You are on page 1of 19

Block: One Introduction

Unit:3 Strategic Human Resource Management (SHRM)

Uni
t 3
Strategic Human
Resource
Management
(SHRM)
Copyright © 2006, Dipak Kumar Bhattacharyya

3-1 Human Resource Management (2nd Edition) Dipak Kumar Excel Books
Block: One Introduction
Unit:3 Strategic Human Resource Management (SHRM)
Introduction
Planning and strategy have a long history (Mintzberg, 1994). Writing in 1916, Henri
Fayol (1916) supported the maxim that ‘managing means looking ahead’. Thus
foresight is an essential part of management. Strategic thinking can occur at a
number of levels. Chaffee (1985) considers that (academically) strategy is viewed in
three distinct but sometimes conflicting ways: linear strategy, adaptive strategy, and
interpretive strategy. The linear model focuses on planning and forecasting. The
second model is described as adaptive and most closely associated with ‘strategic
management’. This model ‘tends to focus the manager’s attention on means’ and is
largely concerned with ‘fit’. The third, interpretative model sees strategy as a
metaphor and, therefore, it is not something which can be measured but is viewed
in qualitative terms.

Cont….

Copyright © 2006, Dipak Kumar Bhattacharyya

3-2 Human Resource Management (2nd Edition) Dipak Kumar Excel Books
Block: One Introduction
Unit:3 Strategic Human Resource Management (SHRM)

Strategic Human Resource Management (SHRM) is a competency-based approach


for management. There are many definitions on SHRM, including:

‘A human resource system that is tailored to the demands of the business strategy’
(Miles and Snow 1984).

‘The pattern of planned human resource activities intended to enable an


organisation to achieve its goals’ (Wright and McMahan 1992).

“The pattern of planned human resource actions and deployments intended to


enable the firm to achieve its goals” (Wright/McMahan 1992: 298).

“All those activities affecting the behavior of individuals in their efforts to formulate
and implement the strategic needs of the business” (Schuler 1992: 30).

Copyright © 2006, Dipak Kumar Bhattacharyya

3-3 Human Resource Management (2nd Edition) Dipak Kumar Excel Books
Block: One Introduction
Unit:3 Strategic Human Resource Management (SHRM)
Integration of HR with Business Strategy
Reviewing various definitions of SHRM, we can classify SHRM into four different
models. The first model, pioneered by Fombrun, Trichy and Devanna (1984),
although known as ‘the human resource management cycle’, it emphasises on
strategic focus on five variables of HR, like; selection, performance, appraisal,
rewards and human resource development.

A second well-known model is the ‘Harvard model of HRM’ by Beer (1984).

The third model of HRM by Guest (Guest, 1987, 1997) also states that HRM can
help to achieve better performance.

Of the four models discussed here the so-called Warwick model by Hendry and
Pettigrew (1990) is the one most oriented to processes of change.

Copyright © 2006, Dipak Kumar Bhattacharyya

3-4 Human Resource Management (2nd Edition) Dipak Kumar Excel Books
Block: One Introduction
Unit:3 Strategic Human Resource Management (SHRM)

Two Approaches to Strategic Management


Formal-Rational Approach
Strategy is deliberately set up and a realised plan and it requires comprehensive
planning. This approach separated strategy formulation and implementation and
consider organisation as rational actor. Since this approach believes strategic
decisions flow from the top, it believes also to manage implementation of strategy, it
is important to follow the structure of the organisation. It states structure follows
strategy.
Informal-Incremental Approach
This approach considers strategy as pattern of realised decision on important and
urging problems. Decision making being informal and iterative, vision of the
organisation largely serves as a decision premises.

Copyright © 2006, Dipak Kumar Bhattacharyya

3-5 Human Resource Management (2nd Edition) Dipak Kumar Excel Books
Block: One Introduction
Unit:3 Strategic Human Resource Management (SHRM)
HRM and Organisational Strategic Decisions
Integration of HR in strategic decisions may be direct or indirect, formal or informal.
The formal approach requires strategy formation and strategy implementation. The
informal approach on the contrary involves HR managers and HRM become the
initiator of strategic decisions. Yet in another way also we can interpret HR
integrated organisational strategic decisions, i.e., deliberate and emergent. If it is
deliberate, HR exerts specific influence on strategic decision makers. In emergent
cases, HR practices being influence organisational culture, HR by default become
the strategic decision maker.

Copyright © 2006, Dipak Kumar Bhattacharyya

3-6 Human Resource Management (2nd Edition) Dipak Kumar Excel Books
Block: One Introduction
Unit:3 Strategic Human Resource Management (SHRM)

Characteristics of Strategic HR Planning


Strategic HR planning establishes link between organisation’s strategic planning
and HRM like other managerial functions; marketing, production, finance, etc.
Craft (1988) identifies following HR inputs to strategic HR planning:
1. Availability Analysis: These inputs consist of HR inventory (internal) and labour
market analysis data, which facilitates HR supply forecasts and HR mobility
patterns.
2. Environmental Analysis: These inputs highlight on complexity and stability
issues and also on external trends like; technical social, legal, political and
economic.
3. HR Competitive Analysis: Here inputs include competence profile, strategy /
competence fit assessment reports, competitive advantage factors and various
HR strategic initiatives.

Copyright © 2006, Dipak Kumar Bhattacharyya

3-7 Human Resource Management (2nd Edition) Dipak Kumar Excel Books
Block: One Introduction
Unit:3 Strategic Human Resource Management (SHRM)
Levels of Strategic HR Planning
Like corporate strategic plan, strategic HR planning also has three levels; corporate,
business and department (operations) levels. Corporate level HR strategic plan
deals with corporate HR staff and corporate HR management group. At this level
organisation wide HR strategies and policies are drawn to fit the corporate mission
and business portfolio plans. At Business or divisional level, divisional HR staff and
divisional HR management group are involved. Here HR strategies and policies are
drawn within the ambit of corporate HR strategies and policies to meet specific
product/market/customer segments. At department or operation level, departmental
HR staff members are involved who draw HR programmes and policies for each
functional area (e.g. recruitment, staffing, compensation, career development, etc.).

Copyright © 2006, Dipak Kumar Bhattacharyya

3-8 Human Resource Management (2nd Edition) Dipak Kumar Excel Books
Block: One Introduction
Unit:3 Strategic Human Resource Management (SHRM)

The Process of Strategic HR Planning


Strategic HR planning process requires to follow certain steps sequentially as under:
 Environmental Analysis
 Internal HR Analysis
 HR Threats and Opportunities
 HR Strengths and Weaknesses
 Strategic HR Issues
 HR Objectives and Strategies
 HR Functional Programmes
 Operational HR Plans
 Business Strategies

Copyright © 2006, Dipak Kumar Bhattacharyya

3-9 Human Resource Management (2nd Edition) Dipak Kumar Excel Books
Block: One Introduction
Unit:3 Strategic Human Resource Management (SHRM)

HR Portfolios
The term HR portfolio is used in strategic HRM and it denotes strategically relevant
HR information. Such information may be basic or critical. Basic HR portfolio
information included company, strategic business units, departments, functional
areas, work force segments, single employees, HR practices, etc. Critical HR
portfolio information includes employee performance / employee potential, strategic
relevance / HR quality of SBUs, external supply / internal stocks of skilled labour,
employee motivation / employee qualification, etc. The process of information
compilation for HR portfolios is to first select units and the criteria of analysis,
visualise the present condition, and plan for the future (in the form of targets) and
then develop HR strategies in more specific and quantifiable terms.

Copyright © 2006, Dipak Kumar Bhattacharyya

3-10 Human Resource Management (2nd Edition) Dipak Kumar Excel Books
Block: One Introduction
Unit:3 Strategic Human Resource Management (SHRM)
5-P Model of HR Strategy
Schuler (1992) advocated this model to highlight HR’s strategic relevance in an
organisation. His model outlines 5-P as under:

 HR Philosophy: Expressed in statements defining business value and culture

 HR Policies: Expressed as shared values (guidelines)

 HR Programmes: Articulated as HR strategies

 HR Practices: For leadership, managerial, and operational roles

 HR Processes

Copyright © 2006, Dipak Kumar Bhattacharyya

3-11 Human Resource Management (2nd Edition) Dipak Kumar Excel Books
Block: One Introduction
Unit:3 Strategic Human Resource Management (SHRM)

Strategic Manpower Planning


Strategic manpower Planning is a dynamic, proactive, ongoing process of
systematically attracting, identifying, developing, mentoring, and retaining
employees to support current and future organisational goals. Strategic manpower
Planning focuses specifically on proactive planning to meet anticipated or
unanticipated vacancies due to retirement and other factors.
Successful Strategic Manpower Planning:
 Requires a team approach and must be viewed as a process, not a single act.
 Must have support of senior management.
 Must have line management ownership and be involved in the process with
support from Human Resources personnel.
 Must align strategic manpower plan programme with the department’s culture,
services, and vision.
 Necessitates creative thinking that may challenge and change the status quo.

Copyright © 2006, Dipak Kumar Bhattacharyya

3-12 Human Resource Management (2nd Edition) Dipak Kumar Excel Books
Block: One Introduction
Unit:3 Strategic Human Resource Management (SHRM)

Benefits of Strategic Manpower Planning


Strategic Manpower Planning can benefit an organisation in following ways:
 Engages senior management in a disciplined review of leadership talent.
 Guides development activities of key executive, managerial, and professional
employees.
 Assures continuity of leadership and management support.
 Avoids transition problems by having candidates who are fully prepared to
assume positions of greater responsibility.
 Prevents premature promotion.
 Audits the current workforce and thereby influences resources and
development strategies.
 Identifies the competencies needed by the current and future workforce.
Cont….

Copyright © 2006, Dipak Kumar Bhattacharyya

3-13 Human Resource Management (2nd Edition) Dipak Kumar Excel Books
Block: One Introduction
Unit:3 Strategic Human Resource Management (SHRM)

A Strategic Manpower Plan requires considering following important aspects:


 Departmental Priorities
• Which requires assessment of departmental priorities duly examining the
department’s mission and objectives and identifying how they are being met.
 Departmental Structure
• Relates the priorities of the department to its actual structure, programmes,
classifications, organisational charts, and budgets
 Workload
• Examines the department’s workload to create a picture of future needs as the
workload increases or decreases in the department.
 Workforce
• Involves using the information gathered to determine current and future
workforce needs.
Copyright © 2006, Dipak Kumar Bhattacharyya

3-14 Human Resource Management (2nd Edition) Dipak Kumar Excel Books
Block: One Introduction
Unit:3 Strategic Human Resource Management (SHRM)

Strategic Performance Management


Performance Management (PMS) is one of the most important HR strategy factors.
HR strategy factors largely encompass six areas like; recruitment and selection,
career development, performance appraisal, training and development,
compensation designing and human resource planning.
Performance has many dimensions.
 Output or result dimension;
 Input dimension;
 Time dimensions;
 Focus dimension;
 Quality dimensions; and
 Cost dimension.
Copyright © 2006, Dipak Kumar Bhattacharyya

3-15 Human Resource Management (2nd Edition) Dipak Kumar Excel Books
Block: One Introduction
Unit:3 Strategic Human Resource Management (SHRM)
Strategic Compensation Management
The strategic use of rewards to regulate behaviour and performance has led to the
concept of ‘compensation management’ or ‘reward systems’ – terms, which belong
in the HRM, rather than the Industrial relations, framework. ‘Remuneration’ refers to
monetary rewards, which are seen as one arm of total compensation.

A total reward or compensation system would have a number of components, based


on the distinctions between Intrinsic Rewards and Extrinsic Rewards.

Intrinsic rewards are non-monetary and include rewards of three types:

i. Job satisfaction

ii. Social aspects of the job

iii. Career Paths

Cont….

Copyright © 2006, Dipak Kumar Bhattacharyya

3-16 Human Resource Management (2nd Edition) Dipak Kumar Excel Books
Block: One Introduction
Unit:3 Strategic Human Resource Management (SHRM)

A strategic reward management model is illustrated below:

To conclude a strategic reward management is essential to enhance organizational


capability to cope with the competition as people is now considered only sustainable
competitive advantage for an organization.
Copyright © 2006, Dipak Kumar Bhattacharyya

3-17 Human Resource Management (2nd Edition) Dipak Kumar Excel Books
Block: One Introduction
Unit:3 Strategic Human Resource Management (SHRM)

HRD and Strategic HRM


The resource based approach to strategic human resources (SHRM) described by
Frank Muller recognises the value of informal, incidental learning in the workplace
and stresses on the activation of this reservoir of skills and accumulated knowledge
for competitive advantage.
Learning and Development promotes exchange of information between employees
hence creating a more knowledgeable workforce. This produces a very flexible
organisation where people will accept and adapt to new ideas and changes through
a shared vision. Learning organisation is defined as an organisation that learns and
encourages learning among its people.
Tracing history we find that in the 1980’s, organisation worldwide discovered time as
a new source of competitive advantage. This leads to ‘capabilities-based
competition’, which included the capability of learning.
It is therefore, well established that learning and development processes are central
to the achievement of SHRM.
Copyright © 2006, Dipak Kumar Bhattacharyya

3-18 Human Resource Management (2nd Edition) Dipak Kumar Excel Books
Block: One Introduction
Unit:3 Strategic Human Resource Management (SHRM)

Hr Strategy Key Targets


Key Aims Key Targets Key Dates

RECRUITMENT & RETENTION


To recruit and retain staff of the highest To spend Rs. 25 million over over next To attract increasing number of applicants for all
quality in order to provide outstanding three years on recruitment, reward and advertised positions at least by 29% by Ja nuary,
services to customers, reducing response retention of employees in all groups, 2007.
time to less than an hour (HR Policy No. including improved promotion and up -
RR.1.1: 2005) gradation opportunities. To reduce the number of unfilled posts to 5% By
June 2007.
To reduce employee turnover to overall 5%. For
service engineers and managerial staff, reduce
such turnover to 1%. For manual staff and
clerical employees reduce such turnover to 15 %.
Achieve such turnover rate by January, 2007.

To provide career advancement opportunities to


the employees, ensuring time -scale promotional
scheme, adopting suitable HR policy by January,
2007.

STAFF TRAINING & DEVELOPMENT:


To provide staff with training and To create the In -house Training and All service engineers and managerial employees
educational opportunities to develop their Development Group by next one-year have to be made aware about the career
competencies and periodically renew their for co -ordinating the planning, advancement scheme, which is linked with
skills, keeping pace with the changing budgeting, designing, delivering and compulsory attendance in training programmes
requirement of the company. (HR Policy monitoring of staff induction, training and clearing examinations as per HR Policy No.
No. STD.1.1: 2005) and development. STD.1.1: 2005 by January, 2007.

To review and increase the frequency


of training programmes for staff
members from current 3 man -days to 6
man-days by next one year.

Copyright © 2006, Dipak Kumar Bhattacharyya

3-19 Human Resource Management (2nd Edition) Dipak Kumar Excel Books

You might also like