHRM

Responsibility Staff personnel in the HR Line managers; all managers responsible

for HR department for people are HR managers
programs
Focus of Employee relations— ensuring Partnerships with internal (employees) and
activities employee motivation and external (customers, stakeholders, public
productivity, compliance with laws interest groups) groups

Role of HR Reactive and transactional Proactive and transformational, change

leader

Initiative for Slow, piecemeal, and fragmented, Fast, flexible, and systemic, change
change not integrated with larger issues initiatives implemented in concert with
other HR systems
Time horizon Short-term Consider various time frames as necessary
(short, medium, or long-term)

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Control Bureaucratic control through rules, Organic control through flexibility, as few
procedures, and policies restrictions on employee behavior as
possible

Job design Focus on scientific management Broad job design, flexibility, teams and
principles—the division of labor, groups, and cross-training
independence, and specialization

Important Capital, products, technology, and People and their knowledge, skills, and
investments finance abilities

Accountability Cost center. Investment center.

1.5 DIFFERENCE BETWEEN SHRM AND HR STRATEGIES

The terms strategic human resource management and human resource strategies are often used
interchangeably, however, some distinction can be made between the two.
In a general sense, the difference between SHRM and HR strategies is similar to that between
strategic management and corporate business strategies. Both SHRM and strategic management
describe an approach adopted by the management and focus on long-term issues and provide
direction to the organization.
Human resource strategies and business strategies are outcomes of this approach which focus on
the organizational view concerning key issues and specific functions, or activities.

SHRM HR Strategies

A general approach to the strategic Outcome (manifestation) of the general SHRM

management of human resources. approach.

Aligned with the organizational intention about Focus on specific organizational intentions
its future direction. about what needs to be done.

Focus on specific issues that facilitate the

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Focus on long-term people issues. achievement of corporate strategy.

Defines the areas in which specific HR Human resource strategy decisions are derived
strategies need to be developed. from SHRM.

Focus on macro concerns such as structure,

culture.

Strategic HRM decisions are built into the

strategic business plan.

1.6 HARD VS. SOFT HRM

Hard HRM:
The focus here is to identify workforce needs so you can recruit and manage as you need to
(including hiring staff, or making others redundant).
The main features of this approach are
 Regular changes in employee numbers.
 Little business transparency.
 Lower wages.
 Little to no empowerment of employees.
 Appraisal systems that focus on good and bad performance.
 A more old-fashioned style of leadership.

Soft HRM: This approach treats employees as an essential resource in your business—if not
the most important one of all. This makes it a more progressive outlook. One where you treat
staff members as individuals. The soft HRM model focus is for the needs of your staff,
including rewards and motivation.
 Focussing on long-term planning for your business and its workforce.
 An open and transparent business model with good communication.
 Competitive pay, relying on salary benchmarking and bonus packages.
 Employee empowerment.
 Appraisal systems that identify training opportunities and professional development.
 A more democratic type of leadership.

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HR Model

David Ulrich HR Model

The David Ulrich HR model is used by big, customer-focused companies around the world to improve
efficiency and efficacy in their HR departments.

Ulrich's model helps to organize roles and responsibilities across HR departments, defining who is
responsible and accountable for the key tasks that contribute to the smooth running of any business.

What is The David Ulrich HR model?

The Ulrich model of HR is a model that helps to organize roles and responsibilities across HR
departments. This HR model was first introduced by David Ulrich in 1995 as a way of organizing HR
functions.

Meant particularly for large corporations with big and unwieldy teams, the model is designed to
streamline ways of working and ensure every team member is clear on their roles and responsibilities,
and what they're accountable for.

Ulrich splits HR into four key sections:

Strategic Partner. The Strategic Partner is there to help manage the development and growth of the
workforce. They look to the customer to see what they could make better, and they review the systems
and processes that might help to deliver what the customer wants and needs more efficiently.

Administrative Expert. The Administrative Expert has more of an internally focused role. They
manage costs, people, and the overall delivery of the day-to-day 'business as usual' output.

Change Agent. The Change Agent looks into the company's overall culture and thinks about how it
can be better, both from a personal and professional perspective. They'll connect with line managers to
lead and facilitate change to make the organization a better place for everyone.

Employee Champion. The Employee Champion aids employees to speak up and ensures they feel
heard and respected at work. They support the delivery of processes and practicalities that ensure
safeguarding, and they can also help to make sure the company's people are happier and healthier,
which is of huge overall benefit to the organization.

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This sets up the framework for a high-functioning HR department and clearly defines which roles
should be focused on people and processes. Within those roles, it states whether each individual should
be looking at operational or strategic planning.

The core goals attached to the model are to:

 Create a high-functioning and unified team structure
 Define every role in the department
 Ensure the company is performing to its best and operating competitively
 Measure performance to consistently do better
The model was particularly revolutionary at the time as it put talent sourcing and future-thinking firmly
on the radar, and showed them to be as significant as the more traditional HR roles of employee
assistance and administrative tasks.

Who is David Ulrich?

David Ulrich is a university professor, author, speaker, management coach, and thought leader in HR.
He was born in Nevada in 1953 but grew up in Oregon. Ulrich attended Birmingham Young University
where he studied University Studies, before earning a Ph.D. in Business Organisation Theory.
The focus of Ulrich's professional career has been strategic leadership and human resources practices,
and his HR books have helped thousands of businesses to address internal structure issues, make
positive changes and improve productivity and effectiveness.
Among many other topics, he's helped to shape thinking in aligning HR practices to customer needs,
the outcomes of effective leadership, and how investing in leadership can increase shareholder value.
In the human resources world, David Ulrich is considered a guru, even though many now argue that his
theories are becoming increasingly outdated in a modern, technology-focused world. The fundamental
principles of his work continue to help many companies organize their HR function in a way that better
supports both people and processes.

Dave Ulrich lists the function of HR

 aligning HR strategy with business strategy
 re-engineering organization processes
 listening and responding to employees
 managing transformation and change.

Lepak and Snell model

Lepak and Snell (1999) analyze advantages and disadvantages of systems based on employment
internalization and externalization, and develop a model that allows relating essential features of human
capital (value and uniqueness) with four different employment modes. These employment modes are in
turn linked to four different human resource configurations or, in other words, to different human
resource practice systems.
The Employer may employ employees as
 Permanent
 Temporary,
 Casual Employee.
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 Contractual or
 Apprentice and trainees
 Commission and piece rate method
The Employer may direct an Employee to perform such duties as are within the limits of the
Employee's skill, competence and training.
The uniqueness and value of human resource should be understood while deciding type of employment
to be offered.
Lepak and Snell proposed two dimensions in their model of employability
 The uniqueness of human resource
 The strategic value of human resource
Based on these two dimensions, Four quadrants were proposed in model. The Lepak and Snell
model proposed that within organizations, considerable variance exists with regard to both the
uniqueness and value of skills. Juxtaposing these two dimensions, they built a (2 x 2) matrix describing
different combinations with their corresponding employment relationships and human resource
systems.

Quadrant 1: Development of Human Capital. This corresponds to the unique and valuable human
capital, i.e. the "set of employees who possess competencies that are both valuable and specific, can be
considered as the core of employees that can serve as a source of competitive advantage. In this way,
the configuration of human resources that can support a relationship centered in the organization will be
that of commitment, as opposed to that of control.

Quadrant 2: Acquisition of human capital. This refers to the human capital that, while valuable, and
providing an incentive for the internalization of employment, due to its low specificity will be readily
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available in the labor market and carries the risk that the investments made for its internal development
cannot be recovered. Thus, the human resources configurations will, in this case, be based on the
market (buy system). This type of configuration will emphasize the recruitment and selection of people
who already possess the generic competencies required and will seek short-term benefits through the
immediate use of the same.

Quadrant 3: Recruitment of Human Capital. This corresponds to generic human capital which is of
limited strategic value for the company. It is describes as "public knowledge" or common knowledge
and which, by its characteristics, is easily found in the labor market and can be treated, in essence, as a
commodity. Therefore, the configuration of human resources is based on compliance. To ensure
compliance, companies will focus on enforcing the rules and regulations, on the defense of specific
provisions on work protocols, and on ensuring compliance with set standards.

Quadrant 4: Building Partnerships of human capital. This contains the idiosyncratic human capital
but with little strategic value. From the perspective of the TCT(transaction cost theory), by the specific
nature of the competencies required, enterprises should internalize them to reduce the transaction costs.
The limited potential for value creation of this human capital minimizes the benefits that can be
obtained from the internalization of the same and therefore outsourcing is recommended. Therefore, an
"intermediate form of governance", the alliance, is chosen and a configuration of collaborative human
resources is oriented to foment the collaboration and to share information among the employees of the
"partners".

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