Strategic Human

Resource Management
An Introduction

Sushma Karwa
For PGDM Sem V Batch 2020
 SHRM : Definition

Relationship between HRM and strategic management in an

organization

Concerned with people issues and practices that affect or are

affected by the strategic plan of the organization

Pattern of planned human resource deployment and activities

intended to enable the firm to achieve its goals
 Objectives of SHRM

• To ensure the availability of a skilled,

committed and highly motivated
workforce in the organization to achieve
sustained competitive advantage.
• To provide direction to the organization
so that both the business needs of the
organization and the individual and
collective needs of its workforce are
met. This is achieved by developing and
implementing HR practices that are
strategically aligned.
 Difference between Traditional HRM and
SHRM Traditional HRM SHRM
Responsibility Staff personnel in the HR Line managers; all managers
for HR department responsible for people are HR
programmes managers
Focus of Employee relations – ensuring Partnerships with internal
activities employee motivation and (employees) and external
productivity, compliance with laws (customers, stakeholders, public
interest groups) groups
Role of HR Reactive and transactional Proactive and transformational,
change leader
Initiative for Slow, piecemeal, and fragmented, Fast, flexible and systematic, change
change not integrated with larger issues initiatives implemented in concert
with other HR systems
 Difference between Traditional HRM and
SHRM Traditional HRM SHRM
Time horizons Short-term Consider various time frames as
necessary (short, medium or long
term)
Control Bureaucratic control through rules, Organic control through flexibility, as
procedures and policies few restrictions on employee
behavior as possible
Job design Focus on scientific management Broad job design, flexibility, teams
principles- division of labor, and groups, and cross-training
independence, and specialization
Important Capital, products, technology and People and their knowledge, skills
investments finance and abilities
Accountability Cost centre Investment centre
Difference between SHRM and HR
Strategies
• The terms are used interchangeably
• However, there is a distinction between the
two
• Difference between SHRM and HR strategies
is similar to that between strategic
management and corporate business
strategies
• SHRM and strategic management : describe
an approach adopted by the management,
focus on long-term issues and provide
direction to the organization
• Human resource strategies and business
strategies : outcomes of this approach
 Difference between SHRM and HR Strategies
SHRM HR Strategies
• A general approach to strategic • Outcome (manisfestation) of the
management of human resources general SHRM approach
• Aligned with the organizational • Focus on specific organizational
intention about its future direction intentions about what needs to be
• Focus on long-term people issue done
• Defines the areas in which specific • Focus on specific issues that facilitate
HR strategies need to be developed the achievement of corporate
• Focus on macro concerns such as strategy
structure, culture • Human resource strategy decisions
• Strategic HRM decision are built are derived from SHRM
into the strategic business plan
Difference between SHRM and HR
Strategies
• SHRM
• Deals with macro concerns
• Quality, commitment, performance,
culture, management development
• Defines the areas in which specific HR
strategies need to be developed
• HR strategies
• Ensuring availability of an efficient
workforce, training, rewards, good
employee relations etc.
• More specific and facilitates the successful
achievement of the corporate objectives
and goals
 Caselet analysis
Air India and Indian Airlines: A Merger Gone Wrong?
Link between HR Strategy and Business
Strategy
• In order to ensure that HR strategies
facilitate the achievement of business
strategies, a strategic integration
between the two is necessary
• Hence, central to the concept of
SHRM, is the idea of strategic fit.
• An organization may pursue several
different strategies to achieve its
goals.
• Each of the business strategies
requires different type of HR
strategies or strategic approach to
managing people.
• There should be a congruence or “fit”
Porter’s classification of Business Strategies

Cost
Differentiation Focus
leadership
Porter’s classification of Business Strategies

Cost leadership

• The firm increases its efficiency, cuts costs so that products or

services may be priced lower than the industry average
• Assumes that a small change in price will significantly affect
customer demand
• Assumes that customers show greater price sensitivity than brand
loyalty
Porter’s classification of Business Strategies
Differentiation

• The firm distinguishes its products/services from its competitors or at

least attempts to make consumers perceive that there are differences
• The firm charges a premium for its products/services because it offers
its customers something that is unique, extraordinary, or innovative
• The firm seeks to develop brand loyalty
Porter’s classification of Business Strategies

Focus

• The firm recognizes that different segments of the market have

different needs and attempts to satisfy one particular group
• The firm can charge a premium for its services since the market has
overlooked these market segments
 Linking Business Strategy and HR
Business Strategy
Strategy
HR Strategy
Cost Leadership Utilization HR Strategy
• Suitable for repetitive and • HR strategy focused on short-term
predictable behavior performance measures, that is, results or
• Concerned with short-term outcomes
focus and quantities • Efficiency is the norm, job assignments
(volumes) are specialized, explicit job descriptions
• Result-oriented • Hierarchical pay, few incentives
• Narrow career paths, limited training
• Limited employment security
• Cost-cutting may involve incentives for
employees to leave the firm
• Limited participation
 Linking Business Strategy and HR
Strategy
Business Strategy HR Strategy
Differentiation Facilitation HR Strategy
• Long-term focus • Broad career paths, extensive training
• Creative job behavior • Equal and fair pay, many incentives for
• Moderate concern for creativity
quality and quantity • Long-term performance measures
• External recruitment and hiring of people
who bring in new ideas
• High employee participation
• Some employment security
 Linking Business Strategy and HR
Strategy
Business Strategy HR Strategy
Focus Accumulation HR Strategy
• High concern for quality • Equal and fair pay with many incentives
• Moderate concern for • Hiring employees belonging to the target
quantity market
• Long/medium-term focus • Broad career paths with extensive
training
• High employee participation
• Some employment security
 Strategic fit
Dilemma :
• Should organizations adopt
business strategies that fit the
available competencies and
capabilities of the firm
OR
• Should they first decide their
business strategy and then stretch
and modify their competencies
and capabilities to fit the business
strategy?
 Strategic fit
• Strategic fit proposes that if an
organization seeks to maximize
its competitive advantage, it
must match its internal resources
and skills (organizational
competencies) with the
opportunities available in the
external environment
• When an organization attempts
to implement new strategies with
outmoded or inappropriate HR
strategies, it can face problems
Theoretical perspectives of SHRM

Typological Fit
perspective perspective
SHRM
Economic Functional
perspective perspective
 Theoretical perspectives of SHRM

• Literally means ‘congruity’.

Fit • HRM practices should be integrated with the
Typological perspectiv
perspective e strategic planning process of the organization.
SHRM • Two types of fit –Internal and external
Economic Functional • Organization’s performance can be enhanced if it
perspectiv perspective adopts HRM practices that complement the other
e
HR practices (internal fit) as well as the strategic
objectives of the organization (external fit)
• HR must be integrated with the strategic planning
process of the firm
 Theoretical perspectives of SHRM
• An organization performs best when each departmental unit
maximizes its contributions, limited to its unique area of expertise.
• Organizations should be structured around differences in rank or
Fit grade, resulting in the creation of staff functional specialists.
Typological perspectiv • General managers at the top have the responsibility of giving
perspective e direction to the firm, functional managers with independent
SHRM expertise are in the middle and subordinates who carry out
directives are at the bottom.
Economic Functional
perspectiv • Thus, SHRM is defined as a carefully planned effort to shape
perspective subordinate behavior so as to make it consistent with the desires
e
of top management as expressed in strategic plan.
• Functional sub-strategies are treated as equivalent with the overall
concept of strategic HR.
• Any HR practice therefore becomes a strategy when it is carefully
selected to complement the pressing concerns faced by the
management
 Theoretical perspectives of SHRM
• Views human resources as a unique and
distinguishable source of competitive
Fit
Typological perspectiv advantage.
perspective e • HR becomes a source of sustained
SHRM competitive advantage when following
Economic Functional requirements are met :
perspectiv perspective
e • HR must add value to the firm’s production
processes
• Skills sought by the firm must be rare
• Human capital must not be easily imitable
• Human resources must not be subject to
replacement by technological advances
 Theoretical perspectives of SHRM
• Three distinct HR strategies
• Inducement strategy : Used by firms to support a business
environment that is highly competitive with respect to price and
Fit /or quantity. Hence HR strategies focus on cost, high performance
Typological perspectiv in a minimally staffed organization, rewarding loyalty and
perspective e commitment
SHRM • Investment strategy : Business strategy is based on differentiation,
such as quality, features or service. HR strategy encourage
Economic Functional creativity, initiative and high-performance standard. Compensation
perspectiv perspective is a balance of fixed and variable
e
• Involvement strategy : Found in firms with a business strategy
based on innovation and flexibility when they are confronted with
a market that is characterized by highly competitive price and/or
quality. HR strategy seeks to provide autonomy and challenge to
the employees to motivate them for high and meaningful
performance. Performance is rewarded by compensation that links
personal outcomes to organizational performance.