Everything you need to know about the meaning of strategic human resource management. 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 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.
“Strategic human resource management can be defined as the linking of human resources with strategic goals and objectives in order to improve business performance and develop organizational culture that foster innovation, flexibility and competitive advantage.
In an organisation SHRM means accepting and involving the HR function 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.”- Rana Sinha
SHRM focuses on people as the primary source of competitive advantage in the organization, and it is considered critical for a company’s success. It has many perspectives such as fit (congruity), functional, economic, typological, inducement, investment, and involvement perspectives.
Additionally, learn about the definition, concept, features, characteristics, scope, focus, tools, theory and development of strategic human resource management.
Meaning of Strategic Human Resource Management: As Explained by Eminent Authors and Experts
Meaning of Strategic Human Resource Management – Meaning and Definition of Strategic Human Resource Management
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 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.
SHRM also emphasizes the implementation of a set of policies and practices that will build employee pool of skills, knowledge, and abilities 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.
Wright and McMahan (1992) defined SHRM as ‘a human resource system that is tailored to the demands of the business strategy’ to ‘the pattern of planned human resource activities intended to enable an organization to achieve its goals’. 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.
In other words, Strategic Human Resource Management may be defined as the ‘organizational use of employees to gain or keep a competitive advantage against competitors and involves aligning initiatives involving how people are managed with organizational mission and objectives.’
In flattened, downsized and high-performing organizations, highly trained and committed employees are often the firm’s competitive key. Perhaps the most drastic change in HR’s role today is its growing involvement in developing and implementing the company’s strategy.
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.
Schuler, R.S. (1992) defined SHRM as- ‘all those activities affecting the behaviour of individuals in their efforts to formulate and implement the strategic needs of business.’
According to Wright and Mc Mahan (1992), “SHRM as the pattern of planned human resource deployment and activities intended to enable the firm to achieve its goals.”
It is fact that, SHRM is concerned with the HR issues and practices that affect or are affected by the strategic plans and programmes of the organisation.
There is a reciprocal interaction between HR practices and behaviour, on one hand and the cultural scenario and managerial role of the organisation. Here, a supportive, essential and directional culture based on work ethics and dominant by strategical aspects are needful for successful implementation of HR practices.
Strategic Human Resource Management (SHRM) is the relationship between HRM and strategic management in a form. It is the pattern of planned human resource development and activities intended to enable the firm to achieve its goals.
Meaning of Strategic Human Resource Management – Features, Scope and Meaning of SHRM
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.
Therefore, a strategy is a pattern or a plan that integrates on organisation’s major goals, policies and action. Strategic human resource management as the integration of HRM, which improve business performance and achieve organisational goals.
In the traditional view, Human Resource Management as a staff or advisory function and strictly operational. Under traditional HRM, human resources are managed by specialists in line. Under strategic HRM, the responsibility for managing human resources is placed mostly on line managers who basically manage people at work.
Features of strategic human resource management could be inferred as mentioned below:
1. Organisational Level- Because strategies involve decisions about key goals, major policies and the allocation of resources, they tend to be formulated at the top.
2. Focus- Strategies are business-driven and focus on “organisational effectiveness”. People are seen primarily as resources to be managed towards the achievement of strategic business.
3. Framework- Strategies by their very nature provide a unifying framework that is broad, contingency-based and integrative. They incorporate a full complement of the HR goals and activities designed specially to fit extent environment and be mutually reinforcing and synergistic.
Again some of the basic features of SHRM has discussed in the following:
1. Strategic human resource management is relevant in both public and private organisations.
2. SHRM has both policy and operative aspects.
3. SHRM as universal academic discipline.
4. SHRM deals with the pattern of planned human resource deployment and activities.
5. It also involves in the management process of human capital.
Scope of SHRM:
The scope of SHRM is very wide. It consists of the following activities:
(1) It deals with the management style and the development of new forms of organisation.
(2) It deals with the development of organizational capability, particularly knowledge management.
(3) It involves in business performance.
(4) Developing and maintaining motivation for workers by providing incentives.
(5) It also deals on behavioural science like an- topology, sociology and psychology, which led to the development of new techniques of motivation and leadership.
(6) SHRM also deals with formulation and implementation of a company’s strategic plan.
Meaning of Strategic Human Resource Management – Meaning and Concept of Strategic Human Resource Management
Traditionally HR department was viewed as playing passive role and not going beyond the administrative tasks like payroll processing. With the changes in business scenario and its growing expectations, the role of HR have changed drastically. Liberalization and industrialization have 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. HR now acts as a strategic partner and helps the company to achieve its goals.
Strategic Human Resource Management (SHRM) has received a great deal of attention in recent years, most notably in the fields of Human Resource Management (HRM), Organizational Behavior, and Industrial Relations. SHRM is not just the function of HR department, but is the responsibility of all the managers and the executives of the entire organization.
Research shows that successful organization have several things in common, such as selective hiring, paying well, being decentralized, and training employees and sharing information. When organizations enable, develop, and motivate human capital, they improve accounting profits in the process.
HR should be prepared to answer the following questions:
1. Does our company have required competence?
2. Does our company have right rewards, measures, rewards and incentives to align people’s efforts with the company strategy?
3. Does our company have right structures, and policies to create a high performing organization?
4. Can our company respond to uncertainty and learn to adapt to changes quickly?
Perhaps the most drastic change in HR’s role today is its growing involvement in developing and 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:
i. Core Competency:
Core competency can be defined as — a unique capability in the organization that creates high value and that differentiates the organization from its competition.
A mission is a statement that explains purpose and reason for existence of a business; it is usually very broad, but not more than a couple of sentences and it serves as foundation for everything organization does.
Strategy is the company’s plan of how it will balance its internal strengths and weaknesses with external opportunities and 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 and on building committed work teams, and these put HR in a central role. In the fast changing, globally competitive & quality oriented industrial environment, it is 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 and 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.
“Strategic human resource management can be defined as the linking of human resources with strategic goals and objectives in order to improve business performance and develop organizational culture that foster innovation, flexibility and competitive advantage. In an organisation SHRM means accepting and involving the HR function 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.”- Rana Sinha
Meaning of Strategic Human Resource Management
Strategic human resource management (SHRM) explores the strategic role of human resources in the arena of human resource environment, human resource evaluation and accounting, measuring and improving human performances, coaching, mentoring, counselling, and career management. SHRM deals with strategic assets, manages human resources from an investment perspective, and aligns the HR development strategy with the business strategy.
SHRM focuses on people as the primary source of competitive advantage in the organization, and it is considered critical for a company’s success. It has many perspectives such as fit (congruity), functional, economic, typological, inducement, investment, and involvement perspectives.
These are described as follows:
1. Fit or congruity perspective emphasizes that HRM practices should be integrated with the strategic planning process of the organization.
2. The functional perspective relies on the principle that an organization performs best when each departmental unit maximizes its contribution.
3. The economic perspective views HR as a unique and distinguishable source of competitive advantage.
4. The typology perspective helps in developing systematic comprehensive theories for the study of new innovations.
5. Inducement refers to supporting a highly competitive business environment.
6. Investment is likely to be found in firms where the business strategy is based on differentiation.
7. Involvement strategy is found in companies with a business strategy based on innovation and flexibility when they are confronted with a market that is characterized by highly competitive price.
It is necessary to understand the differences between traditional HRM and SHRM, and between SHRM and HR strategy, before we proceed further.
Agarwala (2007) has drawn differences between traditional HRM and SHRM mentioning the publication of J. A. Mellow. The approaches differ based on many dimensions.
Although these two terms are used interchangeably, some distinction between SHRM and HR strategy can be drawn. Both describe an approach adopted by the management, focus on the long-term issues, and provide directions to the organization. Business strategies are outcomes of strategic management; human resource strategies are the outcomes of SHRM.
Meaning of Strategic Human Resource Management – With HR’s Strategic Architecture
A strategy is a way of doing something. It usually includes the formulation of a goal and set of action plans for the accomplishment of that goal.
Strategic management is the process of formulating, implementing and evaluating business strategies to achieve organizational objectives.
Strategic management involves those sets of managerial decisions and actions which determine the long-term performance of a business organization. It includes environmental scanning, strategy formulation, strategy implementation, evaluation and control.
The beginning theme case has clearly revealed the importance of aligning the human resource function with the strategic objectives of the organization. Strategic HRM is a concept that integrates traditional human resource management principles and activities with the organization’s overall strategic planning and their implementation.
SHRM integrates human resource considerations with other physical, financial, and technological resources in the setting of organizational goals and solving complex organizational problems. SHRM also emphasizes the implementation of a set of policies and practices that aims to develop pool of employee competencies and capabilities that are relevant to organizational goals and objectives.
Strategic HRM is an approach involving effective decision making with respect to successfully implement the strategic objectives of an organization concerning their employment relationship and HR processes and systems involving recruitment, training, development, performance management, and reward and employee relations management.
The key characteristic of strategic HRM is that it aligns and integrates the HRM strategies with those of the business strategy. The HRM strategies developed by a strategic HRM approach are thereby one of the most essential components of an organization’s business strategy.
Boxall (2003) has strongly supported that strategic HRM is concerned with explaining how HRM influences organizational performance. Strategic HRM is based on HRM principles incorporating the concept of strategy. So if HRM is a coherent approach to the management of people, strategic HRM implies that is done on a planned way that integrates organizational goals with policies and action sequences taken in the organization.
HR’s Strategic Architecture:
The development of the strategic HR architecture requires special sets of skills from the HR executives and HR professionals in the organization. The HR professionals in this regard should make an effort so as to enhance their level of competency in terms of their knowledge regarding the strategic perspectives.
To ensure this they need to develop the following set of competencies, namely:
1. Knowledge of the business
2. Strategic business acumen
3. Mastery in HR practices, particularly in organizational development
4. Capabilities as a change agent and an internal consultant
5. Individual credibility and instrumentality
6. Capability for managing strategic performance management
Strategic HRM has the following four meanings:
1. SHRM involves the use of planning in order to establish a strategic link between the HR systems and the goals and objectives of the organization.
2. SHRM involves a coherent approach to ensure the design and management of the HR systems based on an employment policy and manpower strategy
3. SHRM involves the matching of HRM activities and policies to the business strategy
4. SHRM aims to consider people of the organization as the ‘strategic resource’ for the achievement of ‘competitive advantage’ for the organization.
Hence it is evident that SHRM is a process that involves:
1. Integrating HR into the Strategic Planning Process of the organization.
2. Aligning HR practices to business strategy and to one another.
3. Developing a partnership between the strategic thinkers of the organization along with the line management so that the organizational HR programmes could meet real life business needs and challenges.
4. Internally transforming of HR structure and staff according to the needs of the business.
5. Enhancing the overall HR and administrative efficiency.
6. Assessing the bottom-line impact of the HR activities in organizational performance improvement.
Hence an organization’s HR policies and practices must fit with its business strategy so as to constantly meet the challenges of its competitive business environment.
The concept of such integration has three aspects:
1. The linking of the HR policies and practices with the strategic management process of the organization
2. The internalization of the importance of HR on the part of line managers
3. The integration of the workforce into the organization so as to foster whole hearted commitment or an ‘identity of interest’ for the strategic goals.
Strategic Human Resource Management Tools:
In an organization, managers may use different strategic HRM tools. However, three tools are more common- strategy map, scorecard, and digital dashboard.
1. Strategy Map:
Strategic map is a diagram that presents summarized chain of activities which contribute to achievement of an organization’s strategic objectives. It also shows how the organization can create value by linking these activities based on their contributions to organizational objectives.
Based on strategy map, each department (individual also) can measure its contribution to achieve strategic objectives of the organization. This is true for HR department too. For example, if an organization wants to compete on the basis of offering innovative products, it has to put more emphasis on research and development.
Its implication for HR department is that it has to identify skill sets and attitudes of employees relevant for offering innovative products and taking steps in this direction.
2. HR Scorecard:
In general, scorecard is the report that gives information about the status, condition, or success of someone or something. HR Scorecard reports the HR measures that are strategically relevant for business strategy and HR strategy. HR scorecard draws heavily from balanced scorecard proposed by Kaplan and Norton.
Balanced scorecard measures an organization’s activities in terms of its vision and strategies to give managers a comprehensive view of the performance of the organization. It integrates financial, customer, internal business processes, and learning and growth perspectives with organizational vision and strategies.
HR departments typically measure elements that are measurable such as hiring times for filling organizational positions, employee turnover rates, workers’ compensation-related issues due to injuries, etc. Such an approach fails to address an HR department’s contribution to organizational objectives.
HR scorecard attempts to provide HR measurements that are significant for implementing business strategy. Thus, it helps HR personnel to put more emphasis on those HR activities which are critical for implementing business strategy.
HR scorecard process includes- (i) identifying the critical deliverables for human resources, (ii) identifying human resource customers (departments of the organization and external agencies), (iii) defining HR activities that provide deliverables like high-talent staffing or employee-retention initiatives, etc., and conducting cost-benefit analyses of deliverables.
3. Digital Dashboard:
A digital dashboard is an electronic interface used to acquire and consolidate data across an organization. A digital dashboard provides in-depth business analysis, while providing a real-time snapshot of department productivity, trends and activities, key performance indicators, etc., on managers’ computers. Thus, HR manager can get HR-related information on real-time basis and take the required actions well in time.
Meaning of Strategic Human Resource Management – SHRM in Today’s Context
SHRM is all about the harnessing of the intellectual capacity of the organizations, attracting them and keeping the best people by adequate reward system and performance appraisal. It is also about enhancing skills in order to accelerate performance.
It can be argued that the successful exploitation of technology in a dynamic environment depends crucially upon a skill base capable of identifying opportunities for, and managing technological development.
Many companies today fail to have strategic approach to HRM, especially in identifying current and future staffing needs and providing necessary training and development skills as and when necessary.
The companies, many times, rely on identifying needs based on existing staff profiles and loose projections for new business. Their ability to react to change is thus limited. Time spent on identifying needs at an organizational level would facilitate a more strategic view of requirements. Companies employ different strategies to stimulate and maintain staff, including bonus schemes, share opportunities and support for leisure activities.
Some companies appear to be addressing the question of management development for the senior team within their overall consideration of planning. Building a team needs to reflect the organizational development priorities which may be a part of management development strategy within the strategic management process.
Harnessing intellectual capacity by truly involving all of an organization’s people in the strategy formulation is critical to successful implementation, but it can introduce difficult and often uncomfortable analysis that may find managers adopting a defensive posture. Often managers confuse involvement with interference and fail to recognize the leadership opportunities this presents. Some still find involvement of employees threatening and this leads to a defence of the status quo.
The total quality approach calls into question all the traditional approaches to HRM and argues for a more proactive people- focused approach in which HR professionals adopt total quality to become strategic partners in improvement and business planning. The really successful companies have used TQM to put the spectre of Taylorism behind them, recognizing that TQM could provide a holistic approach.
The introduction of an effective HR strategy aligned to strategic business planning is thus a prerequisite to ensure that underlying power structures, procedures, practices, values and norms are in place to facilitate the necessary pace of change that can be sustained within the psychological capacity of the business. There are many different ways of managing the improvement process, including a consultative approach through participation, intervention, education and communication.
Even the style adopted has much to do with the nature of the change proposed, its pace and sustainability. The style of management and blend of skills play an enabling role in the development of strategies within small firms.
Of equal importance is the need to put in place appropriate reward systems linked to the process improvements required for excellence. Without a reliable performance appraisal through a performance assessment, it is impossible to relate rewards to performance in a way that is motivating.
A holistic approach recognizes that business processes cut across functions, and hence, it is important to link reward systems to recognition of the accomplishment of teams rather than individuals. Performance goals then have to be tailored specifically to what the work team needs to accomplish and it is also important to link the goals of the individuals to those of the team.
Team reward systems reduce the threat of conflict, increase the rewards to individuals who have a shared set of goals and produce more consistent behaviours than is evidenced in individuals alone. If this is the reality, then ‘whole organization’ reward becomes the preferred approach.
Add to this the notion that in the new economy ‘reward’ embraces knowledge, acquisition and personal growth, and these beliefs begin to prescribe an approach to HR planning that supports rather than obstructs excellence. It prescribes a solution based on achieving a balance of individual, team and organization, a balance that allows for comfort zones within which employees can embrace true ownership.
Meaning of Strategic Human Resource Management – Meaning of SHRM Given by Various Experts: Henry Mintzberg, Huslid, John Bratton and Dessler
In the global markets new trends have taken place such as – in economy, expectations of employers, employees and customers, society, etc. Accordingly the changes have taken place in HR functions also. In this situation a lot of challenges are faced by HRM. To tackle the situation under drastically changing business environment, high degree of technology and changing demands and expectations of the customers, HR managers to think carefully and be proactive.
To deal with a particular situation a strategy is to be designed every time and accomplish the tasks effectively and efficiently before the other competitors to take competitive advantage in global markets. This contributes in improving individuals’ performances, overall performance of the organisation and increasing organisational effectiveness in business.
In this situation, the normal functions of HRM are not going to bring better results. Therefore, the strong need for strategic human resource management has been felt across the globe. If not worked according to the them the tasks would not be completed as per the requirements. The company cannot be the leader in national and international markets as well.
For an MNC successful working it should designs the strategies and must have proper match between them at different levels. An organisation must prepare its business strategy according to global competitive environment and with the immediate business conditions currently facing. Further, human resource management must prepare its strategy in line with the business strategy so that it can contribute maximum in accomplishment of organisational objectives.
There must be proper match between these things. Strategic HRM ensures that the policies and practices of it should have long-term impression on employees’ behaviour, their level of commitment towards the organisation and its success. The fundamental objective of strategic HRM is to design strategy and generate skills and competency to make it doubly sure that the organisation is having the talented, satisfied, committed and highly motivated employees.
That is required for higher degree of individual and organisational performance as a whole, achieve competitive advantage over other competitors and achieve effectiveness in business position in global markets. It is possible through strategic policies and practices of HRM. Dyer and Holder commented on this issue that strategic HRM should provide unifying frameworks which are at once broad, contingency based and integrative.
Strategy has been derived from Greek word strategia. It means the “art of troop leader; office of general, command, generalship” is a high level game to achieve one or more goals. It is the art and science of directing and controlling the military forces to achieve the assigned tasks. In military services the tasks are to be completed with no other options. There is only thing that is to do or die with no other option.
The approach of military service is with aggressiveness at right time. If not done so the enemy would take advantage. In the global turbulent business environment, there is uncertainty and risk. There is high degree of competition in the markets. To carry-out the business in this environment, the company has to carry-out its tasks better and others to take the competitive advantage.
For this purpose aggressive and planned approach is needed. Therefore, the strategy concept was accepted in business also. Strategy in business term means planning and execution with aggressiveness. Strategy is considered a tool, technique or weapon that helps to defend the users and defeat others. Strategy is important because the resources available to achieve these goals are usually limited.
Henry Mintzberg defined strategy as – “a pattern in a stream of decisions” to contrast with a view of strategy as planning, while Max Keown argues that “strategy is about shaping the future” and is the human attempt to get to “desirable ends with available means”.
Strategy has started from military services and later on accepted in other fields also such as – games, career, business, etc. Due to rapid changing business environment and high degree of competition, it has been accepted in business by the management for effective accomplishment of the objectives to stay competitive in the markets.
Strategies are prepared for every activity and department Human resource department/ management is a part of management of the organisation so it is also required for human resource management. HR tasks are to be aligned to the organisation objectives. Therefore strategies are required to carry-out the tasks effectively to contribute in accomplishment of the organisational goals, human resource management performs its functions strategically.
It has been called Strategic Human Resource Management. Strategic HRM is a process that involves the use of improved approaches for development of HR strategies, which are integrated vertically with the business strategy and horizontally with strategies of other departments.
This has been defined by experts as follows:
For Snell et. al., ‘Strategic HRM’ is an outcome – ‘as organisational systems designed to achieve sustainable competitive advantage through people’.
Huslid defined the concept, “Strategic human resource management is an approach that refers how the aims of the organisation will be acquired through people by means of human resource strategies and combined human resource practices and policies. Strategic human resource management is also based with viewing the people of the organisation as a strategic element for the acquirement of competitive benefit”.
According to Ulrich, “SHRM is viewed as a process, “the process of linking HR practices to business strategy’ and ‘HR strategy’ is the outcome – ‘the mission, vision and priorities of the HR function”.
Bamberger and Meshoulam describe SHRM as – “the process by which organisations seek to link the human, social, and intellectual capital of their members to the strategic needs of the firm’. They further advocated that HR strategy as an outcome – ‘the pattern of decisions regarding the policies and practices associated with the HR system”
According to Purcell, “Strategic HRM focuses on actions that differentiate the firm from its competitors”.
John Bratton defined, “Strategic human resource management is the process of linking the human resource function with the strategic objectives of the organisation in order to improve performance”.
It was advocated by Hendry and Pettigrew that, “SHRM it is the use of planning; a coherent approach to the design and management of personnel, systems based on an employment policy and workforce strategy and often underpinned by a ‘philosophy’; matching HRM activities and policies to some explicit business strategy; seeing the people of the organisation as a ‘strategic resource’ for the achievement of ‘competitive advantage’.”
Dessler defined that, “strategic HRM means making and implementing practices and policies of human resource that generates the behaviours and competencies of employee that the organisation requires to gain its strategic goals”.